POWER May 2023 - 9

GLOBAL MONITOR
be the decision by oil and gas majors like
BP to pivot back toward hydrocarbons
and scale back their climate targets. The
trend is likely to have also been partly
driven by the incredibly high energy
prices and fears over gas shortages we
saw in Europe last year. " As an example,
BP's annual revenue for 2022 was about
$249 billion, a nearly 52% increase from
2021, according to Macrotrends, an investment
research group.
Emily Tetley-Jones, real estate director
at Fieldfisher in London, said, " Another
complicating factor for the growth of renewable
energy generation in the UK in
particular is the amount of time project
developers have to wait for grid connections.
The race is on to get more highcapacity
cables in the ground but some
developers are reportedly facing [yearslong]
waits to be connected to the grid.
A lot of the growth in renewables will
come from their co-location with mixed
industrial developments, and this is putting
a lot of pressure on an electricity
network badly in need of upgrading. "
The EU's moves toward renewable
energy have been supported by the climate
and decarbonization goals of several
governments. Massimo Maoret, an
associate professor in the Strategic Management
Department at IESE Business
School in Spain, said, " The EU has been
committed since the 2007 'climate and
energy package' to increasing its share
of renewable power production. Its 2020
targets have been met and greatly surpassed,
such that the EU set even bolder
targets for 2030 in its subsequent 'Fit
for 55' package. " That package calls for
at least a 55% reduction in EU carbon
emissions by 2030.
Maoret noted, " The Russian invasion
of Ukraine added even more strategic
urgency to the European energy transition
to make the continent more independent
of key suppliers of fossil fuels
[such as Russia], setting a plan to phase
out Russian gas by 2030. A bet on green
hydrogen as the main substitute for natural
gas requires an even stronger focus
on renewable power production, which
is required at even greater capacity to
reach the goal of 10 million tons of green
hydrogen domestic production set by
the block. "
Maoret told POWER, " While the direction
is clearly set, a few roadblocks
may impair continuing the installation of
renewable power at the current pace. As
macroeconomic conditions are changing
and interest rates are increasing, utility
companies struggle to refinance their
May 2023 | POWER
high debt and finance their renewable
projects. High interest rates may also
lure away institutional investors toward
more traditional low-risk asset classes
[such as sovereign bonds] rather than
keep investing in infrastructure and renewable
power projects [which, in the
past few years, guaranteed the stable
yields that in 'normal' macro conditions
are generated by bonds]. On the other
hand, oil and gas companies are enjoying
extraordinary profits due to the relatively
high prices of fossil commodities;
however, these companies seem more
oriented in reinvesting their cash flows
in fossil exploration rather than fully commit
to renewable energy. "
Those who spoke with POWER about
Europe's energy situation said government
support for additional power generation
projects does not mean new
installations
are
being
fast-tracked.
Said Maoret, " The other major barrier
to renewable projects is securing land
permits. As 'easy' locations [those with
easy access and connection to the grid]
have already been exploited, newer
projects are more complex and often
get slowed down by either conflicting
multi-layered [government] administrations
and/or the 'not-in-my-backyard
[NIMBY]' syndrome, in which local communities
strongly oppose the development
of projects close to their homes.
EU initiatives on 'energy communities'
are oriented to overcome NIMBY resistances
but may indeed generate even
more complex governance problems. "
Anna Crosby, a banking and finance director
at Fieldfisher in London, said, " In
terms of the UK position around onshore
wind, the recent reversal of the 2015
planning laws banning new onshore wind
developments back in December 2022 is
something that might mean there is an
uptick in UK onshore wind investment
this year and in the future. There are still
some slightly tricky practicalities around
investing in and developing an onshore
wind project in the UK, and it's something
planning and finance lawyers in the
renewables space are looking at so they
can help guide clients. "
Those investing in European power
generation projects likely are looking at
more than just renewable energy, said
David Lang, a partner in King & Spalding's
Corporate, Finance & Investments
group. Lang told POWER, " There is
more to discuss than just wind/solar. I
think we are particularly well-placed to
talk about the long-term role the U.S. will
play in providing Europe with energy sewww.powermag.com
curity,
first in the form of LNG [liquefied
natural gas] and increasingly in the form
of hydrogen/ammonia, particularly with
incentives in both the U.S. and Europe
for green hydrogen/ammonia. "
Alex Harrison, a partner in law firm
Akin's London office who represents energy
clients, told POWER: " From a pure
cost perspective, solar and onshore wind
remain very attractive. For renewables
at scale, offshore wind is increasingly
competitive. The next frontier is the decarbonization
of our hard-to-abate heavy
industry, heavy transport, maritime, and
aviation sectors. For that, we will need
solutions relying on biofuels and powerto-liquid
technologies. "
Harrison said hydrogen likely will increase
in importance. " Hydrogen can
play a critical role as a fuel in its own right
and as a feedstock for the production of
synthetic or e-fuels or green ammonia.
The key challenge is securing a very-lowcost
electricity supply that is not subject
to wholesale market volatility. The market
for clean hydrogen and derivative fuels remains
uncertain, which makes securing a
long-term offtake for a price reflecting the
true cost of production difficult. "
Natural gas remains important to Europe's
energy mix, which means alternative
sources for gas are needed absent
imports from Russia. " The EU has seen
increased demand for LNG imports
from those countries without access to
natural gas through a pipeline. There has
been a rush to create new LNG import
capacity in the EU to address that demand
and there are fears that we may
have an oversupply of LNG import terminal
capacity in the near future, " said
Harrison. " We have also seen a surge in
interest in locally produced biomethane
or green gas solutions, which can be
blended into natural gas networks and
which offer additional benefits in terms
of reducing emissions and increasing
energy independence. "
James Hill, CEO of Vancouver, British
Columbia-based MCF Energy, told
POWER he expects gas production
within Europe will increase to offset at
least some of the reduction in imports
from Russia. " To reduce reliance and future
dependence on imports of natural
gas and oil from Russia, European countries
have begun exploring a variety of
options to help refuel economic activity
underscored by energy, for the long
term, " Hill said. " With that being said,
the EU parliament has recently backed
labeling gas investments, much needed
for the energy transition, as 'green.' As
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POWER May 2023

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