Sustainability and Climate Risk (SCR) — Question 31

A sustainability analyst at a global energy company assesses trends in the electric power sector for the next 10 years. To inform strategy, the analyst focuses on the interaction among climate risks, advancements in renewable energy, and stranded asset risk for fossil fuels.
According to the analyst, what trend will likely emerge during the next decade?

Answer options

• A. The global levelized cost of energy for renewables increases to compete with fossil fuel energy generation.
• B. Solar and wind newbuilds require stronger subsidies to be competitive in most parts of the world.
• C. The transportation sector faces technology risk if the trajectory of the learning curve for battery storage remains the same.
• D. Power plants that replace natural gas with coal will reduce transition risks in the event of rising carbon prices.

Correct answer: C

Explanation

The correct answer is C because if the learning curve for battery storage remains unchanged, the transportation sector will struggle with technology adoption, increasing its risk. Options A and B incorrectly suggest that renewables will need to become more expensive or dependent on subsidies, while D incorrectly claims that replacing natural gas with coal will reduce risks, which contradicts the trend towards cleaner energy.