Release date: 23 January 2019
Thank you for the opportunity to be part of this debate.
I know there is a lot to be pessimistic about on climate change, but I’m an optimist and I believe there is a real sense of us entering a new phase in the energy debate.
I’ll explain why I think that but first I think it is helpful to review how we have arrived where we are today.
I would categorize the first phase of the debate as one of awareness – raising awareness – and no one has done more to recognize the scale of the challenge we face than the Vice-President – and it’s a privilege to share a stage with him.
Let me also acknowledge the ambition of Ernesto’s company, Enel, which has committed to becoming an entirely carbon-free company by 2050.
We have a history in low carbon of our own in BP.
My former boss Lord John Browne was the first in our industry to step out and address the threat of climate change and the need for precautionary action.
More than just words, he set the company on a course of action for meaningful change, not least with significant moves into renewable energy and the development of BP’s Alternative Energy business that I’m now responsible for.
The next phase in the energy debate is one I’d categorize broadly as a learning phase – certainly for BP.
In BP we learned several important lessons from the investments we made as a first mover in alternative energy.
It’s important to remember here that the challenge we face is a dual challenge.
The energy landscape needs to be viewed as if looking through 3D glasses.
Yes we need to reduce emissions dramatically, as we hear so much here in Davos, London, Washington and Brussels.
But back in my home country of India, and in much of the East, you hear another narrative as well.
As prosperity grows so too does demand for energy, with around a third more needed by 2040 – nearly all of which is coming from non-OECD nations.
Renewables are going to play an increasingly important role in the energy mix.
Growth in wind and solar is a secular trend – truly remarkable how they have developed over the last few years.
Today you will struggle to find an oil & gas major that isn’t investing in renewables.
Yet with renewables at 4% share of primary energy today, and around 15% by 2040, if recent trends continue, we also need to be pragmatic about how fast they can achieve scale.
To meet the Paris climate goals means rapidly reducing greenhouse gas emissions in the context of sustainable development and the eradication of poverty. That’s going to require us to make all kinds of energy cleaner and better.
Vice-President Gore was kind enough to open one of our solar plants in California back in 1998.
Yet, despite our best efforts we couldn’t make our original solar business work.
Twenty years on we are now back in solar in a new way, but we learned from our experience - in wind, hydrogen, biofuels as well as solar, that you need everyone to be playing a part, including governments and energy consumers to create the conditions for progress and success.
This leads me to third area of debate - and my final observation for now - which is that we are moving into a new phase, one of collaboration.
Those who managed to stay awake when I spoke at Davos last year might recall that I talked about the need to combine the three ‘P’s – policy, people and partnerships.
Increasingly we are seeing this in action.
What is particularly instructive from these partnerships is the bringing together of finance and capability.
Having a lot of money on its own doesn’t solve a problem. But finance coupled with the capability to use it effectively will.
It’s a marriage of human capability, technology, business know-how, including scale and relationships – all lubricated by finance.
Let me offer you one more example, which is illustrative of a whole new capital ecosystem that is helping to drive sustainable energy innovation in India.
Last year Lightsource BP was involved in establishing a $1 billion investment fund that will fundamentally transform the potential for renewables in India.
It brings together BP’s capability.
Investment from both the UK and Indian governments.
And private capital from Everstone Group.
For every 30 cents of equity investment it is leveraging 70 cents and that finance for investment into areas such as renewable energy, clean transportation, water and waste management, and emerging technologies.
There is an old saying that ‘Teachers open the door, but you must enter by yourself.’
You could look at finance in a similar vein – there to enable change, but alone unable to make it happen.
Capital has to have a purpose.
It’s not alchemy, it’s about marrying finance with capability.
That is the recipe for success, and how together you can really drive innovation.
We have seen that with the OGCI, with the Green Growth Equity Fund in India, and in strategic partnerships between Lightsource and BP.
Collaboration built on the foundations of expertise and optimism are indeed positive steps in creating the energy the world needs in the way that it wants.