Page 5 - AsiaElec Week 03

AsiaElec COMMENTARY AsiaElec BlackRock CEO Larry
and despairs that there will be enough global consensus to meet the Paris 1.5 degree target.
“The reality is that a global consensus will very likely not be established soon enough to counter the crisis,” the Forum wrote in a report published this week with the Boston Consulting Group.
The Forum calls for individual governments to pursue unilateral initiatives. Corporations should “de-risk their investments to avoid stranded assets.” This means that they should challenge their exposure in fossil fuel infrastruc- ture, especially coal, in order to minimise the risk of investment write-offs in future.
For example, the International Renewable Energy Agency (IRENA) argues that the global 2°C reduction targets would result in a $5-10tn decline in coal, oil and gas infrastructure value by 2050.
This must be what has at least partly changed BlackRock’s thinking.
Decarbonisation
In order to drive forward decarbonisation, a key metric is that 45% of the world’s primary energy is used to provide electricity. While renewa- bles such as wind and solar have grown rapidly in recent years, coal still accounted for 38% of global power output in 2018, according to BP data included in its World Energy Outlook. .
Crucially, it is the developing world, espe- cially China and India, that is increasing the use of coal in order to keep pace with demand. Indeed, power demand in rapidly developing economies is outpacing the ability of renewables to meet demand, meaning that fossil fuel use is growing.
However, the cost of solar and wind is pre- dicted to continue to fall, making renewables competitive or even cheaper than coal in more and more markets across the globe.
In China, the levelised cost of energy (LCOE) for onshore wind and solar renewables was an average of 26% higher than for coal across most of China’s provinces, according to a 2019 report from Wood McKenzie, down from 100% in 2010.
However, by 2026 this cost premium is
forecast to disappear in some provinces. as onshore wind and solar’s LCOE falls below coal’s anticipated LCOE of $50 per MWh.
“Wealthier demand centres on the coast and parts of central and north-east China will be first to see competitive renewables costs. But renewa- bles investment in some areas of northern China, such as Xinjiang, will not be competitive with coal-fired generation, even by 2040.” said Wood Mackenzie Power and Renewables research director Alex Whitworth.
Decentralisation and digitalisation
Putting electricity aside, 55% of global primary energy consumption is used in industry, trans- port and heating. Electrifying transport and industry is a second key to decarbonisation. The rise of electric cars in key.
Two other major ways to push decarboni- sation are decentralisation and digitalisation. Decentralising energy systems by building more micro-grids and distributed energy systems in both, for example, large industrial plants in the developing world and in remote rural areas in Africa and Asia will also cut emissions.
Finally, digitalisation will encourage more smart-energy systems, match supply to demand, improve generation and distribution efficiency levels, improve billing and payments, and make regional and international power markets more transparent.
The rush of companies since the New Year committing themselves to cutting emissions must be considered against the IPCC’s 2018 report on global warming that highlighted the need to cut emissions by 45% by 2030 to keep warming below 1.5°C.
To achieve this not only needs governments to put in place effective policies, but the invest- ment community and corporations themselves must agree to move their money away from fossil fuels.
If climate risk is now investment risk, as the likes of BlackRock are recognising, then more and more investors and energy companies will make more concerted efforts to promote green investment and reduce their exposure to fossil fuels. ™
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Photo: Stefan Wermuth/ Bloomberg News
Week 03 22•January•2020 w w w. N E W S B A S E . c o m
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