Net zero transition for $7 trillion
The investment required to transition to a net zero emissions world is more than triple the current level of $2 trillion a year. Bloombergnef modelled a path to global net zero by 2050 and found that annual investments need to jump to $7 trillion to limit warming to 1.77 degrees Celsius above the pre-industrial Revolution levels. Electric vehicles and low-carbon power present the biggest investment opportunities, followed by power grids. In addition, money needs to flow to carbon capture and storage, advanced nuclear technologies and hydrogen.
Such a colossal transformation of the global economy would trigger a massive demand for related inputs such as metals. According to BNEF estimates, demand for lithium in 2050 from the energy transition alone looks to be about
17.5 times the total demand in 2020.
Solar manufacturing
India’s decarbonisation journey hinges on solar power. Local panel manufacturing received another boost with the government’s recent approval for the second tranche of subsidies worth ~1,950 crore ($2.4 billion). BNEF sees the possibility of an oversupply of modules if all planned production facilities come online. Exports to the US — the main overseas destination for Indian modules — are unlikely to close the gap.
The US is on its own journey of incentivising local manufacturing of solar panels, among other things, as are other countries such as Brazil. The case for supporting a local supply chain of panels is stronger in countries that have high annual installations. Seven countries are in the 5,000 megawatts (MW) or above bracket this year, and another 10 are added if the cut-off is 2,000 MW. In a scenario of multiple manufacturing hubs, one thing is clear — supply will not constrain demand in the near term at least, though local price anomalies can’t be ruled out.
Mainstreaming electric vehicles
Electric vehicles (EVS) are accelerating towards an era of super-charged growth, and the world’s two largest car markets will be in the lead. “We are at a cusp when policy, products and prices are all aligning to create a giant global wave. China and the US will be at the head of the surf in terms of absolute numbers,” said Corey Cantor, lead EV analyst at BNEF.
Every fourth car sold in the US will be electric in the next three years — a big jump from last year’s level of less than 5 per cent — rising to one in two cars by 2030. China and several European countries are already seeing EVS account for around 25 per cent of new car sales.
As many as 66 national and regional governments are committed to only selling EVS, and completely phasing out conventional internal combustion engine, or ICE, vehicles. The US doesn’t have an ICE phaseout target, but many states in the country do. Another set of countries has committed to accelerate the transition to 100 per cent clean cars by signing the Zero Emission Vehicles Declaration, including India and Kenya. Among automakers, 17 are committed to phasing out ICE vehicles between 2030 and 2040.
Two- and three-wheelers lead the vehicle electrification wave in India. In the first nine months of this year, 44 electric two-wheelers were launched with an average range of 117 kms, according to data collated by BNEF. Start-ups continue to be the main players in this segment.
Passenger EV launches in 2022 have centered on premium segments. This is expected to continue in the near term until automakers can offer an affordable small electric car in the super-competitive market. The incentives available for manufacturing EVS and batteries locally should help.
Electric aviation
Though the electric aviation industry is at an early stage, there has been a recent surge in orders from aircraft operators for small battery-electric or hybridelectric machines. Close to 1,000 electric aircraft have been ordered from various manufacturers, according to BNEF. All are for short-haul flights with 30 seats or fewer.
Developers aim to make their aircraft commercially available by 2030. Commuter planes are so far the most popular, with a total of 409 orders from five developers. As many as 55 operators have ordered or intend to use electric aircraft.
Electric propulsion promises to outcompete conventional aircraft in terms of greenhouse-gas emissions, operating costs, and design flexibility. However, the commercial launch of such aircraft needs to overcome technical hurdles and complete the lengthy and costly process of type certification. Leading developers include Heart Aerospace and Eviation.
No electric aircraft are currently commercially available except for Pipistrel’s Velis Electro, a two-seater battery-electric aircraft that has received a type certificate from the European Union Aviation Safety Agency.