The wind is invested in clean energy

The rapid downward trend in wind and solar equipment costs since 2014 has been reversed due to deteriorating supply chains following the Covid-19 outbreak and inflationary pressures in the global economy.

Rising costs of renewable energy equipment pose the risk of slowing clean energy demand growth, in this period when the clean energy transformation should accelerate and spread away from crisis-causing fossil fuels climate.

Following the disruptions caused by the Covid-19 epidemic in the supply chain, the deteriorating global economic outlook, high inflation and the sharp increase in borrowing costs by central banks to reduce inflation negatively affect costs and investments in clean energy equipment.

While wind turbine costs decreased by 40 percent between 2014 and 2019, this rate stood at 33 percent for solar panels.

Costs have risen again since the beginning of 2020, when the effects of the epidemic began. Wind turbine costs are now 23 percent higher than they were at the start of 2020, and solar panel costs are 20 percent higher.

FROM 40 PERCENT DECREASES TO 20 PERCENT

Emre Tiftik, director of Sustainable Research at the International Finance Institute (IIF), said the 40 percent drop in costs for wind and solar power equipment in the 2014-2019 period is no longer in sight.

Tiftik noted that this rate has decreased to 20 percent: “Prices have increased since the beginning of 2020. The disruption caused by Covid-19 in supply chains, disruptions in China, demand for a clean energy transition and problems in the global economy are triggering these increases. The 40 percent decrease in equipment costs was reduced to 20 percent,” he said.

Mohair drew attention to the fact that while demand for clean energy continues to rise, high costs have slowed the pace of demand growth.

Tiftik pointed out that these processes took 50-60 years if we look at previous energy transformation periods:

“The transition from wood to coal, from coal to gas and oil, are processes that last between 50 and 60 years. At least that’s how the transformations have been since the 1850s. If these energy sources are close to 25 percent of the electricity production, then the prices in a country are falling and it is possible to call these sources as cheap energy sources. at that moment. These rates do not exist today in many countries.

‘WAITING FOR A DIFFICULT PROCESS’

When the total share of wind and sun in electricity production reaches 25 percent, prices go down because this means that the necessary sectors of infrastructure, human resources, logistics, and technology are formed. However, until this pace is reached, things will be a bit difficult and government support is a must. The faster we achieve the clean energy transformation, the faster we can lower prices.

Countries have commitments to achieve net zero emissions by 2050. The share of wind and sun should increase to 50 percent in this period. However, we are not on track to reach this level. Although there has been a large increase in the capacity of these resources, the rate of transformation is not at the required level. Government support is needed to achieve this, but all countries must include it in their list of priorities. The global economy is not so healthy and there are political tensions. These closely affect the energy sector. Therefore, a difficult process awaits us.”

Tiftik said that clean energy transformation trends differ in Europe, the United States, China and developing countries.

Recalling that there has been no growth in clean energy investments since 2019 in developing countries, with the exception of China, Tiftik said, “Priorities have changed in these countries due to the problems caused by the epidemic and the inflation effects. Care also needs to be taken when comparing developing countries with already developed countries. It’s easy to shut down a coal plant in Europe because it’s going to expire soon anyway. But, especially in Asia, these facilities are not old and their closure can cause problems such as rising energy prices and unemployment. Therefore, the transformation must be evaluated on a country-by-country basis.” he made the comment of him.

WILL ACCELERATE IN THE LONG TERM

Eurasia, Middle East and Africa energy director at the European Bank for Reconstruction and Development (EBRD) Sustainable Infrastructure Group, Aida Sitdikova, explained that markets experienced extraordinarily low interest rates, even during the epidemic period, but inflation record led to sharp increases in interest rates.

Noting that there is a common view that interest rates will remain higher for a while until inflationary pressures are removed, Sitdikova said: “All these factors, plus geopolitical turmoil causing price fluctuations for energy resources traditional and energy security concerns, as well “The energy transformation in the regions where the EBRD operates lays a complex foundation for it,” he said.

Over the past three years, developers of wind and solar projects have faced massive supply chain disruptions, rising equipment costs and debt, Sitdikova said.
Sitdikova noted that the rising cost of borrowing has also led to a tangible increase in project costs: “High interest rates will continue to be a factor affecting investor returns in the short term and will make projects more more weighted in terms of capital.

RECORD IN THE PARTICIPATION OF WIND AND SUN IN PRODUCTION

However, the long-term competitiveness of renewable energy sources without the risk of carbon prices or idle assets in fossil fuel sources will prevail, particularly as countries focus on energy security and broader policy implementation. climate conditions to reach net zero by mid-century. Therefore, we believe that the green energy transformation will continue at an accelerated pace, despite the short-term effects of high interest rates.” made his assessment.

Sitdikova added that despite the current difficult market conditions, significant capacity increases are being seen every year in renewables.

According to data from the International Energy Agency, global energy investments are expected to reach $2.8 trillion this year, of which $1.7 trillion will go toward clean energy technologies.

According to data from London-based think tank Ember, the share of wind and solar power in global electricity generation reached a record level of 12 percent by the end of 2022. This rate rose to 15.5 percent in Turkey. (AA)