It’s hard to keep track of where the transition is at. Dashboards like IEA Clean Energy Progress Tracker, Speed&Scale Tracker and Systems Change Lab do give us a solid overview—unfortunately, there’s not a lot on green. However, what they don’t show us are the recently developing trends and underlying areas heading in the direction of green.
And a lot has happened in this regard in 2023. Next to all the great news from our portfolio (learn more here), the overall net zero transition has also not been standing still. In this blog, I share a few of the developments that we’ve been most fascinated by, or worried about.
Energy production
What’s going well?
Solar is the biggest climate tech success to date. In the graph below, you see two trends. The yellow represents the total annual installation of solar capacity in the world, which has increased 100-fold over the last 10 years.* Plus, with a record 75% growth in total annual installations between 2022 and 2023, growth is not slowing down.*
At the same time, costs have dropped significantly—more than 80% in the last 10 years alone*. This cost-efficiency has rendered solar power more affordable than electricity generated from fossil fuels in 80% of the globe. In developed countries, renewables now constitute the largest share of newly installed electricity capacity.
Solar energy is demonstrating that the adoption curve of climate technologies is not linear but rather S-shaped, mirroring the growth trajectories of other groundbreaking technological advances. This pattern indicates exponential increases in deployment during the initial stages. Indeed, we are still in the nascent phase of solar technology's potential.
By 2030, we are committed to tripling the annual installation rate of solar capacity compared to 2023, a target stemming from the latest Conference of the Parties (COP). Encouragingly, if we embrace and actively pursue this exponential growth trajectory—as the Rocky Mountain Institute (RMI) has advocated in its recent publication—we are well-positioned to meet these ambitious goals.
What’s not going great?
Unfortunately, grid infrastructure is not keeping up. Current grid systems face significant bottlenecks, leading to delays in the installation of renewable power projects. A staggering 3,000 gigawatts (GW) of renewable energy capacity, five times the solar photovoltaic (PV) and wind capacity added in 2022, currently languishes in grid connection queues.* This bottleneck highlights a critical underinvestment in grid infrastructure that is crucial for supporting net zero goals.
While investment in renewable energy sources has surged, financial commitment to upgrading grid infrastructure has not kept pace. Many governments continue to allocate insufficient funds towards modernizing our grids, which is essential for accommodating the increasing influx of renewable energy sources.
The chart below depicts the importance of this investment. The solid line represents the grid’s capacity to adopt renewable power if we continue to invest at the same rate we’ve done historically In contrast, the dotted line shows the expected increase in solar and wind adoption and the corresponding reduction in coal and gas if the grid would no longer be a bottleneck.
Time is a critical factor in this equation. Developing new grid infrastructure, from planning and permitting to completion, typically requires 5 to 15 years—a stark contrast to the 1 to 5 years needed to launch new renewable projects and less than 2 years for new electric vehicle charging infrastructure. This discrepancy underscores the urgent need for accelerated efforts and increased investments in grid modernization to keep pace with the demands of renewable energy expansion.
Built environment
What’s going well?
The last three years have marked significant progress in the adoption of heat pumps for home heating across Europe, as illustrated by the graph below detailing its installation rates. This surge in popularity can be attributed to a confluence of technological advancements, market dynamics, and robust government support, each playing a pivotal role in accelerating the deployment of this sustainable technology.
Technological Innovations: Five years ago, during my research on decarbonizing building heating, the future of heating technology was uncertain. Air-to-air heat pumps were notable but lacked the capacity to effectively heat homes during the coldest days. Today, the landscape has transformed dramatically. Modern heat pumps have significantly increased in power and efficiency, performing robustly even in frigid conditions. This leap in technology has not only enhanced their practicality but has also driven down costs through rapid deployment and continued improvements in performance.
Market Dynamics: Heat pumps offer a markedly higher efficiency compared to traditional heating methods, such as gas boilers which typically achieve up to 98% efficiency. In contrast, heat pumps can achieve efficiencies of up to 400% by utilizing ambient heat. The economic landscape has also favored the adoption of heat pumps; the upheaval caused by the Ukraine crisis led to soaring gas prices, making electricity-based heating more cost-effective and hastening the move towards price parity between heat pumps and conventional heating systems.
Governmental Support: Governmental policies, particularly in Europe and the US, have further bolstered the shift towards heat pumps. There is a strong desire to reduce dependency on external energy sources and expedite the transition to net zero emissions. This has resulted in increased incentives for heat pump installation, a trend mirrored by similar incentives in the United States, aiming to make sustainable heating solutions more accessible and appealing to the public.
Together, these factors contribute to the growing success and acceptance of heat pumps as a vital component of modern, energy-efficient home heating solutions worldwide.
What’s not going great?
While the transition to net zero requires electrifying heating and cooling systems, an equally critical aspect is enhancing our buildings' ability to retain heat and coolness through better insulation. The ultimate goal is to construct highly insulated new buildings and improve insulation in existing structures. However, progress in this area has been less than satisfactory.
The accompanying chart demonstrates a concerning trend: although energy intensity per square meter in buildings is decreasing, the total energy consumption continues to rise, propelled by an increase in the overall building stock. By 2030, it is imperative not only to reverse this uptrend in total energy usage but also to quadruple the efficiency improvements in our buildings.
To achieve these ambitious goals, two main strategies must be implemented:
- Enforcement of Building Energy Codes: Robust energy standards for new constructions are essential. The Netherlands sets a strong example with its comprehensive building codes that require nearly energy-neutral new buildings. Conversely, in 2022, 110 countries still lacked mandatory building energy codes, allowing approximately 2.4 billion square meters of new floor space—equivalent to the entire building stock of Spain—to be developed without adherence to any energy performance standards.
- Acceleration of Insulation Practices: Streamlining the insulation process is crucial. Innovative platforms like Fuchs & Eule, 1komma5, and Woltair are pioneering efforts to simplify this process. Utilizing digital twins and other advanced technologies, these platforms help homeowners identify optimal insulation solutions, connect with skilled installers, and even assist in securing local subsidies and financing.
Addressing these challenges head-on is essential for reducing overall energy consumption in buildings and advancing towards our net-zero objectives. For more insights, see the International Energy Agency’s 2023 Breakthrough Agenda Report.
Agrifood
What’s going well?
2023 marked a milestone for plant-based proteins, particularly in the Netherlands, where for the first time, plant-based alternatives became more affordable than their animal-based counterparts in supermarkets.* This shift is significant, as cost has long been a major barrier to the broader adoption of alternative proteins. Organizations like ProVeg and Questionmark have been instrumental, beginning in 2022, in systematically tracking and comparing the prices of plant-based and animal-based products, including staples like meat substitutes, cheese, and yogurt.
Several factors contributed to this pivotal change in pricing dynamics:
- Economic Inflation: The year 2023 experienced substantial inflation, which disproportionately affected animal-based proteins. This disparity is primarily because livestock production is inherently less efficient, as animals require more input in the form of feed than the amount of food they produce.
- Proactive Supermarket Policies: Recognizing the need to support the shift towards plant-based diets, supermarkets have actively adjusted their pricing strategies. For example, Jumbo, a major Dutch retailer, implemented a policy in November 2023 ensuring that their private label meat substitutes are priced the same as or lower than comparable animal products.
- Sales Targets and Promotions: Supermarkets have also set ambitious goals to alter the balance between animal and plant-based protein sales, aiming for a 50% to 60% ratio in favor of plant-based options by 2030. This strategic promotion of plant-based products is a deliberate effort to normalize and boost their consumption among the public.
These concerted efforts underscore a significant trend: as plant-based proteins become more economically competitive, they are poised to play a crucial role in the dietary shifts required for a sustainable future. This price parity marks an essential step in the transition towards more sustainable eating habits, highlighting a key year of progress in the broader protein transformation.
What’s not going great?
Despite significant strides in the affordability of plant-based proteins, their widespread adoption remains a challenge. Recent years have seen a plateau in sales of meat and fish substitutes.* This trend is partly because the most affordable plant-based options often lack comparable nutrition and taste profiles to their animal-derived counterparts. Meanwhile, those products that do match the quality and flavor of meat are still priced higher, making them less accessible to the average consumer.
The path forward involves scaling up the production of the tasty and nutritious stuff more efficiently. Initiatives are already underway to address this challenge, with precision fermentation emerging as a promising solution. This technology leverages microorganisms such as bacteria, yeasts, and fungi to enhance the nutritional value and flavor of plant-based proteins, making them more appealing to consumers. These microorganisms are also more efficient at converting biomass into proteins compared to traditional animal sources, suggesting potential cost benefits as production scales.
However, one significant hurdle remains: regulatory approval. Particularly in the European Union, the approval process for novel foods can be arduous. To overcome this, companies are increasingly collaborating to streamline and expedite the approval procedures, pushing the boundaries of innovation in the food industry. Such collaborative efforts are crucial for bringing these advanced, sustainable food options to market more quickly.
As the industry navigates these regulatory landscapes, the potential for precision fermentation to revolutionize plant-based food production grows. This points toward a future where plant-based proteins can surpass traditional meat in the price-taste-nutrition nexus. For more detailed insights into the progress and potential of precision fermentation, head to my other blog here.
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As always, please feel free to reach out to me at impact@carbonequity.com with any questions or comments you may have!
