BCG highlights six key clean technologies in the energy transition agenda

Dec 05, 2022 by Energy Connects

Tina Zuzek-Arden, Managing Director and Partner; Karan Mistry, Partner; and Shelly Trench, Managing Director and Partner, Global Leader for Sustainability Strategy and Investment, Boston Consulting Group (BCG), examine how these technologies represent major market opportunities

image is BCG 6 Clean Tech

A recent BCG study estimates that the global total addressable market (TAM) for the six technologies, in prioritised sections of the value chain, could reach $72 trillion cumulatively through 2050.

With every news cycle, tackling the global climate crisis takes on greater urgency. Nations around the world are counting on emerging clean technologies to meet net-zero goals. This article highlights six that will help drive the energy transition, representing both existential imperatives and major market opportunities.

A recent BCG study estimates that the global total addressable market (TAM) for the six technologies, in prioritised sections of the value chain, could reach $72 trillion cumulatively through 2050.

Electric vehicles (EVs)

Of the six technologies, electric vehicles enjoy the largest global market opportunity. Established auto manufacturers are shifting investment from internal combustion engines to electrified powertrains, bolstered by increasing consumer adoption.

Meanwhile, technology startups are breaking new ground, for example in autonomous cars and smart, connected vehicles. The technology encompasses both consumer and commercial plug-in battery-electric vehicles, but passenger cars and light/medium-duty transportation offer the fastest-growing markets.

Key opportunity areas include: raw materials (especially the 10-fold increase in demand for battery minerals by 2040); battery and powertrain manufacturing (determining vehicle performance and price); OEM (representing ~60% of total value); and software development and after-sales services.

Clean steel
Increasingly, the future will belong to the lowest-carbon-intensity producers of steel – a sector that currently accounts for substantial, hard-to-abate carbon emissions.

Clean steel includes a range of emission-reducing interventions to improve efficiency, increase renewable energy use, upgrade or transform furnace technologies, and substitute low/no-carbon fuels and feedstocks. Traditional blast furnace produced steel can be decarbonised through accelerated deployment of CCUS technologies.

Leaders today are skilled at designing and running mini mills that can make clean steel using electric arc furnaces and direct reduced iron or scrap, and using renewable power sources to drive operations. Major opportunities include selling clean steel to support customers’ net-zero value chain goals, and developing new technologies.

Low-carbon hydrogen (H2)
Promising a host of net-zero energy applications ranging from low-emission fuel source to fertiliser creation, synfuel feedstock, and industrial processes, low-carbon hydrogen will be critical to meeting global climate goals.

Both green H2 (made with renewable energy and electrolysis) and blue H2 (produced from natural gas, leveraging CCUS) offer opportunities to players that can leverage R&D and economies of scale to quickly drive down costs.

As an emerging technology, H2’s uncertainty and required investment should be offset by significant market opportunities right along its value chain: OEMs; project development; transport and storage; and offtake.

Long-duration energy storage (LDES)

Electrochemical LDES encompasses multiple emerging storage technologies aimed at increasing the reliability and feasibility of intermittent renewable energy resources as suppliers to existing power grids. LDES technologies target a range of storage durations, from multiday to intra-season, effectively decoupling power and energy and representing a game-changing improvement over today’s Li-ion batteries.

The greatest market opportunity lies in the OEM segment of the value chain, with production of LDES battery packs, sub-components, and battery management software. Leaders must be able to manufacture these items efficiently, at scale.

Direct air capture (DAC)

Capturing carbon directly from the atmosphere complements emission-reduction technologies by creating quantifiable “negative emissions”. When combined with geological sequestration, DAC can remove carbon from the atmosphere almost permanently.

It will be of particular value in reducing the climate impact of hard-to-abate sectors. International agreements will be key to realising DAC’s climate and market promise; BCG estimates that its global market opportunity would increase fourfold—more than any of the other technologies—under the IEA’s NZE (versus its APS) scenario.

Advanced nuclear small modular reactors (SMRs)

SMRs offer zero-carbon power generation with lower costs and greater safety than traditional reactors. They can also provide industrial heat for clean steel production and hydrogen electrolysis. SMR leadership will depend on intellectual property and knowhow (the US is the global leader in SMR-related patents), as well as secure access to mined uranium and enrichment capacity.

To create sustainable competitive advantage, nations and companies should strategically target specific stages of the value chain for investment and growth. Decisions will depend on inherent geographic, historical, and resource strengths, as well as market size and growth projections.

Converting strategic bets into long-term success will demand diligent government attention to supply- and demand side factors. On the supply side, this means helping companies to be more competitive through investment, scale economies, and R&D. Creating a favourable demand environment, meanwhile, may include reducing or offsetting extra clean energy costs to the consumer, setting procurement targets to increase deployment volumes, facilitating access to capital, and removing project barriers.

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