Renewable power will become the largest area of expenditure in the energy sector in 2021, surpassing upstream oil and gas for the first time in history, according to Goldman Sachs Research published on Wednesday.
This share stood at just 15% in 2014, however, the bank said it is projected to reach 25% by 2021 driven by bifurcating cost of capital up to 20% for long-term oil projects and down to between 3% and 5% for renewables.
These investments encompass mostly renewables, biofuels and the infrastructure investments necessary to support "a new era of electrification, both in grids and charging networks, and — more marginally — a growing focus on natural sinks, hydrogen and carbon capture, utilization and storage," the bank said.
Goldman Sachs also stressed that clean tech has a major role to play in the upcoming economic recovery from COVID-19. The bank projected that it can drive $1-$2 trillion of green infrastructure investments and create 15-20 million jobs worldwide through public-private collaboration, low financing costs and a supportive regulatory framework.
The bank also projected a total investment opportunity of up to $16 trillion by 2030 in a scenario that would be consistent with the global ambition to contain global warming within 2 degrees Celsius.
Green infrastructure is more capital and jobs intensive than traditional energy developments per unit of energy produced, according to Goldman Sachs, but it said it requires a stable, attractive regulatory framework and a low cost of capital, making it a strong example of pro-growth pro-environment public-private collaboration.
The bank argued that historically, past economic downturns have slowed down global decarbonization efforts. However, it said it would be different for the coronavirus recession “thanks to technologies that are now mature enough to be deployed at scale with the falling cost of capital and an attractive regulatory framework, unlocking one of the largest infrastructure investment opportunities in history on our estimates.”
By Ebru Sengul Cevrioglu