In 2019 we published a white paper titled “The Teal Energy Deal”. This white paper is a follow up and will feature various solutions to facilitate the global transition to cleaner energy quickly and economically.
We believe that TortoiseEcofin is uniquely positioned as an expert on the energy transition and specifically the role that energy infrastructure companies will play in the evolving landscape.
TortoiseEcofin brings together strong legacies from Tortoise, with expertise investing across the energy value chain for more than 20 years, and from Ecofin, which unites ecology and finance and has roots back to the early 1990s. While the stigma in the oil and gas industry had long been to avoid the topic of climate change, that motto has shifted and big players in the industry are working towards constructive climate solutions. We believe the biggest energy companies in the world today will continue to be the biggest energy companies in the world 30 years from now.
Before we dive into energy transition and its evolving new technologies, we would be remiss if we didn’t take a moment to discuss the importance of the energy we derive from fossil fuels. The modern economy as we know it is dependent on fossil fuels and almost everything we count on in our daily lives is tied to it. Energy transitions are slow, typically lasting 50 – 80 years and occur at different paces globally due to regulations, the sway of incumbency, or uncertainty around new technologies. While the European Union and the United States are focusing on renewable development, India’s energy transition is investing billions of dollars to build its natural gas infrastructure. This investment will ween India off carbon intensive pollutants used for power generation to less carbon intensive liquid petroleum gases. While the energy sources may change from liquids to gases or from carbon intensive to carbon neutral, midstream infrastructure will remain instrumental in delivering energy to the global economy.
Access to energy, whether derived from fossil fuels or otherwise, is the key to improving people’s lives. Affordable energy has led to unprecedented improvements to the well-being of humans. Plastics, which are produced from natural gas liquids, are critical to manufacturing medicines, medical equipment (which was so critical in helping in the fight against COVID-19), and the building of water pipelines, wind blades, and solar panels.
Because developed economies are rich, we dismiss the energies the developing world needs for basic human dignity as dirty. Instituting policies to restrict domestic demand will simply result in the export of the energy and in turn sacrifice our energy independence to developing economies. For example, the United States’ energy independence will be exchanged for solar panels and batteries built by coal powered energy in overseas markets, such as China. Exporting our energy independence will lead to its own set of issues. The 2018 tariff dispute between the U.S. and China and COVID in 2020 awakened many companies to the risks embedded in their supply chains. Building a more environmentally friendly supply chain must not sacrifice the predictability of prices and supply for our current energy needs.
For the world to achieve the climate guidelines established in the Paris Accord, yet continue to provide more energy, a multipronged approach will be needed. The Executive Director of the International Energy Agency (IEA) Dr. Fatih Birol stated “almost half of the emissions reductions needed to reach net zero by 2050 will need to come from technologies that have not reached the market today.” The economic prize for disrupting the current global energy sector is substantial with an estimated total addressable market of over $11 trillion1. The approach to achieve a net-zero economy will be two-fold: 1. decarbonizing carbon emitting sectors and 2. increasing electrification across the various sectors.