The clean energy sector can be a capricious beast, all sunny investment one moment and dire outlook the next. There was a reminder for ministers from 23 economies – representing 90 per cent of global renewables and efficiency investment – at the Clean Energy Ministerial in London last week that the sector’s progress to date is still not sufficient to address the climate change challenge.
The International Energy Agency warned that under current policies, carbon dioxide emissions will nearly double by 2050. “This would likely boost global temperatures by at least six degrees Celsius,” IEA deputy executive director Richard Jones told the conference, an eventuality that “would confront future generations with significant economic, environmental and energy security hardships”.
The main outcome of the Ministerial was a raft of initiatives to ramp up energy efficiency, which the IEA said was lagging well behind the deployment of renewable power. Coincidentally, energy efficiency was the only sector in the WilderHill New Energy Global Innovation Index, or NEX, to rise last week, gaining 2.2 per cent. The NEX saw a moderate overall loss, retreating less than 1 per cent over the five days.
A sideshow at the Clean Energy Ministerial – at least for the UK media – was whether or not Prime Minister David Cameron would make a long-awaited speech supporting the green economy. Whether his seven-minute, seated effort constituted the keynote some had been hoping for, Cameron had reassuring words for the sector, saying he “passionately” believed renewable energy is “vital to our future” and “good business too”. This came as a new YouGov poll showed that nearly nine out of 10 people in the UK want the government to increase the use of domestic renewable energy.
There were some sunny investment announcements too. Cameron called for the North Sea to become the site of a “second industrial revolution” after announcing that more than 20 companies had signed up to a vision for it to become a hub for offshore wind and carbon capture and storage – provisionally dubbed Norstec after Europe’s Desertec solar initiative. The prospect of a North Sea supergrid took a further step forward as the grid operators of the UK and Denmark last week launched a feasibility study for a power interconnector.
Grid connections for offshore wind turbines have emerged as a major limiting factor in Germany’s expansion of renewable energy following its withdrawal from nuclear power after Fukushima. The country aims to have 25GW of offshore wind by 2030 but several firms have faced delays in hooking up new turbines. The German government last week said it was in talks with state-owned development bank KfW to expand support for offshore wind to grid operators such as TenneT to connect up projects. The KfW’s €5 billion offshore wind fund should be ideally placed for this purpose, as the first two projects to draw upon it used only a bit more than half the financing allocated to them.
The major deals of the week also featured the wind sector. German utility Eon awarded a £736m (US$1.2 billion) cable contract for its 230MW Humber Gateway wind farm to UK firm Balfour Beatty. Duke and Sumitomo finalised US$353million in financing for two wind farms – with combined capacity of 299MW – they jointly own in Kansas. And Brazil announced that of the 52GW of power projects registered for two capacity auctions later this year, about half is comprised of wind farms.
Bloomberg New Energy Finance gave the green sector’s capricious beast a further boost last week in a new report – commissioned by the UK Department of Energy and Climate Change and publicly available here – revealing that more ambitious greenhouse gas emissions reductions are affordable.
Ratcheting up the EU’s emissions reduction target from 20 per cent to 30 per cent would cost less than 0.04 per cent of the European Union’s GDP, or €7-9 per person per year. Notably, some countries, including Poland – which vetoed an EU roadmap for deeper cuts in March – could stand to benefit as they sell off surplus allowances.
There was more good news for Poland after Chinese Prime Minister Wen Jiabao told a regional economic forum in Warsaw that China would set up a $US10 billion credit line to support infrastructure and “green economy” projects in central and eastern Europe. Meanwhile, as Japan faces the prospect of having no operating nuclear power plants at the end of this week – for the first time in more than 40 years – the government proposed a new feed-in tariff scheme to start in July. The aim of this is to incentivise the development of 2.5GW of new renewable energy capacity by March 2013.
This article was originally published by Bloomberg New Energy Finance. Republished with permission.