Energy Transition

4 lessons from the renewables playbook for today’s clean infrastructure boom

Renewable energy sources such as solar and wind have grown rapidly.

After a slow start in the early 2000s, renewable energy sources such as solar and wind have grown rapidly. Image: LanzaTech

Jennifer Holmgren
Chief Executive Officer, LanzaTech
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Energy Transition

  • Advanced carbon management technologies are needed to tackle hard-to-abate emissions and although there are challenges, solar and wind transitions can provide lessons to accelerate development.
  • Innovative financial strategies and market-driven approaches are critical for overcoming initial commercialization hurdles in carbon management.
  • A longer-term view on return will make sustainable investments in clean infrastructure viable, with a new perspective on the so-called “green premium.”

Globally, we’ve entered an exciting period for next generation clean infrastructure but we’re not getting steel in the ground fast enough to meet our net zero goals. To match the urgency of our climate emergency, we must find ways to accelerate the deployment of cutting-edge carbon management technologies, especially for hard-to-abate emissions.

Carbon management refers to technologies that reduce emissions, including carbon capture, carbon removal and carbon recycling. Some of these technologies are still developing but others have already been commercially proven. However, competing against centuries-old, fossil-based systems isn’t easy and transitioning to more sustainable economic models won’t happen overnight.

Thankfully, this isn’t our first major climate tech transition. After a slow start in the early 2000s, renewable energy sources such as solar and wind have grown rapidly, with major infrastructure investments and government incentives driving adoption worldwide. Deployment costs have dropped sharply and the International Energy Association expects renewable energy to account for over 42% of global electricity generation by 2028.

This is a great example of what’s possible when innovative technology is paired with strong public and private investment to get a nascent market off the ground and there’s much we can learn for this next phase of the climate transition.

Here are four lessons from the renewable energy playbook for today’s clean infrastructure boom with carbon management at the fore.

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1. Build market demand while building capacity

Technological breakthroughs can upend entrenched markets but startups must first cross the “valley of death” between research and development and commercial scale. Companies need to de-risk their technologies to encourage adoption from prospective customers. One way to accelerate that process is to build early demand for new technology while companies scale their capacity to meet it.

For solar and wind power, public sector purchase agreements and corporate renewable energy commitments drove demand, giving new market entrants predictable, long-term revenue sources. We’re seeing similar moves in the carbon management sector as corporations put their purchasing power behind new technologies.

Payments processor Stripe announced carbon storage purchase agreements as part of its Negative Emissions Commitment and American Airlines agreed to become the first customer for carbon removal startup Graphyte.

Cross-sector partnerships also go a long way toward building early demand. For example, my company works with carbon generators and carbon users – industrial partners, consumer brands and the aviation industry – to create a market for sustainable raw materials made from recycled carbon, paving the way for a circular carbon economy.

These deals and partnerships promise progress but more governments and multinational companies must take action to boost demand for carbon management technologies.

2. Streamline investor due diligence with first-mover funds

We need a better way to connect capital investors with commercial-ready carbon management technologies to accelerate scale-up.

The renewables sector scaled successfully because it used public and private infrastructure funding to finance its exponential growth stage. It benefited from dedicated renewable energy funds, green bonds and government loans. Carbon management players can do the same by partnering directly with infrastructure funds to create global investment vehicles that support new projects.

Pairing a technology company with an infrastructure fund creates a vehicle for capital deployment and a strategic, fast-tracked pathway to allocate that capital. This type of partnership streamlines investor diligence of a single technology to fund multiple commercial deployments, accelerating approvals to meet the moment’s urgency.

The World Economic Forum’s First Movers Coalition demonstrates this model with a broad remit, touching several energy-intensive industries. My company is using a similar, more targeted model in collaboration with financial partners such as Olayan Financing Company and Brookfield, focusing on advancing commercial deployment of carbon recycling technology in hard-to-abate industries in the Middle East, Europe and North America.

With more of these models, projects that meet the investment criteria could get funded and deployed sooner.

Commercial-scale carbon recycling bioreactors Steelanol facility Belgium renewable energy
Carbon recycling technology that has been under development for the last few decades is finally commercialized and ready to scale globally. Image: LanzaTech

3. Piggyback on in-progress clean infrastructure projects worldwide

Growing global consensus on cutting carbon emissions has led to government investments in renewable energy infrastructure, including in countries with economies historically reliant on fossil fuels.

Countries including the Kingdom of Saudi Arabia, India, the United Arab Emirates, Brazil and Nigeria have all set ambitious targets to increase their renewable energy capacity by 2030. With myriad projects underway, these regions have the opportunity to leapfrog other countries’ emissions reduction efforts by deploying carbon management technologies alongside renewables.

For example, Saudi Arabia’s Ministry of Energy developed the Circular Carbon Economy National Programme, guiding public and private sector collaborations to achieve the four R’s of carbon management: reduce, reuse, recycle and remove.

As more countries prioritize renewable energy infrastructure, leaders must move quickly to capitalize on the momentum. If nations primed for green investments use this moment to rethink entire systems, we can significantly speed up the transition to a more sustainable global economy.

4. Focus on long-term return-on-investment

In an economy that rewards short-term financial returns over long-term impact, we must prove the value of patient capital.

Investor concerns around the “green premium” are common but the renewable energy boom demonstrated the value of upfront investment for long-term gains. Public and private investment has brought down the cost of solar and wind power, making the technologies competitive with fossil fuels.

We also don’t talk about the “fossil discount;” if we calculated the true cost of fossil fuels, including environmental impacts and excluding government subsidies, the green premium would look much more reasonable.

To make the most of carbon management innovation, investors need to take the long-term view. Today’s clean infrastructure investments will become valuable assets in the sustainable future we must build to thrive.

Financing the climate transition is not a sunk cost but a lucrative bet on tomorrow’s green economy. For example, industrial companies implementing carbon recycling technologies view waste carbon as a valuable, revenue-driving resource instead of an expensive liability.

The immense scale of our carbon problem requires realistic, systemic change. If we work together to apply the lessons from the renewables boom to carbon management, we’ll go farther and faster than ever.

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Energy TransitionNature and Biodiversity
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