Only 5% of the $2trillion earmarked for global fixed offshore wind projects have reached final investment decision (FID) in the clearest sign yet that the current pace of renewable project deployment could potentially stall the progress towards net-zero targets, Stuart Broadley, CEO of the Energy Industries Council (EIC), said today.
“Fixed offshore wind projects – already typically very low margin – are being hit by higher costs of capital due to higher interest rates, which has pushed them to zero or negative margins,” Broadley said. “So, governments will have to subsidise them again if they want these projects to get moving.”
Speaking today at Recharge and Upstream Energy Transition Forum, Broadley warned that current low FID rates in cleantech, including wind, hydrogen, and carbon capture, are behind what policy pledges demand, which will lead to lower installation rates than currently forecast.
“The pressure to invest more in energy transition clearly exists, which EIC fully supports, but the reality is that this expectation is not being matched by demand for key technologies like hydrogen, carbon capture, and floating offshore wind, which are in most cases currently not bankable.”
EICDataStream—which tracks over 15,000 projects worldwide, covering all energy sectors—shows the global FID rate for renewable and transition technologies languishes around 5% or lower, compared to upstream oil and gas, which stands at 33%, and large-scale nuclear energy at 44%. EIC is a global trade association and the voice for the energy industries’ supply chain, being a provider of data, analysis, advocacy, and events.
“The hesitancy to fully commit financially to renewable projects will slow down progress towards energy transition goals,” Broadley warned.
In his on-stage conversation with Leia Marie Parker, Editor-in-Chief of Upstream magazine, Broadley spoke about the upcoming Conference of the Parties (COP). He called for greater transparency at future COP meetings, including COP29 which will be held next month in Baku, Azerbaijan.
Instead of presenting aggregated global progress under the aegis of the global stocktake, he suggested developing a “league table” to track each country's advancement against its specific climate goals. This approach, he said, would enable more precise monitoring and encourage nations to uphold their commitments.
Broadley also addressed the relationship between governments and the energy sector. “Some governments are becoming increasingly unfriendly towards the oil and gas sector,” Broadley said, adding that they often assume separate, “bad” supply chains for oil and gas, and “good” for renewables. However, according to the EICSupplyMap database, 80% of companies in the UK energy supply chain, for example, still rely on oil and gas revenues while also being the driving force for cleantech provision.
This calls for, according to Broadley, dealing with the energy supply chain as one integrated, rather than following a siloed approach of “moving from the bad to the good”, to ensure that companies can carry out business activities across the board in order to be able to survive and thrive through energy transition.
For more information about EIC, please visit: https://www.the-eic.com