Dr. Hubert Danso, Chairman, Africa investor (Ai) Group
Every year of delayed green technology deployment costs the world an estimated $1.6 trillion in climate damages and lost opportunities—a stark reminder of the urgency to act.
The challenge of achieving net-zero targets amidst systemic climate finance gaps is one of the defining crises of our time. Green technologies hold the key to unlocking sustainable solutions. Yet, unlike digital technologies, which have adhered to Moore’s Law—doubling in performance per dollar approximately every two years—green technologies remain constrained by systemic barriers, including entrenched fossil fuel interests, fragmented markets, and regulatory inertia.
But what if we could go beyond simply aligning with sustainability goals? What if we could accelerate cost reductions in green technologies to ease inflationary pressures on consumers and industries worldwide? By integrating Institutional Investor-Public Partnerships (IIPPs), we unlock a scalable framework not just to achieve sustainability targets but also to actively reduce global inflationary pressures by slashing energy and industrial input costs.
This essay presents a groundbreaking thesis: IIPPs can accelerate, de-risk, and aggregate green investments to achieve exponential advancements in cost reductions and performance enhancements, redefining the trajectory of global green industrialization while addressing one of the world’s most pervasive economic challenges—inflation.
Sustainability Meets Cost Reduction: A Dual Mandate
Green technologies are pivotal not just for decarbonization but also for improving economic resilience. In a world grappling with persistent inflationary pressures driven by energy and resource costs, deploying scalable green technologies at reduced costs can function as a critical deflationary lever.
- Energy as a Deflationary Tool: Renewable energy and storage technologies have already demonstrated their ability to stabilize electricity prices and shield economies from volatile fossil fuel markets.
- Green Supply Chains: Industrial processes like hydrogen production, green steel manufacturing, and battery innovations are poised to replace costlier carbon-intensive alternatives, reducing input costs across global supply chains.
By systematically targeting cost reduction as a primary metric, IIPPs can serve a dual purpose: achieving environmental sustainability while driving widespread affordability, thereby addressing consumer-level inflation and industrial cost burdens.
The Cost Reduction Test: Measuring Impact Beyond Sustainability Goals
To ensure that green technologies achieve these dual objectives, we propose a sophisticated test:
The Consumer & Industrial Affordability Index (CIAI)
The CIAI assesses how IIPP-enabled green technology advancements impact both consumer and industrial affordability by evaluating the following metrics:
- Reduction in Consumer Energy Costs
- Baseline: Average cost of electricity per kWh for households pre- and post-renewable deployment.
- Test: A sustained 20% reduction in average energy costs within 5 years of large-scale renewable deployment.
2.Industrial Input Cost Compression
- Baseline: Cost per ton of green steel, green hydrogen, and other industrial inputs compared to carbon-intensive alternatives.
- Test: Green alternatives achieve price parity or a cost advantage over fossil-fuel-based inputs within 10 years, reducing the cost burden on industries like automotive, construction, and manufacturing.
3. Global Inflation Reduction
- Baseline: The contribution of energy and resource prices to global inflation indices pre- and post-green technology scaling.
- Test: A 10% reduction in energy-driven inflation metrics within a decade of scaled green deployments.
4. Rate of Cost Decline (Accelerated Moore’s Law)
- Baseline: Current trajectory of cost declines for key green technologies such as solar PV, wind, and battery storage.
- Test: Doubling time for cost reductions improves from 10 years (current rate) to under 5 years, surpassing Moore’s Law and significantly lowering barriers to adoption.
Analytical Examples: Cost Reduction as a Deflationary Lever
1. Solar PV Deployment: Consumer Savings at Scale
- Baseline Impact: Solar PV costs fell by 85% from 2010–2020, driving residential energy savings globally.
- IIPP Acceleration: By aggregating investments through vehicles like the African Green Infrastructure Investment Bank (AfGIIB), solar PV costs could fall another 40% by 2030. This would translate to household electricity savings of up to 25% in emerging markets, where energy affordability is most critical.
2. Green Hydrogen: Industrial Input Transformation
- Baseline Impact: Green hydrogen costs remain 2–3 times higher than gray hydrogen, limiting industrial adoption.
- IIPP Acceleration: AI-optimized infrastructure and modular hydrogen production hubs could achieve parity by 2030, enabling industries to replace fossil fuels and reduce operating costs by 10–15%.
3. EV Battery Manufacturing: Supply Chain Stabilization
- Baseline Impact: Lithium-ion battery costs fell by 97% from 1991–2023 but face bottlenecks from rising lithium and cobalt prices.
- IIPP Acceleration: Investments in green critical mineral processing within Africa, supported by IIPPs, could reduce material costs, stabilizing EV battery prices and accelerating affordability for global consumers.
Mathematical Model for Cost Reduction Acceleration
1. Redefining Moore’s Law for GreenTech
Traditional Moore’s Law focuses on performance per dollar, assuming a consistent cost reduction trajectory over time:
Where:
- Cost per unit of technology at time,
- Initial cost per unit,
- Doubling time for cost reductions (currently ~10 years for green tech).
2. Accelerating Cost Declines with IIPPs
Enhanced cost reduction via IIPPs can be modeled by integrating factors like:
- Risk reduction through blended finance and guarantees,
- Digital innovation optimizing deployment efficiency,
- Policy stability attracting long-term investments.
The new cost reduction model becomes where:
3. Quantifying Inflationary Impact
By reducing, the inflationary impact () of energy and industrial costs declines as:
If IIPPs accelerate cost declines by 30%, inflationary contributions from energy could drop by 10–15% globally.
Implications: Redefining Green Industrialization as a Deflationary Force
The ability to scale green technologies faster and more affordably has transformative implications for both sustainability and economic resilience. By adopting frameworks like the CIAI, policymakers and institutional investors can ensure that green technologies do not merely meet climate goals but also provide tangible economic relief to households and industries.
In this context, Institutional Investor-Public Partnerships represent a deflationary tool as much as they are a sustainability mechanism. By aligning mandates, aggregating investments, and leveraging AI-driven optimization, IIPPs can drive unprecedented cost reductions that alleviate inflationary pressures, stabilize economies, and accelerate the global energy transition.
The future of green industrialization is not just about sustainability—it’s about economic transformation. By targeting affordability as a core metric, we unlock a pathway to a net-zero, deflationary, and globally equitable future. Let us seize this moment to redefine what progress can mean.
