“A TRANSIÇÃO ENERGÉTICA

RNC2050RNC2050

Evento temático do RNC2050

19 junho, 2018

Teatro Thalia, Lisboa

“A TRANSIÇÃO ENERGÉTICA

EM PORTUGAL E A

CONTRIBUIÇÃO PARA A

NEUTRALIDADE CARBÓNICA”

29/06/20181

RNC2050RNC205029/06/20182

PREVENÇÃO DE STRANDED ASSETS

Nicolette Bartlett, Carbon Disclosure Project

Evento temático do RNC2050

A TRANSIÇÃO ENERGÉTICA EM

PORTUGAL E A CONTRIBUIÇÃO

PARA A NEUTRALIDADE CARBÓNICA

www.cdp.net | @CDP Page 3

Portugal’s Energy Transition and

Stranded Assets

19 June 2018

Nicolette Bartlett

www.cdp.net | @CDP

CDP: Only Global Environmental Disclosure System

5,500Companies in more

than 80 countries

reporting – over half the

world’s market cap

308Cities sharing best practices – 440

million people, 61 leading megacities

66Global corporate supply

chains – US$1.15 trillion in

annual procurement

822Institutional investors requesting

information – a third of the

world’s investable capital

www.cdp.net | @CDP

Portugal’s energy transition

The future will not look like the past

There is only one direction of travel, it is a matter of speed

The risks and opportunities are increasing and are unpredictable

The bet you take now as an investor and as a government sets the

country up for failure or success (or something in between).

Stranded assets mean failure as your citizens will pay the price.

Page 5

Page 6

www.cdp.net | @CDP

Stranded Assets

‘Stranded assets’ are assets that have suffered from

unanticipated or premature write-downs, devaluations or

conversion to liabilities. They can be caused by a range of

environment-related risks and these risks are poorly

understood and regularly mispriced……..’

Smith School of Enterprise and the Environment, University of Oxford

Page 7

www.cdp.net | @CDP

Stranded Assets

Some of these risk factors include:

Environmental challenges (e.g. climate change, water constraints)

Changing resource landscapes (e.g. shale gas, phosphate)

New government regulations (e.g. carbon pricing, air pollution

regulation)

Falling clean technology costs (e.g. solar PV, onshore wind)

Evolving social norms (e.g. fossil fuel divestment campaign) and

consumer behaviour (e.g. certification schemes)

Litigation and changing statutory interpretations

Page 8

www.cdp.net | @CDP

Environmental challenges / physical risk

Water security.

Energy, Food and Materials – depend on a stable supply of good

quality fresh water.

On average - takes 32 megalitres to run a medium sized gold

mining operation for a day; 1,364 megalitres to run a 500 MW power

plant for a day; and 15,145 litres to produce 1 kilogram of beef.

Page 9

www.cdp.net | @CDP

Water stress

22% of the world’s 500 largest companies (Global 500)

reporting to investors that worsening water security will

constrain corporate growth within the next three years.

35% “exposure to water-related risk that could generate a

substantive change in their business, operations or

revenue.” CDP 2015

Page 10

www.cdp.net | @CDP

Water stress for the electric power sector in 2016 and 2030

Page 11

www.cdp.net | @CDP

Water resilience summary

Page 12

Metrics:

Thermal asset water stress exposure

Hydro asset water stress exposure

Water risk management

CompanyWater resilience

rankWater resilience grade

Verbund 1 A

SSE 2 B

Fortum 3 B

EnBW 4 C

RWE 5 C

EDF 6 C

ENGIE 7 C

Centrica (i) 8 C

E.ON 9 C

CEZ 10 D

EDP 11 D

Endesa 12 D

Iberdrola 13 E

Enel 14 E

(i) Centrica’s rankings are weighted differently as it has no hydro assets.

www.cdp.net | @CDP

Thermal asset water stress exposure

2016

2% of thermal generation

capacity situated in high

or extremely high water

stress areas.

2030

51% of assets expected to

remain online to be in high

or extremely high water

stress regions.

Page 13

www.cdp.net | @CDP

Transition risk

New government regulations

Falling clean technology costs

Evolving social norms

Litigation

Page 14

www.cdp.net | @CDP

Consistently getting it wrong

Transition risk and the The dangers of

modelling the future

using the assumptions

of the past.

Page 15



www.cdp.net | @CDP

What about the private sector?

www.cdp.net | @CDP

www.cdp.net | @CDP


Updating model assumptions is critical

…..demonstrates the importance of using

latest available data and market trends in

energy modelling.

Applying up-to-date solar PV and EV

cost projections, along with climate

policy effort in line with the Nationally

Determined Contributions (NDCs),

should now be the starting point for any

scenario analysis.

This is not a radical disruptive scenario in

terms of its inputs, but a reflection of the

current state of play..

www.cdp.net | @CDP

Market dynamics could cause dramatic change

Page 22

Solar PV (with associated energy storage costs included) could supply 23% of

global power generation in 2040 and 29% by 2050, entirely phasing out coal

and leaving natural gas with just a 1% market share. ExxonMobil sees all

renewables supplying just 11% of global power generation by 2040.

EVs account for approximately 35% of the road transport market by 2035 –

BP put this figure at just 6% in its 2017 energy outlook. By 2050, EVs account

for over two-thirds of the road transport market. This growth trajectory sees

EVs displace approximately two million barrels of oil per day (mbd) in

2025 and 25mbd in 2050. To put these figures in context, the recent 2014-15

oil price collapse was the result of a two mbd (2%) shift in the supply-demand

balance.

www.cdp.net | @CDP

Fossil fuel demand

Page 23

Although this study focuses on the decarbonisation of the

global power and road transport sectors, which today

account for only 51% of global CO2emissions and fossil fuel

demand approximately, this scenario sees:

• Coal demand peaking in 2020;

• Oil demand peaking in 2020; and

• Gas demand growth curtailed.

www.cdp.net | @CDP

CDP Investor Research

Charged or static

Which European electric utilities are

prepared for a low carbon transition?

www.cdp.net | @CDP

League Table summary

Page 25

2017 League

Table rank

2015 League

Table rankCompany League Table score

Managing transition

risks

Managing physical

risks

Transition

opportunities

Climate governance

& strategy

1 3 Verbund 3.78 A A A B

2 1 Iberdrola 5.35 B E A A

3 7 Fortum 6.45 B B B D

4 4 Enel (i) 6.48 C E A B

5 11 SSE 6.51 C B C C

6 2 Centrica 6.65 B C D C

7 6 EDF 6.68 B C E B

8 5 EDP 6.72 D D A B

9 9 E.ON (i) 7.13 C C B C

10 8 ENGIE 7.98 C C D C

11 12 EnBW 8.22 E C C C

12 10 Endesa 8.66 D D C D

13 - CEZ 9.44 D D D E

14 13 RWE (i) 10.89 E C E E

Weighting: 35% 10% 30% 25%

(i) E.ON analysis includes 46.65% share of Uniper, RWE analysis includes 76.8% share of Innogy, Enel analysis includes 70.14% share of Endesa

www.cdp.net | @CDP

Estimated locked-in emissions relative to 2°C carbon budget (%)

Only three companies are likely

to remain within implied carbon

budgets by 2050.

The 14 companies are set to

exceed cumulative carbon

budgets by 14%, equating to 1.3

billion tonnes CO2e by 2050.

Early closure of fossil fuel plants

likely needed to achieve 2°C,

very limited scope for any new

fossil fuel assets without

significant coal closure or CCS.

Page 26

www.cdp.net | @CDP

Climate governance & strategy summary

Page 27

Metrics:

Emissions reduction targets

Board climate responsibility

Climate-related remuneration

Low carbon strategy

Use of an internal carbon price

CDP score

Carbon regulation supportiveness

CompanyClimate governance &

strategy rankClimate governance &

strategy grade

Iberdrola 1 A

EDP 2 B

Verbund 3 B

EDF 4 B

Enel 5 B

Centrica 6 C

SSE 7 C

ENGIE 8 C

EnBW 9 C

E.ON 10 C

Fortum 11 D

Endesa 12 D

RWE 13 E

CEZ 14 E


Targets approved by the Science Based Targets Initiative

Source: Science Based Targets Initiative

CompanyHas an approved

science based target?Approved science based target details

EDP

Approved science based targetEDP commits to reduce scope 1 and 2 emissions from electricity production 55% per TWh by 2030, from 2015 levels. The company also commits to reduce absolute scope 3 emissions 25% over the same time period.

Enel Approved science based targetEnel commits to reduce CO2 emissions 25% per kWh by 2020, from a 2007 base-year. The target includes the decommissioning of 13 GW of fossil power plants in Italy, and is a milestone in the long term goal to operate in carbon neutrality by 2050.

Verbund Approved science based targetVerbund commits to reduce GHG emissions 90% by 2021 from a 2011 base-year (Scope 1, Scope 2, and scope 3 emissions from fuel-and-energy related activities and business air travel). This is a milestone in the long term goal to achieve carbon neutrality by 2050.

Iberdrola Committed companies

SSE Committed companies

www.cdp.net | @CDP

Gas being stranded?

Page 29

The Economics of Clean Energy Portfolios: How Renewable and Distributed Energy Resources Are Outcompeting and Can Strand Investment in Natural Gas-Fired Generation. Rocky Mountain Institute, 2018.



www.cdp.net | @CDP

What about fossil fuel

exploration and expansion for

global markets?

Page 32

www.cdp.net | @CDP

Mind the gap: the $1.6 trillion energy transition risk

Page 33

www.cdp.net | @CDP

Mind the Gap

Meeting demand in any of the three

scenarios will still require very

significant investment. Capital

expenditure on existing and new projects

in the period 2018-2025 amounts to

$3.3tr in the B2DS, $4.0tr in the SDS and

$4.8tr in the NPS.

Page 34

www.cdp.net | @CDP

Mind the Gap

Coal carries disproportionate

danger to the climate, but absolute

capex dollars are low compared to

oil and gas. Oil and gas account for

over 90% of total investment under

each scenario, and of the intervals

between each scenario.

New oil and gas projects are needed, but not

all of them. Material investment in new oil & gas

projects is required even in low demand

scenarios - $1.6tr in the B2DS and $2.1tr in the

SDS (2018-2025). However, given the

multitude of project options available, they

also carry the greatest risk. Nearly a quarter of

investment dollars in new projects that go ahead

in the NPS don’t fit in the SDS, and over 40% of

potential capex is surplus to requirements in the

B2DS.

Page 35

www.cdp.net | @CDP

Investor behaviour

Page 36

www.cdp.net | @CDP

Climate liability?

www.cdp.net | @CDP

What does all this mean?

The future will not look like the past

There is only one direction of travel, it is a matter of speed

The risks and opportunities are increasing and are unpredictable

The bet you take now as an investor and as a government sets the

country up for failure or success (or something in between).

Stranded assets mean failure as your citizens will pay the price.

Page 38


Thank you

[email protected]

RNC2050www.descarbonizar2050.pt

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“A TRANSIÇÃO ENERGÉTICA