Clean energy

BF(O)G – big friendly oil & gas

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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.

 

 

“We’ll always have Paris”…continued

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IMG_2427aIn my original post about Trump’s withdrawal from the Paris Agreement, I discussed Michael Bloomberg’s efforts to replace the outgoing USA with a new signatory consisting of a coalition of American states, cities and companies. Positive steps have now been taken in this direction.

The coalition has issued an open letter entitled “We are still in“, pledging allegiance to the Paris Agreement. It now boasts over 1400 signatures.

During a G-7 environment meeting in Bologna, Italy earlier this week, Patricia Espinosa, executive secretary of the United Nations Framework Convention on Climate Change, announced that she will work towards enabling regions, cities and other sub-national players to join the Paris Agreement officially.  It is still unclear how this would work in practice, but the political will is there to ensure that even if America withdraws, the efforts and contributions being made by its states, cities and companies are not ignored.

In a bold move on 6 June, Hawaii passed legislation affirming its dedication to the Paris Agreement. It is the first state to officially confirm its position and hopefully, this will pave the way for other states to join.

The G-7 meeting concluded with the issue of a communique signed by all ministers, other than the US (whose representative only attended one session of the two day event). This communique reaffirmed international commitment to the Paris Agreement and also addressed other sustainability issues, including ocean pollution, energy efficiency and the need for increased funding to assist with reaching the sustainability goals.

 

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.