Wind and solar power plant are on track to together outstrip natural gas in installed capacity by 2023 – and coal a year later – globally, driven by record investment in renewables as the world's economies rebound from the impact of the Covid pandemic and clean-energy technology costs continue to fall, according to latest calculations from IHS Markit.
The clean-energy market is expected to see a “sprightly return to growth” in 2021, rising 8.5% from $235bn this year to $255bn and sustaining this level of spending through to mid-decade, a 9% increase over cumulative capex in 2015-2019, said the energy research group.
“When it comes to renewables, we may likely look back on 2020 not so much for the Covid-induced contraction in spending but for the sprightly return to growth,” said IHS Markit vice president of financial services Roger Diwan.
“The recovery of capital investment to pre-pandemic levels, coupled with falling costs that will give added weight to every dollar invested, is bringing renewed momentum as we head into the New Year.”
“The momentum behind these numbers definitely leans towards the upside,” he said.
PV is foreseen continuing to make up the majority (54%) of new investment and capacity additions in the global energy system during 2021-2025, with IHS Markit expecting a total $700bn total investment in the sector.
By 2025, by IHS Markit calculus, renewables will grow to account for an 18% share of global electricity generation, on the back of a $1.3trn capital spending spree.
Diwan flagged there was a “chance this new surge in capital spending for renewables could still exceed expectations”, noting that “countries and companies are accelerating their renewables ambitions, often anchored in net-zero emission targets, and a number are likely to focus post-Covid crisis spending on new green initiatives".
Growth in the offshore wind industry is forecast to “accelerate swiftly” during the next four years, driven by cumulative investment of $170bn, a nearly threefold increase from 2015-2019 levels.
Meanwhile, onshore wind capex is seen slowing during this period, mirroring a deceleration in land-based installations globally post-2021. Cumulative investment is predicted to be around $320bn, down from the 2015-2019 level of nearly $365bn.
IHS Markit expects the global benchmark capital cost for PV – both utility scale and distributed generation – in 2025 to be “roughly 40%” below 2017 levels while for onshore wind and offshore wind some 20% and 15% lower than three years ago, respectively.