Key Lessons from 2024 in the Global Energy Transition
In a recent BloombergNEF article, Albert Cheung discusses the lessons learned from 2024 in the global energy transition, emphasizing the need to prepare for emerging trends and challenges in the new year.
2024 saw record-breaking achievements, including a surge in EV sales, significant growth in installed clean power capacity, and advancements in energy storage. However, global energy transition investments still fall short of what is needed to reach net-zero by mid-century. Several factors, including the expected Trump administration, slower EV growth, challenges in Europe’s battery sector, and setbacks in hydrogen and offshore wind, contribute to this disconnect.
Here are five important lessons to consider as we address the energy transition in the new year:
- Clean energy technologies will continue to grow
2024 was a strong year for clean energy deployment. Solar PV installations rose by 35% year-on-year, wind energy increased by 5%, energy storage installations grew by 76% (in megawatt-hour terms), and EV sales climbed by 26%.
However, onshore wind outside of the Asia-Pacific (APAC) region experienced a slowdown, with installations declining due to permitting delays and grid connection backlogs. Emerging technologies like clean hydrogen and carbon capture and storage (CCS) faced challenges this year but are expected to grow significantly by 2030.
Despite challenges, the deployment of clean energy technologies, particularly solar PV, energy storage, and EVs, is expected to continue rising in 2025 and the years ahead.
- Slower growth, bigger challenges
As the energy transition matures, it is becoming increasingly challenging. The early adopters in wealthier nations have already invested in EVs and home solar systems, and renewable energy developers have secured prime sites in stable markets.
With this, growth rates are slowing. In 2024, global EV sales grew by 26%, a slower pace compared to previous years. The solar sector is expected to follow suit, with growth forecasted to decelerate after 2024. As advanced markets reach high levels of solar penetration, new revenue models and increased storage deployment will be necessary. Emerging markets such as India, Pakistan, and Saudi Arabia are expected to drive future growth, though many lack the regulatory frameworks needed for large-scale adoption.
The next phase of the transition will focus on solving new challenges, such as enhancing storage and flexibility in mature markets, expanding renewable energy in underdeveloped regions, building EV charging infrastructure, and increasing demand for clean energy in aviation, shipping, and heavy industry. Addressing these challenges will unlock new opportunities and accelerate the energy transition.
- Avoid data misinterpretation
In the complex realm of the energy transition, misinformation and misinterpretation are common. For example, the "EV slowdown" narrative in 2024, particularly in the EU, was often exaggerated. While EV sales growth slowed in certain regions, such as Germany, this was largely due to a surge in sales the previous year, triggered by the expiration of subsidies.
The European Environment Agency confirmed that most automakers met their CO2 emissions targets in 2023, and there was no change in emissions goals between 2021 and 2024, meaning automakers are still on track to meet these targets despite flat EV sales. The slowdown was, in fact, a deliberate strategy by European automakers, who postponed major price cuts and new EV models until 2025. This was part of their efforts to meet short-term sales targets while holding off on major price reductions. The key lesson here is to interpret data cautiously and avoid jumping to conclusions based on short-term fluctuations.
- Profitable energy transition investments
The success of the energy transition hinges on clean energy investments providing risk-adjusted returns that meet the needs of both companies and investors. Public capital alone is insufficient.
In the hydrogen sector, rising costs have made clean hydrogen significantly more expensive than two years ago, requiring long-term government incentives and regulations to remain viable.
Similarly, offshore wind, which initially had low costs, has faced challenges due to competitive bidding and rising costs, leading to canceled projects and failed auctions. Some oil and gas companies are scaling back their investments in offshore wind, which could reduce competition and highlight the need for better policy frameworks.
Financial institutions like JPMorgan and Citi are aiming to increase clean energy financing, but for these efforts to succeed, governments must create the right conditions that enable attractive returns on energy transition investments.
- Balancing protectionism and progress
The narrative around global climate action has evolved over two decades, shifting from sacrifice to opportunity, and more recently to competition. The 2010s emphasized shared benefits and leadership in climate action, while the 2020s focus on economic and geopolitical advantages as nations compete to dominate clean energy industries. This competition is particularly evident in sectors like solar, batteries, and electrolyzers, where overcapacity, falling prices, and trade barriers are reshaping the landscape.
China’s dominance in clean-tech manufacturing has driven down costs globally but left many manufacturers with slim or negative margins. Meanwhile, Western countries and others, including Turkey, Brazil, and Canada, are implementing protectionist policies like tariffs to bolster domestic industries. These measures, however, often lead to higher transition costs for end users and slow the spread of innovation.
Policymakers face critical choices: balancing the need for economic and energy security with fostering global collaboration. A successful transition requires avoiding overinvestment in oversupplied technologies, leveraging competitive advantages, and encouraging partnerships with leading companies. While geo-economic competition is inevitable, the policies adopted now will shape the trajectory of the energy transition in the years to come.
