Renewable projects become more economically appealing

In Opinion



Capital investment in renewable projects will reach USD 494 billion in 2022, surpassing the Oil and Gas industry (USD 446 billion), according to the energy consultancy Rystad Energy. Although the figure for Oil and Gas does not consider investments related to exploration, it is worth noting that this is the first time that investment in renewables has exceeded it.

High electricity prices, mainly in Europe, are changing the renewable sector, radically modifying the timing of investment projects. Projects that previously needed around 10 years to reach payback, see how, thanks to the current high prices, this period can be reduced to a couple of years.

To observe this change in trend more graphically, we can use the example of a solar photovoltaic plant with a capacity of 250 MW. Based on a standard price of USD 50/MWh before the current price escalation, a payback of 11 years is calculated. If a price of 350 USD/MWh, the standard price for the German, French or Italian markets in 2022, is considered, the payback is reduced to one year.

Although it must be taken into account that the bureaucracy to start projects of this type may take years, if it is believed that the high electricity prices of 2022 will be maintained for the next few years, something that cannot be ruled out, developers and financiers should try to start up projects of this type as soon as possible, since, once the initial costs have been recovered, the profitability will be very attractive even if prices fall back to previous levels.

It is not surprising, therefore, that these prices will drive the promotion of renewable plants and that more renewable energy will be added to power grids. Thermal power plants must be prepared to be able to supply energy when renewable energy is not available. In this way, thermal plants must have a great capacity for flexibility in order to be available at any time.

At this juncture, ADEX, thanks to its artificial intelligence technology, allows thermal power plants to act with greater flexibility, and to lower minimum loads, making their involvement in the electricity mix essential to achieve a complete transition to renewable energy and have a better grid stability.