Financing key to green transition – plus other top energy stories this week

The world's poorest countries need to make significant investments to transition to a low-emission economy, but a lack of funds could block progress, according to The Financial Times.

A new report from Avinash Persaud, adviser to Barbados Prime Minister Mia Mottley, targets spending in developing countries of around $1.5 trillion a year, about seven times the amount wealthy countries give annually to overseas development aid.

Today, 63% of emissions now come from emerging and developing countries, and that figure is very likely to continue to increase, leading to calls for huge investment to cut emissions.

High-income countries get 81% of green investment from the private sector, compared with just 14% in emerging and developing countries, the FT writes, and developing countries do not have the ability to finance the transition themselves.

The solution is to secure private finance for projects that are likely to be profitable, which makes up around 60% of all the required investments.

The report also claims that markets are too risk averse, and the risks themselves are exaggerated, which is leading to developing countries paying comparatively higher prices for similar decarbonizing products, as interest rates tend to be higher.

Persaud argues that the opportunity for investors to make a sound investment while accelerating decarbonization is there once the 'risk premia' are removed.

Unlocking investments is also a key focus of the World Economic Forum's Mobilizing Investments for Clean Energy in Emerging Economies initiative (MICEE), which calls for collaborative action to scale clean energy finance in emerging and developing markets.

Investment in lithium iron phosphate (LFP) — used to power electric vehicles — is growing fast in the US, and seven companies have committed more than $14 billion for future manufacturing facilities, Reuters writes.

LFP is a lower-cost alternative to nickel manganese cobalt cells (NMCs). Manufacturing in the US is attractive because all of the required raw materials are there, meaning lower transit costs and a secure supply chain, and demand for EVs has been rising sharply.

Battery expert Lukasz Bednarski believes automakers’ interest in building lower-priced EVs could be one of the drivers behind LFP’s rising popularity, and the US Inflation Reduction Act has provided incentives for the battery value chain.

“LFP provides good enough performance at a lower cost, which makes it an attractive proposition for EVs for the middle class,” he told Reuters.

Toyota and Hyundai have recently announced plans to equip future vehicles with LFP batteries. The addition of manganese to LFP battery cells means they can hold more energy and extend EV range to up to 450 miles (724km) on a single charge, according to Toyota.

The Ukrainian government says that gas flows from Russia to Europe could be shut off next year, the Financial Times reports. Ukrainian energy minister German Galushchenko says the chances of renewing a 5-year transit deal between Ukraine and Russia signed in 2019 are slim. Ukraine is therefore preparing its system for a cut of gas supply, he added, which could lift gas prices sharply in the EU.

Switzerland has narrowly passed a law to reduce its carbon emissions. The legislation commits Switzerland to carbon neutrality by 2050 and creates a $2.2 billion pool of subsidies to help households transition away from fossil fuels, with $1.3 billion for companies to invest in more sustainable energy technologies.

Meanwhile, the EU is in deadlock over reforms to the electricity market, after a clash on extending subsidies for coal plants and increasing state aid for other power plants. The reforms are designed to mitigate the chances of another energy crisis, but countries including Austria, Belgium, Germany and Luxembourg say the proposals undermine Europe’s climate goals.

The UAE’s largest oil producer Abu Dhabi National Oil Company (ADNOC) is setting up a carbon credits trading desk. It will use credits it gains from its own emission-reducing projects as well as for other industries in the UAE, Gulf News reports. The credits can be used to offset carbon taxes applied to exported products that produce emissions, such as the UAE’s exports of oil and natural gas.

Australia’s transition from fossil fuels is not fast enough, according to the head of the Australian Energy Market Operator, nor is there enough investment in wind or solar energy, reports UK newspaper The Guardian. Daniel Westerman also says the delays in transmission construction mean the country is vulnerable to the exit of coal-fired power stations, many of which must close by 2030 to reach climate goals.

The UK’s first deep geothermal project in nearly 40 years has been launched at the Eden Project in Cornwall. The depth of the well is nearly 3.3 miles (5.3km) and will provide constant heat for greenhouses and biomes, while reducing energy bills by around 40%, the Financial Times writes. The project launch coincides with a renewed interest in geothermal in the UK as a government white paper on its potential is due in the coming weeks.

Uzbekistan is one step closer to decarbonization, after Saudi energy provider ACWA Power signed a construction deal to build a 1.4GW solar project, as part of a $10 billion investment plan between ACWA and Uzbekistan's government, PV tech writes. ACWA Power is also working with the Kazakh government to build a $1.5 billion wind and battery storage project in Kazakhstan, due for completion in 2027.

The 25th Africa Energy Forum has taken place in Africa for the first time this year, hosted by Kenya, a country which gets 73% of its installed electricity generation capacity from renewables, Trade Arabia writes.

And Senegal has sealed a $2.7 billion green energy deal with wealthier countries, to help finance the development of renewal energy and speed up the country's decarbonization plans.

Governments are under mounting pressure to establish an investment and financing strategy for their energy transitions. What can Asian countries teach the rest of the world about financing hydrogen development?

Europe's fast-warming climate is a challenge, according to the WMO, but renewables offer hope.

Eastern Germany's historic mining belt is facing a major transformation as the region seeks to transition away from coal and towards a more sustainable future. Here’s how it will do it.

To learn more about the work of the Centre for Energy and Materials, contact Ella Yutong Lin: ellayutong.lin@weforum.org