- Renewable energy to receive 25% of all energy investments in 2021
- Favourable interest rates for renewable energy over oil & gas will drive growth
- Carbon pricing system could provide equal footing for all clean energy technologies
Analysts at Goldman Sachs have predicted that investments in renewable energy will overtake those in hydrocarbons for the first time in 2021. Their research shows that renewables will receive 25 per cent of all energy investments next year (a 15 per cent increase when compared to 2014), and represent a $16 trillion investment opportunity over the next ten years.
Recent trends in global energy financing will drive investment in renewables. Investors are shying away from the oil and gas sector, indicating where they think the long term future of energy lies. This anticipation is being reflected in financing rates; borrowing for new oil and gas exploration will see companies pay as much as 20 per cent interest on loans while renewable energy developers would pay just 3 per cent.
This increased spending on renewable energy may create as much as 15 to 20 million jobs globally. According to the researchers, the high cost of capital for hydrocarbon development will lead to underinvestment that will likely drive up oil and gas prices, almost ensuring an even faster transition to renewable energy. One downside to this new trend is that promising decarbonisation technologies like carbon capture and clean hydrogen will not have access to the low-interest financing available to wind and solar; as these are seen as more mature sectors with proven returns on investments.
African countries will need to adequately position themselves to take the opportunity of this trend in investments. With renewable energy set to provide energy to millions in Sub-Saharan Africa over the coming decade, governments need to implement policies that create an enabling environment for clean energy investments, especially since the economic stakes are getting higher. You don’t want your economy to be the one that misses out on this opportunity.