Upstream capital expenditures outpace cleantech, but for how long?

Global energy sector capital expenditures (capex) will increase by 8% in 2023 compared with 2022 levels. Cost inflation continues to affect key segments.

Expenditures will reach $2.0 trillion in 2023. The bulk of the spend will be in upstream oil and gas ($565 billion), renewable energy ($463 billion), and transmission and distribution ($349 billion).

Over the five-year period from 2021 to 2025, we estimate that cumulative global energy sector capex will increase by 49% compared with 2016-20. In nominal terms, renewable power generation spending will double while upstream spend will grow by nearly 35%.

Asia-Pacific accounts for 45% of total global energy spending in 2023, with North America and Europe the next two largest regions for energy spending.

The tension between energy security and energy transition remains. The move toward clean energy accelerated with record levels of renewable capacity additions and wide-ranging policies. Costs continue to fall; between now and 2030 average annual cleantech additions will double while the US$/kW across all technologies will fall by over 20%.

Currently, oil and gas activity continues to grow, particularly outside of OPEC. At the same time, we are approaching peak demand; S&P Global Commodity Insights' latest long-term outlook projects a peak in crude oil demand of 82 million b/d by 2026. Despite the coming peak, base decline will require significant new supply volumes.

In the US, cleantech employment continues to outpace employment in the wider economy, but serious questions remain on the ability of the labor market to respond to the call for renewable energy. What is clear is that the US will need a much larger workforce to implement its low carbon goals.

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Posted 05 December 2023 by Amy Groeschel, Principal Research Analyst, Costs and Supply Chain, S&P Global Commodity Insights

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.