Powering the AI Revolution
The rapid adoption of artificial intelligence (AI) across various sectors is reshaping industries and has significant implications for electricity demand and supply. Data centers which house the servers and storage units for AI applications currently account for 1-1.5% of global electricity demand (source: IEA). This is expected to more than double to approximately 4% by 2030 driving growth in Western electricity demand for the first time since the 1990s. This has wide ranging implications for the power sector and at Transition Net Zero Advisers (TNZA) we believe this will be a meaningful driver for continued growth in the adoption of renewable power technologies.
Critical Materials
The energy transition is driving high demand for critical materials. Lithium is expected to see some of the highest growth rates with demand increasing by almost 600% between now and 2050. This may seem like an obvious place to invest, but begs the question whether supply can keep pace with rising demand. The fact remains that lithium is one of the most common elements on earth. Yet most sources of supply are uneconomic due to low lithium concentration levels and high levels of impurities. Combined with an immature supply chain and operator balance sheets that struggle to match high capex demands even at the peak of the cycle we struggle to see how the supply side can respond. This might be great for lithium prices in the short term but over the longer term may spur the development of new technologies that eat into this rising demand profile. The industry is showing numerous signs of being able to adapt to these challenges but investors need to tread carefully to navigate this rapidly changing landscape.
Renewables Become Reliable
The terrible events in the Ukraine are likely to have wide ranging and long-term implications for the energy policies of nations. From a climate perspective it has been clear for a while that the world needs to wean itself off fossil fuels. If those same fossil fuels are controlled by bad actors, then the imperative to change has likely been magnified. Renewable power sources are often labelled as being ‘unreliable’. We disagree. They are ‘intermittent’ but with the benefit of being free from ‘political’ control. New energy policies might even see them as becoming more ‘reliable’ than hydrocarbons, cheaper and Paris aligned. The energy transition now has a gale force tailwind behind it. The transition previously looked likely to happen over 50 years. It’s happening faster and with significant investment implications.
The World Continues to Misprice Carbon
Our key philosophy at Transition2050 is that the ‘world’ has radically mispriced carbon. Either directly or as an externality. This is now changing. Governments, corporates, and investors are now starting to attach a price to carbon. This has wide ranging implications for changes to the energy mix, consumption patterns and the development of innovative technologies to lower carbon emissions. Our belief is that a deep understanding of carbon pricing will lead to significant sources of alpha generation for investors over the medium term.
All rights reserved. Your business name.
© 2019
We need your consent to load the translations
We use a third-party service to translate the website content that may collect data about your activity. Please review the details in the privacy policy and accept the service to view the translations.