Green Business 2022: The new Silk Road
Richard Black considers what the world of climate and energy policy might look like in six years time.
By George Smeeton
Information on this page correct as of:
This blog was originally published on BusinessGreen as part of their 'Green Business 2022' series, in which experts from across the green economy offer their views on what the sector will look like in 2022.
It's now just seven years since Nobel Peace Prize-winner Laurent Fabius brought down the gavel on the seminal 2015 United Nations climate summit in Paris; and it's astonishing, looking back, to see just how much that event re-shaped the world for green business.
Until that point, many business analysts and commentators, even in generally respected media organisations such as the BBC, viewed issues such as the greening of the energy sector and the risks of high-carbon investments as side-shows - nice-to-have stories that would occasionally merit a few words at the end of a bulletin, but definitely the trimmings, not the meat.
The collective failure of economic journalists to predict the 2017/18 financial crash (which, by a quirk of fate, occurred exactly a decade after queues began forming outside Northern Rock branches) has since been the subject of many inquiries. The UK Treasury Select Committee assessment in 2019 said, among other things, that "business editors allowed themselves to be enticed by the appeal of the familiar - that the future would represent only a mild evolution of the past, rather than a step-change".
In retrospect it's hard to understand why more analysts didn't spot trouble brewing. Lord Carney, then Governor of the Bank of England, had after all warned shortly before the Paris Summit: "Once climate change becomes a defining issue for financial stability, it may already be too late".
If business analysts didn't believe governments would follow through on the pledges they made in Paris - and there were, admittedly, good reasons for taking that line - it's harder to understand why they still clung, as the Treasury Committee put it, "to an outdated belief that Europe and the US were still the world centres of growth and innovation".
Lest we forget, both the Chinese government and Chinese markets were displaying unmistakable signs of a clean energy transition well before the Paris Summit. Coal burning peaked, coal imports even more so. The government established the world's most far-sighted plan for nuclear power expansion, and even bigger plans for renewable energy. It introduced a national carbon trading scheme, admittedly a little behind schedule, in 2018, and then did what Europe had signally failed to do by ensuring the carbon price was big enough and predictable enough to accelerate innovation.
As a result, China now has, as everyone knows, surpassed 250GW of wind energy capacity installed; and while the official figure for solar stands at 120GW, the reality is that officials haven't been able to keep count, given the speed at which Chinese householders and companies have been "growing their own" electricity.
But those figures only tell half of the story. By 2016, the government understood that you cannot run a modern electricity system on variable-output renewables alone - you must also invest systematically in the other elements needed to account for variability, such as demand response, trans-regional connectors, electric cars, power-to-heat, storage, and all the rest of it. Both Chinese and international companies swiftly took advantage.
As a result, China has achieved its strategic aim of being by far the world's dominant supplier of low-carbon technologies. Chinese companies make 80 per cent of the world's solar panels and 75 per cent of its wind turbines, while its share of the battery storage market stands at 55 per cent and growing. Meanwhile, economic growth has stabilised at four per cent a year, higher than Europe's.
High road and low road
China's success has brought both pain and benefits to other parts of the world; a Green Silk Road for some, a route to ruin for others.
Its clean energy companies have been so successful that an increasing number are now outsourcing manufacture to less prosperous nations - headed by Rwanda, Ghana and Cuba - which in turn is helping drive economic development in these new emerging economies. Solar module prices are through the floor, which has in turn made solar power more affordable in many countries.
But apart from a few specialist high-end products, it has spelled the end of the road for manufacturers in Europe and North America.
The final proof of China's low-carbon dominance, and of the dominance of the low-carbon paradigm worldwide, came last year, when General Motors, Renault-Nissan and Ford all moved their corporate headquarters to Beijing as a result of massive investment in and rapid growth of electric vehicles (Volvo, of course, had been Chinese-owned since 2008).
And India? It too surpassed the clean energy targets it set before Paris, although in slightly more organic fashion. Installed solar capacity now stands at 120GW (although, again, this figure excludes many small off-grid installations that have not been officially recorded). Wind energy has had a more troubled history; but the new jewel in the crown is tidal power.
After literally decades of vacillation in the UK and other European nations, India now leads the market in tidal stream technology following the opening of the Gulf of Kutch array in 2018. The UK company leading the project, Atlantis, is said to be on the point of re-locating to India because of the government's long-term commitment to developing tidal power at home and exporting the technology across Asia.
In the face of such a rapid transformation by these two Asian giants and their neighbours, many European countries have become almost footnotes in the global clean power race. Germany, Denmark and Sweden retain their continental leadership owing to decades of cross-party consensus. But Britain is now seen as a basket-case.
Financially, the 2017/18 crash affected it more than most countries owing to its economic dependence on the City of London, and the City's dependence on oil and gas investments.
With the oil price at $15 per barrel and set to remain there, the Treasury's tax take remains significantly below projections. The pension system is in corresponding disarray, and of course outlay on unemployment benefits is soaring.
As a result, investment in the energy sector has slowed to a trickle. During the 14 years it took Hinkley C to move from concept to cancellation, China alone built more than 150 times the power station's planned capacity in renewable energy.
As the newly self-styled Guru Gideon of Waterford, the former Prime Minister George Osborne, said on RBS Thought For the Day* recently: "Sunny days are a signal that we should repair roofs - and, indeed, generate free electricity from them. If only I had listened..."
*Available as a podcast on NewsCorpPlayer; but if you are using mains power, check Energy Minister Lord Ridley's Twitter feed for announcements of power cuts in your area