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Climate Change Meets Clean Energy—A Contest to Keep a Close Watch



Climate change is the most pressing global grand challenge of our time, and the COVID-19 pandemic has made it an even more pressing concern. The world’s response to this challenge will shape the future of our planet for generations to come.

The clean energy transition is gathering momentum backed by need and intent. The global governments are pushed to provide policy and funding support, as clean energy is the only potent answer to climate change and ensuring energy security. Additionally, the clean energy transition is becoming one of our generation’s most significant investment opportunities because of the domestication of manufacturing for batteries, solar, and electrolyzers.

Consider the following:

By 2027, the global average temperature can increase from 1.16 degrees Celsius to 1.50 degrees Celsius. The world’s oceans have set a heat record for the fourth consecutive year, a significant factor in 2022 is one of the warmest years on record. Extreme weather events have been increasing in recent years. A Carbon Brief analysis of 504 extreme heat events in recent years found that nearly three-quarters of these were more likely or more severe by human-caused climate change.

Evidence shows that the loss of glaciers due to climate change is triggering earthquakes, as seen recently in Turkey and Alaska. Climate-driven disruption of the global water cycle and growing water shortages have enormous economic and geopolitical implications. The changing climate is causing a shift towards extreme precipitation patterns, with long periods of low or no precipitation and short bouts of intense rainfall, leading to increased water-related disasters. According to the World Meteorological Organization, this shift is reflected in the increase in flood disasters by 134%, and the number and duration of droughts have also increased by 29% since 2000.

The clean energy transition is essential for mitigating climate change’s effects. The clean energy transition will also improve energy independence.The transition to clean energy can also have significant public health benefits. Air pollution from burning fossil fuels is a major contributor to respiratory diseases, heart disease, and stroke. According to the World Health Organization, air pollution is responsible for seven million premature deaths yearly.

The disruptive potential of clean energy technologies is significant, with declining costs and rising adoption of solar, wind, batteries, electric vehicles, and emerging technologies like green hydrogen and geothermal energy. The IEA estimates that between 2022 and 2027, the world will add renewable-energy capacity equivalent to the last two decades. Renewable energy will account for over 90% of global electricity capacity additions and surpass thermal power as soon as 2025.

The clean-energy transition is a multi-trillion opportunity. IEA expects the market to exceed $23 trillion by 2030. Consequently, climate change and business opportunities are driving the clean energy transition.

Renewable energy is the most cost-effective choice for expanding new power generation capacity in markets that account for 96% of global electricity production.The cost of solar panels has fallen by around 90% over the past decade, while the price of wind power has fallen by approximately 70%. Operating 99% of the coal-power plants in the US is now more expensive than building and operating new solar or wind projects.

The clean-energy input costs increased due to China’s shutdown last year and the rise in metal prices, including lithium, nickel, and copper. However, the cost decline resumed in the second half of 2022, with the levelized cost of onshore wind, solar, and offshore wind declining q-o-q by a respective 6.3%, 1.7%, and 10.2%. The average benchmark cost of offshore wind projects, which are more expensive to build, is now cheaper than coal and gas-fired power plants for the first time. The increasing EV sales in many parts of the world also reflect the urgency and interest from consumers for cleaner sources.

Newer lithium mining technologies, such as direct lithium extraction, are promising to increase supply and reduce battery prices. New battery chemistries are emerging to reduce reliance on expensive metals. Sodium-ion and flow batteries, among others, are on the verge of commercialization.

Green hydrogen and geothermal are next-generation clean-energy technologies accelerating the transition to cleaner sources. The cost of electrolysis is expected to follow the trajectory of solar price decline, making green hydrogen viable. Deep geothermal wells to extract energy are becoming possible due to advancements in drilling technologies. This will enable harnessing power from super-hot rocks (SHR) at greater depths, including abandoned oil wells.

Huge investments are being made in the clean-energy transition. Last year, clean-energy investment increased by $261 billion, a 31% y-o-y increase, to reach a total of $1.1 trillion in 2022. Global investments at an average annual rate of $4.5 trillion are needed for the remainder of this decade to stay on track for net-zero targets.

The Infrastructure Reduction Act in the U.S. earmarks $369 billion in support for the clean-energy transition and is helping build the domestic supply chain. The EU is also a frontrunner in supporting policies for the clean-energy transition. The EU has already announced funding and policy support through the EU Green Deal, Fit for 55, and RepowerEU.India has committed to fulfilling half of its energy requirements from renewables by 2030 by installing a cumulative 500 GW of renewable energy.

The rapid clean-energy transition is the highest priority to mitigate climate change and increase the sustainability profile of the products and services. We are on the verge of massive investments and economic activity in the sector that will create enormous profit potential for the participants.

Author: Anurag Bansal is a Disruption Analyst and serves as Managing Director at 13D
Research & Strategy. Anurag has 15 years of experience in studying exponential technologies. He is
passionate about understanding the new wave of innovation fueled by exponential technologies like
AI/ML, connectivity, clean energy, and bioinformatics. Anurag believes identifying and
understanding disruptions before they become mainstream is a valuable investment opportunity.

**Disclaimer: Views expressed here are personal and do not represent any institution or entity I’m
associated with.

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