...but there's encouraging news from the Climate Change Committee.
Hello and welcome to the penultimate episode of the Sustainable Futures Report before Christmas. I’m Anthony Day and it’s Friday 11th December.
This week I'm talking to Harald Overholm, CEO of Alight Energy of Stockholm, about coupling renewable energy with power purchase agreements.
The UK government has published its NDC, its revised commitment under the Paris Agreement, and there’s more news of extreme weather following a report from the Met Office. We’ve mentioned air pollution as a worrying and increasing cause of death several times on the Sustainable Futures Report. This week sad and concerning news brings that threat very close to home.
First of all, here's my interview with Harald Overholm.
Anthony: My guest this time is Harald Overholm, from Alight.
Harald's background includes a PhD at Cambridge, where he studied the United States Solar PPA market. PPA I think is power purchase agreement. Is that correct?
Harald: That's absolutely correct, Anthony.
Anthony: And after that, you were some six years as an external associate with the Stockholm Environmental Institute, which is in Stockholm, but is also an international organisation. In fact, we've even had part of it here in York, in the UK.
At the moment you are talking to me from Stockholm, of course.
Harald: Exactly. I'm calling in from Stockholm, which is where I'm based and live these days.
Anthony: Right. And you're currently -- you started as a founder -- but you're currently the CEO of Alight, a solar energy company.
Now there are lots of solar energy companies. My first question for you has got to be -- what makes yours different?
Harald: Well, that's a good question. As a company we're 100% specialised in the Power Purchase Agreement model. So as you mentioned, the PPA, you call it. It's a simple contractual model that helps customers to buy solar energy as a simple service. We are very focused on large corporate energy users.
It's really the one and only thing we do. We sell solar PPAs to large corporate power users.
This makes us fairly special, so we're fairly unique in a European setting. There's not a lot of other companies around with that degree of specialisation. And the few that you'll find will usually have some particular geographical angle, or perhaps focusing on very large projects in Spain, for example.
And in that case, usually the unique selling point from us is that we focus on the Nordics and we focus on small and repeatable projects. We do a lot of on-site projects, which is rooftop projects, obviously.
So just to summarise, we are pretty specialised in creating solar energy as a service. We do that in situations where there's not a lot of other people specialising.
Anthony: As I understand it, you approach an organisation, and you offer to supply them with electricity at a lower rate than they would buy on the market, which is why it's interesting, and then you install a solar farm of some sort to provide the power.
And quite... You might do that on land, or you might do that on the roof of their building. Is that correct so far?
Harald: Yeah, that's absolutely correct. And it's all about... Taking a small step back. For us, it's all about subsidy-free solar. I mean, it's all about creating an organically driven market for solar build-out, where the build-out is happening because power users need the power. So it's not happening because the government is making a decision to subsidise solar, or because there's any particular kind of incentive in place. It's really about just turning solar energy into better power for power users.
Because that's, I think, how you find the unstoppable force in the solar market, which is what we all want, obviously.
And to do that, just as you're saying, yeah, we have to offer solar power as a simple contract, and it can be both a rooftop contract, it can be an offsite contract, so it can be small amount of electricity, it can be a large amount of electricity.
It's really one of the values of solar, is that it's so modular, and you can make sure it makes financial sense, both in the small deployments and in the large deployments.
Anthony: Your customers are simply buying electricity from you if I'm correct, and that you are owning all the kit, all the panels?
Harald: Yes. It's really that simple. Exactly. So from the customer's point of view, there is no behavioural change. Because that's how they buy electricity today. They buy it per kilowatt hour. And that's how we offer them this new thing. But the difference is just that this new electricity comes from a newly built solar project, it doesn't come from just any power producing gear on the grid.
But from the customer's point of view, it's just as simple. So just buy power per kilowatt hour.
And we have to orchestrate, then, the whole delivery of that included in, as you were saying, making sure that we have the finance to own those assets, and to build them, and to just make that whole thing come together.
So the simplicity is on the side of the customer and the complexity is on our side.
Anthony: So if you have a dark day or indeed, if you have a dark night, and you can't actually provide power, they presumably switch to the grid for that period?
Harald: Yes, very important point. Some customers come to us and ask us if we can provide 100% of their power, which obviously, we would all think would be a great thing, if we could replace all of the power with solar power. But that today, would not be feasible, simply because, of course, solar power produces power when the sun shines.
And as we look ahead, just one or two years ahead, then storage is going to help us to produce power, even more similar to the base load power that we expect from the grid.
But it's still not going to be enough to cover 100% of anyone's needs. Especially not if those needs are in the winter and during night, etc.
So at the moment, for a typical customer, let's take Swedbank, for example, which is a large Nordic bank, and we're supplying about 30% of the power that Swedbank uses in Sweden. So 30% would be a reasonable number that you could supply with the help of solar power, and then the rest of the power would come from other sources.
Anthony: If in fact you produce more electricity than your client needs at any point in time, then presumably, you sell that back to the grid, do you?
Harald: Yeah, exactly. There's always a power market that's out there, willing to accept electricity.
But for us, what we need in order to build these assets and to finance them, that's really what our customers are providing to the solar market, is that the customers are providing a long term stability in terms of what we're going to get paid for electricity.
So just as we are important to the customers, it's good to know that the customers are important for the solar market. Because we couldn't just, or typically, today in Europe, you can't just build a solar asset, expecting the spot price that you get from electricity market to cover your costs.
It would be too uncertain. So you need that stability that the customer can provide by buying the bulk of your power.
Anthony: Right. Now, going back to the point about storage. You feature on your website work that you've done with Toyota Materials Handling. And of course, they use fork trucks, which are electric. And you are repurposing used batteries, if I understand it correctly, so that they are a backup resource, if you like.
Harald: Exactly. So a really exciting project with Toyota. We were approached by Toyota because there's really a dual need here. They need solar power for their sites across Europe. So that's something we're working on. We just rolled out a rooftop installation for Toyota at the headquarters in Sweden. And at the same time, as you're saying, the new generation of forklifts from Toyota Material Handling, is run on electricity with lithium ion batteries, as the storage medium.
And something needs to happen with these lithium ion batteries after they are done in the forklift. And the quality of lithium ion battery goes down slightly over time, to a point where it's not really feasible to use it in a mission critical machinery such as a forklift. But you can still do a lot with it in terms of energy storage when you apply to the grid. Because you have simply lower quality requirements for storage. You can accept a longer discharge or charging cycle, etc.
So that's something we're really looking at together with Toyota. We haven't put any of those projects into practice yet and deployed that storage. But it's more... The important thing from Toyota is to see that there's a second life for the batteries that they use in the forklifts.
And as more and more batteries will move into that second life, then using them together with solar installations would be a very good way of making sure that they're useful and keep delivering value, and not just turning to scrap.
Anthony: Yeah, absolutely. We're going to see more and more batteries, aren't we? As more and more people turn to electric cars, the batteries will have -- they will reach the end of their useful life.
I suppose, if they degrade, the thing is that you might need two batteries to provide the same amount of storage as one new battery. But of course, if you're not actually putting that battery in a car or any other sort of vehicle, it doesn't really matter. The bulk is not an issue, is it?
Harald: Yeah, and I think that that's the interesting thing to realise for batteries, is that sometimes with batteries, you have very strict requirements in terms of size and volume because you want to put them into a vehicle on there's a very exact equation.
But then sometimes, especially when you use it together with solar in an offsite installation... We have this again for Swedbank, which is the project that we built for Swedbank, which is the largest solar park in Sweden. It's out there on the field, and it's a huge field, I mean, there's all kinds of space left where it would be easy to put storage, and the volume wouldn't be the critical aspect of that. We could easily accept two batteries doing the work of one, if that meant the better cost equation or just more sustainability.
So really, I think that that's an encouraging aspect of battery deployment, is that there's all these different kind of use cases where we, as the solar industry, can provide a fairly tolerant use case at the tail end of the lives of these batteries.
Anthony: Well, you're speaking to me from Sweden, but you operate across Europe, I believe. You have sites, clients outside Sweden.
Harald: We do, and we haven't communicated any finished project in Europe yet. And that's because we got going on the European expansion just 1.5 years ago. So, really, the background was in Sweden, and we kind of cut our teeth in doing subsidy-free solar, rooftops in Sweden, at the point where there was always no rooftop solar being done on the subsidy-free basis anywhere in Europe.
So we’re somewhat proud of the fact that we could be in the northernmost country in Europe and make that work, financially, even in 2015 when we did our first project.
But now, as the market in Europe has been a market for subsidy-free solar for PPA bank solar is growing very rapidly across Europe, and catching up with the US market. Then we've been very keen to move across Europe. So we have people now in Spain, and in Warsaw, in Poland, and we're talking to clients across Europe.
A lot of our clients being large power users, they're also large companies who are multinational companies. So one conversation with a company might lead us to projects across a number of different countries in Europe, simply because the customer such as Toyota will have sites across Europe.
Anthony: It's very interesting that you're doing this without subsidy. Because it's only relatively recently that it's being possible to do this sort of thing. But that's really, I think, because the price of solar panels has crashed, hasn't it?
Harald: As of the price off what we call the LCOE, or the levelised cost of electricity, which is kind of the all-inclusive power price for solar, when you bake in all the costs and you get a cost per kilowatt hour across the lifespan of solar, that price had been coming down for at least 10% per year for a very long time now.
And of course, given the mathematical laws of exponentiality, etc., when you look at the curve, it looks as though it's plateauing now. But really, it's just a... It's still coming down about 10% every year. There are logical reasons for it. There's nothing strange happening. It's just simply a question of the learning curve, as it were, playing out, and people becoming more efficient across the ecosystem.
And that means that since about two years, there is what we call a grid parity, or a socket parity, across very large parts of the EU. So we can produce electricity at a lower cost than the alternative from the grid.
And with the additional values of being something green and very tangible, and being price-locked, if you like. So it's not volatile. When we when we contract with a customer, they'll know predictably that they have the same price for a long time.
I mean, if you want to do subsidy-free solar, you have to take a step back, and reflect upon what value are you creating for any customers that will make them want this? And I think that that's what happened. We've come to a point where power from new solar is really better power than the power that you can buy from the grid.
Anthony: The other interesting thing you mentioned is, of course, that you are in Sweden, in northern Europe, and yet you can actually produce viable solar electricity. I suppose you have to angle the panels at a particular way, because of the angle of the sun.
But does it not drop off quite a lot in the winter?
Harald: It does, of course. Of course, it does, but that just goes back to the fundamental insight that we're not trying to provide 100% of our customers' power needs. What we're trying to do is to provide a certain amount of their power need, but make sure that that particular amount is better power than what they have today. So if that's 30%, then, as you say, most of the 30% will come during the six sunny months of the year, if you're in Sweden.
But that's still great. I mean, we're adding new power to the grid, and we're creating better power for customers -- not 100%, but that's not something that... Ultimately, the customers, if they want 100% sort of better power then they will have to combine it with wind, and with storage, etc., which is peaceable in its own right. That's not our role to make that happen.
Anthony: Right. We're looking at the broad picture that, of course, in the long term, the world needs to go to carbon free electricity.
So presumably that will be a combination of solar and wind, and storage, and also insulation and efficiencies.
Harald: Exactly. I think that's the whole point. And we as a team, we're purpose driven throughout. I think most of us have come to this market and this company because it's something we really believe in.
And as you're saying, it will not be -- the response to climate change will not be one single technology. It will be a mix of them. And we have to just make sure that we're very good at providing our part of that mix. And seeing the role that that part plays in the whole.
Anthony: Well, finally, what's your view of the future? How fast are we going to get to a carbon free electricity? Do you see any challenges on the way?
Harald: I've been in this field for 15 years. I think it's been, every year, the general market has underestimated the pace of growth of solar and storage. And that seems to still be the case.
So that just helps me believe that we will reach a very high degree of solar penetration, and of wind penetration, much quicker than we'd thought.
But of course, what stands between us and that happening is just hard work, and in entrepreneurship, and building companies, which is, of course, what we're doing.
So it's not going to come by itself. But certainly I think the potential is there for the deployment in being much more rapid than anyone has thought.
Anthony: Harald, thank you very much for taking the time to talk today to the Sustainable Futures Report.
Harald: Thank you, Anthony. It's been a pleasure.
Harald Overholm, CEO of Alight Energy. Find out more at alight-energy.com.
Nationally Determined Contribution
As promised, the government has published its revised NDC, nationally determined contribution, its target for achieving net zero emissions by 2050 under the Paris Agreement. The headlines announced a 68% emissions cut by 2030. That’s 68% down on 1990 levels. We’re already down 41%, but that’s still a considerable target for the coming decade.
You could be cynical. You could say it's a step in the right direction, which it is, but the problem is that at this late stage we need not just a step, but a giant leap. You could point out that the Prime Minister has a track record of overpromising and under-delivering, and anyway he certainly won't be around in 2030. You could say that the targets are for UK territorial emissions, and not mention that the fall in emissions to date is significantly due to the fact that many of the products we buy are now made overseas so the emissions from manufacturing them are no longer counted over here.
Sixth Carbon Budget
Or you could be positive, and say that this is far more than a wild promise. In fact it is based on recommendations from the Climate Change Committee which launched the Sixth Carbon Budget on Wednesday of this week. I was able to watch the launch event online. The Sixth Carbon Budget is for the period 2033 to 2037, but the launch event tracked a pathway from now until net zero. It explained every step of the way to achieving net zero by 2050. That in itself is an increased challenge: previously the target was only 80%.
The figures quoted in the presentation were slightly different from those quoted by the Prime Minister, probably because of the difference represented by international aviation and shipping. They quoted 50% reduction by 2025, 64% by 2030 and 78% by 2035, leading steadily to net zero by 2050.
The presentation was opened by Lord Deben, chairman of the committee. He said the targets were ambitious but achievable, and that they must be achieved in a just and fair way. He said the longer we put off taking action the more expensive it would be. That reminded me very much of the Stern Report, the report prepared by Lord Stern in 2006 when he told the government that the cost would be 1% of GDP to get a Climate Change under control, but be significantly more if we delayed.
The launch event presented an economic analysis. Initially it was believed that even having waited this long we could still achieve our targets at a cost of only 1% of GDP. Then the presenters said that further research showed that in fact this could be done for no more than 0.5% of GDP and that over time the investment involved would pay for itself. The investment needed would amount to some £50 billion per annum from now on. A lot of money, but put that in the context of the £400 billion normally invested in the UK economy each year. That's an increase of about 12.5%. Most of this is expected to come from the private sector. Quite apart from stopping climate change, it’s expected to pay for itself, to create jobs and accelerate the post-COVID economic recovery.
Early investment is important, because the sooner that it is undertaken the sooner it can take effect. The sooner it takes effect, the lower the cumulative emissions in the atmosphere.
What will all this investment be spent on? Technology, but technology alone is not enough. Technology must be allied with behavioural change to achieve results.
Some of the investment will be relatively high tech, like an expansion of electrification, involving both an upgrade to the transmission systems and expansion of renewable generation.
Forests and Rewilding
Some of the investment will be relatively low tech, like carbon capture and storage through rewilding and planting forests.
Individual UK citizens currently have a carbon footprint slightly above the global average of just over 8 tonnes per annum. The plan is to cut this in half by 2035.
Electrifying the transport fleet will go some way towards the reduction.
Home Insulation and Heat Pumps
Much of the cut will be achieved by retrofitting the nation’s housing stock with insulation to achieve greater comfort at lower energy cost.
Projects like these will generate hundreds of thousands of jobs and by 2035 14m homes will be insulated each year. From 2025 it will not be permitted to install natural gas boilers unless they are suitable for conversion to hydrogen and are installed in an area scheduled to receive hydrogen supplies. Eventually all homes not using hydrogen will be using electric heat pumps for central heating.
No Gas Bridge
Gas is no longer considered a “bridge” fuel. By 2035 it will no longer be used in the UK to generate electricity. Coal power stations will close 10 years earlier. At the moment, depending on demand, gas powered generators supply just under 50% of UK electricity. All that must be replaced by clean power.
We have a Plan
These are the points that I picked up from the launch presentation. Supporting papers amount to 1,000 pages or so. The report is available on line - link below and the launch event which was live-streamed on YouTube is available to replay.
The important message that I took away is that we as a nation have a credible plan. This plan is a recommendation to government, so the key factor now is political will. If the government puts these plans into practice the UK will be a positive example and a global leader. The CCC will monitor its progress.
On track for sub-2℃
While until recently the world was facing global heating of 4-6℃, it is now on track for 3-4℃ and as more and better NDCs are published by other countries the prospect of holding the increase below 2℃, and limiting the damage caused by climate change, begins to look realistic.
It's December and there are still wildfires in California.
In recent episodes of the Sustainable Futures Report extreme weather has been up there with energy as a recurring topic. That will probably continue. In the last few days both the BBC and Channel 4 ran hour-long programmes on extreme weather in the UK, its consequences and the outlook for the future. These were triggered by data from the National Climate Information Centre which predicts warmer, wetter winters and hotter, drier summers. Together with the BBC the Met Office has produced an interactive tool which allows you to find out the predicted change in climate for your part of the country by inputting your UK postcode. (Link below)
Dr Mark McCarthy, head of the National Climate Information Centre, said: “This approach of bringing historical observations together with the latest climate projections really puts future extremes into context. We’ve seen a raft of record-breaking weather over the past few years, and when you put that side by side with the projections it really brings to life what the weather could look like if we don’t significantly reduce greenhouse gas emissions.”
Client Earth, the legal practice, has sued the government on many occasions for failing to meet its obligations to deal with air pollution. Each time Client Earth has won, but much remains to be done to improve the nation’s air quality. Why is this a problem? It is said that poor air quality leads to 50,000 premature deaths in the UK each year. These are not people we know and many of them have pre-existing medical conditions so maybe they'll have lost just a year or two of life. Nothing much for us to worry about. Until now.
The inquest is currently in progress into the death of Ella Kissi-Debrah, aged 9. A girl with the whole of her life before her; an active, intelligent child, who loved music, singing and swimming, but a child who was admitted to hospital 28 times in her short life with acute asthma attacks and seizures. Almost all of these admissions took place in the winter months when air pollution was at its highest.
The coroner is being asked to rule that air pollution caused her death. The inquest is examining whether air pollution caused or contributed to Ella’s death, as well as how toxic air levels were monitored, the steps taken to reduce illegal levels of air pollution and what information was given to the public about reducing exposure. The inquest has heard that illegal levels of air pollution in the area where Ella lived and died should have been treated as a public health emergency.
Her mother said that during Ella’s life she knew nothing about air pollution but if she had, she would have moved the family away. They lived in Lewisham, south London, very close to the South Circular Road. This is a busy orbital route but it was never purpose-built as a highway. It’s a succession of streets designated as the South Circular. It’s no motorway so there are frequent traffic lights and the road is choked with stop-start traffic.
If the coroner finds that illegal levels of air pollution were to blame then perhaps the government will be finally spurred into action. But what's the solution? It's rather like the controversy over the COVID lockdown. The drastic actions needed to save lives cause economic damage. It would be impossible to close down the South Circular Road. Even electrifying all the vehicles, which certainly couldn't be done overnight, would not solve the problem. Vehicle pollution comes not just from the exhaust, but dangerous particulates come from brakes and tyres, and electric cars have those as well.
Maybe we should abandon homes right next to roads as busy as the South Circular. Maybe the government should pay for such homes to be fitted with air-cleaning ventilation systems, although that will not reduce the risks from pollution on the walk to school. There will be many other areas where illegal levels of air pollution must be addressed. It will cost money, but how much money are lives worth? How much money do the non-fatal but chronic conditions brought on by air pollution cost the NHS?
News just in!
The Centre for Cities reports that air pollution in cities fell over the course of the first national lockdown, but now exceeds pre-pandemic levels in 80 per cent of places studied. People suffering from the effects of air pollution are more vulnerable to COVID19.
I leave you with the news that if we ever get back to the normal where we take a taxi it's likely to have a human driver for some time to come. At least Uber seems to think so as it has just sold off its businesses researching into driverless cars and flying taxis.
That’s it for another week. I hope you are keeping safe and well and coping with the isolation we are all facing at the moment. The major problem of all this is that it's difficult to see when it will end: the horizon seems to be further away all the time. All credit to the researchers who have produced a vaccine in record time. It's grounds for hope but it will be months, if not many months before it brings us back to anywhere near normal.
All I can hope is that you stay safe and well and I also hope that the Sustainable Futures Report does something to relieve the boredom. There will be another one next week but I'm planning for that to be the last, probably until February.
I'm working on a roundtable discussion on carbon markets and pricing which may take place in January. I shall also set up online discussions for patrons next year. And if you'd like to be a patron you can follow the link from the website to find the full details. The website of course is www.sustainablefutures.report and you’ll find the full text of each episode, together with links to all the sources of my stories.
So that is indeed it for this week.
I’m Anthony Day.
There will be another Sustainable Futures Report next week.
Sixth Carbon Budget
Met. Office report
Out-of-control Bond fire forces residents to flee in southern California
Air pollution death
Mother tells court of Ella’s final hours
Cumulative pollution from London traffic may have led to girl's death
Air pollution roars back in parts of UK, raising Covid fears
Uber sells loss-making flying taxi division to Joby Aviation
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