The barriers to the energy transition should not be underestimated

We see six barriers to the energy transition. The shortfall of fossil fuel production, due to underinvestment, now amplified by the fallout from the war in Ukraine. It is both driving up energy prices and running the risk of a return to investment in fossil fuels. The high price of renewable energies, due to the cost of energy storage made necessary by the intermittency of their production, plus the low efficiency of storage technologies. This high price of renewable energies will lead to high income inequality and the need for redistributive policies. The energy transition is leading to very strong demand for many raw materials (metals in particular) needed to build electrical grids and electric batteries. There is a risk of supply shortages in these raw materials. Huge investment will be required for the energy transition (around 4 percentage points of GDP per year for 30 years). Much of it will provide low financial returns at a time when real interest rates are rising as central banks respond to inflation. This will probably require a mix of private and public funding to finance investments. There is huge technological uncertainty: the energy transition is being launched without a clear view of the technologies that will be available in the future, without knowing whether it might be optimal to wait before starting the transition. The need for behaviour change to reduce consumption of energy and other commodities. Without any change in behaviour, the energy transition will come up against other scarcities.