Abstract
" Over the next decade, every aspect of national energy systems will be affected by changes in climate and energy policy, and financing, continuous technological advancement, and shifts in energy supply and demand. … The energy transition can no longer be limited to incremental steps. It must become a transformational effort, a system overhaul, based on the rapid upscaling and implementation of all available technologies to innovate for the future. " From 2021 United Nations report on Energy Transition " The current energy networks are complex, their establishment and operation require constant maintenance and upgrading, and their costs are considerable. The global energy transitions are multifaceted, unpredictable … And require decades of steady, high-level investments and political commitments to yield major economic and social changes … Nobody can offer a reliable estimate of the eventual cost of a worldwide energy transition by 2050, though a total suggested by McKinsey's Global Institute of $275 trillion between 2021 and 2050 prorates to $9.2 trillion a year… implies an annual expenditure of 10 percent of the total worldwide economic product for three decades, rather than 0.2 or 0.3 percent of GDP for the Marshall Plan (McKinsey 2022). " Vaclav Smil, " Halfway between Kyoto and 2050 " Convene a three-day workshop focused on building energy banks for Saudi Arabia / Gulf countries. New Funding Frameworks The urgency to build a new institutional framework focused on sustainable energy transitions and climate finance-where the risks are greater than the rewards-is recognized by most players in the field (World Bank, IPCC, IEA, IAEE, KAPSARC, and energy consultants). The argument for establishing regional sustainable energy banks is that: 1. The climate risks / impact vary significantly by region – MENA countries with strikingly different economic capacities will be particularly hard hit over the next fifteen years. In fact, each geographic area confronts enormous climate risks, different governance configurations, and mitigation strategies. 2. The risks of investing in new / proven technologies in large long-term energy projects are significantly higher than the medium term returns even in well managed, less volatile markets that are not the norm. Some regions have well developed aging infrastructure. Other regions, like China, are transitioning deliberately from coal-based economy to more sustainable future. While emerging countries continue to struggle. 3. The funds needed and financial / engineering expertise required are beyond the capacity of many institutions and firms operating in the energy / climate arena. In most OECD countries government budgets are in deficit and debt levels high. And less developed countries have little access to capital and higher project risks. The constraints on investing / funding the energy transition appear insurmountable; and they need to be balanced against the development requirements of each country. However, strategic choices must be made – the economic resilience of the region, the burgeoning climate risks, and the demand for faster energy transitions are pressing, (IPCC, IEA, World Bank, OECD). The uncertainty of prices, costs, and our futures is a call for action, not delay. The KSA and Gulf countries are in unique position with the low cost of energy, financial resources, and engineering expertise to lead the energy transition. The energy bank workshop is a step towards building a regional funding framework that makes realistic investments / technologies within the competing governance demands of the region. The goal of the sustainable finance workshop is to draft a practical path forward in our complex political economies. What Regional Energy Banks Do Regional Energy Banks are separate management entities focused solely on funding the energy transition in different parts of the world. In some cases, they may fall under other banking structures (World Bank, regional development banks); or be part of regional development efforts, such as KSA and MENA countries. The management framework reflects the political economy of our heterogeneous world; however, the mission and operating goals are similar. 1. Analyse information and build a rich knowledge base. The energy mix, technology, and models / scenarios are in constant flux, so much of the effort is focused on accessing a deep base of information that is available from consulting firms and international institutions. Evaluating and absorbing the information is challenging since some of the analysis is contradictory, uncertain, and often advocating certain solutions. Green / blue hydrogen, small nuclear, solar, offshore wind, carbon capture, hybrid transportation, storage. Using information to depict a changing flexible view of our regional energy worlds is key to policy guidelines and longer-term investment priorities.