BAKU, Azerbaijan, Oct.26
By Leman Zeynalova – Trend:
Power generation investment is set to decline by 7 percent in 2020, according to the International Energy Agency (IEA), a somewhat more optimistic assessment compared to the 11 percent fall envisaged in May, mostly due to better prospects for low-carbon generation, Trend reports with reference to the IEA.
“Annual spending for renewable power is now seen down by only 3 percent compared to the prior year, supported by continued development of large projects with long lead times, such as offshore wind (where several large North Sea projects recently closed financing) and hydropower.
“A rebound in second quarter FIDs also supports stronger investment expectations for utility-scale solar PV and onshore wind. The boost is concentrated in advanced economies, where favourable monetary conditions, improved technology maturity and policies supporting reliable cash flows have reduced the cost of capital over time. Our analysis of utility-scale solar PV suggests the pandemic has pushed up financing costs in 2020, but with the cost of capital still around 5 percent in the United States and Europe, generation costs associated with FIDs with revenue support remain mostly below that for new gas-fired plants. Greater risks to renewables investment persist in emerging market and developing economies where state-owned utility counterparties are under financial strain and some markets, such as Brazil, have put off capacity auctions, though project sanctioning has so far remained relatively robust in India.
“Investment in electricity networks is set to decline for a fourth straight year. Higher renewables investment and modest grid spending growth in China through the first eight months of 2020 support a moderately improved estimate of a 6 percent decline compared with the 9 percent estimated in May. Rising shares of variable renewables during the pandemic have brought system reliability and resilience more into focus. Utilities in advanced economies also face few difficulties in accessing finance, in part due to the regulatory buffer provided by grid assets. However, grid operator revenues dipped across major economies in the first half of the year and growing vulnerabilities for state-owned utilities in developing economies creates risks for timely future investments. Meanwhile, battery storage investment is proceeding at nearly the same pace as in 2019, with a large project pipeline likely to support growth next year,” according to the IEA report.
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