FORESIGHT Climate & Energy Autumn/Winter 2022 - Teaser

Climate & Energy

Unleashing climate finance

POLICY

FINANCE

POLICY

BUSINESS

Power shifts in the world order

Convincing Big Oil to pay

Where to cut the red tape

Community funds for the transition

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PAGE 22

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PAGE 58

THE MONEY IS AVAILABLE IF IT CAN BE USED EFFECTIVELY

Time to show courage in the energy transition

FORESIGHT Climate & Energy AUTUMN / WINTER 2022

PUBLISHER FORESIGHT Media Group

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EDITOR-IN-CHIEF David Weston david@foresightdk.com

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For all of the bluff and bluster that surrounded the COP26 climate negotiations in Glasgow in November 2021, very little was achieved in securing a pathway to limit global warming to below 1.5°C. In the intervening 12 months, the energy transition has taken a hit with the ripple effects from the war in Ukraine—and the pandemic—affecting supply chains, power prices, investor confidence and political bandwidth. This has led to very few countries strengthening their climate commitments, despite promising to do so in Glasgow.

Ahead of the COP27 talks in Sharm El-Sheikh in November 2022, the UN warned that the world is “still nowhere near the scale and pace of emission reductions required”. Meanwhile, the International Energy Agency’s (IEA) annual World Energy Outlook report predicts global carbon emissions from the energy sector will peak in 2025 due to the increases in government spending on clean fuels in response to the conflict in Ukraine.

The IEA’s conclusions indicate that the money for the energy transition is available, and it seems the willingness of lawmakers, businesses and citizens to adapt in order to make the transition a reality has increased with the plethora of crises blocking the path to a decarbonised economy.

For this issue of FORESIGHT Climate & Energy, our 15th special print issue, we start with the assumption that the funds for the energy transition are available.

The money to shift to net zero is there. What is needed now is the removal of the barriers and adaptation to the challenges so that the funds can be unleashed to accelerate projects and initiatives required to cut emissions sufficiently by 2050.

In these pages, we examine how carbon pricing can be an effective tool in funding low-carbon endeavours but only in alliance with supportive policies and regulations. We look at whether the oil and gas majors—with the deep pockets and knowledge of the energy landscape—can do more to support the transition.

We also examine what all this means for the geopolitical landscape of the world and how that will affect where the money goes.

The lesson we can take from this special print issue is the need for everyone in the sector—investors, regulators, lawmakers, and developers—to be braver.

There are many opportunities afforded by transitioning to a low-carbon economy, which will only diminish the longer they are left unexploited. The whole sector needs to be more ambitious in its targets, bolder in its risk-taking and more courageous in its actions.

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David Weston EDITOR-IN-CHIEF

CONTENT

POLICY

BUSINESS

FINANCE

TECHNOLOGY

A NEW WORLD ORDER

MOBILISE FUNDS NOW TO AVOID THE BIG CHEQUES

CONVINCING BIG OIL TO PAY FOR THE ENERGY TRANSITION

ALL DAY, EVERY DAY

As long as funding targets are missed, the more expensive the energy transition will be

The oil and gas majors have the money and expertise to pay for the transition—so why don’t they?

Power is shifting—not just in terms of the electricity used but also the influence of nations PAGE 6

PAGE 14

RED TO GREEN: WHERE TO CUT THE TAPE

Administrative barriers are holding back renewables growth and investment PAGE 30

Matching energy use to the hour is complicated but could also lead to huge investments in renewables PAGE 42

PAGE 22

COMMUNITY CASH TO BOOST THE TRANSITION

NOT A SILVER BULLET

Alternative ownership and funding models help include the locals in the energy transition

Carbon pricing is seen as a key ally in funding the transition— but it cannot do it alone

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PAGE 48

WILL THE UK’S PERMITTING REFORMS SPEED UP OFFSHORE WIND DEPLOYMENT?

A look at how the UK is trying to remove permitting barriers to accelerate new projects PAGE 38

FORESIGHT

3

6

FORESIGHT

TEXT David Weston PHOTO AerialPerspective Works, Vlad Gansovsky and Yuangeng Zhang

POLICY

A NE W WORLD ORDER As the energy landscape changes, so too could the geopolitical spectrum. Nations that have derived power and wealth from coal, oil and gas face an adapt-or-die moment while countries with the natural resources central to decarbonisation could find themselves holding more cards. Businesses will also need to consider their investment activity accordingly

FORESIGHT

7

POLICY

I

t is often said that some of the major conflicts of the past 50 years have been over oil and the security of supply, demonstrating that geopolitical and energy issues are inextricably linked.

This has never been more evident than in a turbulent 2022, as Russia’s unprovoked invasion of Ukraine sent already-climbing energy prices spiralling even higher and politicians around the world searching for alternatives to Russian natural gas and answers to their energy security challenges.

The necessary transition to a decarbonised economy risks being jeopardised by geopolitical fallout while at the same time the transition itself represents a threat to the status quo.

concluded that all nations should prepare for the changes brought about by decarbonisation. “A state’s relative position in the international system is influenced by a range of attributes, including its gross domestic product, population, land size, natural resources, geostrategic location, military resources, and ‘soft power’,” the Commission’s report says.

“Having control over and access to significant energy resources and markets is an important asset because it enables states to protect vital national interests at home, and leverage economic and political influence abroad. States without such assets, by comparison, have less leverage and are more vulnerable,” the Commission’s report adds.

RENEWED FOCUS The war in Ukraine has both helped and hindered the energy transition. Germany’s decision to expand its coal production and the European Commission’s move to secure a supply of liquified natural gas from other sources, for instance, are not in keeping with the aims of the Paris Climate Accord from 2015 to limit global warming to well below 2°C. However, the fallout has also focussed minds more than ever on energy security, distributed supply and energy efficiency. “Is the energy transition causing or impacting geopolitical events or are geopolitical events impacting the energy transition? It goes both ways but not necessarily at the same time,” says Thomas Boermans from E.ON, a German power company.

Boermans acknowledges that today’s energy system is changing as a direct result of the conflict—not always in a positive way in the context of the energy transition—but he also believes one consequence of the crisis is that people’s readiness to make necessary changes has increased. “People now recognise we need to talk about saving energy and [reduce] resistance to renewables projects,” he adds.

BALANCE OF POWER Reaching net-zero emissions will require a transformation of the global economy. As people and their governments take steps to slash emissions, the flow of money, private investment and power will also shift.

“Renewable energy will not merely influence the balance of power between countries. It will also reconfigure alliances and trade flows, and create new interdependencies around electric grids and new commodities,” writes the Global Commission on the Geopolitics of the Energy Transition. The Commission was formed by the International Renewable Energy Agency (IRENA) in 2018 and is headed up by former Icelandic president Ólafur Ragnar Grímsson.

In 2019, the Commission released a report which 8

“Old kings can be new kings as long as they invest wisely”

ADAPT OR DIE The changing energy landscape means countries with a history of oil and gas production need to adapt their economies to retain income and influence.

“Fossil fuel-exporting countries may face instability if they do not reinvent themselves for a new energy age; a rapid shift away from fossil fuels could create a financial shock with significant consequences for the global economy; workers and communities who depend on fossil fuels may be hit adversely; and risks may emerge with regard to cybersecurity and new dependencies on certain minerals,” the report warns.

These countries—fundamentally the members of OPEC—may use their oil and gas profits to pay for their energy transition. “You see this with countries that have and export large amounts of fossil fuels.

They know that there are limits to earning money on fossil fuels. What they’re doing is cashing in on the ‘Last Man Standing’ philosophy and starting to invest in green hydrogen production” and related facilities,” says E.ON’s Boermans. “Especially if these countries have possibilities for wind and solar, it is very likely that they will use the money they earn on fossil fuels, and currently they are earning billions.”

Private enterprises will also face similar challenges with the energy transition. Companies that rely on fossil fuels—or even just profit from them—will need to adapt and find new business models, new business partners, and new markets in which to do business.

All this while also navigating a potentially challenging geopolitical landscape. “The same goes for oil maFORESIGHT

POLICY

Dependent on energy

SOURCE: World Bank

Percentage of GDP from fossil fuel rents (average 2007-2016)

Mongolia Russia Trinidad and Tobaggo Uzbekistan Kazakhstan Brunei Darussalam Alergia Chad Syria Iran United Arab Emirates Gabon Azerbaijan Qatar South Sudan Equatorial Guinea Turkmenistan Angola Timo-Leste Oman Congo. Rep. Saudi Arabia Iraq Kuwait Libya 0%

10% Oil

Coal

20%

30%

40%

50%

60%

Gas

jors, they have the initial resource and can now earn a lot of money. And then let’s say with money, you can do everything. So that holds in itself the notion that old kings can be new kings as long as they invest wisely,” Boermans states.

NEW GAME, OLD PLAYERS The energy transition will democratise the world more widely, with new countries able to be responsible for their power generation—perhaps for the first time since industrialisation.

Still, as Boermans points out, countries that have held the power in modern times could seek to retain their influence as major economies adapt to the new reality of the energy transition, with potentially damFORESIGHT

aging consequences for the energy sector. Industry observers are warning of a new cold war in which instead of collaborating on energy matters, the world’s major economies enter an arms race of technological hardware and software, including components central to the energy transition.

“The energy industry, like other industries, must consider the impact of geostrategic rivalries, specifically in the procurement of essential hardware and software. This includes make-or-buy decisions for mission-critical components, products and services,” warns E.ON’s trend radar warns, which looks at topics and issues that could affect the energy sector in the future. “For customers of energy services, it will be important that systems comply with, operate and 9

BUSINESS The cost of the energy transition as it stands is astronomical. But the returns are even greater.

The longer investment targets are missed and policy frameworks are neglected, the pathway to a decarbonised economy becomes longer and more expensive. Added support for the developing world is also needed

T

he global opportunities for financial returns are vast. As former Bank of England governor Mark Carney has said, a net zero emissions future will allow banks, fund managers and insurers to invest in private sector plans and profit from the “greatest commercial opportunity of our time”.

He added, in an address in 2020 at the Green Horizon Summit in London: “Building a sustainable future will be capital intensive after a period when there’s been too little investment. It will be job heavy when unemployment is soaring.” Carney has been a UN special envoy for climate action and finance since 2019.

Investment in the energy transition is trickling. In 2020, investment for all energy was $2.5 trillion, with $1.4 trillion of that in clean energy, says Jonathan Coppel, an economist and head of the International Energy Agency’s (IEA) energy investment unit.

Clean energy investment has been accelerating for the past several years. Since 2020, overall growth has been 8% per annum, Coppel says, while clean energy’s growth has been 12%. Energy use accounts 14

for 83% of the CO2 emitted across energy and landuse systems, according to a report by McKinsey, a consultancy.

Meanwhile, asset financing for renewable energy, electrified transport and electrified heat—the funding of projects and infrastructure—was $471 billion in 2020, according to the latest Climatescope report from BloombergNEF, the energy research arm of financial media service Bloomberg. This was up 11% from 2019 and annual volumes have more than doubled since 2013, it added.

Renewable energy accounted for 60% of that total in 2020. China, the US and Germany accounted for over half of 2020 investment. Not surprisingly, China, at $144 billion, was nearly a third of the total. The US followed at 17%, down from $84 billion in 2019 to $79 billion. Meanwhile, at $27 billion, Germany provided a 6% share.

SLOW CHANGE However, this investment is not enough. Gillian Lofts, the global sustainable finance leader at EY, a professional services firm, notes an estimated $32 trillion in FORESIGHT

Road to green Nearly a third of renewable energy investments were made in China in 2020

TEXT Ros Davidson PHOTO Lad Hara Caingcoy, Yiran Ding and Alejandro Luengo

Mobilise funds now to avoid the big cheques

FORESIGHT

15

BUSINESS

investment will be needed by 2030 and $92 trillion in the subsequent two decades to reach net zero by 2050. She recalls that Carney called for $190 trillion by 2050. This includes investment for the circular economy, efficiency and adaptation as well as the energy transition.

By 2030, energy-transition investment would need to be $3 trillion a year to keep the world on track for limiting global warming to 1.5°C, says the IEA’s Coppel. This is more than double the amount in 2020, he notes.

For a net zero scenario in 2050, more than $4 trillion per annum in investment until 2030 is needed, says IEA. “The pace certainly needs to pick up. We also need to avoid a massive uptake in fossil fuels,” says Coppel.

It is in much of the developing world that the influx of money—private and public—is lagging. The cost of capital in the global South is higher, financial systems are less developed and public financial institutions must play a greater role in de-risking investment.

Annual clean energy investment in emerging and developing economies needs to increase by more than seven times—from less than $150 billion in 2020 to more than $1 trillion by 2030 in order to put the world on track to reach net-zero emissions by 2050, according to the IEA. Developing and emerging economies may account for two-thirds of the world’s population but attract only one-fifth of investment in clean energy and just one-tenth of global financial wealth, the IEA adds.

RISK AVERSION

The energy transition is often seen as overly costly in economic terms, according to a number of individual forecasts.

The 2022 Sixth Assessment Report of the United Nations Intergovernmental Panel on Climate Change estimated that the additional cost of decarbonising the energy system to have a greater than 67% chance

However, it is not the appetite of investors that is an issue, but other real and perceived risks. “Renewable energy projects are capital-intensive compared with oil and gas and are especially sensitive to politics and policy risk in a country,” says Sonia Dunlop at E3G, a London-based climate NGO. 16

COSTLY TRANSITION

FORESIGHT

Funding mismatch Investment in the developing world is lagging behind

BUSINESS

Investment inbalance Climate investment is unfairly weighted towards developed markets

$ billion

DEVELOPED MARKETS

150

120

90

60

30

2020

2018

2016

2014

2012

2010

2008

2006

0

DEVELOPING MARKETS

150

120

90

60

OVERBLOWN PREDICTIONS

30

Wind

Biofuels

Solar

Small hydro

Biomass/ waste

Geothermal

2020

2018

2016

2014

2012

2010

2008

2006

0

SOURCE: BloombergNEF

of keeping warming below 2°C corresponds to a global Gross Domestic Product (GDP) loss in 2050 of 1.3%–2.7%.

Meanwhile, McKinsey estimates that the fully-loaded unit cost of electricity production—operating and capital costs plus depreciation of new and existing assets—would actually rise about 25% from 2020 to 2040 under the net zero by 2050 scenario put forward by the Network for Greening the Financial System (NGFS), a network of 114 central banks and financial supervisors.

The cost could still be about 20% higher in 2050, says McKinsey, though technological advances could blunt this impact. The delivered cost could also fall below 2020 levels over time if flexible, reliable and low-cost grids are built, the report adds.

Finally, Wood Mackenzie, a research company, finds that keeping warming to 1.5°C would shave 2% off its base-case GDP forecast for 2050. But as costs come down, transition technologies will become more competitive than high-carbon alternatives, it says. “We think the turning point will be around 2035, after which global GDP growth will outpace our base case, meaning lost economic output could be recouped by the end of the century,” the report concludes.

Some economies will feel the effects more than others. Hydrocarbon-exporting and carbon-intensive economies are likely to see the biggest hits to economic output, while less developed and low-income economies will bear a disproportionally high burden.

Of course, economies that are already closer to net-zero targets will see a smaller economic impact from now to 2050, the report continues. And those that are better positioned—typically wealthier economies with a strong propensity to invest in new technologies—may even benefit economically by 2050, it says.

Marine

FORESIGHT

But the global cost is often overestimated, according to a new peer-reviewed study using probabilistic cost forecasts by University of Oxford researchers, published in the journal Joule. Transitioning to a decarbonised energy system by around 2050 could actually save the world at least $12 trillion, compared with a scenario in which current levels of fossil fuel use continue, says the study.

A decarbonised energy sector would not only result in lower energy system costs than a fossil fuel system—by ramping up solar, wind, batteries, electric vehicles and clean fuels such as green hydrogen— but it would also provide more energy to the global economy and expand energy access to more people worldwide.

17

FINANCE Oil and gas companies are making a ton of cash by selling fossil fuels that are destroying our future.

Could the industry instead be spending lavishly to make amends? It turns out things are not so simple

V

isit Aramco’s website and you would not immediately guess you are looking at the world’s largest polluter. In September 2022, the site was publicising a corporate beekeeping scheme, work with the Aston Martin Formula 1 team on sustainable fuels and backing for “technologies to meet the world’s energy demands ever more reliably”.

Tucked in the news section is a press release on record second quarter and half-yearly results, with quarterly income rising 22.7% to $48.4 billion. This is more than ten times the money spent on the latest phase of the 3.6-gigawatt (GW) Dogger Bank site, the world’s largest offshore wind project.

The figures relating to Saudi Aramco’s environmental impact are no less staggering. According to the Climate Accountability Institute, just 20 companies are responsible for 35% of the 1.4 trillion tonnes of global man-made carbon emissions added to the atmosphere between 1965 and 2018. Aramco, official-

22

ly called the Saudi Arabian Oil Company, tops the list.

Since 1965, when the climate impact of fossil fuels became known to industry leaders and politicians, Aramco’s activities have added some 61 billion tonnes of carbon dioxide equivalent to the air—more than 4% of global emissions.

All the other companies in the Climate Accountability Institute’s most-polluting list are also oil and gas players, with Russia’s Gazprom and Chevron of the United States coming second and third. These two companies alone have added a combined 6% of emissions.

In other words, three oil and gas companies have contributed 10% of total global emissions since 1965, knowing their activities could have devastating environmental and financial consequences.

CLIMATE ALARM In April 2021, a report from Swiss Re, the world’s largest reinsurer, warned climate change could wipe out FORESIGHT

Oil money Countries and companies that profit from fossil fuels could invest more in the energy transition

TEXT Jason Deign PHOTO Equinor and Johny Goerend

Convincing Big Oil to pay for the energy transition

FINANCE

10% of global gross domestic product (GDP) by 2050 if net-zero emissions targets established under the 2015 Paris Agreement on climate change are not met.

“Global temperature rises will negatively impact GDP in all regions by mid-century,” says the report. “In a severe scenario of a 3.2°C rise in temperatures, the global GDP loss could be as much as 14% higher than that under the Paris targets.”

Climate change science is even more unequivocal.

In April 2022, the United Nations Intergovernmental Panel on Climate Change (IPCC) published the final study in its Sixth Assessment Report, with a stark message. Without immediate and deep emissions reductions across all sectors, it said, limiting global warming to 1.5°C is beyond reach. Meanwhile, the effects of climate change are becoming more visible.

An August 2022 analysis of 504 extreme weather events and trends by climate science and policy information service Carbon Brief showed that 71% were made more likely or more severe by human-caused global warming. Given the scale of these impacts, it is 24

reasonable to question what the oil and gas industry is doing, or aiming to do, to avoid them.

There is no question that the sector’s historical impact has been for good. Fossil fuels have powered humanity’s development since the Industrial Revolution, allowing society to record levels of affluence and well-being. Today, fossil fuels meet 77% of the world’s need for primary energy. Nevertheless, it is hard to escape the sense that the oil and gas sector has been profiting from this need while shirking any responsibility to address its negative impact on the environment.

Aramco is not only the most polluting company on the planet but also one of the richest. It came third in the Forbes Global 2000 list of largest companies in the world, published in May 2022, with ExxonMobil and Shell also making the top 20. The oil and gas sector’s historical attempts to discredit the science behind climate change have been widely publicised, and the industry cannot say it does not have the tools to deal with emissions.

FORESIGHT

Cash pipeline Oil and gas companies are more focussed on delivering the energy requirements of today than decarbonising the future energy system

FINANCE

Not walking the walk

SOURCE: ©Influencemap

Percentage of green claims in 2021 public communications vs. percentage of low carbon investments in 2022 Capex

Claims

Investments

TOTAL: 3,421

TOTAL: $87-96bn

GREEN CLAIMS

LOW CARBON

OTHER

Data covers the claims and investments of BP, Shell, Chevron, ExxonMobil and TotalEnergies

TOOLS AVAILABLE Carbon-capture technology in one form or another has been available to the sector since the 1920s and it started storing the carbon underground in the 1970s, but mainly to enhance oil recovery rates. Apologists could argue that modern carbon capture and storage (CCS) facilities should be installed by the industrial customers that use fossil fuels, rather than the oil and gas companies themselves.

Yet it remains an uncomfortable fact that most of the CCS plants in operation today are still used for enhanced oil recovery. The main tool that the oil and gas sector could use to combat climate change is instead being used to make it worse. Furthermore, evidence suggests most oil and gas companies are still committed to worsening the effects of climate change in pursuit of profit, despite public pledges to the contrary.

In September 2022, the climate think tank InfluenceMap analysed company disclosures from BP, Chevron, ExxonMobil, Shell and TotalEnergies. It found that 60% of the companies’ public messages FORESIGHT

made green claims, compared to 23% promoting oil and gas. Yet the companies were only found to be spending an average of 12% of capital expenditure on low-carbon investments in 2022.

The biggest divergence between claims and reality was at Shell, which boasted of sustainability in 70% of its communications while only putting 10% of its capital towards low-carbon investments. While these data sets are not mutually exclusive, they indicate these companies are paying mere lip service to the challenge of climate change. “The world’s big oil and gas companies are spending huge amounts of time and money talking up their green credentials, while their business investments and lobbying activities tell a very different story,” InfluenceMap’s Faye Holder says.

“These companies talk about cutting emissions and transitioning the energy mix, but at the same time continue to invest heavily in new fossil fuels,” she adds. “These companies are out of step with science-based pathways to net zero.”

25

POLICY Clean energy technology is becoming more efficient and powerful, while more money than ever is seemingly flowing into renewables. But administrative barriers thrown up by red tape and permitting bottlenecks threaten to put a damper on the energy transition

I

nterest in clean energy is higher than ever before, as climate targets begin to bite and cheaper renewables offer an unavoidable alternative to more expensive fossil fuels.

New policy announcements to adopt more renewables drop seemingly on a daily basis. Countries around the Baltic Sea agreed in August 2022 to increase their combined offshore wind capacity sevenfold, Spain aims to more than quadruple its solar power reserves by 2030 and the US government plans to spend big on floating wind farms.

Renewables technology is advancing at a rate of knots too. Vestas, a Danish manufacturer, recently started testing a monster 15 megawatt (MW) offshore wind turbine, while tidal facilities and floating turbine platforms are also scaling up quickly.

Another barrier to the mass rollout of clean technology, financing, is also gradually being taken down, through a mixture of changing investor appetites and progressive policymaking by regulators around the world. The European Union, for instance, has rolled out its sustainable investment rulebook to help guide money towards climate-friendly projects, while the European Investment Bank (EIB) as part of its re-

30

brand as a “climate bank” refuses to fund gas power.

Across the Atlantic, meanwhile, US President Joe Biden’s administration successfully pushed the Inflation Reduction Act through, unlocking nearly $400 billion in cash for energy security and climate change resilience initiatives. According to BloombergNEF, an energy finance research group, more and more money is flowing into decarbonisation measures like electric transport, storage and neutralising the emissions from industry across the globe.

SLOW PROGRESS But for the renewables sector, although investments have doubled over the course of a decade from $200 billion per year to $400 billion, the figure has levelled off and not grown at the rate needed to bring greenhouse gas emissions down to where they need to be by 2050.

Admittedly, $100 of renewable energy buys you much more in 2022 than in 2012, due to the plummeting price of solar and wind electrons. However, net-zero targets and the 2015 Paris Agreement’s temperature benchmarks require a much faster energy transition than the one we are currently getting.

FORESIGHT

Administrative burden The amount of paper work required to permit a wind power project is holding the sector back

TEXT Sam Morgan ILLUSTRATION Luke Best PHOTO Sterling Lanier

Red to green: Where to cut the tape

FORESIGHT

31

POLICY

Ember, an energy think tank, insists that the EU needs to double the pace of its wind and solar rollout in order for the Paris deal’s limit of 1.5C of global warming above 1990 levels not to be breached. New data shows that additional renewable capacity needs to top 72 gigawatts (GW) every year by 2026 in order to keep the 1.5C target alive. Current trends suggest that EU countries will not even breach 40 GW a year.

“Europe no longer lacks renewables ambition, but it is now facing an implementation gap. Higher targets have not yet translated into accelerated deployment on the ground,” warns Ember data analyst Harriet Fox. Croatia, Finland, Lithuania and Sweden are set to hit their benchmarks but the rest of the 27-strong union could struggle to install enough clean power generation. A significant reason for that is red tape in permitting processes.

PERMIT HEADACHES Renewable facilities like wind farms and solar arrays need to run the gauntlet of permitting and approval procedures before they can be built. Environmental impact assessments need to be made and local people need to be consulted beforehand.

EU legislation says that new projects should be permitted within two years and that repowering projects—replacing existing wind turbines or solar panels with newer, more powerful models—should take just one year.

But this is not the reality, not by a long shot. According to Zoe Grainge, a senior analyst at S&P Global Commodity Insights, “Permitting is one of the single largest obstacles to renewable power build-out in Europe, including the UK.” Data provided by Ember and trade body WindEurope shows that none of the 18 major EU countries sampled come in under the 24-month mark for onshore wind projects. Just three markets achieve it for solar power.

This translates into completion statistics that make hard reading: in Germany, the average time taken to finish a wind project is six years. In Italy and France it takes even longer, meanwhile in China it is closer to two years. In some cases, the permitting process takes up to five times longer than the law allows. Industry players explain that a combination of digitalisation issues, byzantine local authority procedures and legal appeals are hamstringing green efforts in a big way.

Spain has more than 20 GW of wind power capacity stuck in the permitting process and just 9 GW actively under construction. Poland, which wants to ditch Russian energy imports quickly, has 12 GW wrapped in red tape and just 3 GW under construction.

Nearly the same amount of solar power capacity 32

is also mired in the Polish administrative quagmire, waiting for the right permit that will allow the plants to be connected to the national grid. The government has been urged to reform the process sooner rather than later.

GLOBAL ISSUE Permitting is by no means a niche issue either, as United Nations secretary-general Antonio Guterres said in September 2022, “We urgently need to put policies in place to incentivise investments and eliminate bottlenecks caused by red tape, permits and grid connections.”

It is also a matter of geopolitics and national security. In its ten-point plan on how the EU can reduce Russian gas imports, the International Energy Agency (IEA) insists that admin hurdles must be torn down.

It says that 20 terrawatt-hours (TWh) of extra renewable energy could be added in the next 12 months and most of this would be utility-scale wind and solar PV projects which could be brought forward by tackling permitting delays.

“This includes clarifying and simplifying responsibilities among various permitting bodies, building up administrative capacity, setting clear deadlines for the permitting process and digitalising applications,” the report adds.

“Permitting is one of the single largest obstacles to renewable power build-out in Europe”

RED TAPE Vladimir Putin’s invasion of Ukraine and Europe’s subsequent quest to nix Russian fossil fuel imports has turbocharged energy policymaking, re-energising legislative efforts that had already been kicked off under the EU’s flagship Green Deal policy, first presented in December 2019.

The European Commission published a new strategy known as the REPowerEU plan in May 2022 in a bid to marshall the policies of the 27 member states and propose new measures to save energy and replace imports with clean alternatives.

As part of that plan, solar power installations should double by 2025, power purchase agreements (PPAs) should be streamlined and overall renewable energy should hit a 45% share by 2030. Permitting must also be improved across the board. “The duFORESIGHT

POLICY

Fact not a fairytale It took 36,000 pages to permit three turbines in Germany

Other measures under consideration include “silence means agreement” or “positive administrative silence” rules, which would mean projects are automatically approved if the relevant authorities do not respond in time.

SOURCE: Enel Group

GO-TO ZONES

MOBY DICK

LORD OF THE RINGS

THE HARRY POTTER SERIES

36,000 SHEETS OF PAPER

ration and complexity of the permit-granting procedures greatly varies between the different renewable energy technologies and between member states,” the Commission says in the REPowerEU plan.

“Our aim is to simplify and prioritise. With our new proposal, renewable energy projects are considered as being in the overriding public interest,” EU energy commissioner Kadri Simson explained in June 2022.

Renewable energy’s new label as a matter of “overriding public interest and in the interest of public safety”, will mean that its design, permitting, construction and operation should be given priority attention by regulators.

“This is important because many wind turbine projects are subject to litigation and appeals. The notion of overriding public interest will make it easier for judges to rule in favour of wind energy when weighing its expansion against other different public interests,” explains Christoph Zipf at industry trade body WindEurope.

The Commission also urges countries to implement permitting rules already set by the Renewable Energy Directive (REDII), which stipulates that approvals should be granted within two years and that a single authority should be charged with processing them.

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The main way that Brussels legislators are attempting to help the renewables sector navigate the permitting maze is to push national governments to be more strategic in their planning and designate so-called “go-to zones” in which to deploy clean energy.

Renewable zones would still be subject to environmental impact assessments but the projects carried out within the area would benefit from a presumption of not having significant effects on the environment.

Most significantly, permitting authorities would be obligated to grant approvals within just one year in go-to zones. If eventually backed by member states, the plan could be a powerful stimulus for the sector.

The Commission says governments could either submit one plan per go-to zone or per technology type, which would incorporate more than one zone, granting authorities a bit more flexibility in how they assess potential sites. Degraded land that is not suitable for agricultural use—a nod to the ongoing fears over food supply triggered by the Ukraine invasion— industrial areas like ports and transport corridors have already been touted as easy-to-identify zones.

Lotta Pirttimaa at trade group Ocean Energy Europe, says identifying go-to zones for ocean energy should not be too challenging. “There are many studies on the resource potential and best areas for wave and tidal energy production,” says Pirttimaa.

Bodies such as the European Marine Observation and Data Network (EMODnet) are key to that effort as a network of organisations that aims to collect and distribute in-depth marine data freely. Germany recently uploaded its spatial planning to EMODnet’s portal, increasing the amount of data available to users.

SITE SENSITIVITY However, NGOs are less keen on some of the implications of go-to zones. A WWF Europe report insists that the idea, “Could be helpful, provided that these areas are based on wildlife sensitivity mapping and reliable spatial planning”, but adds that biomass and hydropower should be excluded.

The report adds that renewable projects should not be exempted from the usual impact assessments as proposed, because that would call into question the ability of authorities to monitor and evaluate infrastructure performance over time and its impact on biodiversity.

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Will the UK’s permitting reforms speed up offshore wind deployment?

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for environmental impacts, designed to avoid such lengthy hold ups. Under the current system, compensatory measures are often decided during the application process of an individual project, and disagreements cause delays.

Strategic compensation would mean that any requirements to mitigate the environmental impacts of the project are decided upfront. They would also consider a wider scale than the individual development, resulting in better results. Strategic compensation already exists under the EU Habitats Directive—Ørsted gained permission for the 2852 MW Hornsea 3 development in exchange for building nesting towers for kittiwakes.

Walker believes that strategic compensation will cut permitting delays. “At the moment, each project is having to find sites and scrambling around during the decision stage—that’s delaying projects quite significantly,” he says.

Conservation charity the RSPB has long wanted a more strategic system. “It is not in the ability of individual developers to safeguard our seabirds. We need a strategy—one that recognises the cumulative impacts of each project. All intervention must focus on tackling the root causes of wildlife decline rather than tending to the symptoms with short-term solutions,” it states.

It has published a report—with input from trade body RenewableUK—on how accelerating offshore wind can be nature positive. It recognises the need for a new approach in order to reach the new offFORESIGHT

Bird protection Delays to offshore wind projects to-date have often centred on their impacts to habitats and migration routes

TEXT Catherine Early PHOTO Eder Pozo Pérez

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nergy security concerns prompted by the war in Ukraine have led to Europe-wide calls to boost speed up permitting for renewable energy so that installed capacity can be boosted as quickly as possible.

The UK spelled out its plans in its Energy Security Strategy published earlier this year. The then-prime minister Boris Johnson promised to make the UK the “Saudi Arabia of offshore wind”. The plan sets out how the government intends to use “smarter planning” to both accelerate the pace of deployment by 25% and maintain high environmental standards, leading to up to 50 gigawatts (GW) of new installed capacity by 2030 from around 14 GW today.

Currently, an issue that has caused opposition and delay to UK offshore wind proposals is their impacts on wildlife habitats, in particular seabirds. Delays to offshore wind projects in the UK permitting process have all occurred in the final stage of the process, when the government minister that overseas permitting is due to make a final decision, says Angus Walker, from law firm BDB Pitmans.

At that point, the resulting overrun has varied from 60 to 800 days, and has tended to be caused by insufficient assessment of the impacts on internationally protected habitats and a lack of certainty on the effectiveness of compensation measures for bird strike deaths, such as enhancing or building breeding areas, Walker says.

One of the reforms in the energy security strategy is the introduction of “strategic compensation”

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shore wind targets, which it says will require “startling speed”—the equivalent of one 12 MW wind turbine installed every weekday for the rest of the decade. “We cannot continue to operate in silos and we cannot address the challenges of offshore wind expansion project by project,” it states.

In addition, the government has proposed reviewing the way the Habitats Regulations Assessments are carried out for all projects making applications from late 2023, which it says will maintain wildlife protections while reducing paperwork.

BIODIVERSITY POSITIVE It is also bringing in an “offshore wind environmental improvement package”, which will include an industry-funded marine recovery fund and design standards. Contributions to the fund will come from developers, through another new policy known as “marine net gain”.

This would mirror the UK’s system of biodiversity net gain, which mandates that all developments over a certain size have to improve habitats by ten per cent. However, due to the increased complexities of implementing such a system in the marine environment, the government plans to start with the relatively simple introduction of a levy on marine development.

Under this, developers would contribute to its marine recovery fund, with these contributions paying for environmental enhancement or restoration. The government will then continue to draw up a more sophisticated system as technical knowledge improves.

Developers are concerned that the “nature first” approach the government has proposed means that the benefits of low carbon power generation will not be considered as a positive impact when assessing the impact of the project, says Juliette Webb from RenewableUK. In addition, the level of contributions will be set according to the capital expenditure of the project, meaning that offshore wind will pay the most, when the impacts of other industries are higher, she adds.

CABLE TIES Grid connections from offshore wind sites to land have also become controversial and delayed consent.

For instance, Swedish developer Vattenfall submitted its application for the 1.8 GW Norfolk Vanguard wind farm in June 2018 and it was originally granted permission in July 2020.

However, following concerns about the impacts of the terrestrial substation connecting it to the mainland grid, combined with that for the neighbouring 1.8 GW Norfolk Boreas wind farm, the permission was quashed by the UK High Court in February 2021. It 40

was then re-granted by the secretary of state in February 2022—a full year lost to bureaucracy.

To reduce the need for such infrastructure, and therefore the risk of similar delays, the government intends to allow clusters of offshore wind farms to connect to an interconnector rather than the pointto-point connections currently in use—similar to the German connection system. The move is also predicted to save consumers £6 billion by 2050.

TIME SAVER Another proposal in the energy security strategy is to fast-track the consenting process for “priority cases where quality standards are met”, so that the time taken for the public examination of the proposal is cut from six months to four. Whether this will help project timescales will depend on the details, according to Walker.

“We cannot continue to operate in silos and we cannot address the challenges of offshore wind expansion project by project”

“It’s all very well saving two months on the examination process, but if it takes you more than two months to achieve the higher quality standard, then it won’t really save time,” Walker says. Though good quality design early on in the process might well save time later in the project, he adds.

What really spooks the investment market is uncertainty, Walker says. “The uncertainty is both about what the new policies are and whether the ones that they announced only two or three months ago will continue.”

Webb does not believe that concerns around how long permitting takes were hampering investment in offshore wind, pointing to the size of the interest from developers and investment in the most recent auction rounds in both Scotland and England as evidence.

“There are obviously concerns around the time it takes for things to happen, but we look at it more from a resourcing perspective. The process is not very streamlined and drains a lot of resource in a way that’s probably quite unnecessary, so it could be better,” she says.

“For developers and investors the main prize is renewable energy, and they are continuing to invest significant amounts of money,” Webb adds. • FORESIGHT

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TECHNOLOGY Companies that are keen to purchase clean energy on an hour-by-hour basis to match their usage are encountering issues that will have to be overcome by the wider electricity system as it moves to fully decarbonised supplies

All day, every day

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As companies have woken up to the importance of boasting green credentials, demand for clean energy procurement has soared. Businesses looking to reduce their carbon emissions usually start by looking at their energy supplies. Perhaps the most obvious way to secure a completely renewable energy supply is to install on-site generation and storage assets such as rooftop solar panels and batteries for self-consumption.

This may be an option for some smaller commercial and industrial firms, but not for large corporations with high energy demands and geographically dispersed real estate assets. Instead, these companies have traditionally resorted to carbon accounting, purchasing enough clean power to make up from the dirty power they buy from the grid. To do this, the businesses originally relied on energy attribution certificates or EACs.

CERTIFIED GREEN An EAC certifies that a given unit of energy has been produced renewably. Since 2009, the European Union has backed a form of EAC called a Guarantee of Origin. A company using, say, 50 megawatt-hours of electricity a year could buy Guarantees of Origin for FORESIGHT

Around the clock Corporates are trying to source power to match their demand to the minute

TEXT Jason Deign ILLUSTRATION Luke Best PHOTO Chuttersnap

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osefin Berg of S&P Global Commodity Insights remembers hearing about 24/7 power matching at a solar conference early in 2022. Unusually for a trade event, there was a heated debate on the subject around, “Whether that is something you should aim for or not aim for, how difficult it is and what are you signing for?” she says.

The issue of 24/7 clean power matching is giving rise to a lot of questions, even though it is a subject few people have even heard of. Some of these questions could be central to the global energy transition.

In a nutshell, 24/7 clean power matching means making sure that the zero-emission energy used by a corporate power-purchase agreement (PPA) customer is exactly matched, hour by hour, with the generation provided by a supplier.

Clearly, this kind of power matching happens as a matter of course on the wider grid. Grid operators must make sure generation matches demand not only on an hourly basis but every minute of every day.

However, the grid operators can do this by calling upon a range of dispatchable assets, including the coal plants and gas peakers responsible for the bulk of the electricity system’s emissions. It is to avoid these resulting emissions that PPAs exist in the first place.

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that amount and effectively claim to have sourced all its electrical energy from low-carbon sources. “Guarantees of Origin or EACs, as the generic equivalent globally, are extremely powerful tools for monitoring and reporting on renewable energy,” says Bruce Douglas of Eurelectric, a European electric utility association.

Around a decade ago, large corporations began to realise they could go one better by procuring renewable energy directly from a project developer. This allowed the offtaker not only to claim their annual energy consumption was being met with an equivalent amount of low-carbon electricity procurement, but also to negotiate a fixed price for the supply over several years.

Thus, the corporate PPA was born. The amount of renewable energy capacity given over to such PPAs has soared in recent years, particularly in Europe.

Businesses there have gone from procuring barely 100 megawatts of PPA-based power in 2013 to 18.5 gigawatts (GW) in 2021, according to figures from REsource, a European platform for corporate renewable energy sourcing.

Ultimately, these PPAs are still essentially an accounting tool, with the amount of grid supplies consumed and clean electricity procured balanced out at the end of a year. Whether a company procures via EACs or a PPA, there is no real link between the clean energy it buys, which could come from anywhere in the world, and the electricity it uses, which is sourced from the local grid.

issues. There were areas where we were running significantly on coal, even though we were claiming we were 100% renewable,” she said.

As these impacts started coming to light, Google’s executives asked themselves: “Why aren’t we decarbonising the grid even though we’re buying up all this wind and solar? The reality is, when the wind doesn’t blow and when the sun doesn’t shine, we’re still running on something. We ended continuing to run on gas [and] coal,” Golin explained.

NOT 100% This mismatch means that even if a company is buying the equivalent of all its energy through a renewable PPA, it cannot reduce its carbon emissions to zero. Modelling by Technische Universität Berlin (TU Berlin) shows that if a company sourced 100% of its electricity through renewable PPAs in Ireland in 2025, it would end up covering only 80% of its hourly demand with carbon-free energy.

“24/7 carbon-free energy means that every kilowatt-hour of electricity consumption is met with carbon-free electricity sources, every hour of every day, everywhere”

PPA PROBLEMS In recent years, this has become a problem for some large energy users, starting with the technology giant Google. The search engine behemoth has technically been carbon neutral since 2007, when it started to completely cancel out its greenhouse gas emissions using offsets.

By 2017, the company claimed to be the first large corporation in the world to run all its global operations off renewable energy. It buys a lot, with PPAs for more than 7 GW of wind and solar power output around the world. This has led to challenges. “We started buying a lot of power in areas where we were not connected to the grid,” said Google’s Caroline Golin at the Power Summit event organised by Eurelectric in July 2022.

“We were buying a lot of wind in the places where wind was accessible and we were buying a lot of solar in the places where solar is accessible,” she adds.

“We didn’t necessarily have a data centre there. That created problems on some grids.”

In parts of the United States, “We overloaded the grid with too much wind and then had distribution 44

In Germany, which has a cleaner grid thanks to interconnections with France and Denmark, the level would be higher, but still no more than 90%. Globally, according to a study by McKinsey & Company, the level today is likely to be between 40% and 70%.

In a bid to overcome this problem, Google set what it said was its most ambitious sustainability goal to date: that by 2030, it would aim to operate entirely on carbon-free energy, around the clock, at its data centres and offices worldwide. It was joined by others in September 2021 with the launch of the 24/7 Carbon-free Energy Compact, a United Nations-backed initiative to advance power matching policy, procurement, technology, market mechanisms, data and transparency.

The Compact now has more than 80 signatories, including companies such as Acciona, AES, Centrica and EDP and organisations such as the African Circular Business Alliance, the City of Des Moines in the US and the Government of Iceland. “24/7 carbon-free FORESIGHT

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Hot property Global corporate PPA volumes have grown rapidly between 2008 and 2021

GW/year 35 30 25 20

SOURCE: AleaSoft Energy Forecasting

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energy means that every kilowatt-hour of electricity consumption is met with carbon-free electricity sources, every hour of every day, everywhere,” says the United Nations.

“It is both the end state of a fully decarbonised electricity system, and a transformative approach to energy procurement, supply and policy design that is critical to accelerating its arrival,” it adds.

MATCHING CATCHES Yet despite mounting interest, 24/7 power matching remains problematic in practice, with only very large organisations having the capacity to act as off-takers and just a handful of energy suppliers able to meet demand. The issue is not the availability of renewables such as wind and solar, which were installed at record levels in 2021.

Nor is it the ability to trace where renewable energy comes from. Companies such as FlexiDAO of Spain and Powerledger of Australia use blockchain techFORESIGHT

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nology to track renewable energy production. In Europe, meanwhile, Guarantees of Origin have evolved into so-called granular certificates, which carry time and location stamps. “Granular certificates are the building block of 24/7,” says Douglas of Eurelectric.

The problem is that having traceable, certifiable renewable energy supplies on an hourly basis is only useful while the sun is shining, or the wind is blowing. In this respect, 24/7 power matching narrows companies’ procurement focus on times when renewable energy is not available—but cannot yet stop these times from happening.

“It is very important to recognise that exploring 24/7 PPAs is not about getting to 100% 24/7 power-matched or carbon-free energy today,” says Eloise Moench of FlexiDAO. “Whereas most corporate energy buyers may be able to reach an 80% or 90% 24/7 carbon-free energy target with their current PPAs, the renewable energy technologies needed to reach 100% are not commercially viable right now.”

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Carbon prices at sufficiently high levels can push firms to internalise the costs of greenhouse gas emissions while providing a long-term price signal to drive investments needed for decarbonisation. Emission trading systems and carbon taxes feature in a growing number of climate strategies, but even the most well-designed instruments must be accompanied by other policy measures if emissions reductions goals are to be reached

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TEXT Heather O'Brian PHOTO Parrish Freeman and Ricardo Gomez

NOT A S I LV E R BULLET

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he price for emission allowances on the European Union’s Emission Trading System (ETS) approached €100 per metric tonne of CO2 in both February and August 2022, the highest level since the market’s establishment in 2005 and well above the €8/tonne level they had traded at as 2018 began.

Market gains for the EU ETS over the last four years have accompanied measures to tighten up the rules of the trading platform and more ambitious EU policy measures, notably the 2021 “Fit for 55” package aimed at reducing the bloc’s emissions by 55% in 2030 compared to their 1990 level, up from the previous target of a 40% emission cut.

Economists like the idea of putting a price on greenhouse gas emissions, arguing that it is a cost-effective lever for meeting emission reduction goals.

The principle is that the “polluter pays”, internalising social, environmental and economic costs of global warming that previously were borne by society at large. This in turn should provide an incentive for emissions abatement and investments in lower carbon alternatives.

The EU ETS is a cap-and-trade scheme, where a cap is placed on greenhouse gas emissions of participating sectors that is tightened over time so that total emissions fall. Market participants—which currently include power utilities, industrial facilities and the intra-European flights of airlines—buy or receive allowances. Low emitters can sell their allowances on the market to those who pollute too much, encouraging the most cost-effective decarbonisation to proceed first.

“We see the ETS as the cornerstone of EU climate policy and the key tool to reach the emission reduction objectives of 2030 and beyond,” says Marion Labatut of French energy group EDF.

EXPANDING TOOL While the EU ETS was the first international trading emission scheme and is also the largest in terms of trading volumes, the bloc is far from alone in using carbon pricing.

As of April 2022, there were 68 carbon pricing instruments globally and three more scheduled for implementation, including 37 carbon taxes and 34 emission trading systems, figures from the World Bank show.

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Following the establishment of a national ETS covering electricity generators in 2021 in China, the world’s largest emitter, carbon pricing mechanisms now cover about 23% of global emissions. In the United States, the world’s second-largest emitter, plans for carbon pricing at the national level have gone nowhere, but there are state-wide and regional initiatives.

TAXES VS TRADING ETS mechanisms come with the advantage that a trajectory can be set for emissions reductions although there is more uncertainty on price levels. Carbon taxes have the benefit of price certainty and are more straightforward to implement, but new taxes can be unpopular or difficult to put in place.

In 1991, Sweden became one of the first countries to implement a carbon tax, initially setting a rate of SEK 250 per tonne of CO2 emitted and gradually increasing it to SEK 1200 per tonne in 2022. According to the Swedish government, “By increasing the tax level gradually and in a stepwise manner, households and businesses have been given time to adapt, which has improved the political feasibility of tax increases.”

Canada has also taken a stepwise approach to a federal carbon tax, which is set now at C$50/tonne and is scheduled to rise to C$170/tonne in 2030.

THE PRICE OF CARBON The High-Level Commission on Carbon Prices identified a $50-100/tonne range as the price needed by 2030 to keep global warming below 2°C—the upper end of the limit agreed in the 2015 Paris Agreement on climate change. Yet, the World Bank notes that less than 4% of global emissions in 2022 are covered by a direct carbon price at or above this range.

After years of low prices, emissions allowances on the EU ETS have changed hands at a price over €80/ tonne for much of the year, while S&P Global expects allowance prices to exceed €100/tonne from 2025 as the bloc accelerates with its net zero goals.

More ambitious targets may require higher carbon prices. Simon Dietz from the London School of Economics and other researchers found in a 2018 study that limiting the global temperature rise to 1.5°C by 2030 could require a median price of $145/tonne in 2005-dollar prices. That would be equivalent to about $220/tonne today.

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Edward Baker of Principles for Responsible Investment (PRI), a United Nations-supported network of financial institutions, points out that the height of carbon prices will also depend on the chosen decarbonisation pathway. If the focus is on renewable energy, prices needed are likely to be “a lot lower” but countries looking to maintain a more sizeable role for oil & gas and carbon capture and storage (CCS) could require significantly higher prices, he says.

THE PRICE IS RIGHT Getting the carbon price right can be complicated.

While low prices can reduce the effectiveness of carbon pricing instruments, prices considered excessive are also problematic, particularly at times when households and businesses are already worried about high energy bills.

The Net Zero Asset Owners Alliance (NZAO), composed of 73 institutional investors with combined assets of $10.6 trillion looking to decarbonise their portfolios by 2050, recently laid out a vision for how carbon pricing should be overhauled. Its roadmap includes expanding carbon pricing and raising the long-term price signal on existing markets but also stresses the importance of predictable increases in prices, noting that rapid increases in carbon prices could erode political support.

“A clear price signal provides companies and investors with greater certainty regarding future price levels for efficient capital allocation,” the NZAO says.

“It also creates stable and reliable incentives for investors, companies and consumers to adopt or develop low or zero-emission technologies or practices.”

In emission trading markets, where the intersection of supply and demand sets the price, policymakers can help provide predictability by setting price floors and ceilings that increase gradually over time.

Pricey carbon Heavy industries are encouraged to reduce their emissions through the introduction of carbon taxes

CREDIBILE THREAT Patrick Bayer from the Centre for Energy Policy at the University of Strathclyde believes that the higher prices now seen on the EU ETS will lead to an increase in sustainable investments, but notes that even low carbon prices can lead to emissions reductions and encourage “greener” investments if there is a credible regulatory system in place.

In a 2020 study, Bayer and Michaël Aklin of the University of Pittsburgh found that sectors covered FORESIGHT

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BUSINESS Local community groups are often seen as being against renewable energy sites or other projects to support the energy transition. But there is a rise in different ownership and funding models that includes local residents who do want to support the quest for a decarbonised economy

“Wind turbines in the landscape are pretty ugly, but when you own them yourself, they’re pretty beautiful,” quips Danish community energy advocate Halfdan Abrahamsen. Abrahamsen is project manager of Ærø EnergyLab, which manages energy projects on the Danish island of Ærø, south of the mainland. Ærø island was a pioneer of community energy in the 1980s, when interest in energy self-sufficiency was high following the 1970s oil crisis.

The island has 11 wind turbines, more than enough to power its own needs, including an all-electric car ferry; and three district heating systems. The system is owned by residents of the island, who buy shares in it when they buy a home there. Ærø was one of the first community-owned energy systems, but many others have since been developed, particularly in Europe.

There is no official record of community projects, but a 2019 report by the European Commission’s Joint Research Centre estimates the number at 3500 across the continent, while the International Renewable Energy Agency (IRENA) cites 4000 globally.

Neither is there a single definition for community 58

energy. Many different models exist, including co-operatives, partnerships between developers or utilities and local people, non-profit organisations and community trusts. But what they all have in common is that they involve communities in decision-making and benefits sharing in energy projects.

REDUCE DELAYS Proponents cite many benefits of community energy, including empowering and uniting local communities, keeping investment within local areas and promoting a better understanding of energy consumption. But one of the main reasons the idea has the support of many governments and energy companies is that they are perceived as reducing local opposition to developments and therefore delays and expense from legal cases.

Whether a community opposes or accepts a renewable energy development is often a matter of perception, Abrahamsen believes. “When you look across the landscape and you see a wind turbine where there wasn’t one before, you feel you’ve lost something. But if you own it yourself, you perceive it FORESIGHT

Neighbourhood watch Community involvement in renewables can attract invesment and fast-track permitting

TEXT Catherine Early ILLUSTRATION Luke Best PHOTO Haytem Gataa and Pop & Zebra

Community cash to boost the transition

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Community energy around Europe

Clos Neuf France

Westmill Solar Park England Westmill claimed to be the first and largest community owned solar park in the world when it opened in 2012. Set on 12 hectares, the 20,000 PV panels generate 4.8 gigawatthours per year. It is run by a cooperative, which also offers grants for community projects within 40 kilometres of the project site. The project was unanimously approved by the local council’s planning committee, having received no objections.

The 12 MW Clos Neuf community-owned wind farm opened in September 2022. Developed by German renewable energy developer BayWa. Local and regional residents invested €1 million into the project, contributing €500,000 as shareholders and another €500,000 as bondholders, alongside financial institution Banque des Territoires and partner Quénéa. Two-thirds of the investors live within 10 kilometres of the wind farm. Citizen investors are also directly involved in decisions about the management of the wind farm. Two community representatives sit on the project’s committee.

Zeewolde Wind Park Netherlands

Earlsburn Wind Farm Scotland

The Netherlands boasts a wind farm that is both the world’s largest to be community-owned and the country’s biggest onshore wind project. The Zeewolde Wind Park has just been repowered, rising from less than 200 MW generated by 220 turbines, to 322 MW from 91 larger turbines. The repowering was initiated by the municipality, following complaints about the landscape impact of the older turbines, which were scattered unattractively, alongside a desire to produce more renewable energy, explains its director Sjoerd Sieburgh Sjoerdsma. The project is owned and operated by more than 250 residents of the area.

Scotland’s first wind farm with shared ownership was built by Falck Renewables. Citizens of the nearby village of Fintry requested they install an extra turbine as part of the 37.5 MW development that they could own. Profits from the project, which began operations in 2008, are reinvested in the community, for example, paying for household electricity consumption and energy efficiency measures.

The Fintry Development Trust which owns the turbine has 200 members out of an adult population of around 500.

Energy bills reduced by £90,000 reduction of household energy bills across Fintry.

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profits, tax revenues, jobs). Particularly, energy co-operatives contribute to a more democratic energy system and social economic development by creating employment and benefits at local level,” it states.

A 2019 study of the contribution of Danish community owned energy projects to the energy transition found that there was significant importance of such models in terms of investment in, and implementation of, decentralised energy technologies.

However, trade body WindEurope says that the benefits of such models on community acceptance is well recognised by governments and developers.

“There is less opposition because the community has been taken along with the project—they’re aware of what’s going on, they might have participated in the decision-making stage and they’re benefiting from it.

So whatever model you use, it usually has a positive effect on public acceptance. Fewer cases end up in court when these models are applied,” says Guy Willems of WindEurope.

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in a different way—you sacrificed a bit of your view, but you’ve gained independence, security, and if you own a share in that wind turbine, you actually also earn a bit of money,” he says.

Research on the impact of community ownership models on community reactions to renewable energy projects is patchy. A 2020 study by Oslo’s Center for International Climate Research and the Free University of Berlin’s Environmental Policy Research Centre concluded that wind farms owned by farmers, landowners, individuals and municipalities often experienced higher levels of trust than those solely promoted by commercial developers.

“Community ownership models help to strengthen local identification with the wind farms, to generate local/regional added value (in terms of income/ FORESIGHT

In countries where community ownership is common, contributions to investment in renewable energy can be significant. A paper examining community energy in Germany found that citizens were responsible for 31% of total investments in 2012, or around €5 billion. However, investment in community energy has suffered in recent years, even in Germany and Denmark, as auction-based systems made it difficult for them to access funding.

The European Commission now wants member states to boost opportunities for community energy.

It believes that by 2030, communities could own around 17% of installed wind capacity and 21% of solar. In addition, while most remain engaged in generating energy, their roles are expanding into energy supply, energy efficiency and electro-mobility, and is likely to continue to disrupt activities traditionally held by energy and car companies.

Under the new European Green Deal, the European Union has become a champion of community energy, with an EU directive stipulating that all member countries enact laws that make community energy not only possible, but also profitable. This states that community energy projects have delivered economic, social and environmental benefits to the community that, “Go beyond the mere benefits derived from the provision of energy services”.

“This Directive aims to recognise certain categories of citizen energy initiatives at the union level as ‘citizen energy communities’, in order to provide them with an enabling framework, fair treatment, a level playing field and a well-defined catalogue of rights and obligations,” it adds.

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