In order to meet the goal laid out by the Paris Agreement to limit global warming to below 2 degrees, we will need to see a transition to clean energy over the next decade. But while renewable energy projects and investments have been growing at a promising pace, a more rapid scaling is required to meet global climate and sustainable development goals. We are excited to announce our investment in Bluestar Energy Capital, a new renewable energy asset development and ownership platform that has raised $100 million in initial capital to provide the expertise and investment needed to accelerate the energy transition.
The world has an overall carbon budget of less than 1,000 gigatons of emissions if it is to mitigate the worst impacts of climate change, according to the UN IPCC report. Ample and affordable renewable energy will be essential to meeting this goal. On the one hand, the renewable energy sector is growing in leaps and bounds. The past decade has seen the “levelised costs” (numbers that take into account not just the cost of generating electricity but also the initial spend on financing, equipment, construction, and maintenance) of solar, onshore wind and offshore wind drop by 83 percent, 62 percent and 58 percent respectively, according to BloombergNEF. Two-thirds of the global population now live in countries where wind and solar power offer the cheapest new options for energy.
But these rates of change are still far too slow if we are to reach our climate goals. If renewable generation and electric cars are rapidly expanded through the 2020s, electricity and transport could account for more than 70 percent of the necessary drop in energy-related emissions. But this would require building wind and solar farms at about four times the current pace. And clean energy investment, which is already at an all-time high, would have to exceed $4 trillion by 2030, or three times its average over the past five years.
Unfortunately, in 2021, global energy-related carbon emissions saw their largest annual increase ever, with coal demand alone increasing by 60 percent more than all renewables combined, underpinning a rise in emissions of almost 5 percent. Many bottlenecks still remain for renewable energy development and adoption from institutional to policy, regulatory, market and project level obstacles, which means these projects need extensive know-how as well as substantial capital. Due to these barriers to entry, high-quality development projects spearheaded by management teams with the experience and capital needed to deliver investable infrastructure at scale are in high demand in many global markets.
The momentum is there. The global renewable energy industry was valued at $881.7 billion in 2020 and is expected to reach $1,977.6 billion by 2030, growing at a CAGR of 8.4 percent from 2021 to 2030. Both the US and Europe have the potential to add more than 500 gigawatts of new wind and solar storage capacity over the next decade, according to industry reports. Depending on climate policy and the extent of broader economy-wide electrification in mobility and industrial applications, there is also the potential for closer to 1,000 gigawatts in each market. This would result in the tripling of installed renewable capacity and this outlook is encouraging significant demand for developed assets to support this growth.
Today’s renewable market is seeing more aggressive capacity deployment targets being set and more capital being committed to meet the needs of the moment. Major energy strategics and large financial investors are mobilizing around the opportunity in mainstreaming clean energy. But because of the aforementioned obstacles to clean energy development, these institutions are struggling to realize sufficient project pipelines to meet their capacity and capital deployment commitments.
Bluestar Energy Capital was created to address this scarcity. Through a combination of establishing its own regional development platforms as well as controlling investments in existing platforms, the company's mission is to be one of the largest investors in renewable project development capacity globally. Bluestar’s commercial focus is centered around establishing a pipeline of greenfield developed and early stage acquired renewable projects that can be matured to an advanced stage and sold for development fees to clean energy investors. The company’s initial focus is exclusively on supplying project development capital to scale regional platforms. In the future, Bluestar will evaluate various options for construction and operating capital.
Key to the promise of the company is the management team, which has an extensive track record in wind, solar, and storage, experience in institutional scale project management, and a deep understanding of the market. The team is led by Declan Flanagan, a global clean energy industry veteran and former CEO of Orsted Onshore and Lincoln Clean Energy. He brings with him a long and successful track record of scaling and monetizing renewable energy platforms.
The initial $100 million raised by Bluestar will fund the execution of the first phase of the company’s business plan. Bluestar will develop regional platforms in the US, Australia and Europe and will engage in opportunistic acquisition activity to drive growth. Declan will remain the controlling shareholder of Bluestar, and S2G along with Great Bay Renewables are new investors in the round. We are excited to be working with Bluestar to support the mainstreaming of clean energy over the next decade.