Is the energy transition losing momentum, or has the rate of change always been slow?
Here's a glimpse at some of the compelling arguments made during the recent ESF Europe
advisory meeting earlier this month! Making long-term, meaningful reductions in carbon emissions – has the focus been on spending capital to make the biggest difference from a carbon perspective, or has policy been focused on trying to drive economic growth but for technologies that don't necessarily make the most sense today? This tension between driving immediate economic growth and solutions that deliver clear, measurable carbon benefits requires a shift in focus.
- US hiatus – The upcoming election is creating uncertainty, impacting investment decisions and project timelines in anticipation of shifts in policy direction, especially regarding incentives like the 45V tax credits.
- 1.5°C is no longer an achievable target – According to PwC’s?recent Net Zero Economy Index 2024, last year’s global decarbonisation rate of 1.02% was the?lowest in over a decade. The world must now decarbonise at a rate twenty times faster if we are to limit global warming to 1.5°C. With that in mind, 2°C is fast becoming a supported, more realistic target.
- Geographically diverse policies across Europe – The UK recently pledged ￡22bn in funding for the Track 1 and Track 2 CCS cluster projects - net zero Teeside and HyNet. We are witnessing momentum in Southern Europe, where companies are pressing ahead with their plans to broaden their platform of products and opportunities. Meanwhile, Germany, home to Europe's biggest economy and many energy-intensive industries, has recently changed its previously opposed stance on CCS as a way of keeping heavy industry alive. These diverse policies and subsidy access are posing the risk of a……..
- .... two-speed decarbonisation – Europe has witnessed uneven progress among EU member states in achieving climate goals. Some projects progress at pace if they have the right mix of project elements: supportive subsidies, access to feedstock, de-risked technology, confirmed offtake, an appropriate end-product use case that is aligned with regulatory principles, and some level of collaboration along the supply chain.
- Chicken and egg infrastructure dilemma – Investment in infrastructure depends on a reliable pipeline of projects that cannot move forward to a Final Investment Decision (FID) without the necessary infrastructure in place. This chicken and egg dilemma creates development delays with real consequences for Europe’s ability to achieve its net zero targets.
- We’ve reached an impasse – European governments are hoping that the market will decide what the end game looks like while the market waits for visibility on infrastructure and government requirements. With both sides waiting for the other to take the first step, we’ve reached an impasse, and progress has stalled.
- It's time for action – Are we losing momentum, or has the pace and rate of change always been slow, driven by lengthy engineering studies and market analysis? Today, we have reached the tipping point where the groundwork has been laid, and balance sheets are on the line. As the urgency for decisive capital investment is more pronounced, financiers seek clarity and stability with well-defined pathways, cohesive landscapes, visions, and clear, supportive regulations.
- Green premium – Today’s low-carbon solutions and technologies routes are not more cost-competitive for the consumer than traditional production through fossil fuels. Recent global financial challenges have slowed consumers’ acceptance and willingness to pay more for sustainable products, while rising costs are creating challenging project paybacks in the short to medium term, as the rate of CapEx escalation is not reflected in the rate of escalation of the forecasting commodity prices. The financial reality makes these solutions and technologies unable to stand on their own two feet and be competitive outside of subsidies.
- The pace of market pull – A critical factor influencing FIDs. With the uncertain pace of market pull, companies face complexities in making informed FIDs for projects that align with market demand.
This article is part of an extensive advisory meeting report for ESF Europe - Energy & Sustainability Forum
that will take place in Vienna in February 2025, with the support of our co-host, OMV. Make sure you take part in it!
From theory to practice! As net-zero targets edge another year closer, technology application in action is paramount. We’d like to receive case studies, co-presentations with clients and practical examples of technology application and implementation.
