The Guardian ~ Global Development Professionals Network
At recent Guardian roundtable discussion, experts talked about how the energy sector can bring down dependence on fossil fuels and reduce carbon emissions
Onshore wind and large scale solar farms are expected to come to cost parity with gas-fired power stations by the 2020s. Photograph: Armando Ferrari/Getty Images/Cultura RF
With the UN Conference on Climate Change (COP) in Paris just days away, a global strategy for reducing carbon emissions is tantalisingly close. Current commitments on greenhouse gas (GHG) emissions are due to run out in 2020 and governments are convening in Paris to agree a roadmap for what happens in the next decade and beyond. For any such agreement to work, however, it must include a transition from high-carbon, fossil-fuelled energy production, to one where power comes from clean, renewable energy.
There are some indications that the energy transition is under way. The International Energy Agency (IEA) recently announced that renewable energy accounted for half of all new power plants in 2014, while large oil companies cancelled 80 drilling projects worldwide in 2015. But the IEA also calculates the world is still on course for global warming of 2.7C before the end of the century, significantly above the danger threshold of 2C, with “major implications for us all”. The transition, therefore, must happen sooner and faster.
A recent Guardian roundtable, sponsored by global energy company Enel, looked at what the sector can do to pick up the pace of the transition. The chair, Oliver Balch, asked whether politics is holding the transition back. Diminishing subsidies and support for renewables under the current UK government led the World Energy Council [WEC] recently to downgrade the UK from AAA to AAB rating for its energy policy.
Joan MacNaughton, executive chair of the WEC’s Energy Trilemma study, said:
“All countries struggle because no government in a democratic country is going to last very long if they don’t deliver energy security. We have had over 100 years of investment in [fossil fuel infrastructure] and you can’t just turn that [around] overnight.”
John Sauven, from longstanding climate change campaigners Greenpeace, surprised the room by saying that “fossil fuels are brilliant”, before caveating “except for the downsides. If it wasn’t for war, air pollution and climate change, you couldn’t beat fossil fuels … [for] bang for your buck.” Governments remain addicted to cheap fossil fuels and the key to weaning them off, said Sauven, “is always politics and policy, because [renewable] technology is increasingly coming in at scale and at cost”. Onshore wind and large scale solar farms, he said, are expected to come to cost parity with gas-fired power stations by the 2020s – the technology is there should politicians choose to back it.
Labour MP Daniel Zeichner said the five-year political cycle “just isn’t long enough for a lot of these issues. The only thing that matters to the current government is their notion of ‘balancing the financial books’, and [we have] a weak climate change secretary who’s getting knocked about.”
However, Zeichner said the Climate Change Act (2008), which legally binds any incumbent UK government to work towards GHG emissions reduction targets for 2020 and 2050, should not be taken for granted. “Without that we would be completely lost.” Prof Brian Hoskins, chair of the Grantham Institute, Imperial College, helped draw up the act. He said of the legislation: “It was, and still is, a fantastic thing for giving a long-term view. It was the basis for our 80% reduction in our CO2 by 2050 [target] … and there is no doubt that de-carbonising the electricity supply is number one [in achieving that target].”
Tom Delay, chief executive of the Carbon Trust, said there are some “inconvenient truths” that need facing up to. The first being that “almost any form of new clean energy is going to need high upfront investment, with little operating cost for the lifetime of the investment – as opposed to what we’re used to, which is a modest upfront investment followed by a significant operating cost.”
This scares off institutional investors, said Clare Hierons, chief operating officer of ShareAction. Moving from large investments in mega-projects to smaller amounts across multiple schemes “means being project financed, which is high cost”. However, she highlighted the Environment Agency pension fund – believed to be the first in the world to ensure its portfolio is compatible with the 2C climate change target – as an example of what is possible.
Financing renewable energy in the developing world
From the energy industry perspective Enel’s head of European affairs, Simone Mori, stated that energy companies have two options. They are, he said:
“Trying to resist [the transition to renewables] to defend the existing picture; or trying to be an agent of the change.” And the best example of change taking place most rapidly is in developing countries, especially in Africa. He added: “Renewables are becoming the best option in the larger geographies … not just for the environment, but for answering energy demand in emerging economies.”
Energy entrepreneur Frederik Ottesen, co-founder of solar company Little Sun, argued that delivering solar energy in emerging markets is “hugely profitable”. Solar can deliver more reliable energy and it’s also far more affordable – “one tenth of the price”, said Ottesen – than what many rural Africans currently pay for kerosene-based alternatives, for example.
The difficulty he and other renewable energy startups face is upfront cost. “A solar panel lasts 20-30 years, but you have to pay the money right now,” he said. “The people who take out the loan [to pay for the solar panels] aren’t the consumers, it’s the companies delivering the energy. I would have to find $1bn to deliver a sufficient amount of solar panels [to Africa].”
The barriers to a low-carbon, renewable energy transition, however, do have solutions. “I would start by explaining to people the fundamentals,” said Delay. One of which, said John O’Brien, regional technical adviser on climate change mitigation, the United Nations Development Programme, is that “fossil fuels are only cheap if you don’t factor in the true environmental cost.”
Carbon-trading: EU Emissions Trading Scheme
The best way to do that, he said, is having a high price on carbon via a carbon trading market. The EU’s Emissions Trading Scheme (EU ETS) has done just that since 2005, based on “cap and trade”: a maximum cap is set on the total GHG emissions for regulated industries; those emitting more can buy “carbon allowances” and those emitting less can sell them, or trade them on the open market.
The cap itself is lowered over time, bringing overall emissions down. It has, however, been widely criticised for being ineffectual and unstable: too many allowances were allocated, effectively flooding the market. Prices of €30 (£21) per tonne of CO2 in 2006 fell to just €5 a tonne in early 2013.
However, the EU ETS is still the largest carbon trading scheme in the world and, with China due to launch its own carbon trading scheme in 2017, there is a possibility to look again at a truly global carbon price, argued O’Brien.
There appeared to be unanimous support in the room for a rejuvenated carbon trading market. Mori said:
Keep the climate, change the economy
“When the [EU ETS] carbon market was working properly, the price of carbon was an important determinant of our investments and our business plan … the EU could re-engage with this.”
Delay also believed that a carbon price reaching €19–€39 a tonne would be enough to drive energy efficiency and reduce carbon emissions.
A sceptical and disengaged British public also needs to be won over to raise this up the political agenda. Simon Hill, vice president, EMEA, at energy consultants Opower, argued that consumers are difficult to engage because “fundamentally, energy efficiency is a dull, boring subject … people think about energy use for nine minutes a year. That’s a difficult barrier to break through.” But Helena Molin Valdés, head of the Secretariat, Climate and Clean Air Coalition, argued that you could change the public’s attitude by warning them: “You will have a heart attack by 59 because of pollution.” She added: “We might think about energy for nine minutes, but health is every day.”
Community owned power
Greater community ownership of energy production – through domestic solar or part ownership of local authority schemes – was also widely cited as key to engaging consumers while increasing the proportion of clean energy. Zeichner and Sauven told the roundtable about flagship local council schemes doing just that in Southampton and Nottingham, among others. “People get energy when they own it,” said Hierons.
The government’s 87% cut in feed-in-tariffs for solar – a subsidy intended to incentivise domestic renewable energy generation with a small payment per kilowatt hour generated, guaranteed for 20 years – was a big blow, said Sauven. The government argued that the renewables industry should survive without subsidies, but it was missing the fact that ownership leads to greater interest in energy efficiency across the board. he added:
“We had nearly a million people generating their own power … And there could have been millions more, really engaged in their energy. In Germany and Denmark a percentage has to be community owned. As a result they have a very different attitude.”
But the world is far more aligned on climate issues than during COP3 in Kyoto, 1997, said Hoskins. “Kyoto was a case of some countries starting to do something. Now [at Paris] we have virtually all countries saying: ‘We are going to do this.’ They are no longer questioning the problem … If we can see world emissions peak and start to go down, then everything is possible.”
MacNaughton was also optimistic. “Saudi Arabia has now published its commitment for Paris – one of the last countries to do so – that’s extremely significant. Each country is trying to manage this transition. Paris could be a fundamental step … to get the energy sector – not just the most forward-looking companies, but all of them – to recognise that this is the new reality.”
Carbon-free energy industry debate: at the table
Oliver Balch (Chair) Journalist
Tom Delay Chief executive, Carbon Trust
Clare Hierons Chief Operating Officer, ShareAction
Simon Hill Vice president (EMEA), OPower
Prof Brian Hoskins Chair, Grantham Institute, Imperial College
Joan MacNaughton Executive chair, Energy Trilemma study, World Energy Council
Helena Molin Valdés Head of the Secretariat, Climate and Clean Air Coalition (CACC)
Simone Mori Head of European affairs, Enel
John O’Brien Regional technical adviser on climate change mitigation, United Nations Development Programme
Frederik Ottesen Co-founder, Little Sun
John Sauven Director, Greenpeace
Daniel Zeichner MP for Cambridge, Labour