According to the Bloomberg New Energy Outlook, 85 per cent of the world’s energy production will have to come from renewable energy if we are to reach the global net-zero objective by 2050. Huge investments in wind, solar and batteries are vital to reach this goal, and emerging economies will play a fundamental role in this transition.
Scatec is a renewable power producer. We deliver affordable and clean energy to emerging markets, where our energy production also covers important social needs. We are sustainable by nature, and sustainability is integrated all parts of our business.
We acquired SN Power to leverage our expertise and track record in emerging markets, as well as to capture growth in hydropower and hybrid solutions. This transaction was completed in January 2021 and transformed Scatec from a large-scale solar player into a more diversified renewable energy solutions provider. The process of merging SN Power’s team with Scatec’s has gone very well and we are now operating as a fully integrated unit.
By the end of 2021, we had 3.5 GW of solar, wind and hydro power plants installed across 15 countries, generating predictable cash flows under long-term contracts. In sum, Scatec is now more robust than it was just a year ago, with a much broader diversification across technologies and geographies.
Going forward, our focus is to scale up and further strengthen our market position in our core geographical markets that account for 70 per cent of our project backlog and pipeline, and which are critical to the green transition: South Africa, Brazil, India, the Philippines, Vietnam, and Egypt. The common denominators for these markets are a strong and growing demand for power to support economic development, a carbon-intensive power sector that is ripe for low-carbon alternatives, and a regulatory framework that seeks international capital for the renewables targets to be achieved.
On the basis of this, we set a target in 2021 for 15 GW of renewable capacity to be in operation or under construction by the end of 2025, equivalent to NOK 100 billion of gross capital expenditure. This is ambitious but realistic given our strong platform and the positive market outlook.
We took important steps towards our objective in 2021. We brought projects in Ukraine and Argentina into production, and thanks to our new hydropower assets, power production more than doubled compared to 2020.
We did did however experience prolonged government approval processes and cost inflation which caused delays in progression of several of our backlog projects. This in combination with a wider negative market sentiment towards “green” stocks unfortunately impacted shareholder returns in 2021.
Despite last years challenges the outlook for Scatec remains strong. Our project pipeline increased by 50 per cent to almost 15 GW during the year, and new projects in South Africa and Brazil entered our project backlog, which stood at 1.9 GW by the end of 2021. A main priority for 2022 is to progress this project backlog into construction.
The market advance for Release was another highlight last year. Release commenced delivery of redeployable solar and battery solutions in Cameroon, Chad and South Africa in 2021. Although the outlook remains positive, conservative industries are having an impact on the market adoption rate. However, higher energy prices are beneficial for Release, and we also expect growing interest as soon as the first plants are operational and demonstrating their value.
We are also investing in technology that can make tomorrow’s energy mix even more sustainable. Our “Power-to-X” strategy aims to enable and realise industrial projects that help to reduce carbon emission through provision of competitive renewable energy. We have already embarked on several exciting initiatives in Egypt under the “Power-to-X” umbrella, including desalination of seawater, and the production of hydrogen and ammonia powered by renewable energy. Such development projects underline Scatec’s position as a frontrunner that helps to identify new and profitable renewable energy solutions.
At the time of writing this summary, Russian troops have invaded Ukraine. In light of these tragic events and the growing number of lost lives, a lot of our day-to-day matters suddenly seem trivial. At Scatec, we will always prioritise people ahead of our assets, and we are deeply concerned for the wellbeing of our Ukrainian employees and their families. We are now doing everything we can to assist our local team with the main priority of keeping our colleagues safe.
Finally, I would like to extend my thanks to our employees and business partners that are continuing to support Scatec. We welcomed more than 170 employees last year and our people have once again demonstrated their flexibility, continuously adapting to the changing nature of COVID-19 restrictions throughout 2021. Many of our partners and employees around the world have recently reached out to express concern for our colleagues in Ukraine. I greatly appreciate your support and I am grateful for being part of such a supportive team.