Are oil and gas companies on the run?
While solar industry executives are likely to be drawn to estimates such as an anticipated 10% rise in PV investment in key markets this year, the more headline-grabbing content of the International Energy Agency’s latest global investment survey may concern the world’s oil and gas majors.
The latest edition of the annual report cites figures which
demonstrate non-state-owned fossil fuel companies are pulling away from
exploration in favour of exploiting their existing reserves. With companies
such as BP, Total, Shell and Eni pledging to ramp up clean energy spending to
placate activist investors, market developments accelerated by the Covid-19
pandemic appear to point to the fact the oil and gas majors could be on the
retreat from fossil fuels.
The International Energy Agency (IEA) study notes the reserves
held in the Middle East will enable state-owned players there to pick up the
slack – and market share – in the short term, as demonstrated by ambitious
liquefied natural gas investment plans announced by Qatar. Even in Qatar,
though, the effects of the energy transition are acknowledged by the fact plans
to develop new deposits have been accompanied by a big commitment to invest in
carbon capture, use and storage, in a year the IEA predicts could be pivotal
for the as-yet unproven technology, which would offer fossil fuel majors more
time to adapt.
Back on the solar beat, the IEA document said the technology
was eclipsed by the progress of rival intermittent renewable power source wind
last year, although, confusingly, the numbers don’t stack up where the report
states global wind capacity almost doubled to 114 GW, led by 70 GW in China and
more than 15 GW in the U.S. pv magazine has asked the IEA about the apparent
discrepancy.
Solar companies can take solace from the IEA’s prediction PV
spending will surpass wind investment this year, with a rise of more than 10%
in China, the U.S. and Europe, following a year which saw new PV generation
capacity deployment rise almost 25%, to nearly 135 GW.
Even in markets where large scale solar retreated, there was
an uptick in small scale installations, with the IEA pointing to Vietnam, where
the winding down of a large scale incentive program was counterbalanced by
rooftop arrays – with 9 GW added.
With the report estimating total energy spending will rebound
almost 10% to $1.9 trillion this year – including $530 billion for new
generation capacity of which 70% will be devoted to clean power – the IEA said
record levels of sustainable debt and green bond issuance last year mean there
is plenty of cash available for renewables, but not enough high-quality
projects or dedicated channels to ensure it translates into panels – or
turbines – on the ground.
The document reported battery storage investment rose almost
40% last year, to $5.5 billion, with grid scale facilities accounting for a 60%
rise as the U.S. and China added 1 GW of capacity. The report did not give a
megawatt-hour volume for the new capacities deployed, but did note battery
costs fell an average 20% during 2020.
Low-carbon hydrogen spending also hit record levels last
year with the report stating $70 million worth of electrolysers came online
although the majority of them will “run on grid electricity, at least
initially.”
Storage and green hydrogen also accounted for a healthy chunk
of the venture capital funding which flowed into start-up energy companies,
notably in the U.S. and Europe. The fact more cautious institutional investors
are starting to have exposure to such innovative companies in their portfolios,
according to the IEA report, could be another indicator of lean times ahead for
the fossil fuel industry.
The message from the IEA on energy sector R&D
investment, though, was the same as for overall global spending levels: While
there are encouraging signs in the nascent post-Covid recovery, not nearly
enough is being done to keep the world on track for less than two degrees
Celsius of global heating, let alone sub-1.5 C.
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