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Clean Energy Marketing, HS 17 1 The road from 20:80 to 80:20 – introduction to the energy challenge 1.1 Prelude: The one slide summary Clean energy as the solution to climate change: Different options: buildings (isolations, renewable sources of energy), power generation (replace coal or gas with renewables), transport (electric mobility) Vision of the chair: from 80:20 to 20:80 by 2050 (non-renewable energies vs. renewable energies), more & more countries moving that way

1.2 The challenges of extending the energy status quo 3 drivers for transition: risk, social acceptance, cost 1)

Risk premium of non-renewable energies: Accidents highlighting external cost of fossil and nuclear: Deepwater horizon 2010 (20-40 bn $, Gulf of Mexico, pipe burst, explosion, gas leak, oil spill, very deep sea -> risky) Fukushima 2011 (174 bn Euros, earthquake, tsunami, wall too low, Diesel cooling reactors failed, cooling stopped, waste in water, hydrogen blew up -> heute in CH Dieselgeneratoren erhöht platziert -> Avoid these kinds of damages! Status quo: 80 % energy import in CH (very high, risk), 5-20 % global GDP losses due to climate change, 5 % target for long-term interest rate (Swiss nuclear disposal fund), 0 nuclear waste storage facilities worldwide Risk of climate change: hurricane Harvey, more heat in atmosphere -> more heat in oceans, more & more intense hurricanes

2)

Social acceptance is a challenge for many large-scale infrastructure projects 58 % voted for nuclear phase-out (May 2017), protests against wind turbines, Stuttgart 21, ground coal digging, CO2-Endlager Legal certainty vs. free speech, breaking law Arguments for ground coal: domestic source, work provider, cost efficient, base energy, controllable Some technologies face more issues than others: nuclear most, then wind, then solar (97 % of CH have (rather) positive associations with solar)

3)

Cost: oil price volatility has been a driver for renewable energy & efficiency Expectations drive change High prices -> look for alternatives, but also very rewarding for investments Energy technology learning curves: countervailing cost trends for nuclear (no learning effect (no large-scale, security costs) vs. solar (price drop) -> gap between cost of conventional energy vs. cost of renewable energy is about to close (grid parity) Timely transition to renewables optimizes risk-return profile of future energy supply

1.3 Renewable energy market dynamics: A tour d’horizon A broad portfolio: Hydropower: CH, Ö, Norway, large-scale, very mature, cheap Biomass: gas/solid (wood), more decentralized (transport heat/fuel) Wind: Denmark, more centralized Solar & Wind: lot of investment these days Concentrated solar: Marocco, Spain, rel. large scale, mirrors -> steam Geothermal: Iceland, Cali, only certain pats, drilling required -> earthquake SG, high fix costs Wave: Portugal, Scotland, more energy intensity, hydraulic motors moved by water, power line to beach, no investments Step: Tokyo Subway

Investments in new power plants 2015 (EU): Different lags Wind: scarce sites, make more efficient More gas than years before (zzz!)

EU power generation capacity:

Outlook:

Solar power generation: 3 different ways of using energy from the sun: 1) Sunlight -> electricity PV (solar cells), different materials (silicon & others), “reverse flat screen”, light in, energy out 2) Sunlight -> hot steam -> electricity concentrated solar power (CSP), needs direct sunlight, desert, lost market share (PV got cheaper) 3) Sunlight -> hot water solar thermal collectors, very common in China, Cyprus, Israel Bavaria’s solar market growing at 55 % per year (similar to iPhone market) Grid Parity: cost of rooftop PV and retail power prices have converged in Germany (generous incentives, mass production -> learning -> cost ) -> from homeowner’s perspective, rooftop solar is cheaper now than electricity from the grid (depending on grid charges) -> utilities: need to lower price, make switching more difficult, lobbying Death spiral: less revenue, less to reinvest, grid falling apart (happened in Cali) Even PV + battery storage is becoming competitive with retail electricity, learning curve for batteries -> price , consumers see that it’s coming but are hesitant to invest today PV 2015: China + Japan = 50 % market share Europe: regional differences (D, I, Spanien, Griechenland führend), different segment mix by country (ground (hier CH vorne weil hohe Quadratmeterpreise, industrial, commerce, residential (NL Nummer 1)) Solar Goliaths & Davids: utility-scale PV (USA), solar prosumers (Europe) CH: geographical diversification to address regional variation (efficiency vs. usage -> portfolio) Starke Verlagerung nach China, Europe mit first mover advantages, Asia mit cheap mass production) -> let go uf upstream (production), focus on downstream (installation) Renewable sector is becoming more Asian (made it cheaper, but loss of workplaces, dependency etc.) Wind power generation: Worldwide growth rate: 26 % per year, sehr stark steigend, top 3 2013: China, Germany, UK Similar to the technology learning curve for solar PV, cost of wind power has decreased (little less steep, but effect is there) ca. 6 cent/kWh vs. 13 cent/kWh for new nuclear power plant UK Wind global 2015: China (fast 50 %), US, D, Brazil, India Wind Europe: 86 % onshore, offshore: no neighbours, open space, but harsher, transport), strong growth in D & Poland Wind CH: Alps vs. Per-Alps vs. Valleys: valleys best, wind channels wie Nordsee Good wind sites: power generation proportional to swept area and wind speed, energy payback time 3-6 months, lifetime 15-20 years Energy payback time: energy for production vs. produced energy, PV: 1.5-2.5 years, lifetime 20-30 years Social acceptance: socio-political acceptance (of tech and policies, public, key stakeholders, policy makers– market acceptance (consumers, investors, intra-firm) – community acceptance (justice, trust), more problematic than solar Local ownership increases social acceptance of wind & hydro power Renewables have started to transform electricity markets around the world, shift But what if the wind doesn’t blow and the sun doesn’t shine? Considerations about integrating large amounts of renewables into the grid: smarter grids, geographical and technological diversification Conceptual problem: match demand and supply in space and time (from base load and peak load towards smart grids, now A & N fluctuating) Right now: consumption above wind + solar, in 1..44 % of the hours in 2015 negative German power prices -> new baseload of solar and wind -> new requirements for grid operators and electricity systems but also new market opportunities 1. 2. 3.

Making the electricity grid intelligent -> new forms of demand-supply-coordination in distribution networks, forecasts, storage Geographical diversification -> even on a rainy day, the sun tends to shine somewhere Diversification across technologies: good diversified portfolio works best, need solar and wind (wind trickier, acceptance) -> portfolio

1.4 Conclusions World is at a crossroads: facing the transition from non-renewable to renewable energy supply Risk, social acceptance and cost are 3 important challenges for extrapolating the energy status quo With countervailing cost trends and increasing internalization of external cost, grid parity starts to transform markets Renewable energy markets have seen dynamic growth in the past 20 years, particularly in wind and solar. While Europe has been at the forefront, other world regions are increasingly picking up Despite the significant potential of solar power, there is a case for diversifying the renewable energy portfolio In a nutshell: 20:80 to 80:20: renewable vs. conventional energies 174 bn Euros vs. 1.8 bn CHF: Fukushima costs vs. insurance cost for Swiss AKW -> gap! taxpayer pays, external cost 5-20 %: of global GDP at risk because of climate change 80 %: CHF energy import (Russia, Middle East) Grid Parity: point where clean and dirty energies have same costs Energy technology learning curves: usage (capacity)  -> costs , except for nuclear (not large-scale, security costs) PV vs. CSP vs. solar thermal collectors: PV = panels, CSP = mirrors, STC = heat for water, energy production from solar energy, PV  countries who installed 50 % of global PV in 2015: China & Japan Top 3 wind energy countries 2015: China, USA; Germany 86 %: off shore wind energy (trade-off: more wind off-shore vs. transport more difficult, rough)

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From base load to peak load to smart grids: challenge to meet S & D, old days: fluctuating S, D: base load pp (coal etc.) & peak load pp (hydro, gas), now: A more fluctuating with renewable energies

2 Climate Change 2.1 The Science of Climate Change 2.1.1 Cause & Effect: GHG & Global Warming: The Intergovernmental Panel on Climate Change: Platform, mostly voluntary contributions, governments select people who are most knowledgeable and build author teams, Nobel Peace Price 2007 “The IPCC was established to provide the decisionmakers and others interested in climate change with an objective source of information about climate change.” Different working groups, chose depending on what country you are (scientific basis, impacts vulnerability adaption, mitigation, national greenhouse gas inventories), reports: no serious doubts anymore (evolved over years) IPCC´s AR5: “Warming of the climate system is unequivocal, and since the 1950s, many of the observed changes are unprecedented over decades to millennia. The atmosphere and ocean have warmed, the amounts of snow and ice have diminished, sea level has risen, and the concentrations of greenhouse gases have increased.” -> big picture is clear Uncertainties: disclaimer, in details specific probabilities & uncertainties. -> chose this or AR5 and use it for your side of the debate Steep increase, stable before -> future is unknown territory Weather vs. climate: Weather: short-term, day-to-day temperature and precipitation activity Climate: long-term, average atmospheric conditions over longer periods of time (at least 30 years) The greenhouse effect: Natural

greenhouse effect increases surface temperatures by about 30 degrees Celsius Increasing greenhouse gas concentrations tend to increase surface temperatures Greenhouse does same thing: light through, captures heat More Greenhouse gases: thicker glass ceiling, more heat trapped Effect has always been there, but we´re strengthening it Chain of reactions: emissions -> concentration -> impacts Lags in between, accumulation 2.1.2 Is there sufficient past evidence? CO2 emissions: 1980-2016 , last 3 years: stabilization -> start CO2 in the atmosphere: , 35 % higher than ever in 400´000 years Surface temperature: 1850-2012 annual & decadal , geographical differences, no straight connections between usage & warming (Africa) Aletschgletscher: 1860 vs. 2010: 3 km shorter, 300 m thinner, same in Alps in general Increased intensity of extreme weather events (hurricane Harvey, August 2017) Precipitation (rainfall): some regions more, some regions less Arctic sea ice:  Ocean temperature:  Sea level:  Greenhouse gases: CO2: , GWP 1, Methane CH4: , GWP 25, Nitrous Oxice N2O: , GWP 298, synthetic gases: GWP 14´800 CO2-Equivalent (CO2eq) is a quantity that describes for a greenhouse gas the amount of CO2 that would have the same global warming potential (GWP) - e.g. 1 kg CH4 equals 25 kg CO2,, but: CO2 is clearly biggest amount and therefore biggest contributor clouds might reduce effects (more clouds -> cover), extent unsure radiative forcing: difference of radiant energy received by the earth and energy radiated back to space positive forcing warms the system, negative forcing cools it causes: changes in isolation and concentrations of gases higher forcing -> more heat trapped -> there really is change going on! Manmade? Seems so, can´t explain actual observed warming without taking anthropogenic forcings in account Consequential denial: think about consequences of climate change (personal freedom ) -> deny cause Perceived self-efficacy low, feel overwhelmed

2.1.3 What is the forecast? Outlook for 2100: surface temperature , stable with Paris agreement (different pathways -> different results) sea ice extent:  until there´s no ice left sea level:  up to 1 m CO2 emissions & temperature change: , 1 Gt C is equivalent to 3.7 Gt CO2

2.2 Climate Change and Business: The Carbon Bubble The carbon bubble: Burning all available carbon is incompatible with climate stabilization target Oben: Budget, um im Ziel zu bleiben (2 Grad Erwärmung), grosses Delta! Manche U (BP) sind wertvoll basierend auf fossilen Ressourcen (unten) -> Aktienpreise könnten droppen Carbon bubble is becoming reality: in Medien: Norway oil fund plans to withdraw from coal-burning utilities, Vattenfall (Swedish utilities) likely to need to spend billions to sell German coal-fired power plants, Mark Carney (Gov. of Bank of England) warns investors face huge climate change losses (-> systemic risk) But: for every seller there´s a buyer, nur Verlagerung, alternative: stay in companies and try to engage, change Peak coal demand reached: upward trend has reversed in recent years Economic consequences of missing the trend: coal bankruptcies, 2011-2017, learning curve doesn´t apply to coal Tactical response to climate change: Big oil groups blame climate change on coal

2.3 The even bigger picture: IPAT The concept of sustainable development: I = P x A x T “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” Fundamental equation:

Impact on P: hard (maybe education, but morally difficult) Impact on A (affluence): hard (growth might lead to more or less impact (environmental Kuznet´s curve), hard to implement, social acceptance) Impact on T (technology): have to work on this! The environmental problem: natural capital stock , carrying capacity -, ecological footprint 

2.4 Why is it so difficult to solve the climate problem? An introduction to climate policy and politics Who is causing the problem: tCO2 per capita (EU-Quelle): USA -> current lifestyles, hier schwer zu argementieren, dass man selber mehr haben dürfen soll als andere CO2 emissions per capita 1990-2006 (US-Quelle): Asia Cumulative CO2 emissions: USA, EU -> historic responsabilites, remains in atmosphere Currently: Trump´s policy, safe work, zzz -> different implications, even though all graphs are correct The challenge: overcoming traditional mindsets about relationship between economic growth and climate change Traditional: high financial performance and high CO2 emissions, historically true -> people unlikely to reduce CO2 (would reduce wealth) Now: high financial performance and low CO2 emissions (renewable energies cheaper, price for CO2 emissions) -> people likely to reduce Cost & benefit of protecting the climate: Cost of stabilizing climate = 1 % of global GDP, cost of doing nothing = 5-20 % of global GDP -> conclusion: a limited investment can help avoid large damage Calderon commission report (newclimateeconomy.net): similar argument Global climate policy: Rio (1992): stabilization of GHG concentrations, prevent dangerous anthropogenic interference with climate system, common but differentiated responsibilities Kyoto (1997): some had no specific commitments (China), better than doing nothing, but far from solving the problem Kopenhagen (2009): failed, but 2 degree target first mentioned Paris: “well below 2 degrees”, NDCs: collect voluntary contributions of countries instead of imposing goals, but mismatch, ca. 4 degrees, but at least progress, close gap over time, no sanctions Implementing global climate policy: European emissions trading scheme (ETS): EU ETS sectors: high energy consuming industries -> big steel mills etc. easier to control than every household

Fundamental driver for impact on energy sector: differences in carbon intensity: Lignite, coal, gas, nuclear -> introduce price on carbon as incentive to switch, adjust framework conditions Impact of carbon cost on fuel choice: make renewable relatively less expensive, price of 30 Euros/ton could tip the balance, making onshore wind cheaper than coal But: at current carbon price levels, EU ETS does little to help renewable energy (7 Euro pro allowance), overallocation of allowances Big picture: if European climate policy takes scientific advice seriously, EU ETS could have significant impact in longer term

2.5 Conclusions Climate change is real, and in all likelihood manmade The climate system is complex and this leads to uncertainties, but the main effect is clear: we burn carbon, and it accumulates in the atmosphere. Hence, burning less carbon is a good idea Because of time lags in the atmosphere, burning less carbon sooner rather than later is an even better idea Diverging interests between different countries have made it difficult to come up with a global climate policy solution Person reason for optimism: technologies and behaviors for significantly reducing carbon footprint are there In a nutshell: Greenhouse effect: sunlight entering atmosphere, some reflected, some staying -> heating up surface, effect has always been there (30 ° Celsius is natural greenhouse effect) but emissions of GHG are strengthening it (thicker glass roof) 32 Gt CO2/y > 406 ppm > 2 °C: emissions now are higher than target, we’re now at 1-1.5 °C, comparison to before industrial age (1850) 180-330 ppm: pre-industrial age concentration of GHG (now: 406 ppm) 450 ppm: 2 °C-barrier Common but differentiated responsibilities: every nation is responsible, but not to the same extent (history, high emissions/capita, Rio 1992 Who is causing the problem? Emissions/capita: USA, history: USA/EU, recent accumulated emissions: China (but: workshop for the rest of the world, US more per capita, counterargument: worse to pollute now than earlier because now consequences are clear) Kyoto vs. Paris: Kyoto: 1997, signed, but took until 2005 to ratify because of threshold: 55 countries with 55 % of emissions to come into effect, USA and Russia didn’t ratify for a long time, top-down, EETS evolved out of that, 2 kinds of countries: Annex 1 (commit to reduction of emissions) and non-Annex 1 (don’t, easy, China), Paris: 2015, “well below 2 degrees”, bottom-up, everyone involved, not enough contributions to meet target, review cycle (5 years), no penalty, Kopenhagen: 2005, failed 3 greenhouse gases and their GWP: CO2: 1, CH4: 25, nitrous dioxide N2O: 298, HFCs: 20’000, but massive amounts of CO2 emitted IPAT: impact = population * affluence * technology, have to influence technology, others are socially unaccepted to influence hard 1 Gt C is equivalent to 3.7 Gt CO2 Carbon bubble: 800 Gt CO2 left before we reach 2 °C-target, but 15’000 Gt CO2 left to burn -> mismatch of factor 20, solutions: leave 19/20 in the ground -> meet target but bubble bursts, share prices of companies drop by 95 %, burn it all -> miss target, consequences

3 Green Marketing Strategy: From Eco-Niche to Mass Market 3.1 Background and Motivation Key questions to be addressed: Why are green products often stuck in a small niche market? Which marketing strategies are adequate for successful diffusion in mainstream markets? Which conceptual tools can help to describe a development from eco-niche to mass market? Why are some firms successful in moving beyond the eco-niche? Empirical observation: sometimes, green products successfully enter the mass market : Naturaplan 2005: 13 % of Coop’s food revenues, market share 2009: 32 % of bread revenues, 54 % of milk revenues Wind energy: 33 % p.a. growth rate “green is green”: makes green products profitable LOHAS: lifestyle of health and sustainability -> more mainstream, not like in early days

3.2 Conceptual Framework 3.2.1 Roadmaps The sustainability challenge on an industry level:

German electricity market:

Swiss Food Sector:

Swiss Electricity market:

Investment strategy for automotive industry:

3.2.2 Goliaths & Davids Who...