Energy leaders plan shift
from high-carbon to low-carbon
LONDON, UK, June 9, 2008.
The world’s energy sector is in the throes of a transformation from
high-carbon to low-carbon, but the scale of the challenges remains daunting,
according to clean energy insiders who attended the first New Energy Finance
Summit earlier this year.
While the last three years have seen total investment in the sector of
US$300 billion, this pales into insignificance compared with the US$10
trillion that must be spent by 2030 to create a low-carbon energy industry.
However, the size of the task has created “almost unlimited opportunities,”
said Michael Liebreich, New Energy Finance chairman and Chief Executive
Officer (CEO).
The results of the Summit, on 28 and 29 February, have now been published in
a special 64-page book, including a wealth of previously unpublicised
material on the investment outlook for the clean energy sector. Over 150
delegates at the Summit, representing leading clean energy companies,
investors, regulators, utilities and traditional energy players, discussed
frankly the challenges ahead under “Chatham House Rules”.
Their views were stimulating and often surprising. Renewable energies
such as wind are often criticised for being intermittent, but many clean
energy executives hit back, saying that the real problem is “intermittency
of policy” in countries such as the US, where the Production Tax Credit for
wind is due to expire at the end of 2008.
Traditional energy players saw themselves as part of the move to low-carbon
rather than an obstacle on the way, and they identified a key role for
themselves in working with customers to promote demand-side energy
efficiency and micro-generation. There was lively debate on the merits of
nuclear as a way to curb emissions, with one proponent arguing: “New nuclear
offers a solution to climate change and energy security and should not be
confused with old nuclear.” Traditional energy companies also pointed out
that, if carbon capture and sequestration could be made viable, fossil fuels
had a bright future. However, there was a lack of clarity in regulation and
over who would pay for the development of the technology.
Policy-makers were in strikingly upbeat mood, stressing their commitment to
implement the measures that would bring about the necessary investment in
renewables. Equity investors, unusually, were more cautious – debating hard
among themselves whether renewable energy valuations got out of hand in
2007, or whether the sector’s strong fundamentals would drive share prices
further forward. One said: “Unlike the internet, renewables offer a longer
term investment return, so the sector does not have bubble characteristics.”
In his keynote speech at the start of the Summit, Mr Liebreich said that the
latest science suggested the extent of climate change was even bigger than
realised, but he added that improvements in energy efficiency and the amount
of renewable energy being installed would exceed official forecasts. There
was more than enough oil to take CO2 levels beyond 750 ppm, which would lead
to 3-5ºC of warming. “We either leave the stuff in the ground or we kiss the
climate goodbye or we figure out carbon capture and sequestration. Those are
the only three choices that we have,” he said. While achieving reductions in
CO2 emissions was going to cost a lot of money, “I believe we will see a
peak in carbon dioxide before 2020,” Mr Liebreich added.
Lord Browne, the former head of BP and European managing partner and
managing director of Carlyle Group/Riverstone Holdings, outlined the key
conditions for the large-scale implementation of energy efficiency and
renewable energy. The first was to establish a price for carbon, which would
boost the viability of low-carbon energy and promote energy efficiency in an
economically efficient manner. Tailored technology incentives were needed to
accelerate the development and deployment of low-carbon technologies while
policy barriers to deploying low-carbon solutions also needed to be removed.
These included planning laws, grid regulations, a lack of consistent
technical standards and subsidies for conventional energy, which total about
US$200bn, against US$33bn for nuclear and renewables. Finally, government
needs to intervene to create renewable energy-friendly infrastructure. “To
do all this will require soaring vision – capturing the public’s hearts and
minds. But we will also req uire lead shoes to keep us on the ground,” with
lots of hard, detailed technical work to back up the vision, he concluded.
The Summit examined the role of renewable energy technologies, the role of
traditional energy, the stance of policy-makers, the outlook for equity
finance, the role of the carbon markets and the provision of project
finance. Among the main obstacles to continued rapid growth in the sector,
delegates said, were uncertainty over regulation and bottlenecks ranging
from a shortage of silicon to a lack of skilled staff and entrepreneurs who
can grow a business successfully.
The Summit book also includes the results of the New Energy Finance Awards,
based on the firm’s league tables, which objectively rank investors, banks
and law firms according to the volume of business they completed in 2007.
There were five general categories, split according to asset class: Venture
Capital, Public Markets, Project Finance, M&A, Carbon Finance.
A full version
of the league tables for 2007 can be found by visiting the White Paper
section of New Energy Finance’s website. Click here.
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