Rystad Energy research predicts that low-carbon project spending will rise by $60 billion this year, 10% higher than in 2022, driven by wind development but also by increased expenditure for hydrogen and carbon capture, utilization, and storage (CCUS) infrastructure.
After two years of rising costs, cost-conscious developers are spending less, slowing total spending growth to 20%.
Green industry investments rose 21% in 2022, surpassing oil and gas spending for the first time, but inflation-spooked developers may slow spending growth this year. Spending should rise as inflationary pressure decreases.
In 2023, geothermal, CCUS, hydrogen, hydropower, offshore and onshore wind, nuclear, and solar investments will reach $620 billion, up from $560 billion last year. We calculated project equipment and materials, engineering and construction, wells, operations and maintenance, logistics, and vessels.
Solar and onshore wind will make up the majority. Solar investments would reach $250 billion this year, up 6% from 2022. Polysilicon, the main cost driver of solar PV cells, is reducing in price, therefore capacity growth will exceed dollar investments. Despite a modest investment value increase, installed capacity is predicted to expand 25% to 1,250 gigawatts (GW).
Industry spending will vary greatly. Hydrogen and CCUS will grow 149% and 136% annually. In 2023, hydrogen spending will reach $7.8 billion and CCUS investments $7.4 billion.
Hydropower investments are predicted to decline while nuclear investments remain steady in 2022. Offshore wind investments will rise 20% to $48 billion, while onshore wind investments will rise 12% to $230 billion. Geothermal spending is predicted to rise 45% from a low base.
Inflationary pressures affect low-carbon investments more than fossil fuel industries because they are shorter-cycled. Project plans, permits, and company and government rewards suggest investment growth this year. Each project’s investments were calculated based on its attributes and 2023 unit pricing forecasts.
Which sectors profit most?
Operations and maintenance will climb 16% this year. These enterprises are more susceptible to the overall installed operating capacity, which will grow at a similar pace through 2022 when last year’s additions begin full operations. High consumer inflation is anticipated to raise skilled worker pay, which will increase segment spending.
Offshore project and marine trade-focused logistics and vessel companies are expected to earn 15% more this year. Equipment, materials, engineering, and construction, where most global investment dollars are spent, are predicted to grow by 9% annually. Geothermal drilling and CO2 injection will boost the small market of producers of low-carbon, well-related services by 33% this year. Despite the considerable increase, market investments will reach $3.7 billion.
Some providers favor regional clients and project centres over global markets. This year’s confirmed projects suggest that Africa will have the biggest investment rise at 26%, driven by onshore wind projects in Egypt. Australia is second with 23% growth across most sectors.
China’s solar and wind goals drive Asian growth of 12%, while the US Inflation Reduction Act, renewables, and CCUS will boost North American investments by 9% this year. High inflation and a regional supply chain crisis in Europe have resulted in a projected investment growth of 7%, much below the REPowerEU target.