Tuesday 18 October 2022

High spot electricity prices, particularly in Europe, are changing the utility wind and solar investment narrative as potential payback periods of under a year could start a race to develop renewable assets purely based on project economics, Rystad Energy research shows.

Capital investments in renewables have also increased significantly and are set to reach $494 billion in 2022, outstripping upstream oil and gas at $446 billion for the year, according to Rystad Energy research. This is the first time that investment in renewables is set to be higher than for oil and gas.

Up until now, returns on renewable energy projects (solar PV and wind) have been unspectacular, primarily relying on subsidies to get projects over the line. Cost pressures due to recent commodity and supply chain issues should have made matters worse as they have reversed years of rapid unit cost improvements in the sector. However, Rystad Energy analysis demonstrates current spot prices in Germany, France, Italy, and the UK would all result in paybacks of 12 months or less.

Capital investments in renewables are set to outstrip oil and gas for the first time this year as countries scramble to source secure and affordable energy. Investments into renewables are likely to increase further moving forward as renewable project payback times shorten to less than a year in some cases.

says Michael Sarich, senior vice president, Rystad Energy.

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