The name of the game was solution-focused collaboration. CPP Investments’ first Sustainable Energies Group (SEG) Leaders Summit brought together 45 executives from companies in CPP Investments’ SEG portfolio with energy-sector leaders from Canada, the United States, London, India and Brazil.
The idea was to connect companies in the Fund’s orbit that may not regularly interact. And like our own SEG group, this inaugural event brought together renewable and traditional energy under one umbrella to see what could happen.
We hosted the gathering in Alberta—not only because it is home to one of the world’s most beautiful natural landscapes, but also because it has a reputation for responsibly-produced energy and skilled talent that can help advance the energy transition.
The Head of SEG, Bill Rogers, rallied everyone around a shared objective: delivering excellent risk-adjusted returns while addressing the energy trilemma of security, affordability and sustainability.
As Bill Rogers, Global Leadership Team – Managing Director and Head of Sustainable Energies, put it, “the solution to your current challenge, may exist in this room.”
The highlights:
- We’re in the early innings of the energy transition and while the direction is clear, the path will be bumpy.
- It will be more challenging to make returns at levels seen in the last decade.
- The revival of industrial strategy in the face of global challenges, such as climate change, presents complexities for long-term global investors and businesses. Green industrial policies, ranging from carbon taxes to cap-and-trade to energy decarbonization incentives (as in the U.S. Inflation Reduction Act), have multiplied in response to climate change. Industrial policy can be inflationary since it draws capital away from where it might otherwise have landed.
- New energy players will need to scale dramatically and work collaboratively with incumbents in the sector. There will be a need for traditional energy for the foreseeable future.
- Regulatory matters remain a challenge. Stakeholder management is critical to delivering successful long-term projects in today’s environment.
- As people consume more data, there will be an increase in demand for energy to support the technologies associated with that consumption. As a result, energy costs will continue to rise, becoming a higher percentage of balance sheets for technology-forward companies. This could result in the rationing of data consumption in the future.
- There was widespread agreement among both traditional and renewable energy players that the pervasive mindset of if it isn’t broken, don’t fix it, is changing to it will eventually break, so let’s think about how to fix it sustainably.
- Capacity and scale matter. However, being a fast follower, rather than a first mover, can be beneficial where there is little precedence for regulatory approval and social license to operate hasn’t yet been granted from the community.
- Renewables producers can barely meet demand growth in the market. Green hydrogen projects are expected to go global; and offshore wind will continue to scale as companies look for wind hubs rather than single farms.
- In global markets, legacy utility infrastructure can be a fundamental barrier to growth in renewable energy. Yet, some players are generating base load renewable power for utilities by combining wind and solar for less than the cost of coal.
- A bright spot ahead? The (positive) role of technology in driving innovation and catalyzing change.
At CPP Investments, we believe that betting on a single piece of technology today is a fool’s errand—this view was reinforced by participants. We believe that we need to be nimble and agile and invest in various technologies that will allow us to keep pushing the global economy toward a net-zero future.
For more information about our Sustainable Energies Group, contact Bill Rogers.
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