A global energy transition is underway: a system change driven by exponential growth in clean-energy technologies. But there is an investment gap. Much will depend on closing it. What will happen next? This presentation was the keynote for Business Green's 2019 Tech and Investment Forum.

1. Investment in the global energy transition:
a report from the front lines
28 March 2019
BusinessGreen Technology
& Investment Forum 2019
Jeremy Leggett

2. A tour of the global energy transition
The investment challenge
Investment opportunities
Investment risks

3. A tour of the global energy transition
and its drivers
The investment challenge
Investment opportunities
Investment risks

4. Global average cost of PV has fallen c.78% since
2010 to $80/MWh (£61) today …and continues
7th Jan
2016
11th Sep
2018
Source: IRENA, Carbon Tracker adaptation
The PV panel learning curve is 29% (BNEF)
(£267)
(£38)

5. BNEF estimates the 2nd TW will arrive by mid-2023, costing 46% less
than the c. $1.3 trillion required for the first.
7th Jan
2016
2nd Aug
2018
World passes 1,000 GW of wind and solar,
on a rising exponential curve

6. 7th Jan
2016
19th Nov
2018
Solar PV & wind are now the cheapest new sources
of generation in every developed country ex. Japan
Without subsidies.
So BNEF concludes in its analysis of H2 2018.

7. 7th Jan
2016
1st Nov
2018
Lazard LCOE latest: solar less expensive
than coal, gas, and nuclear at utility scale
PV rooftop resi
PV rooftop C&I
PV community
PV cx utility
PV thin film utility
Coal
Gas combined cycle
Gas peaking
Nuclear
Solar thermal tower
Fuel cell
Geothermal
Wind
Source: Lazard Levelized cost MWh
Offshore
PV residential
“doesn’t compare apples with apples”
– the numbers ignore behind the
meter cost savings: PV Magazine

8. 7th Jan
2016
1st Dec
2017
Operating coal plants are beginning to be shut
down and replaced by solar ….on economic grounds
First in the USA: Wisconsin utility WEC Energy’s 1,190MW Pleasant
Prairie plant to be replaced by a 350 MW solar farm.

9. “Case for coal and gas plants is ‘crumbling’ as wind,
solar and battery costs plunge”
7th Jan
2016
28th Mar
2018
BNEF observes that its latest data have “chilling”
implications for fossil generators.
The Way Humans Get Electricity Is About To Change Forever

10. Nuclear is “ridiculously expensive”, “utterly uncompetitive”,
says the longstanding nuclear advocate.
7th Jan
2016
24th July
2018
Nuclear power can’t compete with solar power:
former IEA boss Nobuaki Tanaka

11. Mark Dooley, Macquarie Capital: “while it makes sense that an
aluminium producer is in the vanguard (Norsk Hydro’s giant wind plans),
there is every reason to expect that all heavy industrial will follow.”
7th Jan
2016
24th July
2018
Heavy industry turns to renewables, including
aluminium smelters, cement plants & “green steel”

12. 7th Jan
2016
2nd Oct
2016
Carmakers embrace electricity as the fuel of the
future at 2016 Paris motor show
Daimler Chairman Dieter Zetsche
unveils the Mercedes-Benz EQ

13. China's Chongqing Changan will sell only EVs
from 2025
7th Jan
2016
19th Oct
2017

14. BYD’s first electric bus, just 7 years ago, was widely viewed as a joke.
Now China’s e-buses are displacing 233,000 barrels of oil a day.
Every five weeks, Chinese cities are adding 9,500
electric buses – the size of the London bus fleet
7th Jan
2016
23rd Apr
2018
Honda’s Asimo

15. This is a total system change
It is very popular
with publics around the world
…and it has an endgame
once widely dismissed
as rootless dreaming

16. 7th Jan
2016
13th Nov
2017
82% in 13 countries believe it is important to create
a world fully powered by renewable energy
This is the largest ever such study:
26,000 people surveyed by Edelman for Orsted.

17. Not just popular
but imperative

18. Insurers warn that climate change could make
insurance unaffordable, threatening social order
7th Jan
2016
20th Mar
2019
Munich Re‘s Ernst Rauch warns of unaffordability for ordinary people.
Insurance Europe’s Nicolas Jeanmart warns of societal implications.
Wyoming oil and gas operations

19. So estimates a Stanford University economic study. “The benefits of
meeting the targets vastly outweigh the costs”: a common conclusion.
Hitting 1.5˚C Paris target vs 2˚ will save the world c.
$30 trillion in climate-related damages by 2030
7th Jan
2016
23rd May
2018
Future Today

20. Net global CO2 emission pathway
1980 20202000 2040 2060
BilliontonnesofCO2peryear
2018
2050
…50%
chance
Zero
net
carbon
7th Jan
2016
7th Oct
2018
IPCC: the 1.5˚ C target entails systems transitions
that are “unprecedented in scale….”
“…but not necessarily in terms of speed, and imply deep emissions
reductions in all sectors” plus “significant upscaling of investments.”

21. 7th Jan
2016
13th Nov
2018
Carbon budget is all used up - world has no more
capacity for building fossil fuel plants: IEA
“We have no room to build anything that emits CO2 emissions,” says ED
Fatih Birol. This applies to the 2˚C target, never mind 1.5˚C.
Existing infrastructure would “lock
in” 550 gigatonnes of carbon
dioxide over the next 22 years.

22. A tour of the global energy transition
The investment challenge
inherent in the Paris Agreement
Investment opportunities
Investment risks

23. Infrastructure the world needs by 2030 will require
c. $90 trillion of investment, built clean or fossil
7th Jan
2016
5th Sep
2018
Building it clean – low & zero carbon, as per governments’ 2015 Paris
agreement commitments – yields $26 trillion in direct economic gain.
The main conclusion
of a Global
Commission on the
Economy and
Climate report

24. That, averaged over the next 11 years,
is $8.2 trillion a year of investment
for $2.4 trillion a year of direct economic gain
…a lot of people investing clean
will make good returns
Conversely, many investments in the threatened
incumbencies will end up stranded, devalued
and in some cases written off….

25. They are solar, lighting, data centres and networks, and EVs. Particularly
problematic is that energy efficiency improvements have slowed.
IEA publishes a new monitoring tool showing only 4
of 38 energy sectors are on track with Paris targets
7th Jan
2016
29th May
2018
Future Today
On track: 4
Much more effort needed: 23
Significantly off track: 11

26. A report by CERES sees realistic opportunities in the tens of trillions of
dollars across an array of asset classes in multiple sectors.
The “clean trillion” - the extra c. $1 tn p.a. needed
through 2050 for Paris 2˚C - is “eminently feasible”
7th Jan
2016
10th May
2018
Summary of conclusion in the original 2014 CERES report
on closing the clean energy investment gap

27. Investment in renewables in 2017 was less than it
was in 2011 …it has essentially been flat since 2011
7th Jan
2016
4th Jun
2018
Global investment in renewable power and fuels
Source: REN21 Renewables 2018 Global Status Report excluding hydro >50MW
…at least $310 bn if included

28. Since 2016, and Paris, 33 banks have poured
$1.9 trillion into fossil-fuels worldwide
7th Jan
2016
20th Mar
2019
The top 4 are all US based: JPMorgan Chase, Wells Fargo, Citi, and Bank
of America. Losses from MidWest flooding in March: $1 bn.

29. A tour of the global energy transition
The investment challenge
Investment opportunities
Investment risks

30. 7th Jan
2016
28th Nov
2018
EU announces it will be the first major economy to
be “climate neutral” - net zero emissions - by 2050
Renewables will be 80% of electricity, 53% final energy demand.
Package will boost economies by 2% of GDP by 2050.
EC’s VP of the
energy union
Maros Sefcovic
Energy
Commissioner
Miguel Arias
Cañete

31. 7th Jan
2016
28th Aug
2018
Hawaii passed legislation in 2015 for 100% carbon-free electricity by
2045. Other states including New York are considering the same.
California's legislators set landmark goal for 100%
carbon-free electricity by 2045 …& 60% RE by 2030

32. 7th Jan
2016
27th Feb
2018 43 cities are now 100% renewable powered
The 43 are mostly in Latin America. Of 570 cities reporting to CDP, 101
are 70% or more renewable powered, compared to 42 in 2015.

33. Science Based Targets Initiative launched by
major companies at New York Climate Week
7th Jan
2016
25th Sep
2014
Companies commit to a sector-specific pro-rata emissions pathway
consistent with <2˚C …with verification.

34. 480 companies from 38 countries now base climate
plans on SBTs: c. one eighth of global market cap
7th Jan
2016
13th Sep
2018
That is nearly USD$10 trillion, comparable to the NASDAQ exchange.
17% of Fortune Global 500. 50 since Trump’s withdrawal from Paris.

35. 7th Jan
2016
23rd Jan
2018
122 companies are now pledged to 100% renewable
electricity. If they were a country….
Their use of renewable electricity in 2017 was up 49% on 2016.
PPAs quadrupled. 25 companies had achieved 100% by end 2016.
Source: RE100 Progress and Insights report
…it would
be the
world’s 14th
biggest
user of
electricity

36. Jerome Pecresse, GE Renewables: “We are inventing things that we did
not even imagine three years ago …renewable baseload is coming fast.”
“Utilities dispel all doubts about renewables' ability
to power planet”: Recharge on Eurelectric summit
7th Jan
2016
6th Jun
2018
Francesco
Starace, Enel
CEO: electrifying
the transport
sector “is not
only a winning
strategy, it’s a
must.”

37. Digitalisation “will increase the profitability of solar
power across every part of the value chain”: SPE
7th Jan
2016
13th Sep
2017
Business models: eg solar to be sold as part of a smart building package.
Grid services and cost savings for manufacturers, developers & installers

38. A tour of the global energy transition
The investment challenge
Investment opportunities
Investment risks

39. First, a disclaimer

40. I researched the geological history of oceans, including shale, funded by
BP, Shell, +. This led to my concerns about climate change.
7th Jan
2016
1978
to
1989
A first career as an an oil-industry insider: lecturer
and consultant at the Royal School of Mines
Oil and gas exploration, Baluchistan, 1984

41. 20 years old, we began in a 180 MW a year global market, & now
operate in a c. 100 GW a year market, with a strong cash position.
Solarcentury: a team of 180 from 14 nations
developing >3 GW of solar on 4 continents
7th Jan
2016
August
2018

42. Joint project with a community, on a waste tip next to an industrial site,
saving 600,000 tonnes of CO2 in the next 25 years.
Nyrstar, Netherlands, connects to the Dutch grid:
44 MW, 120 football pitches, just 5 months to build
7th Jan
2016
3rd Dec
2018

43. Two Solarcentury mini-grid projects bring
solar electricity to 40,000 in Eritrea
7th Jan
2016
26th Mar
2019
1.25 MWp system in Areza and 1 MWp in Maidma, EU & UNDP funded,
Solarcentury managing construction and training locals for operation.

44. The risks for energy incumbents intent on a
slightly modified version of business-as-usual
begin with the prospect that most governments
will execute on what they promised in the 2015
Paris Agreement …or a significant part of it

45. Youth climate strikers: “We are going to change the
fate of humanity, whether you like it or not”
7th Jan
2016
1st Mar
2019
In a letter, from an international co-ordination group of 150: “United we
will rise on 15 March and many times after until we see climate justice.”

48. Net global CO2 emission pathway
1980 20202000 2040 2060
BilliontonnesofCO2peryear
2018
The system change we need
according to climate scientists
UN’s Intergovernmental Panel on Climate Change, October 2018:
To limit global mean surface air temperature to the 1.5˚C target in the Paris Agreement
2050
…50%
chance
Zero
net
carbon

49. BP’s Energy Outlook, January 2019:
(*Similar to Shell’s and ExxonMobil’s: see www.jeremyleggett.net)
2017
2040
Primary energy consumption by fuelBillionsoftonnesofoilequivalent 25
20
15
10
5
0
The best we can expect by 2040
according to BP*
Renewables
Hydro
Coal
Gas
Oil
more
a little less
“Off the charts”
renewables

50. 7th Jan
2016
15th Feb
2019
BP projects demand for oil & gas in 2040 higher
than today even with fast transition to RE and EVs
I asked Twitter users for the most appropriate word
to describe BP’s intentions in the context of
striking schoolchildrens’ hopes
Death wish
Greed
Addiction Criminal
Deliberate Deluded Evil
Madness
Self-serving
Hubris
Sick Suicidal

51. Such views are far from limited to the
echo chambers of people like me

52. 7th Jan
2016
11th Dec
2018
Lift emissions pledges or be guilty of “immoral” and
“suicidal” inaction, UN chief tells climate summit
“To waste this opportunity would compromise our last best chance to stop runaway
climate change. It would not only be immoral, it would be suicidal.”
António Guterres

53. Nontheless….

54. Global coal use up by a third as 2018 global energy
demand / emissions rise at fastest rate in a decade
7th Jan
2016
26th Mar
2019
The IEA reports that much of the growth is down to a fleet of young coal
plants in Asia. And ED Fatih Birol says gas had another “golden year”.
Average annual global primary energy demand growth by fuel, 2010-18
Source: IEA
Nuclear
Coal
Oil
Renewables
Gas

55. Key constituencies perceive substantial risk
in the current oil-and-gas industry approach

56. “The depressing reality about climate change is that
we could solve the problem, at manageable cost,
but are failing to do so”: FT Editorial Board
7th Jan
2016
26th Dec
2018
“This failure is due to a
mixture of blindness
and self-deception. The
blindness comes from
those, such as US
president Donald
Trump, who deny the
reality of climate
change.”
“The self-deception
comes from those who
accept the reality, but
only pretend to solve it.”
Howblind do you
have to be?

57. “Investment in low-carbon energy remains poor
for oil majors”
7th Jan
2016
27th Dec
2018
Disclosed low carbon investment as a
proportion of total capital spend,
2010 to Q3 2018
…a tiny percentage of overall capex

58. “Fossil fuels will peak in the 2020s as renewables
supply all growth in energy demand”
7th Jan
2016
11th Sep
2018
Carbon Tracker report warns of “trillions of dollars in stranded assets”
across much of the corporate sector, and in petro states.
Most likely

59. $25 trillion in past infrastructure investment
is at risk if governments do what they say they will
7th Jan
2016
11th Sep
2018
Companies making up to
a quarter of equity
indexes & debt markets
will be hit, incl. banking,
capital goods, transport
and automotive sectors.
$bn

60. After 6 years of the divestment campaign,
1,000 divestments now sum almost to $8 trillion
7th Jan
2016
16th Dec
2018
Widespread action by mainstream FIs means that divestment is now a
clear risk to fossil fuel companies …and they admit as much.

61. Norwegian government approves state fund to
divest from pure oil & gas exploration companies
7th Jan
2016
8th Mar
2019
Finance Minister Siv Jensen: “The objective is to reduce the vulnerability
of our common wealth to a permanent oil price decline.”

62. “Oil must face its future as a declining industry”:
Legal & General Investment Management in the FT
7th Jan
2016
13th Jun
2018
The CIO and a commodities specialist suggest that rather than transition
to renewables, oil companies stop investing and return cash.

63. Energy analysts forecast ‘start of end of coal’ in Asia
as key Japanese investors switch to renewables
7th Jan
2016
18th Mar
2019
When Australia’s number one customer and the funder of coal’s growth
agenda moves, says Tim Buckley of IEEFA, the rest of Asia will follow.
Tsuruga, Japan

64. US shale gas and oil
are central to the plans
of the oil and gas majors

65. “ ‘Big Oil’ is rapidly becoming
‘Big Shale’ ”
7th Jan
2016
5th Mar
2019
ExxonMobil & Chevron both
planning to c. treble oil
production in the Permian
in the next 5 years….

66. US shale to lead global oil supply growth of 5.7 mbd
by 2024, with no peak in oil demand in sight: IEA
7th Jan
2016
11th Mar
2019
The Oil 2019 report sees 70% of global growth in a 4 mbd expansion
of US shale production in the next 5 years.
“Our forecast
for supply
growth
depends on
investment.”

67. But there are some inconvenient truths
concerning the economics

68. 7th Jan
2016
6th Feb
2018
“The US exploration and production sector has
been a great place to burn cash”
Worse than that, argues e.g. Steve StAngelo of @SRSroccoReport
it has been “a Ponzi scheme from Day One”.

69. 7th Jan
2016
2nd Jan
2019
So how will the drillers service their debts, much less pay them off
and finally make a collective profit?
“Fracking’s Secret Problem—Oil Wells Aren’t
Producing as Much as Forecast”

70. “Frackers Face Harsh Reality as Wall Street
Backs Away”
7th Jan
2016
24th Feb
2019
New bond & equity deals have dwindled to the lowest level since 2007.
In 2018 companies raised less than half the 2016 total.

71. “The Next Financial Crisis Lurks Underground”
…in shale
7th Jan
2016
1st Sep
2018
Bethany McLean, author of famous book on Enron's collapse:
“the Federal Reserve is responsible for the fracking boom.”

72. And then there is methane leakage

73. Methane leaks from the US oil & gas industry c.60%
higher than government estimates: new study
7th Jan
2016
21st Jun
2018
9-basin estimate incorporating aerial data suggests 2.3% leakage well-
to-power plant. EPA suggested 1.4%. 2.7% makes gas worse than coal.

74. NASA-led team shows oil & gas industry responsible
for largest share of rising methane concentrations
7th Jan
2016
20th Dec
2017
New measurements reconciling isotopic data suggest fossil fuels
contributed 12–19 Tg CH4 per year of c. 25 Tg CH4 per year since 2006.

75. One player’s conclusion from all data, trends
and developments in this presentation

76. 7th Jan
2016
22nd Jan
2019
Carbon Tracker analysts argue that the world is
sitting right on a political tipping point now

77. We will see!
Please place your bets

78. www.jeremyleggett.net
Including links to this and other powerpoints for free use
Much more here
Thank you