The transition to the electrification of transport and energy must gather pace in the 2020s, if governments are to meet the ambitious targets they have set to address climate change. That includes phasing out the sale of vehicles with internal combustion engines (ICEs) from 2030 onward.
The International Energy Agency (IEA) stresses that actions are needed today to ensure that the world reaches net-zero carbon emissions by 2050. The climate pledges made to date would still fall short of that target, emphasising the importance of accelerating the transition in the next few years.
A decade of change
The 2020s will see a melting pot of changes that will bring us closer to net zero. Several of the major automotive manufacturers, including Ford, Honda and Jaguar Land Rover, plan to go all electric in Europe by the end of the decade. And renewables will make up a much larger share of the energy mix by 2030. The main drivers for this shift will include:
- Government regulation. Governments around the world will offer businesses and consumers incentives to change their behaviours to meet increased climate commitments. As it stands, they will have to further strengthen climate policies to get to the net-zero goal. The EU, China and the US have indicated that they will prioritise regulations to encourage clean technology innovation, with the added benefit of creating jobs for the new economy.
- Consumer demand. More awareness of environmental issues, especially among younger consumers, will shift their purchasing to support businesses and brands working toward a greener future. While brands typically led the way in introducing change in the past, millennial and Generation Z consumers are pushing for clean, sustainable alternatives and businesses are responding.
- Falling equipment costs. A continuing drop in the cost of battery technologies will make electric vehicles and energy storage more affordable for more people and encourage adoption. Electric vehicle battery costs have fallen by 89% in the past decade, according to BloombergNEF, and could reach parity with ICE engines by 2023. The emergence of new technologies like solid state batteries and carbon fibre structural batteries is set to bring down costs further.
- Digitalisation. The rollout of 5G telecom networks and the Internet of Things (IoT) is finally coming to fruition, delivering the long-promised bandwidth to run smart applications, increase energy efficiency and transform industrial automation.
What does it mean for business?
Electrification presents great opportunities for disruptive businesses in many industries, from automotive to renewable energy to communications, as well as the sectors that supply them.
From raw materials to components to new products, companies are already reporting shifts in their supply chains and new sources of demand – including electric vehicles, battery technologies, solar equipment, smart devices, and so on.