Luiza Demôro, the Head of Energy Transitions at BloombergNEF, walks us through a pair of reports that the team at BNEF recently released. One is their annual Power Transition Trends report. And the other is a special look at the state of clean energy funding in emerging markets and developing economies.
And now that COP27 is upon us, Luiza also gives us a global perspective on energy trends, with a specific focus on where renewables are making inroads. She also shines a spotlight on some of the countries and regions that are ripe for investment. Along the way, Luiza also touches on what countries and jurisdictions can do to attract more capital from private investors who are looking to power the energy transition.
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(Note: This transcript was created using artificial intelligence. It has not been edited verbatim.)
Sean McMahon 00:00
Hey what's up everyone and welcome to another episode of the renewable energy smart pod. I'm your host, Sean McMahon. And I got to say, we've got a heck of an episode in store for you today.
Luiza Demôro is the Head of Energy Transitions at BloombergNEF. And she's going to walk us through a pair of reports that the team at BNEF recently released. One is their annual Power Transition Trends report. And the other is a special look at the state of clean energy funding in emerging markets and developing economies. And now that COP27 is upon us. Luiza is going to give us a global perspective on energy trends with a specific focus on where renewables are making inroads. She's also going to shine a spotlight on some of the countries and regions that are ripe for investment. Along the way, she'll also touch on what countries and jurisdictions can do to attract more capital from private investors who are looking to power the energy transition.
So yeah, get comfortable, because there's lots of great insights on the way from Luiza. But first, here's a quick word from the exclusive sponsor of today's episode. EDF Renewables
EDF Renewables is a market leading independent power producer and service provider with over 35 years of expertise in developing onshore and offshore wind, solar, storage and electric vehicle charging systems. EDF Renewables - Energy your way.
Sean McMahon 01:39
Hello, everyone, and thank you for joining me today. My guest is Luiza Demôro, the Head of Energy Transitions at BNEF. Luiza, how're you doing today?
Luiza Demôro 01:47
Hi, Sean I'm great. Thank you for having me here. How are you?
Sean McMahon 01:50
I'm doing well. I'm doing well. So we brought you in today. Obviously, you know, you're an expert in this field. And your team recently released the power transition trends for 2022. You know, a report that dives into where things are going in the in the global energy landscape. So what were the some of the key takeaways that your team found?
Luiza Demôro 02:07
This is a report that we launch every year with, as you mentioned, looking at where we are and where we are going in terms of transition of the power sector. This report came with like a bittersweet taste and includes really bad, but also good and promising news. The bad news is that the word recorded an unprecedented spike in coal generation. Coal generation jumped at point 5%, between 2020 and 2021. And this is quite sad, because when the pandemic started, the globe was hoping that would actually see generation from fossil fuel technologies and emissions going down which has proven to not be through. There are a few main reasons why we saw coal generation going up significantly last year, the word has started rebounding from the pandemic really quickly. And there was a need to provide and supply this growing demand. Coal was a solution in many cases. We also saw in 2021, much lower hydrogen aeration due to droughts in many countries around the world. And of course, we started seeing gas prices going up. So many countries saw coal as a solution to just lower the cost of generating electricity. And theirs, of course, suddenly led to a significant increase in emissions, which was a direction that was the opposite of what most people were actually hoping to see. Right? When the pandemics or that was like one of the bright sides of the pandemic in 2020. That ended up not not really happening.
Sean McMahon 03:42
So what was some of the good news that you hear team Pamplin report,
Luiza Demôro 03:46
The good news relates to renewables. So renewables specifically when solar saw some milestones in 2021, and one of them is that for the first time ever, wind and solar together, were able to supply 10% of all power produced in the globe in 2021. And this is a huge milestone, a bit far from where we actually need to be. But it shows that we're actually progressing. And we also saw big numbers in terms of wind and solar capacity installed in 2021.
Sean McMahon 04:20
So how much was that how much wind was added around the world wind and solar?
Luiza Demôro 04:24
At a global level, wind and solar accounted for about three quarters of all capacity installed in the world. And we saw about from all technologies 360 gigawatts of capacity installed. So wind and solar together made up to about 270 gigawatts in 2021. And just for comparison, when we refer to those big numbers, this is almost three times the size of Mexico. So wind and solar together added almost three times the total capacity installed in Mexico today. So this is this is quite big.
Sean McMahon 05:00
Yeah, of course. And so with all those news sources coming online, were there any regions or countries that led the way to go on a gas? Do I want to guess? Well, I mean, China, I would guess China, you know, brought on a lot. Europe, Middle East. Yeah, you're the expert here. I got some guesses, but you got the report.
Luiza Demôro 05:19
Well, Asia. Over the past few years, Asia has always to have, like, no matter what we're looking at age is going to be the half of the story. And China's always going to be about a third of it.
Sean McMahon 05:30
So I was right. Wait, my guess was correct,
Luiza Demôro 05:31
Right. Yeah. You're right. So both for generation, capacity stalled everything, Asia is about half of it. And China is about 30%, or a third of the total global. This is true for the annual generation in 2021. Asia is also in no way the driver of part of the bad news. So Asia is the region where we saw power demand growing the most, in 2020. Oman, following the pandemic, while the world saw it growing about like 5.5%, from 2022 to 2021. Asia saw it growing 9%, and China alone saw it growing 10%. And Asia is highly fueled by coal. So that explains a lot of the growth in cogeneration. on the coal side, together with China and India, you as was the other driver of it, which is not good news, considering that developed nations should be actually just being at the forefront of the transition. But on the renewable side, Asia is also driving and leading the way. So for 2021, for example, China in the US are the top markets for wind and solar additions, they are bigger than any other countries over two decades, but also last year, and for solar there, followed by India, Brazil, and Japan, for when they are followed by Vietnam, Sweden and Germany. So we saw the two big markets China in the US at a global level. But we also set start seeing some variety, when we look at other countries that are becoming big markets for this two technologies.
Sean McMahon 07:19
So are there any countries where there's just nothing going on in terms of developed countries where we should be expecting more I know, you've kind of talked about how there's a plus and a minus to the story of China and the US and some other places, but but who's kind of sitting on the sidelines? Is there anybody?
Luiza Demôro 07:32
The sad news is that the answer is most of them. While we see renewables, especially when solar and especially solar actually spreading to more and more countries every year, we still see an absolute numbers, the deployments, very concentrated on the big markets. When we look at the emerging markets, including China, the story is about China. But if we exclude China from this picture, then the 10 big markets concentrate at least 80% of the total capacity requirement, and the other over 100 emerging markets just split the rest, and even then not equally. And we have just launched a report looking at the state of energy transition emerging markets and how to start mobilizing more capital to those countries. And what we see is very concerning, to be honest, because while we need to ensure that emerging markets transition away from fossil fuels, and just start developing renewables, when we look at investment numbers, the numbers are only going down since 20. To 2019,
Sean McMahon 08:37
Wait, you said going down, so it's not a matter of there, the money's there and things are too expensive, or whatever. It's just the funding is not there, it's actually declining.
Luiza Demôro 08:44
I think it's a combination of many factors. If we look at global level, we can see that money to fund clean technology and energy transition specifically is there. Every year, we reach a new record. In 2021, we saw about $785 billion deployed at a global level for energy transition technologies, including power, transport, and buildings, for example. But 2021 was also the year where emerging markets accounted for the smallest share of this total, about only 8% of the total. And those countries are responsible for a big share of global emissions. So if we don't start now focusing on those countries where demand is growing, that would opt tribute coal or fossil fuel capacity, and then accelerate the transition. We're not going to get anywhere close to staying below 1.5 degrees of global warming.
Sean McMahon 09:39
You mentioned the global investments going down. But are there any other factors that are preventing some of those emerging markets from deploying more capital? I mean, is it really the cost of these things or a lack of supply chain or any factors like that?
Luiza Demôro 09:51
The thing is, it's not really the cost at all right? When we look at cost of wind and solar, we see very clearly that, at least in China It turns off the word those technologies, one of those technologies, that LIS is already the cheapest source of new power. So it's not about costs. But in many emerging markets, there is either lack of policy or barriers that artificially increase the cost of deploying those technologies, meaning that they can not make use of the learning curves and the steep drop in technology costs. So I said, it's not about the money not being there, it's really not the money is there, private sector is more and more willing to start deploying capital to emerging markets, but they need and they will always need some specific criteria related to country risk and project risk to be able to go in. And that's not going to change that might become a bit more flexible over time, but it's not going to completely change. So what is needed there is to make sure that all the key stakeholders that are responsible for ensuring the transition, do their job and focus on the areas where they can actually reach greatest potential. To provide more examples. It means like making sure that policymakers implement the policies that are fundamental to lower project risk, lower the perception of risk, and provide clarity on the direction that the country has to go, while reducing some of those barriers which relate to infrastructure, for example, or to specific regulations that don't serve the market. Well. development agencies, philanthropic organizations and other international agencies have two jobs to do. First one is help some of those policymakers to implement the policies that we know that will start transitioning the market and open the market for those sources of private capital. And then once those are in place, they are the players that can help kick off the first projects, which will then lower project risk and welcome private investors to the market.
We'll be right back.
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Sean McMahon 12:51
And now, back to our conversation.
Okay, and when it comes to new sources of energy being deployed, when we take the global snapshot are more countries, when they choose to build out more capacity, are more countries choosing renewables, are they still just tapping fossil fuels?
Luiza Demôro 13:06
Solar is specifically has become the top of mine of countries all over the world, which is great, this is what we need. Right? This is only the starting point. But this is what is going to get us to where we need to be. Based on our research country level research that we do every year for climate sCOPe. We saw that in 2021, at least 120 countries in the world have added some solar capacity. This is big. This is up from only over 50 in 2012. The other interesting thing that we found is that when we look at what is the technology that countries are adding the most, we see that 50% of the countries in the globe have added more solar capacity than anything else.
Sean McMahon 13:52
Wow. So half the countries in the world have added more solar than anything else. So what's wrong with the other half the countries?
Luiza Demôro 14:01
Some of them are also focusing on clean technologies, wind for example, accounts for 13% of the countries in the world. So 13% of the countries in the world have chosen to add more wind than anything else. And then hydro represents 15%. There is to the countries that are choosing gas and oil. The good news is that the number of countries was choosing coal has gone down by a lot.
Sean McMahon 14:25
Okay, so I'm trying to imagine a graph here. So if countries are choosing to add more sources of energy, sounds like solar is more than 50%. Wind is in there at what percentage coaching, okay, and then hydro and geothermal and kind of other renewables. What are those?
Luiza Demôro 14:41
Hydro is that 15 So 15% of the countries chose hydro. Geothermal is not really there. It doesn't mean that those technologies are not being added. It means that they're not being the main one installed in a year. And for me, this is a huge thing. And it's huge one, we understand that the reason why we're seeing this number, of course, policy plays a great role on that. But if we look back at like five years ago, 10 years ago, policy was the only driver of those choices. So only countries in Europe, for example, a few years ago, we're seeing more wind or solar added than any other technology. And that was because they had they were at the forefront of implementing policies to accelerate deployment of those technologies. This is not true today.
Sean McMahon 15:32
Now, is it more markets, market driven decisions?
Luiza Demôro 15:35
Now it's economics, right? So as those technologies get cheaper and cheaper, it just makes more sense. Policy is fundamental to scale up, especially. So we won't see the trend in absolute number for lower income emerging markets change when the policy is not there. But it's very important that we now have economics leading the way. Because then as soon as the policy is implemented, the barriers are address, it's so easy to just shift the direction of those markets, because it just makes sense economically.
Sean McMahon 16:07
I'm glad you mentioned the importance of policy right kind of policy leading the way for economics, because, as you know, we have COP27 Coming right around the corner here. And I understand you're going to be in attendance in Egypt. So what are some of the trends you see? And what are some of the other hopes you have for that event? You know, any any policy decisions you're hoping that are advanced or finalized? Seemed like you've got a good bead on what to expect at a gathering like this. So So what are you hoping for?
Luiza Demôro 16:31
I think my first concern is I mentioned the coal news or bad news. And because one of the key drivers of the spiking coal generation in 2021, only got worse, which is that gas prices and the energy crisis, were very likely to see another spike in call duration in 2022. And this is pretty much against the direction that we need to go. So we need to find solutions. to just get back to the direction that we were discussing at COP26 do provide something that's very concerning as at COP26, about 40 countries committed to retire coal capacity. Half of those countries, over 20 of those countries have recorded an increase in coal generation in 2021. So like even those that are like just making the boat commitments this year, last year, we started to just go into the opposite direction.
Sean McMahon 17:34
What are your reasons for that? I mean, I don't have the list of those 20 countries in front of me, but is it countries that were hit by the war in Ukraine and kind of needed to find another source? Or what are we talking about?
Luiza Demôro 17:43
I think it's a mix of the three factors, really fast economic growth, droughts, which didn't get any better this year. And the gas prices, which only God started going up last year. So there's a it's much worse, much more concerning. Many European countries have already announced that they're restarting some of their coal plants to deal with this situation, at least in the short term. My hope is that the energy crisis becomes a good thing in a way that countries start really understanding as many already are, that transitioning to clean energy is not just a matter of climate change, but also a matter of energy security, which has become fundamental. But I think we still need to see more concrete action. And this direction.
Sean McMahon 18:33
You mentioned droughts as one of the drivers of some of these countries, you know, reverting back to coal. So as someone who kind of covers this industry, I feel like the importance of Hydros underreported, if you will. And so I don't know if a lot of consumers when they hear news about a drought, understand the direct connection it can have in some countries in some regions for power generation, right? Through hydro, what can be done to kind of just raise that awareness or help more people make that connection?
Luiza Demôro 18:59
That's a good point. And a good question. I'm not sure if I actually have an answer to that. But this is something that's extremely clear in my mind, I'm Brazilian, and hydro supplies, most of the electricity in Brazil, or directly in technologies have been growing, but hydro supplies most of it. And over the past years, we have faced a lot of droughts, which impacted a lot on our day to day basis, not only at costs, but for example, when I was a kid, there was a massive initiative to just reduce public lighting, otherwise, we would not have power because after all, it's over months. So people were just like going to every street and painting. The street lights that had should be turned off to just help us deal with this issue. And this is a big thing in I think many emerging markets. But AI has never been top of the mind of people because it's in emerging markets. Now that it's at Actually, I think more and more developed countries, the concerns in depth tend to focus to start the turning a bit more to, to hydropower. And for my experience, like, the reason why we don't talk so much about hydraulic, when we are talking about numbers is because hydro is very important. But the role of hydrogen, the participation of hydro has been pretty much stable over the years. So if you look at, like, the share of generation that hydro is responsible for, it's pretty much the same over the past decade. But it plays a huge role in many markets that rely a lot on hydro, in allowing more and more wind and solar penetration to come in, without such a big need to deploy a lot of energy storage, which makes those technologies more expensive at the moment.
Sean McMahon 20:49
Okay, and then getting back to COP27. Real quick. Are there any specific things you're hoping or announced or agreed upon? I remember, you know, in Glasgow was specific articles that, you know, everyone was happy to kind of see advanced. So, you know, as an insider, please like that. If I would have talked to you in a few weeks time now. And that conferences wrapped up, you know, what are you hoping are some of the key things that are actually accomplished and not just talked about?
Luiza Demôro 21:13
My personally, my may hope, and my main expectation for COP is that the buzz around emerging markets and around Africa that we're seeing right now, remains true when COPs over, I've never seen so much attention paid in emerging markets, this is a good thing, because we really need to make sure that we transition away from fossil fuels and into renewables in those countries. And doing so is more complex in emerging markets and in developed countries. And we also need to ensure just transition in which the clean energy deployment and the transition away from coal and other sources also enable social development. There are many cases which copper related discussions don't last long, which, sadly, is illustrated by the fact that, like there's so much more coal being generated and the countries that have committed to phasing out coal capacity. But I think this is an area that we can benefit a lot from.
Sean McMahon 22:15
Are there any countries in Africa that you kind of hold up as an example of where there's promise, because I mean, part of the reason the copper is being held in Africa does bring that spotlight into that continent. So any individual countries there, you see that really kind of seem like they're providing a roadmap for the rest of the continent.
Luiza Demôro 22:32
We're looking very close at Africa right now. And we have always through many, many initiatives that we have here at Beano. And there are many countries that see booms and spikes in finance for renewables and technology. But if I had to name one of the key barriers limiting investment flows, is that in most of the countries, the procurement of renewables is very inconsistent, which means that investors have no clarity on where to look at or how and when to finance. We had countries that have had good moments of success. Of course, South Africa is the biggest one, one country that has had examples of what good looks like as well as what that looks like. And now was trying to start to just move again, to direction of phasing out coal and accelerating the renewables through many policies. But we also saw some good cases in countries like Kenya, Nigeria over the year, especially with rural electrification. Wonder is a very impressive market, in terms of stability in terms of policies and engagement from the government that I think can also provide good examples for the region. But consistency is the issue. And I think for many of the markets aligned with other policies, if there is clear direction of the market and consistent procurement, we can see those countries booming really, really quick.
Sean McMahon 23:58
All right now one of the things I like to do with guests on the show, Luiza is to ask them for their bold predictions, and you seem like someone who is very well positioned to kind of see trends and see what people are gonna be talking about, not only now but in the future. So do you have any bold predictions on where we'll be with this transition? What would this report will look like in say, five years?
Luiza Demôro 24:15
Starting from 2022, I think we will still be in a bittersweet moment. Not very different from where we are now. I think the coal numbers are likely to get a lot worse because of the energy crisis because of what many European nations are needing to do, as well as some countries in Asia as well. But I also believe that we will only go up with renewables. So while we could be in a worse position with coal, we will also be installing more renewables than ever, and every year generating more and more from wind or solar is specifically a bit more longer term. I'm optimistic. I don't think he would be doing what I do if I was consistently pessimistic about the topic. And I do think that, despite the fact that many countries are not implementing the fundamental policies that they should be, many are actually evolving. And at the same time, I see really good movement from the private sector to understand what role they should be playing, and how they can actually accelerate investment into emerging markets, for example. So I think we're going to be in a good point five years from now, not sure if this is exactly where we need to be at. But I think the trend is positive overall, what I would like to see is the middle stakeholder that is extremely fundamental, playing a more the size of role to just connect public and private sector in a way that's functional and accelerate the transition. Specifically, I'm talking about development agencies, for example, and philanthropic organizations that can act and connect both sides and ensure that we get there as soon as possible.
Sean McMahon 26:08
Okay, well, I echo your hopes, and I hope that all those come together because like you, I'm not pessimistic on this. I'm optimistic. So Luiza, thank you very much for your time. I really appreciate it and enjoy your trip to Egypt, and I hope everything goes well at COP27.
Luiza Demôro 26:21
Thank you, Sean was a pleasure.
Sean McMahon 26:25
Well, that's our show for today. But before we get out here, I want to say one final thank you to the exclusive sponsor of today's episode, EDF Renewables.
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