Financing the Energy Transformation - Civic Exchange

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Financing the Energy TransformationCivic Exchange’s 12th Energy Forumhave a worry that there is not enoughmoney to go round. I think there will be.The private sector will move forward as ithas with financing other challenges in thepast.Those are my reactions to the twopresentations.Ms Christine LohCan I ask you just to share one otherthought with us? You talked about you do not see there is any problem in unlocking these trillions from theprivate sector. Can you just spell out for us what is the condition that you think is necessary for those fundsto be unlocked? As an investor yourself and an operator, what do you have to see to be able to make muchdeeper investments?Mr Andrew BrandlerI think when we are investing in China; there is no concept of the carbon price or anything like that. If Chinahas existing policies, and it seems pretty committed to them, to promote nuclear, to promote renewableenergy, and most of the capital in China will be mobilised by domestic sources in China. There is plenty ofcapital. In a sense, this is what you could call perhaps socialism with Chinese characteristics, which isbasically state-sponsored capitalism, and China is channelling capital into those industries. It is not lookingfor foreign capital so China is solving the problem itself.In other perhaps more open markets, and I will put it in India in that category, what would help a lot is aglobal deal that gives certainty on emissions reduction targets, that will give some kind of clarity on acarbon price, and those markets will need effectively the substitute that comes from a carbon pricethrough something like the clean development mechanism or mitigation of funds that Josh was talkingabout, some kind of capital transfer from the west, from the developed to the developing world, which willsubsidise what are otherwise investments that would not make it. But this is why the whole challenge is topersuade the developed world to come up with that level of funding and to do a deal that basically involvesthe developed world making sacrifices to the somewhat vague promises from the developed world to dosomething in the future. I think that is going to be difficult for the US in particular to swallow.Ms Christine LohI am sure people will want to come back on this point a little later. Before that, perhaps, Robert, you couldgive us your comments.19
Financing the Energy TransformationCivic Exchange’s 12th Energy Forumprojects around the world.Mr Robert ToddThank you. Good afternoon, everyone. Iimagine many of you are familiar withHSBC but perhaps less familiar with howwe are involved in renewable energy, andthis is something the bank is trulycommitted to, not least for thosecorporate and social responsibilities likewhere we are carbon neutral, we buycredits, etc. From the business side, whichis where I am more involved, we activelyinvest in projects globally and we havearound a billion dollars’ worth of our ownbalance sheet invested in solar projects,wind, hydro and other energy-efficientFrom our perspective, and I think following on from what Josh said, ours is an international, privateinstitution playing a key role in the development of renewable energy globally and we want to seeourselves very much at the forefront of that development.In terms of the projects themselves, for us the key part really is the bankability of those projects. What wehave seen here in Asia is rapid growth, particularly in China and India over recent years, and it is thesupport mechanisms that have really facilitated that, whether that is government legislation or incentivepackages. And what we are seeing is the growth of that spreading across the region, so the Philippines andother countries are now announcing a raft of initiatives which will no doubt promote the bulk of thoseprojects, and that is what we are very keen to track.One of the areas which our research team has focussed on is on the economic stimulus packages thatvarious countries have announced globally. What does this mean, and what has come out, which is quiteclear but not immediately obvious when you are reading the daily press with endless articles, particularly atthe moment with Copenhagen, is that actually the proportion of the stimulus packages from Asiancountries is really the bulk of the global overall amount of stimulus packages. I think that is not clear whenyou are reading the papers. There is no doubt that, compared to European or North American colleagues,Asia as a group is leading the way in many respects and that has been clear for a long time.The other thing I would like to say in terms of what Christine said about unlocking investment, it is aquestion of making those projects from a bank perspective bankable, which means many different thingsand that is the question of having tried and tested technologies. What you are seeing a very young market,whether it is wind turbines in development or on-shore turbines which started off very small and havegrown to one to two megawatt size. What we are seeing now is the development of emerging off-shorewind projects where the turbines have been growing to two to three. There are five megawatt turbines inthe water and there are ten megawatt turbines that are talked about. Whether it is on the solar side, on PV,the battle of cost versus efficiency of those modules or, on the solar/thermal side, which we see as a veryinteresting area, harnessing the heat of the sun rather than the sunlight. For us, it is a question of makingthose investments attractive for the equity as well as the debt side, and that is with incentives from the20
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