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Displacing fossil fuels will take more work, panelists say

While renewables are starting to compete with baseload resources in the U.S., getting support from states and demand from investors, a transition away from fossil fuels will take more time, BNP Paribas' head of energy, natural resources and renewables said.

"I would say that some technologies are definitely a lot more mainstream than others, but a lot more work [needs] to be done — certainly on the storage side — as we look to displace all fossil fuels and as we look to move towards a carbon-neutral environment," Ravina Advani said Dec. 11 at the S&P Global Platts Global Energy Outlook Forum in New York.

She and other panelists from the investment community were asked to ponder the question from moderator Chris Edmonds, senior vice president financial markets at the Intercontinental Exchange: "If this is a nine-inning baseball game ... what inning are we in?"

The answer: no more than the fourth.

"The really hard work is yet to come," said Angelin Baskaran, head of North America power and gas origination at Morgan Stanley.

Having a grid where renewables make up 10% to 30% of the generation mix is relatively easy. More challenging, however, is reaching nearly all or 100% renewables, she said.

Ted Brandt, CEO of Marathon Capital, said the penetration of renewables on the grid is still small. While coal has lost its dominance to natural gas, there is a long way to go before renewables do the same to gas.

An important part of the discussion is figuring out who will pay for the infrastructure needed to make the energy transition happen, said David Giordano, global head of renewable power within BlackRock Real Assets.

"That's the challenging question that no one seems to be willing to answer," he said. "Until we decide how that is going to be a part of the equation, it doesn't matter what inning we're in because we're going to get rained out."

Technology like storage, either alone or paired with solar, is exciting for its potential to help resolve intermittency issues with renewables, panelists said. Hydrogen is also intriguing, Advani said.

There are many ways to produce, transport and use hydrogen, she said, noting that it can be used for industrial feedstock, heating and revamping the transportation industry. She pointed to research from the Hydrogen Council showing the resource as has the potential to displace six gigatons of carbon dioxide emissions.

"That's not something you can ignore," Advani said.

While bullish on the prospects for renewable resources, panelists expect natural gas to remain a part of the generation mix. Natural gas plays a "critical role" to the grid, particularly as quick-starting peakers can help fill in gaps that emerge when renewables are unavailable, Baskaran said. It is hard to imagine that, even in a regulatory environment that puts a national price on carbon or sets more fracking restrictions, that newer gas plants will be taken offline.

"They're still a very necessary part of our grid," she said.

On the regulatory side, renewable portfolio standards, ways to encourage the development of transmission and putting a price on carbon could help push the renewables industry forward. A price on carbon, Giordano said, could be the most important policy development for renewables.

"That is going to be one of the things that really kind of accelerates all of the activity pretty profoundly," he said.

S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.