NYC Climate Week: Energy financing in the buildup to COP29

With NYC Climate Week coming to a close, Yusuf Latief reflects in this Power Playbook on how the Big Apple has set the stage for the upcoming COP29.

About two days ago, I was pleased to publish a pretty significant story: less than a year since its formation, the Utilities for Net Zero Alliance (UNEZA) announced their joint intent to invest more than $116 billion annually into both clean energy generation and power grid infrastructure.

The announcement was significant not only for the heavy hitters who formed the alliance – it consists of 39 partners, ranging from IRENA to DEWA to SSE and more – but for two further reasons:

1. $116 billion is no small number and
2. The announcement was made in New York City during NYC Climate Week

NYC Climate Week brought together heads of state, ministers and leaders from across the energy and financial industries, and this year one of the key focus areas was recognising the role of private sector finance in supporting global efforts to decarbonise power grids.

Another important announcement out of the Big Apple was covered by Smart Energy International’s sister site Power Engineering International. My colleague Pamela Largue published that a group of global banking giants expressed support for the call to triple global nuclear energy capacity by 2050.

Yes, New York City was the place to be, hosting not one but two major events: the Climate Week as well as the first edition of the Global Renewables Summit. And, both of these events provided planning platforms for the upcoming COP29 summit, set to be held mid-November in Baku, Azerbaijan.

“By investing in wind, solar and other renewable energies, countries can diversify their energy portfolio and pave the way for a greener, more resilient future. In this context, the [Global Renewables] Summit can serve as an additional platform to deliberate on preparations for COP29 Presidency-led initiatives on green energy pledges,” said Yalchin Rafiyev, chief negotiator of COP29, in a statement.

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The road ahead: Rising costs and increasing complexity

“When you look at what's happening here in New York with heads of states, regulators, a significant chunk of investors and the big-off takers, there's a lot of momentum in the right direction,” said Ole Rolser, McKinsey & Company partner, who is in charge of their Global Energy Perspectives report.

Rolser spoke to me as NYC came alive for Climate Week, discussing not only the event but also the findings of their latest Global Energy Perspectives.

In it, the company reveals that the global energy transition is entering a new phase, marked by rising costs, complexity and increased technology challenges – projecting that annual capital spending on physical assets will grow by up to 80% by 2040.

“That spend is just not enough. It gets us pretty close to the below 2C-type of warming level, but it's hard to get to 1.5 with that, or even below 1.5 which is, in principle, the target. So that would imply that we need even higher spending,” said Rolser.

The company’s analysis also demonstrates that the build out of clean energy technologies has not been fast enough to meet growing global energy demand.

To date, they say that the buildout of renewable energy sources has largely benefitted from the most promising use cases or “low-hanging fruit”, where policy and funding have been most plentiful.

Reflecting on the findings in a release, Diego Hernandez Diaz, partner at McKinsey added: “Even with the surge in global net-zero targets, the technologies needed to reach them aren't progressing quickly enough. Low-carbon solutions must scale up, but they're facing an uphill battle as rising interest rates and supply chain challenges limit access to capital.”

Which is why events such as those this week are so important. Dubai’s COP28 yielded mixed results, and with the 1.5C target looming, the next one will prove crucial, being hailed as the ‘financial COP’.

Speaking to Rolser, the momentum gained at NYC Climate Week will be critical in how the next Climate Change Conference pans out: “This is super important in shaping the COP outcomes, which looks more promising than what I felt before the Climate Week. This excitement is also felt within the investor community, which is only getting higher.

“There's a certain realism people now have, which is probably healthy. In the past, people celebrated simply the pipeline, getting excited for announcements alone. Now, with a certain realism, we know those projects only get done if you have a business case, which only makes sense. Otherwise, it's not going to happen.

“That realism is going to be really helpful to actually get things on the street. And the venture capital folks, in principle, want to invest in the climate and into new technologies, but only into cases that make sense. They’ll invest into those projects that have, let’s say, a five-year horizon of economic viability.

“And that, I think, is going to really make things work and demonstrate to the wider public that it doesn't necessarily mean that things are going to be more expensive.”

Of course, there is another event worth mentioning: Enlit Europe in Milan.

From October 22 to 24, I will be walking the floors, hosting a session on e-mobility and interviewing key speakers in the media studio.

Will you be there? Get in touch and let’s connect.

Cheers,
Yusuf Latief
Content Producer
Smart Energy International

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