End game for fossil fuels

Direct prohibition of the use of fossil fuels will be necessary in order to meet the goals of the Paris climate agreement, says Rana Adib of REN 21. 

This week’s pod discusses how other sectors should emulate the “extraordinary success” of renewable electricity and how short term measures must accompany long term targets for green energy.

Host: 

• Richard Sverrisson, Editor-in-Chief Europe, Montel. 

Guest: 

• Rana Adib, Executive Director, REN 21.

Transcript

Anna Siwecka, freelance journalist/podcaster: 0:01

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Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:30

Hello listeners and welcome to the Montel Weekly Podcast, bring You Energy Matters in an informal setting. My name is Richard Sverrisson, and today's pod is all about renewables and how they could transform Europe's energy systems. The questions I'd like us to address today would be, where's the growth? How will new projects be financed in a world short of cash after the coronavirus crisis with costs plunging for wind and solar, new technologies such as batteries becoming ever more sophisticated and efficient, what will be the consequences of cheap green energy for gas and coal? I'm joined today by Rana Adib, executive director of Ren 21, A renewables think tank. A warm welcome to you, Rana.

Rana Adib, Executive Director, REN 21: 1:14

Thank you very much. Richard. Hello?

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:16

Hello. I was thinking we could start off, I know you are a sort of, you look at things globally, Rana, but we, I wanted to start off by looking at Europe and one of the big focuses now is on e, the EU Green transition, the EU Green Deal. What do you make of this at the moment, the current level of discussions? And the ambitions that are on the table.

Rana Adib, Executive Director, REN 21: 1:37

Yeah, so I do think that the European Green Deal is indeed something which is quite unique because there is really a proposal to create the first carbon neutral region by 2050. And I think this is something which puts basically a framework which is interesting and also put this basically at the center of all our actions. So I think that is something which is very good and ambitious. Also with regard to this, I think the opportunity we have here too is that it's about decarbonizing our economies, not only in the power sector, but also in all our activities. So we're looking into buildings, industry transferred, and the economic activity. So here's a real opportunity to basically drive a renewable energy transition.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:21

Do you think the COVID-19 crisis has slowed that down or has it provided more momentum for what happens in the recovery period for renewables?

Rana Adib, Executive Director, REN 21: 2:31

There are two aspects to this. One is it is a real advantage that the European Green Deal was already a strategy which was there, and as a result, the discussions which we see in Europe around the recovery packages and greening the recovery packages. Are anchored into a more global framework, and in the strategy. And that is something which is positive and which we also see positively compared to other regions. It's clear however, that we really need to take this momentum because the economic recovery packages are an opportunity to spend money, and so you can spend this money early once. So if we don't use this money in a sustainable way, in the smart way and invest into efficiency and renewables and really investment that allowed to decarbonize the region, then we take a risk here. So I think there is an opportunity. There is, however, one thing which is also clear. When we are talking about the anti transition, there is a structural change which needs to happen, and the economic or the recovery packages will not be enough to drive this because it's not only about money, it's also about creating the right rules to make the transition happen.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 3:39

What kind of rules are you talking about there? Ronna, could you give us some examples?

Rana Adib, Executive Director, REN 21: 3:42

So clearly the market rule, the support for renewable energy and efficiency, but also hating out fossil fuel subsidies, topping investing in fossil fuels and creating regulator frameworks for the electricity markets, but also really spreading renewable energy and efficiency into the other sectors which are lagging behind. So into the building sector, industry and transfer.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 4:04

Absolutely. Those are the key. The, in terms of the, there's, so there's often called the sector coupling, isn't it? But if we look at the financing of renewables how do you see this going forward? You've had phenomenal growth in markets that have provided, a lot of subsidies, pumped loads of cash into renewables. How do you see this? Moving on, where should the financing come and what are the methods that should be used?

Rana Adib, Executive Director, REN 21: 4:26

Very clearly, I think the good news is indeed, and this is especially true for renewable energy power, so the electricity part, which is building on solar, pv, and wind, we really have a huge success our year, and that's the least cost option. And this is also why basically investment is going here. And we, for instance, also see that. Private money is going into that direction. However, when we are looking into the other sectors, we don't see the same success story. I think that is something one thing to mention and here we need to continue the support for renewable energy or accelerated and be much more business on these sectors. In general, I would say what we see globally is that the investment basically into renewables capacities in power and in fuel, has basically only increased slightly from 2018 to 2019. It's of 282 billion US dollars. And this is actually something which is positive because it shows that costs have gone down more. But it is also critical because it shows that the finance is not flowing enough. We need to accelerate, basically increase the finance much more to be able to reach the parents agreement.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:34

But how should we do that? What's the best way to do that?

Rana Adib, Executive Director, REN 21: 5:37

The best way to do that is I think having clear strategies. So that the governments are saying we're going in that direction, and we want the private sector also to go in that direction. Creating the market rules, developing, basically investing in renewable heat and renewable fuels for the transfer sector, and also linking e mobility to renewable energy more. So that investment is gearing in that direction. And here governments can actually be quite active by using their public procurement to create the market so that the private sector also invests in that direction. And then and I think that is something which is interesting in the European green deal is basically their structural fund they have for the energy transition and where the objective is actually to also leverage money from the private sector. Another aspect, which we also see here, and this is addressing basically the structural issue we have. It is not enough to only support efficiency in renewable energy. It's also clear that we need to stop, invest into fossil fuel. And I think the divestment movements we see, for instance, on behalf of the European investment bank, but also the Norwegians hovering fund, et cetera. Are really good indicators, but need to clearly become mainstream.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 6:51

It's, we're almost there in some ways. It's almost a week doesn't go, goes by, with a new investment bank or pension fund pulling out to fossil fuels. So the momentum's certainly there. I think Rana. But how, if we can talk about renewable energy in terms of electricity,'cause I think that's what a lot of our listeners. Are interested in, we've seen a huge growth in the power purchase agreements or PPAs in recent years. Do you think these are the chief driver for this sector for renewable electricity?

Rana Adib, Executive Director, REN 21: 7:19

They are not the chief driver. I think the fact that they are growing is really positive because it shows that basically today investing in renewable energy power so in renewable power. Is a no brainer. It's the least cost option and it's often even more economic or more competitive than even operating existing fossil plants. That is something which is obviously a change maker and bring the traction. However, when we are looking into Europe, for instance here, only 5% of the solar PV installations and 11% of wind power were corporate PPAs. So it showed that there is still a lot of space for development. I would also say, I would argue yes, renewable power is the success story. So for your listeners, very much interested in this. So I think the positive story is two third of the investment in new capacities of power capacities are building on renewable energy versus fossil fuel. But today, even in the power sector, we only have globally 26.4% of the power demand, which is covered by renewable energy. So there is still a lot of space for improvement. And if we are really serious about the Paris agreement, then it really means. Stopping to produce electricity with fossil fuels and phasing With that,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 8:31

if we can talk about Europe here before we talk a little bit more globally as well, which regions in Europe are booming? We know, the uk Germany, Northern Europe for wind, Spain, Italy for solar, which, what areas are maybe lagging behind a bit. Or show the most potential, maybe is another way of putting that.

Rana Adib, Executive Director, REN 21: 8:48

So showing the more potential I would really say, like when we're talking about the 26.4%, I think in the electricity sector in Europe, we're at more than 30%, I think maybe 33, 30 4% of renewable electricity. Obviously there's potential everywhere. Still in Europe, I think what is. Thing is we see that solar fitable tag is really a boom, which is happening in all European countries and even countries which are lagging behind. And even in Poland, that is the only country in the EU that has actually not not subscribed basically to the European green deal. That is something which is interesting. So we see that the Spain has become, basically for the first time the top installer, Germany, Netherlands, France, are driving this. And in the wind sector, however, this is much more concentrated. So there is the uk, Spain, Germany, Sweden, and France. When we are looking into the heating sector that is really something very much driven by Scandinavian countries and on the electric mobility or when we are looking for instance, into bio methane and natural gas of France is leading. And that is something which is also an opportunity for developing very much renewable entity in heating, but also in transportation. It is spread. What is very clear is and I think that is also linking very much to the development of the e mobility or developments of renewable hydrogen. These structural changes and developments of decarbonization only work. If in parallel we also build up the renewable power capacities. And that is something which partly is still very much decoupled. So I take the examples of electric vehicles. Austria is worldwide, the only country that connects support for purchasing an electric vehicle to the subscription of a renewable power purchase agreement. It the only country worldwide, and that is something which obviously can become generalized very quickly and it's not happening. And on the hydrogen part. And I think in Europe we have the hydrogen clearly the hydrogen strategy here, and I think it's important to invest in this because renewable base hydrogen is an opportunity to decarbonize sectors that are difficult to decarbonize. But in parallel, we are really lacking the ramp up on the renewable power capacity building site. And that is clearly reflected by investment going down also in Europe.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 11:16

Absolutely. And I'd like to stick then with the points you made about hydrogen. The development that is still very much in its infancy. It's embryonic in a way. When would you expect this to mature as a renewable technology or I presume we're talking. Green hydrogen rather than the gray variety.

Rana Adib, Executive Director, REN 21: 11:30

So to be honest, I think we should only speak about green hydrogen.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 11:34

Of course.

Rana Adib, Executive Director, REN 21: 11:34

That's the first thing. So I think but it's important to underline this because that in the discussions. It's not always the case today. Green hydrogen's, clearly. Okay. Technically it's feasible economically. We're not there yet. And I think it's really good to invest in this technology because we also see that it takes some time. So if we see today the renewable power being such a success story, I guess it's the result of policies and strategic industrial developments, et cetera. Over 10 years ago and started taking place over 10 years ago and materialized today basically. So it's very clear that on the hydrogen front, we need to invest as soon as possible in developing these so that we can also have mature technologies, the industry cost. Reductions, et cetera, the way we need them so that it's being picked up by markets. I think what is really important here is not to forget because there is a bit of a trend, and especially in Europe, we see this and I think we need to combine the longer term strategy, which short term actions. So for strategic reasons, developing renewable based hydrogen is fundamental. However, we should not forget that there are actually already cost efficient technologies, which can be implemented right now. And considering the fact that we have basically 10 years left to fight climate change, we cannot concentrate we cannot put basically everything on one horse, which is renewable based hydrogen. We need to invest in reducing energy demand now. We need to accelerate basically renewable power development, but also developing and implementing renewable thermal renewable energy solutions in the building sector, in the industry sector, and developing sustainable biofuels and bio methane for the transfer sector.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 13:19

Absolutely. So what again, it's very clear what you'd like to be done, both in the short term, as well as the long term strategy. But what concrete measures should governments or the commission put forward at this stage to enable that to happen or to speed it up?

Rana Adib, Executive Director, REN 21: 13:34

Concrete measures, I think first concrete thinking and we'll. Talk about this. So next week we're going to launch a Renewables global status report 2020. And we'll be quite outspoken about basically the systemic change, which needs to happen because there is a structural shift, which is fundamental. What is very clear is. Today we cannot rely only on the renewable energy, power, successes or on the renewable power successes. So electricity. We really need to look into all sectors. And this means that we need to have governance basically to develop the same ambition and even be more emphasis in the building sector, in industry, and in transfer. And this is not happening and this is not happening worldwide. In terms of targets and policies, basically the increase is flat. We have 161 countries that have a renewable power regulated frameworks compared to 70 and transferred, and 20 more or less in heating and cooling. So it shows there is a disconnect. The other part is phasing out fossil fuels. We still have, I think it's approximately over hundred 10 countries that are subsidizing fossil fuel and in sectors like the heating and the transfer sector that are highly dependent on fossil fuel. We also need to face out fossil fuel here, so a fossil fuel ban. Is something which needs to be considered. And I think obviously this means like accompanying also the sectors that depend very much on fossil fuel and have this as a core business. To also make the transition of their own businesses. And I think that is something where we see that, for instance, in the heating sector, skilling and re-skilling people using the procurement, the public procurement possibilities to create market and demands, then have a stronger integration between these different. We still see that the energy supply discussion is often very much disconnected of decarbonization strategies in other n entity sectors. So on the entity demand side, and I really think this the carbon strategy on the European side is a real opportunity here. There'll

Richard Sverrisson, Editor-in-Chief Europe, Montel: 15:41

be more detail emerging from that in, in the months to come. Where does this put nuclear runner? Because obviously that's for some countries that's a key pillar of their decarbonization policy, but what's your view here at re 21? What do you, how do you view nuclear?

Rana Adib, Executive Director, REN 21: 15:56

So basically nuclear is obviously when we are looking into the CO2 emissions, something which is positive. The reality is however, that when we're talking about climate change, we cannot only talk about the CO2 emissions, but also the resilience of the energy system. To climate. And we already see that there is a lot of stress actually on some nuclear plants because of the increased temperatures. Last summer we, during the heat waves, some nuclear plants could not continue their operation because they could not cool down sufficiently. So it's very clear that for this reason I think even in the climate context, we need to be, and we're quite outspoken that, that nuclear is not a sustainable and a resilient solution. The other part obviously is the question of other social and environmental impacts of nuclear. So unresolved question of how to handle the nuclear power waste. So there is other risks here that need to be taken into account. And then there is clearly another one, which is an economic answer. Today, renewable power is the least cost option. So nuclear does not make sense economically.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 17:03

Yeah. I want to come back to that for one of my final questions, Rana. As a result, and even due to developments before the COVID-19 crisis, but maybe in the middle of the Coronavirus crisis, we saw. Prices of fossil fuels come tumbling. Do you see there's a danger that some countries will take this as an opportunity to halt the growth of renewables and go back to the old the dirty fuels as such?

Rana Adib, Executive Director, REN 21: 17:28

Yes. I think there is a, there this depends on the countries and it depends on the climate strategy, very much of the countries and also how this is really anchored in the economic system. There is obviously a risk. I think in the power sector less even though in Asia we clearly see for instance, that coal being pushed very much considering basically the ification. And here in Europe we see obviously natural gas a do see in particular a big risk for sectors and anti sector. There are. Are highly dependent on fossil fuel. And these are heating especially heating in buildings and industry. And in transferred, we're basically globally in the heating sector. We have a share of 10% renewable energy only. And in transferred of something like a bit over 3%. I think the European situation is a bit more positive. I think it's 20% and 8% probably in heating and cooling and in transport. But obviously these sectors are highly dependent and today the political ambition is not there yet to make these sectors also evolve. So what we clearly need here. From the government is peer targets, policies, supporting policies accompanying the sectors to move in that direction, a stronger integration between the sectors and the power sector. So also investment into grids, the link between efficiency and heat pumps and renewable electricity, for instance. And then clearly fossil fuel bans. I think this is something which we see where some European countries I'm sorry, I don't have them in mind, but some European countries already have basically a ban, for instance on oil and gas. Boilers in buildings and also in the diesel vehicles for instance, transfer sector, but we need more.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 19:18

Absolutely. And so I think the other flip side, of course is with the, if you're building new electricity capacity, that the cost of gas, fire, plant, or coal. Fire plant versus installing solar or wind. The renewables is much, much cheaper. Is, does that also spell in some ways the end for coal and gas more globally? I'm thinking potentially Asia, Africa, Latin and South America. So

Rana Adib, Executive Director, REN 21: 19:41

I think it's much cheaper. But it's much cheaper because basically the external cost of these fuels. So the impact on health, on air pollution and also social impacts are not taking into account. And if there is one lesson to learn from COVID is if we don't integrate these, the societies will still need to pay. At one point or the other. And this is actually a reason why we why basically COVID is also leading to such an economic crisis. I do think there is a lot of learning here. If we're smarter and have a preventive investment here, we are not creating a similar possible. And basically it's not only possible, but it's basically secure crisis, which we will need to address as a result of climate change. The true cost of fossil fuel is of 5.2 trillion euros per year, and that is huge. And we just need to keep in mind that unfortunately we're still in a situation where the subsidies don't reflect the real cost. And then the market prices do not reflect the societal cost of these technologies. And another problem is clearly if we don't make this shift here, we're also looking at renewable energy.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 20:56

That's the other angle, of course. As a final question, Ron, we are seeing lots of policy measures coming from Brussels, which already we already have some idea what's coming, some, which we don't. But what's on your wishlist?

Rana Adib, Executive Director, REN 21: 21:08

So on my wishlist, first one that is basically that we have a climate quota in the EU budget of 25%. And this is, I think, too low given the scale of challenge we are facing. And also given the importance of structural change, which we need to address. The other part is to basically replicate in the heating and the transfer sector. And when we are talking about heating, it's in the building and in the industry sector, replicate the success story of renewable energy power. We can learn very much from this. And this means like much more ambitious targets policy and regulator frameworks accompanying the industry to move into these sectors and creating the markets. And this required that we develop clear. Strategies and plans that are not only general and economically and referring to the energy supply side, but that we also look at the demand side and bring other players to the table. And building on this a stronger integration between the energy sector. So the producing sector and the supply side, I mentioned the link between e mobility electric vehicles is an opportunity to reduce the demand and transferred a lot by 60%, but basically, the residual dirt of the energy needs to be produced with renewable power, and this is something where such an integration is not happening sufficiently yet.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 22:36

Rana, thank you very much for joining us today.

Rana Adib, Executive Director, REN 21: 22:39

Thank you very much, Richard.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 22:40

Listeners, that's about all from the Monte Weekly podcast this week. Remember to keep up to date with all our stories on Monte News. Follow us on Twitter and LinkedIn and subscribe on Apple Podcasts, Spotify, or wherever you get your podcasts from. Goodbye.