Today, the energy sector is responsible for two-thirds of global greenhouse gas emissions, and thus, in order to safeguard a Paris-compliant future, significant changes will be required of the energy sector within a relatively short time-frame.

For too long, inertia has inhibited the renewable energy transition, but today it is gaining considerable momentum. New forces such as technological innovation, new market competitors, and synergetic regulation, are transforming the energy sector – and this will continue over the coming years. This is a potentially huge risk for the companies not transitioning, and a great opportunity for the ones that are.

179 countries now have renewable energy targets of some degree, 57 of which aim to use 100% renewable electricity.

When it comes to sustainable energy, we are witnessing some great progress. In terms of regulatory signalling, there has been some progress – 179 countries now have renewable energy targets of some degree, 57 of which aim to use 100% renewable electricity. Renewable energy capacity also increased by 8.3% in 2017, and non-fossil sources now provide 19% of total global energy consumption. The global economy is also becoming more energy efficient, with energy intensity falling on average 1.8% per year since 2010.

But the outlook isn’t entirely sunny. Despite flatlining for three years, global energy-related CO2 emissions rose in 2017, and are forecast to have risen a further 2.7% in 2018. This is mostly a result of sustained growth in energy demand – 2.1% in 2017 – in connection with strong global economic growth of 3.7%. Forecasts expect that total energy demand will actually continue to increase until 2035. In addition, increased use of coal to create electricity in emerging economies like China and India, growing oil consumption for transportation, and insufficient improvements in energy efficiency all contributed to the growth in energy-related emissions.

One of the main challenges is to develop a global scale renewable energy grid. This is currently not possible, because renewables are not yet able to provide power 24/7. And when you look specifically at many of the vulnerable and economically disadvantaged communities, they still often rely on off-grid energy systems such as diesel, kerosene and biofuels that pose a persistent threat to human health and the environment.

New regulations to accelerate decarbonisation create a host of challenges for the incumbent fossil fuels sector – schemes such as carbon pricing, which are already in place in 46 countries, increase operating costs for fossil fuel producers by forcing them to cover the costs of their CO2 emissions.

The financial sustainability of the fossil fuels industry is uncertain. Financial institutions are beginning to price in the long-term risks faced by fossil fuels, and yet the industry often makes long-term decisions based on short term fluctuations in fuel prices – and is consequentially ‘locked-in’ to these decisions for decades. In fact, channelling further investment into fossil fuel assets today could result in up to $11 trillion worth of stranded assets being written down by 2050 due to regulation, uncompetitiveness, or investor demands. This is both a real and immediate concern – it is estimated that 42% of the world’s coal plants are already running at a loss.

Estimates suggest that the incremental opportunity of expanding renewable energy infrastructure could be between $165-605 billion by 2030.

The business opportunities in redesigning the energy system are not to be underestimated. Estimates suggest that the incremental opportunity of expanding renewable energy infrastructure could be between $165-605 billion by 2030, while enhancing energy efficiency could be worth $305-490 billion. And over the past decade solar and wind energy generation costs have plummeted by 80%.

There is a great business opportunity in developing and scaling renewable alternatives that are affordable, clean and stable

A line of innovators are already pioneering energy solutions – creating new materials for storage, using data to manage demand and supply, and developing new technologies for capturing renewable energy sources such as wave or thermal.

There is a great business opportunity in developing and scaling renewable alternatives that are affordable, clean and stable – especially when you look at markets such as China, India and Africa. Although still in early stages, micro – grids hold potential to create greater access to affordable renewable energy for these markets. A myriad of new companies are starting to offer these services to the 1.2 billion people living without access to electricity.

But it is not only the new disruptors who are taking advantage – some major energy companies have already begun the process of divestment from fossil fuels. Ørsted, Denmark’s biggest energy company, divested all its oil and gas assets in September 2017, and has committed to phasing coal out of its power plants by 2023. By 2023, Ørsted expects to have reduced their greenhouse gas emissions by 96%. Realising that renewable energy is more cost effective and carries lower regulatory risks than fossil fuels, Ørsted have invested significantly in alternative energy and are now the world’s largest offshore wind company. In 2017, the energy company enjoyed almost 10% growth in profits while cutting emissions by almost 50%.