Investment Institute

Infrastructure and the energy transition: Moving electrons and molecules

  • 22 April 2024 (15 min read)
The energy transition is a massive endeavour - it can only be achieved via massive economic and societal changes and developing the right infrastructure, at the right pace
A key challenge is to transport and distribute decarbonised electricity. Electric grids, storage mechanisms and access points already are and will be even more critical
If carbon capture and storage is developed at a large scale, then transportation and storage infrastructure will be needed
For hydrogen used in oil refineries, steel mills or fertiliser plants, nearby production with limited transportation will dominate. However, if its usage spreads to long-haul shipping, aviation, or heavy-duty trucking, large transportation and distribution infrastructure will be required
The scale and the certainty of massive investment needed in electricity grids provides security and visibility for investors
For hydrogen, we believe established players will be best positioned to capture growth while for CO₂, there are potential opportunities on a case-by-case basis

The transition to net zero goes far beyond just switching our energy supply and adapting a few consumption habits. It is much more complex. It demands a full transformation of our economic ecosystem – in terms of both supply and demand – alongside a significant behavioural and psychological reset.

Successfully transitioning means reaching net zero emissions – the moment when the concentration of greenhouse gases in the atmosphere stops increasing. This will not be easy to achieve, and this journey has not yet started as carbon dioxide (CO₂) emissions reached a record high in 2023.1

The speed at which emissions are reduced will determine future temperature increases: the faster we move, the lower it will be. Many reports, from the Intergovernmental Panel on Climate Change to the International Energy Agency (IEA) and the UN Environment Programme, have concluded the world is on track for an increase in temperatures of 2.5°C or more, far above the goal of the Paris Agreement which seeks to substantially cut global greenhouse gas emissions to limit global warming to “well below 2°C above pre-industrial levels”.2

While all transition relies on the same technological levers, they differ in how they stack up. Among those levers, electricity, carbon dioxide and hydrogen have a strong role to play. They all have a need for dedicated infrastructure to connect producers and consumers.

In this paper, we discuss the infrastructure required to electrify our society, enable carbon capture, create a hydrogen economy, and what it all means for investors.

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