Quentin Scott, marketing director at Low Carbon, explores the renewable energy landscape in 2016
As we approach the half-way mark of 2016, we thought now would be a good time to reflect on the year so far and look forward to what the rest of it might bring for the renewable energy industry.
The first half of the year has already been a landmark year for renewable energy investment in several ways. We entered the year following a momentous Climate Change Summit (COP21) in Paris, where a global policy on lowering carbon emissions was finally agreed upon. Following that, we saw the official signing of the Paris Agreement by world leaders in April, which tied participating countries into lowering their emissions rates, in line with a long-term goal of keeping the increase in global average temperature to well below 2°C and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial-levels.
From a UK perspective, renewable energy featured in the Spring Budget, which revealed changes in energy taxation for businesses and increased funding for smart technologies. More recently, the Queen’s Speech reiterated the UK Government’s ambition to play a leading role in tackling climate change and also confirmed plans to implement reforms to the energy market.
In May, Bloomberg New Energy Finance figures revealed that a new record-low price for solar power had been set, decreasing by almost 50% in the past year – a trend which looks only set to continue. In the same month, for four whole days Portugal ran on renewable energy alone, and Germany achieved a completely ‘clean’ day on 7th May as well. In the UK, the amount of coal being used by the national grid to power Britain fell to zero on 10th May, and stayed there for four hours. This hasn’t happened in over 100 years.
And the second half of the year is looking jam-packed too, kicking off with EU Sustainable Energy Week between 13-17th June. This event sees hundreds of organisations in over 30 countries take part and brings together public authorities, energy agencies, research organisations, NGOs, businesses, and private consumers to share best practices and inspire ideas on secure, clean and efficient energy.
Even industries that aren’t traditionally known for their ‘clean’ credentials are jumping on the sustainability bandwagon, and motorsport is a good example. In July, London will host the finale of the second ever Formula E championship – an all-electric race series which aims to bring the drama of motor racing into urban areas through its lower levels of air and noise pollution.
Renewables will also be heavily involved in the Rio 2016 Olympics this summer, where the city’s urban environment is undergoing large scale redevelopment to incorporate energy efficient buildings and the use of renewable energy technologies. Rio wants its games to help mitigate the negative effects of climate change as well as bring other environmental, social and economic benefits to the country as a whole.
Later in the year, October sees World Energy Day, which has been running since the World Energy Forum in 2012. This day aims to raise awareness of energy issues and how to support universal energy access that can benefit the whole planet. Similarly, the International Day of Climate Action in the same month is a global campaign from a coalition of organisations and activists demanding world leaders to take action over climate change.
But perhaps the most hotly anticipated event of 2016 will be COP22, this time held in Marrakech, Morocco. The conference will aim to flesh out the top decisions that were made in Paris last year, and will revolve around the issue of ‘loss and damage’, by addressing those most vulnerable of populations who are at risk of displacement or forced migration due to climate change. We can only hope that this conference becomes as pivotal in the fight to reduce carbon emissions globally and move toward a low-carbon economy as its predecessor. We need to ensure that climate issues are top of the agenda for businesses, individuals and governments alike, if we are to stand a chance of reversing the harmful effects that a rise in global temperature is causing. By moving towards a low-carbon economy, we can ensure the environmental stability for generations to come.
Guest blog: Robert Ede, a consultant specialising in energy and environment at the Whitehouse Consultancy, discusses the importance and impact of the UK’s 5th carbon budget
This is an important month for UK energy and climate policy. Whilst everyone’s attention is rightly focused on the outcome of the EU Referendum and its implications, there is an important announcement expected after 23 June which will also prove pivotal in shaping the role of the UK in combatting climate change.
The fifth carbon budget
As outlined in the 2008 Climate Change Act, the government is required to legislate the level of the fifth carbon budget by the end of June. Carbon budgets set the acceptable level of emissions compared to a previous benchmark – in the UK’s case this is 1990 levels. The fifth edition will cover the period from 2028-2032 – effectively setting an end goal for our emissions reductions over the next fifteen years.
Why does it matter?
With such a long time-horizon, why does this budget matter now? There’s a number of reasons, but I have chosen to briefly outline two.
First and foremost, the fifth carbon budget can help send a strong investment signal to the City of London. Accounting for climate risk is now mainstream from financial institutions, and providing a strong regulatory timeframe ensures that investments in future technologies/energy sources are compatible with UK emission reductions scenarios. This has an added benefit in mitigating against the risk of ‘stranded assets’ – whereby investments are rendered effectively un-useable due to climate change. If 2016 is to be the ‘Year of Climate Finance’, as government ministers have stated, then adopting an ambitious budget will be an important first step.
Secondly, setting ambitious carbon budgets is important for giving the UK legitimacy on the global stage. We sometimes forget that the UK remains a major player in international climate negotiations, and this largely stems from having such a robust and ambitious piece of emissions legislation. Strong policy making creates precedent – serving an important purpose in holding other governments to account over their climate strategies. This was particularly apparent during COP21 where a “high ambition coalition” was established. The UK played an important role in signing up major polluters such as Brazil and Canada, and the coalition made a vital contribution to the eventual outcome. The fruition of this kind of diplomacy is already clear; a recent UNEP report found that investment in renewables was higher in developing economies than in developed countries last year. These countries have witnessed the benefits clean technology can provide, and are now able to roll out renewables at an impressive rate.
A number of attempts have been made to ratchet up the political pressure on the government in advance of the announcement. Two groups of Conservative MPs have written to the Prime Minister on this issue – albeit from contrasting standpoints, with one group of twenty backbenchers calling on the government to fully accept the level recommend from the non-partisan Committee on Climate Change (CCC). Meanwhile, fifteen other MPs have requested for the announcement to be delayed until similar action had been agreed by other European states. But is the UK really that far ahead of its neighbours? Research indicates that far from being a lone decarbonisation advocate, the UK is in the middle of the pack when it comes to building a clean energy system.
The Way Ahead
What is clear is that, if adopted as recommended, meeting the new level will require a radical transformation of our energy use. Whilst current policies have been effective in boosting the proportion of electricity from renewable sources, research from the CCC highlights that the route to decarbonisation in other areas such as transport and heating is less apparent. Much of the low hanging fruit has been successful harvested – therefore the cross-departmental decarbonisation plan to be released by the government later in the year will be hugely important for outlining how momentum is to be maintained.
With the finance community due to descend on London for a Business & Climate Summit in the week immediately following the referendum, the end of June promises to be an significant period for the UK clean energy sector.
Quentin Scott, marketing director at Low Carbon, discusses the benefits of sustainability and education for future generations with the opening of the new “Tech Deck” Educational Centre at Land Rover BAR
At Low Carbon we have been working closely with America’s Cup Sailing team, Land Rover BAR, a leading sustainable sports team. In 2015 we powered the Land Rover BAR base in Portsmouth with a high efficiency rooftop solar installation. More recently Low Carbon, in collaboration with the team, funded a rooftop solar installation at the Northern Parade Schools in Portsmouth. The solar installations save in excess of 90 tonnes of CO2 each year and generate enough clean energy to power more than 60 homes combined.
By embracing renewable energy technologies and offering educational opportunities, sports clubs can help to lead the charge in influencing sustainable behaviour. This is where the new “Tech Deck” Educational Centre at Land Rover BAR really shines.
The ‘Tech Deck’ has been developed for Key Stage 3 of the National Curriculum with the aim of nurturing young peoples’ interest in Science, Technology, Engineering and Maths (STEM). The education centre demonstrates, through the use of interactive exhibits, the role that science, technology and sustainability play in building a leading sporting team.
To bring the concept of sustainability to life and with the team’s solar panels forming a perfect backdrop, Low Carbon developed three interactive displays for the education centre highlighting how a winning team like Land Rover BAR is harnessing the power of wind, tidal and solar energy to be more sustainable.
Each of the Low Carbon displays takes visitors on a journey demonstrating the scale of energy can be generated from the elements, how this energy can be harnessed and highlights what the team is doing in these areas to support sustainability. The hope is that visitors to the Tech Deck will be so inspired as to embrace sustainability by making small and impactful changes in their own day-to-day lives.
This is truly exciting. After all, if we each make a small sustainable change, the collective benefit will be there for future generations to enjoy.
To read more about the Tech Deck and to book a visit to the education centre at Land Rover BAR click here
‘Smart city’ is a term which has created a lot of buzz recently, and has been embraced by the media and governments alike. Technologists are excited about the lives we could live in the connected urban metropolises of the future. But underpinning this is the opportunity for us to redesign our cities in a way that not only streamlines everything from transport to healthcare, but which also allow us to power them forward with sustainability initiatives. Renewable energy technologies should be at the forefront of smart city development, in order to create a more efficient economy for the low-carbon future. And with UN figures showing that world’s urban population is expected to surpass 6 billion by 2045, bringing with it the risk of overpopulation as well as dangerous levels of pollution and congestion, this is an enormous opportunity for policy makers, investors and innovators to transform our cities now.
Some cities have already embraced clean energy sources such as solar parks and wind turbines to become truly ‘smart’. For instance, Dubai plans to have solar panels on every rooftop by 2030, which will help to power buildings as well as a network of electric car charging stations. The cities’ authorities will be able to monitor electricity usage and generation in real time through smart meters, and so will be able to anticipate highs and lows in consumption, in order to manage reserves.
These kind of measures are also important because when it comes to climate change, cities are on the front line and will be the worst affected places by temperature rise. Climate Central, an independent organisation of leading scientists and journalists, has predicted the displacement of over 760 million people from the world’s coastal cities if action against climate change is not taken. And as the Intergovernmental Panel on Climate Change’s (IPCC) 2014 Mitigation of Climate Change report indicated, cities consume somewhere between two-thirds and three-quarters of total global energy and generate 75 percent of global carbon emissions. Therefore, they have an undeniable role to play in helping to combat the negative effects of climate change.
We would like to see cities like London develop in a way that is both beneficial to the environment as well as its technological prowess. Other UK cities are already making moves: a new initiative was announced this year which aims to turn Exeter into a sustainable and connected city by developing new approaches to transport, energy and health improvement through the use of technology. The Exeter City Futures scheme is transforming Exeter into a leading smart city in the UK by harnessing innovative technology and data analytics, and others should look to follow its lead.
There’s no escaping the fact that increasing the amount of connectivity and technology in a city will also increase the amount of power it needs to run. By using renewable energy sources, cities cannot only reduce dependence on fossil fuels, but can ensure a reduction in carbon emissions in order to help mitigate the negative effects of climate change and agree the targets set at the Paris Climate Change Conference at the end of last year. Surely this is the ‘smartest’ solution of all?
Nigel Labram, Investment Strategist at Low Carbon, reflects on the first ‘test’ for the Paris deal and how the investor community can combat the negative effects of climate change through sustainable investment
It’s certainly been a ‘big’ month for the global renewable energy industry with the news that 175 countries put ink to paper and signed the historic Paris climate deal on Earth Day 2016. The case for sustainable investment – investing in cleaner energy sources – has never seemed quite so compelling for today’s savvy UK investor community.
The Paris Agreement has opened up the eyes of global governments to the need for new legislation and policies that will create a more positive investment environment into renewable energy. More must be done in this area, however, to ensure that the UK in particular delivers on its pledges and that all areas of the investment sector are engaged in the fight against climate change.
One only has to glance through the papers to see the widespread attention that the ‘divestment’ movement is generating in the ‘Post- Paris’ landscape. Perhaps one of the boldest call to actions for the divestment cause, recently came from the Rockefeller family fund which is openly divesting from fossil fuels. When you consider that the Rockefeller name has been synonymous with the oil industry for many years – this is particularly poignant.
Make no mistake that this is not a case of ‘tree – hugging’. Divesting and reinvesting into climate change solutions such as solar PV and onshore wind, can present strong financial returns. The government, in collaboration with the energy and investment industries can do more to educate the market on the robust and low – risk returns that are to be had from climate change solutions projects. After all, the move to a low carbon economy will require greater levels of investment into low – carbon assets.
Proven technologies, proven returns
As outlined in recent research by the Intergenerational Foundation think-tank – renewable energy technologies have a strong proven track record and can generate the UK’s electricity needs, whilst improving the overall energy mix. Moreover, solar PV panels, for example, have been actively generating electricity for at least twenty years with investment in PV projects increasing dramatically over that time. Onshore wind, also twenty years old, was recently described the Department of Energy and Climate Change (DECC) as ‘the leading individual technology for the generation of electricity from renewable sources in 2014.’ The myth that renewable energy technology is too ‘new’ or ‘unproven’ is just that – a myth. The statistics are there for investors to see.
The continued volatility of oil prices has created global market uncertainty. The benefit of investing into climate change solutions, on the other hand, is that they are not volatile to the same extent and their marginal cost of production is zero. Even if investors still don’t believe in climate change, investments into climate change solutions stand up to financial scrutiny. They are typically inflation-linked and long term contracts which generate attractive returns. Finally, the majority of climate solution projects are, essentially, infrastructure projects. The words ‘green’ or ‘renewable’ don’t have to be mentioned at all, which can be the difference in convincing reluctant investors of their viability as credible investments.
The ‘Post-Paris’ investor
Global investment consultancy firm, Mercer, recently conducted a report into the ‘climate aware’ investors of the future. These investors will take on the role of ‘future makers’, realising that our FTSE 100 will not always be dominated by the major fossil fuel players such as Shell or BP and that renewable energy companies will soon make their way into the mainstream market. Finally, according to Mercer, future makers will apply the motives and beliefs behind their personal investments to his/her business portfolio. For example, if they can see the impressive returns made on their household PV then there is significant potential to make money from investing in solar PV projects at scale.
The French government is making strides to create ‘future maker’ investors and is now calling on institutional investors to both disclose and measure the carbon intensity of their investment portfolio, as the Task Force on Climate related Financial Disclosures (TCFD) consults on whether pension funds and asset managers should also disclosure climate related financial risks and opportunities, I hope to see this call to action and level of engagement imitated by governments globally, especially in the aftermath of the ratification of the Paris agreement. If this occurs, it will ultimately create a more mainstream and positive climate solution investment environment for future generations, and will greatly help in creating the ‘Post- Paris’, climate aware future makers for the task ahead.
The race is on
With the historic Paris agreement signed and widely recognised momentum and support for the renewable energy industry continuing to grow, there has never been a more opportune moment for the institutional investor community to reinvest into climate change solutions. Investors may be unaware of the crucial part they have to play in the global fight against climate change and it is therefore integral that government and the energy industry continue to educate and inform. The transition to a low carbon economy can be achieved if a change is made now.
This article was originally published on Business Green