Spending on renewables is on the rise

The gap between global investment in oil-and-gas projects compared to renewables is narrowing, analysis from the consultancy Rystad Energy shows.

Why it matters: The analysis captures two trends — a downturn in oil-and-gas investment after companies slashed spending during the pandemic, and the growth and cost competitiveness of renewables.

Driving the news: The chart above compares capital spending on upstream oil-and-gas (that is, exploration and production) with new wind and solar projects, including estimated spending this year.

The big picture: "Capital expenditure for renewable energy projects is set for a new record in 2021...forecast to reach $243 billion, and narrowing the gap with oil and gas spending, which is projected to be relatively flat this year at $311 billion," Rystad notes.

• And IEA's separate oil market report this week notes that "Demand destruction, and its uncertain recovery due to COVID-19, continues to have a dramatic impact on upstream investment."
• Last year marked the lowest spending since 2006, it said.

Of note: All these energy sources can't quite be compared apples to apples because the oil side of oil-and-gas is a very minor part of global electricity.

• But gas is a huge source of global power — second behind coal — and renewables are increasingly competing with gas and coal.
• And overall, Rystad's note underscores the broader shifts afoot in the global energy system.