Analyst sees 2024 investment megatrend in energy transition 

Ben Eguzozie

 An international investment analyst is betting on energy transition as a potential investment megatrend in 2024 and even beyond with interest rates set for the cut across global markets.

The statement by Nigel Green, chief executive officer of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organisations, comes as central banks around the world continue to hold rates steady for the time being, but with growing expectations that they will begin to cut them in the first half of this year.

“Investing in renewable energy infrastructure, such as utility-scale solar and wind farms, demands significant upfront capital,” he said.

According to him, as a result of that when interest rates are high, the return on investment for these projects can be adversely affected, leading developers to hesitate and potentially put new projects on the back burner.

Explaining his projection further, Green said beyond the large transitional projects, the industrial sphere has been delving into alternatives to traditional fuels with lower carbon footprints, such as the amalgamation of hydrogen with natural gas, noting that this strategic shift is motivated by a dual concern for both environmental preservation and economic viability. 

“However, in times marked by elevated borrowing costs, the emphasis tends to pivot more towards economic considerations, potentially impeding the pace of investments in environmentally-friendly technologies,” Green added. 

He also observed that the transport sector, poised for advancements in electric vehicles (EVs), hydrogen-powered vehicles, biodiesel, and compressed natural gas, has encountered difficulties in rationalising new projects amid heightened interest rates.

According to him, escalating interest rates have placed added strain on consumers, noting that the allure of embracing electric vehicles or delving into residential solar investments dwindles in the face of elevated borrowing expenses. 

“For consumers, the financial repercussions of these choices become more conspicuous, potentially influencing the pace at which sustainable technologies are embraced,” he said.

But Green noted that all the obstacles notwithstanding, a positive outlook persists for the transition towards sustainable energy. “The enduring validity of the long-term investment perspective is underscored, with companies maintaining their dedication to environmental objectives, and governments worldwide offering financial backing to facilitate the transition.” 

Ahead for the rest of the year and beyond, he said the narrative is likely to shift.

“The energy transition has been hit by high interest rates and inflation. But now the stage appears to be set for an upward trajectory in energy transition investments,” the deVere chief executive said.