While we would generally avoid quoting work from a company that we might consider a peripheral competitor, we are happy to do so when it backs up one of our central themes – in this case, inflation in renewable power costs. The quote is taken from the Wood Mackenzie report flagged article linked here and discusses a view on how challenges that renewable power installers have faced in 2021 will extend into 2022. The quote talks about shortages of renewable power equipment, and the obvious consequence will be higher prices for that equipment, especially as raw material prices for components remain high and possibly move higher. In our ESG and Climate report today, we talk about the need for some commonsense oversight such that impractical ESG investing targets do not limit the ability of producers of critical fuels and materials to operate.
The core message of the IEA analysis published today is around how renewable power rates of investment remain far too low and need to more than double immediately to meet net-zero goals – see below. This analysis is very supportive of our renewable power inflation thesis, as none of the renewable power component manufacturers can double production either cheaply or quickly, and none of their suppliers has that much spare materials capacity. On the solar front, we may have the additional problem of regional production concentration. China has the largest share of capacity for solar module capacity and now has much more aggressive plans for solar power domestically. We could see China-based components stay in China, exaggerating shortages outside China. The IEA has an accompanying report today on the possible impact of commodity pricing on solar and wind pricing and it is also linked here – these reports were published this morning and we will cover them in more detail in next week's ESG and Climate report. More on this in today’s ESG and Climate report.