The future of green investment

NARRATOR Welcome to the DNV Talks Energy podcast series. Electrification, rise of renewables and new technologies supported by more data and IT systems are transforming the power system. Join us each week as we discuss these changes with guests from around the industry.

MATHIAS STECK Welcome to a new episode of DNV Talks Energy. My guest today is Jon Moore, CEO of BloombergNEF. Welcome Jon.

JON MOORE Thank you for having me.

MATHIAS STECK Jon, we want to talk about investing into renewables today but before we start with that, it would be great if you could give us a bit of background about Bloomberg New Energy Finance and yourself as a person.

JON MOORE Okay. Well I spent 20 years in finance before moving into the energy space so I saw a lot of transformation taking place there. So, when I started, derivatives were actually a new idea, swaps and options and those kinds of things. So, I saw that grow from nothing into 20 years to become a massive, massive industry. And I left that industry in 2007 just before the cracks appeared let’s say too much, and then moved into the energy space because it was obvious to me that climate change was going to be a very, very big challenge, complicated, global, very information heavy. So, that was what really attracted me to get into climate. And New Energy Finance was an independent company then. And was really the first company that was starting to look at things like wind and solar and other renewable technologies so it seems like a great place to start to really understand what solutions were out there. And we took it from there, really. It became part of Bloomberg10 years ago. And so Bloomberg New Energy Finance, now BNEF was started 10 years ago.

MATHIAS STECK So, you just mentioned already, you just joined before the crash in 2008. So, when you look back the 10 years from then and maybe you look ahead 10 years, what is your take on how the investment levels into renewables have changed over time and may change over time?

JON MOORE Sure. So, I mean what’s clear is it’s scaled a lot. So, in 2004 it was about 50, 60 billion. We’re now around 300 billion for the last four or five years. So, actually what’s happened is there’s been a growth up to that level. And that level has been fairly stable actually but each year more and more wind and solar has been deployed because the costs keep coming down. So, for the same amount, same 300 billion you get a lot more for your money so actually wind and solar deployment has scaled and increased every year. So now, actually we now have over 500 gigawatts of wind and of solar, so more than that, terawatts. And enough to power the entire United States. So it’s been huge growth over the last two decades but particularly in the last decade.

MATHIAS STECK So, one big factor for renewables to take off was that it came from being an industry which needed subsidies to becoming an industry which allowed you to make money. And BNEF helps investors to make investment decisions. So looking at big data, artificial intelligence, the things we are seeing around as buzz words, how much does that influence investment decisions? Is that something investors use today already or are they more leaning towards the traditional sources of information?

JON MOORE I would say they’re really leaning towards more traditional. So investors are still doing business cases for projects and for funds and for infrastructure investment in the way that they used to. So actually what’s changed is the risks involved have come down dramatically because of the build out of the technology risk associated with wind and solar are now much lesser. So you’re now seeing more and more traditional investors interested in investing in renewables and storage and those kinds of things because they’re starting to become more regular assets, if you like, just part of the power utilities industry. So I think it’s really the big data and new technology is more around the deployment of assets as you get more and more distributed assets. Then digital capabilities will become more associated with managing those assets. So I think that’s really where software is an enabler in terms of the solutions, the deployment of assets.

MATHIAS STECK Right. How about yourself? I mean Bloomberg New Energy Finance’s handing of these. You see a lot data, you’re a very data driven business. How much are these technologies getting important for you?

JON MOORE So, the key data we get actually is around costs to do with wind, solar, batteries, those kinds of things. And actually we get a lot of their under NDA from manufactures so that’s not big data per se. But where I think those skills and data gathering techniques will be useful is in consumer uptake because one of the big question marks around energy transition is how consumers, will they buy electric vehicles? Won’t they buy electric vehicles? Will they put solar on their roofs, won’t they? Et cetera. So, we make projections and many people make projections using modelling techniques but the question is are people doing what we expect? Because they don’t always behave in rational economic behaviour. So, what we want to do, we’re investing more time and effort now in looking at consumer behaviour, how we model that, how we assess the uptakes, how we look at different markets and see what is actually starting to happen to give clues to whether the uptake will be steeper or less steep than we envisage. So those will be very big questions in the investment world as to how quickly the uptake will be. And hopefully we’ll get more data using big data if you like, consumer insights to help gather that.

MATHIAS STECK Jon, in DNV’s Energy Transition Outlook 2019 we called for 1.5 trillion US dollars of investment by 2030 to expand and reinforce the world’s power grid. So, there are different numbers around there but it’s clear it’s a lot of money. So, do we have the right conditions within the energy sector to attract this kind of investment and where do you see it coming from?

JON MOORE I think one of the big areas that we’ll see changes is in reporting, so transparency for companies. So there’s an initiative called TCFD Task Force for Climate Related Financial Disclosures which is putting a standard around companies and how they report their climate risk. Because there are a lot of asset owners, so pension funds, et cetera, who really want to understand the companies they’re invested in and what is their exposure to this transition. So, it’s early days. We’re only at a couple of years in but there are seven, eight hundred companies and institutions already signed up to these standards globally. And I think that will start to change investment behaviour because people will then start to take a view on companies and what their exposure is to climate risks. How their approaching it, how they’re approaching the opportunities, et cetera. And that’s actually significant levels of investment. So in the asset owners, own trillions of dollars of investment. So, I think those are probably the most interesting place that money will come from so that’s really where the big dollars are and as yet they have not been deployed at scale. So, I think that’s the thing to watch out for the next three, four, five years.

MATHIAS STECK So, we of course have an influence from the fossil energy lobby still for understandable reasons. Two questions to this. What do you think what impact does that still have on investment made? And what could the renewable industry do better to get some of that money to build more renewables?

JON MOORE So, I think we’re not going to get around. There’s always going to be lobbying and there’s always going to be positions taken. And I think the key thing is to get transparency around facts and data that point to the real cost reductions that have taken place on the renewable side, just how cost effective these technologies have become, to allow people to make up their own minds. So, I think it needs to be, the different viewpoints need to be shared objectively so that investors can make up their own minds. And they’re very sophisticated. And that needs to be done around the world. So again, in all economies, this transition needs to take place, so we need to make sure that in some of these high growth emerging markets, they’re not sold a line in terms of old technology is the way to go because that’s how other countries did it. I think they need to know that modern energy systems will be renewable so that’s going to be cheapest, most cost effective and by the way it will be less polluting and those are the technologies they should be investing in right now. And I think that would be, if we can get that understood on a global basis then I think governments, investors and companies will make the right choices.

MATHIAS STECK I would like to explore another important angle for investors in this regard to climate change. We all know climate change will result in different conditions for assets, for example rising water levels. And investors do have existing assets and they plan to invest in new assets so they have to think about mitigation and adaptation. How much do you see this happening? And how important is that in investment decisions today?

JON MOORE So, over the last decade, mitigation really has been the focus. Everybody has been talking about mitigation and I think that’s clearly needed, so that should be a key emphasis. However, we are seeing in the last year or two more people starting to think about adaptation. And I think that will definitely increase rapidly as people really start to understand climate risks, not only looking at new investments but then thinking about their own portfolios. I think you’re going to see a lot of people get very interested in the physical risk side of climate change and I think that’s where people will say what are my assets today, these are the pensions of my investors, what will be the impact? And when people start to understand that, I think you’re naturally going to see people interested in adaptation. Where do I need to invest in defences let’s say against the impact of climate change? So, I think that will become a rapidly growing area of interest for a lot of investors. And hopefully that will sit alongside mitigation. It won’t override mitigation. Mitigation is still the most important thing but I think adaptation hopefully will be part of the answer and part of encouraging people to invest in climate smart solutions.

MATHIAS STECK Right. To summarise, maybe last year we spoke with Michael Liebreich, the founder of Bloomberg New Energy Finance and he had this message, act now. So if you could make a call for action to investors, to governments, to the industry, what would be your call for action?

JON MOORE I mean I would agree with that. The sooner we invest, the better. I think now what people need to do is make sure they have the right people in place, the right governance, the right risk management view. And are working with corporates and other financial institutions and governments, engaging with them to make sure that we’re optimising the investment environment as the transition takes place. So I think everybody is clear, the transition needs to take place. The sooner we get all of those enabling factors in place, the quicker this can move and that will be good for everybody.

MATHIAS STECK Jon, I have one last question for you. What is BloombergNEF doing to harness the new collective focus on climate emergency to progress the energy transition?

JON MOORE I suppose we’re providing data to help people make the right decisions. So, at the end of the day, this will be many, many different organisations, be they companies, be they financial organisations or governments, need to make decisions for their environment. So, the transition will take place differently in every country so you need every country and each industry within that to really think about how to practically make the energy transition. So what we want to do is provide real data into those decisions so that people can move quickly.

MATHIAS STECK Thank you very much, Jon, for these great insights. And to the listeners thank you for listening in. That was Jon Moore, CEO, BloombergNEF.

NARRATOR Thank you for listening to this DNV Talks Energy podcast. To hear more podcasts in the series, please visit dnv.com/talksenergy.