- Energy transitioning from fossil fuels to renewables is a trend that is here to stay
- The most efficient route to decarbonisation is to have more things running on renewable electricity
- The transition will create investment opportunities across multiple sectors
Decarbonisation is an important structural trend, but is not without challenges
Decarbonisation – the term used for the process of removing or reducing the carbon dioxide output of a country’s economy - is an important structural investment trend that is here to stay. It is important because greenhouse gas emissions are causing global warming, and this is having unsustainable effects on our environment. Many countries and companies across the world have responded by committing to remove as many emissions as we produce, in other words, to reach “net zero”.
The challenge with getting to net zero is that greenhouse gases are part of all human activities. Achieving net zero does not just entail ceasing to run coal fired power plants and switching to electric vehicles. The challenge is much broader: ranging from transportation, agriculture and forestry, to the boxes used for Amazon deliveries.
Energy consumption is highly positively correlated to wealth and energy demand will continue to rise as emerging nations develop. Solar and wind are currently a small part of the overall mix, although cost competitiveness, government policy, innovation and professionalisation are increasingly driving scale and investment in these technologies. There are comparisons with energy transitions that have taken place in the past, such as the rise of oil in the 1920s, or coal in the 1830s. We are at the beginning of the renewable phase, the key drivers are already in place, and this transition is a survival imperative.