Clean Energy’s Purity Test

Here’s what you need to know…

For decades, environmental activists have waged a pressure campaign to shift the energy sector from fossil fuels to alternative resources. Now that transition has become a reality, with renewables’ share of energy production increasing as they become more cost competitive (even without subsidies) and clean tech innovation takes hold across industry incumbents and would-be disrupters alike.

From carbon capture to hydrogen to solar and wind farms and beyond, the “green energy” future imagined by environmentalists is emerging from the lab and showing promise in the marketplace. Even oil and gas firms are committing to the energy transition. As we note in our mid-year Trends in Energy Infrastructure Report, due out this month (click here to subscribe), “The oil industry is working with White House Climate Adviser Gina McCarthy, energy trade groups are supporting methane regulations, and oil majors are making climate and net-zero pledges.”

These developments should give green energy activists abundant cause for celebration, but they’re not ready to enjoy their victories just yet. Instead, for many activist groups, it has become less about meeting their stated goal of reducing emissions and reaching net zero carbon than how we get there and who makes it happen. That shift in activist expectations has significant implications for industry leaders working towards a lower carbon future, as well as the investors and financial institutions helping them get there. Here’s what you need to know:

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The Energy Transition Is Here, And Environmentalists Are Already Against It.

Is Carbon Capture A “Filthy And False Solution”? Even as industryscientists, and government officials point to carbon capture, utilization and storage (CCUS) as a key component of reaching a net zero carbon future, many green groups are vocally opposing CCUS plans, with one coalition of more than 650 environmental organizations referring to the practice as a “filthy and false solution.” Other environmentalists have argued “the government shouldn’t be boosting the fossil fuel industry” by investing in CCUS technology. Indeed, while The White House includes carbon capture in its plan to reach key climate goals, President Biden’s own Environmental Justice Advisory Council (WHEJAC) recently designated CCUS as a type of project “that will not benefit a community.” Citing the high cost of the technology and the “uncertainties” regarding “waste streams, CO2 sequestration and emissions of criteria pollutants that can’t be captured by CCS systems,” WHEJAC’s Co-Chair Peggy Shepard, who leads a New York-based environmental activist group, pledged “to ensure that these projects are not happening in communities of color.” Her comments indicate how CCUS and other renewables initiatives could be subsumed by the Administration’s focus on environmental justice.

Green Hydrogen Or “Greenwashing”? The International Energy Agency touts hydrogen for its “potential to support clean energy transitions,” and many in the gas sector – and at DOE – see hydrogen as an opportunity to convert existing transport and power generation facilities to hydrogen as the technology matures, avoiding stranded assets and lost jobs. However, skeptical activists condemn this path as “greenwashing” and argue a hydrogen future “risks locking in dependency on fossil fuels.” Some environmentalists even see “green hydrogen,” which is created by renewable sources, as a “false solution.”

Not-So-Green Batteries? While environmental activists have long touted solar and wind power as the key to a green future, these intermittent energy sources need advanced, affordable battery options to continue to increase their market share. So, too, do electric vehicles. Yet, even as it becomes clearer how crucial investments in battery technologies are to the energy transition, there is growing scrutiny on the environmental impacts and sustainability of the mining of rare materials, like lithium, required to produce batteries. In reality, all technological advances come with tradeoffs as well as improvements. However, as companies and investors work towards cleaner power and transportation sectors, they can expect more scrutiny and questions about how green their investments truly are.

That’s A Lot Of Land. Wind and solar developers also face activist concerns over the amount of land needed for utility scale development. According to the Brookings Institution, “Wind and solar generation require at least 10 times as much land per unit of power produced than coal- or natural gas-fired power plants, including land disturbed to produce and transport the fossil fuels.” As we’ve previously observed, “the same activists who once advocated vociferously for more renewables now frequently mobilize opposition to the kind of utility-scale renewable projects necessary to meet the activists’ net zero carbon demands.” Their mobilization has the potential to create unique coalitions of opposition to projects, including local landowners, farmers, and ranchers concerned about taking away agricultural lands, as well as Republican officials and grassroots activists who oppose the subsidies for such developments.

Even As Financial And Political Shareholder Activism Merge To Advance Clean Energy, A Dividing Line Remains.

Time and time again, as new technologies emerge and industry adapts to address societal and governmental demands, what was once new, green, and clean becomes just another industry investment subjected to scrutiny by the media and pressure by activists. As the costs and benefits of these investments become clearer, activists push for more and better.

The recent installation of three green-friendly independent directors to Exxon’s governing board via shareholder activists at Engine No. 1 exemplifies this phenomenon. As we describe in our mid-year Trends in Energy Infrastructure Report, forthcoming later this month, Engine No. 1’s victory was the result of an unusual alliance between politically motivated shareholder activists and hedge funds who have determined that profitability is directly tied to investing in sustainable, clean technology. However, while the financially motivated investors take credit for Exxon’s “sudden enthusiasm” for investing in clean technology like carbon capture and expect the firm to invest wisely in continuing to meet the world’s oil and gas demand, their politically motivated allies expect nothing less than Exxon’s complete departure from fossil fuels and already oppose Exxon’s proposed $100 billion carbon capture project. Even as these two types of activist shareholders push for more green, it is important to remember that both groups are not always focused on the same kind of green.

Navigating The Clean Energy Purity Test Requires Actionable Insights.

As energy producers invest in technology to better protect our environment – a goal purportedly shared by green groups – they face a clean energy purity test by well-funded and well-organized activists who refuse to accept that every technology that advances emissions reductions and other climate goals will have its own tradeoffs and challenges. This gap between demands and reality leaves energy producers and even ESG-minded investors chasing a moving target. To advance their initiatives toward a cleaner planet, they must build a strategy informed by actionable intelligence that ensures their public affairs professionals can anticipate these shifts in sentiment and help business leaders and investors make better decisions about how to respond.

Want the full story? Be sure to check out our soon-to-be released Trends in Energy Infrastructure Report hitting inboxes soon.