Perspectives
6 March 2023
The first installation in this year’s Green Energy Conference (GEC) series focused on the role of partnerships in overcoming complex decarbonisation and energy security challenges and scaling up climate technologies.
Paul Plewman, Macquarie EMEA Chief Executive Officer, in conversation with Catherine MacGregor, CEO of Engie
The event was held in London and hosted speakers from various industries instrumental to the energy transition to discuss topics ranging from delivering a rapid but orderly transition, to securing clean technology supply chains, from how policy can unlock private investment to how we address skilled labour shortages.
In this article we outline our key takeaways from those discussions and explore the overall themes in more depth.
2022 was a turning point in the energy transition. Albert Cheung, Head of Global Analysis at BloombergNEF, highlighted that momentum for the transition withstood its greatest test so far in the face of the global energy crisis last year. Despite initial fear about countries and corporates backtracking on climate commitments, governments committed more financial and policy backing to the transition than ever, and energy transition investment reached a record high of over $US1 trillion. One standout growth area was clean mobility which saw close to $US500 billion in investment in 2022 and over 10 million electric vehicles sold.
Source: ‘Energy Transition Investment Trends 2023’, BloombergNEF
Beyond the climate imperative, a key reason that commitment to the transition grew in 2022 was an increased appreciation of how low-carbon alternatives can aid long-term energy security and affordability. Geopolitical tension and extreme weather brought energy supply security to the fore of the political agenda and made governments eager to hedge against future energy price shocks and their consequent economic fallout. Catherine MacGregor, CEO of Engie, reflected on how this macro trend has informed Engie’s strategic investment priorities, increasing the focus on flexibility solutions like batteries and dispatchable generation.
Watch Catherine MacGregor, Chief Executive Officer of Engie, reflect on how macroeconomic trends have informed energy investment priorities.
With each passing year, the rate at which we must cut emissions and deploy new solutions for a net zero world gets steeper. While 2022 was a record year for energy transition investment, the world remains below a pathway consistent with the Paris Agreement goal of keeping global warming well below 2C. Aligning to that trajectory will require current annual investment to increase three-fold between now and 2030 and five-fold in the 2030s.
Time is of the essence in the transition and a recurring message from panellists was that at our current stage of the energy transition, scale trumps innovation. For most sectors, mature low-carbon technologies exist that can satisfy most of their demand and our priority should be scaling up production of these to improve their cost competitiveness. This was stressed particularly by the CEO of Verkor, a French EV battery manufacturer, with respect to the risks of focusing too much on new battery chemistries, and the CEO of SkyNRG, a sustainable aviation fuels producer, with respect to the focus on new aircraft propulsion technologies, such as hydrogen.
We don't need a breakthrough in the technology to be able to have the range that will satisfy most people’s needs, especially as the network of charging options will increase. We are in a position of being connected to the [innovation] ecosystem but also willing to accelerate the best viable technology of today.”
Benoit Lemaignan,
CEO of Verkor
We will see arguments around new propulsion technologies, we will see efficiencies in the airline industry, we’re going to continue to see offsets as part of the mix. But a huge chunk has to come from sustainable aviation fuel, and it can be done today.”
Philippe Lacamp,
CEO of SkyNRG
The energy transition requires dizzying levels of new infrastructure across various sectors. This is especially daunting in sectors like carbon capture and storage (CCS) which, as flagged by Nick Cooper, CEO of Storegga, needs to build out infrastructure at the scale of the 120-year-old oil and gas industry between now and 2050 to meet the goals of the Paris Agreement. In that context, Catherine MacGregor expertly summed up the important role of repurposing and reusing in saying “the best infrastructure is that which has already been built.” Other speakers reinforced this point with regards to reusing minerals in EV batteries, repurposing grid infrastructure for flexibility solutions and EV charging deployment.
Nick Cooper, Chief Executive Officer of Storegga
Though the increased focus on energy security in 2022 drove greater government commitment to the transition, it also drove a shift towards an increasingly nationalistic approach to climate policy. The race to deploy climate solutions is on and countries are taking major steps to attract investment in domestic value chains. Albert Cheung highlighted that China remains a clear leader, accounting for 50 per cent of the $US1 trillion invested in the transition in 2022 and exercising an even greater dominance in most clean energy and critical mineral supply chains. However, governments across the globe are looking to change this picture with a steady stream of policy announcements aimed at onshoring or “friend-shoring” clean energy supply chains to reduce their reliance on China and secure a competitive advantage in the transition.
Despite the steep increases in capital needs to align to a net zero trajectory, finance is not a material bottleneck to the transition – a message shared by Mark Dooley, Global Head of Macquarie Asset Management’s Green Investment Group. More effort must be directed towards removing regulatory and permitting barriers that slow projects down. For the power system, greater investment in grid infrastructure is key for enabling high renewables penetration and large-scale electrification of heating, transport, and industry.
Sustainability is not the problem; we know how to do that. Money is not the problem; well-structured and conceived projects will find the money. The blockers are the blockers. The grid, planning processes, consenting processes, those are the things that are going to stop us scaling the dizzying heights of $US4.5 trillion.”
Mark Dooley
Global Head of Macquarie Asset Management’s Green Investment Group
Catherine MacGregor also highlighted the need for consistency in regulatory and investment frameworks within regions and policy stability for boosting investor confidence. A critical and often overlooked bottleneck flagged by GEC23 panellists is the availability of talent for the transition. Melanie Lane, CEO of Shell Recharge Solutions, noted that the availability of skilled electricians is a limiting factor to the buildout of EV charging infrastructure and other panellists echoed the impact of skills shortages on their industries. This challenge underscores the importance of investment in workforce training and initiatives like the green jobs programme sponsored by the Macquarie Foundation.
A recurring theme across the conference was the reality that partnerships across value chains, such as the mineral-battery-automotive value chain, across industries, like waste, refining, and aviation, and across sectors, such as energy, industry, and finance, are necessary for a rapid and efficient transition. There will be no ‘quick wins’ in the transition, which is why panellists highlighted the importance of building cross-sectoral ecosystems where we can share knowledge and capabilities to both scale existing clean solutions and innovate. Beyond private partnerships, collaboration between public and private sectors is also crucial to create an environment that gives businesses and investors the certainty to commit billions to clean technologies and assets with lifespans ranging from 15 to 40 years.
