Gas currently accounts for slightly over one-fifth of global primary energy demand, and its share in the energy mix looks set to grow overall as coal use declines. Renewables will also increase their share in the energy mix, but forecasts typically concur that fossil fuels will meet 70-80% of global demand for energy for at least the next two decades. However, opinions differ widely over when and at what level energy demand will peak. There will also be significant regional variations in the use of gas and renewables, because of energy policy as well as demographic and wealth trends.
Given this complexity, investment in energy projects is intrinsically risky. Commodity and regulatory risk are the two exposures that most investment managers worry about, but there is a third – the risk of disruptive technological change – that often goes unconsidered.
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