Follow the money

Billions of dollars continue to be committed to green projects globally, underpinning the energy transition, even as sanctions and bans dominate another set of headlines related to Ukraine. Leading renewable energy companies like Vestas, Orsted, and Sunrun received a boost in the stock markets earlier this week amid speculation that more solar and wind will be built to reduce some countries’ dependence on imported fossil fuels. Energy security is being debated in every strategy room across the world as the ripples of geopolitical developments in Europe touch almost every country.

Oil tanker rates have spiked and in the metals market, prices of nickel and aluminum jumped. Supply chain challenges are under scrutiny, and another push for localisation is imminent. US President Joe Biden reiterated his “Make in America” slogan in his State of the Union address on March 1. “Instead of relying on foreign supply chains, let’s make it in America,” he said.

These developments may augur a jump in energy transition spending. Global investment in the low-carbon energy transition totalled $755 billion last year, up from $595 billion in 2020, according to the latest update from BloombergNEF. This includes investment in renewables, energy storage, charging infrastructure, hydrogen production, nuclear power, recycling and carbon capture, as well as end-user purchases of low-carbon energy devices, such as small-scale solar systems and zero-emission vehicles.

The largest sector was renewable energy, which attracted $366 billion, a 6.5 per cent increase from 2020. Electrified transport grew the fastest, however, surging by 77 per cent to $273 billion. The next largest in terms of spending were electrified heat and nuclear energy, at $53 billion and $31 billion, respectively.

Offshore wind in US

The just-concluded offshore wind seabed lease auction in the US yielded $4.4 billion from six developers that won the right to build wind farms off the coast of New York and New Jersey. The six tracts on offer in the New York Bight span 488,201 acres — for which the auction winners agreed to pay between $6,000 and $10,700 per acre — and could host almost 9 GW of new capacity. TotalEnergies and Shell were both part of winning joint ventures.

BloombergNEF expects global offshore wind to enter a sustained period of growth, with new installations reaching over 35 GW annually by 2030. New capacity this year is expected to exceed 10 GW. It will also be an important year for the nascent floating wind market, as significant research funding and supply chain investment flows in.

India is yet to finalise its offshore wind policy and hold its first auction. The level of interest, however, remains high. Germany’s RWE and Tata Power announced a partnership last month to explore the potential for “joint development” of offshore wind projects in India. The two companies will conduct technical and commercial site assessments to facilitate the establishment of an offshore wind market in India.

Buying into biofuels

Chevron agreed to buy green diesel producer Renewable Energy Group for $3.1 billion earlier this week. Oil and gas majors are decarbonising their operations and investing in low-carbon technologies.

A record $21 billion was invested by oil and gas companies in low-carbon assets last year, up 53 per cent from the 2020 estimate, according to BNEF. Wind, solar and biofuels are the most popular investment targets.

India’s oil-refining and petrochemicals giant Reliance Industries is also pivoting operations towards the green economy. Last week, Chairman Mukesh Ambani, who is also Asia’s richest person, reiterated that he saw the country emerging as “a global new energy leader” exporting green energy worth billions of dollars. Policy changes are also ratcheting up ethanol blending and biodiesel use in the country.

Finland’s Neste and Marathon Petroleum of the US announced a 50:50 venture to produce renewable diesel in California. The parties will each invest $1 billion in the plant. “Through this joint venture Neste obtains a 50 per cent interest in the Martinez Renewable Fuels project. The production output will be split evenly between the partners, and each partner will be responsible to market the products under its own brand and responsibility,” Neste said in a statement.

India outlook

New wind and solar installations in India are set to total almost 13 GW this year, according to the latest forecast from BNEF, rising up to 14 GW in 2023. India’s ambition to achieve net-zero emissions by 2070, and its interim target of 500 GW of zero-carbon generation capacity by 2030, will drive growth in the near term. Green bond issuances last year were at a record $9.7 billion, while funding secured for constructing new renewable energy plants topped $11 billion.

India is also in the lead globally in auctioning renewable energy capacity. It has cumulatively awarded 108 GW through auctions since 2003, with another 29 GW announced. China is next in line, having awarded 126 GW, followed by France, Germany, and the Netherlands.

The writer is the New York based editor – global policy for BloombergNEF, reachable at vgombar@bloomberg.net