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The End of Business-As-Usual?

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Presentation at RWE seminar on "New Energy Systems", May 2013

Presentation at RWE seminar on "New Energy Systems", May 2013

Published in: Business, Technology

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  • 1. The End of Business-As-Usual? Dr. Johannes Meier European Climate Foundation
  • 2. The end of BAU?4 Perspectives 1. Climate Science 2. Asset Valuation3. Political Will4. Transition Management
  • 3. The end of BAU?4 Perspectives 1. Climate Science 2. Asset Valuation3. Political Will4. Transition Management
  • 4. The  Skep(cs      
  • 5. 4  Types  of  Skep(cs    1.  Climate  change  is  not  happening  2.  Humanity’s  contribu(on  to  climate  change    is  not  significant  3.  We  cannot  mi(gate  climate  change  effec(vely  4.  It  is  too  costly  to  mi(gate  climate  change  
  • 6. Image credit: James Lawrence Powell, MITClimate  Science  Firming  Up  
  • 7. Source: climateactiontracker.orgPaHern  ShiI:  Global  Warming,  Rising  Risks  
  • 8. HIGH-CARBON ECONOMY“On track to 6 degrees” (IEA)CHANGING RISK PATTERNS- Weather- Oceans- Food- Security- HealthMitigationLOW-­‐CARBON  ECONOMY  -­‐  Decarbonizing  power  -­‐  Resource  efficiency  -­‐  Smart  ci(es  -­‐  Forests/land  use  AdaptationPAYING  FOR  CONSEQUENCES  -­‐  High  costs  of  delay  of        mi(ga(on  -­‐  Stranded  assets  -­‐  Tipping  points  PaHern  ShiI:  Global  Warming,  Rising  Risks  
  • 9. Source:  Swiss  Re  Source:  Swiss  Re  Insured  Losses  from  Climate-­‐Related  Disasters,  1970-­‐2011  
  • 10. If  “Frankenstorm”  is  happening  at  0.8°C  warming,  what  might  3°C,  4°C,  or  6°C  warming  bring?    10  
  • 11. The end of BAU?4 Perspectives 1. Climate Science 2. Asset Valuation3. Political Will4. Transition Management
  • 12. Emissions  Underlying  Financial  Flows  Source: Carbon Tracker report: Unburnable Carbon 2013
  • 13. Fossil  fuel  carbon  budget    2013  –  2050  (GTCO2)  Scenario   Maximum  temperature  rise  50%  probability    80%  probability  Pessimis(c   2°C   886   500  Op(mis(c   1.5°C   525   -­‐  2°C   1075   900  2.5°C   1275   1125  3°C   1425   1275  13  Stress  Tes(ng  with  Carbon  Budgets  Source: Carbon Tracker report: Unburnable Carbon 2013
  • 14. Listed  reserves  are  a  quarter  of  all  known  fossil  fuel  reserves      Current  listed  reserves  (762GtCO2)  far  exceed  a  quarter  of  the  total  carbon  budgets  but  could  double  (1541GtCO2)      If  we  break  the  2°C  budget,  we  very  quickly  hit  2.5°C  and  3°C  14  Poten(al  listed  reserves  Current  listed  reserves  Carbon  Budget  Deficits  for  Listed  Companies  Source: Carbon Tracker report: Unburnable Carbon 2013
  • 15. Stranded  Assets?  
  • 16. The end of BAU?4 Perspectives 1. Climate Science 2. Asset Valuation3. Political Will4. Transition Management
  • 17. Key  Uncertainty:  Poli(cal  Will  
  • 18. Poli(cal  Will  Think  Tanks  Environmental  Advocates  Na(onal  Interests  Elec(on  Cycles  Governance  Capabili(es  Media  Dynamics  Cultural  Memes  Ideologies  Economic  Factors  Global  Factors  BAU  Lobbies  Progressive  Industry  
  • 19. Policy  Frameworks    -­‐  20/20/20  Targets  -­‐  EU  2050  Energy  Roadmap    -­‐  EU  Climate  Roadmap  -­‐  EU  ETS  Direc(ve  -­‐  EU  EE  Direc(ve  -­‐  UK  Green  Deal  -­‐  GER  Energiewende  etc.  Think  Tanks  Environmental  Advocates  Na(onal  Interests  Elec(on  Cycles  Governance  Capabili(es  Media  Dynamics  Cultural  Memes  Ideologies  Economic  Factors  Global  Factors  BAU  Lobbies  Progressive  Industry  
  • 20.  ECF/Mercator  Addressing  Convergence  and  Coherence  Challenge  with  Agora  Energiewende  2  goals:  •  Prepare  ground  to  ensure  that  policymakers  take  decisions  needed  to  set  the  course  toward  full  decarbonisa(on    •  Enhance  understanding  of  the  Energiewende  and  help  stakeholders  views  to  converge,  thereby  minimising  space  for  vested  interests  
  • 21. The  Council  of  Agora  28 MembersMartin IffertCEOTrimet AluminiumStefan KapfererState SecretaryMinistry of EconomicsMechthild WörsdörferHead of UnitEC DG EnergyJochen HohmannPresidentBundesnetzagenturVera BrenzelVice President ElectricityE.ONLucia Putrich (CDU)Minister for Environ-ment HesseMatthias Machnig (SPD)Minister for EconomyThuringiaBoris SchuchtCEO50Hertz3 meetings so far05-09-201221-11-201220-02-2013Ottmar EdenhofenPIK
  • 22. The end of BAU?4 Perspectives 1. Climate Science 2. Asset Valuation3. Political Will4. Transition Management
  • 23. Key  Challenges  for  Transi(on  Management  Level  and  quality    of  market  integraMon  •  Na(onal,  EU,  global  •  Gas,  electricity  markets  •  Flexibility/capacity  markets  Feedstock  price  development  •  Shale  gas,  LNG  •  Unconven(onal  oil  Technology  development  •  Cost  curves  •  Centralized    decentralized  architectures  •  Convergence  energy    IT  systems    Public  acceptance    •  Technologies    •  Infrastructure  •  Markets    •  Retail  energy  prices  Economics  •  Market  designs  and  subsidies  •  Internalisa(on  of  externali(es  (carbon  taxes/carbon  price)  •  Capital  flow  constraints  
  • 24. A  Framework  for  Transi(on  Management  BackcastingDesirable future•  Competitiveness•  Sustainability•  EU2050international roleConstraints•  Installed base•  Contracts•  Business models•  MindsetsForecastingBalancing•  Resilience•  Optionality•  Intelligence
  • 25. Where  do  we  want/need  to  be  in  2050,  in  2030?  
  • 26. New  Metrics  for  Dynamic,  Complex,  Unpredictable,  and  Risky  Environments  1.  Resilience        2.  OpMonality          3.  Intelligence  •  Energy  systems  to  withstand  shocks  (including  worst-­‐case  scenarios  in  calculus)  •  Future  proofing  design  and  loca(on  of  assets  •  Bias  towards  diversity    •  Adding  assets  in  smaller  increments  •  Avoiding  lock-­‐in  •  Hedging  outcomes  •  Reducing  capital  intensity    •  Staying  on  top  of  cost  curves  •  Harnessing  of  big  data  (Industrial  Internet)  •  Learning  plaoorms  Based on M. Liebreich: The new energy ROI
  • 27. Finding  Orienta(on  in  a  Principled  Approach  1.  EU  global  leader  in  transiMon  to  low-­‐carbon  economy    2.  Energy  system  led  by  RES      3.  Industrial  policies    to  address  compeMMveness  challenge  •  Ambi(ous  and  binding  2030  targets  •  Integrated  EU  market  and  financial  union  •  Investments  in  flexibility  and    energy  efficiency  •  Avoiding  fossil-­‐fuel  lock-­‐in    •  Sectoral  differen(a(on  •  Innova(on  incen(ves  •  Easing  transi(on  costs  
  • 28. The end of BAU! 1. Climate Science 2. Asset Valuation3. Political Will4. Transition Management
  • 29. Further  Links  Interpre(ng  climate  science  and  media  reac(ons  hHp://klimafakten.de/  hHp://www.carbonbrief.org/    Carbon  bubble  hHp://www.carbontracker.org/carbonbubble  hHp://www.carbontracker.org/wp-­‐content/uploads/downloads/2013/03/SnPCT-­‐report-­‐on-­‐oil-­‐sector-­‐carbon-­‐constraints_Mar0420133.pdf    Poli(cal  will  hHp://ec.europa.eu/energy/index_en.htm  hHp://www.agora-­‐energiewende.de/    Transi(on  management  hHp://about.bnef.com/blog/liebreich-­‐the-­‐new-­‐energy-­‐roi-­‐resilience-­‐op(onality-­‐intelligence/  hHp://roadmap2050.eu/