The energy transition is witnessing record investment and yet requires an awful lot more. Whether that necessary acceleration will happen now that geopolitical developments mean energy security is providing compelling competition for a place at the top of global governments’ priority lists is the question at the heart of Infrastructure Investor’s latest Energy Transition report. The answer is somewhat mixed.
The Russian invasion of Ukraine requires both an immediate response and a longer-term one and is fuelling transformation in energy markets. In the short-term, many – mostly European – nations, not least Germany, are scrambling to wean themselves off Russian energy. Renewables can play a significant energy security role in the long term, but in the short term, Western leaders are talking seriously about firing up coal-powered plants that had been winding or wound down. Energy transition and security are uneasy bedfellows, for now at least.
Compounding those coal concerns is the fact that China has already increased coal mining in response to a spike in LNG spot prices in early March, while India remains a growth market for coal. LNG could be set for serious growth as well, however.
Natural gas is an obvious bridging fuel to take steps in the right direction for energy transition while also promoting energy security. The US has pledged to send 15 billion cubic metres of LNG to Europe and wants to scale up to 50 billion cubic metres by 2030. Europe will need to develop the infrastructure to absorb that scale of supply, just as other countries are building up their own infrastructure, such as the push being made in Chile to become a renewables powerhouse.
Back in Europe, the winding down of nuclear power also hangs in the balance. While countries such as Germany remain committed to going nuclear-free, the UK is in the process of building a new generation of nuclear plants. This is great news from an energy security standpoint, but many in the industry had thought nuclear energy would be phased out as the energy transition accelerated.
And that acceleration has been well underway.
At $755 billion, global energy transition investment was 27 percent higher in 2021 than it had been in 2020, and around three times what it was a decade ago. The single largest sector was renewable energy, which attracted $366 billion last year, which was 6.5 percent more capital than in the previous year. Transport grew more than any other sector, with investment increasing 77 percent year-on-year.
Onshore and offshore wind, solar, natural gas, power-to-X, energy storage, digital tools, technology and artificial intelligence, electric vehicles, biogas, biomass, heating districts, carbon management and a whole lot more is packed into the Infrastructure Investor Energy Transition report.