In terms of technological trends, every human industrial revolution has been accompanied by an energy and power revolution, and the fourth industrial revolution is no exception.
The fourth industrial revolution is characterized by a wave of digital technology, where the operation of large-scale intelligent devices and network communications will require electricity far beyond that required by traditional industrial systems.
Fossil energy can hardly carry this burden, and the only way is to develop new energy technologies.
Energy with “desire”: from carbon reduction and speed to energy autonomy
Before the energy crisis in Europe, carbon reduction plans with the goal of carbon neutrality were being implemented globally.
The path to carbon neutrality consists of two processes: electrification of energy use patterns on the consumption side, and sustainable energy production and delivery on the supply side.
As far as the consumption side is concerned, industries such as transportation and industry used to consume fossil energy directly, and under the carbon neutrality goal, all these industries have to switch to more use of electricity.
The change on the supply side, on the other hand, means more innovation and growth in this energy transition.
AI Core World丨In Depth丨The New Elephant in the Room for 2023 Investment: Shifting from Fossil to Renewable Energy
The availability of renewable energy sources such as wind and photovoltaic for power generation at the grid source.
The application of distribution technologies in electricity transmission that can regulate the volatility of renewable energy sources, i.e. smart grids.
and energy storage technologies that enable large-scale, long-cycle storage of electricity, such as hydrogen storage.
All three of these renewable energy supply segments are seen as investment targets with significant market potential.
In addition to carbon reduction, another important value of greater use of renewable energy lies in achieving energy autonomy.
One of the reasons for the heavy fossil energy crisis is the inequality in distribution.
Compared to fossil resources, contemporary energy sources such as wind and light are relatively more evenly distributed globally, and national mastery and deployment of these new energy technologies will facilitate energy autonomy.
Finally, the most potential and more attractive aspect of the energy transition is that it means leadership in the next technological era.
Record-breaking investment: flat last year, overtaking this year
Global 2022 renewables received a record $532 billion in new investment.
Of this, $495 billion is for project deployment, namely asset finance and distributed PV.
In 2022, renewable energy and related companies will raise a total of $19.6 billion in the public markets, 57% less than in 2021.
VC/PE investment for expansion totals $18.8 billion, a 55% boost from 2021.
Investment in new large-scale renewable energy projects in 2022 will increase 15% from 2021 to $405 billion.
Investment in large-scale and distributed PV projects reaches a record $308 billion, up 36 percent from 2021.
Wind power financing remains roughly unchanged, holding steady at $174 billion.
Instead of slowing down, energy transition investments soared to a new record as countries and companies continue to implement their energy transition plans.
The global fossil fuel investment in 2022 is about $1.1 trillion, the same as the total energy transition investment.
Although the energy crisis in 2022 triggered the growth of fossil fuel investment, the growth of global energy transition investment also made it equal to fossil fuel investment for the first time.
In addition to the renewable energy sector, funds are flowing into more diverse areas.
The electrification of transportation, including electric vehicles and related infrastructure, reached $466 billion in investment, up 54 percent year-on-year, almost catching up with the amount of investment in renewable energy.
Riesta Energy expects global investment in renewable energy to reach $494 billion this year, exceeding the $446 billion investment in upstream oil and gas for the first time in history.
DNV GL believes that in the long run, the short-term growth of coal cannot compete with the declining cost of renewables, electrification and rising carbon prices.
In the past decade, the cost of renewable energy has been reduced by about 90%, the efficiency of power generation has been greatly improved, and the reliability and stability of the technology has made great strides.
Giant companies increase investment in renewable energy
By acquiring some renewable energy companies, increase their own energy assets more diversified at the same time, reduce the risk of future fossil energy carbon lock.
World energy giant Shell announced an absolute emissions reduction target in October 2021 of a 50% reduction in the company’s net emissions by 2030 compared to 2016, and a commitment to become a net-zero emitter by 2050 or sooner.
British oil and gas giant BP has pledged to be net-zero emitters by 2050 and to achieve 50GW of net renewable energy generation by 2030.
U.S. energy giant Chevron has committed to net-zero upstream emissions by 2050 and has pledged to reduce its carbon capital allocation by about $10 billion over the period 2021-2028.
Growth in renewable generation will go a long way toward meeting the growth in electricity demand.
Currently, total U.S. electricity generation from renewable sources exceeds that of nuclear and coal. Growth in renewables is expected to exceed that of natural gas around 2030.
Companies that will benefit from this exponentially growing long-term trend will focus on wind and solar power, and those that can provide such power to homes and businesses.
Other beneficiaries will include companies that can provide the raw materials used to generate and transmit electricity.
Investment institutions “declare war” on traditional energy
Recently, dozens of investment institutions suddenly joined together to pressure the five major European banks to stop providing loans to fossil fuel companies.
In a formal letter, the investment institutions said that continued financing of fossil fuel projects could jeopardize the global net-zero emissions path.
As a result, the five largest European banks were asked to stop providing direct financing to new oil and gas fields by the end of 2023.
Britain’s Barclays, BNP Paribas, Credit Agricole, Deutsche Bank, and Societe Generale all received letters.
The “strong relationship” between renewable energy and world economic development
The International Energy Agency (IEA) latest report shows that global energy investment will grow by 8% this year, reaching $2.4 trillion, with growth mainly coming from the clean energy sector.
Among them, the fastest growth is renewable energy and power grids, as well as related energy efficiency technologies.
The reason for the strong growth in investment is that major economies have increased their financial support for clean energy.
Investment is focused on renewable energy, grid and storage, and investment in some emerging technologies is growing rapidly, especially batteries, low-emission hydrogen, carbon capture utilization and storage.
Mid- to late-stage energy ventures are also up 70 percent, led by energy storage, batteries, hydrogen and fuel cells, reflecting continued investor confidence in the energy transition.
As the EV market matures, EV-related investors and startups are focusing more on the component and battery value chain, and early-stage venture capital is beginning to shift from EVs to battery manufacturing and critical minerals.
In addition, early stage investments in innovative ways to avoid fossil fuels in heavy industry continue to grow, and hydrogen energy continues to attract significant early stage venture capital.
Fossil energy divestment aims to drive all types of institutional investors to pull their money out of fossil energy companies.
Pressure is being put on traditional fossil energy companies to adopt methods to reduce CO2 emissions and thereby slow the global warming trend by limiting capital investment, among other things.
When renewable energy investment overtakes upstream oil and gas investment, it will be an important milestone in the global transition to clean energy.
In addition to renewable energy project investment, the increase in VC and PE financing is also the driving force behind the continued growth of global renewable energy investment.