What, where, and when to invest in a sustainable energy transition

Finding balance is never easy, especially when more than two factors need equal shares. This is where the energy transition –which considers investments, climate goals, and social needs— encounters its most daunting challenges. Aligning these key factors can lead to a holistic approach, but achieving it requires setting priorities. It's not about what's more important but determining what needs to come first and what can wait. 

Navigating the obstacles begins with identifying them. The primary challenge often lies in finding the right technology with an appropriate investment-to-energy output-to-operation cost ratio. Photovoltaic energy stands out due to its low cost and high bankability. However, while investing in such renewable technologies poses minimal risk to investors in principle, the impact of geopolitical tensions on global supply chains from an energy security perspective must also be considered. Transmission capacity affects the development of low-carbon projects. Experts suggest lawmakers need to adopt a different approach to transmission regulation and be more open to funding projects speculatively. While the cost of making mistakes in this area is relatively low, the consequences of slowing down project development are significant,” reads the Reuters-GHD white paper "Progress Paralysis: Accelerating the Energy Transition," putting the spotlight on energy security and transmission capacity as crucial when it comes to deciding and investing in alternative energy options.

Energy requirements—and necessary output—will vary for different activities, and so will the chosen technology. Suppose power is only needed for computers, lighting, and heating, in this case, solar panels should be enough. However, if the operation involves industrial production, then hydropower or a large-scale photovoltaic plant or wind farm might be the best solution, but that will, in turn, depend on the landscape, climate, and social (community) conditions. According to GHD’s 2023 SHOCKED report insights, rebalancing resources and supply chains for greater resilience would expedite the energy transition by integrating renewables and low-carbon solutions. The paradox of maintaining some forms of fossil fuel energy alongside renewables might facilitate a more sustainable transition to an all-renewable system.

When determining the timing for investments, having a strategy and plan for stages that yield environmental and social returns is crucial.  Collaborating with external sustainability experts can aid in making objective decisions and prioritising actions for simplicity and speed. “Part of today’s progress paralysis likely stems from an inability to clearly see the outcome of current strategies. That should not stop leaders from embarking on projects and programs that can have a significant impact in the short term,” says the Reuters-GHD white paper, emphasising the importance of agile thinking combined with a well-informed approach and visualisation of challenges, opportunities, needs, and desired outcomes. This approach sets the tone for and guides the energy transition process. It's not meant to be a sprint; it's a long-distance marathon.