In 2024, the energy market has observed a surprising dominance of fossil fuels over renewable energies. The S&P Global Oil Index, which represents companies in the oil and gas sector, rose 7%, while the S&P Global Clean Energy Index, representing renewable energy companies, fell 13%. This article examines the reasons for this divergent performance, the implications for the future of clean energy, and the strategies companies are adopting to adapt to this changing economic context.
Performance of energy indices
The S&P Global Oil and S&P Global Clean Energy indices have followed opposite trajectories in 2024. Global economic uncertainty, particularly regarding interest rates, has hurt renewable energy companies. On the other hand, oil and gas companies benefited from rising hydrocarbon prices and sustained demand for their products.
Index performance in 2024 :
- S&P Global Oil Index : +7%
- S&P Global Clean Energy Index : -13%
Reasons for the dominance of fossil fuels
1. Rise in hydrocarbon prices Rising oil and gas prices have directly benefited companies in the sector, increasing their profits and stock market values. This increase was partially driven by geopolitical disruptions and increased global demand.
2. Uncertainty about interest rates High interest rates make financing more expensive for renewable energy projects, which often require large upfront investments. This situation has hampered new projects and slowed the growth of companies in the clean energy sector.
3. Energy policy reviews Some energy policies, particularly in Europe, have been reassessed, affecting investor confidence in renewable energy. Debates on the energy transition and security of supply have also influenced the markets.
Implications for the future of renewable energy
1. Need for innovative financing To overcome the challenges of high interest rates, renewable energy companies will need to explore innovative financing models, including public-private partnerships and green financing.
2. Focus on efficiency and profitability Companies will need to focus on improving the efficiency and reducing the costs of their technologies to remain competitive with fossil fuels.
3. Importance of regulation and incentives Governments will play a crucial role in providing incentives and adopting policies favorable to renewable energy. Subsidies, tax credits and emissions reduction targets will be key to supporting the sector.
Energy company strategies
1. Portfolio diversification Many energy companies, including those focused on fossil fuels, are investing in renewable projects to diversify their portfolios and prepare for the energy transition. For example, Shell and BP have announced significant investments in wind and solar energy.
2. Technological innovation Technological innovation will be key to improving the profitability of renewable energies. Advances in energy storage, carbon capture and storage technologies, and the efficiency of solar panels and wind turbines will play a central role.
3. Partnerships and collaborations Collaborations between businesses, universities and governments will be essential to accelerate the development and adoption of new energy technologies. These partnerships will make it possible to share the risks and costs of innovative projects.
Case studies: leading companies
Iberdrola Iberdrola, a leader in renewable energy in Spain, has experienced significant challenges in 2024. Despite a stock market loss in June, the company maintains a positive outlook thanks to its diversified portfolio and continued investments in clean energy.
Repsol Repsol, traditionally an oil company, has diversified its activities to include renewable energy projects. This strategy allowed Repsol to benefit from the rise in hydrocarbon prices while positioning itself for the future.
Solaria Solaria, specializing in photovoltaic solar energy, showed relative resilience despite unfavorable market conditions. The company continues to invest in solar projects in Spain and internationally, banking on a long-term clean energy recovery.
The year 2024 was marked by a divergent performance between fossil and renewable energies. While fossil fuels have benefited from favorable market conditions, renewable energies have faced economic and financial challenges. However, the continued commitment of businesses and governments to the energy transition points to a promising future for clean energy. Strategies for innovation, diversification and collaboration will be crucial to overcoming these challenges and achieving a sustainable energy transition.