In some parts of the world, the payback time for wind and solar is less than a year
Record energy prices, particularly in Europe, are driving demand for renewables and storage. This is changing the way the new energy market develops, and in some areas project payback periods have shrunk to less than a year. Energy storage and deployment are also expected to increase significantly by 2030, driven by recent policy developments around the world.
Electricity prices in Europe have risen to record levels, creating a favourable investment climate for solar and wind energy projects, making them increasingly attractive.
Currently, Germany, France, Italy and the UK all have returns on solar and wind investments of 12 months or less, according to the agencies. Given the average investment price in these countries in August, coupled with the relatively low operating costs of renewables, investing in solar and wind projects seems like a no-brainer.
For example, for a 250-megawatt solar project, assuming a long-term electricity price of €50 / MWH, the expected after-tax return is about 6% over an 11-year payback period, Continuous reckoning by the relevant agencies. A price of €350 / MWH or more would only result in a one-year payback period, while a price of around €180 (the Commission's proposed price threshold) would halve the payback period to five to six years.
This will be a huge opportunity for investors. Capital investment in the renewable energy sector has increased significantly and is expected to reach $494 billion by the end of 2022, surpassing the $446 billion in the oil and gas sector, according to relevant agencies.
This year, capital investment in renewables will overtake oil and gas for the first time as countries scramble to secure safe and cheap energy, agencies say. Investment in renewable energy is likely to rise further as the payback time for renewable projects shrinks to less than a year.
High energy prices and the introduction of climate legislation, including the U.S. Inflation Reduction Act and the European Union's REPowerEU program, are expected to give a big boost to the global energy storage market.
China and the United States are now by far the world's two largest markets.
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