"Energy transition reaches tipping point in 2020"

" \n Last year was a tipping point in the green transition, with renewables avoiding the\u00a040% slump\u00a0in global foreign direct investment (FDI) and low oil prices intensifying energy majors\u2019 attention on diversification.\u00a0 \n \n\n \n In 2020, greenfield foreign investment in renewables exceeded flows into fossil fuels for the first time on record, according to investment monitor\u00a0fDi\u00a0Markets. Renewables FDI totaled $85.5bn, down 11.2% from 2019, while greenfield investment into coal, oil and gas plunged nearly 62.3% to around $44.1bn.\u00a0 \n \n\n \n \u201cWe see 2020 as a turning point in the energy transition\u201d said Edurne Zoco, executive director for clean technology and renewables at IHS Markit. The firm\u2019s data shows that global capital expenditure in renewables (excluding hydropower) was up 2% on 2019, suggesting that FDI is just one part of the sector\u2019s broader resilience to the pandemic. \n \n\n \n <img src=\"https:\/\/www.fdiintelligence.com\/var\/storage\/images\/media\/images\/a-paradigm-shift-in-the-making-renewables-overtake-oil-gas-in-2020-700x500-webmed-copy\/2604775-1-eng-GB\/a-paradigm-shift-in-the-making-renewables-overtake-oil-gas-in-2020-700x500-webmed-copy_reference.png\" alt=\"a-paradigm-shift-in-the-making--renewables-overtake-oil-gas-in-2020-700x500-webmed copy\" title=\"a-paradigm-shift-in-the-making--renewables-overtake-oil-gas-in-2020-700x500-webmed copy\"\/> \n \n\n \n This resilience is explained in part by its independence from fuel prices, which collapsed in 2020 as lockdowns dried up demand and a spat between oil-producing countries led to a glut of supply. Another driver is clean energy\u2019s growing cost-competitiveness. \u201cThe steadily declining capital cost of renewables makes capital increasingly efficient,\u201d says Ms Zoco, noting that the 14% growth in Capex which IHS Markit anticipates over the next five years could represent over 50% growth in installed capacity. \n \n\n \n But what really propelled the sector through 2020 was investors\u2019 long-term commitment to transitioning toward a low-carbon economy. \u201cWhen this started we asked ourselves if Covid-19 was an opportunity or a challenge for renewables development,\u201d said Ms Zoco. \u201cObviously we can\u2019t neglect the impact of the pandemic over the last year. But the reality is there is liquidity in the market, and [there is] strong demand for renewable and other cleantech companies and assets which are looking like a good bet for many investors.\u201d She admits renewables investment in 2020 held-up better than initially expected. \n \n\n \n Greenfield FDI into European renewables grew nearly 70%. This was driven by the UK, France, Poland, Portugal, Italy and Ireland, which collectively nearly trebled their 2019 levels by attracting $30.2bn of investment. Further east, Japan, Vietnam and China made gains too, although the latter is exclusively down to a project by Hong Kong-based Panda Green Energy Group. \n \n\n \n No direct trade off \n \n\n \n 2020 was a pivotal year in the green transition for other reasons, too. The EU, China, South Korea and Japan all announced net-zero emissions targets, along with oil majors such as Total, BP and Shell. Meanwhile,\u00a0renewables overtook fossil fuels as the EU\u2019s main source of electricity. \n \n\n \n But analysts warn against reading too much into the fact that fossil fuels\u2019 and renewables\u2019 fortunes have diverged throughout the pandemic. Wood Mackenzie\u2019s head of upstream analysis, Fraser McKay, says the circa-30% drop in upstream oil and gas expenditure in 2020, as revealed by the firm\u2019s Lens platform, was \u201centirely\u201d caused by the collapse in prices. \n \n\n \n Low oil prices and concerns about long-term demand will, however, accentuate energy transition considerations when petroleum firms start to reinvest. \u201cThese factors have been gaining prominence in how companies approach new investments and strategies, and there is nothing like a downturn to focus the minds of the people who matter in the industry on sustainability and resilience,\u201d said Mr McKay. \n \n\n \n Their immediate focus will be on short-term investments. \u201cAnything that doesn\u2019t return any cash relatively quickly or has a long life is very difficult to think about at the moment,\u201d he said. Fossil fuels are expected to bounce back, but IHS Markit expects cumulative investments in 2021\u20132025 to be 20% lower than 2015\u20132019 levels. \n \n\n \n For oil majors, last year\u2019s reminder of the urgency with which they should be diversifying could not have been more timely. \u201cTo reach any 2050 target you will need to make major investments in the next 10 years. That is clear,\u201d said Ms Zoco. \n "

"Energy transition reaches tipping point in 2020"

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