Digitalization Driving Decarbonization

Everything around us is getting smarter—buildings, cars, cities. And environmental, social, and governance (ESG) factors are accelerating this trend.

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Decarbonization is topical these days, but digitalization is what is making this a reality. Everything around you is getting smarter—your buildings, your cars, your cities, your HVAC unit. And ESG factors are further accelerating this trend.

Power Grids

The costs associated with green technologies (or cost curves) have been declining rapidly as renewable power generators and developers have deployed significant amounts of capital. Even though solar and wind are at parity with or cheaper than incumbent fuel types like coal, we’re still expected to see nearly 50% cost declines for some green technologies through the year 2030.

Buildings

Putting sensors in a building and connecting those sensors to a central unit helps you understand the hot zones and the cool zones within that building and helps you manage the energy needs of that building more efficiently.

Electric Vehicles

In terms of cars, increasing the battery size improves the range of electric vehicles and going forward you won’t see cars that drive less than, call it 250 miles or so of range. And improving that range will remove the hindrance for greater adoption of electric vehicles.

Risks of a Greener Future

Decarbonization and the energy transition present significant societal benefits. There are also risks associated with this greener future. With more digitalization, power companies have to consider how to harden their infrastructure against cyber risks and cyberattacks. The biggest risk to the energy transition would be any slippage in global coordination or global commitment.

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Alaina Anderson, CFA, partner, is a portfolio manager and research analyst on William Blair’s Global Equity team. Anil Daka, CFA, is a global research analyst for William Blair Investment Management.

 

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