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DECARBONISATION REQUIRES BALANCING ENERGY REALITIES WITH AMBITIONSDECARBONISATIONREQUIRESBALANCINGENERGYREALITIESWITHAMBITIONS

Dec 12, 2024

The multi-decade energy transition demands pragmatic pathways and investment opportunities abound for alpha generating potential.

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As the dust settles from pivotal 2024 elections across the U.S., U.K., and Europe, the energy challenge remains stark. Rising global power demand, fueled by digitalisation, electrification, urbanisation and the push for clean energy solutions, must be balanced against net-zero commitments. In this complex scenario, the energy transition demands pragmatic pathways-and investment opportunities abound for those positioned to capitalise on this shift.

RENEWABLES ARE NICE BUT NOT ENOUGH YET

While renewables remain the cornerstone of decarbonisation, their intermittent nature and reliance on nascent storage technologies reveal a gap in the new energy infrastructure. Natural gas and nuclear energy are emerging as vital, scalable solutions to bridge this gap. Copper, the “metal of electrification,” is also key to building a sustainable future that includes electric vehicles (EVs).

NATURAL GAS: A FLEXIBLE TRANSITION FUEL

Natural gas continues to play a critical role in reducing reliance on coal, offering immediate decarbonisation benefits while ensuring reliability in the grid. It complements renewables by providing flexible, on-demand power when solar and wind falter during seasonal lows or extreme weather events. With LNG infrastructure expanding globally, companies poised to support this transition represent significant near-term opportunities. Investors may find value in exploring firms that focus on lower carbon fossil fuels, as their role remains central to stabilising energy markets while advancing decarbonisation goals.

NUCLEAR ENERGY: CATALYSING LONG-TERM DECARBONISATION

As a zero-carbon baseload power source, nuclear is reclaiming prominence in global energy strategies. Advances in modular reactor technologies and policy incentives in the U.S. and Europe position nuclear power to meet long-term climate targets. These developments also mitigate risks previously associated with high costs and waste management. Energy providers modernising nuclear fleets or integrating small modular reactors into grid systems are set to benefit from policy and market tailwinds.

COPPER: THE HIDDEN HERO OF ELECTRIFICATION

Copper is emerging as the linchpin of the clean energy transition, vital to the production and transmission of electricity, EVs, and renewable infrastructure. As global electrification accelerates, copper demand is set to double by 2050. Unlike niche critical minerals, copper is essential across many sectors. Investors may find significant value looking through the supply chain, from mining companies with diversified operations and sustainable practices, to downstream companies well-positioned for electrification.

CHANGING MIX OF GLOBAL PRIMARY ENERGY DEMAND SOURCES

Source: Statista, OPEC as of October 2024.

JAY SAUNDERS

Carbon Solutions Strategy

Portfolio Manager

Jennison Associates

The energy transition is a multi-decade evolution. Companies that combine innovation with operational scale—whether in natural gas, nuclear, or copper—will be at the forefront of this transformation.
Jay SaundersCarbon Solutions Strategy, Portfolio ManagerJennison Associates

TARGETING RESILIENT THEMES THROUGH A PRAGMATIC ENERGY MIX

The energy transition isn’t a singular, binary shift, but a multi-decade evolution requiring an “all-of-the-above” approach. These technologies are examples not only of immediate pathways to decarbonize electricity generation, but also the need for carbon solutions that feed energy-intensive sectors like manufacturing and transport, where electrification is more challenging. Companies that combine innovation with operational scale—whether in natural gas, nuclear, or copper—will be at the forefront of this transformation.

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