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Energy and natural resources group hosts first 'energy trilemma' roundtable of 2024

Posted: 29/02/2024

On 28 February, Penningtons Manches Cooper’s energy and natural resources group hosted the first of its ’energy trilemma’ roundtable events for 2024 in Singapore.  

Partners John Zadkovich, Nick How and Nick Dingemans were joined by a diverse group of attendees from banks, private credit providers, oil companies, energy companies, sustainability funds and other energy advisors.

The theme of the discussion was financing the energy transition in the context of the energy trilemma (affordability, sustainability and security). With the increased security risks to global supply chains (Ukraine, Middle East and the tensions between Venezuela and Guyana), security of supply is again coming to prominence in the energy trilemma. However, sustainability and affordability are competing for attention. 

It is clear from the discussion that the energy transition is well underway and there is no turning back. The need to move rapidly and at scale is clear; however, the complexity and confusion of which technology to use, and the risks involved in the deployment of new technologies at scale, means incentives are needed. 

As with previous energy trilemma discussions, the conclusion that government support is needed remains. New, clearer and effective regulation (not simply more) is needed, alongside financial incentives to facilitate the acceleration of the energy transition.

The key points raised included:

Banks are pivoting to a green economy

There is, however, no green without mining. Energy transition starts with the metals needed for electrification and energy storage; education to consumers and policy makers regarding this is critical.

Supply chain security is now dominating thinking in energy transitions

How do industrial groups that need metals secure supply? Do they support traders with financing structures, or do they actually need to invest in mines directly to secure supply of key metals?

The uneasy relationship between ESG and mining

Despite the fundamental need for mining, there remains a level of unease about mining and its ESG credentials. However, for now, mining appears to have escaped the harsh criticism that oil and gas companies have received.

Follow the real economy

The financing will follow the demands of the real economy. As technologies are de-risked, lenders will be more willing to lend.

Blended finance  

To kick start new technology, non-traditional financing structures are needed. Blended financing (the mixing of development funding and commercial funding within the same fund with a cash waterfall, that allocates early risk to development funding, and later risk to the commercial investors) is one of the tools that is being successfully used by some funds.  

E without the G  

There are concerns that the environmental aspects of ESG are dominating the conversation, when the governance aspects may be more important (given the damage that poor governance can cause to the energy transition, especially in emerging markets).

Rapid change of technology  

The complexity and confusion of the energy transition, and the decisions as to which technology to deploy, is leading to some preferred technologies being overtaken and becoming redundant. The slow pace of decision making has in some cases led to technologies being overtaken.

Carbon credits remain relevant

There is a move away from nature-based solutions towards carbon credits that are linked to carbon reduction and avoidance technologies within verifiable methodologies. The slow move to an agreement around Article 6 of the Paris Agreement is limiting options to existing compliance markets or the use of voluntary carbon markets.

Private credit

Private credit is stepping into higher risk investments that traditional bank lenders are not willing to lend to. It also happens to be more agile. While private credit investors want bankable projects, they are more willing to take technology and early-stage risks compared to the banks.

Middle East

The Middle East is emerging as an important part of the energy transition with significant projects being financed in blue hydrogen and green ammonia.


India’s giga scale deployment of renewables is now supporting the creation of a hydrogen economy around green ammonia, both for domestic consumption and export. India’s exports, particularly to Europe, appear to be moving to a much greener value chain, making India an ideal export location in connection with the Carbon Border Adjustment Mechanism.

What happens when the incentives stop?

While we need incentives to drive innovation and new technologies (to make energy transition affordable), are these technologies sustainable in the long term without incentives? Being able to deploy at scale to drive down prices and allow for wide-ranging adoption continues to be a theme of the energy transition.

Small modular reactors (SMRs)  

The conversation around SMRs is getting louder. The base load supply that can be achieved with SMRs when blended with the intermittency of renewables makes the case for them much stronger. The public perception of the risk of nuclear fission and the cost remains a strong barrier to their deployment.

Our energy trilemma events are planned to be run quarterly, with the next ones being in London and Madrid. If you hold a C-suite position in the energy sector and would like to attend one of these events, please contact Nick Dingemans or John Zadkovich.

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