Scenario Analysis Vincent Reulet Head of Advisory Services AGENDA - PowerPoint PPT Presentation

Carbonsink Climate-related Risks & Scenario Analysis Vincent Reulet – Head of Advisory Services

AGENDA 1 Carbonsink Carbonsink’s Methodology 2 Case Study – Decarbonisation Scenarios Applied To Utilities 3 Applications of carbonvista 4 Conclusion & Take-aways 5 Q&A www.carbonsink.it 2

About Us Carbonsink is a highly specialized consultancy company focused on the development of sustainability strategies and compensation of CO 2 emissions. Expertise Carbon Carbon Finance Management Sustainability Climate Mitigation Solutions www.carbonsink.it 3

Our Services www.carbonsink.it 4

Overall Carbonsink’s Approach Tools: CDP Finance guidelines the transition to a zero-carbon Science resilient economy investing in climate Based mitigation projects Target Reduce Carbon climate impacts pricing in line with science Measure Advocate Carbon for strong + disclose finance policy climate frameworks impacts and risks www.carbonsink.it 5

Carbonsink’s Methodology www.carbonsink.it 6

Carbonsink’s Methodology 1 Aligned with internationally recognised standards Integration within the business 2 Data review & theoretical scenarios modelling 3 Integration of financial KPIs – Realistic scenarios modelling 4 5 Results www.carbonsink.it 7

IPCC Scenarios GENERAL FUTURES SRES & POST – QUALITATIVE SCENARIOS SRES SCENARIOS TARGETS: climate Section 2.4 scenarios for each Section 2.5 Utopia narrative scenarios storyline Polestar: quantitative Quantative descriptions scenarios QUANTITATIVE GENERAL MITIGATION EPA: rapid changing & slow changing the SCENARIOS Beyond the limits: world Section 2.3 CO 2 emissions scenarios CLIMATE GENERA L www.carbonsink.it 8

Analogy With TCFD Recommendations www.carbonsink.it 9

SBT Approach Towards Net-Zero www.carbonsink.it 10

Science Based Target – Below 2 Degrees Scenario www.carbonsink.it 11

How to limit to Reducing to By 2050 0 1.5˚C global CO 2 emissions temperature increase Source: IPCC 1.5˚C report: Net zero emission 2050

Relisation with Business Strategy Technology Finance Operations Finance Assessment of actual Review of past and planned – – performances (vs. legislation & CAPEX peers) Incentive to drive toward a low- – Feasibility of upcoming carbon economy – technologies Legal & Compliance R&D EU ETS – Assessment & integration of new Fees associated to failure to – – materials and/or technologies comply Sales & Marketing Quality, Health & Safety Brand image – Assessment & integration of new – Competitive advantage materials and/or technologies – www.carbonsink.it 13

Data Review & Scenario Modelling INTEGRATION OF VARIOUS SYSTEM www.carbonsink.it 14

Case Study – Scenarios To Drive Decarbonisation Applied To Utilities www.carbonsink.it 15

International Climate-Related Scenarios Related to Energy Sector IEA 450 • • 31% renewable in energy mix by 2030 IEA 2DS (2030) • • 42% renewable in energy mix by 2030 • 57% renewable in energy mix by 2050 • 72% renewable in energy mix by 2060 IRENA 2050 • • 66% renewable in energy mix • 85% CO 2 emissions annually for Power sector vs. 2015 www.carbonsink.it 16

European & National Decarbonization Scenarios EU 2030 • • 43% CO 2 emissions vs. 2005 for sectors within EU- ETS • 32% renewable in energy mix SEN 2030 • • 28% renewable share in the energy mix • Coal phase out by 2025 www.carbonsink.it 17

EU Energy Mix Forecast SOURCE: A Clean Planet for all A European strategic long-term vision for a prosperous, modern, competitive and climate neutral economy (28/11/2018) www.carbonsink.it 18

Net Zero by 2050 18/06/19 www.carbonsink.it 19

Assumptions made for Business As Usual Scenario Principal Assumptions Business Plan • Constant to slight • 2021: Oil phase out increased demand for • 2025: Coal phase out electricity: 340TWh in 2030 - • Refurbishment of some old Terna CCGT • Increases in electricity prices (due to cost of gas • Increase of Renewable (low) and ETS) • No consideration toward • Role of CCGT still strategic price of Storage to respond to demand • Low Carbon Pricing bracket • Installed capacity of Renewable Energy www.carbonsink.it 20

EU Energy Mix Forecast BUSINESS AS USUAL CONSIDERATION CLIMATE CHANGE RELATED RISKS VARIOUS SCENARIOS 18/06/19 www.carbonsink.it 21

Transition Risks TECHNOLOGY POLICY & LEGAL MARKET REPUTATION www.carbonsink.it 22

Technology Risks Decreasing cost of RES generation technology Energy storage - 49% • since 2015 Photovoltaic and • onshore wind -88% and -69% since 2009 www.carbonsink.it 23

Cost Of Storage www.carbonsink.it 24

Market Risks Implementation Market Stability Reserve in the EU’s ETS in 2021 CO 2 price to increase 8€ in 2008 vs. 28€ in 2019 RES to become cost- competitive vs CCGT www.carbonsink.it 25

Carbon Taxes 2008 2018 Source: WORLD BANK, 2018 www.carbonsink.it 26

EU ETS prices grapgh SOURCE: Carbon Tracker; Bloomberg 18/06/19 www.carbonsink.it 27

Carbon Pricing Corridor for utility sector www.carbonsink.it 28

Marginal Cost www.carbonsink.it 29

Scenarios Taken In Consideration Disregarded Simulated Carbon Capture & Storage: Overall demand in Italy and Electrification → Technology not cost effective → Source taken from IEA and Terna Revamp of CCGT plants → Already highly efficient (best in Increase of Renewable class in EU), cost of €/tCO2 saved too high → XX% per year up to 2050 → Integration of storage cost Fuel switch (coal to gas) → High CAPEX and push-back Upgrade of strategic sites to class from investors H → To improve CCGT efficiency www.carbonsink.it 30

Application Of The Tool 18/06/19 www.carbonsink.it 31

carbonvista Concept BUSINESS PLAN CORPORATE STRATEGY MATERIALITY ASSESSMENT KPIs SCENARIO EU 2030 Energy Strategy SEN 2030 IRENA 2050 IEA EU ETS SBTi REGULATIONS GUIDELINES www.carbonsink.it 32

Live Dashboard To Track Selected KPIs In Time www.carbonsink.it 33

Live Dashboard To Compare Scenarios S C E N A R I O “ C O N N U O V O C C G T ” S C E N A R I O “ A S I S ” www.carbonsink.it 34

Dashboard Benchmarking With International Scenarios & Legislations www.carbonsink.it 35

Conclusion www.carbonsink.it 36

Results • Understanding of their climate situation regarding Climate Change exposure • Developed an approach shared with all departments • Define the more realistic scenarios taking in account financial, technological and policies constraints; not the “Perfect” one • Learned to use the tool as an instrument in order to embark the other departments www.carbonsink.it 37

Conclusion A concrete tailor made approach • Work with clients to define objects in order • to customize the tool (on going approach) Create a flexible approach that give the • opportunity to play with numbers Be consistent with the corporate climate • strategy, constant update and changes in trends and methodologies www.carbonsink.it 38

Take-aways Consolidated with robust and trusted data • Scalable • Customisable • Flexible • Easy to understand and use • Applicable to any industry sectors • A tool that will seize the tangible aspects of • your corporate complexity www.carbonsink.it 39

Thank You. www.carbonsink.it info@carbonsink.it