Green investing: the foundation of a sustainable energy future

When it comes to green investing – a form of socially responsible investing in companies that support or provide environmentally friendly products and practices – there are plenty of benefits, including reducing carbon emissions, protecting biodiversity and managing natural resources.

Thanks to green investments, new technologies that support the transition from carbon dependence to more sustainable alternatives are transformed from concept to reality, which could not be more applicable in the energy sector.

Green investments play a key role in ensuring a sustainable future. The International Energy Agency estimates that in 2023 alone, approximately $2.8 trillion was invested in energy, of which over $1.7 trillion was allocated to clean energy such as renewable energy, nuclear power, grids, storage, low-carbon fuels, improvement efficiency and end services. use renewable energy sources and electrification.

The body is also highlighting how clean energy investments are expanding their advantage over fossil fuels, a development reinforced by energy security strengths, with solar power expected to eclipse oil production for the first time.

This shows that green investments are essential to transitioning away from fossil fuels, reducing greenhouse gas emissions and combating climate change.

Tom Foley, Executive Director of Future Energy for the UK, Europe and Middle East at GHD, is an experienced energy leader who firmly believes that green investments underpin the long-term sustainability of the energy system – both in terms of coping with demand and environmental impact .

“It is essential to build a resilient energy system along with the development of renewable energy sources,” he begins. “We need a smarter approach focused on investing in sustainable solutions such as advanced energy storage technologies and increased grid flexibility.”

The importance of green investments

Resilient energy systems rely on investments in smart grids, equipped with advanced data analytics and real-time monitoring capabilities, to enable flexible management of renewable energy and distributed energy resources.

All of this, explains Tom, depends largely on tackling ongoing infrastructure deployment challenges and policy gaps.

“The right incentives can enable the development of essential, flexible low-carbon technologies, which, alongside renewable and nuclear projects, remain a key priority for the government,” says Tom.

However, this is to some extent tainted by the ecological investment gap, i.e. the shortage of funds needed to achieve climate goals. This can be seen, for example, in Great Britain. A study by the Commission on Climate Change (CCC) shows that to meet its 2050 net zero emissions target, the UK will need to increase its investment in low-carbon technologies from £10 billion ($12.5 billion) a year in 2020 to approximately £50 billion ($62.4 billion). ) per year until 2030. Brexit has exacerbated this challenge, but Europe faces similar challenges. The Foundation for Progressive European Studies (FEPS) shows that the European Commission’s modeling of required investment needs is “too optimistic” as the EU faces an investment gap of EUR 11.7 billion ($12.5 billion) to 16. EUR 3 billion ($17.4 billion) between 2020 and 2050.

“The difference between the current level of investment and the level needed to achieve net zero is significant,” says Tom.

“The main barrier is the lack of green investment in the private sector due to high upfront costs and potentially uncertain returns. Public investment banks play a key role in providing patient capital for long-term projects, but they have limited resources and capacity, hampering the potential pace of the transition to net zero.

“Ensuring that clearer policies are in place and supporting relationships with the private sector to build a team of solution providers will be key to unlocking these strategic investments.”

Reducing the risks associated with the energy transition

The next hurdle for Tom and GHD to overcome is de-risking the energy transition, which is integral to achieving net zero energy commitments and goals. While the transition from fossil fuels to renewable energy sources is crucial here, as well as addressing climate change as a whole, this transition is not without risks.

This is clear from GHD’s SHOCKED report, which shows that 94% of energy leaders believe the current energy crisis is unprecedented in severity.

Based on this study, GHD recommends that companies explore a multi-faceted approach that takes into account five factors: unlocking capital to accelerate financial decisions for energy projects, improving technical solutions through research and development, effectively managing supply chains and resources, ensuring community support and social acceptance, and ensuring just and fair transformation.

“De-risking the energy transition is essential to mitigate these potential pitfalls,” explains Tom.

Using its expertise, GHD actively works with clients to prevent the risks of this transformation. One notable one is the Scottish city of Grangemouth, a key industrial center that aims to achieve net zero emissions by 2045. Working with the Scottish Government, the partnership is focused on a just and inclusive transition, increasing the economic, environmental and social value of the area.

But it doesn’t stop there: GHD is also supporting Australia’s transition to net zero emissions by helping CSIRO assess hydrogen refueling infrastructure, as well as helping Los Alamos National Laboratory relocate air quality monitoring equipment to Tasmania. These efforts provide the basis for evidence-based decisions for governments, industry and research agencies, contributing to global climate resilience.

The future of meeting the world’s greatest energy challenges

Because net zero is only possible when low-carbon energy is both affordable and secure, collaboration is key to tackling energy challenges head-on – including barriers to green investment.

To address this issue, using a problem-centered approach to open, collaborative discussions that aim to improve outcomes for communities and environments while balancing costs, GHD has a number of strategies that include:

• Cost reduction by optimizing project design, identifying potential financing and adopting long-term strategies to scale sustainable solutions to achieve economies of scale. For example, GHD supports National Grid with financed innovation projects, including optimization of the connection system of hydrogen electrolysers with distribution networks.
• Technology and innovation are critical, and by examining their benefits, GHD can identify more ways to support transition risk reduction while managing costs. GHD is working closely with LAVO to develop novel HEOS hydride technology for hydrogen production in response to market demand for long-term energy storage.

They are an integral part of ensuring accessible, risk-free and the most ecologically beneficial solutions possible.

“Meeting the world’s greatest energy challenges is no easy task, but we are committed to tackling global energy challenges by working closely with our clients to ensure long-term, sustainable strategies are implemented in every project,” Tom concludes. “We strongly believe that our efforts provide valuable solutions that improve sustainability outcomes and contribute to a more sustainable and resilient future for all.”

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