Outlook 2023 - Sustainable Future: Energy security to fuel the energy transition

The energy crisis has triggered a seismic shift, energy security becoming a top priority for governments. Renewable energies are expected to be a major beneficiary, but not only. 2023 is poised to be a year full of opportunities in the entire cleantech sector, driven by accelerating demand and easing supply chain pressures.

Bottom line

The world is living through one of its biggest energy crises in history. Energy flows are being reshuffled, driving up the cost of electricity and fossil fuels. Energy security has risen to the top of governments’ priority list. As the oil shock in the '70s ignited significant renewables and energy efficiency developments, we expect the current crisis to spur the deployment of such technologies, which have mostly become cost-competitive with fossil-based alternatives.

Both Europe’s REPowerEU plan (presented in May 2022) and U.S.’s Inflation Reduction Act (signed in August 2022) contain supportive measures to accelerate the deployment of renewable energies and energy efficiency. We expect the current energy crisis to act as a strong tailwind for clean energies, driven by environmental and energy security needs.

Table of contents

Portfolio Snapshot
Sustainable Future Overview

Energy Storage
Clean Transportation
Smart Grid
Smart Building
Food & Agriculture
Carbon Capture

A glance in the rearview mirror

Portfolio Snapshot


An unprecedented energy crisis

The current energy crisis is acting as a wake-up call, highlighting the vulnerabilities of our energy systems. While some voices still blame renewables for fragilizing power systems, the reality is that renewables enjoy more stable costs compared to volatile fossil fuels. Natural gas and coal have hit record levels, and the barrel of oil rose well above the $100 mark before falling back to the $80s. High gas and coal prices accounted for 90% of the upward pressure on electricity costs.

This year, the total number of people without access to electricity worldwide (currently standing at about 770mn) is set to rise for the first time ever, with up to 75mn people risking losing the ability to pay for it (source: IEA).

A boost for the energy transition

Based on history, big crises and wars tend to accelerate energy transition processes. Indeed, the 1973 oil crisis is today seen as the key trigger that initiated R&D in renewables. This time, we believe that surging power prices and energy security concerns will accelerate the deployment of renewables and energy-efficient technologies that have significantly improved since the 70s.

Out of all clean technologies, we see solar energy as a sweet spot, featuring direct energy independence (generating electricity locally) at competitive pricing and with short construction and installation cycles. More specifically, rooftop solar in Europe should be one of the near-term beneficiaries.

In reaction to the crisis, governments are taking short and long-term measures to diversify the energy supply, improve energy efficiency, and boost clean energies. Europe’s REPowerEU plan and the U.S.’s Inflation Reduction Act include significant measures designed to foster the deployment of clean technologies.

Signs of supply chain improvements

Although global supply chain bottlenecks remained an issue for most of the year, we see the situation evolving in the right direction. Weak global demand has pushed steel prices (used in producing solar panels and wind turbines) back to below pre-Covid levels, and container freight costs have drastically fallen off 2021’s highs.

While several critical materials' costs remain elevated (e.g., polysilicon, copper, lithium, nickel, etc.), we expect some normalization in prices driven by new production capacities coming online. We also expect to see an increasing interest in manufacturing reshoring, with countries willing to repatriate some parts of clean energy supply chains domestically.

Supply chain normalization and aggressive policy responses should propel clean technologies deployment in the near term and alleviate margin pressures.

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The big winner of the global energy shock

Supply tightness easing

While raw material prices and logistics costs remained high in 2022, they are expected to start declining gradually through the beginning of 2023.

The price of polysilicon (primary material and cost component used in the production of solar cells) kept on rising, reaching up to RMB300 (~$42) per kg from about RMB90 (~$13) per kg a year ago (source: PV-magazine). High silver, aluminum, and copper prices (used for electrodes, frames, and connectors) also impacted the price hike of solar modules, which stand at ~$0.25/w today.

While polysilicon production capacity kept expanding, it did not catch up with the surging demand for solar panels. The global production capacity increased in 2022 from 293GW to 550GW. We expect polysilicon prices to normalize and even decline in 2023; the total capacity will spike to 975GW by the end of 2023. Indeed, while freight costs and steel prices have already drastically declined (back to pre-Covid levels), polysilicon prices are expected to fall back within the $10-15/kg range next year, helping module prices to ease towards the $0.21-$0.22/w levels.

A year marked by regulatory uncertainty

While demand for solar panels remained solid over the year, the sector was impacted by several policy-related uncertainties.

These include the anti-dumping and countervailing duties (AC/CVD) investigation (which was put on hold for 24 months by Biden), the Uyghur Forced Labor prevention Act (banning imports of goods from the region of Xinjiang), the new Net Energy Metering (NEM 3.0) regulation in California (for which the latest proposal appears to be better than feared), and the aborted Build Back Better Act which was finally transformed to become the Inflation Reduction Act (and still providing $369bn of investments on climate and energy programs).

While the final result is very positive for the solar industry (investment tax credit extensions, support for domestic manufacturing, etc.), U.S. solar players remained mired in uncertainty until the beginning of August (when the Inflation Reduction Act was eventually signed into law), leaving investors hesitant.

The best short-term option for energy security

In the current context of political tensions, resource scarcity, and energy security concerns, solar photovoltaic (PV) technology appears to be one of the most straightforward solutions.

New PV installations will reach 268GW this year, up 47% from the 182GW deployed in 2021, with China accounting for 47% of global installs. 

Additionally, rising electricity prices have improved the cost competitiveness of solar PVs. Governments are putting all their efforts into accelerating the deployment of solar panels while incentivizing manufacturing re-localization; see, for instance, First Solar's new $1.1bn solar plant to be built in Alabama. Europe’s REPowerEU plan has set short and medium-term milestones to fully disconnect Europe from all Russian energy imports by 2027. Solar energy plays an essential role in this strategy. The goal is to increase Europe’s total installed PV capacity from 160GW (end of 2021) to 320GW by 2025 and almost 600GW by 2030 (nearly doubling current installation rates). In the near term, we believe that 2023 will be another record year for new solar installations worldwide.  

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Strong demand despite elevated costs

Lithium-ion remains the top technology

Out of all the different energy storage technologies (mechanical, thermal, pumped hydro, hydrogen, etc.), lithium-ion batteries have remained the preferred option for electric vehicles (EVs) and stationary energy storage applications.

Indeed, li-ion batteries account for about 95% of all utility-scale energy storage applications and are the technology of choice for all battery-based electric vehicles.

Several chemistries co-exist within the Li-ion battery industry: from high-performance nickel-based chemistries (e.g., NMC) to nickel-free ones (LFP) that are cheaper but feature lower energy density. We believe that in the current context of high commodity prices and potential material scarcity, LFP chemistries will see a significant uptake in the near term.

Material costs remain elevated

Material costs for lithium-ion batteries were approximately 10% to 15% higher in 2022 than the previous year. In addition to increased raw material costs (lithium carbonate/hydroxide, nickel, cobalt, etc.), high shipping costs also weighed on the battery supply chain. While many battery players had cost pass-through mechanisms (e.g., CATL), they often decided to absorb cost increases to remain competitive.

Additionally, many battery suppliers have been adding capacity aggressively throughout the year, strengthening market competition and pressuring margins. Today, the total global commissioned lithium-ion battery manufacturing capacity is 806 GWh, up from 586 GWh a year ago. By 2025, the total capacity is expected to grow fivefold to 4’151GWh, and any slowdown in demand could put the entire supply chain at risk of oversupply.

China remains the dominant player, but re-localization is in the air

From battery production to end-uses, China remains the most significant player in the world as it accounts for roughly 50% of the demand and 80% of the supply. However, we are noticing a clear trend for re-localization, with Europe and the U.S. willing to reinforce their domestic battery supply chain.

The European Commission recently proposed the Critical Raw Material Act to reduce Europe’s growing dependency on China, diversify supply chains (e.g., Chile, Mexico, Australia, etc.), support innovation and recycling, and build up strategic reserves in case of supply risks.

On the other hand, the U.S. government is to award $2.8bn in grants for projects expanding local manufacturing of batteries, backed by the bipartisan $1tn Infrastructure Bill.

We expect such initiatives (diversifying away from China) to lead to additional partnerships with Korean players (such as Samsung SDI and LG Energy Solution) and stimulate innovation in the entire industry.

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Electrification remains key

Another record year for electric vehicle sales

Global sales of electric passenger vehicles (EVs) are on track to reach 10.6mn units in 2022, up from 3.1mn in 2020 and 6.9mn in 2021. In the year's first half, they accounted for 13.2% of all new car sales globally, up from 4.3% in 2020 to 8.7% in 2021. This surge in EV sales contrasts with the global passenger vehicle market trend, which is projected to decrease by 0.2% this year.

While China and Europe remained the most significant markets, accounting for 56% and 28% of global EV sales in H1-2022, EV share of sales has dropped in some European countries partly due to supply chain issues and recessionary fears.

High gasoline prices improve competitiveness

While the direct price of EVs has been slightly rising this year due to higher battery prices, their total cost of ownership (TCO) has improved (vs. internal combustion vehicles) thanks to higher fossil fuel costs. Indeed, even if electricity prices increased in most parts of the world, gasoline prices have also surged.

As we wrote in our mid-year review, upfront car costs are not the main driver for EV demand. Instead, model availability, driving range, available charging infrastructure and charging time, etc., play an increasingly important role.

Corporate and government Commitments

Automakers accounting for about 30% of the global automakers have already announced phaseouts of combustion engines, and they have collectively committed to selling about 43mn EVs annually by 2030.

As per government commitments, the E.U. recently confirmed its plan to effectively phase out new internal combustion engine (ICE) vehicle sales by 2035. On the other hand, California has finalized its Advanced Clean Cars II policy, which calls for the phaseout of ICE vehicle sales by 2035.

Although the growth in electric vehicle sales could slow down next year (due to the global economic context), we remain confident that EV demand will keep growing at a double-digit rate.

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Upgrading the grid becomes a necessity

Investments are recovering but are still too low

In 2022, investments continued their recovery phase and should reach close to $320bn (+3% YoY) by year-end, following a strong rebound in 2021 where CapEx rose 6% from Covid-impacted 2020 levels.

While investments in electric grids have been oscillating around the $300bn p.a. over the past decade, they would need to increase ~$600bn annually through 2030 to align with climate targets. Emerging markets and developing economies are lagging, with annual investments averaging about $80bn, while $220bn would be required.

Digitalization is on its way

Global investment in digital technologies is to account for more than 19% of total power grid investments (up from 12% five years ago). About 75% of all digital investments are on the distribution level, notably smart meters, substations automation, network digital twins, and the deployment of sensors and monitoring devices. Such technologies enable more dynamic control of power flows, improve grid performance and uptime, and allow for greater integration of intermittent renewable sources.

At the transmission level, digital technologies primarily focus on digitalizing power transformers and integrating energy management systems to better monitor, control, and optimize power generation and transmission.

A crucial step to connecting the world

Investing in grid infrastructure such as large-scale interconnectors (including subsea cables) is crucial for balancing supply and demand across regions and interconnecting countries with access to different renewable sources (e.g., Moroccan solar plants with the U.K. grid). In its REPowerEU plan, the E.U. proposes €29bn of investments to stimulate the development of such interconnectors.

Additionally, the current context of more frequent weather events and increased geopolitical tensions exacerbate the need for investing in a more flexible, resilient, and secured power grid. Next year, we expect recently-signed infrastructure plans (especially in the U.S. and Europe) to be translated into actual CAPEX for the smart grid sector.

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Prepared for the wind of changes

The industry is getting back on its feet

After a year of decline, new wind capacity additions will remain flat in 2022 at around 95GW. While some raw material prices (e.g., resin, balsa wood, etc.) and logistic costs remain elevated, new supportive policies are brightening the picture.

Indeed, the passage of the Inflation Reduction Act (IRA) in the U.S. and the re-introduction of the Production Tax Credit (PTC) are expected to revitalize the U.S. wind industry and provide long-term investment stability.

In Europe, the REPowerEU plan aims for 510GW of total wind capacity by 2030 (up from 236GW today).

China, on its end, published its 14th Five-Year Plan, which set the ambitious target of 33% power generation from renewables with 18% from solar and wind alone. Under this new plan, annual wind installations are expected to increase by 64GW p.a. (vs. 30GW in the previous Five-Year Plan).

China’s push into international markets

Despite lockdowns, political tensions with Taiwan, and typhoons (disrupting offshore wind projects), China remains the largest market for wind energy, accounting for over 50% of 2022’s new capacity additions.

Beyond being the largest market, Chinese wind turbine makers have started entering overseas markets (e.g., Ming Yang new project wins in Italy and the U.K.). While Chinese OEMs have historically dominated the local market (already big enough), they have begun competing overseas, benefiting from lower prices and mature supply chains. Indeed, China is home to the world’s largest steel industry, and Chinese wind turbine prices continued to decrease when the rest of the world was experiencing price hikes. While western Europe and the U.S. markets might remain challenging to enter, we believe that Chinese makers could expand in less established wind markets such as Eastern Europe, Latin America, Middle East, and Africa.

Offshore wind is the sweet spot

Over the past two years, the wind energy industry has struggled with high input costs, supply chain challenges, and Covid outbreaks, resulting in the delay of many large-scale projects. We believe that the industry is entering a recovery phase and that 2023’s new installations will break new records.

Within the wind energy industry, offshore wind is to experience the fastest growth, with an average annual growth rate of about 29% in the next decade (vs. 6% for global wind). Advances in offshore wind technology (notably in foundations for fixed-bottom turbines) enable larger turbines to be installed and improve economic competitiveness. Floating turbines (still in development) are gaining interest as they can be placed further from shore and capture more robust and consistent winds with fewer construction materials.

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If you can’t electrify it, biofuel it

Slower growth amid the current geopolitical context

Global demand from biofuel is to grow by 5% YoY and reach 8’500mn liters (a 20% slowdown in annual demand growth compared to last year). This slowdown can be explained by the current geopolitical context, notably the Covid-related mobility restrictions in China and globally weaker GDP growth. As biofuels are blended with gasoline and diesel, any slowdown in the transportation sector directly impacts biofuel growth.

On the other end, the Russia-Ukraine conflict had a negative impact on the cost of many feedstocks used in the production of biofuels (such as corn or vegetable oils). Nevertheless, we believe the biofuel industry will maintain a stable low-digit growth rate, mainly driven by policies and blending mandates.

Feedstocks sources are essential

Although today most of the biofuel production is still supplied by traditional feedstocks (e.g., sugarcane, maize, vegetable oils, etc.), we expect biofuels produced from waste (e.g., used cooking oils, animal fats) to keep gaining importance in the future. These feedstocks are typically used in producing renewable diesel, a category of biofuels made through hydrogeneration and hydrocracking.

In addition to having a smaller environmental footprint (as produced from waste and renewable raw materials), renewable diesel has theoretically no blending limit as it has the same chemical composition as fossil diesel and is fully compatible with existing diesel engines. We expect renewable diesel to grow faster than the biofuel industry with a >50% annual growth rate.

Aviation biofuel is to accelerate

The aviation sector is arguably one of biofuels' most relevant transport modes. With battery electric planes holding many technical challenges (notably on weight and range), and hydrogen planes remaining a long-term dream, biofuels appear to be the only option to help decarbonize the aviation sector in the short term.

The so-called Sustainable Aviation Fuels (SAF), of which Neste is a leading global supplier, are renewable or waste-derived aviation fuels produced from sustainable feedstocks with very similar chemical properties to traditional jet fuel.

Although still a nascent industry (representing less than 1% of aviation fuel uses), the share of SAF is set to reach 2% by 2025 and 5% by 2030. This year, as the aviation sector is recovering from the pandemic, the number of airlines committing to cleaner fuel has surged. Almost 30 of the world’s top airlines have committed to SAF adoption targets (often 10% of jet fuel share by 2030).

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The best energy is the one you save

Major energy consumers

In 2021, buildings accounted for 30% of global energy demand and 27% of total energy sector emissions (8% direct emissions and 19% indirect from the production of electricity and heat used in buildings). An additional 6% should be added if the production of cement, steel, and aluminum (used for building construction) is considered.

Tackling the buildings sector remains crucial to helping reduce energy use and mitigate emissions. In the context of energy security concerns, a lot of focus has been put on solutions for reducing buildings' energy demand, including upgrading heating and cooling systems with heat pumps, improving building envelopes, using more efficient appliances, and behavioral changes (e.g., reducing heating temperature).

A massive heat pump rollout needed

Heat pumps are critical for heat decarbonization. They use electricity to capture ambient heat from the air, water, or ground and then supply it using a fraction of the electricity used by conventional equipment. In 2021 there were about 190mn heap pump units in operation in buildings worldwide, accounting for only 10% of global heating needs in buildings. To align with climate targets, the global stock of heat pumps must reach 600mn units by 2030.

Energy security concerns are a significant driver for heat pumps, and the E.U. has set an ambitious target of 50mn heat pumps to be installed by 2030 (doubling the current installation rate). These aggressive new ambitions should benefit European heat pump providers such as Nibe Industrier.

Challenging times ahead

The building industry is one of the most difficult to decarbonize. Renovation is often complex and requires considerable skills and strong economic incentives. Annual energy efficiency renovation rates stand at less than 1% today, and retrofits generally reduce energy intensity by less than 15%. Since 2000, the global constructed floor space has increased by 60%, while, at the same time, the average energy use (per m2 of floor space) has decreased by only 20%.

We believe that in 2023, the global macro context will be challenging for the (smart) building industry, except for some specific technologies, such as heat pumps which provide greater energy independence.

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Supplying more with less

Securing supply is a top priority

Although representing 70% of the earth’s surface, only 0.3% of the world’s water is available for use as fresh surface and groundwater. This limited supply is under pressure with growing demand, aging infrastructure, and climate change. Water scarcity is already affecting 40% of the world’s population today.

As is the case for energy, ensuring water security has become essential. Aging infrastructure (e.g., old pipes, rusty joints, etc.) in many parts of the world is causing costly leaks and water loss, exacerbating supply/demand stress. A study evaluated the direct costs of water leaks in the U.S. at $2.6bn per year.

Rapid urbanization and changing dietary habits will drive water demand in developing and emerging countries, highlighting the need for efficient water technologies (from water sourcing to distribution and treatment).

Covid-19 highlighted the importance of clean water access

The pandemic underscored the importance of access to a reliable, clean water supply. Hand-washing is one of the most basic defenses against Covid-19, yet about a quarter of the world’s population still lacks access to clean water.

The crisis has hurt the water industry, with commercial and industrial water demand declining in the first months of the pandemic and water utilities absorbing declines in revenue due to lower water tariffs and suspended actions against non-payers. Amid this challenging context, water utilities were less inclined to unlock new investments in water tech.

Technology plays a central role

Technologies are critical to cope with the water scarcity challenge.

Desalinization (mostly done through reverse osmosis) is increasingly used to remove salt and other chemicals from water. Thanks to economies of scale, average desalinization costs have fallen from ~$2/m3 20 years ago to ~$0.7/m3 today.

Digitalization is also embracing the water industry, integrating the Internet of Things (IoT) and sensors to improve water usage, distribution, and maintenance.

We believe that integrating smart technologies (smart meters, IoT & sensors, digital twins, etc.) will help water players tackle water loss issues, reduce maintenance costs, and optimize the usage of freshwater resources.

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High hopes, low expectations

Governments maintaining the momentum

Currently, 31 national governments have set strategies to support hydrogen production and consumption (up from 26 countries at the end of 2021 and 13 at the end of 2020). Out of them, more than two-thirds come from European countries. Europe’s REPowerEU plan foresees a “hydrogen accelerator”, targeting 10mt of domestic green hydrogen production and 10mt of imports by 2030.

In the U.S., the Bipartisan Infrastructure Law (passed in November 2021) provides $9.5bn for regional clean hydrogen hubs, and the Inflation Reduction Act (passed in August 2022) includes $13bn for the introduction of a clean hydrogen tax credit.

Still an early-stage technology

Many hopes have been placed on the potential benefits of green hydrogen technology (produced through renewable-powered electrolysis of water). Western governments see it as a multi-purpose solution to reduce greenhouse gas (GHG) emissions and enhance energy independence. On the other hand, China is waking up on the fuel-cell and electrolyzer technology, putting western actors at risk. 

Some studies foresee huge growth, with the total cumulative electrolyzer installations reaching 242GW by 2030 (from only 2GW today). Hence, many early movers are willing to seize this opportunity and compete in a nascent industry where practical applications remain limited.

The reality is that the green hydrogen industry is still in its infancy, and one kg of green hydrogen costs between $10-15 (high electricity prices impact green hydrogen costs). To become competitive with fossil-based alternatives, green hydrogen production costs must fall under $2/kg, and we do not expect this to happen in the near term. 2023 will likely be another year of high volatility for unprofitable hydrogen players, with increased hopes but a challenging market environment.

Shifting the focus to industrial applications

Green hydrogen is not an energy source but an energy vector. In this sense, it holds multiple applications, from transport (fuel cell electric vehicles, hydrogen planes/ boats, etc.), industry (fertilizers, iron & steel, high-temperature industrial heat, etc.), and as an energy storage solution for intermittent renewables (e.g., producing green hydrogen from offshore wind).

Out of all the different usages, we believe that the most (and often only) meaningful ones are as a decarbonizing vector for heavy industry and hard-to-abate sectors. The use-case is already verified as these industries already use hydrogen (most of the time fossil-based) in their processes. Green hydrogen represents only about 1% of all global hydrogen production, and tackling all existing fossil-based hydrogen applications should be the focus.

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Food security over quality

The high footprint of food systems

The food industry is responsible for over 33% of global GHG emissions and is one of the most significant contributors to climate change. Agriculture alone takes up to 50% of the world’s habitable land, of which 75% is used for livestock.

Although the food sector strives to improve food supply and quality in a safe and affordable way for a growing population, the resources needed to produce food are reaching their limits. Indeed, today’s method of producing proteins won’t suitably supply future demand. In many countries, the so-called “Earth Overshoot Day” (when humanity’s resource consumption exceeds what Earth can regenerate in that year) happens as early as March or April.

Supply chain disruptions in the spotlight

Recent events such as the Covid-19 pandemic and the Ukraine-Russia conflict highlighted the vulnerability of global food supply chains. Russia and Ukraine are significant suppliers of grains, vegetable oil, and fertilizers. The conflict has led to a 70% increase in wheat prices in Q1-2022, and food availability has been a growing concern in Africa, where Russia and Ukraine provide over 40% of the wheat supply.

These vulnerabilities are fostering the need for a more resilient food supply chain. Solutions such as reshoring, food supply diversification, vertical farming, alternative proteins, etc., are all gaining interest in this context.

Plant-based meat: not for today

Demand for plant-based meat is evolving below expectations. Indeed, today plant-based protein products still represent less than 1% of the total food market, and it appears that the market is not ready yet for mass adoption.

The early mover advantage claimed by several pure players (e.g., Beyond Meat, Impossible Foods, etc.) seems overdone as competition intensifies with traditional food & beverage companies (e.g., Nestle, Kellog's, etc.) flooding the alternative meat market.

While much progress has been made on taste, the main near-term barriers will remain price, health impact, and nutrition habits.

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Yesterday’s enemy, tomorrow’s friend

Public perception is changing

A couple of years ago, nuclear energy was perceived as a risky, unsustainable option and was rarely included in global low-carbon strategies. Today the opinion is evolving, and the energy crisis has pushed people (and countries) to turn back towards nuclear power.

Fears of energy shortages have prompted countries to re-think the nuclear question. Germany said it would keep running its last three nuclear plants, going against its nuclear phaseout policy. Japan, on its end, announced it would restart several idle nuclear reactors and build new, more advanced ones, reversing its post-Fukushima decision to get rid of nuclear power. Also, in the U.S., nuclear power is part of the country’s decarbonization plans as a low-carbon generation source.

This year, the European Parliament confirmed the inclusion of nuclear (and abated natural gas) in the EU Taxonomy as an environmentally sustainable economic activity, making it an “investable” industry for all actors considering ESG criteria.

An essential element in the power mix

Nuclear power has long been a significant contributor of low-carbon electricity and remains essential to enable the decarbonization of the power sector. Today, nuclear power represent about 10% of global electricity generation. A share that is expected to remain roughly stable, with retired old nuclear reactors being compensated by new installations.

Out of the 31 reactors that are being built since 2017, only four are not of Russian or Chinese design. Western countries have lost market leadership in nuclear technology, and most of the industry’s future growth is expected to come from China.

While the industry’s growth rate is not comparable to renewable sources such as solar or wind, nuclear remains a fundamental element to the energy transition, providing dispatchable low-carbon electricity.

Maintain the existing, drive the innovation

Nuclear power (together with hydropower when available) is an excellent complement to intermittent renewables. Extending a nuclear plant’s lifetime is a necessary path in a decarbonization scenario. Today about 63% of existing nuclear plants are over 30 years old and close to the end of their initial operating license.

In addition to lifetime extensions, momentum is building behind small modular reactors (SMR). With lower capital costs, enhanced safety, and lower waste (sometimes reusing nuclear waste as a fuel), SMRs are starting to attract private investments (e.g., Newcleo) and are currently in their research and development phase.

We expect new nuclear power plans to be unveiled in 2023 and some of the existing nuclear reactors (currently under maintenance) to come back online.

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If you can’t avoid it, capture it

Scaling up is the main challenge

Carbon capture consists of capturing CO2 emissions (from industrial exhausts, power generation, or directly from the air) to then be stored underground or used in various ways (urea manufacturing, enhanced oil recovery, synthetic fuels, etc.).

Currently, only 35 commercial carbon capture, utilization, and storage (CCUS) facilities exist. In aggregate, they are capturing 45Mt of CO2 per year. The 200 projects for new facilities announced to operate by 2030 would add up to about 265 Mt of CO2 per year. To align with climate objectives, the total annual capacity of large-scale capture facilities should reach about 1.7Gt per year.

Promising innovations under development

One innovative approach to carbon capture involves removing CO2 directly from the air through a process called Direct Air Capture (DAC). Currently, only 18 DAC plants are operational in Europe, the U.S., and Canada, capturing about 0.01 Mt of CO2 annually. Additionally, a 1Mt of CO2/year plant is under development in the U.S. and should be operational by 2024.

In IEA’s Net Zero Emission by 2050 Scenario, DAC scales up to 60Mt of CO2 captured per year by 2030; a long way to go that seems unrealistic under current conditions.

Further incentives are needed

To have a meaningful impact on carbon emissions and climate change, carbon capture must scale up by several orders of magnitude. While efficiency improvements (higher capture rates) and economies of scale are possible, they arguably won’t be sufficient to stimulate the required deployment of CCUS technologies.

One way to incentivize the adoption of CCUS is to increase carbon credit pricing. If the price of emitting a ton of CO2 is higher than that of capturing and using/storing it, it becomes economically viable to adopt CCUS. Globally, most carbon credits are within the $10-80 per ton of CO2 range. The cost for carbon capture (only) varies greatly depending on the CO2 source and the technology. It can range from $40 to $400 per ton of CO2, depending on the concentration of CO2 and the method used.

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The next centerpiece of the energy transition

Surging demand for critical minerals

The fast adoption of clean technologies is boosting the demand for critical minerals and raises the question of availability and geographical concentration. Today’s supply and existing plans for new capacity fall short of what would be needed to support future demand. Disrupted supply chains have exacerbated the demand/supply tightness, and the prices of many minerals and metals have soared in the past two years. Since the beginning of 2021, lithium prices have increased by 738%, cobalt by 156%, nickel by 94%, aluminum by 76%, and copper by 34%.

Given the significant drop in the price of clean technologies over the past years (thanks to innovation and economies of scale), raw materials now account for a substantial share of total costs. Greenflation (the inflation of raw material costs due to increased demand for clean technologies) is growing as one of the biggest obstacles to faster clean energy deployment.

The mining paradox

Mining is seen as a non-sustainable activity, but producing so-called “clean technologies” requires a range of critical materials that need to be mined. Hence, investors tend to avoid mining companies and focus on actors at the bottom of the value chain. Given the lack of popularity of mining activity, and the long lead time to bring new mines online (16 years on average from mine discovery to the first production), critical minerals are likely to become a bottleneck in the process.

We believe that a new mining paradigm needs to emerge, using less energy-intensive processes (e.g., direct lithium extraction) and leveraging new technologies (e.g., IoT, blockchain, etc.) to guarantee transparency, reliability, and traceability.

An opportunity for recycling and innovation

One way to reduce the mining of new materials is to promote waste management and the 3R (reduce, reuse, or recycle). Technology advances can reduce the need for critical minerals (e.g., in the battery industry) thanks to material substitution or optimized design. Recycling can also alleviate the pressure on primary supply while reducing geographical dependency (what is recycled doesn’t need to be mined).

We expect Europe and the U.S. to play a central role in the future of recycling. Beyond environmental benefits, China’s dominance in extracting and processing many critical materials constitutes an additional catalyst for western actors.

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  • Raw material cost normalization. Production capacity ramp-up and de-bottlenecked supply chains would limit the inflation of raw materials and improve margins for key cleantech manufacturers.

  • Fossil fuels disruptions. Geopolitical tensions could exacerbate fossil fuel supply challenges, driving interest in renewable alternatives.

  • China reopening. China easing its zero-Covid policy would stimulate local demand and alleviate some of the supply chain tightness.


  •  China tensions. Rising tensions among the Chinese population relating to strict Covid-restrictions could disrupt supply chains and impact the manufacturing of many clean technologies.

  •  Greenflation. Lack of sufficient supply of critical materials could further exacerbate cost inflations and make clean technologies less attractive.

  •  Global recessions. A global recession would impact consumer demand and potentially slow the adoption of consumer-driven clean technologies (e.g., electric vehicles, residential solar panels, etc.).

Companies mentioned in this article

Beyond Meat (BYND); CATL (300750); First Solar (FSLR); Impossible Foods (Not listed); Kellog's (K); LG Energy Solution (373220); Ming Yang (601615); Neste (NESTE); Nestle (NESN); Newcleo (Not listed); Nibe Industrier (NIBEB); Samsung SDI (006400)


This report has been produced by the organizational unit responsible for investment research (Research unit) of atonra Partners and sent to you by the company sales representatives.

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Past performance is not indicative or a guarantee of future results. Investment losses may occur, and investors could lose some or all of their investment. Any indices cited herein are provided only as examples of general market performance and no index is directly comparable to the past or future performance of the Certificate.

It should not be assumed that the Certificate will invest in any specific securities that comprise any index, nor should it be understood to mean that there is a correlation between the Certificate’s returns and any index returns.

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