More than six months on from the November summit, the final episode of the COP Shop podcast reflects on the lasting impact and legacy of the Glasgow conference.
The COP Shop is a podcast and article boxset series from Energy Voice in association with COP26 and paid partnership with the NatWest Group, diving deep into the critical climate summit and the role of green finance in helping the world meet its emissions reduction goals.
For this final episode, Energy Voice’s Allister Thomas and NatWest’s James Close are joined by Michael Matheson, Cabinet Secretary for Net Zero, Energy and Transport, to reflect on the legacy of COP26, and, in the context of the invasion of Ukraine, to discuss how we can balance energy security with the urgent need to decarbonise the energy supply.
Fresh from the All-Energy conference earlier in May – held on the same Glasgow campus as the UN event – Mr Matheson concurred that a focus on energy markets and energy security has become “front and centre” for many countries since November.
“I think that’s probably a dynamic that has changed the most over the course of the last couple of months, and central to that change in the dynamic has been the way in which countries are now looking at how they can ramp up decarbonisation quicker in order to reduce their dependency on fossil fuel-based energy,” he added.
“We’re seeing what I would say is an acceleration of the process that we were already engaged in, and people are now actually reducing the time frames that they want to see that decarbonisation process taking place.”
Mr Close emphasised customer needs in addressing these issues of energy security, especially as most must now adapt to far greater energy costs as a result of price increases.
“I think that’s really an opportunity to start thinking about demand side measures and energy efficiency,” Mr Close said. “That’s a great source of green finance to promote and accelerate energy efficiency – because the less energy we use, the less we have to decarbonise anyway.”
Using this as a starting point, he continued, users can start thinking about how to turn an “increasing and volatile operating cost” in their energy bills into an upfront capital cost that can be financed cheaply to help lower their overall operating costs.
“If we can frame the mobilisation of finance in that way, then I think we can start to make a big difference immediately in terms of the demand side,” he suggested.
Both guests agreed that a combination of government and the private sector will be needed to deploy the capital and solutions to achieve these aims.
Mr Matheson said the role of government was to provide the right regulatory framework and policy environment, as well as the “the right type of leadership” so the sector is area of what’s expected. As for the private sector, he said he had “no doubt” that organisations are ready to commit finance if the right policy propositions are in place.
However, he also said scale was vital to ensuring more ambitious projects could be realised. Using the example of district heating, he said big-impact projects may not be able to be delivered by one town or city on its own.
“So we need to think about how we can create collaborations between different parts of the country… That might be one way in which you could actually help to aggregate the potential for investment into these projects and that’s one thing that we’re actively looking at the present.”
Moving to the impact of rising energy prices on consumers and the drive to net zero, Mr Matheson said he had some initial concerns that the debate would focus on hydrocarbon exploration as a means to ease the crisis, rather than renewable energy.
However, he believes the debate has instead moved away from that, maintaining its focus on cleaner and more secure forms of energy.
“I know from the engagement I’m having with the sector and with ministers and other parts of Europe, the focus now is much more on looking at how we can speed up the rollout of renewables and how we can use the energy that’s provided by renewables in a way that helps to deliver energy security, not just at a domestic level, but a wider European level,” he explained.
Looking to countries like Germany, which has set ambitious targets for hydrogen adoption, can in fact create new opportunities for countries like Scotland, given its sizable renewables base – wind in particular, given Scotland’s possession of up to 25% of European resources.
Having fixed targets and dates – and an impending 2030 deadline – is equally helpful for financiers deploying capital, said Mr Close, while the certainty of demand for solutions such as hydrogen or battery storage also helps bring the costs of that capital down.
“I do think there’s a positive story around this,” he added. “It’s easy to get into despair because there is so much to do…but if we do think forward and we can mark this as a point in time, that helps us shift and accelerate to new technologies, then I think it could be regarded as quite a significant moment for governments, financiers and businesses.”
Both also acknowledged that North Sea oil and gas will continue to play a role in the UK energy mix to 2050 and indeed, beyond. But Mr Matheson pressed the importance of a managed transition to cleaner energy and technologies that does not leave those communities behind.
Yet, it’s vitally important that Scotland remain at forefront of leading that transition – not just in producing energy but in developing and making these new technologies.
“We need to be in the manufacturing space so that we get the real GVA advantage that comes from manufacturing the products, the technology, the IP, all of that it goes with it,” he added. “That’s where we can make sure that we’re at a real advantage in that we are getting the economic benefits of moving into the renewable sector.”