ENERGY TRANSITION

5 talking points from Financing Energy Transition 2024

On 23rd May, Tamarindo hosted Financing Energy Transition with a day of discussion about wind, solar, energy storage, power-to-X and more. Here were five of the biggest talking points, including investment potential, Chinese turbine makers, and obstacles to the viability of wind, battery and power-to-X projects.

RICHARD HEAP

June 4, 2024

  • 500 leading renewables players joined us on 23rd May
  • Wind, solar, storage and power-to-X in the spotlight
  • They discussed Chinese OEMs, Goldilocks and more

 

What were the biggest talking points from Financing Energy Transition?

On 23rd May, A Word About Wind’s parent group Tamarindo hosted the Financing Energy Transition conference in South Kensington, London. This event was run in partnership with headline sponsors GCube Insurance and MUFG, and gave nearly 500 industry leaders the chance to weigh in on the biggest industry issues.

This included wide-ranging discussion about key issues affecting investors in wind, solar, energy storage and the power-to-X sectors.

Here are five major themes:

 

1) Is investment in wind and solar poised for rapid acceleration?

Stephen Jennings, head of energy, structured finance EMEA at MUFG, kicked off the day with a presentation called ‘Who’s winning – Goldilocks or the Bears?’ He shared his views on why solar and wind might be entering a ‘Goldilocks era’ of growth that is both stable and sustainable, as well as some of the ‘bears’ that may de-rail it.

Jennings started by arguing that support for solar and wind investors in Europe and the US have grown due to strong policy support in the EU Green Deal and Inflation Reduction Act respectively. He said strong policies globally could unlock investment in renewables totalling $7trn in the next ten years, and help boost deployment from the almost 500GW – including 350GW solar and 116GW wind – added globally in 2023.

But he added that there were disruptive ‘bears’ that may undermine these positive policies. Potential constraints on growth include much-talked-about disruption in the supply chain in fast-growing markets, which was a major theme throughout the day; inflationary pressures that threaten to undermine the economics of renewable energy projects; and the risks posed by political change in a big year for elections globally.

Jennings concluded there was still plenty of evidence to support the theory that the renewable sector is entering a ‘Goldilocks era’, but we will need to reconvene in 2025 to check if that optimistic view still holds true.

 

2) What role should Chinese turbines play in the western wind market?

In a wide-ranging opening panel discussion, our expert panellists agreed that there is plenty of positive sentiment surrounding the deployment of solar and wind. They said growth of solar power would be strong in both new and established markets globally, but added that transmission would remain a major difficulty in some countries.

They said growth would continue in wind too but were less bullish than for solar, due to the complexity of the global wind supply chain. Almost inevitably, discussion then moved to one of the hot topics for wind in 2024: the influence of Chinese suppliers.

Lucy Heintz, partner and head of energy infrastructure at Actis, argued that Chinese turbine makers “are going to have to play a role” in the wind sector’s growth outside China if the industry is to achieve its goal. Her view was echoed by Jonathan Cole, chief executive at Corio Generation, who warned that hostility to Chinese turbine makers in western markets risked putting their energy transition at risk.

“Taking China out of the global supply chain is going to result in delaying the global energy transition and making it more expensive,” he said. Cole also argued that the positive outcome for renewables at COP28 was based on sectors working together.

 

3) How can we unlock investment in the UK offshore wind supply chain?

Financing Energy Transition included a dedicated discussion about how to build a stronger offshore wind supply chain for the UK offshore wind sector. Hosted by Tim Pick, chair of the Offshore Wind Growth Partnership, our speakers argued that firms needed more clarity on upcoming UK projects to unlock supply chain investments.

Nathalie Haller, director at the UK Infrastructure Bank, discussed a ‘chicken and egg’ situation in UK offshore wind. Developers want to progress their projects but would only be able to develop viable projects if they have clarity about the state of the UK offshore wind supply chain. However, manufacturers will only be able to invest in strengthening the supply chain if they know which projects are in the development pipeline, are likely to be profitable, and are set to reach financial close too.

Haller said the UK’s Contracts for Difference round six should give greater certainty to companies looking to invest in strengthening the UK supply chain.

Meanwhile Will Apps, offshore wind strategy director at The Crown Estate, said the UK Government also needed to focus its attention on training the “diverse pipeline of people” needed to support a healthy offshore wind sector. Apps also announced the launch of The Crown Estate’s £50m Supply Chain Accelerator fund, which intends to support investment in UK suppliers to accelerate and de-risk early-stage projects.

 

4) What are the biggest obstacles to developing viable battery projects?

 Supply chain difficulties are not only issues for wind. Experts in our storage-focused sessions discussed the issues that are affecting the economics of battery systems.

James Mills, managing director at Adaptogen Capital, highlighted the rising costs of lithium-ion batteries and the lithium used in them, which is partly due to the fact that China dominates the global supply chain. Mills said he expected the battery supply chain for batteries to remain tight in the coming years, but shared his hope that the cost of batteries would keep falling as a result of technological innovation.

Fraser McLachlan, chief executive at GCube Insurance, said another big change for battery projects was the steep rise in freight costs since the Covid-19 pandemic. He concluded: “When we’re trying to replace equipment that’s failed, freight costs are six times more than they were before Covid. That’s a significant cost.

This week, Tamarindo and our sister title Energy Storage Report have launched our inaugural Energy Storage Investment Awards. Get your entries in by 6th September and join us in London for the awards dinner on 3rd December. Full details here

 

 

5) How can developers secure bank funding for their hydrogen projects?

In our power-to-X sessions, we heard from banking experts about how developers can take their green hydrogen production projects to financial close. This is a hot sector for developers, but there are bottlenecks to take projects to financial close.

For example, our speakers argued that developers would find it hard to take projects to financial close in Europe without off-take deals for the hydrogen they produce, as this would make it harder for them to secure bank debt. They also argued it was vital to develop the hydrogen supply chain to support the execution of larger projects; and the difficulty of project-on-project risk, which is where one development – such as a green hydrogen plant – is reliant on other infrastructure investment for its viability.

But there was optimism about green hydrogen developments too.

Matthew Williamson, UK head of hydrogen at BP, said the UK government has done a good job of establishing a hydrogen business model that should help developers. He shared insights about BP’s development-stage H2Teesside scheme in northeast England, which he said helped to avoid some of the infrastructure and off-taker risks because the different elements of the development would be physically close to each other and a host of hydrogen off-takers. This reduces infrastructure and volume risk.

Have you heard about our Power-to-X Leadership Council programme, where we gather leading industry experts to solve the most pressing issues in power-to-X. Our next meeting is on 3rd July. Get in touch to find out more