Global spending on green energy projects is expected to rise just 10% this year, down from the 20% growth posted annually since 2019, as renewable energy developers adjust their plans in line with rising costs of critical minerals and other input materials. 

Consultancy Rystad Energy forecasts investment in low-carbon industries, which includes nuclear power alongside traditional renewables, to hit $623bn in 2023 — up nearly $60bn from $566bn last year.

“As the renewable industry becomes larger and larger, continuing on an annual growth rate above 10% will be harder and harder as you start to reach absolute growth numbers,” says Audun Martinsen, the consultancy’s head of energy service research.

Rystad attributes this year’s weaker-than-expected growth to “inflation-spooked developers” looking to rein in spending after two years of soaring prices for the critical minerals and materials required by renewable industries.

Green energy spending is more vulnerable to inflation than fossil fuels, notes Mr Martinsen. Development timelines for hydrocarbon projects are longer, and therefore less exposed to monthly price changes. They are also less reliant on expensive critical minerals and materials. Indeed, Rystad’s projection of a 10% increase in renewables investment this year is outstripped by the 14% rise it has forecast for upstream gas and liquefied natural gas. 

However the renewables slowdown will only be temporary. Mr Martinsen says the combination of weakening general inflation, the critical mineral price drops expected later this year, and the US’s Inflation Reduction Act will “catapult project spend in 2024 and 2025.” 

This landmark piece of legislation from US president Joe Biden’s administration, which was passed last August, commits $369bn to boost clean energy and green investments. Rystad expects the incentives package to help lift US renewables spend by 20–30% this year, and up to 40% from next year after allowing the necessary lead times for large investments and purchases.

The president of the European Commission, Ursula von der Leyen, announced on January 17 that the EU is preparing its own legislation to promote green investments — a move seen as a counter to the US’s efforts to boost its energy transition.

The 2023 picture

Alongside the US, China will be a major driver of increased spending this year, as it pursues its goal to install 1200 gigawatts of wind and solar capacity by 2030. Mr Martinsen also expects Egypt, Vietnam, Indonesia, Saudi Arabia, Spain and the Philippines to post big spending increases. 

Measured by percentage growth, Africa was the leading region with investment tipped to rise by 26%, while Australia, which is considered as a region in Rystad's analysis, placed second with an expected increase of 23%.

Spending in Europe, on the other hand, is forecast to rise just seven percent. While the region has fashioned itself as a renewables leader, its inflation challenges — coupled with surging power prices in the wake of Russia’s invasion of Ukraine — are stymieing efforts to build clean-energy supply chains. 

The renewable sectors to drive this year’s activity are onshore wind, which is tipped to grow 12% to some $230bn, and offshore wind which will jump 20% to $48bn. Spending in hydrogen and carbon capture, utilisation and storage projects are expected to swell by 149% and 136%, respectively, but from very low bases. Investment in hydropower, on the other hand, is expected to shrink 2.5% while nuclear power will remain flat.