What’s the energy transition going to cost?
Interchange Recharged
Wood Mackenzie
4.8 • 535 Ratings
🗓️ 23 April 2024
⏱️ 41 minutes
🧾️ Download transcript
Summary
Estimates for the cost of decarbonising could be inaccurate. What does that mean for investment and policy-making?
About $1.2 trillion is invested annually in climate technology and infrastructure worldwide, with significant portions allocated to China due to its accelerated decarbonization goals. However, experts argue that about $9 trillion could be needed annually to effectively counter climate change, indicating a substantial gap in current funding. Debate continues over the economic feasibility of such costs, to the detriment of progress, but what if the cost was actually far less? RMI, the research and clean energy advocacy group, says that this may indeed be the case. These forecasts could be overinflated by trillions of dollars. If that’s true, what will it mean for investors, markets and policy?
We are joined by Dan Goldman, managing partner at Clean Energy Ventures, a VC that funds startups developing early stage breakthrough technologies. He says the there’s a significant investment shortfall – regardless of the total cost of decarbonising – currently to stabilise global temperatures. He discusses a downturn in venture capital investments in climate tech, particularly affecting early-stage companies and innovation in new technologies. Challenges remain in scaling up clean energy technologies due to a combination of high interest rates, inflationary pressures, and supply chain disruptions, which increase costs and complicate project implementations.
There's a specific shortfall in investment for infrastructure necessary for large-scale renewable energy implementations, like wind and solar, which are essential for a robust energy transition. We discuss how this could be addressed, and analyse the current economic environment, characterized by high costs and uncertain returns.
Is it these barriers that are hindering significant capital flow into this sector, or the forecasted cost for decarbonising global energy systems? How can global financial strategies be adjusted to accelerate the necessary investments in clean energy and technology? Find out on the show.
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Transcript
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| 0:00.0 | Wood McKenzie's Solar Energy and Storage Summit is back in Denver on the 29th and 30th of April, |
| 0:06.2 | 2026. It's co-located with the brand new North American Power and Renewables Forum, |
| 0:11.9 | which features senior speakers from across the U.S. power sector. Come and join over 450 senior |
| 0:18.2 | leaders from U.S. power developers, utilities, and independent power producers |
| 0:23.3 | to tackle the industry's biggest challenges. From navigating life after tax credits to capturing |
| 0:29.7 | the load growth boom, discover how the energy mix is evolving and how the U.S. is going to meet |
| 0:34.9 | that power demand. Seats are limited, so register now at woodmack.com. |
| 0:40.4 | $9.2 trillion a year to get us to net zero by 2050. |
| 0:45.3 | It sounds astronomical, but what if the cost is a lot less than we thought? |
| 0:49.1 | This is the interchange, recharged. |
| 0:51.8 | A Wood McKenzie production. |
| 0:53.8 | I'm David Banannmiller. |
| 0:57.7 | Transforming global energy systems and the economy itself is estimated to cost us over $9 trillion a year. |
| 1:04.5 | That's three and a half trillion more than today and about half of global corporate profits. |
| 1:09.6 | But what if that number is overinflated? What if it costs |
| 1:12.6 | us way less than we thought? That may be the case. It could be trillions or even tens of trillions |
| 1:18.0 | of dollars less than forecast. RMI is a clean energy research and advocacy group. And they say that |
| 1:24.1 | there's a flaw in these estimates, that they don't take into account a decrease in fossil fuel spending. |
| 1:29.1 | Could these misleading forecasts be impacting the flow of capital into clean energy technologies and influencing government policy? |
| 1:36.0 | The key now is to ensure that CAPEX moves from generation to grids and from developed markets to emerging markets. |
| 1:43.1 | The primary impediments to change our policy and expertise |
| 1:46.4 | rather than the volume or availability of capital. |
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