and diversified power networks can lead to substantial losses and waste of generated electricity, which would be particularly negative in terms of ‘clean electricity’ generated. Diversification without sufficient oversight and above all adequate data to enable coordination for efficient management of flexible supply and demand, as is the case currently, would also continue to see grid utilization rates running up to 20-25% below capacity, i.e. be wasteful. Without highly attentive management, the risk is that the strength of demand for the raw materials, parts and finished goods to implement the modernization and expansion of the grid could only further exacerbate upward pressure on utility bills, and consumer prices and business energy costs. The fact that China already accounts for around 60-75% of output of processed minerals and materials, and finished goods needed for energy transition creates a further dilemma in an increasingly bifurcated and fragmented world. In passing, one also has to consider that increasing reliance on electricity will also require better management of cyber security risks as has been more than amply demonstrated in the USA and other countries.


But perhaps the biggest risk to the energy transition, and a potentially misguided top down approach of setting targets


UK and EU countries' investments in wind and solar energy have been substantial and are taking an increasing share of total power output.


without having detailed, but also flexible plans (be that contingencies for shocks or advances in technology, for example) for transition management is that the legal and regulatory framework relies too much on penalties, and offers insufficient incentives, and quite possibly misguided timelines. ‘Firefighting’ measures such as the Power Purchases Agreements (PPAs) may well help to secure supplies, along with Contracts For Differences (CFDs) which allow power supply operators to hedge against market risks clearly have their applications, but in no way serve as a guarantee of stable or low prices. Indeed, as with price caps (in principle subsidies) on consumer and or business utility bills they actually are counterproductive, as the comfort of the reliability of supply acts as a disincentive to conservation and increased efficiency.


Last but certainly not least in terms of legal and regulatory frameworks, perhaps above all in light of the many unintended negative impacts of both MIFID and GDPR directives, is the EU’s proposed Corporate Sustainability Due Diligence Directive(1)


(CSDDD). In


its current form, it has rather too many potential loopholes, and that rather than creating a ‘level playing field’ as it proposes. As some have suggested it may put a greater burden on companies operating in countries with weak governments and institutional frameworks, than on the local government to protect human rights.


Be that as it may, the other risk both the EU and UK need to be wary of is China’s drive towards greater self-sufficiency, and the enormous energy transition investment incentives contained in the US Inflation Reduction Act, while the EU and UK are still grappling with establishing their own frameworks, leaves both lagging far behind both in investment and technological advances.


Marc Ostwald E: marc.ostwald@admisi.com T: +44(0) 20 7716 8534


(1) https://commission.europa.eu/publications/ proposal-directive-corporate-sustainability- due-diligence-and-annex_en


13 | ADMISI - The Ghost In The Machine | Sustainability Edition 2023


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