Ahead of the UN Climate Change Conference this month, global energy leaders and investors have highlighted poor government support as a key obstacle to reaching net zero goals.
In its 2024 Energy Transition Outlook, International law firm Womble Bond Dickinson reports the views of boardroom executives from energy and utilities firms as well as leading investors in the sector from the UK and Europe, North America, Asia Pacific, the Middle East and Latin America.
Respondents to the survey pin-pointed the insufficient support of governments as the main hurdle in the journey to net zero. Concerns that governments will not live up to their commitments were also identified as a key issue.
Richard Cockburn, Head of Womble Bond Dickinson’s UK Energy and Natural Resources Group, explained: “As world leaders prepare to gather for COP28, decision makers in energy companies across the globe are calling for more support, better legislation and firmer commitments to net zero targets.
“Our report reveals that more than half (56%) of respondents are deepening their focus on energy transition strategies, and many show significant optimism around low or no carbon resources and technologies, such as carbon capture and green hydrogen. Yet, they are also clear-eyed about the need for more political support as well as the greater-than-anticipated level of capital investment to realise energy transition ambitions.”
Barriers to energy transition
Amid rising interest rates and equipment prices, 56% of respondents said cost and economic impact was a leading challenge impacting the transition to clean energy. Cost concerns were slightly more pronounced in the developing economies of Latin America, selected by 60% of respondents, compared to 57% in Europe who cited those challenges.
Infrastructure needs and grid flexibility requirements also ranked among the top challenges impacting the energy transition, as selected by 54% and 52% of respondents, respectively. Respondents said key concerns in grid modernisation include interconnection challenges, mitigation of grid instability resulting from renewable energy integration, and aging infrastructure.
Although political and public support for clean energy remains strong, the survey revealed that much more is required – both in Europe and globally – in terms of capital mobilisation, legislation, and regulation. Asked to select all areas in which government guidance or incentives could be most effective in accelerating the energy transition, 40% of respondents chose funding of grid upgrades and efficiency improvements, 33% chose policies to incentivise energy storage, and 32% said such support would be most effective in energy efficiency measures.
Cockburn added: “Energy industry leaders will be keen to see how these views are reflected in the UK by the Chancellor in the upcoming Autumn Statement. What’s more, with a general election on the horizon, it’s clear that energy transition will be a critical issue within party manifestos and in enabling the UK to regain momentum in the long-term move away from fossil fuels.”
Appetite for investment
Despite these pressing challenges, the 2024 Energy Transition Outlook paints an encouraging picture for investment in clean energy for the year ahead. Key areas of opportunity, according to respondents, include biofuels and biomass (energy from waste); energy efficiency improvements; carbon capture technologies; utility-scale energy storage; and electric vehicles.
Executives are particularly bullish on biomass and biofuels, while both executives and investors show interest in carbon capture infrastructure and technology. Nearly 70% expect commercial-scale carbon capture, transport and sequestration will be a reality by 2040.
Cockburn concluded: “The energy industry has entered a new phase in the multi-generational journey to net zero. While costs, infrastructure and politics all bring fresh challenges, it’s encouraging to see sustained commitment and optimism towards energy transition from industry leaders.” To read the full Energy Transition Outlook Survey Report please click here.