Accelerating the energy transition – risk, innovation, and the impact of smart policies
Accelerating the development and deployment of low-carbon technologies on a global scale is fundamental for the stabilisation of atmospheric greenhouse gas (GHG) emissions. The IEA (2008) projects that under a business-as-usual scenario, GHG emissions will rise by 130 percent between 2008 and 2050. This warrants a growing penetration of fluctuating renewable energy sources (RES) in power systems across industrialising and industrialised countries as well as an increasing number of storage facilities to cover demand peaks and equilibrate low supply periods from wind and solar PV. To stay within the two-degree target, however, this will require massive investments into these assets. Bloomberg New Energy Finance (2016) estimates that from 2017 to 2040 $12.6 trillion in investments will be necessary.
However, contrary to conventional generation assets, RES require high up-front capital expenditures and feature low operating costs once built. This increases the risk for investors and equity providers, pushing up the cost of capital and therefore the overall project cost for RES. Similarly, many storage technologies – such as redox-flow – do not have a long track-record, making future cost trajectories more uncertain than conventional storage assets. Hence, access to low-cost finance as well as robust cost projections are central to raising the investments necessary to meet the climate targets. To decrease the risk of these investments, smart policies play a central role in lowering the risk and therefore the overall cost of renewable energy power sources and storage assets.
Specific questions that the PhD project will cover using econometric analyses, expert-elicitation methods and techno-economic modelling:
- How does reduced risk from smart policies increase both research and development (R&D) as well as deployment and diffusion of these technologies? What is the impact of specific policies that reduce the perceived and actual risk of inventors and investors?
- What can we learn from specific programmes implemented by bilateral and multilateral development banks, national agencies, and other relevant institutions?