Wednesday 15 April 2020

The path to decarbonisation – funding your net zero ambitions during challenging times

Stuart Reid, Managing Director (Projects), AMP Clean Energy

During the last few weeks, the word ‘unprecedented’ has become part of common language. Although arguably overused, there is no doubt we are now operating in unprecedented times, with businesses having to adapt quickly to minimise the disruption caused by COVID-19. Understandably, the main impact is that many businesses are freezing any major decisions on capital investment, and that the drive for decarbonisation – that had gathered such powerful momentum during 2019 – has fallen down the priority list.

However, when the pandemic passes – and it will – the focus will return to sustainability. It does pay to be sustainable - recent insight from major financial institutions including Morgan Stanley and HSBC have indicated that those businesses that have a focus on sustainability are more likely to be resilient during the current crisis. And, some businesses are still announcing their net zero plans, indicating that it remains a focus for when we return to business as usual – even if ‘usual’ is a new way of working.

So, while the pressure is on businesses from a financial and operational point of view, this doesn’t necessarily mean that the ambition, or the planning, for greater sustainability has to stop.

With this in mind, our message to organisations that are looking to their post-COVID future is that AMP Clean Energy is still very much open for business. And, importantly, we can provide no-risk funding options for organisations keen to keep the decarbonisation momentum going, but wish to conserve their own cash.

As part of the Asterion group, we have access to a €1.1 billion fund to be deployed over the next 3 years into clean energy projects. It is available now, and it means we can get projects off the ground quickly.

There are two key ways this funding can be deployed:

• ESCOs (or ESAs) - long-term energy supply agreements that can be used to fund, develop and operate, low carbon and renewable installations. They typically operate for a 10 to 20-year period, and during this time, businesses only pay for the heat or electricity they use through the energy supply agreement. This means they can access all the benefits of on-site generation without needing to find the upfront capital.
• Generation PPAs – these can fund new electricity generating assets, such as solar PV and wind, bringing new additionality onto the grid. Again, it involves no upfront capital investment by an organisation, and benefits can include stability of pricing.

We also appreciate that that many organisations will currently be in ‘hibernation’ mode, as offices, plants and places of work are broadly closed during the current period of lockdown. With this in mind, we know considering an on-site generation asset may seem a strange option. However – as the previously mentioned studies have shown – those businesses that continue to implement decarbonisation strategies are more likely to prosper.

That said, in light of the current situation and the current energy market dynamics and government policies, some projects are more suitable than others. We have argued before that a smart, heat-led scheme is a path of ‘least regret’, and this still holds true. With this in mind, biomass heat, heat pumps and waste heat recovery can still provide organisations with a compelling option, even during the current climate, as can a fully-funded electricity generation project such as solar PV or on-site wind. While each would need to be assessed on a case-by-case basis to decide the best route, there is an option suitable for most types of organisations.

As we all settle into our ‘new normal’, we understand that the future for many organisations is still uncertain. However, what is certain is that the 2050 net zero emissions target will become a priority again when these challenging times are behind us. With no-risk funding options available now, businesses can continue their sustainability plans – even remotely - so they are in the best position possible when they return to business.

Stuart Reid is presenting a live webinar for Future Net Zero on at 11am on 23 April. To register your attendance, visit https://futurenetzero.com/2020/04/07/webinar-the-path-to-decarbonisation-how-to-fund-your-net-zero-ambitions/.