Key takeaways:
- Renewables are on the rise, but not fast enough for climate goals.
- $4.1 trillion annual investment needed for a successful transition by 2050.
- Each region’s energy journey will be unique.
- Decarbonizing hard-to-switch sectors like industry is crucial.
- Companies have a chance to lead the transition and reap the rewards.
The global energy system is at a pivotal point, with the pace of change set to accelerate in the coming decade. However, several significant risks could impede progress. A recent EY report, “If every energy transition is different, which course will accelerate yours?”, predicts that by 2050, an estimated $4.1 trillion in annual investment will be required for low-carbon transition technologies and energy-generating infrastructure. This is four times more than the current levels.
The EY study considers four key drivers for the impending changes in energy: technological progress, raw material supply, consumer involvement, and government policy. These factors will impact 52 technologies, underscoring the complexity and diversity of the upcoming transitions.
The authors argue that there isn’t a single energy transition, but multiple transitions occurring at varying rates and in different ways globally. The shift to renewable energy sources is happening faster than expected.
The EY report forecasts that green energy will dominate global electricity production by 2038 and will constitute 62% of the energy mix by 2050. However, the current rate of change is insufficient to limit global warming to the 1.5-degree Celsius target, necessitating further acceleration.
Fossil fuel usage is expected to peak by 2030. Hydrocarbons will likely remain a part of the energy mix for a longer period than anticipated, especially in sectors where their use is challenging to phase out. Therefore, policies are needed to enhance the appeal of low-carbon alternatives for investors. If oil and natural gas continue to exist for an extended period, decarbonizing these sectors will be crucial.
Energy transitions are reshaping energy systems worldwide, albeit at different speeds and in various ways. The EY study predicts that change will accelerate over the next decade and beyond, but only if organizations seize the momentum now.
Fossil fuels won’t vanish overnight. The report expects them to linger, especially in hard-to-decarbonize sectors. This means doubling down on making clean alternatives more attractive to investors. And while oil and gas may stick around, their emissions need to be slashed – think carbon capture and storage.
So, how can we avoid an energy stumble and ensure a green leap? The report outlines three key areas for energy and resource companies:
- Ditch the fossil fuel baggage: Aggressively shift investments from dirty assets to renewables.
- Secure the green goldmine: Build a robust supply chain for the minerals and metals needed for clean technologies.
- Empower the green army: Engage consumers and give them the tools to actively participate in the transition.
Energy and resources companies can spearhead the transformation by taking action in three areas: driving the shift from legacy assets to renewables; building a minerals and metals supply chain to keep up with demand; and empowering consumers to play a more significant role in the process. Organizations that commit to the right actions now can accelerate their evolution toward a decarbonized future and seize substantial business opportunities.
Companies that embrace these actions today stand to not only secure a decarbonized future, but also unlock significant business opportunities. The energy race is on, and the prize is a healthy planet and a thriving economy. Will we cross the finish line, or will we stumble at the starting block? The choice is ours.
The road to a green future is paved with both opportunities and obstacles. While the $4.1 trillion price tag may seem daunting, the potential rewards are immense. By embracing innovation, adapting strategies, and collaborating across sectors, the world can harness the momentum of the energy transition and build a more sustainable future for all.
