Extreme weather events such as this summer’s wildfires in California, Greece and Turkey as well as floods in China, Germany and Belgium highlight the devastating impact of climate change. As global decarbonisation efforts gain momentum, we believe there’s an attractive, multi-decade investment opportunity in clean energy infrastructure, which is at an inflection point for two reasons.
- Declining Costs
In most places, renewables are cheaper than traditional energy sources even on an unsubsidized basis, as costs for wind and solar have declined by 80%1 over the last ten years. Over the next 10 to 15 years, we see the potential for further cost reduction. While energy storage challenges remain, we believe that innovation will continue, further reducing the dependency on fossil fuels and reaffirming renewables as the primary source of global energy.
- Policy Action
We are seeing alignment across governments, corporations, and investors, as well as behavioural changes from consumers. Amongst these stakeholders, aggressive decarbonisation goals and net zero targets are creating long-term demand for clean energy solutions. While legislative action tends to take longer to come to fruition, we see an increased global focus ahead of the UN Climate Conference (COP26) in Glasgow later this year.
For context, a $50 trillion investment in clean energy (renewables, electrification, energy efficiency/reliability) is needed to keep emissions flat relative to today given expected population and energy demand growth around the world. Globally, $100 trillion of investment is needed to meet the Paris Agreement goals and mitigate the negative impacts of rising world temperatures.
