Most of the money being invested in the energy transition is on renewable power, but, that said, there has not been a decrease of investment in fossil fuels.
The investment is largely coming from pension funds and infrastructure funds, which look for longer-term returns. They are also increasingly looking to make sure their investments are made in the most responsible i.e. environmentally conscious, ways. They’re investing into assets that have a good sustainability story around them and where they’re contributing to a cleaner system over the long-term. That is a very strong trend.
More technologically advanced forms of energy are being added to the available and existing forms of energy. There are, of course, variations between markets. There has been a rapid uptake of solar power in Spain. Germany and the UK are pushing towards net zero. However, with that drive, problems are being encountered – particularly of infrastructure. Systems weren’t built for renewable energy; they were built for on-demand energy or flexible generation, while with renewables, you depend on external factors, such as the wind and sun.
Lewis McDonald
Partner
We are at a new point in the transition, particularly when it comes to power generation. Countries are bumping up against these infrastructure challenges, which will take time to resolve. We are going to have to see a lot more investment in the networks and the grids and the electricity infrastructure to enable us to build these systems of the future which can accommodate a greater proportion of intermittent power.
The energy transition is also having a bearing on the core of the energy system, that is fossil fuels, adopting better practices and decarbonisation, preventing the release of methane into the atmosphere, for example.
Against that, I would say we’re at a point in the transition where higher interest rates, increased construction costs and greater general volatility are putting pressure on some of the assets in the renewable energy system around the world. The profitability of some of the assets is not as high as people might have expected. That’s challenging for companies because they have to look at those big portfolios of assets and make sure they perform, and if they’re not performing, they have to deal with it.
The transition’s not smooth. We learn as we go. We have just had a phase where we’re discovering these aspects of it as you push up against limits. But I do believe the transition is still pressing forward.
Personally, I am passionate about energising the world, leading the energy transition and supporting the change. I’ve always had a strong interest in energy and the environment. I studied science as well as law, studying climate change and biodiversity. We should be aiming for economic growth and growing prosperity for people, but doing that in a way which leads to the lowest level of emissions possible.
Whilst the direction of travel is a decarbonised energy system that doesn’t produce greenhouse gases, the pathway towards that is going to take time. It’s going to take a series of moves. It doesn’t lend itself to a simple narrative. I’m trying to operate within the domain of all that complexity and to contribute to solving the problem in a genuine way.
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