Electricity prices are rising in Europe. According to Rystad Energy, an energy analysis and consulting firm, if electricity prices reach €350 per megawatt-hour (MWh), the payback period for solar photovoltaic and wind power investments could be reduced from ten years to less than one year. At €180, the payback period would be around five to six years. The company predicts a surge in renewable energy deployment in Europe.
Once inflation and war factors subside, electricity prices will fall, lengthening the payback period. However, Rystad Energy notes that taking advantage of this opportunity to recoup initial investment costs will still yield substantial profits, even if electricity prices return to historical levels.
Despite rising electricity prices, renewable energy investments can be recovered within a year.
Australian energy media "Renew Economy" reported that new research by Rystad Energy showed that renewable energy investment is expected to reach US$494 billion in 2022, while oil and gas investment will be US$446 billion. This will be the first time that renewable energy investment is higher than oil and gas.
Generally speaking, photovoltaic and wind power plants have high initial investment costs, requiring government subsidies to generate profits. However, following Russia's attack on Ukraine, European electricity prices soared, and the price of renewable energy followed suit. Analysts say that these high electricity prices will allow renewable energy investments to be recouped in less than a year, potentially triggering a new wave of deployment.
According to a report by World News Network in late August, electricity prices for 2023 delivery in Germany (the European benchmark price) soared to over €1,000 per MWh, and French power contracts also rose to over €1,000. To curb rising electricity prices, the EU implemented an "emergency landing" policy in September, setting an EU-wide cap of €180 per MWh (approximately NT$5,705).
Rystad uses a 250MW solar farm in Germany as an example. When the electricity price is 50 euros per MWh, the investment takes about 11 years to recover. When the electricity price rises to 180 euros, the payback period drops to five or six years. When it rises to 350 euros, the payback period drops to one year.
Rystad said that although this case is in Germany, in France, Italy and the UK, when the electricity price reaches 350 euros per MWh, the payback period will also be reduced to less than one year.
According to a June forecast by the International Energy Agency (IEA), global energy investment is expected to grow by 8% this year to US$2.4 trillion, with clean energy investment being the main driving force. Some countries are increasing investment in coal-fired power plants due to energy security and price considerations.
Rystad states that most European solar and wind projects have yet to benefit from high electricity prices, but this situation will soon change. The report recommends that developers and financiers accelerate the launch of new projects and bring projects online quickly, taking advantage of periods of high energy prices to accelerate the recovery of upfront costs. Even if prices subsequently fall back to historical levels, returns will remain substantial.
Source: Environmental Information Center (https://e-info.org.tw/node/235300)
