by admin | May 25, 2021 | Investing, Markets, Opinions, Technology
By Taponeel Mukherjee,
The “Global Energy & CO2 Status Report”, published by the International Energy Agency (IEA), states that “renewable energy saw the highest growth rate of all energy sources in 2017 and met around a quarter of global energy demand growth” — a significant statistic by any standard and one that clearly points to the fact that renewable energy is here to stay.
This has serious ramifications for fossil fuel-producing nations. While fossil fuels still contribute a large part of the global energy needs, the fact that a “structural shift” is in process is clear. It is clear that over a medium- to long-term horizon, fossil fuel-dependent nations will have to rethink their strategy to boost and manage their economies.
A quick look at the largest sovereign wealth funds (SWFs) in the world tells us that approximately 50 per cent of them are fossil fuel-based economies. Significant pools of capital are available with these SWFs and it should not be a surprise to see them diversify into various asset classes.
The next few decades may see fossil fuel-dependent countries go from being providers of energy and capital to focusing significantly more on being a source of capital, i.e., an investor. This switch towards investing is a visible trend, with SWFs being a source of significant capital across asset classes such as equity, private equity and infrastructure. The key takeaway is that SWFs, especially those from fossil fuel-producing countries, can be significant financiers of infrastructure.
Infrastructure as an asset class has two elements that make it attractive for SWFs: Fixed cash-flow profile and large market. Infrastructure assets, by their very nature, are highly regulated assets with fixed income type of cash flows. Such a structure works well for SWFs that are looking to match liabilities, i.e., cash outflows, on their balance sheets. In addition, infrastructure needs that countries face are large enough markets for SWFs to invest into in meaningful size to generate returns.
The large fossil fuel-driven SWFs are of significant size. Estimates by the Sovereign Wealth Funds Institute say the top 10 SWFs globally are managing more than $200 billion each, and four of these are fossil fuel-driven. Therefore, given the long-dated investment horizon of the SWFs, the nature of liabilities on their balance sheets, and the large size of capital that needs to be deployed, infrastructure as a broad sector is attractive.
For fossil fuel-producing countries, switching from being an energy supplier to a supplier of capital lets them reduce their exposure to fossil fuel price volatility in the short term and play a larger role in boosting trade ties with other nations through infrastructure creation in the long run.
For nations that need financing for infrastructure creation, the global shift towards renewables and its consequent impact on fossil fuel-producing countries to turn investors is an opportunity not to be missed.
There are also important lessons to be learnt by both investors and infrastructure destination nations from the Norwegian government’s decision against allowing unlisted infrastructure investments by its Sovereign Wealth Fund. The reason given was that the fund wasn’t equipped to deal with the risks involved, especially from a political and regulatory perspective.
This points towards the urgent need for infrastructure destination nations to, one, improve regulations around unlisted infrastructure assets and, two, create mechanisms that allow for listed infrastructure assets to grow.
The issues faced by the Norwegian Sovereign Fund are generic issues that all SWFs face. It is important that in a highly competitive global capital market, countries expedite the creation of an enabling environment for infrastructure creation.
Clearly, the global changes in the energy markets also have significant ramifications on the financial markets.
The energy transition from a world dependent on fossil fuels to one driven by renewables does not necessarily need to have winners and losers. In a global economy besieged by the fear of “trade wars”, switching roles for fossil fuel-producing nations from major energy suppliers to large providers of capital is worth considering.
(Taponeel Mukherjee Development Tracks, an infrastructure advisory firm. Views expressed are personal. He can be contacted at taponeel.mukherjee@development-tracks.com or @Taponeel on Twitter)
—IANS
by admin | May 25, 2021 | World
By Vishav,
Moscow : With global energy demand expected to grow 30 per cent by 2040 as per International Energy Agency (IEA) estimates, a sustainable energy balance needs to be achieved to meet this requirement while also ensuring reduction in hazardous emissions, experts said.
A stable and safe energy balance will require a combination of different sources of clean generation — with a mix of wind and solar combined with nuclear power — from every country worldwide, they said.
The Director General of the Russian state atomic energy corporation Rosatom, Alexey Likhachev, said that there will be no place for monogeneration in the future global picture.
“In any case, both stability and peak loads will be provided by different types of generation: Solar, wind, and certainly nuclear, geothermal and many other renewables. We definitely consider nuclear energy to be a clean energy source that is environmentally comfortable for humankind,” he said.
In recent times, carbon emissions have reached extremely high levels globally, raising questions about how the world’s energy system should develop in the future. An increasing number of experts believe that a carbon-free power industry should be developed with all those types of energy generation that are called carbon-free: Wind, water, solar and nuclear.
More and more regions and countries are enthusiastically developing renewable energy projects. The UAE government has announced its intention to invest $163 billion in renewable energy projects to meet more than half of its needs by renewables.
In 2016, China invested $32 billion in overseas renewable energy projects and is planning to invest at least $360 billion by 2020.
India is also actively developing renewables. The installed capacity of the country’s wind energy farms, mainly concentrated in the western, southern and northern regions of the country, exceeds 28 GW. India also plans to achieve the target of 100 GW of solar power capacity by 2022.
Incidentally, even Rosatom is not relying on nuclear generation alone these days. “We believe that the only possible way to achieve sustainable development and preserve the environment of our planet is to create a green energy balance. The solution of the global warming problem lies in the transition to green carbon-free electrical energy generation, to the energy of the atom, sun, wind and water. This is what future generations are demanding from us,” Likhachev said.
In an interview to France 2 Television earlier this week, French President Emmanuel Macron said his “priority was to cut carbon emissions and shut down polluting coal-fired production” and that he won’t follow Germany’s example by phasing out nuclear energy.
Germany decided to get rid of its nuclear power and spent billions of dollars for expanding its renewables infrastructure. However, greenhouse gas emissions increased in Germany over the last several years as the capacity of the closed down nuclear plants had to be replaced mainly by thermal and coal generation despite efforts to boost renewable sources.
According to Kirill Komarov, Rosatom’s First Deputy Director General for Corporate Development and International Business, the renewables and nuclear power industry should “work as a team” to achieve the goals of the 2015 Paris Agreement to keep the rise in temperature to less than two degrees Celsius by the end of the century.
“Balance is very important not only for good, normal and properly organised consumption but also for power systems as a whole.”
International Atomic Energy Agency (IAEA) Deputy Director General Mikhail Chudakov said nuclear energy is not the opposite of the green and renewable energy and there is a space for both in the global energy balance.
“We do not have sufficient power generation units to meet the requirements of the climate agreements that we have committed to. So we need to advocate the positives of nuclear energy to build trust in the same,” he said.
Chudakov said that generation of one gigawatt of nuclear energy only needed a space of three square kilometres as against 900 square kilometres in case of wind energy. “That’s the size of a city like Moscow.”
(Vishav was in Moscow at the invitation of Rosatom for an international conference on nuclear energy. He can be contacted at vishav.v@ians.in)
—IANS
by admin | May 25, 2021 | World
Minister Coelho, right, and Minister Ferreira, center, with Dr Birol in Brazilia as Brazil joins the IEA as an Association country
Brasilia : Brazil has joined the International Energy Agency (IEA) as an association nation, a move that will further drive the country to develop clean energy, a media report said.
Brazilian Minister of Mines and Energy Fernando Coelho Filho and IEA Executive Director Fatih Birol signed a three-year working program here on Tuesday that details cooperation between the two sides, Xinhua news agency reported.
“We are taking another important step to place Brazil at the centre of global debate on key energy policy issues, including renewable energy, energy efficiency, rational use of fossil fuels, energy security and sustainable development,” Coelho said.
The IEA said Brazil’s decision to join the agency will open “new avenues for cooperation towards a more secure and sustainable energy future with Latin America’s largest country.”
Brazil, which is part of the BRICS nation, relies on hydroelectric power plants and bio-energy. In addition, the country has significant potential in developing wind and solar power.
—IANS
