In 2022, global energy investment will amount to $2.1 trillion - Rystad Energy
The record level will be reached primarily due to oil and gas
In 2022, global energy investment will set a record - it will exceed $2 trillion, Rystad Energy analysts predict. A significant share of investment will take oil and gas. Rising oil, gas and electricity prices, combined with European Union (EU) targets to reduce reliance on supplies from Russia and inflation following the Covid-19 pandemic, will push global energy investment this year to $2.1 trillion, Rystad Energy reports following a company study.
Thus, this year, investment for oil and gas exploration and production will increase by $142 billion (+16%) compared to 2021 and amount to $658 billion: oil and gas producers around the world increase their investment budgets to increase production to 99.6 million b/d in total. Investment for LNG will amount to $401 billion (+15%) to ensure the production of 396 million cubic foot per day, to other fossil fuels - $ 396 billion (without dynamics).
Costs in solar energy will grow by as much as 64% and amount to $191.47 billion, in onshore and offshore projects in wind energy - $209.06 billion (+24) and $43.79 billion (-15%), respectively. Rystad forecasts investment in hydrogen projects at $7.88 billion (up 37%), and on carbon capture and storage (CCS) at $5.73 billion, but CCS investment growth will be 54% compared to 2021. Significant growth should also be shown by investment in geothermal energy - 38%, investment will amount to $4.75 billion.
In general, investment growth in green energy will be higher than in the fossil fuel sector. Researchers note the market's concern about the disruption of energy transition plans due to the conflict between Russia and Ukraine - in its absence, the growth of investment in oil and gas would be less, and the share of "green" energy in global investment in energy would be slightly more than today's 31%
In 2022, based on the current list of projects, the global renewable energy capacity will increase by 250 GW, and green energy spending will increase by 24%, or $125 billion. Solar and wind energy will make the main contribution to the generation growth: by about 140 GW and 110 GW, respectively, according to Rystad Energy.
“The world is now investing in energy more than ever before. We previously saw such numbers in 2014. There is a significant shift for investment in green energy; it is growing while oil and gas investment is falling. However, spending on other fossil fuels such as coal has remained constant,” said Audun Martinsen, head of energy services research division at Rystad Energy.
Another major factor pushing energy costs to new highs is global inflation – the rising cost of materials, labor and freight rates caused by the pandemic and sanctions against Russia. Compared to the level of 2020, the cost of projects in the oil and gas industry increased by 10-20%, mainly due to higher steel prices and more expensive logistic support. In the field of renewable energy, inflation also affected the cost of materials (lithium, nickel, copper and polysilicon) for the production of batteries and solar panels, which led to an increase in the cost of green energy projects by 10-35%.
As for the EU's search for alternative energy suppliers in the face of sanctions against Russia, "this is only a temporary solution, since the EU pursues a clear goal - to reduce the EU's dependence on energy from fossil fuels in general," the researchers note. Green energy, through solar, wind, hydrogen and CCS initiatives, will be key to both energy security and the EU's energy transition goals. "In March, the European Commission unveiled a plan to ensure Europe's independence from Russian gas, and the REPowerEU department of the commission developed a plan according to which the share of renewable energy in energy generation should be 45% by 2030," Rystad Energy explained.
