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An $18 trillion capital gap ‘threatens the energy transition’


Worldwide Finance Closing the $18 trillion gap to fund the green energy transition through to 2030 is being slowed by negative investment conditions according to a report from the consulting group BCG. Challenges include inflation, supply chain constraints and pressures, and higher costs of capital. However, the energy sector has responded proactively. Total energy sector transactions exceeding $320 billion so far in 2023 show that the industry is fine-tuning capital frameworks for the energy transition. The assessment comes from a publication released on 20 November by the Boston Consulting Group Centre for Energy Impact. Titled ‘Bridging the $18 Trillion Gap in Net Zero Capital’, the report is based on an analysis of 260 of the world’s largest energy companies across power and utilities, oil and gas, and private equity.


The publication builds on the recent BCG Centre for Energy Impact report ‘The Energy Transition Blueprint’, which showed that an investment of $37 trillion is needed by 2030 to finance the energy transition. Of this, $19 trillion is already committed over the next seven years, with 20% forecast to come from


government spending, and 80% from private capital. A broad mix of investors is expected to contribute to the latter, including a $2 trillion share from private equity, $3 trillion from the oil and gas industry, $4 trillion from national oil companies, and $6 trillion from utilities companies.


Committed investment includes nearly $2 trillion in new government spending, while company targets suggest a 15% increase in energy expenditures between 2023 and 2027, with an increasing share allocated to low-carbon investments. Approximately 70% of the capital flows expected through 2030 are forecast to originate in the US (30%), China (19%), and Europe (18%).


The most challenging areas The vast majority of the $18 trillion shortfall, almost 90%, is traceable to two areas: electricity, including renewable power investments, and end use, such as consumer and industrial spending to bring down energy demand and emissions. The investment environment for renewables has been adversely impacted by the higher cost of capital, especially in the wind sector and,


geographically, in North America. However, early signs point toward consolidation in renewables to support continued investment, and power and utility companies are divesting assets to reduce debt and meet financing requirements in the face of these challenges. For end users, a huge $9 trillion investment shortfall is expected through 2030. Challenges include bureaucratic hurdles, insufficient infrastructure, and weak business cases. In addition, most prospective investments, including 93% of proposed carbon capture projects, remain in the early planning stages.


“The energy sector accounts for almost a third of the world’s annual capex, and its capital intensity rate is more than double that of others,” said Maurice Berns, a BCG managing director and senior partner who chairs the Centre for Energy Impact and co-authored the report. “’The massive challenge we are seeing in green energy investment today is that upfront capex investment is much higher as a share of total energy production cost than in traditional hydrocarbons. The high cost of financing we are seeing now matters more than ever.”


Next–gen tidal energy project in Wales


Wales Tidal power HydroWing is preparing to deploy its next generation tidal energy technology, following the recent announcement that it has been awarded a contract for a 10 MW tidal stream energy project in Wales under the UK’s latest Contracts for Difference round. The project will be located at the Morlais tidal energy site in Anglesey, the UK’s largest consented tidal


energy scheme, and is managed by the social enterprise Menter Môn. HydroWing is designed to be a cost-


effective and scalable solution to tidal stream energy generation. A supporting structure sits on the seabed, under its own weight. The technology to be used for the Morlais project will incorporate the next generation Tocardo T-3 turbines.


First sensor of commercial scale emissions in orbit


USA Emissions abatement An orbital sensor able to detect carbon dioxide emissions from industrial facilities and other sources has been launched from Vandenberg Space Force Base in California. It is the first such sensor able to pinpoint CO2


emissions from


individual industrial facilities such as power plants. The sensor, designated ‘Vanguard’, has been developed by emissions detection specialist


GHGSat and will provide high-resolution CO2 data measured at individual sites. It will be able to gather date from nine satellites to make over two million measurements annually, on and offshore, providing data to NASA, ESA and the United Nations.


This technology will change how emissions are monitored, and provide greater support for the task of decarbonising hard-to-abate sectors and power plants. There are public CO2


sensing satellites


currently in orbit, but Vanguard can home in on individual targets and accurately attribute emissions. This will allow operators of industrial complexes and power plants to access emissions data, supplementing the Continuous Emissions Monitoring Systems (CEMS) already in place, and providing independent verification to improve environmental, social and governance reporting.


Stephane Germain, CEO at GHGSat, 6 | November/December 2023 | www.modernpowersystems.com


commented: “With regulators, investors and the public increasingly holding companies to account for both their direct and indirect


emissions, there is little doubt that better CO2 data is needed. Trusted, independent data will help incentivise industry to manage its emissions effectively. It will ensure that climate policies are well-founded. Above all, it will help all of us stay on track to achieve Net Zero by 2050.” Vanguard was launched into space on board SpaceX’s Falcon 9 during the Transporter-9 mission via Exolaunch. The GHGSat sensor payloads were built by ABB in Canada and integrated into satellites designed, built and operated by Spire Global.


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