Is there enough energy transition investment taking place?

DW: It is clear much more needs to be done. It has been interesting to read in the recently published IPCC report that the scale of carbon-reducing investment needs to be six times higher by 2030 compared to today, so there is a great opportunity to match investor capital with the opportunities that we expect to increase over the coming years.

Our panel

Pierre Abadie
Group climate director, Tikehau Capital

Barney Coles
Managing director and co-head, clean energy, Capital Dynamics

Olusola Lawson
Co-managing director, African Infrastructure Investment Managers

Daniel Watson
Head of sustainability, Amber Infrastructure

BC: Investment in this space has accelerated, but not enough for European countries to meet their net-zero goals. Further support is required from governments for renewables, upgrades to grid code and energy efficiency schemes.

PA: Although investment into energy transition has increased in Europe with rapid investments into renewable energy, Europe’s carbon footprint has not yet seen the significant reduction needed to fight climate change.

OL: The advice from climate scientists is clear: we must dramatically reduce our reliance on fossil fuels if we want to stand a chance of limiting global temperature rise to 1.5C. Currently, fossil fuels account for 80 percent of global primary energy demand and we are not doing enough to ramp up production of replacement energy sources.

Will the war in Ukraine aid or hinder the energy transition?

OL: Many countries have vowed to free themselves from their dependence on Russian fossil fuels, but this is not necessarily good news for the energy transition. The reality is that renewable energy installations are not ready to completely replace fossil fuel supplies so many countries are simply trying to secure oil and gas from other countries. This is an extension of the response last winter, when coal use surged globally and renewable energy installations fell below levels required to meet net-zero targets. In addition, Ukraine and Russia are key suppliers of crucial metals used to manufacture solar panels, wind turbines and electric vehicle batteries – all vital ingredients for the energy transition.

BC: Whilst the war has already stimulated a huge energy policy shift away from Russian gas reliance to focusing on greater renewables capacity, this transition will take time and, in the short term, could trigger the re-opening of dirtier coal power stations to bridge the shortfall in generation.

PA: The best way for Europe to end its dependency on Russian fossil fuel is to accelerate the Fit for 55 European Commission plan which aims to reduce 36 percent of energy consumption in Europe by 2030, through the introduction of energy efficiency measures, increasing renewable energy production and banning the sale of fossil fuel powered cars by 2035.

Where does the energy transition create the greatest investment opportunities?

BC: Energy transition continues to offer attractive investment opportunities in the renewables generation sector, but in addition we are seeing interesting opportunities ‘downstream’, whether that be in battery storage, electrical vehicles or green hydrogen infrastructure.

DW: There are some big bets that could be placed on emerging technologies and systems, such as early-stage green hydrogen, but these types of investments would necessarily have different risk profiles than traditional infrastructure investments.

PA: There are opportunities to reduce CO2 in three key sectors: energy efficiency must be improved by 4 percent per year (in buildings, retail and manufacturing), electrification of end uses and the penetration of low-carbon mobility. This will lead to an increase of demand for electricity and therefore lead to an increase in demand for renewable energy (4x by 2030).

OL: Africa is only scratching the surface with its generation capacity, producing 1 percent of global solar power when it has the potential to contribute 40 percent. The continent’s unreliable grid installations and the fact that many communities are not connected to the grid mean that decentralised energy generation, such as C&I solar, is an obvious solution.

Are net-zero goals realistic?

OL: If we look at Africa, the reality is that many countries are already at net zero. The whole of Africa accounts for only 2-3 percent of the world’s carbon dioxide emissions from energy and industrial emissions. But this is because 40 percent of Africans have no access to electricity – the lowest in the world. The challenge is to find models which meet the continent’s development aspirations, but steer clear of the higher carbon choices developed economies have made in the past.

DW: This question tends to focus the mind on the near-term challenge and ignores the longer-term implications that will come if we do not take action. The global economic benefit of limiting warming to 2C is reported to exceed the cost of mitigation in most of the assessed literature. However, these macro-economic benefits don’t mean anything to members of the general public who will be more concerned about how to pay their energy bills.

PA: Net-zero targets are realistic since they are ensuring a viable biosphere for human kind, and Europe is already aligned with these targets in the Fit for 55 plan and RePowerEu Plan, which are currently being accelerated to ensure the energy security for the continent.

What will be the next big trend in energy transition?

BC: Green hydrogen will be the next big trend – the ability to create a new green fuel through the pairing of renewables with electrolysers for the transportation and industrial sectors will be a game-changer.

DW: If we are to meet net-zero ambitions, we need systemic change across a variety of sectors. From an infrastructure perspective, there are some really exciting opportunities that are emerging because of the focus on growing trends such as new mobility and the circular economy.

OL: For the African continent, capitalising on the falling cost of clean energy technologies is key. Near-term opportunities around integrating renewable energy into the continent’s power mix, particularly with regards to distributed energy resources, continues to be a tremendous opportunity. Energy efficiency around cooling and large-scale refrigeration, as well as substituting away from dirtier cooking fuels to cleaner sources, remain areas of immediate opportunity.

PA: The energy transition and decarbonisation of our economy are the biggest investment opportunities of our industrial age, even bigger than the evolution of the digital transition which we saw in 2000. The annual pace of investment to fulfil and achieve climate goals and ensure energy security to our economies is more than $4 trillion per year.