Thank you very much, and thank you very much for inviting me to speak to your committee today.
My name is James Cameron, and I am the founder and chairman of an enterprise called Climate Change Capital. We are an asset management and advisory business focused on the climate change issue. We are now owned by a very large agribusiness, listed in New York, called Bunge, a Fortune 130 business that's a very substantial player in global commodity markets.
One of the things I do in my work is that I am part of the U.K. Prime Minister's Business Advisory Group, and my evidence to you today will be in some way couched in terms that would be similar to the advice I give that group. I want to make it plain that I am not a technologist, so I'm not in the position to give you good advice on this or that technology by way of comparison for your work, but I have seven points for you that I can make briefly, which I think you would find of assistance.
The first is that it's imperative to think of this problem as a system problem, not merely as a generation problem. The energy system needs to be thought of as a whole, and we get into trouble when we break it up into bits. Too much of our debate turns around one form of generation versus another. We don't think nearly enough about how the system could be defined, really quite radically, by the requirements of products that can be engineered in such a way that they have far less demand for power.
It's vital that in your thinking, even if it's just organizational, you look at generation. Please don't look at it separately from demand-side management, but don't even think of it in those traditional terms. If you think through how an intelligent grid might operate, why goods might be designed in order to meet tough energy efficiency standards, the energy service delivered to customers and citizens can be thought of in a very distinct way, rather than merely lining up alternatives for power generation. That's my first point, the absolute imperative of system thinking.
The second absolute imperative is that of climate change and the need to mitigate greenhouse gas emissions. Because that's an absolute priority and because it's extremely hard to do, it's important that you have means of measuring performance along the way to what are very difficult targets. It's important that in the innovation strategies you develop, you leave scope for things that we do not know today that will help us manage risks that we still don't fully understand. That level of uncertainty requires great care not to build into energy systems those technologies that ultimately will cause more economic and indeed social harm than the good they might deliver in the short term.
The third thing is to think in terms of the various devices any society has to encourage innovation and entrepreneurship independently of the energy sector. If a society can create companies easily, can shut down businesses that are ineffective, can register intellectual property with ease, can take advantage of a highly educated and skilled workforce, the chances are that there will be an innovative response to issues of major concern and importance.
It may well be that for many years we have taken energy for granted. We've been through a period of decades now in which energy has been relatively inexpensive, and huge advances have been made in the way we deliver energy to customers. I think a lot of customers have underestimated the technological input into providing that service. There is probably some public education required there to elevate the importance of energy and energy systems. On the other hand, people always feel the cost of energy when there is a small change in its price. My sense is that there is a huge capacity to innovate around energy.
However, one of the other aspects of a successful economy—innovating on any subject—is that it's a competitive economy, meaning that you have to have strict adherence to rules of competition and antitrust and you have to create space for new entrants. Many energy systems tend to get ossified around incumbents. It's extremely hard to move people who have been making investments for a long period of time and have great strength in the marketplace. It's very hard for new entrants to make their way, particularly if they have a disruptive technology.
One of the attributes of a successful, innovative energy system is that there is space for disruptive technologies to enter, and incumbents should be made very aware that they are at risk of losing their powerful position if a better, cheaper, more attractive technology makes its way into the energy mix.
The fourth point is that it's imperative to make a plan. There is a real opportunity to combine public policy initiatives that the market responds well to. Procurement can be a very useful strategy for organizing an innovative response, because you have a kind of volumetric demand that you can respond to. You know that there will be scope for your technology to enter a marketplace. It takes courage and it takes a decision that a government might find awkward to make, especially in the face of an incumbent, if we have a procurement strategy for certain megawatts of renewable energy, for example, we know has an effect on innovation. People can invest into that space.
Equally, we know that price signals work. Whether it's a price signal for carbon or a price signal for water, we know that those constraints, those strategies, allied to an opportunity to make money from delivering public policy, will work. Entrepreneurs rush to the opportunity to create value from delivering public policy.
The fifth point is that there is a huge reward in resource efficiency and energy conversion. In fact, if you look at the climate change problem in the same space as the energy problem, it's largely about conversion from primary energy into usable energy. That is a fantastic investment universe. It's a place where large amounts of capital can be deployed. It's not a small sandpit for environmentalists to play in; it's something that is extremely attractive to large-scale investors of all types.
However, it is a marketplace where there is considerable risk, so again, the availability of clear standards for products, for pricing mechanisms to reward delivery of public policy, and for competitive strategies that value resource efficiency as much as they value resource exploitation—that's the way for any economy to compete in the longer term, even if they are resource-rich. That provides opportunity for capital to flow into energy conversion.
The sixth point is just one from our own business. We have a private equity clean technology fund, which is largely focused on energy, water, and to some extent waste. Most of those investments are in small private entities in Europe that are growing, perhaps in the periphery of this energy world that you're looking at. They're in energy storage, in LED lighting, in solar PV manufacturing, in silicon waste from the solar energy. We're using that waste in order to improve the life-cycle efficiency of solar PV energy.
These investments tend to be in the bracket of €8 million to €20 million, and they're going into markets that are experiencing quite significant growth even after a very tricky last three-year period for all types of investments. The scale of opportunity for those kinds of investments remains very large. They are largely fuelled by risk-takers in the investment and entrepreneurial world. Private equity has had a difficult time in the last few years, but there is no prospect of growing an innovative economy without access to risk capital.
My final and seventh point, which really links back to the first and is a way of making sure that policy, finance, and technology are in close collaboration, is with regard to data. We have a huge capacity to create, manage, store, and distribute data. That system needs to be tuned to the needs of economies to provide energy in larger amounts to larger quantities of people.
Data systems that provide real-time information to allow large-scale consumers as well as individuals to manage their energy needs will have a profound effect on the systems we use in the future. We are very close to building big open data systems that will, I think, make a profound difference to the relationship between supply and demand in the energy system.
Put simply, with open data systems and with good data management, pretty much anybody can be a producer of energy. Pretty much anybody can play a part in the successful management of energy demand. Therefore, we have to build a system that enables many, many participants to build a more robust, stable, and secure energy system quite different from the one where there are a few large-scale suppliers in a push-power system where consumers are largely receiving passively.
That's a system that requires a lot of data, but we have the capacity to provide it.
Thank you.