Global low-carbon investments to rise by $60bn in 2023

Investments in green sectors surged 21% in 2022 to overtake related oil and gas spending for the first time. However, the growth in total spending was a slowdown from recent years – which averaged 20% annual increases, reports the market analyst. This trend is predicted to continue in 2023 as inflation-spooked developers rein in spending growth after two years of soaring prices.
  
Commenting on the forecast, Audun Martinsen, Rystad Energy’s Head of Supply Chain Research, says: ‘The weaker-than-expected growth is not a reason to panic for those in the low-carbon sector. Rampant inflation typically triggers fiscal restraint across industries, and spending will likely bounce back in the coming years. The outlook for hydrogen and CCUS is especially rosy as technology advances, and the large-scale feasibility of these solutions improves.’

Investments in the geothermal, CCUS, hydrogen, hydropower, offshore and onshore wind, nuclear and solar industries are forecast to hit $620bn in 2023, up from about $560bn last year. Service segments included in Rystad’s analysis calculations include project equipment and materials, engineering and construction, wells, operations and maintenance, and logistics and vessels.

Solar and onshore wind are expected to contribute the most by a sizable margin. Spending on solar investments is forecast to total $250bn this year, rising only 6% over 2022. However, thanks to the falling cost of polysilicon, the primary cost driver of solar photovoltaic (PV) cells, capacity growth is predicted to be more substantial than dollar investments suggest. Despite a relatively insignificant rise in investment value, installed capacity is projected to swell by roughly 25% to 1,250 GW.

Spending growth is forecast to vary widely across industries. Hydrogen and CCUS are expected to see the most significant annual increase, growing 149% and 136%, respectively. Total hydrogen spending is predicted to approach $7.8bn in 2023, while CCUS investments are forecast to total about $7.4bn.

In contrast, the hydropower market is expected to shrink over 2022, while nuclear investments are forecast to stay relatively flat. Onshore wind investments are projected to increase by 12% to about $230bn, while offshore wind spending is expected to jump 20% to $48bn. Expenditure in geothermal is expected to jump significantly – about 45% – albeit from a relatively low starting position.

Regional considerations 
Some investors are not targeting the global market, preferring to focus on regional clients and project hubs, notes Rystad Energy, reporting that the location of confirmed projects this year shows that Africa is set to attract the highest investment growth with a 26% increase, mainly driven by onshore wind projects in Egypt. Australia takes second place, with 23% growth and expansion across almost all sectors.

Asian growth of 12% is heavily impacted by China’s ambitions within solar and wind, while the US Inflation Reduction Act and a step-up in renewables and CCUS will help push North American investments up 9% this year. Europe is challenged by high inflation and a regional supply chain in crisis, resulting in a projected investment growth of 7% – much lower than the tempo needed to meet the European Union’s REPowerEU ambitions, according to Rystad Energy.