While in political terms 2016 is most likely to be remembered for President-elect Donald Trump and for Brexit, maybe we should pinch ourselves and remember how this year also saw international Governments come together to establish a consensus in favour of ever more ambitious climate change mitigation targets. Many would agree this is the most significant political issue of the year. The signing of the COP21 agreement in November 2015 has been followed by an extremely fast ratification, so that the agreement came into force on the 5th of October this year. For this we must partly thank Mr Trump, without whose candidacy for President of the United States a more relaxed approach may have been adopted by Governments.
Today Glennmont Partners brought together some of the leading opinion formers from the UK clean energy industry, from Government and from the world of environmental economics to mark the shift in thinking on energy policy and investment trends that has occurred. Lord Deben, the Chair of the UK Government’s Committee on Climate Change, Ivor Catto, CEO of leading global renewable energy developer, RES, and Tom Burke, past advisor to several UK Secretaries of State and Chairman of independent think tank, E3G all spoke at Glennmont’s event in the House of Lords. From three diverging backgrounds the message was the same: that there is a momentum behind the decarbonisation of the power sector globally that will not easily be headed off by unilateral actions by climate sceptic Governments; that the economics of renewable power are creating a ‘pull’ factor on regulation, in a reversal of the conventional paradigm of policy being used to create a commercial case for renewables; and that for energy sector investors the choice is no longer difficult – there is more risk inherent in sticking with old conventional plant than there is in supporting the clean energy revolution.
In his speech, Lord Deben drove home the point that whatever policies are under debate in the UK Parliament, decarbonisation is beyond discussion due to the terms of the Climate Change Act of 2008 which establishes a framework to develop an economically credible emissions reduction path. He emphasised the significance of the Paris Accord, drawn up at COP21 last year, which constituted a hugely significant indication of a global direction of travel.
For us to rise to the challenge set out by COP21, innovation is essential. Ivor Catto spoke about how this is indeed under way through the UK’s private sector companies. He considers that the challenges set by climate change mitigation are well understood and create many opportunities for investors to put their funds to work for the good of the planet. Ivor showed that the development of demand-side technologies had the potential to create very significant new opportunities for generation, and that the decarbonisation of the transport sector would give rise to a whole new requirement for carbon-free power generation to fuel the fleet of electric cars.
We ended our roundtable on an optimistic note for the sector. Tom Burke, the well-respected economist and commentator in the world of climate change mitigation, reiterated the point that there is a momentum in the clean energy sector and in decarbonisation in general that will be hard to stop. He pointed out that now Paris is in force there is little that any individual can do to undermine it. The biggest risk in commercial and environmental terms is not investing in low-carbon power generation.
The aligned message from all the speakers was that the momentum of industrial activity and the precipitous drop in the price of power produced from renewable sources signifies a fundamental reversal in the situation from a few years ago. Whereas policy was once used to drive the economics of power generation, it is now low carbon power which directs activity and potentially policy.