Estimating financial risks from the energy transition: potential impacts from decarbonization in the European power sector

Author(s):  
Chris Cormack ◽  
Charles Donovan ◽  
Alexandre Köberle ◽  
Anastasiya Ostrovnaya
Author(s):  
Rudolf Rechsteiner

Abstract The German Energiewende (energy transition) started with price guarantees for avoidance activities and later turned to premiums and tenders. Dynamic efficiency was a core concept of this environmental policy. Out of multiple technologies wind and solar power—which were considered too expensive at the time—turned out to be cheaper than the use of oil, coal, gas or nuclear energy for power generation, even without considering externalities. The German minimum price policy opened doors in a competitive way, creating millions of new generators and increasing the number of market participants in the power sector. The fact that these new generators are distributed, non-synchronous and weather-dependent has caused contentious discussions and specific challenges. This paper discusses these aspects in detail and outlines its impacts. It also describes Swiss regulations that successfully launched avoidance technologies or services and asks why exactly Pigou's neoclassical economic approach to the internalization of damage costs (externalities) has rarely worked in policy reality, while sector-specific innovations based on small surcharges have been more successful. Based on the model of feed-in tariffs, a concept for the introduction of low-carbon air traffic is briefly outlined. Graphic Abstract


Significance The benefits accruing from a whole system approach to the energy transition bring new energy supply threats, including integrating renewable energy sources, cybersecurity and climate resilience. The focus of energy security will shift from extended international, predominantly maritime, supply chains to domestic and regional electricity networks. Impacts Policies to bolster power system resilience tend to be agreed reactively rather than proactively; lessons may be learned the hard way. Opportunities for skilled employees to work in the power sector will rise. Clear policies and enhanced planning capabilities will be needed to encourage investment at the scale the power sector will require. Inadequate investment in power systems could hold back the energy transition.


2021 ◽  
Author(s):  
Schrutir Jain ◽  
Maarten Arentsen ◽  
Albert Molderink

Abstract Climatic changes have made transition to renewable energy essential. However, energy transition in the globalized world is challenged with diversification in culture, economic prowess, social development, and state structure. The global negotiations are always tough, among others, due to the split between the Global North (GN) and Global South (GS) countries. At the same time, the debates on how to deal with the inequalities in climate mitigation potential veils a thus far hardly acknowledged difference in energy transition potential and impact in the GN and GS countries. This paper, therefore, aims to contribute to bridging this knowledge gap by making a systematic comparative assessment of energy transition potential in the GN and GS with two regions as example cases. We analysed and compared energy scenarios in two regions in the world: Overijssel representing the GN countries and Matura representing the GS south countries. Both regions are similar in economic activities, but differ in demography and economic development. We analysed and compared the current energy system in both regions and two development scenarios towards 2050: the BAU scenario and the zero emission scenario. Despite the differences in starting position, the energy systems in both regions move towards each other in the longer term, but change pattern and costs differ. In both regions bioresources are the dominant renewable resource in an locally determined energy resource portfolio. However, the costs of getting into this longer term position are significantly higher in Matura than in Overijssel, whereas the general economic potential, as it looks in 2020, is worse in Matura. Our analysis therefore indicates that a renewable energy transition in the longer term can result in zero emission systems in both GN and GS countries, but with substantial differences in costs.


Significance While the US oil majors are adopting strategies primarily based on decarbonising oil and gas production, European companies are also developing new businesses designed to compensate for future demand-led reductions in oil and gas revenues. The European majors’ entry into the power sector and renewable energy markets brings new, well-financed and technologically proficient competitors into a sector made up predominantly of utilities and smaller developers. Impacts Hydrocarbon majors' capital spending on renewables will rise over the next decade. The oil majors will continue to buy into promising new energy transition technologies. These companies will invest in oil output and protect their legacy assets, but their valuations will be less driven by their oil reserves.


2017 ◽  
Vol 26 (8) ◽  
pp. 505-523 ◽  
Author(s):  
Christian Breyer ◽  
Dmitrii Bogdanov ◽  
Arman Aghahosseini ◽  
Ashish Gulagi ◽  
Michael Child ◽  
...  

2021 ◽  
Vol 11 (1) ◽  
Author(s):  
Fabian Stöckl ◽  
Wolf-Peter Schill ◽  
Alexander Zerrahn

AbstractGreen hydrogen can help to decarbonize parts of the transportation sector, but its power sector interactions are not well understood so far. It may contribute to integrating variable renewable energy sources if production is sufficiently flexible in time. Using an open-source co-optimization model of the power sector and four options for supplying hydrogen at German filling stations, we find a trade-off between energy efficiency and temporal flexibility. For lower shares of renewables and hydrogen, more energy-efficient and less flexible small-scale on-site electrolysis is optimal. For higher shares of renewables and/or hydrogen, more flexible but less energy-efficient large-scale hydrogen supply chains gain importance, as they allow to temporally disentangle hydrogen production from demand via storage. Liquid hydrogen emerges as particularly beneficial, followed by liquid organic hydrogen carriers and gaseous hydrogen. Large-scale hydrogen supply chains can deliver substantial power sector benefits, mainly through reduced renewable curtailment. Energy modelers and system planners should consider the distinct flexibility characteristics of hydrogen supply chains in more detail when assessing the role of green hydrogen in future energy transition scenarios. We also propose two alternative cost and emission metrics which could be useful in future analyses.


2021 ◽  
Vol 13 (5) ◽  
pp. 2573
Author(s):  
Gireesh Shrimali

This paper seeks to study and compare the historical and present-day financial performance and risk profile of the renewable energy and fossil fuel power sectors. Our findings are as follows. First, renewable energy power portfolios have historically shown more attractive investment characteristics including, on average, 12% higher annual returns, 20% lower annual volatility and 61% higher risk-adjusted returns. Second, investors perceive renewable energy power investments to be less risky than fossil fuel power investments, with the expected returns on debt to the fossil fuel power sector is at least 80 basis points higher than for expected returns on debt for the renewable energy power sector. Third, the main risk factors driving the risk perception of both renewable energy and fossil fuels are counterparty, grid and financial risks; counterparty risk is the most significant risk by far, followed by grid risk and then financial sector risk. Our findings have significant implications for investments in these technologies in India.


Water ◽  
2020 ◽  
Vol 12 (9) ◽  
pp. 2482
Author(s):  
Julia Terrapon-Pfaff ◽  
Willington Ortiz ◽  
Peter Viebahn ◽  
Ellen Kynast ◽  
Martina Flörke

Electricity generation requires water. With the global demand for electricity expected to increase significantly in the coming decades, the water demand in the power sector is also expected to rise. However, due to the ongoing global energy transition, the future structure of the power supply—and hence future water demand for power generation—is subject to high levels of uncertainty, because the volume of water required for electricity generation varies significantly depending on both the generation technology and the cooling system. This study shows the implications of ambitious decarbonization strategies for the direct water demand for electricity generation. To this end, water demand scenarios for the electricity sector are developed based on selected global energy scenario studies to systematically analyze the impact up to 2040. The results show that different decarbonization strategies for the electricity sector can lead to a huge variation in water needs. Reducing greenhouse gas emissions (GHG) does not necessarily lead to a reduction in water demand. These findings emphasize the need to take into account not only GHG emission reductions, but also such aspects as water requirements of future energy systems, both at the regional and global levels, in order to achieve a sustainable energy transition.


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