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The world’s focus on delivering energy security has sharpened significantly this year, as European countries in particular seek to reduce reliance on Russian energy imports. With the rising cost of energy, a shift to renewable energy has now become not only the key to governments meeting net zero commitments, but also one of the most attractive ways to strengthen the resilience of energy supply. This is because the cost of deploying renewables has plummeted,1 which in turn has led to adoption rates that have significantly outpaced even the most optimistic predictions.2
It is forecast that global electricity demand will triple by 20503 as a result of population and economic growth, as well as the increased electrification of the economy. Whilst renewable energy makes up an increasing proportion of the energy mix, we are still heavily reliant on fossil fuels to meet demand. However, with soaring gas prices, the case for increasing the speed and scale of the roll-out of renewables, energy efficiency measures, and investment in new technologies is compelling.
Given that a comprehensive global system of renewable energy will take decades to build, the world will continue to rely on fossil fuels, particularly gas, over the medium term. This will be required in order to ensure a reliable and affordable supply of energy during the transition. We see a role here for traditional energy companies, but given the anticipated decline in fossil fuel demand, only those that have clear and credible transition plans.
A compelling opportunity
The investment required to get the world on track for net-zero by 2050 must accelerate from current levels to over US$4 trillion annually by 2030,4 not only in renewable power generation assets, but throughout the entire clean energy value chain. This underscores our view that the transition to a net-zero carbon economy is one of the long-term megatrends that we see shaping the global economy, business, and society. This represents a significant investment opportunity.