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By Robert Todd

Global Head, Renewables and Cleantech,

Global Banking, HSBC

About 10 years ago, renewable energy was still a niche area, of interest primarily to specialist investors. The energy was typically more costly than traditional sources such as gas or coal and played a relatively small role in helping countries meet their needs.

Today, renewables are a growing part of the energy mix in dozens of countries. Portugal met its electricity needs using renewables alone for four consecutive days in 2016; while on a windy day, Germany can meet more than 100 per cent of its national electricity needs from renewables.

Thinking about renewable energy has become part of 'business as usual' for most major companies

The broad direction of future legislation is clear. National governments around the world have made major commitments to reduce carbon emissions over the long term. Technology has also improved, with some forms of renewable energy now able to compete on price with fossil fuels.

Thinking about renewable energy has become part of “business as usual” for most major companies. Technology firms, high street retailers and oil and gas companies are among those studying the sector and assessing the opportunities. Some have made such substantial investments in renewables that they have more energy than they can use themselves – and want to sell the surplus to consumers, subject to permission from regulators.

Clients often ask me about emerging technologies, new policies and changing legal requirements. Given the pace of change over the past decade, it would be unwise to make categorical claims about the future. Not all new technologies will succeed: some investors will see the products they have backed become obsolete before they even reach the market.

With that said, there are some trends reshaping the sector today that we are looking at closely. These include:

  • Distributed generation – a shift to more energy being generated on a small scale by individuals and communities. Many households have a solar panel on their roof or a wind turbine in their field. Some communities are investing in generation at a village or neighbourhood level, perhaps using a biomass generator to turn waste into heat and power. If this so-called “distributed generation” continues to grow, it would raise questions: what if communities no longer wanted to be connected to a national transmission system? Governments would have to decide whether to require them to contribute to the cost of maintaining a national grid. Utility companies would need to adapt, too, to ensure they remained relevant as consumer needs and expectations changed.
  • Storage – helping secure a steady supply of energy from renewable sources. One of the challenges of relying on small-scale renewable power is that it has peaks and troughs. A photovoltaic panel produces a lot of energy on a sunny afternoon, for example, then nothing at night. Some companies are investing to develop a battery that sits in your shed, attic or basement to capture the spare energy during the day and keep your home powered into the evening. There are different types being researched: “sprint” batteries for a short burst, and “marathon” batteries to store and distribute energy over a longer period. If this technology were to be embraced by consumers, it could accelerate the rise of distributed generation.
  • Smart meters – technology that helps power networks to operate more efficiently. A lot of policy debate today is about how to use less energy and use it more smartly, rather than generate more. Currently power stations in most countries produce energy based on what they think demand is likely to be, based on previous patterns of use. There is sometimes a mismatch between demand and supply, leading to waste. Regulators in some countries support the introduction of “smart meters” in homes and businesses. These smart meters transmit information to the grid, give a more accurate idea of likely demand in real time, helping to reduce the mismatch and carbon wasted.
  • Analytics – technology that makes it easier to produce renewable energy cost-effectively. Servicing offshore windfarms in person is tough and expensive, but a drone can fly at a safe distance and use thermal imaging to check that the blades are working properly. This helps engineers pinpoint problems and focus their efforts. Similarly, the software that helps owners to run renewable plants to best effect in any given weather conditions is constantly improving.
  • This list is far from exhaustive – and in many areas, the decisions of governments and regulators will have a profound impact on how new technologies develop and where private companies choose to invest.

    World leaders have made clear that they expect the society of the future to be low-carbon. This means changing the way we do business, manage natural resources and use energy. Exactly what those changes will be, and when, where and how they will occur is the subject of a fast-moving debate. It is a fascinating moment in energy history.

    Working in HSBC’s Infrastructure and Real Estate Group, Robert Todd advises large organisations such as multinational companies on investing in renewables and clean technology. Here, he shares his views on the rising profile of green investment – and on some of the trends reshaping the low-carbon sector.

Issued by The Hongkong and Shanghai Banking Corporation Limited, incorporated in the Hong Kong SAR, acting through its New Zealand branch ("HSBC").

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