Agenda 2018 marks new turn in energy

A few critical announcements about likely themes in energy and mobility this year had a familiar ring but for a surprise one on a shift away from upstream gas investments

A few critical announcements around the world in December and January highlight the themes that are likely to dominate 2018 in energy and mobility. While most threads will have a familiar ring to them — record installations of solar once again, more divestment, more disclosure and more disruption — the somewhat surprising one was the announcement of a shift away from upstream gas investments.

The World Bank Group announced its intention to avoid upstream oil and gas investments after 2019. Why gas, which has the lowest emissions among fossil fuels? The Bank averred that “for those countries with oil and gas resources, commercial financing is often readily available for exploration and production”. It did, however, say that there could be a possible investment in an upstream natural gas project in “exceptional circumstances in the poorest countries”.

General Electric announced that 12,000 jobs will cease to exist in its power business division. “Traditional power markets including gas and coal have softened. Volumes are down significantly in products and services, driven by overcapacity, lower utilisation, fewer outages, an increase in steam plant retirements, and overall growth in renewables,” it said in a statement.

AXA, the French insurer, announced its decision to divest from coal and tar sands companies, and desist from insuring new coal plants, while quadrupling green investments to about $14 billion. ING decided to speed up its exit from financing coal, and will no longer lend to utility clients who rely on coal for more than 5 per cent of their energy mix. Norway’s Storebrand said it was starting to clean its bond portfolios of fossil fuels.

• Shell and power: Royal Dutch Shell announced its plans to acquire a 44 per cent stake in a US solar developer — Silicon Ranch Corporation — continuing its expansion in the power sector. It is also buying UK’s First Utility, and NewMotion — Europe’s largest electric vehicle charging provider. In India, Shell Technology Ventures was among the investors in Husk Power Systems — a supplier of power through mini-grids — earlier this month.

• Climate disclosure drive: The World Bank Group also said it would disclose the greenhouse gas emissions from the projects it finances. Exxon Mobil announced that it would start disclosing “energy demand sensitivities, implications for 2-degree Celsius scenarios and positioning for a lower-carbon future”. BlackRock asked about 120 of its investee companies to report on the climate risk to their businesses. Electric vehicles hit a new global sales high of 1.1 million in 2017, and are set for another record year in 2018, with as many as 1.5 million new cars expected to hit the road, according to Bloomberg New Energy Finance. The market for electric-powered trucks and buses is also gaining traction, as is the one for self-driving autonomous vehicles. Not many people would be unaware of Google’s Waymo (way forward in mobility)! Ford announced that it would add 40 hybrid and all-electric models to its line-up by 2022, and more than double electric car spending to $11 billion. In India, charging stations would become somewhat more visible soon in the offices of government-owned companies that have opted to shift to electric vehicles procured by Energy Efficiency Services.

• Auctions: Egypt announced plans for its first solar auction, soliciting bids for a 600-megawatt plant. Pakistan decided to move to competitive bidding and plans shortly to auction 1 gigawatt of solar and wind plants. Saudi Arabia plans to issue tenders for up to $7 billion of renewables — 3.3 gigawatts of solar and 800 megawatts of wind.

The author is editor, Global Policy, Bloomberg New Energy Finance. She can be reached at vgombar@bloomberg.net