The energy crisis has steered investments in a sustainable direction

Photo by: Carsten Koall / Getty Images

A new report from Rystad Energy shows that cumulative investment in renewables will be higher than in fossil fuels in 2022. They should exceed oil and gas spending on new projects by almost $50 billion as early as this year. Meanwhile, skyrocketing electricity prices are reducing the payback period for solar and wind installations to less than a year.

The report says investment in renewable energy is projected to reach $494 billion in 2022. Oil and gas, on the other hand, will see $446 billion invested. Rystad analysts say high spot electricity prices, especially in Europe, have prompted a shift in investment towards wind and solar power, as the potential payback period adds to the attractiveness of the renewable energy economy.

Previously, the payback on new wind and solar photovoltaic projects was not particularly impressive. The systems often depended on subsidies to achieve self-sufficiency. Such costs may have made things worse amid the energy crisis, but according to Rystad, current spot prices in Germany, France, Italy and the UK will result in a payback period of 12 months or less for renewable energy systems.

In June, the International Energy Agency (IEA) predicted that global energy investment will grow by 8% this year to $2.4 trillion, with most of the growth coming from clean energy investment.

According to the IEA, the growth in clean energy spending is mainly in advanced economies and China, while in some markets energy security concerns and high prices are prompting increased investment in fossil fuel supplies, primarily coal.

At the moment, according to Rystad, most European solar and wind projects are not benefiting from the current high prices, but that will soon change. “Both developers and financiers should try to get projects up and running as quickly as possible and with maximum exposure to wholesale prices, because once the initial costs are recovered, the returns will be very tangible, even if prices fall to historical levels,” the report says.

Obviously, it is the situation with the energy crisis that has given a strong impetus to the switch to renewable energy sources. It is possible that humanity will soon enter a new period of development based on a more sustainable and “green” energy base.

Cover photo: Armand Burger / iStock