Opportunities Flashcards
What is the immediate opportunity that people think of as an opportunity in the energy transition?
there are several opportunities to make transportation more efficient, accessible, and sustainable that are immediately actionable. For example, multiple types of electric vehicles can effectively compete today against traditional transportation technology from a total cost of ownership perspective. The resulting consumer demand is presenting several investment opportunities within energy transition and transportation for sophisticated investors to earn attractive risk-adjusted returns.
Where is the opportunity in the rail mode of transportation?
As another example, rail transportation continues to be one of the most efficient forms of transportation for both passengers and freight, but often suffers from long dwell times and delays, prompting many users to revert to higher emitting transportation solutions that rely on the U.S. road system. However, innovations in telematics, scheduling systems, and more connected freight technologies have been improving on-time performance, which also improves sustainability as rail is one of the most environmentally friendly ways to move the greatest number of people per kilometer and the most tons of freight per kilometer.
Where is the opportunity in the maritime sector?
The maritime sector is also presenting attractive investment opportunities with multiple alternative fuels being implemented to reduce carbon emissions. For example, we are seeing increasing demand for LNG, bio-LNG, methanol, ammonia, and hydrogen as many vessel operators consider and implement alternatives to heavy fuel oil. Each alternative fuel source has its own risk profile, but early-stage investment is seeding the ground for further development and implementation. Similarly, the vessels themselves are incorporating new features such as air lubricating systems, wind, and solar technologies to improve efficiency.
Which types of transit infrastructure are doing well in terms of efficiency, low-carbon goals?
In order to assess how well different types of transit infrastructure are performing towards the objective of improving overall efficiency and making progress towards low-carbon goals, it is important to consider how and where the transportation equipment in each use case is sourcing the energy required to refuel on mission-compliant time frames.
Significant renewable generation and battery storage investment and development has, and will continue to, enable the electrification of the transportation sector. Solar energy is a market that has performed well over the last 10-15 years with considerable worldwide project development. This is due to major cost reductions in photovoltaic modules, hardware, and inverters where the market has seen 60-80% reductions over the last decade alone. We are also seeing wind energy as another attractive renewable energy source with land and offshore wind farms gaining momentum and following a similar path to solar from a levelized cost of electricity perspective. Transportation asset classes that are able to electrify or ultimately source fuel from renewable generation are most likely to meet carbon reduction goals.
What other infrastructure, working in conjunction with transit infrastructure, needs improvement?
An area that is often neglected is the infrastructure required to properly dispose of the waste created from new transport technologies. The immediate need will be battery recycling and in particular, the ability to safely contain and dispose of the millions of tons of lithium that has been, and will be, a core input of the battery production required to support the electrification of our transportation system. There are several innovative companies developing processes and technologies to mitigate the waste created by new propulsion technologies, but they tend to get less attention than the ones focusing on the powertrain, vehicle design and fueling infrastructure.
What’s the outlook for transit infrastructure over the next year or so? Where do we go from here?
In the near-term, electric vehicles will continue to gain popularity as pricing for components fall and competition increases. Charging infrastructure will expand significantly, further bolstering adoption. Certain pockets of alternative fuels such as sustainable aviation fuel will experience increased supply, but the volumes necessary to replace conventional fuels are beyond the scope of a short-term, annual outlook. Alternative sustainable fuels, such as ammonia and hydrogen, will continue to be tested in small-scale applications, but will require longer term planning and investment horizons to evolve to the level of broad-based adoption.
Automation will continue to be developed with cargo applications likely leading the way given the safety and redundancy testing required of passenger vehicles. Small-scale roll outs of automated cargo vehicles in defined areas will continue to show operational functionality and become more mainstream.
