As the United Nations Framework Convention on Climate Change (COP21) draws to a close in Paris this week, Michael Wilkins, Managing Director of Infrastructure Finance and Head of Environmental Research at Standard & Poor’s Ratings Services (S&P), explores the likely outcomes in this month’s Infrastructure Outlook.
Wilkins suggests that COP21 success would be the realisation of a flexible, high-level political framework that allows for bottom-up national pledges, which could later be translated to concrete policies to decarbonise global economies by 2100 and limit the world’s rising temperature to 2 degrees centigrade. Of course, one way to achieve this is to place great emphasis on renewables.
Highlighting the growing appetite for renewables, last month saw S&P’s first ever rating of an offshore wind project, WindMW. The project to operate a 288 megawatt offshore wind farm in the North Sea has been assigned a ‘BBB-’ with a ‘stable’ outlook due to predictable wind resources which should maximise availability.
Certainly, cleaner, greener energy is at the top of the agenda in Paris. But in another prominent feature, S&P’s Pierre Georges explains how European utilities are having to set to aside large sums – potentially up to €100 billion in total – to cover the costs of decommissioning nuclear plants and the disposal of nuclear fuel waste over the next two decades. Given the size of these provisions, any change in their valuation would most likely have implications for their credit metrics and their ability to invest in new projects.