The Energy Transition from fossil to cleaner 'fuels' is now globally recognised as an imperative. The initial impetus has come from mass recognition on the need to tackle climate change, global warming and health externalities. And very recently, the realisation that energy security cannot be guaranteed by a reliance on Gas and Oil rich countries such as Russia. But investors are now asking whether the investment case still tenable?
The spillovers from the crisis between Russia and Ukraine are impacting the Energy Transition on two fronts:
- The rise in commodity prices whose levels are expected to remain elevated for much longer.
- A simultaneous rush by countries dependent on Russia for Oil and/or Gas to redraw their trading partners and enhance domestic energy supply.
Together, these two factors are driving the demand for the core inputs into the energy transition process even higher. Namely, the extraction, production and processing of metals. required to make the move. There is a problem of Greenflation.
The question on investors minds is whether these short term bottlenecks can be solved with long term patient capital investment. And if so, how, where, and via which asset classes. Ironically, the Energy Transition has become more urgent as a result of the Russia-Ukraine crisis. And the elevated price that needs to be paid remains more attractive than the alternative. Looking at search queries for 'Energy Transition' across all asset class research feeds inside RFPnetworks, t seems that the search for opportunities has only just begun.
