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Digital is key for new class of investor

Global momentum for renewables is changing investment flows in the energy sector as we enter 2023, and digital technology will play a crucial role to help those new entrants. Mark Futyan, Non-Executive Director at Origami, explains.

We have reached a critical turning point for the energy sector. Renewables are now cost-competitive with conventional generation across much of the world, without the need for subsidies. This is fuelling a rapid rise in installations globally.

The International Energy Agency forecasts 2,400GW of new renewable energy projects to complete in the next five years, adding to the 3,600GW already in operation. We saw a stunning 270GW of solar capacity added worldwide in 2022, with neither the COVID pandemic or the Ukraine war sapping momentum.

The shocks of the last few years have, however, made things challenging for the renewables supply chain. After decades of price declines, the cost of building solar and battery projects rose between 50% and 75% from the low point in 2019. But this has not deterred investors who are able to offset these higher capex costs with increased revenues from strong electricity prices.

The rapid rise in renewables opens the door to a low carbon power system that not only powers electrical demand, but also provides the energy for heat and transport for both homes and industry. In the net-zero world, renewables will sit at the core.

A new class of Investor

The energy sector has been through a few rapid shifts in my 25-year career. We had the 1990s ‘dash for gas’, a ‘nuclear renaissance’ in the 2000s, and the ‘renewables revolution’ that gathered pace in the 2010s. These were all led by big listed companies.

The key shift of today is away from large centralised power stations and giant offshore oil and gas fields towards a more fragmented system of smaller wind, solar and battery projects. This brings a profound change to transmission networks and, importantly, is also changing how assets are financed. No longer are energy projects the preserve of global multinationals and regulated utilities. Financial investors such as pension funds and specialist asset managers with lower costs of capital are increasingly taking market share.

These investors are attracted by the stable returns and alignment with sustainability targets. However, many of these firms typically have a core competency in finance rather than engineering or operations, so rely on third parties to develop and manage their assets. Without in-house technical expertise, and with a multitude of assets to manage, strong digital systems are increasingly seen as a vital tool to ensure optimal investment returns.

Unlike utilities, financial investors often have a global outlook rather than regional focus, so will be managing a diverse and geographically spread portfolio. Again, data will be key to keeping track of asset performance.

This is where companies like Origami can assist. Origami’s platform helps owners to visualise, understand and control asset risk and performance. This enables investors to monitor and benchmark asset performance; manage route-to-market strategies; and hold third-party asset managers to account. Real-time and consistent performance data puts this new class of investor in the driving seat.

What lies ahead

The renewables boom is a global phenomenon and that means continued competition for raw materials and supply chain capacity. The spread of COVID in China may also affect supplies and prices for materials in the year ahead. The end of the war in Ukraine is also sadly a distant prospect. Last year was tumultuous for the energy sector and 2023 looks like another bumpy ride.

But none of this is going to shake renewables off track. This year will be exciting for renewables and continue the trend we have seen so far in the 2020s. We may see short-term measures in 2023 to boost energy security, including life extensions for ageing coal and nuclear plants, but renewable energy is still very much the future.

The huge investor appetite for renewables is here to stay. The investors that take advantage of the latest digital innovations will be among the best-placed to thrive.

Origami is on a mission to help build a green energy world powered by smart technology. Origami is the leading, independent energy data & portfolio management platform for BESS owners, energy services companies & optimisers.​ Origami helps manage and commercialise growing portfolios of green energy assets.


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