'Lego-like' solar and driver-less cars

A huge transition is underway in electricity, transport and green finance

The electricity sector in the world, and in India, looks very different than it did a decade ago, with solar and wind farms — big ones and tiny ones — pumping power to homes and factories. A fuel transition is also underway in the transportation sector, as is automation. As many as 61 companies are testing autonomous driverless cars in California, while the number of testers in China went up to 35 at the end of last month, according to BloombergNEF (BNEF). To track the transition in electricity, transport and green finance, here are four things to keep track of this year: 

• Solar and wind power: New solar installations globally last year were close to 110 gigawatts, and may set another record by crossing 125 gigawatts this year, according to early estimates from BNEF. Solar panels have become “Lego-like”, according to the principal economist at the Beijing-headquartered Asian Infrastructure Investment Bank, Jang Ping Thia. The panels are being installed on the ground, on rooftops and floated on water bodies to quietly generate power across the world. 

In the wind sector, almost 54 gigawatts of new wind farms were added globally last year, and the projected addition for the current year is 70 gigawatts, with over 10 per cent of that offshore. India is taking its first steps to install offshore wind, with a tender likely to be issued in the first half of the current year.

• Sustainability-linked loans, also known as ESG-linked loans, provide benefits to the borrower if specific environment, social or governance metrics are satisfied. The loans need not necessarily be earmarked for green projects, as is the case, for instance, with the proceeds of green bonds. According to the latest data from BNEF, sustainability-linked loans jumped 677 per cent to $36.4 billion in 2018. Singapore’s real estate developer CapitaLand was among the companies that secured a sustainability-linked loan last year: A S$300 million (USD 222 million) five-year, multi-currency loan from DBS for general corporate purposes. Also in Singapore, agribusiness group Wilmar International signed a deal with OCBC Bank where the interest rate was pegged to the company’s sustainability performance.

Total sustainability debt finance increased to $247 billion in 2018, with green bonds making up the largest, $182 billion chunk, followed by sustainability-linked loans. The balance was made up of sustainability bonds, social bonds and green loans. Expect to hear a lot more about sustainable finance this year, and also about standards like the Green Loan Principles. 

• Self-driving vehicles, also known as driverless or autonomous vehicles, are moving closer to reality with car manufacturing companies, software developers, ride-hailing companies like Uber, and telecom network providers jumping in to secure a piece of the action. Google’s Waymo is widely seen as the leader in this space, with millions of miles driven in testing, and a live pilot underway in Arizona, U.S. BNEF expects much more activity in this space in 2019 in the U.S. and in China, where as many as 15 cities have allowed public road testing of autonomous cars.  In India, the Mahindra Group has already demonstrated a self-driving tractor. This “will open up entirely new possibilities in farming”, according to Anand Mahindra, chairman of the group. 

• Electric vehicles and oil displacement: Worldwide, there are over 5 million electric vehicles on the road (including buses and other commercial vehicles), with a good number running on China’s roads, as well as on thoroughfares in Europe and the U.S. It is possible that the sales of conventional internal combustion engine or ICE vehicles may have already peaked. Even if that is not quite the case yet, restrictions on the purchase of such vehicles are being imposed or mooted in several cities globally to manage pollution and congestion. This has impacted oil consumption and demand. BNEF will be announcing its 2018 estimates for oil displacement by electric vehicles later this quarter. In India, electric buses are already plying their trade in many cities, and they are set to increase in number this year. In terms of total cost of ownership, electric buses tend to be cheaper, though the upfront costs are higher than a diesel vehicle. Organising charging infrastructure for electric buses is also less of a challenge. 

The author is editor, global policy for BloombergNEF

vgombar@bloomberg.net