How inflation could limit green energy growth


posted on Sunday 05.06.2022 at 07:00

The investment costs of building new solar and offshore wind capacity burdened by the growth of freight transport and vital raw materials increased by 15 to 25% between 2020 and 2022, ending a decade of decline, the International Agency calculated.

Rising prices of fuels, raw materials, everyday mealsbut also paper … Inflation caused first by the Covid-19 crisis and then by war in Ukraine affects all sectors.

The rise in prices, starting with the prices of strategic metals, is such that it could hamper the development of renewable energies, which is currently driven by an exponential increase in competitiveness, experts warn.

The investment costs of building new solar and offshore wind capacity burdened by the growth of freight transport and vital raw materials increased by 15 to 25% between 2020 and 2022, ending a decade of decline, the International Agency calculated.

Renewable electricity remains competitive with other energies, adds the IEA, but the expected continuation of higher installation costs at least in 2022 and 2023 than before, Covid could complicate its acceleration.

In one year, the price of cobalt more than doubled, when from January 2021 to March 2022 nickel gained 94%, aluminum 76%, copper 34% … Lithium increased by 738% during this period (compared to the annual average of + 13% in recent years). ten years). The price of photovoltaic modules, divided by four over five years, rose by 16% last year. The cost of wind energy required 9%: offshore in particular suffers from additional costs for precious metals and copper, which also affects cabling and connections. As for lithium-ion batteries for electric vehicles, the share of cathode alloys increased from 3% of total costs in 2015 to more than 20%, notes the IEA …

“Lithium has risen sharply as demand doubled and supply was insufficient in 2021. It is a small market and a smaller increase in demand is causing massive price movements,” explains AFP Tae-Yoon Kim, an IEA analyst. As a result, “critical minerals threaten a decline in costs that has lasted for at least 10 years in renewable technologies,” says Kim, with “major implications for the financial needs of the world’s energy transformation.”

“Air pocket”

In France, the industry is sounding the alarm. In the solar sector, due to additional costs (metals, transport, steel, interest rates and even soaring aggregator margins), projects corresponding to a total electricity production of 2.1 GW, ie most that were theoretically ready for 2022. sales force), were stopped. Renewable Energy Syndicate (SER). The observations concern wind energy, small hydropower and even biogas.

These are contracts signed before the cost boom, contracted electricity prices at a level that no longer covers costs. And there can be no question of catching up with market prices, because the operator must return the difference to the state compared to the one in the contract.

While France expects 3 GW of additional solar energy per year, “we risk an air pocket by losing these projects,” says Alexandre Roesch, SER General Delegate, who calls for indexation with a higher guaranteed price, such as € 70 / MWh, which would remain well below current market prices. or 200 euros. “It will still benefit the community,” he says.

Renewable energies remain competitive, all the more so in the midst of a sharp rise in fossil fuels and in the face of “average prices recorded over the last six months on wholesale electricity markets,” the IEA said. However, it calls on states and industrialists to “act seriously” and “diversify their raw material supplies”, an imperative highlighted by the crisis with Russia, the world’s second largest producer of aluminum, cobalt, platinum …

“There are still reserves to reduce costs”says Kim: “Invest in new mining projects first. Prices only stabilize when new supplies become available.”

The IEA recommends updating geological knowledge, especially in developing countries. “And there is room for project development in the United States, Canada, Latin America …”: from 2023, new plants should start producing cobalt in the Democratic Republic of the Congo, nickel in Indonesia and Canada, lithium in Australia , copper in Latin America …

“But it will take more,” notes the expert, adding that manufacturers will also need to innovate to significantly reduce their need for metal.


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