CIO Special – Energy Transition: An Investment Perspective

The renewable energy sector is experiencing extraordinary growth. But this rapid expansion is met with challenges.

The solar industry is struggling with oversupply, which is affecting profitability and competition. Similarly, the wind sector is struggling with rising raw material costs and logistical challenges. Despite these headwinds, the long-term outlook for renewables remains positive, thanks to technological advances, cost reductions and government support.

Similarly, utilities play a key role, but their valuations may not fully reflect current growth prospects. Energy storage is growing rapidly, with battery capacity set to quadruple between 2020 and 2023. However, China’s dominance of lithium-ion battery production raises supply chain concerns. Finally, some oil giants are also investing more in transformation. Regulatory pressures remain, but recent market performance has been positive. Adaptation is essential for their future success.

In this CIO Special, we explore why the trajectory of the renewable energy sector remains positive. As the world moves toward cleaner energy sources, the potential for growth and transformation in the energy landscape remains significant.

Key conclusions:

• The renewable energy sector, especially solar PV and wind, is experiencing significant growth. Global annual renewable capacity additions increased by almost 50% in 2023, led by China. The IEA forecasts that wind and solar PV will become the leading sources of electricity by 2025 and 2026, respectively.
• Global and regional policies are key to driving the clean energy transition. Notable measures include the EU’s Fit for 55 package and the US Infrastructure Investment and Jobs Act (IIJA). However, inconsistencies in policy implementation and potential regulatory changes pose risks to the sector’s stability and growth.
• Different sectors face unique challenges in the clean energy transition. Despite these challenges, the long-term outlook for renewables remains positive due to technological advances, falling costs, and strong government support. Traditional sectors such as utilities and major oil companies are also navigating the transition by combining traditional and renewable energy investments, addressing both regulatory pressures and market opportunities.