Rethinking uncertainty
Unlock the Uncertainty door to achieve ‘Well below 2 cents’
Main players
The key to successfully accomplishing the mission:
THE LEAP OF FAITH
The fundamental issue in a sustainable energy transition is the uncertainty, which no one is really able to assess. Whereas risks can be evaluated and priced, uncertainty cannot.
In the absence of valid data, what we need is a leap of faith: the necessary strong commitment we need to make in the first place when everything is a blur and which is necessary to federate all the stakeholders to achieve the goal.
An immediate investment of
USD 110 trillion
by 2050
A significative investment is necessary to kick-start the energy transition on a massive scale.
The challenge is consequently to reduce the value at risk as much as possible; to manage all manageable risks and to federate a group of countries and institutions able to commit their balance sheet to covering the residual uncertainty.
Making the demand creditworthy
It is necessary to address this issue at its root, i.e. at demand level, in order to send the right signal to the other parties involved and avoid costly risk premiums being embedded all along the value chain.
This means making demand creditworthy up front.
To that end, non-specific risks need to be addressed, particularly off-taker risk. Risk transfer tools exist, but at the granularity level of solar power assets, they become neither practical nor scalable. Enabling massive investment will require adapting to the risk appetite of institutional investors and alleviating all uncertainties.
The Common Risk Mitigation Mechanism Report
WHAT WE DID
Once demand has been structured and standardised though a sound and transparent regulatory and contractual framework, the question of the mitigation of residual risks remains.
Commissioned by 18 ISA countries in May 2017, TWI, together with TCX, CEEW and CII, designed an innovative instrument to address uncertainties in solar financing in ISA countries: the Common Risk Mitigation Mechanism (CRMM).
The CRMM report
The report was published on the occasion of UNFCCC COP 23 in Bonn in 2017.
And you,
what would you do?
Next mission
Rethinking communication
Sustainable energies are generally misunderstood and underestimated. A simple and federative narrative is necessary to change people’s perception and gather everyone around a common goal.
Rethinking Policy
Essentially decentralised and close to demand, the renewable energy system empowers people. It requires clear policies and symbolic political messages.
Rethinking regulation
Achieving a ‘well below 2 cts’ target can only happen if cash is available at the right price, in the right quantity, for the right tenure, in the right location.
Rethinking transactions
Scaling solar power deployment requires the simplification and automatisation of transactions. After having radically decreased the cost of renewable power, we need to focus on the reduction of soft costs.
Rethinking financing
The obvious challenge is to shift the affordable institutional trillions to the new energy system, starting with renewable power generation but followed closely by energy management and storage.
Rethinking leadership
Creating a systemic approach and developing collective solutions to set up a new market framework.
Rethinking uncertainty
Because uncertainty cannot be evaluated and priced, what we need is a leap of faith: the necessary strong commitment we need to make when everything is a blur, to federate all the stakeholders.
Our final report
This 200 pages report provides a summary of nearly four years of work carried out by TWI to accelerate the transition to affordable, reliable, sustainable and modern energy for all, starting with solar power.
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