A major event is happening next month to inject speed into the transition. Led by the Energy Industries Council (EIC) it will address why globally, the pace of net zero has stalled and how to kick start rapid acceleration if we are to meet our goals.
Stuart Broadley, the CEO of EIC, sat down with ELN to discuss the major issues stopping so many clean tech projects getting to Final Investment Decisions (FID), where money is actually put in to make something happen.
The start of the carbon capture hub in the North East is an example of this, investment is also starting to flow into new nuclear including fusion research, yet we are still at the stage where despite the UK making big strides we have delays to getting clean tech to market.
Across the world there are still far too many FIDs for new fossil fuel plants, despite all the policies announced to try and force the transition, so why is it that companies and the markets are not putting their cash into green generation.
Stuart’s reply to this question is simple…
Why do companies invest? They don’t invest because the policy says invest. They invest because they see the commercial opportunity. So, the fundamental problem with net zero right now is not enough work is flowing from the policy landscape to the order intake.
“This government and many governments around the world have to unlock the potential through actually moving projects, through to the final investment decision.
Around the world we’re producing and using more coal, oil and gas than any other time in history. So, although we have these very ambitious net zero targets, most of the money is not flowing there yet. It’s flowing still into the hydrocarbon world. So, you have to ask question, what’s going wrong?”
“It is because it’s not economical, it is because of most of these renewable projects are not profitable enough for investors and developers to press the button. So, the policies are in place, that’s fine. But ultimately you then have to line up all the stakeholders in the value chain for those projects to move forward.”
So, who’s to blame for this?
“That’s the hard work of government right now. And you know, when governments are changing policies so quickly, it is hard for any of those key stakeholders to know what’s coming next.”
The next area is obviously finance, how do you convince the money people to put their cash into clean tech?
“That’s about return on investment, isn’t it?
“So, when you look at the renewable projects right now, let’s say in Western Europe, you could look at it globally as well. Where does the technology come from? Right. So, what are we talking about? Solar PV that comes predominantly from China, EVs that’s now being dominated increasingly from China.
“So now we look at offshore and onshore wind, which has been dominated by Western European manufacturers, and they are also really struggling to be competitive. And there’s this sort of decision point.
“Do we need to also accept Asian and Chinese technology to really get the return on investment moving again?
It’s not about policy. It’s not about supply chain capability. It’s not really about what’s the right thing to do. It’s about whether key players can make money doing it.
“I don’t know how you fix that until we get real investment moving.”
The EIC are trying to stimulate this by hosting a conference called Bankable Energies next month in the City of London. The aim, says Stuart, is to bring key stakeholders in and get to the stage where investors can work with the suppliers and politicians, so momentum picks up.
“The money has to work. In simple terms, that’s bankability. How do you get a major net zero project to be profitable, to be bankable? And that means all of the stakeholders see the value in putting money and time and effort into it and believing that the policy is not suddenly going to flip flop again and change.
“That’s what this event is about, because we know from the data we’ve got on final investment decision rates across all the net zero technologies, covering all the renewable technologies of onshore wind, offshore wind, solar, also new nuclear technologies and then the liquid technologies like SAF, biogas, biofuels and of course carbon capture and hydrogen, that all of those sectors are only 5% right now, more or less, of globally all the projects announced that are actually at FID right now. Just 5%.
“How does that compare to oil and gas? So that’s at about 40% FID rate.
“So, we feel it’s time now for a senior level forum to bring all the stakeholders together – policy makers, developers, the finance community, the supply chain, the regulators to say, well, what are the 20 or 30 key net zero projects that are stuck and how do we help them?
“I’m not aware of an event that’s done this before where it is purely focusing on unlocking opportunities.
“We all know the problem. Let’s get in a room and work the problem.”
The event takes place on 26-27 February.
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