ESG Economist - Transition check: are renewables in crisis?

Full report (p.15)

• The tight labour market for energy transition occupations and the resulting lack of personnel to undertake the necessary work is also an additional bottleneck in the industry

• Vulnerability to supply chain disruptions, inflationary pressures, rising financing costs and higher raw material costs are some of the other factors deteriorating the business case for renewables

• The government also plays an important role in keeping these investments financially viable: When these do not materialize as expected, such as with the tax credits in the US, this serves as a blow to the industry as a whole

• At the same time, governments also need to meet public interests, resulting in auction prices still remaining relatively high (and/or maximum allowed prices low) as they try to push for lower energy prices

• These challenges also have potential spill over effects: The impact of limited infrastructural capacity does not only affect the transition domestically, but it could limit the transition across borders

• Hence, managing the speed of the transition across different channels is crucial for avoiding unnecessary delays or weakening the incentives to invest in clean technologies

• In this piece, we also try to quantify all these challenges and evaluate how they impact renewable energy developer’s returns.

• Overall, our calculations show that the current macro- and microeconomic environment does not yield sufficient returns in order for these projects to be viable from an investment point of view…

• …Ultimately meaning that the renewable energy industry is in crisis