Alliance warns firms to drop thermal coal investments
Alliance is turning up the decarbonised heat on its members, warning companies not to invest in thermal coal plants or face sanctions, according to a Reuters report.
The Net-Zero asset owner, whose members include German insurer Allianz, manages a combined £5 trillion in assets. It is making the call after a recent commitment to set tougher carbon limits on portfolios.
In order to meet the terms of the Paris Agreement on climate change – which aims to limit global warming to 1.5 degrees Celsius above pre-industrial norms by 2050 – developed economies need to phase out most thermal coal by 2030, with a global phase out by 2040.
In a report seen by Reuters ahead of its release on November 9, the alliance says all companies owned by the group needed to develop their own plans to transition away from thermal coal.
“If no long-term carbon footprint reduction can be produced the members will need to escalate and ultimately divest,” Günther Thallinger, Member of the Board of Management, Investment Management, Environmental, Social and Governance (ESG) at Allianz, says.
In order to help these companies, the group has issued a set of core principles, including that, other than coal plants currently under active construction, no further thermal coal power plants should be financed, insured, built, developed or planned.
“Alliance members believe that all companies in our portfolios should have a firm understanding of the wider implications for the activities, operations and projects that they are engaged in,” the report says.
Furthermore, there should be an immediate cancellation of all new thermal coal projects that are in a pre-construction phase, including coal mines and related infrastructure, as well as the supply of other products and services, it continues.
In addition, all unabated existing coal-fired electricity generation, that which is not captured by carbon sequestration or storage, should be phased out, the alliance says.
“Participation in activities and projects that are not aligned with these principles is incongruent with our net-zero goals and the aspirations we have in respect to the different decarbonisation strategies of the companies we invest in,” it states.
The International Energy Agency (IEA) expects global coal demand to fall by approximately eight percent in 2020 – the largest drop since World War II, with coal use declining in virtually every sector of every region in the world.
“In China, coal demand will decline in 2020 by around five percent, despite the gradual recovery since February lockdown. Coal-fired power generation will be hit especially hard because the power system is crowded by low variable cost hydro, wind, solar and nuclear power,” IEA says in its Global Energy Review 2020.
“An even greater decline in coal demand is expected in India, where economic growth and power production are slowing significantly. Despite the recovery expected later in the year, a decline in coal power generation will push coal use down for the second year in a row.
“In the rest of the world, coal demand will decline steeply in 2020. Even in Southeast Asia, the region with fastest growth in the recent years, where coal power generation is curtailed by lower electricity demand, especially in Malaysia and Thailand.
"We also expect significant declines in coal demand in advanced economies: by 25 percent in the United States, around 20 percent in the European Union, and five percent to 10 percent in Korea and Japan,” IEA adds.
Lightsource bp’s first Spanish project powers up in Zaragoza
Lightsource bp has powered up its 247MW flagship solar project Vendimia in Zaragoza, Spain.
Around 615,000 bifacial solar panels have been installed, over 650 hectares of land on multi-row tracker technology enabling the panels to follow the sun, maximising energy generation efficiency. In addition, two overhead transmission lines at 18km and 20km were constructed to efficiently deliver the solar power into the local network.
The five-project cluster was constructed safely during the COVID-19 pandemic and commercial operation recently began. The total power output will be supplied to bp’s European power trading team under a long-term Power Purchase Agreement (PPA).
Fernando Roger, Country Head for Lightsource bp Spain, said the connection of its Vendimia project demonstrates the resilience of solar. "We had to face many challenges due to the COVID-19 pandemic, but our team and trusted partners remained focussed, and now we have completed our first project in Spain. We would also like to extend a special thank you to all the landowners involved for their continued support on this project.
Felipe Arbelaez, senior vice president for zero carbon energy bp said: “It’s fantastic to see the safe start-up of this first project in Spain, and for Lightsource bp to achieve an impressive 3GW pipeline in just two years. Through disciplined investment and safe execution, we are delighted to see the next chapter of bp’s energy story in Spain come online. This project is also a great example of the power of bp’s integration capabilities as our expert power trading team will offtake the power generated, supporting the financial stability of the project and meeting bp’s strict returns threshold.”
The construction process was handled by Lightsource bp’s appointed contractor, Prodiel (an Andalusian engineering, procurement and construction company) and over 600 local jobs were created during that time. Prodiel will continue to maintain the solar cluster under an Operations & Maintenance agreement for the next two years.
At the opening ceremony, Carlos Barassa, head of country for bp Spain, said: "The Vendimia solar project that we are inaugurating today in Zaragoza is great example of the fulfillment of bp's ambition in its transition to an integrated energy company, and our contribution to building a low-carbon future."
bp will pay 7X Energy $220 million for the projects and 1GW of 'safe harbour' equipment and expects the acquisition to complete in 30 days. The projects, spread across 12 states - with the largest portfolios in Texas (ERCOT) and MidWest (PJM) - are expected to meet bp’s low carbon investment criteria, generating returns of at least 8-10%.