Renewable energy

Sustain a Future’s 2017 Review

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design-2711676_19202017 was a year when sustainability, climate change and emissions reductions came to the fore on both private and public agendas. And so as we tumble towards 2018, I would like to do a run-down of the year’s developments that are helping to sustain a future.

Paris Agreement

One of the biggest developments early in 2017 was President Trump’s decision to pull out of the Paris Agreement (see blog). However, this only served to galvanise worldwide support for the agreement and as of today, 172 out of 197 countries have ratified it. The President’s actions also gave birth to the “We Are Still In” movement of over 2700 US companies, cities and states, together representing $6.2 trillion of the US economy, coming together to pledge allegiance to the Paris Agreement goals and ensure that America abides by its commitments, even when it withdraws from the agreement. The US withdrawal has also opened the door for Emmanuel Macron to become a leading voice in the fight against climate change, as evidenced at the One Planet Summit this December.

Electric vehicles

2017 also saw a reassessment of forecasts relating to electric vehicles. In a report published in July, Bloomberg New Energy Finance stated that it estimates that by 2040, 54% of new car sales and 33% of the global car fleet will be electric (see blog), a much more bullish forecast than it had issued just a year before. Added to this, a number of countries and car companies announced the ban or phase out of petrol-only vehicles. For example, Volvo announced that it would be going all-electric with every car in its range to have an electric train by 2019 and the UK and France announced a ban on the sale of new petrol and diesel cars from 2040.

Renewable power generation

Records were set in renewable energy generation in 2017. In the UK, low-carbon energy sources made up 52% of the energy mix throughout the year, making 2017 the “greenest” year on record for the UK. The country also succeeded in having a full 24 hours of coal-free power generation in May 2017 (see blog). Furthermore, in October 2017, wind power provided nearly a quarter of all energy generation in Europe as a whole. These records have been assisted by the continued falling costs of solar and wind power technology and renewed investment in renewable energy infrastructure. For example, earlier this year the world’s first floating wind farm came into operation offshore Scotland, operated by Statoil.

Business initiatives 

On the business side, the RE100 group of companies committed to 100% renewable power (see blog) grew again this year to 116 members including Google, Apple, Unilever,  Walmart, ABInv Bev…to name but a few! These huge, multinational companies have each set the goal of obtaining 100% of their electricity from renewable sources within the next decade or so. Traditional oil and gas companies have also embarked on the energy transition journey. Shell now commits $1 billion annually to investments in clean energy. BP is committed to a lower-carbon future with a move towards greater investments in gas and carbon capture and storage technology. Both companies are also members of the Oil and Gas Climate Initiative (see blog), which includes the world’s biggest oil and gas companies. These companies have 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.

Plastic pollution

2017 also witnessed the first UN Ocean Conference, which highlighted the plight of our oceans due to growing plastic pollution and climate change (see blog). The Ocean Conference raised $5.24 billion in commitments to protect the oceans and created a Call for Action which affirmed the signatories’ “strong commitment to conserve and sustainably use our oceans, seas and marine resources for sustainable development”.  Greater awareness of the dangers of plastic pollution have also resulted in individual action to fight plastic pollution, including the Ocean Cleanup whose plastic waste collection system aims to remove half of plastic waste in the Great Pacific Garbage Patch in five years; Adidas teaming up with Parley to develop trainers out of plastic and Plastic Odyssey which has developed a boat that can be powered by plastic.

A look to the future…

So what are the predictions for 2018? I think that the key themes will be:

  • a broader conversation about peak oil, but due to falling demand rather than supply;
  • the role of gas in the future energy mix;
  • the use of blockchain to facilitate peer to peer energy transactions;
  • the rise of electric vehicle alternatives, such as the hydrogen motor; and
  • more innovative uses of existing technologies – such as the solar panelled motorway in China that intends to charge cars as they drive using wireless technology.

It’s been an eventful year and so for now, I wish you all a very happy and prosperous New Year!

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!

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!

Big Business going Green

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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

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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.

 

“We’ll always have Paris”

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IMG_2427a…So goes the iconic phrase from the end of Casablanca. However, on 1 June 2017, President Donald Trump announced the US’ withdrawal from the widely respected Paris Agreement on climate change. What implications could this have for the agreement’s success? Unlike Ilsa and Rick from Casablanca, could it be that we will not always have Paris?

The Paris Agreement, adopted on 12 December 2015 and, as of today, ratified by 147 out of 197 signatories, is a commitment towards a sustainable, low carbon future. Its key aims are to curb global warming to 2 degrees Celsius above pre-industrial levels and to equip countries to deal with the consequences of climate change.

According to President Trump, the agreement is at odds with his “America First” mantra as complying with its terms could result in an apparent loss of 2.7 million US jobs. However, President Trump’s decision, somewhat counter-intuitively, may have actually galvanised support for the Paris Agreement around the world and given it an even greater impetus.

In Europe: Immediately on the back of President Trump’s announcement, Italy, Germany and France issued a joint statement reiterating these countries’ commitment to the Paris Agreement, stating that “We deem the momentum generated in Paris in December 2015 irreversible and we firmly believe that the Paris Agreement cannot be renegotiated, since it is a vital instrument for our planet, societies and economies“.

In America: Tesla’s Elon Musk and Walt Disney’s Bob Iger have announced their intentions to resign from White House advisory councils. And even more impressively, Michael Bloomberg is now spearheading the creation of a coalition of thirty American cities, three American states, and over 100 American companies which pledges to uphold America’s obligations under the Paris Agreement and even attempt to replace it as a signatory, once America fully withdraws. The coalition is currently in negotiations with the UN to be accepted as a signatory entity. This blog will follow the developments of this coalition.

In China: China also made it clear at the recent EU-China summit in Brussels that it considered President Trump’s actions to be an error. Although the summit was expected to produce a formal statement of cooperation on climate change between the EU and China, disagreements over trade intervened. Nevertheless, China has proven that it has an appetite for renewable energy with US$102.9 billion worth of investments into renewable energy in 2015* (however, falling to US$78.3 billion in 2016*) and with its Longyangxia Dam Solar Park becoming the world’s largest solar farm earlier this year. Here’s hoping therefore, that a formal cooperation statement between the EU and China will be forthcoming in the not too distant future…let’s watch this space.

In conclusion: President Trump’s withdrawal from the Paris Agreement does inevitably deal a blow to its ambitions. However, signatories and stakeholders around the world do not seem phased by his actions and indeed seem to have used his stance as a uniting counter-point. So yes at this stage, I think it is fair to conclude that we will always have Paris and in the words of Emmanuel Macron, there is substantial international commitment to “make the planet great again“.