The energy transition in Europe

We believe energy will be both a challenge and an opportunity in the next 30 years. While in the past the focus was on the safety of supply and cost, we have now understood the price to pay for pollution. The headline issue is carbon emissions. Cutting down these emissions should help with climate change but will also collaterally lower the damage from other pollutants, toxins and fine particles.

Europe has since the late 1980s walked that path, chiefly by shutting down coal-fired power plants and delivering some energy savings. Going forward, the continent will need to leverage the expertise gained in the deployment of the first wave of renewable power to grow the supply of clean electricity and nurture other industries that offer solutions, such as hydrogen and carbon capture.

To lower emissions further, Europe will need to invest in its infrastructure to:

• Grow and stabilise power output from clean sources;
• Expand, strengthen, stabilise and digitalise power grids and manipulate demand to create virtual assets;
•  Build and improve transport infrastructure to marry the new (electric cars) and the old (rail, buses);
•  Make the use of hydrogen and carbon capture an economical reality;
• Invest into real estate and industrial assets to improve energy efficiency.

To do so across all industries will demand better oversight to avoid the ballooning subsidy commitments that have interrupted or slowed down the deployment of renewables in Europe since 2011. We believe energy policy will become a transversal and core issue. The financial and governance effort is expected to be colossal but this should in turn offer long-term value, both social, environmental and financial.

At AMP Capital, we are already investing along this theme and funding companies engaged in this effort. We welcome a more detailed conversation on energy transition if you have interest.

The below whitepaper is a follow-up to an earlier piece from this year, which you can read here.