Energy transition investment is set to soar in Asia in the next five years while Western Europe, the UK and North America will remain key destinations for capital as the world recovers from Covid disruption and responds to the Ukraine conflict, a new research report by global law firm Ashurst has found.
The report, Powering Change: Funding Net Zero, now in its third year, compiles the views of nearly 2,000 senior business leaders from across the G20 economies on the transition to a low carbon energy system.
The research explored attitudes towards the global transition to cleaner energy, off the back of the COVID pandemic and the conflict in Ukraine, and found that investor appetite for the renewable energy sector continues to grow.
According to Ashurst's research, Asia is increasingly recognised for its potential as a key destination for clean energy investment, with respondents citing South-East Asia, North Asia and Central Asia, as becoming ever more attractive investment destinations for the next five years.
Although currently ranking as only the fifth most popular location, South-East Asia is viewed optimistically, moving to second place as a total of 18% of respondents said they were considering investing in renewable energy, the energy transition or decarbonisation technologies there.
North-East Asian markets are set to dominate destination offtake for hydrogen and ammonia, originated from renewable energy projects in the APAC region, including Australia.
The research also identified that newer technology in critical fields such as battery storage is going to continue to develop, complementing the rapidly maturing markets, such as solar power. Battery storage is expected to remain the most significant technology, but the biggest change is the importance of decentralised energy, expected to rise from seventh place to second place over the next five years. Similarly, interest in the electric vehicle ecosystem continues to grow.
The conflict in Ukraine has had a significant impact on the global energy market. A total of 96% of respondents confirmed their organisation had suffered some degree of impact, with supply chain issues and energy or commodity price volatility being the main problems they faced. Interestingly, the increased need to ensure greater energy security made evident by the crisis is likely to lead to a quicker energy transition, not a slowdown. Three quarters of respondents expect its pace to speed up, yet conversely, only one in eight (12%) thought the war would slow the transition down.
Access to skilled workers is becoming a bigger challenge for the energy sector, as it is in other parts of the global economy. Almost two fifths of respondents now think access to a skilled workforce would significantly help drive their investment approach, a big increase from our pre-Covid survey in 2020 when it was only mentioned by 27%.
Michael Burns, Ashurst's Global Co-Head of Energy, said: "Regional developments, coupled with the wider pool of investment opportunities now available to companies for energy transition projects, puts investors in a strong position to deliver on sustainable investments in the energy space. However greater clarity and transparency on the standards for measuring and managing commitments is needed to ensure consistency in approach and, importantly, outcome. In addition, investors and society continue to focus pressure on governments to take more assertive action to encourage capital deployment in more emerging markets such as hydrogen production."
"Our report outlines the global opportunities as the transition momentum continues to grow, with the conflict in Ukraine further prompting sustainable energy investing as a vehicle for long-term secure energy supplies."
Dan Brown, projects partner and co-head of Ashurst's international projects group, added: "Following COP27 and the Just Energy Transition Partnership, our research supports what we already know: that climate change is undeniably something corporates, among others, cannot ignore. The transition to a low carbon energy system is a huge part of this global focus on ESG and we are already seeing clients taking direct action themselves to reduce emissions."
