Coming off the grid

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This year, we have watched in utter horror as hurricanes Harvey, Irma, Jose and Maria thrashed the Caribbean, the Gulf of Mexico and the southern United States. This hurricane season has had the highest number of storms since 2010 and the most accumulated cyclone energy since 2005. Damage from the hurricanes is now estimated to stand at US$186.7 billion!

But amid all of this destruction, flickers of hope emerge…

Late last week we learnt that Elon Musk, of Tesla, has been in conversation with the governor of Puerto Rico offering for Tesla to rebuild the island’s power grid with batteries and solar power. For Tesla, in addition to coming to the aid of an island in dire need of assistance, this provides a perfect platform to demonstrate its technological prowess.

The technology Tesla plans to use has already been deployed on a number of other smaller islands and according to Musk, there are no scalability issues. For example, the island of Ta’u in American Samoa is powered by a solar grid which can store enough electricity to power the entire island for three days without sun.

A Tesla-built Puerto Rico grid sounds like a brilliant option for the island and, with a promised 100 day turnaround, it couldn’t come quickly enough!

The rise of local renewable mini-grids or standalone grids has been a growing trend since 2016, spurred by falling solar technology costs, technological advances in battery storage capacity and the continued spread of innovative customer payment solutions. Standalone grids provide much-needed electrification to areas that are poorly accessible or that are far from established electric grid infrastructure. According to the IEA World Economic Outlook 2016, there are 1.185 billion people without access to electricity in the developing world, the majority of them in Africa. Mini-grids and standalone grids would be an energy efficient and affordable (from the consumer perspective) solution to this problem.

However, as with any disruptive technology, in order to scale up, it requires a regulatory regime that is fit for purpose and funding. Most regulatory regimes do not cater for the off-grid market and so it continues to operate in somewhat of a grey area. A more encompassing regulatory regime would pave the way for more market entrants. On the funding side, there have been some breakthroughs. Indeed, just yesterday M-Kopa Solar, a leader in the pay-as-you-go energy provision market, announced that it had secured commercial debt funding of US$80 million, proving that the off-grid electricity market can be financial viable. However, such announcements remain an exception, rather than the norm.

Perhaps Tesla’s involvement will spark a renewed interest in the off-grid market and will encourage greater investment…here’s hoping!

ChangeNOW!

image1 (4)This weekend your blogger went along to the inaugural ChangeNow! conference in Paris. The conference describes itself as one of the first international events on the topic of “innovations for good”. It focussed on the UN Sustainability Goals in the fields of energy, circular economy, healthcare, education, sustainable cities and tech for good.

A couple of key take-aways from the conference:

Energy

On the topic of energy, we heard from a variety of speakers, including Jerome Schmitt, Senior VP Innovation and Energy Efficiency at TOTAL Gas and Power, Dr Michael Dorsey, full member at the Club of Rome, global energy expert and co-founder and principal at Around the Corner Capital, and energy industry disruptors Meteoswift, Echy and Zephyr Solar. A number of key themes emerged.

Firstly, Jerome Schmitt discussed the important role that traditional oil and gas companies should play in the energy transition. He acknowledged that companies such as TOTAL are not safe from renewable energy and clean tech distruptors. However, the cost and technology race in solar and wind power over the last few years has actually resulted in many start-up renewable energy companies going bankrupt. Schmitt believes that oil and gas companies should partner with renewable energy companies and provide the necessary funding to enable them to scale-up. For example, since 2011, TOTAL has owned a majority stake in Sunpower, a solar energy company.

Secondly, both Jerome Schmitt and Michael Dorsey discussed the trend of decentralisation in the energy supply industry with the rise of microgrids and the use of blockchain technology to permit peer-to-peer energy supply. However, Dr Dorsey contended that large utility companies may drag down such innovative progress by preventing third parties from supplying existing grids or by lobbying governments to introduce restrictive regulations.

Thirdly, one other way that the energy industry may evolve is through the development of innovative non-electricity reliant solutions. For example, Echy has developed technology to harness sunlight to light-up buildings with natural daylight. The technology results in electricity savings of approximately 68% as Echy lighting does not use electricity. Many of the speakers predicted that more and more such non-electricity reliant solutions will come to the fore in the next 5-10 years.

Tech for good

The theme of tech for good was prevalent throughout the entire conference. Ynse de Boer, Managing Director at Accenture, delivered the introductory talk on this topic.

De Boer proposed four ways to ensure that technology is used as a force for good. Firstly, companies using technological solutions must ensure that their customers are protected, supported and educated about how their data and information are used. Secondly, businesses and governments need to anticipate that the jobs of the future will not be the same as the jobs of today but instead of using technology to eradicate jobs, it should be used to complement them, improving productivity. Thirdly, technology should be directed towards delivering innovative products and services and used to solve largescale social issues. Finally, technology should be used to create transparent and inclusive value chains, facilitated through the use of mobile and digital technology.

According to de Boer, governments, business and not-for-profit organisations all need to work together to ensure that technology is used efficiently and always as a force for good.

Cleaning the oceans

The session on ocean clean-up introduced three different companies that are working on cleaning up our oceans – TheSeaCleaners, Adidas and Plastic Odyssey.

TheSeaCleaners work on removing rubbish from seas, harbours and oceans. Since 2002, their team has removed over 5.1 million litres of rubbish and they are continuing to gain momentum.

Adidas has recently teamed up with Parley to develop a range of trainers made from discarded plastic. According to Adidas, each pair of these trainers prevents approximately 11 plastic bottles from entering the oceans.

Finally, Plastic Odyssey are working to create innovative, small scale, local solutions to plastic waste. They are developing a boat that will spend three years travelling between Africa, Asia and South America, fuelled exclusively by plastic collected from the oceans and converted into fuel. The boat will stop off at numerous locations to work with local communities to understand their recycling needs and develop unique solutions.

The conference also included sessions on the future of agriculture, healthcare and the creation of sustainable cities.

It was heartening to see such enthusiasm and creative buzz for positive impact projects and issues. Governments and business can no longer ignore the need for purposeful investment and regulatory structures that are favourable to the social entrepreneur. The trend has started and it won’t be long before it really takes off! Are you ready?

Clean Britannia

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It’s been a busy week for the British clean energy industry.

On Monday, the business secretary, Greg Clark, announced the launch of phase one of a £246 million four-year Government investment in revolutionising the UK energy grid through the development and improvement of battery technology and storage. Phase one includes the creation of a £45 million “Battery Institute” competition to establish a centre for research into making battery technology more affordable and accessible. One of the longterm goals is the creation of giant battery facilities around the National Grid which would store excess wind and solar energy to be deployed at times of peak energy demand.

The investment, known as the “Faraday Challenge”, is part of the Government’s Industrial Strategy. It is split into three streams of research, innovation and scale-up and is being seen as a “game-changer” for the UK, enabling the UK to be a world leader in clean energy and transportation.

Responding to the announcement, Professor Philip Nelson, Chief Executive of the Engineering and Physical Sciences Research Council (EPSRC), said: “Batteries will form a cornerstone of a low carbon economy, whether in cars, aircraft, consumer electronics, district or grid storage. To deliver the UK’s low carbon economy we must consolidate and grow our capabilities in novel battery technology.”

Another aspect of the announcement is the introduction of new rules over the next year to enable households with solar panels to generate and store their own electricity with the help of new battery technology and to sell this electricity back to the National Grid. The rules would move away from the traditional tariff model which solar panel owners currently have to pay to import electricity from or export electricity to the National Grid. The new rules would also reduce energy costs for people and businesses that agree to use less electricity during peak times. Overall, the intention is to provide for greater flexibility in the electricity system. The Government and Energy regulator Ofgem estimate that consumers could save between £17 billion and £40 billion by 2050.

These developments will be facilitated by the roll-out of smart meters and the development and installation of smart gadgets and appliances, enabling a washing machine to be turned on by the internet during a period of high energy supply or a freezer being turned off for a few minutes to regulate demand. Tech companies, such as Google and Amazon, are already eyeing up opportunities in this new market to act as energy suppliers on the back of Ofgem agreeing to relax licencing and data sharing rules. This would give such companies direct control over appliances in a customer’s home, which has raised some serious concerns over privacy and security.

In other developments, earlier this week, the world’s first floating wind farm began trials off the coast of Scotland. Using revolutionary technology, this trial if successful, would enable wind energy to be generated in waters that are too deep for bottom-standing turbines, opening a new frontier for wind energy. Although currently much more expensive that traditional wind turbines, producers are hopeful that the cost of floating turbines will fall, just as it has for traditional turbines.

 

Finally, the UK has made a bold announcement to ban the sale of new petrol and diesel cars from 2040, following on from a similar announcement made by France earlier this month. Perhaps somewhat fortuitously, this announcement was followed by BMW announcing that it would start developing a fully electric Mini car at its plant in Oxford, UK.

After years of ignoring clean energy and environmental issues, it looks like the UK Government is finally starting to sit up and take notice. This week’s developments are an excellent step forward. However, much more investment and innovation is still needed for the UK to meet its 2030 Agenda commitments.

 

 

G20 2017 Climate and Energy Action Plan

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Among the many topics discussed at this year’s G20 Summit, was climate and energy. The summit culminated in the issue of a joint declaration summarising the agreements reached and the plans adopted by the G20 leaders. With respect to climate and energy, the declaration was decidedly split between the “G19” and the US, acknowledging the US’ desire to pull out of the Paris Agreement and its continued support for the use of fossil fuels, albeit “more cleanly and efficiently”.

As part of the summit, the G20 leaders also adopted the G20 Hamburg Climate and Energy Action Plan for Growth. The Action Plan  identifies six key areas of development, which include developing strategies for long-term low greenhouse gas emissions; creating a reliable and secure framework for the transition of the energy sector, which involves the promotion of energy efficiency and the scaling up of renewable and other sustainable sources of energy; realising access to modern and sustainable energy services for all; and aligning finance flows.

Although only the last-mentioned area of development specifically refers to finance, a recurring theme throughout the whole Action Plan is the need to secure more private and public investment. And this seems to be one of the biggest hurdles to meeting the Paris Agreement targets and to transitioning to clean energy.

The Action Plan identifies that significant levels of investment, both private and public, will be required to modernise infrastructure in line with the Action Plan’s goals and to continue the scaling up of renewable and sustainable energy. In addition to achieving climate and energy goals, such investment is likely to also generate local growth, employment and help with poverty eradication. Addressing several Sustainable Development Goals at the same time!

The Action Plan specifically notes the role played to date by Multilateral Development Banks (MDBs) in mobilising “climate finance” and calls on them to further enhance their involvement. In 2015, the following MDBs, the African Development Bank, the Asian Development Bank, the European Bank of Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank and the World Bank Group, issued a joint statement at COP21 committing to work together to “substantially increase climate investments from public and private sectors to support”. This existing commitment is applauded but the Action Plan further encourages the MDBs to cooperate and coordinate efforts to finance ambitious energy and climate adaptation and mitigation projects and new technologies, and to identify how the private finance sector can assist with meeting the 2030 Agenda objectives and the Paris Agreement goals.

The investment question has also be considered in detail in the UN Green Finance Report published on 14 July 2017 by the UN Environment Programme (UNEP). The report identifies that the G20 in particular has made significant progress in mobilising private and public capital for climate and clean energy developments and initiatives. An example, is the recent joint commitment by eleven global banks to develop tools for assessing climate-related financial risks and opportunities; and to make more disclosures in relation to climate investments, making the sector more transparent. The banks are ANZ, Barclays, Bradesco, Citi, Itaú, National Australia Bank, Royal Bank of Canada, Santander, Standard Chartered, TD Bank Group, and UBS.

Commenting on the new Green Finance Report, the Executive Director of UNEP, Erik Solheim said: “This new research […] shows encouraging progress in this regard. From a record number of new green finance measures to ambitious plans for green finance hubs, we are seeing the smart money move to green financing.” He further added: “The challenge now is to rapidly increase capital flows to investments that will support our sustainable development objectives and create commercially viable green businesses for decades to come.”

The challenge has been set and the rewards are great economically, environmentally and socially. So let’s hope the investment starts to flow in the right direction!

BF(O)G – big friendly oil & gas

oil-rig-2191711_1920I have always believed that a clean energy revolution can only be achieved with support and buy-in from the big oil and gas companies. It seems that many such companies are now starting to agree.

A few years ago, 10 major oil and gas companies, between them responsible for over 20% of world oil and gas production, came together to form the Oil and Gas Climate Initiative (OGCI), an “initiative which aims to show sector leadership in the response to climate change“. The ten companies are BP, Total, Statoil, CNPC, eni, Pemex, Reliance Industries, Saudi Aramco and Shell.

The initiative’s mission is to work together to achieve notable reductions in greenhouse gas emissions from the oil and gas industry, while still meeting world energy demand. At present, the OGCI is focussing its efforts on three working groups – Low Emissions Roadmap, Carbon Capture, Utilisation and Storage, and Managing Methane Emissions.

It has also prepared an interesting matrix which maps actions identified by the IEA as having the potential to reduce greenhouse gas emissions sufficiently by 2040 to remain on track for a 2°C scenario against the oil and gas industry’s ability to influence such actions. This matrix is reproduced below (source: OGCI):

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In November 2016, the companies behind the OGCI finally put their money where their mouth is and set up OGCI Climate Investments, a partnership with a committed US$1 billion of funding to be invested over the next decade in innovative technologies and start-ups which propose solutions to substantially reducing greenhouse gas emissions. The partnership will operate out of Imperial College London’s White City Campus, bringing it into direct contact with the Better Futures initiative recently launched by the Mayor of London (see my blog on this). OGCI Climate Investments appointed its first CEO, Dr. Pratima Rangarajan, in May 2017 which hopefully means that it will now come into full operational mode.

I hope that both the initiative and the investment partnership will actively push ahead with their stated aims and that we will begin to see the fruits of their labour in the not too distant future. I also hope that other oil and gas companies will join their cause.

 

 

Big Business going Green

solar-energy-2157212_1920Big businesses often get lambasted for ignoring their impacts on the environment.

However, with climate change and energy efficiency issues currently high on the agenda, a growing number of big businesses are beginning to take impressive steps towards going “green” through the RE100 initiative, “a collaborative, global initiative of influential businesses committed to 100% renewable electricity, working to massively increase demand for – and delivery of – renewable energy“. So far the initiative has 96 signatories and these companies are coming up with some innovative solutions to meet the goal of 100% renewable electricity generation.

For example…

Last week, Goldman Sachs, the global investment bank, signed its first power purchase agreement with a subsidiary of NextEra Energy Resources, LLC which will result in the development of a 68 MW wind farm in Pennsylvania. The power purchased by Goldman Sachs pursuant to this agreement would cover its electricity needs in North America. This heralds a positive step towards Goldman Sachs’ aim of using 100% renewable energy for its global electricity needs. It also shows the bank’s desire to actively contribute to the creation of new clean energy generation. The project is expected to come online in 2019 and will result in the reduction of more than 200,000 tons of greenhouse gas emissions per annum once operational.

In March 2017, Anheuser-Busch InBev, the beer giant, made a commitment to acquire all of its purchased electricity from renewable sources by 2025, amounting to a shift of 6 tWh of electricity annually to renewable sources. The company estimates that this would cut its operational carbon footprint by 30%, which is the equivalent of taking 500,000 cars off the road. It intends to meet this commitment by investing in some renewable electricity, such as solar panels, onsite, and from a majority of direct power purchase agreements with renewable energy generators.

Since 2012, the LEGO Group has invested approximately US$ 890 million in offshore wind power and in May 2017, it met its target of acquiring 100% of its energy from renewable sources.

Finally, Wal-Mart Stores Inc., the global retailer, has made two commitments to be met by the end of 2020 in line with its aim of achieving 100% energy from renewable sources. Firstly, it seeks to procure 7 billion kWh of renewable energy globally by the end of 2020 and secondly, it is working towards reducing the energy per square foot intensity required to power its buildings by 20% compared to 2010. The company believes it can achieve these targets through long-term power purchase agreements which it has always found to be an effective way of shifting towards renewable power.

And something I was interested to learn is that Apple already generates 93% of its electricity worldwide from renewable sources, with operations in 23 countries being 100% run on renewable power. Great work!

 

Record-breaking Renewables

italy-2098343_1920On 7 June 2017, the UK generated over 50% of its electricity from renewable energy for the first time ever. This follows on from the UK going a full 24 hours without any power generated from coal on 21 April 2017. These are landmark moments indeed! However, the UK still has a long way to go in renewables as it is lagging behind most international benchmarks. In 2015, only 8.2% of UK energy was generated from renewable sources. Furthermore, the UK now has plans to scrap its target of reaching 15% renewable energy generation by 2020 as part of Brexit.

The UK is not the only country that has recently been setting clean energy records. In early May 2017, Germany broke all records with renewable energy sources powering 85% of the country’s energy demands. On 13 May 2017, California generated just over 80% of its energy from renewable sources, with approximately 67% coming from solar power.

The EU is seeking to increase its power generation from renewables to 20% across all countries by 2020, as part of Europe 2020, the EU’s 10 year jobs and growth strategy. By 2015, it had reached 17% with several countries already meeting and exceeding the set thresholds. However, as the below diagram shows, there are still many countries that are falling behind.

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Source: Eurostat

In 2015, the countries with the highest share of renewable energy generation in the EU were Sweden, with 53.9%; Finland, with 39.3%; Latvia, with 37.6%, Austria, with 33% and Denmark with 30.8%. The countries with the lowest share were Luxembourg, Malta, the Netherlands, Belgium and the UK.

However, with renewable energy costs steadily tumbling, we are likely to see an increasing share of energy generation coming from renewable sources as more renewable capacity is installed. Indeed, a recent report from the UN Environment Programme and Bloomberg New Energy Finance shows that 139 gigawatts of renewable capacity was built in 2016, an 8% increase on the year before, despite investment falling by 23%. The report also shows that the 2016 gigawatt figure was equivalent to 55% of all the generating capacity added globally in 2016, the highest proportion in any year to date. So for the moment, we are getting more renewable energy capacity for less money. Let’s hope this trend continues…but without investors losing appetite for renewables!

 

When small means big: bringing clean energy mainstream

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Yesterday, I attended a conference at the Cambridge Judge Business School on the topic of clean energy. The conference was entitled “When small means big: bringing clean energy mainstream”.

The conference was kicked off with opening remarks from Dr David Reiner and proceeded with a panel discussion. The panel consisted of Dan Barry, Global Head of Environmental Products, BP; Giovanni Terranova, Co-Founder and Managing Partner, Bluefield Partners; Peter Bance, CEO of Origami Energy; Martin Schoenberg, Energy Efficiency Finance Consultant, UN Environment Finance Initiative; and Pamela Taylor, Partner Enforcement and Innovation Link, Ofgem. The closing remarks were delivered by Ilian Iliev, CEO of EcoMachines Ventures.

The main focus of the discussions was what role clean energy would play in our electricity mix in the future and how to ensure that there is a supportive regulatory framework and sufficient finance to encourage the proliferation of clean energy supply.

A few key themes emerged from the discussions:

1) Unpredictability:

Every speaker alluded to the fact that we are notoriously bad at forecasting. For example, oil price fluctuations have, in the last few years, caught many off guard and no-one expected the cost of renewable energy to fall so dramatically. Another more specific example provided by Pamela Taylor was the projection made in 2012 for the uptake of solar photovoltaic in the UK. In 2012, it was estimated that it would take 18 years to reach 6GW of generation capacity. In reality, it only took four years to reach 10GW!

The good news is that, based on the panel’s experience, regulators (in the UK), companies and financiers are aware of this unpredictability, especially in relation to clean energy technology, and are responding.

Ofgem has launched a new initiative called the “Innovation Link” which advises new and alternative energy companies on their regulatory requirements and provides a service called a regulatory “sandbox” which enables new products and technologies to be trialled with fewer regulatory barriers. By March 2017, Ofgem had received 29 sandbox applications and over half related to local energy models. The intention behind the Innovation Link, and especially the regulatory sandbox, is to enable regulators and companies to work together to develop a stable and supportive regulatory environment for clean energy.

The BP Environmental Products team is responding to the unpredictability challenge by researching and helping invest in and develop a broad spectrum of new energy technologies, without, at this stage, committing to any one in particular. BP’s logic is that it is still unclear which technologies will be sufficiently stable and scalable to engender a systemic shift away from oil and gas.

2) Investment:

Giovanni Terranova of Bluefield Partners outlined the ideal investment framework for energy technology – a stable regulatory regime and technology which is both proven and scalable. This prompted me to ask, what about funding for early stage technologies where there is no established regulatory framework (Ofgem sandbox companies, for example)?

According to Giovanni, there is plenty of appetite from PE houses, VCs, hedge funds and family offices for investment in early stage clean energy technology. The incentive is obtaining first mover advantage in respect of a particular product. However, the downside is a high cost of capital. But, just like the solar and wind power industries, costs of capital will come down as the technology becomes more stable and better researched.

However, in his concluding remarks, Ilian Iliev lamented the lack of, especially, VC funding in clean energy. He even provided anecdotal evidence of his company playing down the clean energy aspects of certain products they invested in. At the same time, Ilian noted that project finance and corporate finance in clean energy was steadily rising. Perhaps therefore the model adopted by BP’s Environmental Products team is the most effective at providing funding for early stage clean energy technology.

3) Blockchain and other technology innovations in energy:

The use of blockchain technology in the energy sector was mentioned a number of times.

BP predicts that blockchain technology will enable real-time peer-to-peer energy transactions. Peter Bance of Origami noted that blockchain can be used to generate audit trails.

The panel also discussed potential future technologies that could assist the clean power industry, from an app which enables a consumer with solar panels on their roof to buy and sell energy from the main grid to the use of API technology to prevent excess demand failures.

The conference raised many questions about the future of clean energy but what was clear is that whatever form it takes, clean energy is already a substantial component of worldwide energy generation and its impact is only going to grow.