A recent survey conducted by Womble Bond Dickinson reveals that the world’s transition towards a clean-energy future is not without its challenges. The report, titled the 2024 Energy Transition Outlook Survey, highlights the primary obstacle as cost and economic impact.
According to Jeff Whittle, head of WBD’s Global Energy and Natural Resources Practice, achieving net-zero ambitions is a challenging pathway. However, there is a strong commitment to a lower-emissions future among respondents of the survey.
56% of the 456 decision-makers in the energy industry identified “cost and economic impact” as a key challenge in the energy transition. Rising interest rates and equipment prices were cited as factors contributing to this concern. Additionally, 47% of respondents expressed apprehension about inadequate tax and incentive support.
The report emphasizes that money is no longer cheap, highlighting the significant increase in interest rates by central banks over the past two years. This upward trend may persist, impacting the associated levelized cost of electricity, which incorporates construction, fuel, and financing fees.
Infrastructure needs and grid flexibility requirements were also identified as top challenges in the energy transition. 54% of respondents noted the importance of addressing infrastructure needs while 52% stressed the significance of grid flexibility.
Belton Zeigler, co-head of WBD’s Regulated Utilities Team, emphasized that creating a clean-energy system extends beyond deploying solar, wind, and storage assets on a large scale. It also involves modernizing and expanding the transmission grid to ensure efficient and reliable service as electrification continues and renewable resources are added.
The report further highlights grid modernization challenges such as interconnection limitations and aging infrastructure.
In summary, while the transition towards clean energy brings significant benefits, it is not without its hurdles. The cost and economic impact, along with infrastructure needs and grid flexibility requirements, are key challenges that need to be addressed as we work towards a sustainable future.
The Global Challenge of Upgrading Transmission Lines
A recent report by the International Energy Agency (IEA) has emphasized the urgent need to address climate goals and ensure energy security by replacing or adding 49.7 million miles of transmission lines by 2040. Astonishingly, this replacement amounts to the equivalent of the entire existing global grid.
According to a survey conducted by Womble Bond Dickinson, the success of infrastructure projects relies heavily on government support. When asked about the most effective ways to expedite the clean-energy transition through legislation, regulation, or incentives, 40% of respondents highlighted the importance of funding grid upgrades and efficiency improvements. Additionally, 33% identified policies incentivizing energy storage, while 32% believed that government support would be pivotal in achieving energy efficiency measures.
Fulfilling future net-zero emissions goals poses significant challenges, with more than one-third of survey participants identifying insufficient government support as one of their top three obstacles. However, the report also suggests a positive outlook for the clean energy sector, with 56% of respondents indicating an increase in investment or operational focus on energy transition strategies over the past year.
The survey findings outline several key areas of investment opportunity in the clean-energy transition. Decarbonization-focused solutions like biofuels, biomass (energy from waste), energy efficiency improvements, carbon-capture technologies, utility-scale energy storage, and electric vehicles are all seen as promising investment prospects.
Nevertheless, the survey report identifies three major threats to achieving net-zero emissions goals, all rooted in politics. These threats include insufficient government support, fragmentation and inconsistency of legislation, and general political risks that governments may fail to fulfill their net-zero commitments.
Despite the inherent risks, business leaders are increasingly committed to driving the global clean-energy transition. However, they acknowledge that this transition will require capital investments beyond what was initially anticipated.