Nigel Topping: reflections on the momentum behind the energy transitionNigel Topping
Four months after the breakthrough climate agreement in Paris and returning from 24 hours in France with an eclectic group of leaders who met for the 5th Shift Forum, it seems like a good time to reflect on the pace of change and the big challenges to come.
The energy transition is well underway. And we now have a decade of evidence to prove how far we’ve gone and how strong the momentum behind clean energy is.
Over the last 12 years, clean energy investments have risen from $62 to $329 billion, with renewable energy scoring an impressive series of record achievements in the last two years.
Last year alone, renewables grew 8.3%, the highest rate ever recorded and accounted for more than half of all new electricity capacity. Wind and solar power in particular, have overtaken fossil fuels as the main source of new electricity generation across several countries, including the United States. Not only are investments going up, but costs are coming down, so this double exponential bodes well for accelerating positive impact, creating jobs and profit.
Businesses can accelerate the low carbon transition
One of the lessons learned with our campaign at We Mean Business is that collective actions can truly make a difference. Businesses and investors have the power to scale up the energy transition at a much faster rate than the public sector could on its own, as their choices drive market demand for renewable energy and shift capital to developing new low-carbon technologies.
But what needs to happen in order to truly drive this transition further and faster? As I leave the interesting discussions of the Shift Forum, there are four big ideas that seem to be crucial to understand what shape the low-carbon pathway will take in the next years.
The EU Emissions Trading Scheme is in clear need of a reform, as only a strong, regularly increasing price on carbon will be able to drive the transition from coal and oil to cleaner sources of energy. In fact, we are now hearing regularly from oil and gas CEOs that we need a price of $30-40 to drive the switch from coal to gas in power generation. The recently proposed carbon price corridor from the French government would deliver the kind of certainty needed, with prices rising to about $34 next year and reaching about $110 in 2030.
The speed of technology change
One of the top technology headlines in the last few weeks is the launch of Tesla’s Model 3, which witnessed a record 325,000 orders (worth over $14 billion) within the first week. It is an impressive signal of the growing demand for cleaner means of transport as well as of the fast technology shift. It is a fundamental piece of the low-carbon transition, which does require a much faster pace in the development of charging infrastructure and clean power generation.
Carbon capture and storage
As we head towards a zero-carbon world, carbon capture and storage (CCS) technologies could be a viable solution for some high-emitting industries.
Though CCS is still considered a high-risk and costly approach to cutting carbon emissions in the power sector – where demand management, storage and clean power generation are more effective solutions – there could be a significant business opportunity in the steel and cement industry, where process emissions are currently unavoidable.
Finally, there seems to be growing clarity in the financial world about the real economic risks associated with climate change, as well as the opportunities opened by the shift to a low-carbon economy. This is happening thanks to the actions of forward-thinking investors such as AXA, which shifted €350 million from coal assets and tripled its investments in green technologies, as well as bold joint initiatives like the Portfolio Decarbonisation Coalition.
There is no doubt that business and investors are recognizing the benefits of joining forces in global collaborative initiatives to drive the energy and climate transition. Whether committing to 100% renewable power through RE100 or implementing bold sectoral plans through the Low Carbon Technology Partnership initiative, new leadership norms are emerging that show the way to implement on the promise of Paris.