I’ve been in the renewables business now for almost 20 years now and I’ve been fortunate to work with the very best in the industry. One of these being Andrew Garrad who has in fact worked in the industry longer than me, a career spanning over 30 years. We have become allies within the industry and our work complements each others.
Andrew became Chairman of Bristol 2015 European Green Capital and asked me to provide a key-note address at the Bristol European Green Capital Business Summit on 22 October – I was delighted to be able to do this and here below is the speech.
“Change is Coming”
Ladies and Gentleman,
My name is Eddie O’Connor, and I’ve been a sinner.
I confess to having run power stations on fossil fuels and to have been the purchasing manager for Ireland’s power utility, buying coal and oil from around the world for burning in Ireland.
I also confess to having been the Chief Executive of Bord na Móna, the Irish Peat Development Authority, which extracted turf from Ireland’s extensive peat-lands for burning in specially designed power stations. Under my guidance, we released 10 million tonnes of CO2 per year
So when it comes to fossil fuels, I’ve been a sinner. A big one.
But then I saw the light and reformed, even when I was CEO of Bord Na Móna.
I’m a chemical engineer, so I’m supposed to know something about chemistry.
I had to accept the scientific evidence about the effects of burning fossil fuels, about the growing concentration of carbon in the atmosphere and about the threat of global warming.
So, I did what a good engineer should do, I sought a technical solution to a technical problem – how to replace a dirty fuel with a clean fuel.
And that’s how I came across wind.
As CEO of Bord Na Móna I built the first wind farm in Ireland. It was a pioneering effort, and do you know what? Twenty three years later it’s still working, still generating electricity, all the capital paid off, with no cost of fuel.
The wind is free after all. The only cost is O&M.
Having left Bord, I set up my own company, Airtricity in 1997. It was a classic start-up.
I invested £25,000, began selling green electricity to Irish consumers, and went on to develop wind farms in Ireland, the UK and the US.
In 2004, I went offshore and built the first offshore wind farm in Ireland. It’s still running.
And then I developed the Greater Gabbard offshore wind farm in the UK. It’s still running.
After ten years, we had circa 9,000MW under development. That pipeline had value.
In late 2008, Airtricity was sold for £1.7bn, which represented a pretty rapid growth in value. In fact, the average annual rate of growth to share value was 54%.
Within a month of Airtricity being sold I set up another company, Mainstream Renewable Power, a different business model but the same technologies wind and solar.
I set up Mainstream because
I recognized that the transition to sustainability was only beginning,
- there was and is a big business opportunity,
- I like working.
To me this is a moral obligation. We have to build a low carbon society and economy, otherwise we humans face catastrophic, and irreversible, climate change.
Fantastic Business Opportunity
I like being part of the future, being ahead of the curve and making good profits for doing what is right.
Those who want to be ahead of the game should be investing in green, in green power, in energy efficiency, in smart products and services. It’s good for the bottom line. There is no guarantee of profits. Competition is always there. But you have a better chance if innovation flows in your veins.
When you want to try and get a picture of what is coming in the electricity sector just think about the size reduction in computers, the internet everywhere and the end of communism.
The transition from a high to a low carbon economy wind requires the biggest ever investment in infrastructure, in the way we manufacture, distribute and consume.
It is not just an unprecedented challenge, which it is, it is also an unparalleled business opportunity for those of you with vision, foresight and courage. In fact, it is an unparalleled opportunity for entrepreneurs.
Some years ago I put it this way: we are entering the era of the electric economy, in which there will be no coal and no petrol, or no gas used in the generation of power. In this era, electricity demand will continue to rise, and as aggregate demand goes up costs come down.
Just think about this for a second. Solar energy is now cheaper than wind on high radiation sites, which in turn is cheaper than new coal, which is cheaper than oil.
Over the past five years the cost of wind has come down by 55%, while solar, wait for it, has fallen by 80%. This is the classic J-curve at work with a vengeance.
It’s a product of economies of scale, greater efficiency and, of course, breakthroughs in technology.
In the case of solar PV every time global production doubles unit costs fall by 24%. It’s analogous to Moore’s Law for microchip. In fact, it’s called Metcalfe’s Law.
And we’re not at the bottom of that particular J-curve as yet, we have no idea when it will go asymptotic.
Change is Coming
I hear you say that wind and solar are variable, but the price of electricity storage is falling almost as fast as PV. In 5 years solar + storage will be as cheap as solar on its own now.
With electricity storage the J-curve is at work also.
Michael Liebreich of Bloomberg New Energy Finance says that the price of the Electrical Vehicle Lithium-ion Battery Pack has fallen by 60% since 2010 and is following the same experience curve as solar PV.
This will transform the economics of EVs.
Elon Musk is building one of the largest manufacturing plants in the world to produce EV and home batteries, which will accelerate the downward trend in the price of storage and speed up improvements in efficiency.
As you know, COP 21 will be held late next month in Paris. This Climate Change Summit will be held under the auspices of the UN with the objective of achieving a legally binding universal agreement on capping and then reducing the level of carbon emissions into the atmosphere.
COP 21 will augment and universalize the momentum towards a zero carbon economy.
And it’s virtually certain the solution will be putting a price on carbon, a proper price that internalises all its social costs. I say “let the polluter pay”.
The Chinese have already chosen carbon pricing as their primary policy instrument for reducing carbon emissions, as the EU did a decade ago, as many US cities have also done, and as many in business accept, the price of carbon goes to €30 tonne, as it inevitably will by 2030, then the game will be finally over for fossil fuels. It’s only a question of when.
In addition, we are now seeing significantly increased activity by some of the world’s leading companies in pushing for an ambitious and binding agreement in Paris. In addition, companies are taking their own actions in recognition that business as usual is no longer an option.
In particular, I welcome this week’s American Business Act on Climate pledge as the kind of initiative that is needed in all markets. This is further evidence, following the recent announcements from a number of companies during Climate Week, of a clear realisation that the world faces a once off transition to sustainability, and that business has a leadership role to fulfil in that transition.
At Mainstream, we are playing our part. Our mission since we set up the company in 2008, has been to deliver large-scale, low-cost renewable energy plant to provide the power to enable the world’s emerging economies to grow with a far smaller carbon footprint than in the past. We have arrived at a point in many markets where wind and solar energy is now delivering electricity that is far cheaper than new fossil power, quicker to deploy and providing reliable power onto the grid. Business is waking up to this. Over half of the 81 corporate commitments to the American Business Act on Climate include investment in renewables as a key pillar in their decarbonisation strategies.
My message – and Mainstream’s – is a simple one: we can create wealth and create jobs in our efforts to improve global sustainability, and business and industry has a vital role to play in overcoming our collective environmental and social challenges.
Investing in Green
Michael Liebriech says that Renewable Energies will take 65% of the $12 trillion investment in power generation that will be made between now and 2040.
That’s the scale of the business opportunity I was mentioning earlier.
I can already hear somebody say “but what about nuclear”?
Flammanville in Northern France, and Olkilauto 2 in Finland are coming in at a cost of €6.2million per MW to install. Wind onshore costs about €1.5M euro and offshore costs €3.5M. This capital cost has no allowance for decommissioning, or insurance.
I won’t even talk about nuclear fusion, one of those Alice-in-Wonderland solutions to replacing fossil fuels.
Carbon Capture and storage is another highly touted scheme but it belongs to the Harry Potter school of economics.
Just look at what happened to the DRAX project in Yorkshire. It’s been abandoned, just like all the rest of them.
The Rockefeller Brothers Fund, the family who you could say invented the oil industry, is getting out of oil and are only investing in renewable energy.
Its President has said that if John D. Rockefeller were alive today, as an astute business man looking to the future, he would be moving out of fossil fuels and investing in clean renewable energy.
This is why Mark Carney, the Governor of the Bank of England, has warned that investors in fossil fuels face potentially huge losses and that the assets of fossil fuel companies could be left “stranded” by tougher rules to combat climate change.
The exposure to this risk included insurance companies, a paradox you might say. At the same time as Mark Carney was issuing his warning, the Prudential Regulation Authority published a report identifying potential climate risks for the UK insurance industry, which manages £2 trillion in assets.
No wonder there has been growth in ethical funds. Even though they only account for just over 1% of the total sum under management their very existence is a sign of what is to come.
And what is coming is disruptive technology, changing the world, and changing the way we look at it. As I said, change is coming.
Take buildings for example. I see zero energy buildings becoming the norm, even becoming net producers of energy.
Think of the potential of photo active roof tiles that turn solar radiation into electricity, electricity that would then power everything within the building while heating it and cooling it, and all done in real time with smart appliances and smart grids. Why will anyone install inert ceramic tiles on their when the roofs can be mini power stations.
In short, Ladies and Gentlemen, we are moving towards the era of complete interconnected renewable systems, in energy and manufacturing. We are heading into an era where we redesign everything we do, and the way we live.
Probably the most exciting aspect of this vision is the city of the future, in which everything is connected to everything else through the internet, the internet of things, as it is called.
An American company, called NEST, has already put a system on the market for managing the interconnected home in which all the domestic and personal devices are connected together, and in which the home is connected with all other homes – and with all other buildings, as well as power generators and distributions.
We are heading into a world of distributed power generation and consumption where the monoliths of electricity generation, huge great utilities, we are all familiar with, will simply become a thing of the past.
It’s already happening. For proof, just look at their balance sheets. Or their corporate plans. If you do then you’ll quickly agree that the future is already upon us.
The theme of this Green Capital Business Summit is that whole hearted business involvement is fundamental to the pace and direction of change. It is essential.
The motto of our company is “Leading the Global Transition to Renewable Energy”, no small ambition.
What I have seen is a fantastic opportunity for business. I hope you have too.
Industry and business are central to the Green Capital project. That is the message from this Summit.
I have offered you a record of my business career and personal beliefs as an example and reinforcement of that message.
Thank you, Ladies and Gentlemen, for your attention.