How much is enough? Renewables growth in the energy transition
Investors and infrastructure operators should be many times more bullish on investment opportunities in renewable energy. Why? Because it appears that the investment community, and obviously the UK government, is systematically underestimating the enormity of the market growth for renewable energy generation to achieve the 2050 net-zero horizon.
The necessary investments are long-term, which means a degree of certainty over future electrical demand is required to effectively plan for future development and to make investment decisions. So let’s highlight the scale of the potential gap between current renewable generation and future demand across the UK and Europe.
What’s the likely growth in electrical demand and renewables by 2050?
Electricity demand by 2050 is likely to grow by several multiples in a net-zero development pathway. Based upon datasets from the UK’s Office of National Statistics [1] and the EU Commission’s Eurostat [2], electrical generation capacity will need to at least double or even triple, depending on the extent of decarbonisation.
Considering the potential for huge increases in electrical demand from decarbonising industry, transport, or from new sources such as widespread industrial-scale desalination, these growth projections are likely to be in the lower-range of possible pathways.
The question is, what will be the composition of energy production in a net-zero 2050?
There are many diverging models in this space. According to the IEA’s Net Zero by 2050 model, over 20% of energy supply will be from coal, oil and gas, and a further 20% from ‘modern bioenergy’ sources [3]. Yet these estimates don’t hold up to scrutiny in a net-zero pathway. The suggestion that net zero can be achieved while up to 40% of the total energy supply creates emissions requiring extensive (and expensive!) abatement appears ill-judged on its face.
Neither does it stand up to economic reality, even by today’s standards. By comparison, utility-scale renewable energy generation technologies and storage are already cost-competitive with Gas Combined Cycle and cheaper than other fossil fuel sources, even without considering the additional cost base for carbon capture, use and storage (CCUS) [4]. And the twin trends of heightened regulatory and compliance burdens and increasing overhead costs for GHG-emitting energy sources are only likely to continue, if not escalate. It appears obvious that the promise of renewables is only improving.
So, if renewable generation is so much more efficient, the question is how much more of it is needed to make increased demand pathways by 2050?
What kind of investment opportunities does this growth potential entail?
What does this mean for investors and infrastructure operators?
First, it’s almost impossible to over-estimate the necessary growth in renewable generation and storage capacity in the UK or the EU. To achieve these ambitious growth rates (let alone some of the more extreme scenarios that range as high as 13-fold[5]) in a single generation requires huge sums of private investment – encouraged and aided by incentives from the public sector [more on that later!]
Second, there are untapped opportunities for investment both up and down the value chain. Supply chains and manufacturing for renewables are heavily dependent upon Chinese production, estimated to manufacture 80% of all solar panels globally, and 97% of the silicon ingots and wafers at the core of solar cells[6]. This represents a critical value chain dependency, and given the projected necessary growth in renewables capacity and the servicing of assets once installed, this will require greatly increased near-shore production in Europe.
In short, the scale of the investment opportunities in all parts of the renewables space is so much greater than many investors appear to have grasped. Furthermore, the risks are comparatively far lower than alternative infrastructure investments. Sancroft has considerable experience helping investors to identify their specific sustainability risks and opportunities. With our 25-year history of providing trusted advice on these complex and nuanced issues, we are uniquely placed to help our clients understand the possibilities in renewables available to them, stay on top of emerging ESG regulations, and provide bespoke advice for your unique investment strategies and position.
We’d be delighted to share our experience and help support you on your journey. If you’d like to find out more about how we can help, please get in touch with sebastian.woollard@sancroft.com.
[1] ONS, ‘Energy use in the United Kingdom, 1990 to 2021’, Ricardo Energy and Environment;
[2] Eurostat Data Browser, online data code: NRG_BAL_C;
[3] IEA, Net Zero by 2050, (2021), p.57;
[4] Lazard, 2023 Levelized Cost of Energy+,
[5] EU Commission, JCR, ‘Towards net-zero emissions in the EU energy system by 2050’, p.52;
[6] Graham Allison, Financial Times, ‘China’s dominance of solar poses difficult choices for the west’, 22nd June 2023, https://www.ft.com/content/fd8e7175-9423-4042-a6f7-c404afdfcda4