Low-carbon investments to rise by US$60b in 2023, Rystad says

KUALA LUMPUR (Jan 13): Spending on low-carbon projects will increase by US$60 billion (RM260.13 billion) this year, 10% higher than 2022, led by wind developments, but helped by a significant rise in funding for hydrogen and carbon capture, utilisation and storage (CCUS) infrastructure, according to Oslo-based Rystad Energy.

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In a statement on Friday (Jan 13), the energy research and business intelligence company said the growth in total spending is a slowdown from recent years — which averaged a 20% annual increase — as cost-conscious developers tighten their purse strings after two years of soaring prices.

It said investments in green sectors surged 21% in 2022 to overtake related oil and gas spending for the first time, but inflation-spooked developers seem set to rein in spending growth this year.

However, as inflationary pressure weakens, Rystad expects spending to rebound.

Rystad said investments in the geothermal, CCUS, hydrogen, hydropower, offshore and onshore wind, nuclear and solar industries are set to hit US$620 billion in 2023, up from about US$560 billion last year.

Service segments included in the calculations include project equipment and materials, engineering and construction, wells, operations and maintenance, and logistics and vessels.

Solar and onshore wind will contribute the most by a sizeable margin.

Rystad said spending on solar investments will total US$250 billion this year, rising only 6% over 2022.

However, it said thanks to falling cost of polysilicon, the primary cost driver of solar photovoltaic cells, capacity growth will be more substantial than dollar investments suggest.

Despite a relatively insignificant rise in investment value, installed capacity is expected to swell by roughly 25% to 1,250 gigawatts, the firm said.

The company said spending growth will vary widely across industries. The most significant annual increases are expected for hydrogen (+149%) and CCUS (+136%).

Total hydrogen spending will approach US$7.8 billion in 2023, while CCUS investments will total about US$7.4 billion, it said.

Rystad head of supply chain research Audun Martinsen said the weaker-than-expected growth is not a reason to panic for those in the low-carbon sector.

“Rampant inflation typically triggers fiscal restraint across industries, and spending will likely bounce back in the coming years.

“The outlook for hydrogen and CCUS is especially rosy as technology advances, and as the large-scale feasibility of these solutions improves,” he said.