Press release:
Abu Dhabi, United Arab Emirates, 1st March 2025. The POLICY CLUB/ Borderless Renewables
Global investments in energy transition have often been challenged by geopolitical shifts, technological advancements, and policy developments. The past year has been no different due to political volatility and elections threatening to alter energy landscape.
Despite the looming geopolitical instability and fluctuating interest rates, KPMG reports that 72% of investors are accelerating investment in energy transition assets, exemplifying the commitment across sectors. 64% have invested in energy efficiency technologies, 56% in renewable energy, 54% in energy storage, and 51% in transport and related infrastructure thereby reflecting the diversity of opportunities. However, 75% of investors continue to engage in fossil fuel projects, especially natural gas, due to its role in ensuring energy security.
The top concern for investors in energy transition continues to be regulatory and policy risks. Policy development plays a crucial role in shaping energy transition investments. It can provide incentives such as tax breaks, subsidies, and grants to encourage investment in renewable energy projects. Additionally, disincentives to fossil fuels like carbon taxes and penalties for high emissions can also push investors towards cleaner energy options. Most importantly, a stable and transparent regulatory environment is essential for attracting investment. Clear policies and regulations reduce uncertainty and risk, making it easier for investors to commit capital to long-term energy projects. Conversely, changes in government and political instability can lead to shifts in energy policies, creating uncertainty for investors that can stall or disrupt long-term investment plans and disrupt capital flows.
The United States presidential election in 2024 has been consequently accompanied by a shift in energy priorities with support for increasing fossil fuel production, including natural gas and oil. Following the election, solar and wind energy stocks fell sharply. Furthermore, the new administration has indicated plans to end offshore wind energy projects and ease regulations to make it easier to drill on federal land to increase fossil fuel production. This could lead to a short-term boost in fossil fuel investments but may create uncertainty for renewable energy projects. An additional concern is the intention to pull the United States out of the Paris climate agreement which could have significant implications for international climate cooperation and global energy transition.
Despite the change in administration, the Inflation Reduction Act (IRA), which provides funding for green energy projects, remains in place. Enacted in 2022, the IRA has provided substantial tax incentives and grants for renewable energy projects, energy storage, and electric vehicles which led to a surge in clean energy investments in the United States. This act has been beneficial to many Republican districts, and its continuation is expected to support ongoing investments in renewable energy.
At its core, US policies continue to stimulate technological advancement of energy intensive technologies such as AI. Due to the direct dependence of AI model performance on Graphic Processing Units, the associated energy consumption of AI based technologies is projected to surge in the coming years, putting a strain on power grids, hindering decarbonization efforts, and consequentially causing volatility in energy markets – the negative effect of all of which will inevitably impact economies across the globe. AI is expected to represent 3.5 percent of the global electricity consumption by 2030. According to predictions by Rystad Energy, AI and electric vehicles will add a massive 290 TWh (terawatt hours) demand of electricity to the United States energy grid by the end of the decade – a number that compares to the electricity consumption of the entire country of Turkey, the world’s 18th largest economy.
The economic system and infrastructure were incubated in the U.S. during the 1950s and have since been driven by the American model which by now has been deeply engraved in business knowledge and a profit-driven framework built on natural resource exploitation. This system is not only embedded in infrastructure but also in the know-how in monetizing resources and shaping economic lifestyles.
‘We continue to generate wealth by extracting natural resources while protecting them through formidable entry barriers, reinforced by geopolitical control and legal mechanisms. However, the shifting U.S. political landscape appears to offer an effective pathway to dismantle these economic and institutional structures.
This is a colossal moment, an opportunity to re-engineer the system and rebuild it with decarbonization at its core. Now is the time for scientific, intellectual, and socially responsible communities—those who prioritize their children’s health and collective well-being—to leverage their expertise and wishes for technological foresight. By moving beyond natural resource exploitation, we can drive innovation in economic clusters that shift financial rents from carbon intensive toward decarbonized economies.’ Ionna Trofimova Elliot, CEO, The POLICY CLUB.
One potential solution to dramatically reduce the energy consumption by AI – by up to 100 times less than standard supercomputers – can be found through quantum computing which offers quantum mechanical properties that enable the simultaneous computation of each output value for every possible input – a notion called quantum parallelism. Information is represented by the configuration of matter and energy. Hence, the way that information can be stored, transmitted, and processed is determined by the laws governing physical systems. Several properties of quantum computing congregate to create unprecedented benefits in terms of time and computational complexity of certain problems that are often not efficiently solvable on a standard computer. This efficiency in computing drastically reduces energy consumption as many AI algorithms use large matrices and probabilistic algorithms – properties that are offered by default in the quantum domain.
While the new administration’s policies may favour fossil fuels, the existing frameworks and market dynamics continue to support the transition to renewable energy. Technological advancements provide new opportunities for investment and innovation in the energy sector that help to balance economic and climate demands amidst challenges posed by geopolitical tensions and supply chain disruptions. Additionally, international policies such as the European Green Deal, India’s National Hydrogen Mission, Japan’s Green Growth Strategy, and China’s 14th Five-Year Plan continue to encourage investments in energy transition. Multilateral development banks, such as the Asian Infrastructure Investment Bank, also play a crucial role in leveraging finance and directing it towards energy transition efforts. Overall, while there are significant challenges, the commitment to energy transition remains robust, and investors are finding ways to navigate the complexities of this evolving landscape.
Authors:
Ionna Trofimova Elliot, CEO, The POLICY CLUB
Delma Joseph, Policy Officer, The POLICY CLUB
Dr Joe Pilotta, Executive Member – Communications, The POLICY CLUB
Santanu Ganguly, Executive Member – Quantum Technologies, The POLICY CLUB
Press Contact: Dr Joe Pilotta, Email: [email protected]