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Writer's pictureMathew Jensen

Investing in the Clean Energy Transition: Only 10% there – what more needs to change?

As faith-consistent investors, many of us have investment policies that exclude and/or engage fossil fuel-based energy producers (for example,, oil companies, etc), and include no or low carbon energy producers, methods and products – typically under a 'care for creation' or like value. 


We’ve all seen the climate data, net-zero commitments are being increasingly adopted by governments and businesses, and most believe in a causational link between levels of greenhouse gases in the atmosphere and planetary temperatures ...


... and as investors we’ve poured billions into 'clean tech', more than US$280 billion in the US alone for the 12 months ending June of 2024, but …


...where are we in the energy transition we’re investing in?


McKinsey Global Institute has a new study into this question: The hard stuff: Navigating the physical realities of the energy transition. And we’re still very early '…with about 10% of required deployment of low-emissions technologies…' in place and '…largely in less difficult use cases'.


Why – and what needs to change?


The report’s authors note the immense challenge of trying to build 'a new low-emissions energy system (the net zero gap)' and at the same time 'continue to grow [the system] to expand access to energy for billions of people who still do not have it (the empowerment gap)'. 


We wrote on this challenge in a prior post, where the numbers are indeed high: US$37 trillion to close the empowerment gap, US$41 trillion to close the net-zero gap.  By comparison, total world GDP in 2022 was US$100 trillion (World Bank).


The report identifies 25 'physical challenges', or 'barriers to switching from high-emissions physical assets and processes to low-emissions ones”, across seven domains in energy production, consumption and distribution, but notes that the barriers have three common features:


  • Technological performance gaps – where new clean energy systems and technologies still significantly underperform current systems (think long haul trucking, where just 1% of this fleet is electrified).

  • Tangled Interdependencies – where a clean energy solution in one area (for example, low-emissions steel production) requires significant changes in other areas; in this case, hydrogen power sources and carbon capture technologies.

  • Scaling for Efficiency – deploying and supporting nascent low-carbon technologies raises issues over the supply of needed raw materials (consider the speciality metals used in modern batteries), and expanding the support for these new technologies, for example, the required charging-station infrastructure for electric vehicles.


The nearly 200-page report goes into extreme detail sector by sector in the 'seven domains', documenting the current state, challenges and likely future pathways.  For us as investors and changemakers with our investments, the report offers a few areas to consider that may not be on your list: 


  • Carbon capture utilisation and storage technologies (CCUS)

  • EV (electric vehicle) infrastructure and supply chains

  • Plastics recycling processes and technologies, where 'today, less than 10% of the plastics produced uses recycled plastics'

  • Low emissions hydrogen capabilities, where its use in technologies such as fuel cells produces electricity and releases water (vs CO2), and hydrogen has three times the energy density of oil.


Why is all this important?  The authors state: 'Understanding the physical realities can help navigate the way forward to a successful transition.'  And while the numbers may seem daunting, they point out that in the past 'new ways of transforming energy have been achieved that had been unthinkable, from liquefying natural gas to splitting the atom. Such ingenuity [and investment] is now needed again'.

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