COP27 and energy Infrastructure: Securing a cleaner future towards net-zero

This year’s COP27 comes at a time when the world is addressing two challenges: climate change and the need for energy security posed by the ensuing energy crisis brought about by Russia’s invasion of Ukraine. Although climate change and energy security may appear to be opposing demands, what has emerged during COP27 is that these in fact can and must work together.

Here on the ground in Sharm El Sheikh the narrative around energy security has certainly been present, with green hydrogen playing a central role in discussion around the future of energy mix. When I participated in a panel at the Hydrogen Transition Summit on 8 November, looking at scaling a hydrogen economy, there was lively debate on the opportunities to accelerate hydrogen’s development as it is not only is a key enabler of the Energy Transition, but offers excellent solutions for decarbonisation. Afterall, it wasn’t very long ago that we started investing in the wind and solar markets, which have now become a very core part of sustainable infrastructure investment all over the world.

Through the discussions with policy makers and business leaders in Egypt during COP27, I hope we can unlock the same momentum for hydrogen. Once we start to see some significant hydrogen projects reaching financial flows and starting to ship products, I am sure that a lot of sources of capital will be looking to invest into hydrogen.

Beyond the future role of green hydrogen, the current energy crisis demonstrates the importance of energy diversification through fast scaling, and increasingly cheap, renewable technologies already present in many electricity grids globally. Solar and wind power continue to be perfect examples of strong contributors to national energy security due to their increasing availability and as they are both far less susceptible to supply interruptions from overseas than are oil and gas.

However, it is important to note that the increased energy security that low-carbon energy offers is simply accelerating an existing trend towards the renewable sector that was already apparent. Even before the crisis, there was a growing sense of momentum towards renewables driven by climate change and lowest costs of power, which has helped revolutionise developing countries’ energy security and decarbonisation efforts; an essential effort core to negotiations at this year’s COP.

This can be seen in Senegal, which has some of the highest electricity prices in the world due to its dependence on costly fossil fuel imports. Through our development of Parc Eolien Taiba N’Diaye, Senegal’s first large-scale wind energy project, Actis has helped deliver cheap, clean power for over two million people in the west African nation.

As mentioned, one of the most significant factors which is supporting the renewable sector’s growth has been that costs continue to fall. The cost of generating solar energy has fallen around 90%, with wind down around 70%. Even before the Ukraine crisis began, renewables were by far the most cost competitive source of electricity. The greater reliability of supply which the war has highlighted has simply added an extra dimension to the sector’s attractiveness to investors.

The case for investing in the energy transition through cleaner energy is even more compelling than before. It also brings with it a whole new range of parallel investment opportunities in renewable-supportive infrastructure such as battery storage, smart meters and of course hydrogen.

At Actis we tap into the opportunities offered by renewable energy to help solve the energy problems of today. Recently, we announced the signing of a memorandum of understanding (MoU) with the Egyptian government for green hydrogen development. The MoU will give Actis an entry point into what could be one of the largest hydrogen markets in the region.

What we need to see now is the mobilisation of further capital to invest in the energy transition and in energy security assets. Rising energy costs, heightened security concerns, demand to meet climate targets, and stakeholder expectations, are causing a rethink on energy usage – and production. Today, private companies, as well as public utilities, are finding their traditional reliance on fossil fuels far less viable.

Energy security has only accelerated a need for change that was already evident. It will create more compelling investment opportunities for the world’s investors, ensure there is less dependence on sometimes unreliable sources of fossil fuels, as well as helping the world meet its climate goals. This sentiment has been reflected strongly at this year’s COP27, and hopefully discussions and agreements in Egypt will result in a continued drive towards a just transition, especially for emerging markets.

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