The New Math for Investors in a World of Cheap Energy. With costs sinking for both oil and renewables, only one of them is still offering investors a healthy return on equity. For years, integrated oil companies enjoyed very high ROE, which they returned in part to shareholders through share appreciation and dividends. There were economic cycles, of course, but even during the global financial crisis, returns never dipped below 10%. ROEs are now trending down again. Per Bloomberg Intelligence, the average for integrated oil majors at the end of 2019 was about a third of what it had been in 2006. This depressed (or depressing) return on equity position matters right now because an oil company’s new normal low ROE is lower than what BloombergNEF expects new renewable energy assets to achieve. In our latest levelized cost of electricity analysis, the global benchmark return on equity for offshore wind is 11%; for onshore wind, 9%; for photovoltaic solar, 8%.
Bloomberg 7th May 2020 read more »