Renewables spend set for new $243 billion record in 2021 – experts

The accelerating energy transition has created a new reality which would see capital expenditure for renewable energy projects set a new record spending of $243 billion in 2021, a Rystad Energy analysis shows.

According to the independent research firm in Norway, renewables CAPEX, which equals purchases from supply firms, is set for another record year, picking up where last year left off when spending hit $224 billion.

Rystad Energy compared the revenues of 170 listed suppliers exposed to the upstream oil and gas, wind, and solar markets after it discovered the 2020 financial results of some companies suggest more needs to be done.

“Our analysis reveals that while oil and gas-focused businesses on average saw revenue drop 23percent in 2020 from the previous year, wind and solar PV-focused businesses enjoyed an 18percent growth in sales,” Rystad Energy said.
By contrast, oil and gas CAPEX this year is expected to stay in line with the 2020s $306 billion, a far cry from the industry’s better days, as just in 2019 Exploration and &Production splurged $422 billion on supply purchases.

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“The spending gap between renewable energy and oil and gas is closing, as CAPEX for renewables is now just 22 percent below the estimate for upstream projects,” Rystard Energy said.

The report noted that most of the renewable energy spending will go towards onshore wind projects, rising to $100 billion from $94 billion in 2020.

For instance, solar PV spending is expected to climb to $96 billion this year from $88 billion last year, while offshore wind will see CAPEX grow to $46 billion from $43 billion.

Chinmayi Teggi, energy service analyst at Rystad Energy said last year’s events forced leading oil and gas businesses to look at strategies to reduce exposure to the risky market amid the energy transition.

“Oilfield service suppliers, for instance, have started a considerable transformation, hoping to be more relevant in a greener market and become a more attractive option for investors,” Teggi said.

Most of the expenditure is expected to from Asia, which has 156 gigawatts (GW) of capacity under construction as of January 2021, followed by Europe with 32 GW.

Rystad Energy is expecting much spending from China as a result of the country’s 800-megawatt (MW) Rudong offshore wind farm and the 2 GW Zhuozi County Project, as well as Orsted’s 1.4 GW Hornsea 2 project off the UK.

Chinese service suppliers, including LONGi Green Energy, Jinko Solar, and Trina Solar companies with expertise in manufacturing solar panels are expected to account for most of the growth.