At Blunomy, I lead our renewable fuel practice. Sometimes it feels like a forgotten sibling of renewable electricity. Electrification is often the first port of call for decarbonisation, never mind that it is just passing the buck to centralised generation. And then there’s the renewable energy procurement through the certification instrument where there is usually no need for matching the time of generation with the time of use – mostly just reconciliation of the gross amount of energy injected into the grid and what was withdrawn for the user on the same month, sometimes even just for the year.
Yet when it comes to renewable fuels, we hold it up to a higher standard. It needs to be mass balanced and the physical commodity will need enter the tank of the owner claiming the use of the renewable fuel. Book-and-claim makes sense to reduce logistical cost and overall compliance cost but it is deemed not as legit or at least not giving enough confidence.
And then there are all sorts of requirements for the production of green hydrogen, including trying to match the time of hydrogen production with that of the green electricity injection into the grid. You get my drift.
Renewable fuel needs to get started sooner rather than later to move our world away from the trajectory that is going beyond 2-degree Celsius warming scenario. And more often than not, in order to grow something mainstream and to achieve the cost reductions that are necessary for broad adoption, we need to get started at small scale. This means expensive fuel, and we sometimes think with this scarcity, we ought to reserve it for use-cases for which there are no alternative decarbonisation. That is probably not always true because at this stage when the fossil alternatives are still broadly available, it is all about willingness-to-pay and channeling the resources to pay for it.
Elon Musk have been incredibly successful at using the capital markets for this end – to be able to fund the scaling up needed to get the cost down. He also successfully identify plausible markets and use-case to pitch into where the capital he raises won’t seem like it is hanging high and dry – that there are people with money willing to pay for the high-end EVs that Tesla churns, or the satellite-launching services that SpaceX could bring about.
The capital market quite frankly hasn’t been all that kind to the energy or climate transition. I think part of the reason is that there’s often this altruistic motive behind the bulk of the pioneering capital there – not the greed-driven ones. And since the transition has such a reputation of not being the favourite of those sharks, it would seem like there was hardly much money to be made there.
And then there is regulations not really wanting to take the fall for raising cost of living when it tries to push the economy towards lower carbon intensity. All of these serves to drive a very unbalanced transition that is skewed towards technologies and approaches to transition where someone else somehow pays for the transition. Take renewable electricity for example; majority of it is intermittent and so the costs is more on the grid infrastructure – which is typically socialised in many jurisdictions. It’s easier to sell green electricity cheap (solar LCOE!) and then load the costs on the grid investments and let the end-users foot the bill by force in order to remain on the networks.
There isn’t really sufficient system level thinking that is operating at the moment across the world when tackling this issue of the transition. There’s a lot of obsession with asking ‘what is the right answer’ to displace/replace fossil when the question should be more about considering what would be an energy system we want to build, and what are the attributes worth building towards.