ENERGIZED: Investment Insights on Energy Transformation
Edition 1: What Comes After the Energy Transition?
14 January 2025
Welcome to Energized!
This newsletter aims to bring you practical insights on the future of energy via a carefully curated mix of company insights, market analysis, standout stats, report highlights and investment ideas.
But first, why focus on energy? In short, because we see it as the ultimate currency. All our financial resources are effectively a call on the energy that fuels and powers our demanding modern lives. It’s fast evolving but will always be a major investment theme.
Energy today is still highly carbon-intensive, so we can’t ignore coal, oil and gas. But our primary focus is to navigate the key pillars of the future energy system and analyse their financial flows.
These include renewables, flexibility, electrification, efficiency and carbon removals. We’ll explore the opportunities across each one, always aiming to keep it concise, clear, informative and useful as possible (tell us if not!). There’s a price explainer on the website and we plan to add a glossary too.
In this inaugural edition we highlight a few key energy stats from 2024 and reflect briefly on where we stand today. That’ll set us up for some specific 2025 energy predictions next time, before then turning our attention to the big winners and losers of 2024 and who might prosper (or not) in 2025.
Welcome aboard and thanks for reading!
What Happened in Energy in 2024: Key Takeaways
(NB: some data still provisional)
Gas & LNG: strengthening
We start with gas because it met 40% of total incremental energy demand – the most of any source. Global gas consumption rebounded 2.8% last year.
Gas markets strengthened from March onwards as LNG capacity additions fell to only 10bcm (1% vs predicted 4-5%), the lowest since 2015, on project delays and the “Biden pause”.
TTF, the biggest European gas benchmark, bottomed out in March at ~€26/MWh before rising to average ~€44/MWh in December and €33.88/MWh over the year. Far below the 2022-23 peaks but still double the prior decade average.
A colder winter so far – especially than the last two very mild ones – has reduced stocks faster, helping to push front-month TTF to €50/MWh by early 2025.
In the US, Henry Hub spot prices also floored in March 2024 at a record monthly low of $1.49/MMBtu. The cycle then turned and by year end front-month HH prices were touching $4.
Reports of the death of Russian gas exports were grossly exaggerated– LNG exports to the EU actually rose by 23%.
Solar: stratospheric (but still far to go)
Nearly 600 GW (TBC) of new solar capacity was added in 2024, boosted by ever-lower module costs. That would be up one third on 444 GW in 2023.
Total installed capacity reportedly reached the 2 TW mark in late 2024, just 2 short years after hitting 1 TW (which took 68 years).
That’s some S-curve – and forecasts keep being revised upwards. Total capacity look set to more than double again to >4 TW by 2030.
Over half of installations were in China, which met its 2030 renewables targets six years early. They’re also rising fast in south Asia,the Middle East and Brazil.
Wind: steady
Wind capacity is growing more steadily, with total 2024 additions expected at ~85 GW.
Global wind generation has now passed nuclear, while solar will quickly overtake both.
EU solar+wind generation of 385.6 TWh overtook coal+gas at 343.5 TWh, with renewables providing over half of generation in Germany, Spain and the Netherlands.
But for context, European economies still remain only around 20% electrified, while global coal generation remains around 4x larger than wind.
Batteries: breaking through
Lithium-ion battery pack prices fell another 20% to $115/kWh - versus $463/kWh just a decade ago.
Energy storage systems (including project equipment and grid connections) fell 40% to $165/kWh.
EVs: mixed bag
EV sales are expected to have hit 17m or ~20% of total sales, up from 14m (18%) in 2023. Tesla sales dipped 1.1% to 1.79m, while BYD sold more than double that, at 4.3m.
In the EU, Battery EV sales were down ~5.5% vs 2023 due to still higher up-front costs, removal of German subsidies and insufficient charging infrastructure.
Oil: faltering
The big story was the 0.37 mmbbl/d (1.4%) fall in Chinese demand to 26.51 mmbbl/d on decelerating growth plus higher adoption of EVs and LNG for trucking. This is a significant inflection given China’s outsize role in oil demand growth this century.
Average front-month oil prices fell from $85/bbl in 1H24 to $77/bbl in 2H24.
Coal: stabilising
Hopes that 2024 could finally be the peak for coal demand proved optimistic: Chinese and Indian demand nudged it to a new high of 8.77 bn tonnes.
But there are signs of change ahead. New Chinese coal-fired generation capacity approvals fell 83% to only 9 GW.
Clean energy indices: brutal
ERIX: down ~40%
S&P Global Clean Energy down ~25%
MSCI Global Alternative Energy index ~32%.
To be covered separately in more detail soon!
Efficiency and electrification: contradictory
Energy efficiency (the rate of energy intensity improvement) reportedly hit just 1% for 2024, far below the 4% target adopted in late 2023. This implies efficiency gains are getting harder to find just when they’re needed most.
Conversely, electrification was projected at 2%, roughly twice the 2010-19 average. At 3% though, China is not just winning the clean tech race but the electrification one too.
Nuclear: re-emerging
The growth of AI and its thirst for steady, reliable, low-carbon power raised the prospect of a nuclear renaissance
Google and Amazon announced plans to accelerate SMR investment
Microsoft backed the recommissioning of the infamous Three Mile Island plant
Emissions & Atmospheric CO₂: alarming
Total CO₂ emissions were expected to rise 1 bn tonnes to 41.6 bn tonnes, of which 37.4 bn from fossil carbon.
Monthly average CO₂ concentration at Mauna Loa Monitoring Laboratory in December 2024 was 425.40 ppm, a 3.54 rise from 421.86 ppm in December 2023. The trend is alarmingly clear.
Temperatures: scary
As wildfires ravage California, 2024 was confirmed as the hottest year on record and the first to exceed 1.5°c above pre-industrial level.
The 10-yr average is now over 1.2°c and only a few years away from hitting 1.5°c… (image source: Copernicus)
So where does that leave us?
By year end, the energy/climate mood music had decisively changed. For some commentators, the so-called “Energy Transition” is over. Or worse: it never even began. It’s all just energy additions and we’re pissing in the wind. The Death of Net Zero is upon us. ESG? Forget about it. Populist nationalism and the race for AI supremacy are dominant. Climate concerns are just a luxury of wealthy urban elites.
Clean energy advocates can’t hide from these enormous challenges. Our hydrocarbon civilisation has not only vast scale: >102 million barrels of oil and 24 million tonnes of coal used every day. It also has undeniable inertia and penetrates the fabric of modern life. A static look at primary energy sources suggests it’s a hopeless task to turn around this proverbial oil tanker.
But the underlying dynamics reveal a potentially different future. Transformative technologies also have huge momentum. And change is rarely linear. It happens slowly, then rapidly.
The truth is, priorities have changed less than they seem. Energy security has been the primary goal always and everywhere, even if obscured by other targets. And adoption of any energy technology always boils down to economics in the end – being sustainable means being profitable. The road to energy sustainability has always been via security and affordability.
This is the dynamic that will drive rapid further growth in solar and batteries, in particular. Still marginal, these modular, ever-cheaper technologies will start to play a more meaningful role in delivering affordable, reliable energy. That’s their unique selling point. The associated emissions reductions may just be helpful co-benefits, but they still count.
It might seem bizarre that, just as we contemplate the inevitable reality of a 1.5+°c world, the energy transition is being pronounced dead. But if so, it has a successor: Energy Transformation. Where clean technologies get ever cheaper, easier and more reliable, becoming the default choice not just in power, but in industry, transport, buildings and agriculture too.
Thanks for joining us on as we set out this journey to explore the opportunities that the energy transformation will bring. More to follow very soon.
As for what 2025 will bring, the image below already stands out as symbolic… (source: Bluesky)
Key commodities and indices
Notable strengthening in both gas and power prices over the past month:
US gas prices have continued to strengthen as cold winter weather draws down stocks.
TTF rose 20% in the last 2 weeks of 2024, before dropping back slightly so far this year.
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