Political and Weather Extremes but the Nordic Green juggernaut Rolls On
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Dear Reader,
Domestically, the action was with some major announcements from Nordic green corporates. But, internationally, it's all about the politics.?
Beginning with international news. Southeast Asia sweltered in an extreme heatwave that reminds us that we are not awaiting the impacts of climate change, they are already on us. And while recent European summers may have been just tolerable, with an El Nino weather pattern kicking in in the Pacific, 2023 is likely to get very uncomfortable. In scientist speak, that’s expressed as “a 66% chance that the earth will pass the 1.5C global warming threshold between now and 2027.” Practically speaking, it's clear that the time for talking has past.
That won't stop the talking. Actually, there’s going to be a lot more of it. And yelling. And worse. Vested interests are being exposed, passing political pain points and triggering political tension. Last week it was the turn of Germany, whose coalition government witnessed internal dissent, with the FDP undermining the Greens’ boiler replacement policy. Within the EU, it was France’s turn to be the bad boy, holding up an energy agreement unless it got its way over nuclear. The G7 met in Japan, but couldn't agree on a joint position for a rapid phase out of fossil fuels. Instead, a communique called for countries to reach net zero by 2050. The signs suggest that there is not going to be a lot of movement in negotiating positions heading into COP28. But the weather gods are likely to be reminding Europeans and Americans of the consequences of this over a long, hot summer.
Western countries will say (with some justification) that unless China diverts from its trajectory, then extreme climate change will be on us sooner rather than later. And China will respond that it is making massive changes to its economy. It is a conundrum that due to its size and its growth rate China can be both the biggest source of the problem and the biggest technology innovator in solving it as these charts from The Economist make clear.?
One aspect of all of these conflicting signals is the poorly understood battle now underway in China’s market for electric vehicles (EVs). The Financial Times does an excellent job of elevating the issue. Unfortunately the article is behind a paywall, but a few facts help underline the point.?
Long-term, the consequences of losing market share in China for western car brands aren't just a loss of income. The companies that win in China will have such a cost and technology edge that they will be hard to compete with anywhere. Biden’s incentives to buy American cars are likely to be replicated elsewhere.?
Interested to know more about China’s energy transition? BloombergNEF has an excellent report.??
Returning to the Nordics. There are now several companies that have worked out a business model that works for them, and are now scaling quickly. Copenhagen Infrastructure Partners (CIP) is a clear leader in this respect. Last week it announced both massive investments in Australia and Finland. ?rsted is another, buying into the US wind market.?
Hydrogen is pushing forward in Denmark, with the appointment of Evida and Energinet to connect consumers and cross-border pipelines to the national hydrogen grid. This comes on the back of Denmark’s agreement on a hydrogen pipeline to Germany in late March. Both announcements emphasise Denmark’s energetic pursuit of PtX and hydrogen that can be refined into green fuels and chemicals useful for a spectrum of industries.
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Renewable energy production is another business model that has come into its own. The number of solar panel installations tripled in Finland in 2022, leading to the Finnish Business Confederation calling for a further rapid expansion of wind and solar power to support industrial projects. The addition of so much solar and wind is having an amazing impact on prices. At peak times in December the energy price was trading at around 600 €/MWh. Now it is hovering around zero, or even marginally negative. That doesn't mean that it will stay there, but it underlines the twin impact of additional generation and the savings made in consumption during the energy crisis.?
One final point to note is that reality has started to bite for the plethora of ventures that have been announced. In a normal month, Mundus International might come across a single announcement of a project being cancelled. Last week, we saw Equinor postponed Trollvind, a floating offshore wind farm, due to high costs, and 林德 Gas pulled out of a PtX project at the Port of Aabenraa in Denmark. In Finland, the Compensate Climate Action app shut down given a lack of further funding. This is not necessarily bad news - it is part of the process that companies take risks, only later to give up when faced with insurmountable challenges.
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