#5 Sustainable Development Goals
Episode 2

Affordable and Clean Energy

Episode 5/7

The world is making progress towards the SDG 7, with encouraging signs that energy is becoming more sustainable and widely available. Access to electricity in poorer countries has begun to accelerate, energy efficiency continues to improve, and renewable energy is expanding significantly in the electricity sector.

Key facts and figures

Forest

The cost of electricity (LCOE*) by onshore wind power plants, geothermal and hydropower, and biomass is now equal to or lower than the cost of energy generated by coal, gas and diesel power plants, even without financial support and with falling oil prices.

Solar energy has the leading position among other renewables because of its popularity among people and various stakeholders and policy makers.

In many countries, including Europe, wind energy is one of the most competitive sources of new energy capacity. According to US EIA, nuclear power is expected to stay expensive at $0.099 per kWh.

*Levelized Cost of Energy = the cost of the energy on the global value chain, from implementation to dismantling

(Latest available sources for Coal and Nuclear: 2019)

  • Between 2000 and 2020, renewable power generation capacity worldwide increased 3.7 fold, from 754 gigawatts (GW) to 2 799 GW, as their costs have fallen sharply, driven by steadily improving technologies, economies of scale, competitive supply chains and improving developer experience. Costs for electricity from utility-scale solar photovoltaics (PV) fell 85% between 2010 and 2020.
  • To compare, in 2019 Coal Levelised Cost Of Electricity was at 0.109 USD/kWh (constant over 10 years), therefore more expensive than any of the renewables listed above. Gas as a combined cycle remains the last non-renewable energy with comparable prices, at 0.056 USD/kWh in 2019 (ranking fourth cheapest).

How is the challenge addressed by the financial industry?

  • The overall financing requirement to meet SDG 7 — across renewable energy, energy efficiency and universal access — is estimated at US$ 1.3 to 1.4 trillion per year until 2030 (1.5% world GDP), which is comparable to global tourism income in 2019. While progress is being made to scale-up financing, current annual financing levels are significantly below this level, at approximately US$ 514 billion.
  • In April 2021, 45 banks, including BNP Paribas, from 23 countries launched the Net-Zero Banking Alliance. Members are committed to aligning their lending and investment portfolios with net-zero emissions by 2050. Combining near-term action with accountability, this ambitious commitment sees banks setting an intermediate target for 2030 or sooner, using robust, science-based guidelines.
  • Financial industry has a key role to play by orientating capital towards projects and companies involved in the energy transition:

·         Production of renewable energy

·         Energy efficiency

·         Digitalization and decentralization

 

  • Banks have also been driving the change by developing new products that enable lending to green industries and encourage behavioral change amongst customers, for example by facilitating the purchase of solar panels and electric cars. There are several examples of “solar loans”, a kind of loans that banks propose for dedicated solar panels financing.

 

How does BNP Paribas address the issue?

  • BNP Paribas has doubled between 2016 and 2020 the financing of renewable energy from 9bn EUR to 18bn EUR, while committing to exit thermal coal financing by 2030 in Europe and 2040 worldwide. This evolution of the energy mix is aligned with the trajectory set by the Paris Agreement aimed at limiting the global warming to 2°C.
  • The Group is paying particularly close attention to GreenTechs that are active in the energy transition, in which it already invested €100 million. In 2016 and 2017, for example, the Group invested €5.5 million in equity in Heliatek, a start-up that produces organic photovoltaic films that help decarbonize electricity production in buildings.
  • BNP Paribas created several funds rated 7 to 9 clovers* that tackle SDG 7 – Clean and Affordable Energy. 
    *https://wealthmanagement.bnpparibas/en/what-we-do/positive-impact/clover-rating.html

 

Discover our other episodes throughout the summer. Around the theme of sustainability, they address the role of the financial sector in different Sustainable Development Goals, and allow you to identify how you, as an investor, can act for a better and more sustainable future.