Coronavirus can provide catalyst to greener future
COVID-19 opens the door to more green investment as it has given governments, businesses and investors an opportunity to concentrate on fighting climate change, according to a leading renewables investment firm.
Octopus Renewables, part of the UK-based Octopus Group, says fighting global warming without large amounts of investment into renewable energy generation and technologies will making achieving the targets of the Paris Agreement impossible.
“COVID-19 can be the catalyst to a greener, more sustainable future,” explains Alex Brierley, co-head of Octopus Renewables. “But it needs to be a collaborative and organised effort from governments, institutional investors, specialist energy fund managers, banks and energy companies.”
Many institutional investors agree, with the latest Octopus report find that almost a third of those surveyed think the pandemic has made the fight against climate change more urgent. A similar number also believe that the crisis will speed up the implementation of decarbonisation policies.
'The coronavirus pandemic has had a surprisingly positive effect on the environment. In early 2020, we saw carbon emissions decreasing as factories shut down, fewer planes took off, and more people worked from home, keeping cars off the road. The demand for energy fell, along with oil prices. And for the first time, Europe generated more electricity from renewable sources than from fossil fuels,' a statement from Octopus Renewables says.
Furthermore, governments are now being challenged to make the most of these short-term environmental gains by putting climate change measures at the centre of their COVID-19 recovery plans.
“There is now a huge opportunity for governments everywhere to implement measures that not only help economies recover post the pandemic, but create an environment that encourages further, and greater, investment into renewables at the same time,” adds Matt Setchell, co-head of Octopus Renewables. “It is crucial they do.”
Several governments have done so, with the UK’s Build Back Greener plan aiming to make the country a leader in wind energy, while the EU’s recovery proposal – Next Generation EU – commits to investing 30 percent of its funds into sustainable, low-carbon technologies.
‘Encouraged by public demand and government measures, our report shows 80% of institutional investors surveyed [KF6] plan to increase investment in renewable energy over the next few years. This proves investors are still interested in clean energy assets like wind and solar farms, making sure the money they invest has a positive impact,’ the Octopus Renewables statement says.
At the same time, many investors are looking to move money out of fossil fuels. The previous year’s report focused on divestment from oil and gas, highlighting this strategy as investors’ main push towards a cleaner energy future.
‘In the face of Covid-19 uncertainties, the speed of divestment has slowed in comparison to last year’s plans. But institutional investors are still moving money away from fossil fuels, showing momentum has slowed rather than stopped,’ the statement continues.
However, while institutional investors are looking to invest more in renewable energy, there are still barriers in the way of these plans. The first of these concerns is the lack of liquidity involved with renewable energy investments. Once invested in wind or solar farms, money is usually locked up for a set amount of time. Double the number of investors see this as a big challenge for them, in comparison to last year’s report. This is likely down to doubt caused by coronavirus.
Investors would also like to see more joined-up international policies to fight climate change and are worried that if this doesn’t happen, it will become harder to push for innovation in the renewable space.
Ultimately, the report states that although COVID-19 has made institutional investors cautious while moving investment away from fossil fuels, it can also act as a catalyst for more investment in renewable energy.
‘Governments must put lowering carbon emissions at the centre of their COVID-19 recovery plans, creating the opportunity for trillions of dollars of investment from institutional investors. With this injection of funding, renewable energy assets have the potential to help keep global temperatures down, bringing us closer to success in the fight against climate change,’ the statement concludes.
Octopus Renewables buys Eclipse Power
The deal, which was completed with funds managed by Octopus, furthers Octopus’ involvement in the electricity distribution sector, having worked with Eclipse since 2018. It will allow Eclipse to continue the expansion of its team, while also investing in its systems, technology, and pipeline, with the ambition of making it one of UK’s leading IDNOs.
Eclipse has secured a portfolio of more than 10,000 connections across residential, industrial, commercial, battery storage and electric vehicle charging customers. Given the focus on electrification of heat, transport and industry in the UK, Eclipse is expected to play an important role in facilitating the UK’s energy transition.
Octopus Renewables is the largest investor of utility scale solar power in Europe, as well as a leading investor in onshore wind and biomass, managing a global portfolio valued at more than £3.5 billion. Institutional investor Nest partnered with the company in March.
Peter Dias, Investment Director, Octopus Renewables, said: “Having worked with Eclipse since 2018 and seeing their exciting growth, we’re thrilled to be able to make this acquisition and support the team to maintain this momentum.
“The acquisition of Eclipse is part of our strategy to identify and back great management teams that are supporting the energy transition. With ongoing support and investment, our investee businesses will have access to the expertise, business networks and financing to be able to scale faster and help contribute towards the UK’s net-zero goals.
“High-quality management of the distribution networks is going to be critical for the UK, and we are very pleased to be directly supporting the decarbonisation of heat, transport, and industry through this acquisition of Eclipse.”
Gary Gay, Managing Director, Eclipse, added Octopus shares a clear understanding of the important role that electricity distribution networks will play in the UK’s drive towards net-zero, and importance of a customer-focussed approach for building future smart distribution networks.
“With that, we are excited to now be part of the Octopus Group, with this investment helping us to reach the next stage of our growth journey and contribute to a greener, more efficient electricity network in the UK.”
Global renewables updates
ReNew Power recently won a 200MW/ac Interstate Transmission System (ISTS) solar generation project in an auction conducted by the Maharashtra State Electricity Distribution Company. ReNew Power expects to sign a 25-Year Power Purchase Agreement with the utility by the third fiscal quarter of 2022 to supply clean energy to Maharashtra at a tariff of Rs 2.43/ kWh (~US$0.033).
Natel Energy, a supplier of sustainable hydropower solutions, has announced a $20M funding round led by Breakthrough Energy Ventures and supported by Chevron Technology Ventures.
The company will use the funding to deploy its Restoration Hydro Turbine (RHT), which enables cost-effective production of distributed reliable renewable energy.
Duke Energy Florida plans to invest an estimated $1 billion in 10 new solar power plants across Florida, including the construction of four new sites, which will begin in early 2022 and will take approximately 9 to 12 months to complete. Construction of all 10 sites is projected to be finished by late 2024.
LG Electronics has made public its commitment to transition completely to renewable energy by 2050 as a key component of its sustainability strategy.