Does the rise of renewable energy create new risks for investors? Insights from 20 years of energy transition in the UK

Published:  October 2022
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We examine the impact on the risk profile of wind and solar power investments of the increasing dominance of renewables in the energy mix of a given country, using the case of the UK whose economy has made a rapid transition to renewables and away from coal.

Summary

This EDHECinfra research note examines the impact on the risk profile of wind and solar power investments of the increasing dominance of renewables in the energy mix of a given country.

As green power sources that are intermittent become central to a power system, without commercially viable medium- and long-term storage options, what is the likely impact on the electricity market and system as a whole and do wind and solar investments, which have historically benefited from a safer, privileged position in the power sector, become riskier?

We use the case of the UK as an example of an economy that has made a rapid transition to renewables and away from coal, while relying on very limited hydro and nuclear capacity i.e., the typical transition required of most advanced economies.