Energy Transition

Energy transition refers to the global energy sector’s shift from fossil-based systems of energy production and consumption — including oil, natural gas and coal — to renewable energy sources like wind and solar, and other low carbon energy sources such as green hydrogen.

The increasing penetration of renewable energy into the energy supply mix, the onset of electrification and improvements in energy storage are all key drivers of the energy transition.

This is a once in a lifetime change which also includes the electrification of transport enables by the mass production of battery storage technology.

Many reputable organizations have developed scenarios for the energy transition including the IEA, BNEF and McKinsey. However, a few salient trends are summarized below with the source being DNV’s Energy Transition Outlook:

High energy prices and a greater focus on energy security due to the war in Ukraine will not slow the long-term transition

1. High energy prices and a greater focus on energy security due to the war in Ukraine will not slow the long-term transition

Europe aims to accelerate its renewables build-out to achieve energy security
In the rest of the world, tackling high energy and food prices may shift decarbonization down the list of priorities in the short term
The long-term influence of the war on the pace of the energy transition is low compared with main long-term drivers of change: plunging renewables costs, electrification, and rising carbon prices

2. COP26 and the IPCC have called for urgent action which has not materialized: emissions remain at record levels

3. Electricity remains the mainstay of the transition; it is growing and greening everywhere

4. Hydrogen only supplies 5% of global energy demand in 2050, a third of the level needed for net zero

5. We are heading towards a 2.2°c warming; war-footing policy implementation is needed to secure net zero by 2050

6. Net zero means leading regions and sectors have to go much further and faster

In summary, the global energy transition is driving a generational revolution which will touch every part of the economy, underpinned by technology, innovation, artificial intelligence and critical minerals. The trends driving the change are giving rise to enormous investment opportunities. The transition is supported and buttressed by the most power governments around the world via policies, regulations and incentives. A massive call for investment and participation by the private sector is underway.