Director, Columbia Center on Sustainable Investment & Columbia Climate School MS in Climate Finance
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Countries have several energy objectives: security, reliability, affordability & decarbonization. Those factors are shaped by resource endowments, cost of technologies, cost of capital, and institutional strength & coherence. First: geology & geography are decisive. Each country's optimized energy system can only be determined with robust scenario analysis. This critical analysis has been overlooked in favor of NDCs, which can't answer what an optimal, technically feasible energy system looks like given endowments, demand & constraints. The cost of relevant technologies has become largely a moot point. China has driven down the cost of solar, wind & batteries so decisively that clean energy is now more affordable, absent tariffs & other distortions. But resource abundance & cheap technology ≠ automatic feasibility. The Sahel is a solar powerhouse, yet cannot secure financing for critical energy infrastructure. For coal- and gas-rich countries, there are real near-term tensions & trade-offs to navigate, on top of technical, institutional & financing complexities. China navigates its energy objectives with unparalleled coherence, using reinforcing policy & financing tools. It has achieved high energy security, unprecedented clean energy growth, and industrial dominance in clean energy tech, while also making the transition affordable around the world. The lessons of planning & coherence are impt. For smaller EMDEs, risk perception is decisive. A high cost of capital (reflecting high risk) makes clean energy prohibitively expensive even when renewable resources are abundant (https://lnkd.in/gmum4GkX). The cost of capital is a function of the global financial architecture and can be lowered through long-overdue reforms, which developed countries have been slow to advance. (https://lnkd.in/ghXsizrE) ⚡But the war on Iran changes the calculus (at extraordinary cost...). The shock to oil/gas supply has laid bare the extreme vulnerability of FF-dependent countries; countries having nothing to do with the war are reeling from worsening energy & food crises. B/c of this crisis, it is now evident that energy security and affordability are best achieved with clean energy -- but the speed & coherence of the necessary transition depends on the how coherently it is supported. (Bradford M. Willis & I discuss this in the context of ASEAN: https://lnkd.in/gPaJUQzt) Each country needs a robust energy system analysis at national & regional levels (for many countries, the most cost-effective configuration involves regional integration), and then a sequenced investment plan, regulatory reforms, and a financing plan that doesn't de-risk projects 1-by-1 but determines how a whole system becomes financeable. The main constraint is not ambition or accountability, but coherent planning & support. As always, it was great to speak w/ Diego Laje about the painful lessons of the war & the more hopeful lessons from China. https://lnkd.in/gHSHvdGw