On 15th March 2018, in London at the House of Lords, Glennmont Partners brought together key institutional investors, former Government clean energy policy makers and a range of Industry experts to discuss and analyse the political support for clean energy and the investment opportunities and trends for 2020 to 2030 in UK and Europe.
The following key observations were noted:
• Gordon Edge looked ahead to what the 2030 Clean Energy Market may look like. Gordon highlighted that mechanisms to take away price risk would still be necessary for renewable energy investments to be made as renewable infra structure are characterised by high upfront capital costs and very low marginal costs. This is a conundrum as clean energy moves to a zero-subsidy world. To ensure capital costs are made at the optimal WACC – someone needs to take the price risk away.
• Gordon predicted from his long-standing experience in the renewable market that projects would be underpinned by different streams of capital comprising of a) electricity revenues (these could be derivate style, contracts for differences, floor price ppa) b) capacity market payments inflows or outflows and c) system services. Technology (both storage and also demand response systems) would facilitate these payment streams.
• Angus McCrone said that investment in renewables globally continues at a steady pace. In 2017, globally over US330bn was invested in new renewable power. This is the eighth year in a row where more than USD250bn was invested in clean energy which continues to outstrip investments in conventional power by a significant factor. Solar was the biggest segment, followed by wind and particular China installed a record 55GW of new solar.
• Angus said that Europe is continuing also at a steady pace with off shore wind taking up a bigger part of the capital flows.
• Also, institutional capital played a big role in financing European investments in particular. This kind of finance came in through multiple pockets including direct investments, fund investments (taking up the largest share) but also project bonds and listed
• Finally, Angus highlighted that battery costs are declining and that the number of storage projects is increasing.
• Barbara Boos explained that the European Investment Bank has been and continues to be one of the most active investors in renewable infrastructure as a fund LP.
• Barbara emphasised that Renewable technologies have rapidly matured into established and reliable low costs technologies. This goes beyond just economies of scale and cost declines. But also, significant positive learning – managers, builders, operators gain experience on lead-times, real costs and methods – have been made reducing project construction times. Also, there has been an evolution of industry standards and counter-selection of best suppliers.
• Barbara mentioned that wind and solar are decentralised, modular and scalable systems – so it is significantly easier to fix and replace single turbines or panel than dealing with break downs in conventional large-scale power plants.
• Also, Barbara pointed out that RE is a powerful method to address power access to less developed geographies with limited grid investments. It can help redefine labour market and working conditions of people working in energy related industries
• The panellists agreed the clean energy market is evolving rapidly and that the significant new growth can be attained as market participants find new ways on the back of technology and further policy making.