By the end of this year, global renewable energy capacity is projected to surpass the energy capacities of Germany and Spain, combined.
That number is then expected to increase from 440 gigawatts in 2023 to 550 GW in 2024, thanks in part to rapid, widespread deployment of solar and on-shore wind projects. By 2050, renewables are slated to make up 62% of the power mix.
But it’s too soon for complacency; despite immense gains in wind and solar, we are not on track to meet Paris Agreement targets, and must accelerate the energy transition even faster. And while we’ve ramped up renewables fairly quickly, other elements of the energy transition — including decarbonizing the industrial sector — are far more difficult, according to a report from Ernst and Young released today.
EY’s Energy and Resources Transition Acceleration model analyzed the impact of four levers driving change in global energy systems: technology advancement, commodity supply, consumer engagement, and government policy.
The report predicts that the pace of the energy transition will have major — and related — implications across systems.
“We discuss these implications separately but, in reality, they are interconnected, driving and impacting each other,” EY wrote. “Rising electrification will accelerate the evolution of the molecule. Mainstream adoption of EVs will shift supply chains. Localized energy will reconfigure the grid. Considering the cumulative impact of these implications can help companies assess their impact — and identify emerging risks.”
To keep up with this potential, though, EY forecasts that we’ll need around $4.1 trillion in annual investment in energy transition technologies and related infrastructure by 2050. That would entail quadrupling today’s investment levels.
There are a few key areas where dollars could go furthest towards boosting decarbonization efforts. For instance, policies to make renewables more appealing to investors — like intelligent carbon pricing and subsidies — could help improve renewables returns and make hydrocarbon-generated energy more expensive more quickly.
And a focus on the critical minerals supply chain gap could help alleviate a bottleneck for the buildout of new assets and infrastructure that require immense amounts of copper, lithium, nickel, and iron ore. (Considering the current pace of investment, though, EY predicts that by 2030 investment in mining exploration and development will only be around half of what’s needed.)
For power and utility companies, the biggest opportunity is in nailing their value propositions, particularly for industrial consumers, who will make up more than half of total electricity demand by 2050. That likely involves adopting a “digital-first approach” and “ripping up the old rulebooks about consumer engagement,” the report said. Investments in this space should focus on grid flexibility and intermittency management, alongside a steady buildout of renewables.
There’s also a need for utilities to release the “handbrake” of slow adoption rates for new technologies. While the report found that early adoption of technologies such as those aimed at solving intermittency challenges (think storage) comes with higher costs and risks, those short-term downsides are dwarfed by the potential detriment of waiting for those costs to come down.
