Energy Transition
The need to decarbonise is accelerating the energy transition globally
Investment levels need to increase significantly
It is estimated that between 2020 and 2050 we need to spend nearly $120 trillion of investment in energy transition infrastructure. Urgent action is required to decarbonise the entire value chain.
Increased need for independent energy security
Driven by the deglobalisation trend and exacerbated by conflicts in Europe and Middle East, many countries are looking to develop decentralised and localised renewable energy sources.
Conventional energy companies will transition their business models
Leading oil and gas companies will be an important part of the energy transition due to their global scale, large capital available to redirect toward new energy sources and their long-standing relationships with energy customers.
What is the energy transition?
When we speak about the energy transition, we are referring to a long-term transformation of the entire energy system. This involves not only significant investments in renewable energy, but also close collaboration with traditional energy companies as they embark on their decarbonisation journey. We are entering a multi-decade investment cycle across almost all areas of the energy market value chain. At Schroders, we believe that taking a holistic approach to investing in the energy sector will be crucial in the coming decades.
Conventional energy will play an important role in the transition
Conventional oil and gas companies must adapt and transition their business models to continue to be dominant players in the global energy market going forward. Conventional energy companies currently provide a critical link in the energy mix and their investment rates will have a huge influence on the stability and speed of the energy transition. As these companies transition their business models, specialist expertise and active management are crucial to understanding the valuation cycles and managing risks.
Renewables market opportunity is happening now
We also see huge demand for renewables from the increased demand for electricity globally; the market is expected to grow by about 150% between now and 2040 (McKinsey, Global Energy Perspective 2023). This is an unusually strong growth rate in demand that is separate from the energy transition movement. The key drivers being energy consumption per capita, population growth, data centre usage and electrification of key industries.
Our areas of expertise
Schroders Greencoat
Renewable infrastructure - enabling the clean energy transition
Energy transition videos
3D Reset is accelerating the energy transition movement
We see the urgency of decarbonisation as one of the “3Ds” – demographics, decarbonisation and deglobalisation – which are driving seismic change through the global economy.
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