For the global energy transition, trillions of dollars or euros need to be shifted from climate-harmful to climate-friendly investments. Many banks promise exactly that – but continue to invest substantial sums in fossil industries, as Nick Nuttall illustrates with new figures.
Because cooking is life-threatening, millions of women and children are at risk: Over two billion people prepare their food using only wood, coal or charcoal – and suffer from the pollutants in the smoke. Now, a high-level summit in Paris aims to mitigate this danger while also preserving nature and climate, especially in Africa, as Urmi Goswami explains.
Kiel’s mayor, Ulf Kämpfer, explains in an interview with Malte Kreuzfeldt where the money for the heat transition in Germany should come from. He shares his thoughts on the right pace and why he considers Kiel a pioneer.
We also look at a study that explains why the economic damages of climate change are even greater than previously assumed, a possible first climate lawsuit in Russia, and how costly a coal phase-out could be for China and India.
Sixty of the world’s largest banks invested over 700 billion dollars in supporting oil, gas and coal companies in 2023, apparently flying in the face of international efforts to combat climate change by decarbonizing the global economy.
In climate diplomacy, finance is set to become a central issue this year, as a new financial target is expected to be adopted at COP29. However, investors can now use a new platform called “Move the Money” to see precisely whether their banks are advancing fossil investments and, if in doubt, switch to other financial institutions.
The Climate Policy Initiative has estimated that global financial flows into climate action need to reach $8 to 9 trillion annually up to 2030 and then jump to up to over 12 trillion dollars a year from 2031 to 2050.
But since the Paris Agreement of 2015, 60 of the globe’s biggest private banks including JP Morgan Chase, Bank of America and Mizuho of Japan, invested a total of 7.1 trillion dollars not in climate action but into fossil fuels a new report out today claims. Nearly half of this investment – 3.5 trillion dollars – has supported expansion of fossil fuels including in ecologically sensitive areas like the Amazon and the Arctic says the Banking on Climate Chaos report.
This is not an isolated case in the financial industry: Table.Briefings recently reported that Commerzbank missed its climate goals.
The report is considered the most comprehensive global analysis of “fossil fuel banking”, covering lending to over 4,200 companies involved in fossil fuels. It was prepared by experts from organizations and non-governmental organizations such as the Rainforest Action Network, BankTrack, Oil Change International and Urgewald.
The study shows that in 2023, financing increased in three markets for fossil fuels: methane or liquefied natural gas (LNG), thermal coal used for power plants and heating and metallurgical coal used as coke for products like steel. Accordingly:
Many of the banks named in the report are members of the UN’s Net Zero Banking Alliance. JP Morgan Chase, topping the list of global financiers of fossil fuels in 2023, did not respond to a request from Table.Briefings regarding how they reconcile these investments with their membership in the UN Net Zero Banking Alliance.
Asked how they square this membership with sustained fossil fuel investments, Sandrine Dickson Decleve, co-President of the Club of Rome and Co-Chair of the European Taxonomy for Sustainable Finance, told Climate Table. “Many of them also invest in renewables, so they kind of think they are climate neutral with their investments – which is frankly delusional.”
“Many also say these investments are supporting pensions. But that makes no sense when you look at what climate impacts from burning fossil fuels are likely to do to the economy and thus people’s pensions,” she added. “They (the big banks) know that regulation is going to get tighter over the coming years, but they’re keen to max out their fossil fuel profits before that happens-to be honest governments need to step up the rules on sustainable investment flows now, before we are locked into temperature rises above 1.5 C.”
The actions of these 60 big banks, most of whom are headquartered in North America, Europe and China, contrast sharply with a group of 17 banks who are members of the Global Alliance for Banking on Values (GABV). On Earth Day 2024, they reaffirmed their support for the adoption of a Fossil Fuel Non-Proliferation Treaty aimed at managing the world-wide phasing down and phasing out fossil fuels.
Martin Rohner, Executive Director of the Global Alliance for Banking on Values, told Climate Table: “Most values-based banks exclude financing of any fossil fuel related activities, and many have committed to ambitious net zero targets as early as 2035. We encourage the wider financial industry to follow our lead and join us in our effort to protect the climate.”
Katrin Ganswindt, a co-author of Banking on Climate Chaos and Head of Finance and Research at Urgewald in Germany, said she was concerned that coal was still attracting investment given its high climate footprint. “While we urgently need to exit coal, only 5 per cent of global coal companies have announced exit dates for their core business,” she added. However, there are also pioneers: “Frontrunners like Credit Mutuel or Banque Postale (two French banks in the new report) with strong exclusion policies lead the way to a climate sensitive finance industry.”
Nick Nuttall is a presenter and Director with We Don’t Have Time and the official UN spokesperson for the Paris Climate Agreement.
With a high-level summit, representatives from states, businesses, charities, development banks and the International Energy Agency (IEA) aim to make significant progress for climate action and development on Wednesday in Paris: The Clean Cooking initiative aims to address a significant problem, particularly in Africa, improve the health of millions of people, protect nature, and significantly reduce greenhouse gas emissions relatively inexpensively.
“It’s a major humanitarian issue beyond energy and climate change,” said IEA chief Fatih Birol about the summit, which he invited along with Tanzanian President Samia Suluhu Hassan, Norwegian Prime Minister Jonas Gahr Støre, and President of the African Development Bank Group Akinwumi A. Adesina. “For me, the most important gender equity issue today is that in Africa, 80 percent of the people use primitive cookstoves for preparing a meal by using wood, agricultural and animal waste and it is almost exclusive women who are doing the cooking. This creates major respiratory diseases, and it is one of the two reasons for premature death of women in Africa,” said Fatih Birol, International Energy Agency.
Clean cooking reduces or eliminates these problems. Due to various conditions, there isn’t a single technique – anything that replaces fuels like charcoal, coal, crop residues, dung, kerosene or wood is considered “clean.” Access to “clean cooking” is considered achieved when a household reaches level 4 of the World Bank’s multi-stage framework, which considers efficiency, pollutant load, comfort, fuel availability, safety, and affordability.
The lack of access to clean cooking affects some 2.3 billion people worldwide across 128 countries, contributing to 3.7 million premature deaths annually with women and children most at risk. Ensuring universal access to clean cooking is not a question of technology or policy solutions, it is an issue of implementation capacity and funding.
There has been progress in Asia and Latin America, where the number of people without access to clean cooking has been declining, countries like India, China, Indonesia halving their population without clean cooking access. Less than a third of those lacking access live in countries with adequate policies and funding required to achieve the 2030 target. The numbers, however, continue to rise in Africa, particularly in the sub-Saharan region. Today, roughly 1 billion in Africa, roughly four in every five, are dependent on primitive cooking options and polluting fuels. The policy and funding gap is widest in Africa. Less than a third of clean cooking plans in Africa are funded; incentives and financial support to households have been affected by the Covid-19 pandemic and high fuel prices due to the global energy crisis.
For Africa to achieve universal access to clean cooking by 2030, international financial flows, particularly concessional finance, will have to play a key role. “It is a very small amount of money when you think of the order of magnitude of the problem. If you want to solve the access to energy and clean cooking problem in Africa, you will need 25 billion dollars a year to put it in context, the cost of building one LNG terminal is 25 billion dollars,” said Birol. Globally, an investment of 8 billion dollars in clean cooking appliances and infrastructure is required annually. This is less than 1 percent of what governments spent in 2022 to keep energy prices affordable for their citizens during the global energy crisis.
Clean cooking trends over the past 20 years show that gaseous fuels, particularly liquefied petroleum gas (LPG), has emerged as the front runner fuel – 70 per cent of those who gained access in the last decade did so through LPG. Between 2000 and 2021, the share of gaseous fuels for cooking rose from 36 percent to 60 percent, bypassing biomass (share dropped from 44 percent to 29 percent). Among the commercially available solutions, LPG is the least cost, realistic scenario of achieving universal clean cooking.
Affordability is a major challenge, as the most clean cooking appliances require households to make upfront payments and ongoing expenditure for fuels. A large majority of households cannot afford the upfront costs even though switching to clean cooking systems eventually pays for itself. This is why clean stoves are often promoted through offset projects, although these do not always deliver what they promise – as Table.Briefings reported.
The initiators of the summit want to counter this with new business models based on financing by the end consumer, such as:
The IEA expects the summit to be a turning point in addressing the issue of clean cooking. The IEA has been working over the past several months with companies, philanthropies, multilateral development banks, and governments to come to the summit with pledges, monetary and projects on the ground. “The numbers are very, very encouraging for filling a lot of the gaps. So, there will be a real mobilization, with financing and actions on the ground,” said Laura Cozzi, Director of Sustainability, Technology and Outlooks.
Representatives from India, Kenya, Egypt among others will share their experiences. “They will talk about what has worked and what hasn’t, and lessons learnt as well as good practices,” said Cozzi. Discussions on policy frameworks that can help will also be discussed.
It is expected that several milestones will be agreed on to drive concrete action in policy, financing, and partnerships that will be taken up at the G7 and G20 summits in June and September, respectively. The communique of the G7 Climate, Energy and Environment ministerial in Turin, Italy in April welcomed the IEA’s clean cooking access initiative and pledged to promote clean cooking technologies, including by electrification, sustainable and low GHG biomass, biogas, ethanol and where alternatives are unavailable LPG. These partnerships will be carried forward at COP29 in Baku, Azerbaijan culminating with COP30 in Belem, Brazil.
Achieving the goal of universal clean cooking access is a net gain for the environment. While the switch to fuels like LPG will lead to increase in emsission by 100 million tons of CO2 2030, the reduction fuelwood and charcoal use will lead to reduction in methane and other greenhouse gas emitted by incomplete combustion in primitive cookstoves by 900 million tons carbon dioxide equivalent and reduction in deforestation, saving 700 million tons by 2030.
One of the biggest tasks for municipalities currently is the climate transition in heating supply. How is Kiel progressing in this regard?
We aim to have district heating in Kiel 100 percent climate-neutral by 2035. We’re relying on large heat pumps, decarbonized waste incineration, deep geothermal energy and hydrogen. A mix that shows: Those who are ambitious in the heating transition can also find models for how to make it work.
You’re simultaneously the President of the German Association of Local Public Utilities (VKU) and Deputy President of the German Association of Cities. These associations are much less ambitious in the heating transition. How does that fit together?
This is because the conditions of our member companies are very, very different. On the one hand, we are further along with heating planning than others because Schleswig-Holstein introduced it early by state law, and the major cities in Schleswig-Holstein have to finish it by the end of the year. I have the Baltic Sea in Kiel, where I can relatively easily put large heat pumps into operation. Others have it harder, so the starting positions are different. As a federation, we have to take that into account, especially since the climate neutrality goal for 2045 is already ambitious. But I would say that climate action has already arrived everywhere.
But if the issue has arrived, why did your associations fight to push back the deadlines for decarbonizing district heating in the Heating Planning Act?
From my perspective, there’s a good reason for that. We not only want to decarbonize existing district heating but massively expand it, ideally tripling it. And that comes with many uncertainties, also due to lacking political frameworks: Do I, as a municipality, have the capacity and capital? Do the citizens want it? Can I offer an attractive price? If renewable shares in district heating are legislatively increased too quickly, many municipal utilities would be cautious and expand district heating less. That’s why we advocated not wanting too much, because ultimately that would achieve less. Perhaps we need to slow down a bit sometimes to achieve climate action for everyone at a good pace.
You mentioned the necessary capital. With the expansion of heat networks and climate-friendly power plants, there are huge sums involved, plus the expansion of distribution networks for electricity. Where will the money come from?
Nobody knows for sure yet. We only know that we need to diversify the financing bases significantly. On the one hand, municipalities must be willing to forego the distribution of profits so that they can be invested. But we’re talking about an amount of roughly 600 billion euros by 2030 and at least one trillion euros by 2045 – we won’t get there with classical instruments, we need new ones.
What could that be?
We need new capital collection points to use money from other sources. As the VKU, we are currently developing the rough concept for an Energy Transition Fund, which we will soon present with the BDEW. In addition, there are other forms of financial citizen participation, such as bonds or citizen cooperatives. But it’s clear that it mostly must be private capital.
When private capital is invested, it expects a good return. Wouldn’t it be cheaper to finance this task with public funds?
Of course, we also need the state, especially for district heating. But we all know the discussion about the debt brake and the federal budget. We would already be pleased if the federal government would provide municipalities with the three billion euros per year for district heating as demanded, instead of the one-time 3.2 billion euros until 2029. To be honest, I lack the imagination that there are political majorities for completely financing this task with taxpayer money. That would overtax the state. And of course, private investors want a return. But if the investment is secure, for example, through state guarantees, the interest doesn’t have to be so high, even though a higher equity interest in energy transition investments would help.
Already, district heating has become quite expensive in some cases. And unlike with electricity or gas, you can’t simply switch to a cheaper provider. How do you respond to criticism that getting a district heating connection is a financial adventure with an uncertain outcome?
I understand the critical questions and we’re also discussing other price-setting mechanisms. But it shouldn’t be overregulated or heavily cut. Because no supervisory board of a municipal utility can embark on the adventure of massive district heating expansion without knowing how the prices will be regulated afterward and how the investments can be refinanced. And we also have to be careful not to talk district heating to pieces. Because it’s not as if operators can demand any prices they want; it’s already a controlled market. And of course, prices have risen during the energy crisis, but they have also risen for electricity and gas, which impacts district heating with a delay. That’s why I’m very unhappy with the district heating bashing that’s sometimes happening.
But isn’t a heat pump really cheaper – and above all, more predictable – for many households?
In addition to acquisition costs etc., you’re dependent on the electricity price, which is also uncertain. And of course, district heating prices must be attractive compared to the alternatives, but we don’t have to be the cheapest everywhere. Because district heating offers other advantages: You don’t have to install heating at home, the infrastructure is provided. I have high supply security with a provider I can trust. It doesn’t have to be a bargain, as my municipal utilities say – but of course, nobody wants to pay twice as much for district heating as for heating with a heat pump.
Ulf Kämpfer, 51, has been Lord Mayor of Kiel for ten years. He is also President of the German Association of Local Public Utilities (VKU) and Deputy President of the Association of German Cities. The SPD politician, who was once State Secretary in Schleswig-Holstein under Robert Habeck, is seen as a potential challenger to Daniel Günther in the next state elections.
The goal of Solar Package I within the new European Renewable Energy Directive (RED III) is commendable: to streamline and accelerate the construction and operation of wind and photovoltaic installations. Among other things, so-called “acceleration zones” are provided for renewable energy projects. And this acceleration is urgently needed. By 2030, 80 percent of the electricity consumed in Germany is supposed to come from renewable sources. This requires easy access to wind and solar power and better options for using volatile energy and relieving or stabilizing the grid. Large battery storage plays a crucial role here.
Large battery storage currently serves mainly three purposes: stabilizing grid frequency by providing regulation energy, managing bottlenecks in the power grid and smoothing out extreme price fluctuations in the electricity market.
They not only stabilize market prices but also have a price-reducing effect. Additionally, they reduce the need for controllable generators like gas power plants and contribute to supply security. Expansion is more relevant than ever. By 2030, the Fraunhofer Institute ISE estimates the need for storage capacity at around 104 gigawatt-hours. Currently, only about 1.5 gigawatt-hours are installed (as of January 2024).
Due to the highly dynamic market development with investment announcements on a billion-dollar scale, storage systems are now moving up the political agenda for the first time. This is important because the legal-regulatory framework still massively hinders the potential of large battery storage. The German government is currently working on three strategies concerning large battery storage: the system development strategy, the electricity storage strategy, and the power plant strategy. Initial conclusion: the strategies are not aligned with each other.
With the electricity storage strategy, the German government recognizes the role of large battery storage and accurately describes why they must play a central role in the future energy system. However, it remains a statement of intent because concrete measures and timelines are missing. In contrast, the system development strategy completely ignores the relevance of large battery storage: It is based on long-term scenarios that consider the energy system up to 2045. Neither the interim report nor the updated scenarios (February 2024) are aligned with the electricity storage strategy. For example, the reference scenario does not assume any expansion of storage. The model does not even differentiate between home storage and large-scale facilities. And even worse, the reality of expanding energy storage is inadequately considered. The models are already outdated.
The recently published power plant strategy, on the other hand, focuses on how a secure generation capacity can be created from hydrogen-based gas power plants. However, the extent to which “storage power plants” should play a role remains open. Also, a capacity mechanism is announced from 2028 onwards. This is akin to a bombshell because it would effectively abolish the established energy-only market that has been in place for many years. The mere announcement of this will have significant implications for investment readiness in various areas of energy generation. It is, therefore, crucial to quickly clarify the design of these mechanisms to prevent necessary and economically viable investments in energy generation and storage from being withheld due to uncertainties. Such a situation would exacerbate the problem and turn the capacity mechanism into a “self-fulfilling prophecy”. It should, therefore, be ensured that any future mechanism does not unduly affect the price signals in the energy-only market in a way that excessively dampens price volatility. Furthermore, the strategy should stipulate that a capacity of a few hours, as is typically the case with newly planned large battery storage (and also pump storage power plants), is highly valuable for the overall system.
A closer look, unfortunately, reveals that the individual strategies are conceived as silos. However, neither the expansion of renewables nor of storage is an end in itself. It’s about building an energy system that works with 100 percent renewables in the future. This requires a holistic approach that must also consider storage, among other things, alongside improvements for wind and photovoltaics. The German government needs to step up here.
This means that the electricity storage strategy must contain concrete measures and a clear legislative timeline. Legal clarity regarding the discontinuation of construction cost subsidies and privileges in rural areas is necessary. Similarly, a market-based redispatch instrument for storage is needed. Fair conditions for providing non-frequency system services and, if necessary, for the future capacity mechanism should also be ensured. The system development strategy urgently needs to emphasize the relevance of large battery storage and realistically correct the expansion rates of large battery storage.
In the first step, the power plant strategy needs a quick clarification of the design of the announced capacity mechanism to ensure future investment readiness. The role of storage power plants should also be defined. Instead of sticking to silo thinking, it is now advisable to promote synergies to ensure that the strategies support each other rather than undermine each other.
Benedikt Deuchert is Head of Business Development & Regulatory Affairs at Kyon Energy, a project development company focusing on large battery storage systems.
For the global energy transition, trillions of dollars or euros need to be shifted from climate-harmful to climate-friendly investments. Many banks promise exactly that – but continue to invest substantial sums in fossil industries, as Nick Nuttall illustrates with new figures.
Because cooking is life-threatening, millions of women and children are at risk: Over two billion people prepare their food using only wood, coal or charcoal – and suffer from the pollutants in the smoke. Now, a high-level summit in Paris aims to mitigate this danger while also preserving nature and climate, especially in Africa, as Urmi Goswami explains.
Kiel’s mayor, Ulf Kämpfer, explains in an interview with Malte Kreuzfeldt where the money for the heat transition in Germany should come from. He shares his thoughts on the right pace and why he considers Kiel a pioneer.
We also look at a study that explains why the economic damages of climate change are even greater than previously assumed, a possible first climate lawsuit in Russia, and how costly a coal phase-out could be for China and India.
Sixty of the world’s largest banks invested over 700 billion dollars in supporting oil, gas and coal companies in 2023, apparently flying in the face of international efforts to combat climate change by decarbonizing the global economy.
In climate diplomacy, finance is set to become a central issue this year, as a new financial target is expected to be adopted at COP29. However, investors can now use a new platform called “Move the Money” to see precisely whether their banks are advancing fossil investments and, if in doubt, switch to other financial institutions.
The Climate Policy Initiative has estimated that global financial flows into climate action need to reach $8 to 9 trillion annually up to 2030 and then jump to up to over 12 trillion dollars a year from 2031 to 2050.
But since the Paris Agreement of 2015, 60 of the globe’s biggest private banks including JP Morgan Chase, Bank of America and Mizuho of Japan, invested a total of 7.1 trillion dollars not in climate action but into fossil fuels a new report out today claims. Nearly half of this investment – 3.5 trillion dollars – has supported expansion of fossil fuels including in ecologically sensitive areas like the Amazon and the Arctic says the Banking on Climate Chaos report.
This is not an isolated case in the financial industry: Table.Briefings recently reported that Commerzbank missed its climate goals.
The report is considered the most comprehensive global analysis of “fossil fuel banking”, covering lending to over 4,200 companies involved in fossil fuels. It was prepared by experts from organizations and non-governmental organizations such as the Rainforest Action Network, BankTrack, Oil Change International and Urgewald.
The study shows that in 2023, financing increased in three markets for fossil fuels: methane or liquefied natural gas (LNG), thermal coal used for power plants and heating and metallurgical coal used as coke for products like steel. Accordingly:
Many of the banks named in the report are members of the UN’s Net Zero Banking Alliance. JP Morgan Chase, topping the list of global financiers of fossil fuels in 2023, did not respond to a request from Table.Briefings regarding how they reconcile these investments with their membership in the UN Net Zero Banking Alliance.
Asked how they square this membership with sustained fossil fuel investments, Sandrine Dickson Decleve, co-President of the Club of Rome and Co-Chair of the European Taxonomy for Sustainable Finance, told Climate Table. “Many of them also invest in renewables, so they kind of think they are climate neutral with their investments – which is frankly delusional.”
“Many also say these investments are supporting pensions. But that makes no sense when you look at what climate impacts from burning fossil fuels are likely to do to the economy and thus people’s pensions,” she added. “They (the big banks) know that regulation is going to get tighter over the coming years, but they’re keen to max out their fossil fuel profits before that happens-to be honest governments need to step up the rules on sustainable investment flows now, before we are locked into temperature rises above 1.5 C.”
The actions of these 60 big banks, most of whom are headquartered in North America, Europe and China, contrast sharply with a group of 17 banks who are members of the Global Alliance for Banking on Values (GABV). On Earth Day 2024, they reaffirmed their support for the adoption of a Fossil Fuel Non-Proliferation Treaty aimed at managing the world-wide phasing down and phasing out fossil fuels.
Martin Rohner, Executive Director of the Global Alliance for Banking on Values, told Climate Table: “Most values-based banks exclude financing of any fossil fuel related activities, and many have committed to ambitious net zero targets as early as 2035. We encourage the wider financial industry to follow our lead and join us in our effort to protect the climate.”
Katrin Ganswindt, a co-author of Banking on Climate Chaos and Head of Finance and Research at Urgewald in Germany, said she was concerned that coal was still attracting investment given its high climate footprint. “While we urgently need to exit coal, only 5 per cent of global coal companies have announced exit dates for their core business,” she added. However, there are also pioneers: “Frontrunners like Credit Mutuel or Banque Postale (two French banks in the new report) with strong exclusion policies lead the way to a climate sensitive finance industry.”
Nick Nuttall is a presenter and Director with We Don’t Have Time and the official UN spokesperson for the Paris Climate Agreement.
With a high-level summit, representatives from states, businesses, charities, development banks and the International Energy Agency (IEA) aim to make significant progress for climate action and development on Wednesday in Paris: The Clean Cooking initiative aims to address a significant problem, particularly in Africa, improve the health of millions of people, protect nature, and significantly reduce greenhouse gas emissions relatively inexpensively.
“It’s a major humanitarian issue beyond energy and climate change,” said IEA chief Fatih Birol about the summit, which he invited along with Tanzanian President Samia Suluhu Hassan, Norwegian Prime Minister Jonas Gahr Støre, and President of the African Development Bank Group Akinwumi A. Adesina. “For me, the most important gender equity issue today is that in Africa, 80 percent of the people use primitive cookstoves for preparing a meal by using wood, agricultural and animal waste and it is almost exclusive women who are doing the cooking. This creates major respiratory diseases, and it is one of the two reasons for premature death of women in Africa,” said Fatih Birol, International Energy Agency.
Clean cooking reduces or eliminates these problems. Due to various conditions, there isn’t a single technique – anything that replaces fuels like charcoal, coal, crop residues, dung, kerosene or wood is considered “clean.” Access to “clean cooking” is considered achieved when a household reaches level 4 of the World Bank’s multi-stage framework, which considers efficiency, pollutant load, comfort, fuel availability, safety, and affordability.
The lack of access to clean cooking affects some 2.3 billion people worldwide across 128 countries, contributing to 3.7 million premature deaths annually with women and children most at risk. Ensuring universal access to clean cooking is not a question of technology or policy solutions, it is an issue of implementation capacity and funding.
There has been progress in Asia and Latin America, where the number of people without access to clean cooking has been declining, countries like India, China, Indonesia halving their population without clean cooking access. Less than a third of those lacking access live in countries with adequate policies and funding required to achieve the 2030 target. The numbers, however, continue to rise in Africa, particularly in the sub-Saharan region. Today, roughly 1 billion in Africa, roughly four in every five, are dependent on primitive cooking options and polluting fuels. The policy and funding gap is widest in Africa. Less than a third of clean cooking plans in Africa are funded; incentives and financial support to households have been affected by the Covid-19 pandemic and high fuel prices due to the global energy crisis.
For Africa to achieve universal access to clean cooking by 2030, international financial flows, particularly concessional finance, will have to play a key role. “It is a very small amount of money when you think of the order of magnitude of the problem. If you want to solve the access to energy and clean cooking problem in Africa, you will need 25 billion dollars a year to put it in context, the cost of building one LNG terminal is 25 billion dollars,” said Birol. Globally, an investment of 8 billion dollars in clean cooking appliances and infrastructure is required annually. This is less than 1 percent of what governments spent in 2022 to keep energy prices affordable for their citizens during the global energy crisis.
Clean cooking trends over the past 20 years show that gaseous fuels, particularly liquefied petroleum gas (LPG), has emerged as the front runner fuel – 70 per cent of those who gained access in the last decade did so through LPG. Between 2000 and 2021, the share of gaseous fuels for cooking rose from 36 percent to 60 percent, bypassing biomass (share dropped from 44 percent to 29 percent). Among the commercially available solutions, LPG is the least cost, realistic scenario of achieving universal clean cooking.
Affordability is a major challenge, as the most clean cooking appliances require households to make upfront payments and ongoing expenditure for fuels. A large majority of households cannot afford the upfront costs even though switching to clean cooking systems eventually pays for itself. This is why clean stoves are often promoted through offset projects, although these do not always deliver what they promise – as Table.Briefings reported.
The initiators of the summit want to counter this with new business models based on financing by the end consumer, such as:
The IEA expects the summit to be a turning point in addressing the issue of clean cooking. The IEA has been working over the past several months with companies, philanthropies, multilateral development banks, and governments to come to the summit with pledges, monetary and projects on the ground. “The numbers are very, very encouraging for filling a lot of the gaps. So, there will be a real mobilization, with financing and actions on the ground,” said Laura Cozzi, Director of Sustainability, Technology and Outlooks.
Representatives from India, Kenya, Egypt among others will share their experiences. “They will talk about what has worked and what hasn’t, and lessons learnt as well as good practices,” said Cozzi. Discussions on policy frameworks that can help will also be discussed.
It is expected that several milestones will be agreed on to drive concrete action in policy, financing, and partnerships that will be taken up at the G7 and G20 summits in June and September, respectively. The communique of the G7 Climate, Energy and Environment ministerial in Turin, Italy in April welcomed the IEA’s clean cooking access initiative and pledged to promote clean cooking technologies, including by electrification, sustainable and low GHG biomass, biogas, ethanol and where alternatives are unavailable LPG. These partnerships will be carried forward at COP29 in Baku, Azerbaijan culminating with COP30 in Belem, Brazil.
Achieving the goal of universal clean cooking access is a net gain for the environment. While the switch to fuels like LPG will lead to increase in emsission by 100 million tons of CO2 2030, the reduction fuelwood and charcoal use will lead to reduction in methane and other greenhouse gas emitted by incomplete combustion in primitive cookstoves by 900 million tons carbon dioxide equivalent and reduction in deforestation, saving 700 million tons by 2030.
One of the biggest tasks for municipalities currently is the climate transition in heating supply. How is Kiel progressing in this regard?
We aim to have district heating in Kiel 100 percent climate-neutral by 2035. We’re relying on large heat pumps, decarbonized waste incineration, deep geothermal energy and hydrogen. A mix that shows: Those who are ambitious in the heating transition can also find models for how to make it work.
You’re simultaneously the President of the German Association of Local Public Utilities (VKU) and Deputy President of the German Association of Cities. These associations are much less ambitious in the heating transition. How does that fit together?
This is because the conditions of our member companies are very, very different. On the one hand, we are further along with heating planning than others because Schleswig-Holstein introduced it early by state law, and the major cities in Schleswig-Holstein have to finish it by the end of the year. I have the Baltic Sea in Kiel, where I can relatively easily put large heat pumps into operation. Others have it harder, so the starting positions are different. As a federation, we have to take that into account, especially since the climate neutrality goal for 2045 is already ambitious. But I would say that climate action has already arrived everywhere.
But if the issue has arrived, why did your associations fight to push back the deadlines for decarbonizing district heating in the Heating Planning Act?
From my perspective, there’s a good reason for that. We not only want to decarbonize existing district heating but massively expand it, ideally tripling it. And that comes with many uncertainties, also due to lacking political frameworks: Do I, as a municipality, have the capacity and capital? Do the citizens want it? Can I offer an attractive price? If renewable shares in district heating are legislatively increased too quickly, many municipal utilities would be cautious and expand district heating less. That’s why we advocated not wanting too much, because ultimately that would achieve less. Perhaps we need to slow down a bit sometimes to achieve climate action for everyone at a good pace.
You mentioned the necessary capital. With the expansion of heat networks and climate-friendly power plants, there are huge sums involved, plus the expansion of distribution networks for electricity. Where will the money come from?
Nobody knows for sure yet. We only know that we need to diversify the financing bases significantly. On the one hand, municipalities must be willing to forego the distribution of profits so that they can be invested. But we’re talking about an amount of roughly 600 billion euros by 2030 and at least one trillion euros by 2045 – we won’t get there with classical instruments, we need new ones.
What could that be?
We need new capital collection points to use money from other sources. As the VKU, we are currently developing the rough concept for an Energy Transition Fund, which we will soon present with the BDEW. In addition, there are other forms of financial citizen participation, such as bonds or citizen cooperatives. But it’s clear that it mostly must be private capital.
When private capital is invested, it expects a good return. Wouldn’t it be cheaper to finance this task with public funds?
Of course, we also need the state, especially for district heating. But we all know the discussion about the debt brake and the federal budget. We would already be pleased if the federal government would provide municipalities with the three billion euros per year for district heating as demanded, instead of the one-time 3.2 billion euros until 2029. To be honest, I lack the imagination that there are political majorities for completely financing this task with taxpayer money. That would overtax the state. And of course, private investors want a return. But if the investment is secure, for example, through state guarantees, the interest doesn’t have to be so high, even though a higher equity interest in energy transition investments would help.
Already, district heating has become quite expensive in some cases. And unlike with electricity or gas, you can’t simply switch to a cheaper provider. How do you respond to criticism that getting a district heating connection is a financial adventure with an uncertain outcome?
I understand the critical questions and we’re also discussing other price-setting mechanisms. But it shouldn’t be overregulated or heavily cut. Because no supervisory board of a municipal utility can embark on the adventure of massive district heating expansion without knowing how the prices will be regulated afterward and how the investments can be refinanced. And we also have to be careful not to talk district heating to pieces. Because it’s not as if operators can demand any prices they want; it’s already a controlled market. And of course, prices have risen during the energy crisis, but they have also risen for electricity and gas, which impacts district heating with a delay. That’s why I’m very unhappy with the district heating bashing that’s sometimes happening.
But isn’t a heat pump really cheaper – and above all, more predictable – for many households?
In addition to acquisition costs etc., you’re dependent on the electricity price, which is also uncertain. And of course, district heating prices must be attractive compared to the alternatives, but we don’t have to be the cheapest everywhere. Because district heating offers other advantages: You don’t have to install heating at home, the infrastructure is provided. I have high supply security with a provider I can trust. It doesn’t have to be a bargain, as my municipal utilities say – but of course, nobody wants to pay twice as much for district heating as for heating with a heat pump.
Ulf Kämpfer, 51, has been Lord Mayor of Kiel for ten years. He is also President of the German Association of Local Public Utilities (VKU) and Deputy President of the Association of German Cities. The SPD politician, who was once State Secretary in Schleswig-Holstein under Robert Habeck, is seen as a potential challenger to Daniel Günther in the next state elections.
The goal of Solar Package I within the new European Renewable Energy Directive (RED III) is commendable: to streamline and accelerate the construction and operation of wind and photovoltaic installations. Among other things, so-called “acceleration zones” are provided for renewable energy projects. And this acceleration is urgently needed. By 2030, 80 percent of the electricity consumed in Germany is supposed to come from renewable sources. This requires easy access to wind and solar power and better options for using volatile energy and relieving or stabilizing the grid. Large battery storage plays a crucial role here.
Large battery storage currently serves mainly three purposes: stabilizing grid frequency by providing regulation energy, managing bottlenecks in the power grid and smoothing out extreme price fluctuations in the electricity market.
They not only stabilize market prices but also have a price-reducing effect. Additionally, they reduce the need for controllable generators like gas power plants and contribute to supply security. Expansion is more relevant than ever. By 2030, the Fraunhofer Institute ISE estimates the need for storage capacity at around 104 gigawatt-hours. Currently, only about 1.5 gigawatt-hours are installed (as of January 2024).
Due to the highly dynamic market development with investment announcements on a billion-dollar scale, storage systems are now moving up the political agenda for the first time. This is important because the legal-regulatory framework still massively hinders the potential of large battery storage. The German government is currently working on three strategies concerning large battery storage: the system development strategy, the electricity storage strategy, and the power plant strategy. Initial conclusion: the strategies are not aligned with each other.
With the electricity storage strategy, the German government recognizes the role of large battery storage and accurately describes why they must play a central role in the future energy system. However, it remains a statement of intent because concrete measures and timelines are missing. In contrast, the system development strategy completely ignores the relevance of large battery storage: It is based on long-term scenarios that consider the energy system up to 2045. Neither the interim report nor the updated scenarios (February 2024) are aligned with the electricity storage strategy. For example, the reference scenario does not assume any expansion of storage. The model does not even differentiate between home storage and large-scale facilities. And even worse, the reality of expanding energy storage is inadequately considered. The models are already outdated.
The recently published power plant strategy, on the other hand, focuses on how a secure generation capacity can be created from hydrogen-based gas power plants. However, the extent to which “storage power plants” should play a role remains open. Also, a capacity mechanism is announced from 2028 onwards. This is akin to a bombshell because it would effectively abolish the established energy-only market that has been in place for many years. The mere announcement of this will have significant implications for investment readiness in various areas of energy generation. It is, therefore, crucial to quickly clarify the design of these mechanisms to prevent necessary and economically viable investments in energy generation and storage from being withheld due to uncertainties. Such a situation would exacerbate the problem and turn the capacity mechanism into a “self-fulfilling prophecy”. It should, therefore, be ensured that any future mechanism does not unduly affect the price signals in the energy-only market in a way that excessively dampens price volatility. Furthermore, the strategy should stipulate that a capacity of a few hours, as is typically the case with newly planned large battery storage (and also pump storage power plants), is highly valuable for the overall system.
A closer look, unfortunately, reveals that the individual strategies are conceived as silos. However, neither the expansion of renewables nor of storage is an end in itself. It’s about building an energy system that works with 100 percent renewables in the future. This requires a holistic approach that must also consider storage, among other things, alongside improvements for wind and photovoltaics. The German government needs to step up here.
This means that the electricity storage strategy must contain concrete measures and a clear legislative timeline. Legal clarity regarding the discontinuation of construction cost subsidies and privileges in rural areas is necessary. Similarly, a market-based redispatch instrument for storage is needed. Fair conditions for providing non-frequency system services and, if necessary, for the future capacity mechanism should also be ensured. The system development strategy urgently needs to emphasize the relevance of large battery storage and realistically correct the expansion rates of large battery storage.
In the first step, the power plant strategy needs a quick clarification of the design of the announced capacity mechanism to ensure future investment readiness. The role of storage power plants should also be defined. Instead of sticking to silo thinking, it is now advisable to promote synergies to ensure that the strategies support each other rather than undermine each other.
Benedikt Deuchert is Head of Business Development & Regulatory Affairs at Kyon Energy, a project development company focusing on large battery storage systems.
