Investments in renewable energy sources and in compatible energy infrastructure will also record growth this year. The analysis noted the growth trend of investments in this sector already last year. This is to be expected, especially considering that the war in Ukraine is unfortunately being delayed, and this will directly affect energy prices, and will continue to create uncertainty and difficulties in the supply and delivery of energy.
The fact is that last year precisely as a result of the energy crisis, large energy companies made historically enormous profits from fossil fuels. This implies that this year, due to the potential for making new profits, a large part of the investments will be directed to fossil fuels.
However, despite the negative market trends, according to the analysis, investments in renewable energy sources will be attractive for investors this year as well. Government policies, especially those of large countries such as the USA, EU, China, Brazil and others, played a significant role in this process and are a positive signal for investors.
They, in turn, want investments that will bring a solid profit margin. Last year showed that investments in renewable energy sources are more vulnerable to inflation compared to fossil fuels. In addition to inflation, an additional negative factor is the expensive materials on which renewable energy projects rely.
However, this year, investments in this sector are expected to increase by 10% compared to the same period last year. Estimates are that this year investments in the renewable energy industry will reach 623 billion dollars, which is almost 60 billion more than last year. As a result of inflation, an increase in costs is expected.
Although the industry is more vulnerable to inflation, investments in this sector will go upward, and the slight stagnation is of a temporary nature.
A drop in the prices of repair materials is expected, which will also mean a reduction in input costs, and political decisions to further reduce risks are a new encouraging signal.
US President Joe Biden’s legislation that the White House passed last year to boost investments in clean energy provides about 370 billion dollars for this sector.
The European Union also announces its package of measures for the advancement of the sector. It is expected that in the medium term, that is, in the next three to five years, it will stimulate the growth of investments in the sector, and if the forecast for the reduction of the prices of materials for renewable energy sources is added to that, then the investments will become much more favorable.
This year, the leaders in the sector in terms of investments in projects are expected to be the United States and China. Large projects are also expected in Saudi Arabia, Egypt, Spain, and others. Seen by continent, a large growth of 26% is expected to be achieved this year by countries in Africa, where there is huge potential.
Globally, last year, 1.3 trillion dollars were invested in renewable energy projects, according to the latest report by IRENA Investments in Renewables Reached Record High, But Need Massive Increase and More Equitable Distribution.
The level of investments in 2022 grew by 19% compared to last year, and by 50% compared to the period before COVID, i.e. in 2019. Although the sector is growing, they are not at the level to achieve the goals set in the Sustainable Development Agenda until 2030, IRENA states in its analysis.