Recent economic instability around the world has drawn attention to the importance of renewable energy sources.
Restrictions related to the COVID-19 pandemic have created a new reality for citizens and economies across the world, fundamentally shifting the way consumers and businesses interact with one another. Across the globe, lockdowns have changed the economic landscape, forcing both public and private leaders to adjust their respective policies and strategies. As shown by the recent flash-crash that saw oil prices drop into a negative price range, a new economic reality is upon us. With unprecedented motivation for governments and corporations to adapt to a rapidly-shifting economic environment, the importance of sustainable energy resources has been thrust into the spotlight.
Renewable energy and environmental sustainability
While the concept of environmental sustainability has been a prominent part of the economic discussion for years, the COVID-19 pandemic represents a black swan event with the potential to permanently shift the needs of consumers. As recent environmental data in regions affected by lockdown has shown, there is significant potential for change when provided with the right incentive.
In the face of these changes, global industry leaders including oil executives are beginning to reckon with the importance of a sustainable, clean energy-based economy. BP CEO Bernard Looney was recently quoted by The Guardian saying he firmly believed his company must embrace an energy transition. “I am more convinced than ever that this is the right thing to do, and we need to crack on with it,” he said. “The pandemic only adds to the challenge that already exists for oil in the medium to long term.”
Renewable energy a sustainable investment
Looney is one of a growing number of executives and analysts that have recognized the ways in which environmental sustainability and economic performance have become intertwined. “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance,” said BlackRock, Inc. Chairman Larry Fink in a letter to shareholders titled “A Fundamental Reshaping of Finance”. “Companies that do not respond to climate change will face growing skepticism from the markets and a higher cost of capital, but companies that respond will attract higher-quality, more patient capital.”
This paradigm shift has caused asset managers and executives to re-assess their risk factors in both environmental and economic terms. In an effort to mitigate part of that risk, leaders in the oil and gas industry are embracing new business models that have the potential to compete with their core operations. In the United States, for example, the recent pressure on oil prices has drawn attention to sustainable alternatives such as geothermal power production and direct lithium extraction which can re-purpose and utilize the oil industry’s significant drilling expertise, infrastructure, and workforce.
In Europe, the EU continues its plan to enforce strict vehicle emissions standards that include eye-watering fines for non-compliance. According to Forbes, European automakers could pay approximately US$39 billion in fines this year under EU emission regulations.
Investment coalitions are also demanding fundamental changes. Climate Action 100+, a global investor coalition with over $41 trillion in assets, is reportedly pushing its 161 companies across all sectors to align their actions with the goals of the Paris Climate Agreement. Meanwhile, the Climate Majority Project, which includes investors representing $1.8 trillion in assets, has called for the 20 largest publicly traded electricity generators in the US to commit to achieving net-zero carbon emissions by 2050.
As impact investing begins to filter through into traditional investment sectors, new collaborations are emerging with investors, innovators, and energy companies working together to create sustainable solutions. Breakthrough Energy Ventures, a coalition of private investors established by Bill Gates, recently led a US$20 million investment in technology company Lilac Solutions. The company believes it has the potential to commercialize a direct lithium extraction process that is cleaner, faster, and more scalable than current methods for extracting lithium from brines.
Sustainability to drive new US lithium production
Renewable energy and lithium developer Controlled Thermal Resources intends to deploy Lilac’s ion exchange technology at its Hell’s Kitchen Lithium and Power project located at the Salton Sea Geothermal Field in California. The project, to be developed over eight stages, has a total resource and production capacity of over 300,000 tonnes of battery-grade lithium per annum in addition to 1,100 MW of renewable (baseload) geothermal power. “We are seeing a major uptake in interest in the US for sustainably-sourced lithium beyond COVID-19,” said Controlled Thermal Resources CEO Rod Colwell. “Demand for lithium by 2023 is expected to hit 1.2 million tonnes per annum. Today the world is consuming around 300,000 tonnes per annum globally. That significant increase will be difficult to fulfill. Beyond EVs, we see a large increase in demand for utility-scale batteries for the renewable energy sector and batteries for heavy transport & equipment, replacing fossil fuels.”
In the wake of the COVID-19 pandemic and the new economic reality it has brought with it, sustainable energy companies such as Controlled Thermal Resources have the potential to capitalize on the increased awareness and economic motivation to improve global emissions. “People across the world have witnessed a historic improvement in air quality due to fewer fossil fuel-dependent vehicles on the road during the ‘shelter-at-home’ conditions. This has spurred many to believe that clean air is indeed obtainable,” said Colwell. “It’s promising to see early commitments from governments encouraging a clean energy future and we’re seeing investors at all levels responding positively as well. We feel there will be a significant increase in demand for clean energy going forward including sustainably-produced sources of battery materials such as lithium.”
The economic landscape has been drastically altered by the COVID-19 pandemic, forcing governments and corporations alike to reconsider their respective approaches to both the economy and sustainability. With an increased focus on the negative externalities of the fossil fuel industry, sustainable energy alternatives have the potential to enable a more environmentally-friendly economy.
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