Governments need to support early-stage investments in new energy transition technologies, since the key driver behind the shift is innovation, Macquarie Group’s CEO says.
The transition to sustainable forms of energy generation, away from fossil fuels, is being driven by technological innovation and governments need to back early-stage investments in these technologies to accelerate the move towards net zero, according to Shemara Wikramanayake, Chief Executive Officer of Macquarie Group.
“It is ultimately innovation that drives the solution,” Wikramanayake said in a fireside chat at the JANA Investment Advisers Annual Conference last week.
“We’ve been investing in the green space for two decades and I think we’ve invested $19 billion over that period.
“In the time we’ve been involved, we’ve seen … the cost of solar drop by 77 per cent, the cost of onshore wind has dropped 66 per cent and, basically, this is through innovation.
“The problem is the early investments are challenging because there’s very high risk and this is where governments have to come in to try and de-risk and create a framework to draw the funding for that.”
She pointed to the wind energy sector in the United Kingdom, where between 2015 and 2022, the strike price of offshore wind fell from £140 per megawatt-hour (MWh) to below £40 per MWh, which brought it well below the price of gas generation. It is seen as one of the greatest industrial cost reduction stories of recent decades.
“The UK, [is] a great example in terms of what they did in the wind sector by getting this Contract for Difference on offtake so that people came and bid … against each other to win these offtakes, but had to bid lower and lower prices,” she said.
“And that’s what drove the innovation; they underwrote the early-stage investing. So I think we do need that for it to happen.”
She emphasised that it isn’t just about innovation in solar and wind technologies, but about innovation in a broad range of sectors that all tie together to make the adjustment to a lower- carbon world.
Human beings are amazing; they will come up with [solutions]. It's trying to support them to make those early-stage bets is what's challenging
“At the moment, obviously solar and wind become, what we call, the default choice of rational actors onshore because they are the cheapest and fastest way to respond to the huge, increasing need for energy and electrification,” she said.
“But today, we need a lot of investment in areas like the grid, including in this country, because we’re having a much more distributed energy system around the world. We need investment in storage, so BESS (battery energy storage systems) projects, we’re doing a lot around Australia at the moment, and the world over.
“We need that, but we need solutions in transport as well. Evs (electric vehicles) in passenger vehicles is already taking off; it is now cheaper to run. But in commercial vehicles, it’s still challenging, the cost of the fleet.
“Then long transport, so shipping, aviation, sustainable aviation fuels, there’s a lot more technology and innovation needed to deliver these solutions. But human beings are amazing; they will come up with [solutions]. It’s trying to support them to make those early-stage bets is what’s challenging.”
US Backflip on Fossil Fuels
United States President Donald Trump has not been a proponent of the Paris Agreement, to say the least. He has taken a series of measures to promote the fossil fuel industry, roll back subsidies to renewable energy projects and block pollution initiatives since taking office in January 2025.
A detailed breakdown of all of the Trump administrations’ actions against clean energy can be found in the so-called Trump Tracker.
Macquarie is a large player in the sustainable investment sector and has invested in 109 transactions since 2015, of which it still owns 35.
Asked if the Trump administration’s antagonism towards sustainable energy would derail the transition, Wikramanayake answered that this hadn’t impacted the movement as much as is sometimes assumed.
The changes to the Inflation Reduction Act that happened through the One Big, Beautiful Bill were not as draconian as people expected, because a lot of the Republican states are leading in terms of these climate projects
“The US President is very anti offshore wind, but actually other forms [of renewable energy] are moving very fast and I think it’s partly because they can control federal land. And really, it’s only the offshore wind that’s on federal land. Most of the other projects are dealing with states and city councils,” she said.
“Also, the changes to the Inflation Reduction Act that happened through the One Big Beautiful Bill were not as draconian as people expected because a lot of the Republican states are leading in terms of these climate projects.
“And so the stock market actually went up on the day the Bill was passed because it was less onerous than expected. Investments are actually stepping up, even in the US … but each country has to have their own glide path.”
The Energy Transition is A Balancing Act
Wikramanayake acknowledged the concerns of previous speakers at the JANA Annual Conference, who pointed out greenhouse gas emissions in the atmosphere are going up dramatically and this will have negative implications for not only the current generation, but also future ones.
But she also said the war in Ukraine and the subsequent supply issues in energy provision, in particular gas from Russia, made it clear a transition can’t happen overnight.
“You have to do it in an orderly way because you’re trying to thread the needle between the climate needs, but also the availability of energy and [the] affordability. Initially, when the Paris goals were done, there was a lot of enthusiasm to move quickly, but then we had the Russian invasion of Ukraine, which caused energy availability and price issues in communities,” she said.
“And people started saying: ‘Oh, my goodness, we’re going too fast and my generation is paying a big price.’ So we have to do this in an orderly way.”
There's a lot more investing that we need to be doing across everything. It's not just energy, but also transport, it's agriculture, it's heat. Again, you can look at that as a challenge, but we look at it as opportunity
At the same time, she remained positive on the growth of the sector and pointed out total investments in clean energy assets were still going up.
“Even though we’ve had the pendulum swing, particularly in the US, back to fossil fuels and a lot of big global energy companies are trying to build their fossil fuel reserves, the fact is that investment in clean solutions … is going up,” she said.
“In 2022, it was about US$1 trillion. It’s been going up about US$100 million a year, running at about US$1.4 trillion a year now. But if we are going to meet the Paris goals, the IEA (International Energy Agency) is saying that’s going to have to go up nine per cent a year to 2035 to meet net zero by 2050.
“So there’s a lot more investing that we need to be doing across everything. It’s not just energy, but also transport, it’s agriculture, it’s heat. Again, you can look at that as a challenge, but we look at it as an opportunity.”
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