On tackling Climate Change

The Climate Change summit is crucial to save the Earth from the crippling pollution, and other waste material, plus deforestation created by man through industrial activity that are altering the planet in unforeseen ways and may cause untold human suffering in the near future with worst case scenario prophesies famines, floods, cities like Mumbai, New York going underwater as sea levels rise, toxic air and worse. Torrential rains the heaviest in a decade are pounding southern states Tamil Nadu and Andhra Pradesh fitting the larger picture of climate change as predicted by Indian scientists as well as global climate change reports.

Several effects of global warming, including steady sea level rise, increased cyclonic activity, and changes in ambient temperature and precipitation patterns, have affected the subcontinent. Prime Minister Narendra Modi was in Paris to attend the crucial climate change conference to steer a historic and legally binding deal to cut emissions globally. He inaugurated the Indian pavilion at the climate change summit and addressed leaders and delegates from across the world at the summit. He also launched the India-mooted International Solar Alliance with French President Francois Hollande.

Prime Minister Narendra Modi also said India would fulfil all its responsibilities with regard to climate change as he met U.S. President Barack Obama on the sidelines of the climate summit in Paris. He also mentioned India’s ambitious target of producing 175 GW of renewable energy, later joined the leaders of 19 other countries including the US and China for “Mission Innovation”, under which, the governments are committed to double public investment in basic energy research over the next five years.

Prime Minister Modi told the global climate summit that advanced nations, which have a larger carbon footprint, should take the lead in addressing the climate change issue. Democratic India, he said, “needs to grow”. The 21st session of the Conference of Parties or COP21 in Paris aims to forge an elusive agreement to curb global warming by limiting the emission of greenhouse gases.

Earlier this week in his monthly radio programme ‘Mann Ki Baat’, Modi said it is the responsibility of all to ensure that the Earth’s temperature does not rise as global warming is already creating disasters like recent heavy rainfall in Chennai. He asked all people to adopt energy conservation and energy efficiency measures like the maximum use of solar-powered items.

It is indeed a scary scenario from which we need to wake up … now scientists say even a 2 degrees Celsius rise in global temperature will mean faster melting of glaciers and polar ice caps and a corresponding rise in sea level that will gobble up land. Droughts will be longer and more frequent, and shortage of drinking water will become more acute. Global warming has started since the mid-19th Century, when industrial-scale emissions began. The only solution is to cut emissions !.

 

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Risks associated with Renewable Energy

Although investments in renewable energy plants are growing, so are the risks. Political/regulatory risk and financial risk are on the rise against a backdrop of macro-economic uncertainty, while weather-related volume risk is rising up the agenda as investments in offshore wind farms accelerate.

The level of investment in renewable energy projects surged largely driven by a combination of incentives to invest in renewable energy and political pressure to reduce emissions. For the growing volume of planned renewable energy developments, risk management is a critical element in securing project financing. As investments in renewable energy plants grow, so too do the risks inherent in owning, building and operating such plants.

In particular, political and regulatory risk and financial risk are becoming acute, as the macroeconomic outlook for many countries deteriorates. In addition, weather-related volume risk is particularly acute as investments in wind farms continue to expand.

Yet, the risk management resources including industry expertise, operating Data and specialized risk transfer products available to the renewable energy sector remain, in some respects, limited. This raises important questions over the future development of the renewable energy sector worldwide.

Financial risk is the most significant risk associated with renewable energy projects, highlighted by 76% of respondents. Other significant risks include political and regulatory risk (flagged by 62%), and weather-related volume risk (mentioned by 66% of respondents involved in wind power)…reference ‘The Economist Intelligence Unit Limited ‘

The renewable energy sector faces significant obstacles in managing its risks. Although 70% of respondents say they are successful in identifying risks, fewer Say they are successful at mitigating and transferring risks 61% and 50% respectively. Renewable power executives rely on diversification to mitigate risk. Diversification across geographies and technologies as the single Most powerful tool to mitigate regulatory risk and weather-related Volume risk. In addition, operational risk can be mitigated by relying On proven technologies.

Insurance is the most common mechanism to transfer risk to third parties.Insurance policies are used to transfer risk to third parties, making it the most Common mechanism to transfer risk. Alternative risk transfer mechanisms Such as weather- based financial derivatives appears to be growing, Make additional use of special purpose vehicles. More standardized Weather derivatives, insurance and hedging contract.

I feel solution lies in more comprehensive information and data on renewable energy technologies, coupled with industry education programs, may enable development of expertise both within the renewable energy sector and among external stakeholders. This will pave way for wider availability of effective risk transfer products.

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