Is there enough investment in the energy transition?
DC: There isn’t enough energy transition investment taking place, both in terms of scale and speed. The latest IPCC report published in recent weeks demonstrates we are falling short of the goal of keeping temperature rises to below 1.5 degrees, with a trajectory to 3 degrees now most likely.
Managing director, Brookfield
Partner and head, Actis Japan
Head of energy for North Asia, Actis
Managing director, BlackRock Real Assets
CR: The energy transition has accelerated to the pace of an energy revolution. Unprecedented levels of capital are being invested every year to build out clean energy in APAC at vast scale. Meanwhile, institutional investors are rapidly transitioning their portfolios to sustainability and are seeking net-zero-aligned investments. The issue for the energy transition is no longer availability of capital; the gating factor is the number of bankable clean energy projects.
JO & TS: The energy transition is a period of time requiring sustained action, not a simple flick of a switch. Navigating climate change is the challenge of our lifetime.
Are net-zero goals realistic?
CR: Historically, when governments mandated clean energy targets, they seemed impossible to achieve. This is also the case for net-zero targets, which require the rebuilding of global infrastructure and the mobilisation of $50 trillion-100 trillion of capital. However, I am optimistic that these targets will be met and that net zero will be reached before 2050.
JO & TS: We all have our part to play. Over the last two decades, Actis’s renewable power companies have developed 11GW of renewable energy capacity. This equates to providing renewable energy to approximately 20 million people, and over 20 million tonnes of CO2 avoided.
DC: The net-zero goals under the Paris Accords are and remain achievable but require immediate and transformational change. It hinges on a significant leap toward clean energy by the end of this decade and we have the means to do it – the capital and technologies, not to mention the potential breakthroughs and advances that may come forth in the future.
JO & TS: Whether it is investing in clean energy to power reliable grids, or in data centres to ensure more people have access to more information, infrastructure has a key role to play in ensuring a fairer, more equitable, more inclusive society.
CR: We currently favour investing in clean energy development platforms, as well as infrastructure assets, in order to benefit from the growth in the sector, as well as the sustainable yield that renewables assets offer once they are operational.
DC: Around 76 percent of emissions today can be traced back to the energy and power generation sector. Therefore, decarbonising this sector through clean energy and electrification are the first, largest and most impactful investment opportunities to achieving net-zero.
Where is the most progress being made in the energy transition?
CR: Renewable power is the beating heart of the energy transition. Wind and solar technologies are now competitive with, and in many cases cheaper than, conventional energy and are being deployed at scale across the APAC region.
DC: There is also a lot of momentum and progress being made in battery energy storage, which is a critical enabler of wind and solar. The unit economics of batteries are beginning to follow the same trajectory as renewables, witnessing lower costs through mass production, technology developments that improve capacity, and greater demand.
JO & TS: The straightforward answer is renewables – mostly solar in Japan, mostly offshore wind in Taiwan. Coal plants are being decommissioned. However, it’s important to look beyond the power sector.
Investing in digital infrastructure is one of the fastest ways to transition to a more equitable, efficient, and prosperous society. Digital infrastructure underpins better-functioning, more inclusive and more connected economies and is critical to delivering the UN Sustainable Development Goals. Despite the outsized benefits, there is a significant supply-demand mismatch, which is currently estimated at $50 billion and expected to reach nearly $1 trillion by 2040.
What will be the next big trend in energy transition?
CR: In order to complement renewable energy once it reaches high levels of penetration on the grid, battery storage will need to be built out at massive scale. This subsector is in its infancy across APAC, but is growing quickly as batteries come down the cost curve owing to electric vehicle uptake accelerating. We also see electric vehicle charging infrastructure as a key trend in the energy transition in APAC, requiring $1 trillion of capital globally by 2030.
DC: Battery storage will be driven by the need to capture excess energy when it is produced and release it when it is in demand. Renewables are inherently intermittent, meaning we cannot precisely control when they are generating. This has significant knock-on impacts to the energy grid, which must be reinforced to operate much more flexibly. Batteries will be critical in capturing the price differentials between time of generation and time of use.
Storage also doesn’t just mean batteries – it means molecules too, particularly hydrogen. Much has been said about hydrogen as a potential clean alternative to using gas or coal in heavy industry, or petroleum-based products in aviation and shipping – the so-called ‘hard-to-abate sectors’. As well as being all these things, hydrogen is also a way of storing excess energy from renewables, turning electricity into clean fuel at times when it isn’t needed on the grid and is therefore lowest cost.
JO & TS: India has already made rapid strides towards a net-zero future as it is close to achieving its 175GW renewable energy target of 2022 and is now on the path to achieve 450GW by 2030. In contrast, the Southeast Asia region has lagged behind in adoption of renewable power. However, there is renewed recognition of the untapped potential of Southeast Asia’s natural capital.
Reshaping the current ecosystem from resource extraction to electrification is one of the largest challenges Asia-Pacific has ever faced. Immediate opportunities lean toward driving energy efficiency and renewables, scaled by grid modernisation and electrification, and on the horizon, rethinking transport, emerging carbon capture technologies and hydrogen innovations.