Climate tech 2.0 still has a one per cent problem

Billionaires hate not getting their way. But that was the situation Andrew Forrest found himself in a year ago at the COP26 climate conference in Glasgow.

The Australian mining magnate was trying to set up a meeting with world leaders to promote green hydrogen, a technology using renewables rather than fossil fuels that he is betting will be central to the global energy transition.

He sounded out leaders from King Charles down, to no avail. “There just wasn’t enough interest,” he told an FT conference at this year’s COP27 meeting in the Egyptian resort of Sharm el-Sheikh.

One year on, it’s a very different story. Forrest was one of several chief executives invited to a COP27 green hydrogen investment round-table co-chaired by Egypt’s president Abdel Fattah al-Sisi and Germany’s chancellor Olaf Scholz.

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“The whole mood has changed,” he said. “Green hydrogen is now big.”

And it is not alone. As concern about global warming rises, climate tech is starting to attract record interest – and funding. Much of this new tech has been on display at COP27, where a series of green hydrogen deals was announced by countries eager to ramp up supplies.

The question is, can new technology really help to ward off the gathering climate crisis? Or is it a costly distraction from the need to dramatically scale up the wind, solar and other climate tech we already have?

Not long ago, I would have said the answer was obvious. Global emissions must nearly halve by 2030 to have any hope of saving the slipping goal to limit global warming to 1.5C, so the focus needs to be on rolling out all existing tech as fast as possible.

But having hosted the latest series of the FT’s Tech Tonic podcast, I’ve had a minor change of heart.

For “Climate tech to save the planet”, I watched a machine in Iceland suck carbon dioxide out of clean air and scientists trying to unlock the revolutionary promise of nuclear fusion. I spoke to a start-up founder convinced he can build a supersonic jet powered by green aviation fuel, and people working to make green hydrogen mainstream, including Forrest.

I saw enough to think some of these new technologies might develop and fall in cost much faster than expected.

Of course, we have been here before. In the bloodbath known as clean tech 1.0, investors threw some $25bn (€25 billion) into start-ups from 2006 to 2011 and ultimately lost more than half their money.

Since then, the industry has learned important lessons, not least the need to be more patient with technologies still in the lab. And today’s money flow is impressive. Private-sector fusion companies alone had raised nearly $5bn by June this year, most of it in the preceding 12 months.

Many companies, not just fusion groups, have made important scientific or manufacturing advances and their leaders are clearly committed to efforts that have consumed years of their working lives. But the main factor that made me think again is the speed at which some technologies are making it to the marketplace.

That was obvious at COP27, where I spoke to Andrea Fuder, chief purchasing officer at the Volvo Group, one of the world’s biggest truck makers.

She explained how, in April last year, the group announced plans to use fossil-free steel in its products, made with green hydrogen by Sweden’s SSAB steelmaker. Six months later, it unveiled a prototype hauler machine made with the greener steel and, just eight months after that, it delivered a finished machine to the Nordic construction group NCC.

“That’s super fast,” said Fuder, adding customer demand is so strong that Volvo might be able to fully switch from conventional steel to the fossil-free version by the 2030s – if it can find enough supplies.

Supply volumes matter. They point to what I’ve come to think of as climate tech’s 1 per cent problem. Green hydrogen made up about 1 per cent of global supply last year. Sustainable aviation fuel’s share was even smaller. Direct air capture machines are sucking in an even tinier fraction of global carbon emissions and fusion energy is years away from powering a grid.

No wonder COP27 attendees who voted on 12 net zero policies in a poll at South Korea’s pavilion overwhelmingly plumped for existing tech: renewables such as wind and solar topped the chart with 22 per cent of the vote on Monday, versus a puny 1 per cent for direct air capture.

Most new climate tech will not develop quickly enough to make a difference in the short-term but, considering the scale of the problem, any that can make fast advances are welcome news indeed. – Copyright The Financial Times Limited 2022