In this two-part report our Global Energy Perspectives team summarise developments in the energy transition over the past couple of years and look forward to the implications for investors.

In part two of this report we focus on the reasons to be cautious:

Longer-term economics risk

The uncertain trajectory of future commodity prices creates downside risk for power generators if commodity markets move from famine to feast. Equally, a cost of living crisis is incentivising political action to cap the upside of energy profits or attempt to decouple renewable prices from commodities.

Rising cost of capital

Rising inflation is causing interest rates to rise, ending a period of unprecedented low interest rates since 2008. This will increase the cost of raising finance for developers.

Permitting and grid constraints

There will be persistent challenges in converting accelerated renewable demands into greater supply owing to planning, permitting and grid capacity issues.

Supply chain and production costs

Increasing demand, coupled with rising material costs, is creating price pressure on the renewable supply chain. The rise of local sourcing requirements risk compounding these price pressures further.

Government spending

Economic pressures and politicisation of the decarbonisation agenda risk reductions in fiscal support for green technologies.

 

Read our full report below for a more detailed analysis. Please get in touch to find out more.