The opportunities and challenges of the global energy transition were part of the debate at the second day of the BNEF Summit in New York on Tuesday, as the push to slash emissions is expected to attract $196 trillion in investments through 2050,.
Still, the transition is proving bumpy, even after the US passed landmark climate legislation that promises to supercharge the clean-energy boom. A backlash against renewable energy in Texas threatens to chill solar and wind development in its biggest market. Extreme weather is taking a toll on power grids that increasingly rely on renewables. And some technologies designed to slash emissions, including carbon capture and sequestration, haven’t quite taken off.
First 90% of power industry can be decarbonized with existing tech
The power industry can be decarbonized 85% to 90% of the way with existing solar, wind and energy storage technologies, said Leonardo Moreno, president of clean energy with AES, a power company that works with Google to deliver around-the-clock clean power.
But getting the last 10% to go green in the power or even transportation sector will require long-duration storage, green fuels and hydrogen, he said.
Google says no US power market built to fully decarbonize grids
US power grids are “not designed for whole-grid decarbonization,” Caroline Golin, global head of energy markets and policy at Google, said on a panel about the changes needed to deliver 24/7 clean power.
For the grid to move away from fossil fuels, there needs to be change at multiple points in the system: the capacity markets that dole out payouts to power plant owners so they’re always ready to supply the grid, the interconnection queue that evaluates new generation before it can be connected and the expansion of transmission lines that move power around.
“You have got to commoditize clean energy and create the market structures,” she said.
Full-time carbon-free electricity is a long way away
Even the big US companies that buy huge amounts of clean energy for their operations, like Amazon and Google, are a long way from reaching the point where all their electricity comes from clean power at every hour of every day, said Kyle Harrison, head of sustainability research at BloombergNEF. “We’re talking about systemwide decarbonization,” said Harrison. “This is a big challenge.”
Companies — and eventually the entire global economy — can get closer to running on clean power 24/7 by building an expertise in buying clean power and improving their power demand flexibility. There also needs to be a deeper penetration of renewables into electrical grids, Harrison said.
Fusion companies avoid burden of nuclear regulations
Companies seeking to commercialize fusion energy are praising a decision earlier this month by US officials not to regulate their industry with the same safety standards developed for conventional nuclear power plants.
“Fusion is very different from fission,” said Rick Needham, chief commercial officer for Commonwealth Fusion Systems. “This is a big deal.”
Blackstone sees ESG debt momentum amid ‘significant obstacles’
There’s an enormous amount of capital that’s needed from the private credit space for the energy transition, according to Mark Rutledge, managing director at Blackstone Credit. Green loans continued to grow last year despite the global sustainable debt market posting its first decline on record in 2022 amid a credit rout and US borrowers issuing less debt linked to ESG, according to BNEF.
“That just gives you an idea of the amount of momentum and capital required for this transition, even in the face of some significant obstacles,” he said during a panel discussion. “Capital allocators and borrowers are seeing the value of private credit and that capital is going to this space, so I’m optimistic.”
Google’s small solar projects to help low-income power customers
Finding ways to help local communities in an equitable manner is a critical part of any successful plan to decarbonize and address climate change, according to Amanda Peterson Corio, the global head of data center energy at Google.
That’s the framework for the deal Google announced Monday with EDPR NA Distributed Generation to build 80 small scale solar projects totaling 500 megawatts, which is equivalent to the output of a modest-sized natural gas-fired plant, beginning in Ohio. The financial savings generated by the panels will be used to create a community fund to benefit more than 25,000 low-income families, possibly through rebates to their power bills, according to EDPR.
Google and EDPR will release the blueprint of their project to make it easier for corporations and financiers to make them economic, EDPR Chief Investment Officer Richard Dovere said during a panel discussion.
Climate finance groups are misunderstood, BMO’s Barclay says
Climate finance groups that press companies to decarbonize are wrongly confused as being regulators that set rules for businesses to reach net zero emissions, according to Dan Barclay, head of Bank of Montreal’s BMO Capital Markets.
Climate groups such as the Glasgow Financial Alliance for Net Zero, or GFANZ, don’t set rules and there is no “regulatory” outcome from what they do, Barclay said in a panel discussion.
GFANZ was created two years ago ahead of a key United Nations-led climate conference in Scotland. The group is co-chaired by Mark Carney, a former governor of the Bank of England, and Michael Bloomberg, founder of Bloomberg News parent Bloomberg LP.
BP in talks to send gas to blue hydrogen project
BP Plc is in talks with Linde Plc to provide natural gas to its blue hydrogen project on the Gulf Coast, said Kirsty McCormack, vice president for special projects.
Blue hydrogen is an industry term for hydrogen produced from natural gas. BP had already agreed to sequester the project’s carbon dioxide emissions.
Emerging markets not spending enough on energy transition
Emerging markets aren’t investing enough in the energy transition compared to the size of the challenge, said BNEF’s head of energy transitions Luiza Demoro.
Only 8% of total investments in energy-transition technologies went to emerging markets in 2021, down from a record 20% in 2012, according to a BNEF presentation. Most spending is concentrated in Brazil and India, while many emerging economies aren’t receiving any investments at all, Demoro said. The pipeline of clean-energy projects in such markets has fallen since 2019 partly because of the impact of the pandemic, she said.
Bank financing needs to go green
Banks need to shift their financing priorities to help avert the worst consequences of climate change, according to Katrina White, a sustainable finance associate at BNEF.
BNEF has devised a metric that calculates the ratio of clean-energy lending and equity underwriting relative to the amount flowing to fossil fuels. That ratio was roughly 0.8-to-1 at the end of 2021. But it needs to hit 4-to-1 by 2030 if the planet is to meet the goals laid out in the Paris Agreement of 2015, White said during a presentation.
Anti-ESG backlash forces precise communications, Apollo says
Republicans attacking environmental, social and governance investing is forcing Apollo Global Management to be more precise in how it communicates its strategy, according to Dave Stangis, chief sustainability officer.
“The conversation, the rhetoric isn’t changing the way we do business,” he said. “But it’s definitely helped the conversation inside the firm to be more precise” when discussing ESG topics, he said.
Carbon management opportunities under IRA may be underappreciated
Energy companies haven’t yet realized the full scope of opportunities to develop carbon sequestration and storage projects in the US under the Biden administration’s Inflation Reduction Act, according to Noah Deich, the deputy assistant secretary for carbon management at the US Energy Department.
“We’re still thinking of carbon management predominantly as a regulatory defensive mechanism, how we’re going to keep our existing assets working in a mid-century net-zero strategy,” Deich said during a panel discussion. “That’s no longer the opportunity with the IRA and the Infrastructure Law in the US — it’s really about how we turn North America into a leader in carbon management.”
Inflation is accelerating energy transition, Blackstone says
Inflation is hastening the shift to cleaner technologies such as electric vehicles, said Rob Horn, global head of the sustainable resources group at Blackstone Inc.’s credit group.
“Inflation is acting as an accelerate of the energy transition, making electric vehicles economic,” Horn said.
Blackstone was investing in residential solar in the US and Europe, as well as carbon-intensive industries to help them shift to cleaner fuels, according to Horn. President Joe Biden’s landmark Inflation Reduction Act made the market bigger for clean projects, he said. Horn added that the world is focusing on an “energy trifecta” — climate change, energy reliability and affordability. “We need an inclusive process.”