11 November 2010
The UK’s proposed Green Investment Bank (GIB) should focus on “quick wins” and offer, for example, financial products that reduce the cost of mezzanine debt for offshore wind projects, according to a leading investment banker.
Policy uncertainty is causing “a paralysis of investment opportunities”, said Abyd Karmali, a managing director and global head of carbon markets at Bank of America Merrill Lynch in London. But a lack of public finance means that policy instruments – such as a green bank – must be designed to leverage, not crowd out, private finance, he said.
“The [green bank] has to have a clear set of metrics of when to exit or not offer its products, otherwise it will overlap with private investors,” he told Environmental Finance Publication’s Climate Finance 2010 conference this week.
The government is still discussing what its planned GIB will do. More details will be released next year and it should open its doors in 2012, said Karmali, who was on the GIB’s advisory panel. However, it will have a small staff and will rely on existing financial intermediaries. “Initially, we expect it to be almost a virtual institution,” he said.
Karmali suggested the bank could offer a “menu of risk-reducing products” that private institutions could use, such as mezzanine debt, securitisation of existing project finance loans, insurance products, loan guarantees and first-loss equity provisions.
Of these, subordinated or mezzanine debt – which bridges the gap between secured debt and equity investment – is probably the most important of product offerings, Karmail said. “It appears to be the most tricky one … but it’s also the one where GIB could have the biggest impact.”
However, the GIB should not remove all risk for investors, otherwise it could give investors and lenders supra-normal returns, he said. And he does not believe the GIB should be a venture capital investor. “I believe there’s enough expertise in the UK already,” he said.
Potential sources of funding for the GIB could include low-cost government borrowing, green bonds and savings products, as well as the income from the sales of EU emissions allowances, he added.
Christopher Cundy
Sunday, 14 November 2010
IEA predicts $5.7tr of renewables investment by 2035
11 November 2010
$5.7 trillion must be invested in renewables by 2035, even under the International Energy Agency’s more conservative forecast – which would still result in global warming of 3.5°C. In 2009, $115 billion was invested in renewables, by comparison.
The IEA’s World Energy Outlook report released on Tuesday warned the timid conclusion last year’s Copenhagen climate talks has added $1 trillion to the cost of keeping greenhouse gas concentrations at 450 parts per million, which scientists say will contain global warming at 2°C, preventing runaway climate change.
Renewables would make up nearly one third of the global electricity supply in 2035 under the New Policies Scenario, up from 19% in 2008 – this assumes that governments cautiously fulfil the policy promises made at Copenhagen. To meet the more ambitious 450 Scenario target, renewables will need to make up 45% of the electricity supply and 20% of the heat supply in 2035.
The shift to renewable electricity will avoid 2 billion tonnes of carbon dioxide equivalent in 2035 under the New Policies Scenario, compared to business as usual. Oil importing countries would save around $135 billion in 2035, as an additional benefit, the IEA says. The 450 Scenario would see nearly 4 billion tonnes saved.
Government subsidies will need to continue to rise in order to deliver these increases, the IEA says. Public spending to support renewables reached $57 billion last year, the first time such a calculation has been produced. This is up from $41 billion in 2007 and $44 billion in 2008. But government spending must rise to $205 billion in 2035 – although costs of installing renewable energy will decline, the IEA puts the increase down to the scale of expansion needed.
This is set against fossil fuel subsidies of $312 billion in 2009, the report shows. Iran paid out the most to support fossil fuel sales last year, making up more than $60 billion of the total figure.
Meanwhile, the glut of natural gas on the market could pose problems for the growth of renewables, however, the report warns. The current oversupply – which is already affecting the ability of US renewables projects to sign power purchase agreements with utilities – will peak soon, but only “dissipate slowly”, the IEA says.
“The gas glut will peak some time soon, but it will be with us for about 10 years,” said Fatih Birol, chief economist at the IEA, adding that this “may not be good news” for renewables. “Renewables may have major difficulties, we see the first signs of this in some countries such as the US,” he said.
The IEA is due to release an analysis of the gas market and its implications in 2011.
Jess McCabe
$5.7 trillion must be invested in renewables by 2035, even under the International Energy Agency’s more conservative forecast – which would still result in global warming of 3.5°C. In 2009, $115 billion was invested in renewables, by comparison.
The IEA’s World Energy Outlook report released on Tuesday warned the timid conclusion last year’s Copenhagen climate talks has added $1 trillion to the cost of keeping greenhouse gas concentrations at 450 parts per million, which scientists say will contain global warming at 2°C, preventing runaway climate change.
Renewables would make up nearly one third of the global electricity supply in 2035 under the New Policies Scenario, up from 19% in 2008 – this assumes that governments cautiously fulfil the policy promises made at Copenhagen. To meet the more ambitious 450 Scenario target, renewables will need to make up 45% of the electricity supply and 20% of the heat supply in 2035.
The shift to renewable electricity will avoid 2 billion tonnes of carbon dioxide equivalent in 2035 under the New Policies Scenario, compared to business as usual. Oil importing countries would save around $135 billion in 2035, as an additional benefit, the IEA says. The 450 Scenario would see nearly 4 billion tonnes saved.
Government subsidies will need to continue to rise in order to deliver these increases, the IEA says. Public spending to support renewables reached $57 billion last year, the first time such a calculation has been produced. This is up from $41 billion in 2007 and $44 billion in 2008. But government spending must rise to $205 billion in 2035 – although costs of installing renewable energy will decline, the IEA puts the increase down to the scale of expansion needed.
This is set against fossil fuel subsidies of $312 billion in 2009, the report shows. Iran paid out the most to support fossil fuel sales last year, making up more than $60 billion of the total figure.
Meanwhile, the glut of natural gas on the market could pose problems for the growth of renewables, however, the report warns. The current oversupply – which is already affecting the ability of US renewables projects to sign power purchase agreements with utilities – will peak soon, but only “dissipate slowly”, the IEA says.
“The gas glut will peak some time soon, but it will be with us for about 10 years,” said Fatih Birol, chief economist at the IEA, adding that this “may not be good news” for renewables. “Renewables may have major difficulties, we see the first signs of this in some countries such as the US,” he said.
The IEA is due to release an analysis of the gas market and its implications in 2011.
Jess McCabe
Graciela Chichilnisky's innovation: carbon capturing
The "architect of the Kyoto Protocol's carbon market" regulates the Global Thermostat
Lucy Siegle The Observer, Sunday 14 November 2010
There are several reasons why Graciela Chichilnisky can claim to be an innovator. She was the architect of the Kyoto Protocol's carbon market, the lead author on the 2007 Intergovernmental Panel on Climate Change that won a Nobel Prize, and reputedly even created the term "sustainable development".
Her most recent venture is the Global Thermostat (globalthermostat.com) pilot plant in Silicon Valley, California. The technology takes waste heat from a solar-generating plant and puts it to good use, thanks to a refined chemical process that (apparently) sucks carbon out of the air, before sequestering it underground. The fact that, according to Chichilnisky, they are able to reallocate this low-cost energy is key: other carbon-capture techniques have come unstuck because they consume too much energy to sequester the carbon, making them uneconomic. Global Thermostat estimated that its process can remove 5lb of CO2 per kWh of electricity, as opposed to coal-fired power stations which currently (in the US) emit 2lb of CO2 for every kWh of electricity created.
Chichilnisky's claims her innovation reverses the "current paradigm" in which the more energy is created the more emissions are created. With her pilot plant she insists that the more energy is produced, the more carbon emissions are reduced. This is a bridge too far for many environmentalists who believe the only way to avert disaster is to turn out the lights – yesterday. Global Thermostat is the embodiment of the optimistic belief in a "technical fix" to global warming, but Chichilnisky is determined to prove it is also economically viable. "The first principle of creating change is you have to make the change profitable," she says.
Lucy Siegle The Observer, Sunday 14 November 2010
There are several reasons why Graciela Chichilnisky can claim to be an innovator. She was the architect of the Kyoto Protocol's carbon market, the lead author on the 2007 Intergovernmental Panel on Climate Change that won a Nobel Prize, and reputedly even created the term "sustainable development".
Her most recent venture is the Global Thermostat (globalthermostat.com) pilot plant in Silicon Valley, California. The technology takes waste heat from a solar-generating plant and puts it to good use, thanks to a refined chemical process that (apparently) sucks carbon out of the air, before sequestering it underground. The fact that, according to Chichilnisky, they are able to reallocate this low-cost energy is key: other carbon-capture techniques have come unstuck because they consume too much energy to sequester the carbon, making them uneconomic. Global Thermostat estimated that its process can remove 5lb of CO2 per kWh of electricity, as opposed to coal-fired power stations which currently (in the US) emit 2lb of CO2 for every kWh of electricity created.
Chichilnisky's claims her innovation reverses the "current paradigm" in which the more energy is created the more emissions are created. With her pilot plant she insists that the more energy is produced, the more carbon emissions are reduced. This is a bridge too far for many environmentalists who believe the only way to avert disaster is to turn out the lights – yesterday. Global Thermostat is the embodiment of the optimistic belief in a "technical fix" to global warming, but Chichilnisky is determined to prove it is also economically viable. "The first principle of creating change is you have to make the change profitable," she says.
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