Financing the Energy Transformation - Civic Exchange

Financing the Energy TransformationCivic Exchange’s 12th Energy ForumMs Christine LohI’ll take the next question and maybe Josh and Robert Allender obviously need to have a conversationabout the hundreds of millions, or low billions that, if they could be diverted into Asian energy efficiency,where it can go and where it ought to go, but let me take the next question first.Comment from Audience memberWhat we found, this is on-line border-free by trading explosions in science – it is a bit wild - and a lot ofthese energy efficiency technologies are very complex and some of them are very hard to understand. Andwe start talking usually the first people in the company and then go down to the technical level. We talk tothe engineers. They think it is great. But, what we found is that the engineers, particularly on theoperational side, they have actually very little understanding of the economics of what they are doing. It isvery interesting and a big surprise. They could not quantify the efficiency gains monitoring, certainly not atoperational/engineering level and, once they are comfortable with our technology they want it, and ofcourse there is a price, and then they get scared and they do not dare to bring it up to the managementbecause they think it is too expensive.I think there is a disconnect between the technical level in companies who fully appreciate the economicsof energy efficiency gains and then an internal incentive structure that actually brings forward themanagement and asks for more money. It is actually not additional money but to make a case why it wouldmake sense for a company to introduce such new technology needs money. So, I think there is some workto be done at the technical, operational levels at facilities that are using and, shall I say, converting energy.Question from the AudienceI have a question referencing Charles’ slide earlier, the power cost curve. Nuclear energy is one of thesources with the lowest generating cost that can reduce the most amount of carbon emissions, and whatwe are seeing right now is China having an aggressive plan to increase nuclear capacity to 86 gigawattsfrom the current nine gigawatts. And we are also seeing other countries like Japan, South Korea and Indiahaving similar plans to increase their nuclear capacity. Some have pointed to some sort of a nuclearrenaissance. So, I would like to ask the speakers if you do think the investment opportunity for nuclearpower is becoming rosier and what some of the issues might be for countries like China, issues that theymight face as they try to achieve their existing targets.Mr Andrew BrandlerCLP is obviously very familiar with China’s nuclear industry through our investment in Daya Bay, and reallythere are two companies in the mainland. There is China National Nuclear Corporation and there is ChinaGuangdong Nuclear Power Plant, the latter is our partner. We are quite familiar with what they do. Theyare bringing down the capital cost of their nuclear power units quite dramatically from where they were,say, ten years ago when they built them, and they are doing that through localisation of the fabrication ofthe equipment. Almost everything is now fabricated within China, and also standardisation of design. It is abit like the model 2 Ford, any single car you like as long as it is black. No choice. That’s it. So, they are justrolling these out. That was the comment I was making earlier, effectively state-planning, state-sponsoredcapitalism, if you can call it that.The whole supply chain is being activated. When I talk to the China Guangdong Nuclear Power Plant, theyhire something like a thousand nuclear engineers every year building up the operating capability. You lookat the fabrication side, the equipment manufacture. They are building up their production capability and I26