Energy Transition Digest: 19 August - 1 September 2024

1. Germany Cut Red Tape to Support Renewables

Germany accelerated renewables deployment by reforming the permitting process.

So what? Permitting a greenfield renewable energy power plant can take several years, and it is widely considered one of the key obstacles to scaling renewables, at least in Europe. Germany's example shows that deployment can be accelerated by making the process more efficient.

Details:

• In 2023, Germany installed 18.6 GW of wind & solar – more than any other European country and almost twice as much as the year before.
• The measures introduced into legislation are designating clean energy projects as serving national security, allocating public land for the projects, and reducing the number of regulators involved in reviewing project applications.
• Industry players welcomed the changes but cautioned that other problems must be solved, such as continued supply chain issues or lack of incentives for manufacturing localization.

2. Chinese EVs To Be Localized in Europe

XPENG Motors 小鹏汽车 plans to set up EV manufacturing in Europe to avoid EU import duties.

So what? EU's move to support EV manufacturing capacities domestically seems to take effect. And Western actions against the Chinese EV industry are intensifying. The question is – when and how will China retaliate?

Details:

• XPENG will focus on mid- and top-segment models in the European market.

• The company will also set up a data center in Europe to enable AI and intelligent assisted driving features for its European customers.
• Following the EU and the US, Canada plans to introduce a 100% import duty on Chinese EVs.

3. Course Correction on Danish Energy Island

Denmark will delay the construction of a North Sea energy island by at least three years and will partner with Germany instead of Belgium.

So what? Because of the recent increases in material costs and interest rates, several energy megaprojects are taking the reality check (think large offshore wind farms or gigawatt-scale green hydrogen facilities). Some are adjusting timelines and cost estimates, others are cancelled altogether.

Details:

• The North Sea energy island is now expecting completion by 2036 at the earliest, compared with 2033 previously planned. The estimated investment is close to $30bn.
• An energy island is a concept for the hub that collects energy produced by surrounding offshore wind parks and supplies it to neighboring countries.
• Belgium, Denmark's initial partner for the project, pulled out, and Germany stepped in with the intention of building a power link to the German energy system.

4. Big Nuclear Push in China

China approved 11 new nuclear reactors with a total investment of at least $31 bn.

So what? Many countries turn to nuclear as a clean energy source, and China is one of the biggest proponents, seeing nuclear energy as an important component in the decarbonised energy system.

Details:

• China has 24 nuclear reactors under construction and is expected to approve around 10 new reactors annually in the next 3-5 years.
• In 2023, China had 53 GW of installed nuclear power capacity (#3 globally), but with the speed and scale of deployment, it can be #1 within the next decade

5. Big Tech Underreports AI’s Carbon Footprint?

Bloomberg says that big tech companies are concealing the actual carbon footprint of AI by claiming clean energy use with unbundled renewable energy certificates.

So what? According to Bloomberg, RECs have no value because they don’t lead to new renewable projects being built. But their value comes from the ability to claim clean attributes of electricity already produced, and that’s what companies are paying for. As long as RECs and underlying electricity are traded within the physical boundaries of the same energy system, it should be a legitimate way to account for clean power consumption.

Details:

• Unbundled renewable energy certificates are the type of a book-and-claim system that allows the trade of the ‘clean’ attribute of electricity separately from its physical delivery to the grid.
• Meta used unbundled RECs for 18%, Microsoft – for 51%, and Amazon – for 52% of their respective renewable energy consumption volumes.
• Hourly matching of data center demand and renewable energy supply would be a better way to achieve carbon neutrality in tech companies’ operations, as it would consider the energy system's physical limitations. It’s something Google and Microsoft are working on.

More News Headlines:

• Australia-Singapore undersea power cable receives environmental approval.
• Meyer Burger will not move its solar cell factory from Germany to the US.
• Poland allocates a $1.2bn budget to prepare for construction of the first nuclear power plant.