Alex Hunter, CEO of Sherwood Power, recently spoke to Fintech Herald to explain why the UK needs both infrastructure investment and an increase in risk capital available if the country is going to transition to renewable energy. You can find the original article here.
Energy is essential to combating climate change. Production and consumption of energy produce most of the world’s greenhouse gases, so it is only possible to achieve net zero by decarbonising our energy systems. This is not new information: this year marked the 30th anniversary of the adoption of the United Nations Framework Convention on Climate Change – and, obviously, the 27th UN Climate Change Conference. Yet we’re still talking about what needs to be done.
What has become apparent throughout this year’s conference is that energy security is now a pressing concern globally, thanks to current geopolitical events. There is renewed political will to invest in ‘home-grown’ renewables due to their reduced security risks. In her Energy Day speech at COP27, the European Commissioner for Energy spoke of the need for a “renewables revolution”, but for this to have a real impact, it needs to move beyond bilateral agreements and focus on tangible interventions.
Why we need a hybrid solution
This is why the current focus on specific solutions, like green hydrogen, feels like a distraction rather than an exciting development. No one source of renewable energy is going to provide a silver bullet for all our net zero and energy security woes. While hydrogen has huge potential to provide clean energy at the point of use, the ongoing debates about its green credentials and the lack of existing technology at scale mean that it still faces the same issues as many other forms of renewable energy. And unlike electricity, there is no existing hydrogen infrastructure to make sure that hydrogen energy is available at the time and place that it’s needed.
If we are going to embrace a “renewables revolution” and use a transition to renewable energy to achieve net zero, then we need to make it easier for companies and institutions to work together. No one company or institution has all the answers, so we need cooperation and collaborative action. In the same way, there is not a singular solution out there waiting to be discovered. To embed renewable energy solutions within our energy systems, we need a hybrid solution.
Right now, you cannot say to a company, let’s just take you off the grid (just as you cannot say to a domestic consumer that they should take their home off the grid). What happens when there is a power cut or the weather changes? A hybrid solution would allow energy to be generated from multiple renewable sources, to be distributed where it’s needed, and allow for flexibility at the grid edge. Achieving this will rely on collaboration, but if it can be achieved, the result will be a robust, decarbonised energy system.
Investing in renewable energy
A hybrid solution will also require significant investment into infrastructure. In the UK, the Infrastructure Commission has said that we need to spend £100billion by 2025 to meet our Net Zero commitments, while the head of the UK National Grid recently said that they need to spend eight times the amount spent in the last 32 years on infrastructure to get the energy from the North Sea into the national grid to where it is needed. Issues relating to energy storage and distribution are not new or limited to renewables but do need to be addressed urgently if we are all to benefit. The Carbon Trust predicts that up to £17 billion can be saved annually up to 2050 if we embrace system flexibility.
If governments are committed to renewable energy, investment is also needed beyond infrastructure: there needs to be an injection of early-stage risk capital into the market to allow innovation to take place and partnerships to develop. In the UK, there was around £10 billion of public and private investment in low-carbon projects in 2020, but this will need to increase to around £50 billion annually by 2030 according to the Climate Change Committee. Where incentives have been made available previously, we’ve seen action follow – such as trials where industrial users are paid to use energy outside of peak times or the UK Government’s Industrial Fuel Switching Programme. But if we want to see action on a global scale – and not just more talk – then these need to be expanded on – and invested in – significantly.