Price of entry into wind or solar may be higher than expected in 2022

Oil&Gas Materials 11 January 2022 14:25 (UTC +04:00)

BAKU, Azerbaijan, Jan.11

By Leman Zeynalova – Trend:

Oil and gas players planning to push into wind or solar in 2022 may find the price of entry is higher than expected, Trend reports with reference to Westwood Global Energy Group.

“While many sources believe most commodity price increases seen in 2021 will subside this year, potentially leading to flat or falling oil prices, industrial metals could still see pricing volatility. Meanwhile, global supply chain problems could last two years more, particularly if coronavirus variants such as Omicron cause new lockdowns. These issues will affect all infrastructure projects,” reads the latest report released by the company.

But one major impact will be on wind and solar plants, where key commodity and freight costs represent around 15 percent of capital expenditure, Westwood Global Energy analysts believe.

“The solar industry has an added complication in the form of polysilicon shortages. The situation is leading to projects being postponed or abandoned. This could have two implications for oil and gas. The first is that a drag on renewables buildouts could somewhat prolong demand for fossil fuels, although this effect is likely to be minimal in the scheme of things. The second is that oil and gas players pushing or planning to push into wind or solar in 2022 may find the price of entry is higher than expected, and the timeframes for projects are longer,” the report says.

Arguably, Westwood Global Energy Group notes, one of the main things to come out of the 2021 United Nations Climate Change Conference, or COP26, was an agreement on the need to return to the negotiating table this year.

“For national leaders, there is pressure from peers not to come away from COP27 with vague promises and watered-down targets. While the outcome of any COP is hard to determine in advance, methane emissions emerged as a soft target last year and are likely to receive further focus this year. Coal’s days are also numbered, after which attention is likely to move to the decarbonization and future role of gas. The EU Taxonomy discussions now taking place illustrate how challenging it may be to get gas to be seen as a transition fuel. And then, of course, there will be new nationally determined contributions towards net zero. What will emerge on this front is anyone’s guess, although research suggests China could be among the countries bringing carbon neutrality dates forward,” says the report.


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