2024 energy transition outlook: Navigating challenges

NEW DELHI: In pursuing a global energy shift, 2024 poses intricate challenges for the energy and mining sectors. As per S&P Global, over the past decade, efforts to transition to renewable energy have faced hurdles from macroeconomic and geopolitical factors, slowing the pace of change since 2022.

Policy shifts in 2022 and 2023 introduced opportunities and challenges for renewable energy and critical minerals sectors. While providing short- and medium-term advantages, 2024 anticipates headwinds due to elevated interest rates and a slowdown in economic growth.

Major mining companies emphasize critical minerals, energy transition, and decarbonization, but weak metal prices may deter additional investments.

The macroeconomic landscape throughout 2024 is expected to influence investment decisions. Weaker metal prices may disincentive substantial capital commitments despite the strong medium-term outlook for the mining sector.

Energy and utility companies face challenges in rolling out renewable and traditional energy infrastructure, with complex regulatory pathways and persistent inflation impacting project economics, especially in offshore wind. China's economic slowdown, a stronger US dollar, and rising interest rates have shaped metals price fluctuations in 2023.

The soft post-COVID-19 recovery, particularly in China's retail and property sectors, led to excess supply, affecting margins for steel, copper, lithium, and cobalt.

Although China's recent stimulus measures aim to stabilize industrial metal demand, aggressive deployment of renewable energy may offset demand for certain commodities, such as copper.

Increasingly protectionist trade policies in Western countries pose challenges for mining capital expenditures. Policies favoring domestic battery supply chains limit materials from China, affecting global sourcing.

Some countries, like the US and EU, are reducing incentives for consumer EV purchases, impacting the affordability of electric vehicles. This shift in policies poses hurdles to achieving targets like the EU's goal to phase out internal combustion engine vehicles by 2035.

Cost containment and abatement are focal points for renewable energy deployment. The offshore wind project pipeline faces bottlenecks, with developers citing cost overruns due to higher interest rates and interconnection costs.

Regulatory structures in the US hinder project development, and despite efforts to reform permitting processes, challenges persist. The global energy transition effort is expected to persist in 2024, but challenges, including macroeconomic uncertainties and shifting government policies, will slow the shift away from fossil fuels.

Enterprises must look beyond 2024, considering opportunities in the commodities sector, as demand for renewable energy infrastructure and related metals continues to grow. As the world grapples with the complexities of the energy transition, stakeholders are urged to adopt strategies for a sustainable and resilient future.