Fossil Fuel Lock-In in Ireland - How Much Value is at Risk

Fossil Fuel Lock-In In Ireland - How Much Value Is At Risk

Project Title:  Fossil Fuel Lock-in in Ireland – How Much Value is at Risk?

Researcher: Dr. Celine McInerney

T: 021 4902839


Funding Body: Environmental Protection Agency

Project type: 2015 Climate Research Call

Period: 24 months from July 2016 to July 2018

Project Description:

The proposed research will assess Ireland’s exposure to carbon lock-in and stranded asset risk.  The project will initially conduct a literature review to quantify, value and document existing fossil fuel assets, infrastructures and support systems in Ireland.  These results will be compared with global and EU studies to benchmark Ireland’s position. The Irish TIMES integrated Energy System model, which allows for detailed techno-economic scenario analysis,  will be used to assess how the value of these assets will evolve under a series of decarbonisation scenarios for Ireland out to 2050.  The output from the Irish TIMES energy model will be used to value these assets using a number of different valuation techniques including discounted cash flows (DCF), value at risk (VaR), asset impairment and credit ratings agency models to assess financial viability under the decarbonisation scenarios. The stranded asset risk of key infrastructure assets will also be estimated using spread option models. This project will provide recommendations to policy makers on the investment signals needed through capacity payment mechanisms, the DS3 (Programme Delivering a Secure, Sustainable Electricity System), and other financial incentives to reduce stranded asset and fossil fuel lock-in risk and to facilitate the transition to a low carbon Irish economy.

Environmental Research Institute

University College Cork, Lee Road, Cork