As governments get to grips with the economic aftershocks of the Covid-19 pandemic, it is evident that this challenge is radically different from that posed by the last global economic crisis. That was a financial crisis, with financial remedies that led to a long period of austerity as governments sought to repay debt.
This time, it is clear that a structural shift is underway in the economy, with indications of people changing the way they live, work, shop and travel. “We need completely different answers [in terms of] how we grow back,” says Keith Anderson, CEO of ScottishPower, the U.K. power group owned by Spanish clean-energy company Iberdrola. “We need to invest and build back, but to build back better, in a way that puts tackling climate change and a green recovery right at the top of everyone’s agenda.”
ACCELERATING ECONOMIC RECOVERY
The European Union (EU) is putting the €1 trillion Green Deal package at the heart of its recovery plans. Meanwhile, countries from New Zealand to the U.K. have committed billions to green building and energy-efficiency programs, both to speed the economic recovery and help them meet targets to become net-zero economies by 2050. The EU aims to double the level of building renovation, for example, while Germany is introducing a national hydrogen strategy and South Korea plans a KRW1.7 trillion ($1.4 billion) green industry revival that would lead to the creation of 11,000 jobs.
In the U.S., support for green stimulus has split along party lines and, despite pressure from Democrats to include clean energy measures in support schemes, they have not to date been included.
“Aligning economic stimulus and policy packages with climate goals is crucial for a long-term viable and healthy economy,” says Ignacio Galán, CEO of Iberdrola, which was founded in 1992 on the vision of a greener future.
“If we build a wind farm, for example, it creates benefits for local villages, companies, and contractors,” explains Mr. Anderson. “There are a whole lot of infrastructure projects that we need to do anyway to meet net-zero targets—things like converting heating away from gas and transforming transport. Let’s just accelerate them. If we want to get to net zero and create jobs at the same time, let’s electrify the hell out of everything.”
ENCOURAGING INVESTMENT AND INNOVATION
To make this vision a reality, companies must discuss with regulators and governments exactly what changes are needed. “A lot of regulatory processes and planning regimes were designed for a different world—a world of austerity, where the primary aim was to cut costs. We need to rebalance so that we are still acting as efficiently as possible, but balance that with the need to achieve net zero and the need to create jobs,” Mr. Anderson says.
This need not cost governments a huge amount of money if the right frameworks and commitments are in place, he argues, citing the example of the rapid development of the offshore wind market. “The great trigger for offshore wind was the U.K.’s Round 3 leasing of offshore wind development zones, which called for more than 30 gigawatts of projects—everyone realized that this was a massive market. Developers know this is a market that will carry on growing for 20 to 30 years. That gives them the confidence to pull investment forward and that flows down the supply chain to companies that make vessels, cables and foundations.”
Meanwhile, the U.K. government’s Contracts for Difference (CfD) mechanism has given investors stability, clarity and certainty, and brought competition into the market by making project developers compete on price. This has encouraged innovation that has led to costs falling to about £36 per megawatt hour (MWh) from £150/MWh. “We need to learn lessons from that and replicate that performance for heat pumps and other technologies,” says Mr. Anderson.
However, deploying massive amounts of renewable energy to decarbonize transport and heat might not be enough. Time must also be spent on developing new technologies that are not yet commercial but could play a key role as the 2050 zero-emissions target date draws closer.
SUPPORTING THE SWITCH
Another key issue is to persuade companies to change their behavior and their business models. “ScottishPower was predominantly a coal-powered company and now we are entirely renewable. We have shown that it can be done, but how do you encourage other businesses to make that flip?” asks Mr. Anderson.
Switching corporate electricity contracts from green tariffs neither fully guarantees that the power bought is 100 percent renewable, nor results in new capacity being built. More effectively, companies can buy clean energy direct from renewable-energy companies to ensure that their power purchases result in new wind or solar capacity.
However, the process of going green needs to be made more user-friendly, Mr. Anderson says. “Our mission is to make it easy for people to buy green power, to charge their electric car, and to switch to cleaner heating. We need to make the green choice the obvious choice. That’s why we launched our Zero Carbon CommunitiesEnlace externo, se abre en ventana nueva. initiative.”
The scheme, launched in 2019, attempts to translate net-zero targets into concrete actions at a local level—the number of electric-vehicle charging points that need to be installed, the number of heat pumps that will be required, the cost of upgrading electricity networks to cope with increased demand in order to meet the targets.
The company says that the U.K. needs more than 25 million electric vehicle charge points by 2050, at a cost of almost £46 billion, while almost 23 million homes will need to install electric heat pumps at a cost of £192 billion.
But meeting such targets cannot just be mandated by central government. It requires action at the local level. ScottishPower is currently working with Liverpool, Glasgow and Edinburgh, which all want to become net-zero cities. But each has different circumstances—Liverpool aims to be net zero by 2040, while Glasgow aims to reach the target in 2030. The Zero Carbon Communities report sets out a blueprint for the steps local communities can take to meet climate change targets and to ensure they are not left behind.
“Communities want to know how they can get to net zero in a sustainable way that works for their city and region, in a way that encourages investment, creates jobs and links to industrial development and clean air policy. The people who know best how to do that are those working in the local area,” says Mr. Anderson.
“There is a fantastic appetite in local communities for doing this,” Mr. Anderson says. “We need to encourage cities to drive this agenda forward.”
Source: The Trust.
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