Daily Update: September 24, 2021

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

Market participants are investing in offshore wind farms to realize the energy transition from fossil-fuel generation to renewable energy sources.

“Offshore wind will be instrumental as the EU and U.S. aim for 2050 carbon-neutrality. Today, it accounts for only 3% of the European electricity mix and remains marginal elsewhere. We expect global installed capacity will surpass 180GW by 2030 (6x more than today),” S&P Global Ratings said in a recent report. “With 25GW of installed capacity at year-end 2020, Europe accounted for 72% of the global offshore wind market, with S&P Global Platts Analytics expecting the region to account for 60% in 2030 … Offshore wind still currently lacks competitiveness in the U.S., but economics are improving.”

Global investment in offshore wind projects is picking up speed, led by Europe. The region aims to install more than 100 gigawatts of offshore wind capacity by 2030, from today’s 25 gigawatts, and may need to install at least 400 gigawatts more of capacity in order to achieve net-zero by 2050, according to S&P Global Ratings. French cable company Nexans told S&P Global Platts that it anticipates growth in the offshore wind cable market to swell 250% by 2030, and is already planning projects from Norway to North Carolina.

As the historic offshore wind pioneer, the U.K. has solidified its position as the world’s leader in the technology with new offshore wind projects and investments, most recently in Scottish waters.

"We have the best resource and probably one of the best geographies for offshore wind in the world," Barnaby Wharton, director of future electricity systems at the trade group RenewableUK, told S&P Global Market Intelligence in an interview. "We're very lucky that we have the North Sea, which is shallow and has great wind speeds."

The Biden Administration aims to build 30 gigawatts of offshore wind capacity by 2030, and the pipeline for U.S. offshore wind generation has quickly expanded to 29 gigawatts as of August, according to S&P Global Ratings. As potential capacity market changes in transmission markets and tremendous investor interest create more opportunities for offshore wind development in the U.S., governmental agencies are reviewing new offshore projects in California, New Jersey, Rhode Island, and Virginia. The first major offshore wind farm in the U.S., located off of Martha’s Vineyard, Mass., was approved by the Biden Administration in May.

As climate risk intensifies, offshore wind is an attractive investment proposition for decarbonization because "the wind blows pretty constantly, and ... as it pairs with solar in particular, the generation patterns actually complement each other," Mark Mitchell, senior vice president of project construction at Dominion Energy, told S&P Global Market Intelligence’s Energy Evolution podcast this week. "You're getting closer to 24/7 renewables."

Today is Friday, September 24, 2021, and here is today’s essential intelligence.

Uncertainty in the Global Economy

Economic Outlook Europe Q4 2021: A Faster-Than-Expected Liftoff

The rebound of the European economy since restrictions were lifted in March/April has been surprisingly strong, both in terms of GDP and employment.

—Read the full report from S&P Global Ratings

Economic Outlook U.K. Q4 2021: Recovery Still On Track

The U.K. economic recovery paused in July, largely due to one-off factors, such as the "pingdemic", when the National Health Service's tracking app notified users they had been in close contact with someone who had tested positive for COVID-19 and needed to isolate.

—Read the full report from S&P Global Ratings

Biden Faces Tough Sell At Glasgow If Congress Stalls On Reconciliation Bill Passage

A failure by the U.S. Congress to pass a budget reconciliation package laden with climate policies and clean energy investments would not only be a blow to President Joe Biden, but would greatly damage prospects for obtaining more aggressive climate action plans from around the world, the head of the Environmental Defense Fund said Sept. 22.

—Read the full article from S&P Global Platts

The Credit Cycle

Weakening U.S. Economy Threatens Swelling Corporate Debt Mountain

Slowing U.S. economic growth and an expected rise in borrowing costs could leave American companies vulnerable after they gorged on debt during the pandemic.

—Read the full article from S&P Global Market Intelligence

Market Dynamics

Bear Market Unlikely, But Stumble In Stocks May Lead To Bigger Fall

Investors shrugged off this week's stumble in equities as a speedbump in the ongoing, historic stock market rally. But cracks in the run have widened in September, and market analysts see increasing potential for a sizable correction.

—Read the full article from S&P Global Market Intelligence

The Importance of Order

We all know that stock market returns vary substantially over time. For example, the S&P 500®’s performance between 1981 and 2020 ranged from -37% (2008) to +38% (1995). The market’s compound annual return for this period was 11.5%.

—Read the full article from S&P Dow Jones Indices

Global Diversification Trending in India – Time to Notice?

The merit of international diversification seems to have proven itself lately in the context of the Indian market. Over the past year, interest has increased in adding global exposures to local investment portfolios.

—Read the full article from S&P Dow Jones Indices

Technology & Media

Netflix Amortized Content Spend Estimated At $13.6 Billion In 2021

Following a rough year for productions and swelling competition in the streaming space has necessitated an increased program budget for Netflix Inc. in this and the coming years. For 2021, we forecast the company could amortize about $13.60 billion in total costs, including $5.21 billion positioned for originals.

—Read the full article from S&P Global Market Intelligence

Live TV Still Dominates Most TV Viewing In Asia

The Kagan 2021 Asia Consumer Insights survey found that nearly all internet adults in China view online video, using an average of five OTT video services.  The same goes for India.  Nine out of ten internet adults in South Korea report viewing online video, as well. 

—Read the full article from S&P Global Market Intelligence

Listen: Take Notes—Structured Finance Vs. Cyber Risk

This episode discusses how a securitization could be vulnerable to a cyberattack, the structural features that are available to mitigate and manage the cyberattack, how cyber risk is accounted in rating analysis, and how the ratings could be affected.

—Listen and subscribe to Take Notes, a podcast from S&P Global Ratings

ESG in the Time of COVID-19

Global Reinsurers Grapple With Climate Change Risks

Reinsurers have increased their efforts to incorporate climate change in their decision-making process, particularly in risk management, exposure management, and pricing. However, this is still nascent across the industry, and many companies are facing difficulties in implementing climate change considerations robustly.

—Read the full report from S&P Global Ratings

Green Bond Premium Justified By Strong Secondary Market Performance, Flexibility

The higher price that investors pay for green bonds on the primary market is justified by the instruments' strong performance and flexibility on the secondary market, according to industry players and new research.

—Read the full article from S&P Global Market Intelligence

U.S. Solar Trade Feud Erupts At Crunch Time For Democrats' Climate Agenda

The latest feud over trade policy in the U.S. solar industry comes at a critical moment for President Joe Biden, who hopes to turn the country into a leading manufacturer of green energy technology while ensuring that efforts to limit climate change are not hamstrung by soaring prices or equipment shortages.

—Read the full article from S&P Global Market Intelligence

Net-Zero Commitments, Financial Vehicles Evolving Amid Decarbonization Trend

Corporate commitments to net-zero carbon emissions can be difficult to decipher and measure, which is a problem that energy companies must address as the market for linking the commitments to financing tools grows, investment and industry experts said.

—Read the full article from S&P Global Market Intelligence

EV Impact: Rise Of Electric Vehicles Heightens Grid-Integration Imperative

The millions of new grid-connected cars, vans, trucks and other electric vehicles hitting the road each year will not get far without ample charge for their increasingly powerful lithium-ion batteries.

—Read the full article from S&P Global Market Intelligence

The Future of Energy & Commodities

Spot And Term, Australian Supply And Asian Demand: Indelible Links In The LNG Market

As the LNG market matures, the commodity's spot price has emerged as the driving force behind prices of all contract types, including long-term contracts. This is especially relevant for exporting countries like Australia that are undergoing changes in their downstream gas market development and pricing policies.

—Read the full article from S&P Global Platts

China's Pivot From Overseas Coal Sends Strong Signal, But Experts Await Details

China's pledge to stop building coal plants overseas deals another blow to an increasingly challenged sector, but just how much damage it inflicts will depend on several unknowns around implementing the pledge.

—Read the full article from S&P Global Market Intelligence

Feature: Latin American Soybean Meal Premiums Surge To Record

South American FOB soybean meal basis levels have soared to record levels amid firm Indian demand and Hurricane Ida's effects on the US Gulf Coast's export facilities, according to sources.

—Read the full article from S&P Global Market Intelligence

Listen: How Are Rising Prices And New Green Regulation Impacting Heating Oil Demand?

Just as the summer finally comes to an end and mornings become chilly, we would be expecting demand for heating oil to ramp up in Europe, as no boom has been reported yet. Furthermore, new environmental regulation will be applied in many European countries in 2022, which could lead to some changes in buying patterns.

—Listen and subscribe to Oil Markets, a podcast from S&P Global Platts

Written and compiled by Molly Mintz.