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One “clean” trillion dollar needed – annually!

To keep global temperature rise under 2°C, the level deemed vital by scientists to avoid a global climate catastrophe, some $36 trillion, or $1 trillion annually, is needed in clean energy investment by 2050, according to a 2012 report of the International Energy Agency.

This was the back drop when more than 500 global financial leaders last week gather at the United Nations to discuss the growing urgency of climate change and investor actions needed to mitigate escalating economic risks.

Falling percentages

Global investment in renewable energy fell 11 percent in 2013 to $254 billion, according to data released by Bloomberg New Energy Finance, casting a shadow over the notion of a “clean trillion.”

Last year was the second decline in renewable investments since 2011’s record-high $318 billion. The decline in investment last year was mainly due to technological advances that are driving down costs and making clean power more affordable! But also due to a lack of trust and predictability for investors worried about regulatory risk in Europe and USA.

Turning Mature

The renewable energy industry has done a fantastic progress over the last decades and is now a mature industry. Recent news: In Denmark – wind generation in 2013 was 33.2% of the country’s electricity consumption. In Germany – more than 22,000 windmills already spin, while about 1.3 million solar panels are installed, from residential rooftops in Bavaria to the Chancellery in Berlin. In Sweden – electricity production from wind increased 30% last year. Meanwhile, China continue to boost renewable energy investments and in 2014 they have plans to install 14 gigawatts of solar capacity and 18 gigawatts of wind power as well as approve 20 gigawatts of hydroelectric plants in order to curb air pollutions.

However, despite great progress, and many such initiatives within the global renewable industry, this is still not enough to keep us under the 2 degree scenario. More investments are needed.

Telling it like it is

So, how can we quadruple the investments to 1 trillion a year? What can the renewable industry do to attract more investment?

First, I believe we need to work more on envisioning an inspiring low carbon future. It must be a future where the new renewable technologies are working together and where all stakeholders are engaged, not least energy consumers and local producers (prosumers) and it must also address the enormous potential in energy efficiency. We must create messaging that communicates a sustainable future to people’s hearts and minds. All the good local initiatives ongoing around the world should be shared to inspire others to action. The Scandinavian initiative SUSTAINIA is a great platform for sharing and scaling excellent cases world-wide.

Secondly, the transition to a low carbon energy system needs a mindset of collaboration. Last week I participated in Recharge’s first Annual Thought Leaders Summit in Oslo where almost 50 of the biggest names in the global renewables sector gathered. This was an excellent initiative where stakeholders across the renewable technologies discussed key challenges for the entire sector. When it comes to collaboration, the renewable sector can take inspiration from the oil and gas sector. They are very effective to solve common challenges through Join Industry Projects where competitors collaborate to find good industry solutions on technical challenges. Reliable grid integration and measures to reduce regulatory risk are both good candidates to be solved as collaborative efforts.

Finally, the renewable industry must work more systematically on driving transparency into the energy discussion. LCOE (levelized cost of energy) is one of the utility industry’s primary metrics for the cost of electricity produced by a generator. Going forward the LCOE must be done on a macro-economic level to allow for optimized political decision making on the energy mix and to provide argumentation for a broader view on cost of renewables. The goal must be to calculate society‘s costs of electricity revealing the true macro-economic costs of energy – including elements such as cost of pollution to society, healthcare, job creation, and much more. Renewables are a natural hedge against fuel price changes and allow geopolitical independency.

Working without water

Moving forward the water intensity of energy production should be taken into consideration. We know that solar PV and wind are virtually water-free fuel sources, and yet we continue to adopt policies that create roadblocks to their integration in favor of highly-water intensive coal and natural gas. We need to rethink how we plan for energy needs and factor water in – or out of – the equation from the beginning.

Talking and transparency

The renewable industry needs to work systematically towards driving transparency into the energy discussion and to establish a broader view in messaging and communication to consumers, prosumers, politicians and other stakeholders. The IEA’s latest estimates indicate that fossil-fuel consumption subsidies worldwide amounted to $544 billion in 2012, while renewables subsidies totaled US$101 billion in 2012.

Inspiration unlocks the future. Combined with transparency on the true social cost of energy, this will hopefully install stronger confidence and attract the “One Clean Trillion” needed in annual investments.

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