Investments battle triggers green tech arms race

Battery storage projects around the globe are in line to benefit from an investments bonanza as economies power up to regain and expand business lost in the pandemic — but with climate-friendly industrial policies as the new touchstone.

Analysis for this Energy Storage Journal cover story shows widespread recognition by the world’s leading financial institutions that they need to turn on the financial taps to back innovations in battery storage, e-mobility, renewables and clean energy systems to feed an increasingly powerhungry planet.

The European Investment Bank alone revealed earlier this year that it had signed a record €17 billion ($18.5 billion) in new financing for energy storage, renewables, efficiency and grids in 2022, spurred by the European Union’s green energy agenda and security of supply concerns amid Russia’s war with Ukraine.

That sum will be dwarfed by the near $400 billion package of investments that the US is rolling out to tackle the climate crisis.

However, the bonanza of investment support now being offered by governments and financial institutions to stimulate private investments in battery storage and beyond has also triggered a green arms race.

Texas-based hedge-fund manager Eagle Global Advisors defines the green arms race as the idea that in order to encourage energy transition, countries have to out-incentivize others — be they friends or foes.

The introduction of the US Inflation Reduction Act in August 2022 was the tipping point, when allies, let alone enemies, braced themselves for the economic shockwave of Uncle Sam’s sheer financial firepower.

US allies voiced concerns over the potential of the measures to suck private investment away from them.

There has since been a redoubling of efforts by countries in the European Union, Canada and South Korea to name but a few to draw up similar incentives to protect battery manufacturing, raw material supply chains and related sectors.

According to World Energy Pulse — an annual survey by the World Energy Council of more than 700 energy leaders and decision makers from 77 countries — 48% of respondents said the focus on decarbonization was redirecting $1 trillion of investments a year to adding renewable power capacity and low carbon liquid fuels.

And 46% of respondents cited national self-interests and the risk of the green arms race as the “greatest obstacles to progressing orderly, clean and just energy transitions”.

The survey revealed that national interests continue to dominate, with 59% of respondents agreeing that energy independence was critical to securing their countries’ climate-energysecurity agendas.

However, this me-first sentiment was challenged with the overwhelming (84%) acceptance that “energy interdependence is the new global reality”.

Council secretary general and CEO Angela Wilkinson said: “Throwing more money and technology at complex system change is not enough to ensure faster or fairer energy transitions.”

Wilkinson called for a “humbler leadership approach”.

The International Renewable Energy Agency has also called for lessdeveloped regions not to be left out.

But even the highly-developed market economy that is Australia, the so-called lucky country, fears being locked out of the race to become a global clean energy superpower because of dramatic increases in ambition and levels of policy support among other major economies.

Clean Energy Council CEO Kane Thornton told an industry roundtable on March 1 that while the country had vast untapped potential

$5 TRILLION A YEAR NEEDED

According to a report published by the the International Renewable Energy Agency in May, to meet the climate goal of limiting temperature increases to 1.5°C above pre-industrial levels, the renewable energy share in the primary energy mix should rise to about three-quarters — which would require annual investments averaging over $5 trillion until 2030.

However, the agency said access to funding in many emerging and low-income economies is insufficient, and often too costly, to accelerate the energy transition at the necessary rate. in renewables and storage, Australia was now facing a “global clean energy arms race that requires new levels of leadership and policy support to ensure we unlock Australia’s full potential”.

It’s worth putting this $5 trillion number into context as human beings aren’t good at visualising huge numbers. Imagine how long a million seconds would last. The short answer is 11-1/2 days.

And now a billion seconds?

Roughly 31.7 years.

And now putting the number of a trillion seconds into context? It’s 32,000 years — less a few hundred years.

Thornton called for long-term policies to incentivize private capital to invest in Australia. “The production of green hydrogen and the rollout of renewable energy in the US is now backed by enormous new incentives,” he said.

“Australia has a small window of time to stake our claim in the emerging green industries of the future, which can ultimately overtake our declining fossil fuel industries and revitalise and expand our local manufacturing base.”

Thornton said there was no doubt that decision makers in Australia had the necessary ambition, but said that needed to be matched with “a cohesive strategy and policy framework that will stimulate the new wave of investment in clean energy and green manufacturing”.

Thornton said the unprecedented investment in clean energy by the US, Canada, and, most recently, Europe was acting as a “giant magnet for clean energy investment, making it harder for Australia to attract green capital, equipment and skilled workers”.

A key pillar of any strategy should be an extension of the national Renewable Energy Target to accelerate investment.

The RET, which is set to expire in 2030, is an Australian government scheme designed to reduce emissions of greenhouse gases in the electricity sector and encourage the additional generation of electricity from sustainable and renewable sources.

RET works by allowing both largescale power stations and the owners of small-scale systems to create largescale generation certificates and smallscale technology certificates for every MWh of power they generate.

Certificates are then purchased by electricity retailers (who supply electricity to householders and businesses) and submitted to the Clean Energy Regulator to meet the retailers’ legal obligations under the RET.

This creates a market which provides financial incentives to both large-scale renewable energy power stations and the owners of small-scale renewable energy systems.

Thornton said extending the RET “would be a relatively simple and efficient approach for encouraging investors to accelerate clean energy deployment in Australia”.

An extension to the RET would ensure the government delivers on the ambition of 82% renewable energy by 2030 and rebuild Australia’s clean energy competitiveness.

“This would also deliver lower power prices by increasing the supply of low-cost power and further reducing our reliance on increasingly expensive gas and unreliable coal generation,” Thornton said.