Decarbonisation Technology - August 2024 Issue

US renewables sector, it is costly and its sustainability is questionable. Using government resources to create carrots is an indirect form of taxation, effectively using taxpayer money and may be more difficult in countries with a low taxation history. However, sticks such as carbon taxes are a direct form of taxation which raises the cost of energy and, therefore, goods and services, which can be difficult to enact. Barring substantial innovation, sticks and carrots will be needed for years to come and, as of today, are impacted by politics. If governments want to drive energy transition projects, they must create durable policy and regulation that banks and investors believe will survive elections. One example of durable policy is the UK Contract for Difference model, where the government guarantees the project a minimum level of revenue based on the project’s performance. Programmes based on this model feature a long-term bilateral contract which is negotiated on a project-by-project basis. This model is much slower to deploy and more resource intensive for governments as it requires detailed diligence and negotiation of terms with each individual project. Such bilateral contracts, however, are almost completely insulated from political risks once in place, which makes this kind of support much more bankable. Conclusion The energy transition is among the most urgent and critical challenges facing us today and

presents a massive opportunity. Unlocking this opportunity requires innovation, not just in technologies but also in commercial and regulatory approaches. Governments, private investors, commercial banks, and EPC companies all have important roles to play in financing new energy transition technologies and projects. Governments can help bridge the Green Premium and create stable markets for low-carbon commodities through a combination of incentives and penalties. Investors and EPC companies can adopt a more balanced approach to share construction and technology risk to accelerate FOAK deployments and make these projects bankable. Ultimately, achieving the Paris Agreement’s net zero target by 2050 will require collaborative effort and long-term commitment from all stakeholders to drive the necessary investments and policy changes. By overcoming these hurdles together, we can accelerate the transition to a sustainable energy future.

VIEW REFERENCES

Conrad Woodring cjwoodri@bechtel.com Rishabh Agarwal ragarwa4@bechtel.com Joe Selby jmselby@bechtel.com

Decarbonisati n Technolo gy The transition to sustainable fuels & energy Decarb nisation Technolo gies The transition to sustainable fuels & energy Your essential resource for navigating the transition to sustainable fuels and energy .com