Foreign direct investment (FDI) into renewable energy is set to touch new highs in full 2022 as mega developments in hydrogen and offshore wind have dramatically increased the capital intensity of the sector.
Foreign investors announced 327 projects in renewable energy between January and July, which is in line with the average recorded in the previous three years, according to fDi Markets figures. However, those 327 projects mobilised as much as $132.2bn in committed capital expenditure, which is already higher than full-year figures in 2021 and 2020, and slightly short of the $138.3bn announced in full 2019, which remains the biggest FDI year for the sector, fDi Markets figures show.
FDI figures show the transition of the renewable energy industry towards less, more capital-intensive projects as developers bet on scale and new technologies to exert profitability in an increasingly competitive market.
Green hydrogen takes major credit for this shift. The hype around its potential remains high, with developers announcing multi-billion dollar power-to-x projects combining major solar and wind capacity to produce hydrogen across geographies. Among others, Luxembourg-based Total Eren announced a MAD100bn ($9.3bn), 10GW green hydrogen project in Morocco and India-based ReNew Power announced an $8bn memorandum of understanding to produce of 200,000 tonnes of green hydrogen and one million tonnes of green ammonia per year by 2030.
Offshore wind, where it takes on average $3bn to develop 1GW of installed capacity, has also been a major driver of investment into the sector. Among others, French TotalEnergies announced a $5.01bn, 2GW offshore wind farm off the Scottish coast and German RWE a $2.2bn, 1GW project in Danish waters. European countries alone, particularly in the North Sea, are willing to install hundreds of gigawatts of offshore wind capacity by 2050 – at the moment, they combine for just 25.2GW of offshore wind installed capacity.
Overall, green hydrogen and other emerging clean technologies like carbon capture made up 44% of the $132.2bn of FDI committed in the renewable energy sector between January and July, followed by wind (24.8%), solar (21.5%), biomass (8.3%) and marine power (1.3%), with other technologies accounting for the remaining 0.1%, fDi Markets figures show.