Energy security and AI are accelerating the renewable energy transition

Enthusiasm for climate mitigation solutions such as solar power, grids and storage remains strong, even as governments are backtracking on net-zero commitments and reducing subsidy support. Investors continue to see investing in such solutions as a cornerstone for advancing their climate strategy, underpinned by energy security and AI as additional drivers, according to the sixth annual survey of 300 investors from across Europe, Asia-Pacific (APAC) and North America.

For the first time, the survey asked how the conflict in the Middle East and the disruption to energy supplies caused by the closure of the crucial Strait of Hormuz could impact the transition to renewable energy sources.

Globally, 75% thought the conflict will moderately or significantly accelerate the transition, rising to 78% in Europe and 83% in APAC, but falling to 66% in North America. Most respondents are in the ‘moderately accelerate’ bucket, while a quarter globally expected little or no acceleration.

The regional difference may partly reflect exposure to Gulf oil and gas supplies. Europe and APAC are more dependent on these imports, whereas the US is the world’s largest producer of crude oil and natural gas.¹ Canada ranks fourth for oil production and fifth for natural gas. ²

“The survey highlights that investors increasingly view renewable energy not only as a climate solution but also as an energy security solution,” says Lucian Peppelenbos, Climate and Biodiversity Strategist at Robeco. “Recent geopolitical tensions have reinforced the strategic value of domestic renewable power and reduced dependence on imported fossil fuels.”

“The implications extend beyond short-term energy price volatility. If governments and companies place greater value on energy resilience, investment may increasingly be directed toward domestic renewable generation, storage, electricity networks and electrification technologies.”

“The opportunity set therefore goes beyond renewable developers to the equipment, infrastructure and services needed to build a more secure power system.”

A second new question examined whether investors were more positive about the benefits of AI than its drawbacks. Globally, 57% said it would have a positive impact on accelerating the transition toward renewable energy, while a higher proportion of 63% thought it would accelerate the development of sustainable infrastructure.

AI can work out the maximum efficiencies of wind turbines and solar panels, optimize the building of other renewable sources such as hydroelectric and tidal power, and predict variations in peak power demand and supply. Applying AI-based management could unlock up to 175 gigawatts (GW) of additional transmission capacity without building a single new physical line, according to the International Energy Agency. ³

Investors nevertheless recognize the environmental cost of expanding data centre capacity. Data centres are heavy users of electricity for power and water for cooling, now accounting for 1.5% of global electricity demand and 0.5% of CO2 emissions, according to CarbonBrief. ⁴

Only 47% of respondents expected AI to reduce water consumption or improve water use, while 24% expected a negative effect. Views were also mixed on reducing reliance on fossil fuels (41% positive, 23% negative) and achieving net zero (35% positive, 21% negative).

“AI is affecting the transition in two directions,” Peppelenbos says. “On the one hand, it increases demand for electricity and infrastructure, while on the other, it can improve the efficiency of renewable energy systems and electricity networks. While recognizing the emission increase in the short term, it seems that investors see both effects ultimately supporting the long-term transition.”

The survey also asked whether political and populist backlash against net-zero emissions could slow the transition. A majority of investors remained confident that renewable energy adoption would continue regardless of that backlash.

Globally, 71% thought that the transition will continue, rising to 74% in APAC, but dropping slightly to 69% in Europe and 68% in North America. In addition, 63% globally believed opposition to net zero would reduce over time as climate risks became more significant and material for investors and governments. This view was shared by 66% in Europe, 62% in APAC and 57% in North America.

“What stands out from this year’s survey is the resilience of investor conviction,” Peppelenbos says. “Despite political debates around net zero, most institutional investors continue to see climate change as a critical factor shaping the long-term economic transition and associated investment risks and opportunities.”

Footnotes

¹ https://www.eia.gov/todayinenergy/detail.php?id=67844
² https://www.capp.ca/en/oil-natural-gas-you/oil-natural-gas-canada/
³ https://www.renewableinstitute.org/how-ai-is-making-renewable-energy-smarter/
⁴ https://www.carbonbrief.org/ai-five-charts-that-put-data-centre-energy-use-and-emissions-into-context