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Blackstone’s Horn Compares Today to 1970s Embargo: BNEF Summit Update

These translations are done via Google Translate

By Bloomberg News

It’s the second day of the BNEF Summit in New York, one of the premier conferences focused on the energy transition. Many of Tuesday’s speakers discussed how Russia’s war in Ukraine may affect the global transition to clean energy.

As the conflict disrupts global energy markets, many see the turmoil as an opportunity to accelerate the shift to clean energy, while others say it shows how much the world still needs fossil fuels. Wednesday’s speakers will address policy and financing issues as the industry responds to the upheaval.

Time stamps are New York.

Heavy Industries Need Creative Financing to Slash Emissions (3:21 p.m.)

Investors aren’t going to be willing to fund decarbonization by accepting lower returns on projects, said Paul Bodnar, global head of sustainable investing at BlackRock Inc. “We need to bring the green premium down.”

Industry is difficult because it’s about rebuilding entire systems, he said. Cement and chemical firms, for example, may need to follow the auto industry, as when Ford and Daimler split themselves to pursue decarbonization, he said.

“We do believe the energy transition in general has inflationary pressures which need to be managed and they need to be managed through public policy,” Bodnar said. “It will require public finance” and heavy regulatory support that is coordinated across borders, he said.

The use of proceed bonds can be a significant sustainable financing tool, according to Daniel Shurey, ING’s director of sustainable finance. These are bonds that create credit transparency by showing a borrower is planning to achieve certain goals.

With many of the technologies that still in early stages of development or adoption, there will need to be more creative forms of financing, said Andrée-Lise Méthot, founder of Cycle Capital.

Carney Says Financial Alliance is Assessing Stranded Assets (3:07 p.m.)

Mark Carney, co-chair of Glasgow Financial Alliance for Net Zero, said the group of banks and money managers is working on how to manage the phaseout of stranded assets to help expedite the shift to cleaner fuels.

“We need a responsible and transparent framework to do that so that industries that are high-emitting, energy sources causing climate change, those can be responsibly managed down and truly be part of the transition,” Carney said in a presentation at the summit.

Carney started the alliance in April 2021 to bring together existing and new net-zero finance initiatives in one-sector wide coalition. The group has more than 450 member firms from across the global financial sector, representing more than $130 trillion in assets.

Shipping Snags Are Hampering Deployment of Big Batteries in U.S. (2:39 p.m.)

Shipping bottlenecks and supply-chain constraints are hurting deployment of large-scale batteries in the U.S. just as the market was poised for explosive growth, BNEF’s Helen Kou said in a presentation.

The U.S. in 2021 deployed about 4 gigawatts of batteries big enough to supply the power grid, up from about 1 gigawatt the year before, according to BNEF data. BNEF initially expected that growth to continue soaring this year, with the U.S. forecast to install 7.6 gigawatts, Kou said.

The industry has been hit with shipping problems, supply-chain hiccups and higher costs for lithium and other battery metals. As a result, BNEF cut this year’s growth forecast for the U.S. by 29% since projects have been delayed. Batteries that can supply power for four hours cost roughly $200 to $280 per kilowatt-hour last year, and now they cost $250 to $400 per kilowatt hour, she added.

Plug Power Makes U.S. Second-Largest Market for Electrolyzers (12:22 p.m.)

One company – Plug Power Inc. – accounts for the U.S. being the world’s second-largest market for green hydrogen electrolyzers after China, BloombergNEF analyst Meredith Annex said.

Electrolyzers, the building blocks of a green-hydrogen economy, are machines that split hydrogen from water. If powered by solar or wind, they can produce a fuel that gives off no carbon emissions, either when it’s made or used.

BNEF expects China to be the world’s largest market for electrolyzers this year, deploying between 1.1 gigawatts and 1.6 gigawatts of the machines. But the U.S. comes in second, Annex said, with 262 megawatts to 336 megawatts forecast to be deployed.

Most of those will be tied to Plug Power, which makes electrolyzers, produces hydrogen and sells fuel cells that use the gas to generate electricity. The Latham, New York company is building a series of hydrogen production plants nationwide and on Tuesday announced a deal with Walmart to supply the retail giant with the fuel.

Startups Target Carbon Removal in Ocean and Soil (11:24 a.m.)

Technologies for locking away captured carbon dioxide in the soil and the ocean could be deployed in as little as five years, startup founders in the field.

Project Vesta adds the mineral olivine to seawater, allowing the ocean to absorb more CO2 from the atmosphere while also lowering acidity, co-founder Kelly Erhart said. Vesta plans to mix olivine into sand that coastal communities use to fight beach erosion, with a pilot project in New York State beginning in June. Vesta could reach 1 million tons of carbon removal per year in 2027 or 2028, she said.

Jason Aramburu, co-founder and CEO of Climate Robotics, said his startup could reach that level between 2026 and 2028. Climate Robotics uses pyrolysis, a process of heating material in the absence of oxygen, to turn crop waste into carbon-rich biochar, a soil additive that can increase crop yields. The firm has pilot projects in Texas and Arkansas, he said.

EnerStar Solutions

Goldman Sachs Sees Carbon Markets Helping Incentivize Expensive Tech (11:08 a.m.)

The sale of credits will help make carbon-removal technology more financially viable as the market gains greater credibility, said Kara Mangone, Goldman Sachs’s global head of climate strategy.

There’s “a lot of momentum” in voluntary markets, but they’re still small compared to compliance markets like the EU ETS, Mangone said in a panel discussion. Further growth will help finance plans to hit goals of the Paris Agreement, which are set to cost around $100 trillion to $150 trillion. Removals credits are still a small part of the carbon market, which means the need for both removal and avoidance offsets, and clearer guidance on what’s good quality, she said.

“There’s a huge amount of nervousness among corporates” who don’t want to buy something investors or the media will criticize, Mangone said.

Both removals and avoidance credits will get clearer guidance on what’s a high-quality asset, said Nathaniel Keohane, senior adviser to the Integrity Council for the Voluntary Carbon Market. “We are developing the high-quality threshold standard for what a good carbon credit looks like,” he said in the panel talk.

Drax Group Plc’s Chief Executive Officer Will Gardiner said that bioenergy with carbon capture and storage — or BECCS — is the “next big wave” in carbon markets and has the potential to spread globally. “Permanent geological removals is much more of a new market, and that’s what BECCS can provide,” Gardiner said during the discussion.

Colombia Boosts Renewable Capacity by 100 Times Over Four Years (10:35 a.m.)

The Colombian government has awarded 100 times the installed capacity for renewable energy since 2018 to reach 280 megawatts, Energy Minister Diego Mesa said. Colombia is moving toward green hydrogen with two pilot projects — one developed by the nation’s state-owned Ecopetrol and another one to blend natural gas and green hydrogen for a distribution network.

Colombia is focusing on its domestic market first and expects to develop as much as 3 gigawatts of equivalent electrolyzing capacity for green hydrogen by 2030, and is targeting prices of around $1.7 per kilogram by that period.

Meanwhile in Panama, Energy Secretary Jorge Rivera said he doesn’t expect a change in green energy policy in the Central American nation. Rivera said the country is one of the three countries across the globe that’s certified as carbon negative and he expects to continue that path. The nation produced 81% of its total energy from renewable sources last year.

The country is working hard to incentivize electric transportation in the Panama City metro, he added.

World Held Hostage by Petro States That Wield Energy as Weapon (10:07 a.m.)

The world has been held hostage by aggressive petroleum-producing states too many times and needs to rapidly develop clean energy so it’s not vulnerable to pressure from leaders like Russian President Vladimir Putin, U.S. Treasury climate counselor John Morton said.

“We need to change that script so this is the last time malign actors and autocrats can weaponize their oil and gas,” he said. Putin’s “brutal war” should be our last energy supply shock, he added. Treasury is working toward that goal by making tens of billions of dollars available for domestic investment and working with G-20 partner nations on plans to increase clean power development, Morton said.

Morton also spoke about the effort to encourage South Africa to shutter its coal-fired power plants.

“The question is how can we put together a financial package that is significant enough to support the government making difficult decisions around coal decommissioning,” he said.

Blackstone’s Horn Sees Similarities to OPEC ’70s Embargo (9:30 a.m.)

The current energy crisis sparked by Russia’s invasion of Ukraine recalls the OPEC oil embargo in the 1970s and is an opportunity to speed up the development of new technology and the energy transition, Blackstone Inc.’s Rob Horn said Wednesday.

“There are a lot of similarities to what we see today with very high energy prices and a focus on energy security,” said Horn, global head of the sustainable resources group for Blackstone Credit. That embargo spurred a lot of innovation and the start of new technologies, he said. We have built an amazing energy system in the U.S., he said, but “it needs to be cleaned up.”

Google Looks Beyond Wind and Solar to Regulatory Change (9:12 a.m.)

Eliminating carbon emissions from a company as big as Alphabet Inc.’s Google involves more than just buying a lot of wind and solar energy. To ensure there’s enough carbon-free power for its operations, now and in the future, the company has to invest in next-generation energy technologies and push to change regulatory structures, said Caroline Golin, the company’s global head of energy markets and policy.

Besides putting money into wind and solar, Google is also investing in carbon-capture, hydrogen and advanced nuclear systems, and has had rethink the way it procures energy.

“When we took on the challenge of decarbonizing our offices and data centers, we realized we have to fundamentally change the way we do business,” Golin said. “All corporations have a role to play.”

Financiers Pessimistic on Greenhouse Gas Emissions (8:50 a.m.)

Late Tuesday, financiers expressed pessimism about whether global greenhouse gas emissions would peak in 2025. That’s the date most scientists agree is the latest to keep the world on track to cap global warming at 1.5 degrees Celsius (2.7 Fahrenheit) and avoid the worst impact of climate change. Five speakers on a panel were asked to rate their pessimism to optimism on a scale of one to 10; four people responded with three or lower, while the fifth person said six.

The world will be focused on energy security during the next three years, as Europe seeks alternative gas supplies and China increases coal generation, said Vikrum Vora, a portfolio manager with Goldman Sachs Group Inc.’s asset-management arm. Later in the decade there could be an accelerated effort to tackle carbon, with China and India’s projected peak emissions in 2030 or beyond.

“I am pessimistic,” but peak emissions could be achievable by 2028 or 2029, he said.

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