Faster, cheaper and cleaner power

We don’t see this often: An investor with very deep pockets, Mike Cannon-Brookes, bought 11 per cent of Australia’s AGL Energy to oppose a demerger proposal that would keep the utility company’s coal plants running for decades. “The demerger makes no sense, or cents,” Mr Cannon-Brookes said in a Twitter post. “We believe it destroys value for everyone — shareholders, employees, Australia and the planet.”

Meanwhile, in India, state-owned NTPC said it plans to begin work on the construction of a new coal power plant, despite it being faster, cheaper and cleaner to build solar or wind.

“The country has seen record low renewable energy tariffs of Rs 1.99 (2.6 US cents) per kilowatt-hour for solar power, and Rs 2.43 per kilowatt-hour for wind power, which are quite favourable as compared to tariff of electricity produced from non-renewable sources or new hydro power projects,” Power Minister R K Singh said in Parliament recently.

India added a record 4.1 gigawatts of ground-mounted solar plants in the first quarter of the year. Solar generation is highest during summer months, which coincide with high power demand in India. Power from the sun could also help meet the rising midday demand as the use of air conditioning increases in the world’s third-largest economy. Solar plants “offer a sustainable pathway to bridge the gap between electricity demand and supply,” said Rohit Gadre, a solar analyst at BloombergNEF.

Coal power generation dominates India’s power supply, followed by hydro power. Solar emerged as the third-largest source last year, with wind power close behind.

Shell’s India buy

Solar was also a big part of the portfolio of Sprng, which is being acquired by Shell in a $1.6 billion deal. Sprng’s operating assets include 1.6 GW of solar and 0.5 GW of onshore wind plants.

“The deal highlights Shell’s approach to focus on emerging markets to build its clean energy business — likely due to higher returns and better growth prospects than developed economies,” according to BNEF. Sprng diversifies Shell’s portfolio and furthers its goal of becoming a “profitable net-zero emissions energy business by 2050.”

The oil and gas company has been making strategic investments in the electricity and electric-vehicle-charging space over the last few years. It is, in fact, leading in “preparedness for a low-carbon world,” according to BloombergNEF’s business model transition scores that compare 41 oil and gas companies. Solar will also dominate new power capacity in the US this decade. BNEF is projecting as much as 300 GW of new solar by 2030, which is almost triple the wind capacity that is forecast to be added. About 86 GW of storage is also expected to be added over 2022-2030. Total annual global solar installations could cross 400 GW by 2030. As much as 245 GW of new solar is projected to be built this year under BNEF’s mid-scenario, with installations being led by China, US, India, Brazil and Germany, in that order.

Coal redux

Ironically though, the world is using a lot more coal now, after making serious pledges to phase it out altogether. Yes, the energy transition is being disrupted around the world — partly due to the supply shock resulting from the war in Ukraine — and at the same time it is also speeding up in response to the energy crunch. Russia’s war is “turbocharging the world’s addiction to coal”, Bloomberg News reported last month. Annual consumption of the polluting fuel may jump further to 8 billion tonnes this year. The long-term trend, however, remains downward.

Meanwhile, the $8.5 billion commitment finalised by the governments of France, Germany, the UK, the US and the European Union for a “Just Energy Transition Partnership” in South Africa — aimed at accelerating the move away from coal — could be a model for other countries. There is an attempt to seal similar deals with India, Indonesia and Vietnam before the COP27 conference in November, Bloomberg News reported, citing unnamed officials.

Direct air capture

There is a lot more activity in the carbon removal market too. Climeworks, a Swiss startup working to remove emissions from the atmosphere via direct air capture, or DAC, recently raised $650 million in an equity round. This is the largest investment in DAC seen to date. Climeworks will use part of the funds to construct a facility that can capture 40,000 metric tonnes of CO2 per annum. Emerging players such as Verdox and Heirloom have also raised tens of millions of dollars this year to commercialise their solutions. DAC could comprise a large share of the investment in the broader carbon capture and storage sector, if companies can bring down costs. BNEF expects the cost of DAC to fall to $250 per tonne of CO2 by 2025 from $600 per tonne today.  

The writer is New York-based Editor – Global Policy for BloombergNEF. vgombar@bloomberg.net