Wind, solar payback times under a
year in some parts of world, says Rystad
Record energy prices, particularly in
Europe, are driving demand for renewables and energy storage. That is
changing the equation for utility solar and wind investment and
shortening project payback times to under a year in some regions.
Storage deployment, driven by recent policy developments around the
world, is also expected to get a big boost through to 2030.
Image: Aqua Mechanical/Flickr
The record-breaking run in power prices,
particularly in Europe, is creating a favorable investment case for
solar and wind projects, making it increasingly compelling to develop
renewable assets purely based on project economics.
According to Norwegian consultancy Rystad
Energy, current spot prices in Germany, France, Italy, and the United
Kingdom would all result in payback of 12 months or less. Considering
the average monthly spot prices for August in these countries were all
well over €400/MWh and the relatively low operating costs of
renewables, investing in utility-scale projects appear to be a
no-brainer.
For instance, for a generic 250 MW solar
project, assuming a long-term electricity price of €50/MWh ($49/MWh),
the expected post tax return is approximately 6% with a payback period
of 11 years,
Rystad calculates. A price of €350/MWh or above results in a
payback period of only one year while a price of approximately €180 –
the European Commission’s proposed price threshold results in the
payback time of five to six years.
Investors are seeing the opportunity.
According to Rystad, capital investments in renewables have increased
significantly and are set to reach $494 billion in 2022, outstripping
upstream oil and gas at $446 billion for the year.
“Capital investments in renewables are
set to outstrip oil and gas for the first time this year as countries
scramble to source secure and affordable energy,” says Michael Sarich,
senior vice president, Rystad Energy. “Investments into renewables are
likely to increase further moving forward as renewable project payback
times shorten to less than a year in some cases.”
Rise of storage
High energy prices but also newly adopted
climate legislation, including the US inflation Reduction Act and
European Union’s REPowerEU plan, are expected to give a big boost to
the global energy storage market.
In its
latest forecast, BloombergNEF says that energy storage
installations around the world are projected to reach a cumulative 411
GW/1,194 GWh by 2030. That is 15 times the 27 GW/56 GWh of storage
that was online at the end of 2021.
Driven by recent policy developments,
BNEF has revised its previous estimates up by 13% from the ones
presented in its 2H 2022 Energy Storage Market Outlook. This is equal
to an extra 46 GW/145 GWh. While an estimated 387 GW/1,143 GWh will be
added from 2022 to 2030, supply chain constraints will cloud
deployment expectations until 2024, says BNEF.
High energy prices but also newly adopted
climate legislation, including the US inflation Reduction Act and
European Union’s REPowerEU plan, are expected to give a big boost to
the global energy storage market.
In its
latest forecast, BloombergNEF says that energy storage
installations around the world are projected to reach a cumulative 411
GW/1,194 GWh by 2030. That is 15 times the 27 GW/56 GWh of storage
that was online at the end of 2021.
Driven by recent policy developments,
BNEF has revised its previous estimates up by 13% from the ones
presented in its 2H 2022 Energy Storage Market Outlook. This is equal
to an extra 46 GW/145 GWh. While an estimated 387 GW/1,143 GWh will be
added from 2022 to 2030, supply chain constraints will cloud
deployment expectations until 2024, says BNEF.
The United States and China are set to
remain the two largest markets, representing more than half of global
storage installations by the end of the decade. Europe, however, is
catching up with a significant ramp-up in capacity, driven by the
current energy crisis.
BNEF’s forecast suggests that the
majority of energy storage build by 2030, equivalent to 61% of
megawatts, will be to provide energy shifting – that is, advancing or
delaying the time of electricity dispatch. Co-located renewables-plus-storage
projects, in particular solar-plus-storage, are becoming commonplace
throughout the world, notes BNEF.
