The energy transition requires investors to take a broad view of the energy system as a whole. Rather than trying to identify individual technological winners, understanding interdependencies and persistent system needs is becoming increasingly important. This is the view of Ronald Huisman, Professor of Sustainable Energy Finance at Erasmus School of Economics, in a recent article in Financial Investigator.
According to Huisman, the growing interconnectivity of energy systems presents both opportunities and risks for investors. Being able to draw on energy from other regions, for example, makes it possible to benefit from a surplus of renewable energy elsewhere. At the same time, disruptions in one system can have consequences for others. ‘It means that in your local system you always need to have the flexibility to deal with these contagion effects,’ Huisman says.
The increasing decentralisation of the energy system also creates interesting opportunities. ‘When we think about the existing electricity grid and how it can be used in the future, decentralised locations in a decentralised energy system can be highly relevant and important,’ he explains.
Huisman also sees technological innovation primarily as a source of opportunity, although it brings risks as well. These risks arise partly because it is not always clear how new technologies should be integrated into the energy system, while legislation and regulation may not yet be sufficiently flexible to accommodate new developments.
For investors, Huisman believes the key to success ultimately lies in 'systems thinking'. ‘I think the key to success is being willing to understand the system. And then determine where you want to make an impact and how you can do that.’ For anyone investing in the energy sector, he considers this understanding essential.
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Click here for article "Energie-infrastructuur vraagt om systeemdenken" (in Dutch), that recently was published in Financial Investigator, the magazine serving the Dutch and Belgian institutional asset management and securities services market.
For questions, please contact Ronald de Groot, Media & Public Relations Officer at Erasmus School of Economics: rdegroot@ese.eur.nl, +316 53 641 846.
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