Financing the Green Energy Transition

Released yesterday, Deloitte’s Financing the Green Energy Transition report found that achieving net-zero greenhouse gas emissions by 2050 will require an annual global investment in the energy sector ranging from NZD$8trillion to NZD$11 trillion. However, the world currently invests less than US$2 trillion each year into the transition, which is far short of the financing needed to help put the world on course to meet our collective climate goals.

Released in advance of the 2023 United Nations Climate Change Conference (COP28), the report found that green projects currently suffer from underinvestment and high required return rates because private investors tend to see green technologies as riskier than alternative investments.

Here in Aotearoa New Zealand, we are rightly proud of our high levels of renewable energy, with much of our electricity generated from renewable energy sources (80-85%), which is promising for reducing our reliance on fossil fuels in the future. But we still have a long way to go. Only 40% of our overall energy is from renewable sources, and we know that to achieve our 2050 net-zero goals, we too must act now to unlock innovation and investment to accelerate the decarbonisation of our energy sector.

The benefit is considerable and real. We would not only reduce our reliance on global fossil fuel markets while also reducing costs for households and communities, but we can create high-wage job opportunities in a low-emission economy, with the emergence of new sectors that drive increased growth and employment here at home, and as we export innovation and technology abroad.

Deloitte New Zealand's 2023 Turning Point research showed through economic modelling that decisive climate action could deliver NZD$64 billion to New Zealand's economy by 2050. With inadequate action, we stand to lose NZD$4.4 billion.

The case is clear. It’s time for both business and government to be resolute, to lead, and to take practical climate action today towards a more prosperous economic outcome for tomorrow.

At the heart of this is our ability to transform our society from one reliant on fossil fuels to a highly renewable and electrified energy system. In this latest report, Deloitte looks at the key action levers required to reduce risks associated with the political, market and transformation barriers that are in the way of a green energy revolution. Here in Aotearoa New Zealand, many of these barriers are also those holding us back and require our government, financial institutions, investors, innovators, businesses and communities to come together for real action.

In reading this report, we should consider the following questions:

• What is our context here at home to accelerate the decarbonisation of our energy sector? 

• How can we get the capital flow needed? 

• What are the tools that would increase the bankability of sustainable projects to make them more attractive to investors, both in New Zealand and offshore? 

• Are our climate and energy policies fit for purpose and keeping up with the new technologies that may provide future solutions? 

• What can our policy makers do to help ease the transition and guide public and private funds towards our goals? 

• How are we incentivising innovation by using every option available to us? 

• What is missing and what can we learn from the past? 

• What are the financial instruments that are right for our context? 

• How can we care for people and ensure that a just transition is at the heart of our green energy sector?
  

We ask you to explore the main barriers for investment into clean technologies and to identify those that are the most impactful here in Aotearoa New Zealand.

• What are the key solutions that will make green projects more bankable and attract the capital needed for success? 

• What are the financial tools that are right for our context to foster investments in green and sustainable projects? 

• Perhaps most importantly, what must we do to work together to accelerate our energy transition?