At BNP Paribas Sustainable Future Forum and Sustainability Expert Day in Paris, industry leaders discussed what is needed to accelerate the scale up of clean energy and battery production.
COP28 saw a collective pledge by nearly 200 national governments to triple the world’s renewable energy capacity by 2030 from a 2022 baseline of 29% share.
The IEA projects that the investment in clean energy technologies and infrastructure is expected to reach USD2 trillion by the end of 2024. This reflects the surge since 2020 and indicates that by the end of this year, investment in clean energy (namely, renewables, grid technologies and storage) is expected to almost double the investment in fossil fuels.
Still, IEA experts warn that current trends are insufficient and call for doubling the annual global investment in renewables capacity by 2030.
Tackling the energy trilemma
Speakers agreed that renewables have demonstrated their capacity to address the key energy objectives of sustainability, affordability, and security.
With that, a new energy trilemma is emerging: managing grid capabilities and balancing supply and demand.
Jose Entrecanales, the Chief Financial and Sustainability Officer at ACCIONA Energía, an independent international renewable power producer, explained that there is a pressing “need to take a holistic view of demand, supply, and investment in the grid.”
The necessity to invest in grid technologies was unanimous across all panellists and Séverine Mateo, Global Head of the Low-Carbon Transition Group at BNP Paribas, agreed that “investing in renewables, especially for Europe, should come with investment in the grids.”
She also highlighted that as the industry has matured, “the price of the renewable energy is transforming from being regulated to more market driven.” And that it’s important to realise that “the paradigm of power is changing,” leading to more market-driven balance of supply and demand.
Mobilising a spectrum of stakeholders across the industry is also key. Mateo explained that meeting the scale-up challenge requires the banking community “to channel the financing for the development of the renewables” and to support the full ecosystem, together with project financing.
Bridging the investment gap: scaling up to triple renewables by 2030
Against the backdrop of an urgent need to increase renewables investment and decarbonise industries, investors are aiming to increase the share of clean energy and associated technologies in their portfolio.
CPP Investments, which manages the C$646 billion Canada Pension Plan Fund, aims to almost double its portfolio in green and transition assets to C$130 billion by 2030.
Bill Rogers, Global Head of Sustainable Energies Group at CPP Investments, acknowledged that it will be “a non-linear route, with the pace and the way that will evolve unclear.” He stressed the importance of a diversified approach encompassing various geographies, technologies, and energy sources.
Rogers also reinforced the importance of a holistic approach to finding opportunities by “leveraging traditional energy assets and capabilities,” unlocking new businesses and closing the market’s skill shortage gap.
❝ We are big believers in the transition. We are committed to driving it. But we think it is going to be a non-linear route. ❞
Finance remains a vital lever in the transition towards a low-carbon economy. Entrecanales underscored the significance of accessing capital markets.
He highlighted that in 2023 ACCIONA invested “over EUR2 billion and installed 1.7GW of new capacity,” representing triple its average growth from previous years, with plans “for similar investments this year.”
ESG credentials can be strong enablers for attracting capital and de-risking projects, with Entrecanales giving an example of “Local Impact feature” embedded into ACCIONA’s Sustainable Impact Finance Framework. The energy producer aims to positively impact the communities surrounding its projects through “reforestation, training, and annual impact measurement.” He concluded that the ESG component at ACCIONA “is key to the equity story” that “will continue to be differential in years to come.”
❝ It’s not so much about being a company that issues green bonds, but rather about being a green company that issues bonds. ❞
Tackling challenges of battery production
According to the IEA Net Zero Emissions scenario, about 60% of the CO2e emissions reductions in 2030 in the energy sector are associated with batteries, making them a critical element to meeting our shared climate goals. Close to 20% are directly linked to batteries in EVs and battery-enabled solar PV. Another 40% of emissions reductions are from electrification of end-uses and renewables that are indirectly facilitated by batteries.
Scaling battery production effectively remains a significant challenge, requiring further cost decreases and improvement of energy intensity.
When it comes to the value chain economics, Jean-Baptiste Pernot, deputy CEO of strategy and development at Automotive Cells Company (ACC), a European battery manufacturer, emphasised how batteries are important in addressing the price gap for electric cars. He noted that reducing costs across the entire value chain, including “the industrial roadmap, processes, and traceable supply chain,” is a top priority across the European industry.
Beyond this, he added that the continuing R&D is critical to catalyse efficiencies and cost reductions. Pernot described that when it comes to technology a “new generation of batteries is required every few years.”
❝ We consider that the battery made in Europe must be a battery with a high level of ESG and the high level of compliance, which also means traceability of the supply chain. ❞
Cost competitiveness is vital for the viability of technologies in the battery sector. Mateo noted that it is crucial to “carefully assess the offtake, to ensure that the investment will have a viable market.”
Future transition landscape
The adjacent technologies that could accelerate the transition are also notable in the influence that they could play. Adding a broader outlook research perspective, Martin Brough, moderator of the session and Head of ESG research at BNP Paribas Exane, pointed out that “as renewables and batteries scale up, there are many more low-carbon technologies to follow.” This encompasses a wide range of opportunities for growth in power demand “for data centres and AI technologies, heat pumps, for hydrogen and e-fuels.” Brough also added that on the policy side, “the legislation is in place already to drive emission reductions to 2030 and beyond.”
The structure of the market and engagement with customers when it comes to the future of the low-carbon transition was also discussed across the experts. Rogers emphasised the vital role of customer engagement, as “the industry becomes more decentralised and digitised, and consumers and customers drive for greener products.” He noted that “it will be a really important driver for decarbonisation,” and that the need to “put customers at the centre of it” is key.
In concluding on the forces shaping the future of the transition, Mateo expressed a consensus view: “Sustainability is not at any and all cost. It’s about sustainability, affordability and reliability of the energy”. In that perspective, supportive regulation and public policies are critical enablers, alongside the economic, environmental and financial fundamentals.
❝ Decarbonising the economy across sectors is not only a matter for developers, investors, and financial institutions. It’s also a matter of public policy and regulation: we need to ensure an alignment across all the stakeholders. ❞
BNP Paribas created the Low-Carbon Transition Group in 2021 to support and accelerate our clients’ energy transition. LCTG is a global team of over 100 bankers covering all investment banking products – from project finance and debt advisory through to equity placement, M&A and strategic advisory. It brings together all our sector experts under one roof, with backgrounds across all these areas of expertise to offer our clients the most relevant advice and the best-suited pool of capital for each individual situation.