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Annual spending levels in low carbon would need to be two times
the current projections to meet more ambitious climate objectives
by 2030.
Overall capital expenditure efficiency for low carbon power
technologies to improve by 30% by 2030.
There is a significant upside to these numbers, due to several
recent developments that have brought the geopolitical dimension of
energy and energy independence into sharp focus.
Low carbon power accounted for 30% of the $1.5 trillion
capex spending in the energy sector supply-side [1] in 2021, up from 22%
in 2015. Transmission and distribution accounted for the
largest individual share at 23%, spending in upstream and non-hydro
renewables was roughly equivalent at 22% each. Utility-scale solar
PV and smaller, distributed PV systems made up together a third of
low carbon power spending. Onshore- and offshore wind accounted to
20% and 14%, respectively, the latter benefitting from an
unprecedented installation rush in Mainland China.
Energy capex spending in 2022-30
Cumulative spending in low carbon power during the rest
of the decade is expected to exceed $4.4 trillion [2] and reach $530
billion per year in 2030. Spending increases are most
spectacular for hydrogen generation, increasing from a very low
base to nearly US$70bn per year towards the end of the decade.
Battery spending also continues to grow fast, at around 10% per
year.
Spending increases are greater in the Africa and Middle East
region, starting from a low base. Low carbon spending in North
America stagnates after a burst in the next few years, as the
anticipated phase-out of local tax incentives takes a toll on
renewable capacity additions. The share of low carbon in total
energy spending increases everywhere except in Asia Pacific where
it remains roughly constant at 35%, and the Americas where it drops
slightly from 23% to 19%.
Because of falling cost, the amount of capacity
installed for each dollar spent in low carbon technology increases
faster than for any other segment. Overall capital
investment efficiency for low carbon power technologies improves by
30% by 2030. Capital expenditure per unit of capacity of green
hydrogen production drop the fastest as benefits from scaling up
electrolyzer unit capacity materialize, making a dollar spent at
the end of the decade 2.7 times more efficient than in 2021.
Generation efficiency for renewable power will also improve by 23%
while efficiency gains will be much lower for conventional energy
sources as costs could even increase due to more stringent
environmental constraints.
Upside to the 2030 outlook - renewables accelerate
growth given increased focus on energy independence
There is a significant upside to these numbers, due to
several recent developments. First and foremost, Russia's
invasion of Ukraine has brought the geopolitical dimension of
energy into sharp focus, with energy independence becoming a key
topic, particularly in Europe. This is likely to boost spending in
all segments of the energy sector as the region tries to reduce its
energy-related imports. Doubling renewables additions in Europe
from our current outlook could add between $390-$580 billion in
spending, depending on timing and the technology mix.
Higher-than-anticipated government driven capacity increases from
Europe as well as Asia could put additional pressure on already
tight supply chains, contributing to upwards pressures on higher
prices and consequently higher per MW spending in the
near-term.
Annual spending levels in low carbon would need to be
twice as high in 2030 as they are in our current projections to
meet more ambitious climate objectives. Current spending
projections are not sufficient to fund a capacity build-out that
would put the energy sector onto a path to reach net zero. Annual
spending in low carbon power technologies would need to increase
sharply, and reach around $1tr in 2030, with renewables accounting
for $770-930 billion annually depending on the scenario [3].
[1]
Including upstream oil and gas, mid- and downstream, coal mining,
fossil fuel power generation and transmission and distribution
infrastructure, and low carbon power. Low carbon power includes
non-hydro renewables, batteries, green hydrogen production,
hydropower and nuclear, and carbon capture utilization and storage
(CCUS). This analysis does not include investment spending on the
demand side of the energy system, such as on transport vehicles and
networks, the buildings sector, or nonenergy industry.
Francesco d'Avack is an Associate Director on the Clean
Energy Technology team, focusing on market analysis for renewable
power technologies worldwide.
Dr. Edurne Zoco is an Executive Director for the Clean
Energy Technology & Renewables , leading the group's research
activities across renewables, supply chain, and carbon
sequestration.
Our new Clean Energy Technology report examines the levelized cost of CO2 avoided (LCCA) for #CCUS projects in key… https://t.co/VXwETPMJ6N
May 18
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