Global investment in renewables to bounce back in 2021 to pre-COVID levels

Global CAPEX spending on renewables is poised to bounce back in 2021, rising 8.5% to $255 billion—in line with 2019 levels, according to IHS Markit Energy. Annual spending is expected to remain at those levels through 2025. This adds up to a $1.3 trillion cumulative 2021-2025 spend—a 9% increase over cumulative capex in 2015-2019.

At the same time, sharply declining capital costs across renewable technologies mean that just a 9% increase in spending will be associated with a 45% increase in cumulative gross renewable capacity additions in 2021-2025 vs. 2015-2019.

The expected recovery follows a 2020 that saw the renewables sector hit by supply chain disruptions and construction delays stemming from COVID-19 lockdowns and mobility restrictions, among other factors. IHS Markit expects 2020 global non-hydro renewables capex will be $235 billion, down 7% from 2019 levels.

Falling costs

IHS Markit expects the global benchmark capital cost for solar PV (both utility scale and distributed generation) in 2025 to be roughly 40% below 2017 levels. Meanwhile, global benchmark capital costs for onshore wind and offshore wind in 2025 are forecast to be 20% and 15% below 2017 levels, respectively.

Capacity additions

Solar PV will continue to account for the majority of cumulative global new investment and gross capacity additions in 2021-2025. IHS Markit expects solar PV to account for approximately 54% (nearly $700 billion) of global cumulative investment in the renewables sector.

Global offshore wind investment will accelerate swiftly during the 2021-2025 period. Cumulative investment of $170 billion is expected—a nearly threefold increase from cumulative 2015-2019 levels.

Meanwhile, onshore wind capex is forecast to slow, reflecting a deceleration in onshore wind installations globally post-2021. Cumulative investment in offshore wind is expected to be $320 billion for 2021-2025, down from the 2015-2019 level of nearly $365 billion.

Expanding share of electricity generation

The overall growth in capex and capacity additions is expected to push combined global wind and solar PV installed capacity beyond that of global installed natural gas-fired capacity in 2023 and installed coal-fired capacity in 2024. In terms of global electricity generation, renewables will rise to an 18% share in 2025, up from 11% in 2019.

Source: IHS Markit