Lawyer Monthly Magazine August 2020 Edition

53 AUG 2020 | WWW.LAWYER-MONTHLY.COM RENEWABLE ENERGY: IS THE LAW DOING ENOUGH? spent on additional subsidies – solar and wind will still meet less than 5% of our needs. Fossil fuels currently meet 81% of our global energy needs. Even if every commitment in the 2015 Paris climate agreement is achieved by 2040, they will still deliver 74% of the total 1 . One way that more could be done on a global level, therefore, is through an increase in spending on green-energy research and development so that clean energy sources eventually become cheap enough to outcompete fossil fuels. Is the government doing enough? The pace of delivery in renewable energy is heavily influenced by the mechanisms the UK Government puts in place: incentives, taxation measures, trading and support mechanisms affecting generation, supply and consumption. However, more funding is needed to decarbonise heat and to upgrade the energy efficiency of the UK housing stock. The messaging for economic renewal post-pandemic relies on ‘building back better’ – targeting support on companies that commit to climate action, investing in skills, training and jobs that will deliver low- carbon infrastructure. Areas, where the Government can do more in policy and financial support, include promoting smart grids, decentralised energy, heat networks, building efficiency standards and a radical re-think of the medium to long term value of expensive retrofitting – the nation’s building stock. The future of personal transport (car, public, electric, hydrogen, autonomous etc) also requires a clearer policy and investment strategy. Green investment in 2020 so far With the global pandemic severely affecting the major economies, CO2 emissions have fallen dramatically with consequent improvements in air quality, particularly in the major cities with reduction in car traffic. Electricity consumption across Europe has fallen by over 15% in this period and with a wave of good weather, the production of renewable energy has risen dramatically, occasionally leading to periods where the network paid consumers to take electricity out of the grid: minus £84 MWh at 1 pm on the 21 April. The pandemic has perhaps heightened appreciation of climate impacts and the value of renewable sources, though fossil fuel energy productionwill remainanunavoidable part of the fuel mix for some time. However, in terms of investment risk assessment, its future looks increasingly challenged from a regulatory, fiscal and consumer preference perspective. Fracking looks particularly at risk whilst nuclear – which provided around 45% of Europe’s power in recent weeks – is costly. Recent developments in the use of mine water for heat recovery may offer ‘at scale’ opportunities for cost effective heat networks which are not reliant on technological innovation. Inevitably, with much of industry shutdown and recession looming, appetite for investment in energy has been impacted but will return once the economic forecasts are better understood. This is not assisted by Government’s reduction in spending to support climate action noted by the Environmental Audit Committee in May, which found that a series of Government policy changes had caused a fall in clean energy investment. It noted that more detail was required of the Government to plug the policy gap and secure the investment required (both public and private) to meet climate targets. Aiding investment in green technology Investors require a stable economic and regulatory environment – this requires not just all-party commitment to the targets (which exists) but also the roadmap and associated funding strategy. These latter elements are now required to avoid piecemeal investment and failing to deliver at the scale required. This is likely to require a comprehensive, game changingpackageof regulatory change, targeted subsidies, penalties, and allowances to encourage sustainable infrastructure and simplified models of generation and delivery that are responsive and resilient. This is not likely to be forthcoming until after the pandemic recedes and the demands of leaving the EU have been addressed. Are major corporations pledging to buy 100% renewable energy enough? The ability of the largest corporations to influence consumer trends – and not just react to them – is substantial and their commitments tobuy 100%renewable energy is to be welcomed. Cascading requirements through supply chains at all levels will further embed the climate change journey into the world economy and consumer spending choices. However, it will not be enough. Major technological and policy changes, including increased spending on R&D in green-energy technology, will be needed to replace fossil fuels and to offset any irreducible emissions. Should it be the law to ensure big corporations are doing more? The scale of the challenge and the required pace of change go a longway beyondwhat big corporations are doing. But therewill be a role for a stronger and more extensive package of policy, regulatory and fiscal incentives to steer the behaviour of business and consumers. The current sense of the market is that all participants in the global marketplace now see action on climate change as increasingly important for the financial performance of their business as well as an essential part of being a responsible business. Ben is a Partner in the Infrastructure & Energy Group at Walker Morris LLP with twenty years’ experience advising public and private sector clients in the waste, energy and infrastructure sectors. Ben specialises in renewables, energy from waste and carbon reduction projects and advising clients on what Net Zero means for them. Ben Sheppard Partner Walker Morris LLP