12 JAN 2017
Market competition the best model for clean-tech innovation
Marie-José Nadeau, Honorary Chair of the World Energy Council
More than two years on from the ambitious and forward-looking COP 21 agreement in Paris, the need for effective government and business strategies to implement the commitments is growing stronger.
Indeed, the global community, and more specifically individual governments and corporations, must be encouraged to redouble their efforts to decarbonise their economies, to focus on further developing their Nationally Determined Contributions (NDC) and to implement them. Government and business strategies go hand-in-hand and both have a role to play in reducing the Green House Gas (GHG) emissions that contribute to global warming. The stakes are high and each sector needs to play an active role. Individual governments should not wait for new global agreements, and corporations should not wait for signals from governments.
According to the latest edition of World Energy Scenarios, global demand for electricity will double by 2060. Meeting this demand with cleaner energy sources will require substantial infrastructure investments and systems integration to deliver benefits to both consumers and the environment.
Fortunately, World Energy Scenarios says that much of this growth will be supplied by non-fossil energy sources such as solar and wind, driven by the steep reductions in the cost of renewable technology. Solar and wind energy accounted for only 4% of power generation in 2014, but by 2060 it could represent between 20% and 39%. This is a very wide range and the final outcome will depend on the decisions taken by governments and corporations over the coming decades.
While lifestyles and economies demand more energy, efficiency gains will keep consumption growth moderate. World Energy Scenarios suggests that the optimum results will come from those societies that allow a competitive economy shaped by market mechanisms that allow technological innovation to thrive. In this scenario, the continued penetration of digital technologies leads to new markets across industries, driving strong productivity gains and strong economic growth. Consumers, not governments, are expected to drive the penetration of both renewables and natural gas. For their part, governments will support the transition by promoting the creation of market structures that result in liquid power markets and increased distributed energy backed by the rising liquid natural gas (LNG) trade.
These are, of course, scenarios; they are not forecasts. The future will be determined by choices made by governments and corporations. The key tools for enabling change are state directives and markets. All states have a mixture of both. Even strong market economies like the USA have a wide range of regulations — for example, anti-trust policies and environmental standards.
In the current debate on the environmental and social factors shaping energy policy, there is a clear difference between those who take a socio-political perspective and those who see choice as predominantly a techno-economic matter. Each perspective includes two very distinct and coherent bodies of tools. One focuses on taxes and subsidies and on the state’s role in research, regulation, education, national planning, state-run companies and public investment. In contrast, the markets-focused perspective is concerned with competition, corporate vision and planning, private investment in R&D, innovation and training. A set of public-private enterprises is emerging, but such organisations remain limited. The important point is that governments and corporations face choices. With so much at stake, not making a choice is not an option.
Fortunately, the UAE is showing leadership with a range of policies as outlined in its NDC contribution. Abu Dhabi Sustainability Week from January 12-21 will be an opportunity for other countries and corporations to showcase their commitments.
13 JAN 2017
Seva Karpauskaite Time to Accelerate Innovation and Action
As this year’s winner of Masdar’s Engage Global Competition, I am excited to have this unique opportunity to attend thelargest gathering on sustainability in the Middle East as a guest blogger and social media influencer. During Abu Dhabi Sustainability Week (ADSW), I look forward to participating in and covering a series of exciting events, exhibitions and conferences, including the Global Action Day, the World Future Energy Summit, the International Water Summit and, of course, a visit to Masdar City.
I entered the contest because I am passionate about sustainability and climate. I come from a small country, Lithuania, that is vulnerable to climate change’s impacts. After I finish my master’s, my goal is to become an advocate for sustainable development and environmental protection by making the business case for clean technologies. Studying Energy, Resources and Environment at SAIS, Johns Hopkins University has enabled me to hone my theoretical knowledge on diverse energy and environmental issues. To that end, diving into ADSW will integrate me within the global community as it debates and addresses the most pressing issues related to climate change, at a time of uncertainty in the global energy landscape.
Here are the facts: there are two certainties regarding the phenomenon of climate change. First, the science makes clear that it has already started - and, indeed, it is mind-boggling. One of my goals during ADSW is to highlight the borderless and multidimensional nature of this complex issue. I strongly believe that all of us need to reframe and broaden our understanding of climate change.
While we can clearly grasp the science behind global warming, I cannot emphasize enough that it is also a global security threat, exacerbates inequality and also is detrimental to sustainable development.
So let’s pursue a two-pronged approach: innovation and action. The development and deployment of the physical capital based on scientific research and technological innovation is crucial. So is the growth of social capital, catalyzed by reaching a global consensus that can be transformed into collective action.
We already see encouraging signs that community building is underway. For example, Masdar’s Gen Z sustainability survey revealed that young people see climate change as the biggest threat to the world over the next 10 years and that they seek to be proactive in ensuring a more sustainable future. The next step is engagement: channelling their passion for activism into opportunities to advance sustainable development. ADSW events like the Student Exclusive offer a platform for such youth-industry cooperation, so I am keen to meet youth from the UAE and worldwide who are also passionate about the issue.
Greater awareness is the crucial next step. The fact is that global leaders and institutions have historically focused their work on climate science and economics. Consequentially, we have significantly advanced in our technical ability to address sustainability issues. In some parts of the world, including the UAE, solar is price-competitive with electricity from conventional sources; cities are implementing smart & sustainable solutions to boost their infrastructure; clean technology R&D is creating new business opportunities for start-ups and corporates alike. Nevertheless, the world must accelerate implementation of renewable and sustainable technologies. We must find new ways to narrow this chasm between ability and action to shape and spread knowledge of sustainability issues that engage and empower.
Women represent one of the key stakeholders that exemplify the need for a more nuanced understanding of global warming. We are greatly underrepresented in climate change science, negotiations, policy-making and adaptation efforts. Yet women, especially poor women, are also disproportionately affected by climate change. Strengthening our capacity to deal with climate change relies on grasping the intersection between gender and climate change. We must acknowledge the impact that global warming has on women, and strive to inspire them to become powerful agents whose knowledge, innovation and skills play a bigger role in the climate change crisis. That’s why I’m keen to attend and report from the Women in Sustainability, Environment and Renewable Energy (WiSER) event at ADSW.
I’m grateful to be included within this week-long conversation, which promotes cooperation and innovation as the next ten years are crucial to harness climate change risks and transform them into opportunities. I am thrilled to be part of the dialogue and cooperation that sparks the development of the financial and social capital necessary as we shift towards a more sustainable world. Follow me on Instagram, and Snapchat for daily musings, happenings and snapshots from ADSW 2017! Also, track my journey with the hashtags #WorldIn2026 and #ADSW2017.
12 JAN 2017
IN CONVERSATION WITH
Vinay Rustagi, Managing Director, Bridge to India
- India has pledged 175GW of renewable energy capacity by 2022, up from around 43GW today, and for non-fossil fuels to be 40% of total generating capacity by 2030, which equates to 300GW of capacity. Are these targets realistic?
This is obviously a very steep target and I would say that it is more of an aspiration right now. But the Indian government is very serious and they have announced an array of operational and financial measures to support the growth of renewables in India. It is also worth noting that India has all the fundamental drivers for renewables in place – growing energy demand, huge resource potential, competitive costs and an urgent need to reduce carbon emissions.
- The theme of Abu Dhabi Sustainability Week in 2017 is ‘Practical steps towards a sustainable future’. What are the practical steps that India should be taking towards delivering on its ambitious renewable energy goals, particularly with respect to the key challenges of accessing affordable finance, technology and outdated distribution infrastructure?
India has already been taking many practical measures to drive the growth of the renewable sector. The UDAY package has improved the finances of some of the weakest utilities in the country and improved their offtake risk. The solar parks policy where the government is developing 20,000MW of solar park infrastructure (land, transmission, transport connectivity etc) and providing it to developers on a ‘plug and play’ model has also been very helpful in dealing with the operational concerns of developers. There are many ongoing initiatives on the transmission side including the green corridor programme and national smart grid and storage missions. We have also seen pilot storage projects being tendered by various state governments.
In my view, upgrading the transmission and distribution infrastructure and making it sufficiently robust to deal with the fluctuations in renewable energy output is the biggest practical challenge for the sector. This requires proactive government support and planning, billions of dollars in investment and high-tech intervention.
- Financing 100GW of solar and 60GW of wind requires, according to industry estimates, a massive capital injection of nearly US$300 billion. How much money is the Indian government prepared to spend? What will be the contribution of Indian financial institutions? Where are the main foreign investments coming from, and how much foreign investment has been pledged so far?
The Indian government does not have the capacity or willingness to spend this amount of money. The good news is that the private sector is increasingly willing to do so provided there are appropriate systems and policy mechanisms in place. On the power generation side, we see huge investment interest in the sector from around the globe. Some of the leading international utilities, private equity funds and corporate houses are active players in the sector. I believe that out of the total solar installed plus the pipeline capacity of 25GW, approximately 20% is sponsored by international investors.
On the debt side, more than 80% of capital is coming from Indian lenders comprising banks, financial institutions and private finance companies. The government’s role is restricted to being a catalyst by providing seed capital, capital subsidies and tax incentives to selected target segments. The Government of India has very recently announced a US$2 billion equity fund specifically for the sector.
The government is also playing a more active but indirect role in the financing of the transmission system where most of the national state level transmission companies are owned by different arms of the government.
- How can overseas investors and stakeholders, including those from the Middle East & North Africa, support India’s renewable energy transformation? What is the role of the private sector?
Middle East investors have been looking at this market with increasing interest. Abu Dhabi Investment Authority (ADIA) has a substantial minority stake in ReNew, one of the largest renewable IPPs in India. FRV has also been bidding successfully in the Indian market. These investors can bring much needed capital to the sector but also contribute by transfer of international technology and project development expertise. We also see a great commonality of interest between MENA and India from a renewable energy consumption, technology development and investment perspective.
- How can the private sector and government collaborate more effectively in realising India’s energy transition from fossil fuels to renewable energy?
We believe that the current government, particularly the Ministry of New and Renewable Energy (MNRE), is already working very closely and proactively with the private sector. One area with substantial scope for improvement is for the different state governments to learn from each other and share best practices. That will go a long way in streamlining administrative processes and helping the private sector. There also needs to be more dialogue on addressing key long-term issues such as building skills for the sector.
- India recently announced US$750 million in funding for a 30% capital subsidy for rooftop solar installations, mainly to improve energy access for India’s poorest communities. How will the subsidy scheme work, and is it the right strategy?
This subsidy is actually targeted towards residential and institutional consumers. Some major changes have been announced in the subsidy scheme whereby instead of the central government providing subsidies directly to private installers through an open window process, funds will be channelled to state level nodal agencies and utilities, who will then be disbursing subsidies to lowest cost bidders decided through a tender process. The government is trying to improve the process but we believe that this process will again be highly inefficient and controversial. Running a well-structured tender process with adequate safeguards is a very time consuming and costly exercise wiping away much of the subsidy benefit.
We believe that these funds could be put to much better use in other ways, for example, skill building initiatives, setting up standards, training utilities and regulators on various aspects of distributed generation, net metering and grid management.
- Why is ‘Bridge to India’ attending ADSW 2017? What will be your message to visitors and delegates?
12 JAN 2017
From ambition to action on climate how is an oil company responding
Bjørn Otto Sverdrup, Senior Vice President, Sustainability, Statoil In 2016 we saw the Paris climate agreement ratified and brought into effect at high speed. The agreement was a call for government and business action. At my company, Statoil, we have decided to take a proactive approach and actively shape the energy transition, a key discussion topic at Abu Dhabi Sustainability Week. To be able to do something about the climate challenge, we need to change how we use and produce energy, simply because our energy systems are responsible for nearly two-thirds of all man-made emissions. Changing the world’s energy mix is not easy. It will take time. Even with an exponential increase in investment in alternative energy, most forecasts predict that fossil fuels will still make up a large share of the energy mix in 2040. Less than the 80% share of today, but almost certainly well over 50%. To supply more energy for a growing population while emitting less greenhouse gas requires a collective leap of the imagination and technology development. We all share this responsibility. Governments need to implement visionary policies. Consumers need to change the ways they use energy. And energy companies like mine need to continuously drive operational efficiency to lower emissions and costs.
At Statoil, we don’t question climate science, we act on it and see the transition to low-emissions energy as a key driver of our business. We now embed climate action into our business strategy and the management of the company in new and profound ways. Statoil’s effort to tackle the climate challenge is built on two pillars: First, we position ourselves to capture the growth and value creation opportunities offered in renewables and new energy solutions. Second, we will continue to be a world leading oil and gas company recognised for leading energy efficiency and the lowest carbon emissions.
We have ramped up our offshore wind business with new developments in the UK and Germany, and later this year we will open the world’s first floating offshore wind farm off the coast of Scotland. Collectively, these projects will supply 1 million households with renewable electricity. Through our US$200 million venture capital fund and the new US$1 billion Oil and Gas Climate Initiative fund, we are dedicated to investing in attractive and ambitious growth companies in low carbon solutions. We believe carbon capture and storage technology will be vital, based on 20 years of experience from our Sleipner field, where we have safely stored 16 million tonnes of carbon emissions.
Despite strong growth in renewables, the world will continue to rely on fossil fuels for decades. How we produce oil and gas, and which resources we develop, will therefore be increasingly important. We need producers who can deliver energy at low cost, with low emissions. We are focusing on reducing the carbon intensity and cost of our oil and gas assets, to build a resilient portfolio for the future. Statoil is a world leader in carbon-efficient oil and gas production. This is the result of determined efforts over decades. The carbon intensity of our upstream production is currently around 10kg per barrel of oil equivalent, compared to an industry average of 18kg. We have now set ourselves a target of reducing that to 9kg by 2020. Indeed, the Carbon Disclosure Project ranked Statoil in first place for readiness for a low carbon future among oil and gas companies.
At Statoil we believe we can make a difference and both improve our business and help meet the climate challenge. Yet, the scale of change that is necessary requires businesses and sectors to mobilise, and consumer behavior to change. Sound policies are essential to encourage what we need to see more of and reduce what we need less of.
Two policies can be particularly effective: Firstly, a price on carbon is probably the most efficient policy instrument to accelerate a change in the energy mix and to shift behaviour among both producers and consumers. Secondly, if policy makers are serious about tackling climate change, dramatically and rapidly reducing the amount of coal in the energy mix is an obvious and urgent priority. Coal emits twice as much carbon emissions as natural gas when consumed. Since coal is mainly used for power generation, renewables and natural gas are better alternatives. We see how this is working in the United States, where emissions from the power sector have been cut 12% in the past decade due to the switch from coal to natural gas. Last year alone, 100 coal plants closed down, and natural gas for power generation grew 19%. As part of their climate strategies, the United Kingdom plans to close its last coal-fired power station in 2025, and Canada will follow by 2030. The potential is even bigger in the rest of the world.
The energy transformation needed is tremendous and change will take time. In order to be successful we need responsible governments, responsible consumers and responsible companies willing to take the lead. At Statoil, we are ready to do our part.