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We propose and implement a procedure to optimally hedge climate change risk. First, we construct climate risk indices through textual analysis of newspapers. Second, we present a new approach to compute factor mimicking portfolios to build climate risk hedge portfolios. The new mimicking portfolio approach is much more efficient than traditional sorting or maximum correlation approaches by taking into account new methodologies of estimating large-dimensional covariance matrices in short samples. In an extensive empirical out-of-sample performance test, we demonstrate the superior all-around performance delivering markedly higher and statistically significant alphas and betas with the climate risk indices. This version: March 2024

We propose a price-cap mechanism for electricity-transmission expansion based on redefining transmission output in terms of financial transmission rights. Our mechanism applies the incentive-regulation logic of rebalancing a two-part tariff. First, we test this mechanism in a three-node network. We show that the mechanism intertemporally promotes an investment pattern that relieves congestion, increases welfare, augments the Transco’sprofits, and induces convergence of prices to marginal costs. We then apply the mechanism to a grid of northwestern Europe and show a gradual convergence toward a common-price benchmark, an increase in total capacity, and convergence toward the welfare optimum.

In this study, biogas was produced from the anaerobic digestion of Sorghum bicolor stalk. Pretreatment of the biomass was carried out prior to the digestion using sulfuric acid ( H2SO4) and hydrogen peroxide (H2O2). The physicochemical, elemental and structural analyses were carried out on the biomass before and after pretreatment. The microbial composition of the fermenting materials were also determined using standard method while the Fourier Transform Infra-red (FTIR) spectroscopy were used to quantify the structural changes that took place after pretreatments. Results showed enormous reduction of hemicellulose and partial solubilization of cellulose with the application of H2SO4 for pretreatment with obvious breakdown of all important bonds in the biomass. The most suitable condition for the most efficient acidic pretreatment of the Sorghum bicolor stalk was using H2SO4 concentration of 0.75% (v.v−1), autoclave temperature of 118 °C and biomass dry mass of 3.7 g for 52 min. However, the use of H2O2 caused huge solubilization of lignin while partial dissolution of hemicellulose took place. The most suitable condition that gave the best result in this pretreatment procedure was H2O2 concentration of 6.8% (v.v −1), shaker temperature of 28 °C, agitation at 126 rpm and 3 g of biomass for 85 min. Overall, the use of the H2O2 showed reduction of lignin and hemicellulose by 73 and 42% respectively while also increasing the concentration of cellulose by 23%. The acid and alkaline pretreated biomass produced a total of 312.3 and 607.1 LNbiogas.kg VSad −1respectively. In comparison, the biomass pretreated with H2O2 produced 65% more LNbiogas.kg VSad−1than the other and equally reduced the production time by 5 days. For the alkaline treated biomass, the 1422 kWh t−1 TS thermal energy gain exceeded the 945 kWh t−1 TS used in the pretreatment thus giving a net thermal energy of 477 kWh t−1 TS. However, the acidic pretreatment of Sorghum bicolor stalk is not profitable because the -131 kWh t−1 TS thermal energy gain was far below the 1025 kWh t−1 TS thermal energy used in pretreatment with a net thermal energy of -761 kWh t−1 TS. Till now, use of low-cost H2O2 for biomass pretreatment is unpopular while the uses of other strong alkali and acids are well studies. However, hydrogen peroxide gave better product yield. Therefore, use of this alkali pose a novel biotechnological means for generating biogas. Keywords: Biogas, Biomass, Economics, Energy, Optimization, Pretreatment

Political decisions and trends regarding coal use for electricity generation developed differently in the UK and Germany, despite being subject to relatively similar climate protection targets and general political and economic conditions. The UK agreed on a coal phase-out by 2024. In Germany, a law schedules a coal phase-out by 2038 at the latest. This paper investigates reasons for the different developments and aims to identify main hurdles and drivers of coal phase-outs by using the Triple Embeddedness Framework. The comparative case study approach reveals that policy outcomes regarding coal consumption are deeply influenced by several actor groups, namely, coal companies, unions, environmental NGOs, and the government. The most discussed aspects of a coal phase-out in both countries are energy security concerns, whether coal is mined domestically, (regional) economic dependence, as well as the relative power of actors with vested interests in coal consumption.

This paper addresses the following question: How can smart energy management system (SEMS) influence the residential electricity consumption at both individual household and national level? First, we developed an hourly optimization model for individual households. The energy cost of an individual household is minimized under given assumptions on outside temperature, radiation, (dynamic) electricity price, and feed-in tariff. By comparing the optimization to the reference scenario, we show the impact of SEMS on grid-electricity consumption and photovoltaic (PV) self-consumption at the individual household level. Second, to aggregate the results to the national level, we constructed a detailed building stock taking Austria as an example. By aggregating the results of 2112 representative households, we investigate the impact of SEMS in the residential building stock on the national electricity system. As a result, we found that for individual single-family-houses (SFHs) with PV (no battery) and heat pump adoption, SEMS can significantly reduce the grid-electricity consumption up to 40.7% for a well-insulated building. At the national level we found that, for the buildings with 5 kWp PV but without hot water tank or battery storage, SEMS can still reduce the grid-electricity consumption by 7.4% by using the building mass as thermal storage.

The German reserve power market has been subject to important regulatory changes in recent years. A new market design has been introduced by synchronizing and interconnecting the four regional German control areas. We analyze whether the reforms have led to lower prices for minute reserve power (MRP). In contrast to existing papers, we use a unique panel dataset to account for unobserved heterogeneity between the four German regional markets. Moreover, we control for endogeneity by using weather data as instruments for electricity spot market prices. We find that the reforms were jointly successful in decreasing MRP prices leading to substantial cost savings for the transmission system operators.

Grid integration remains one of the key challenges related to the worldwide expansion of distributed renewable energy systems. This paper presents innovative measures for increasing the hosting capacity of distribution grids with a focus on the medium-voltage grid, based on representative interviews with leading large-scale distribution system operators (DSOs) from Germany. For grid optimization, DSOs have implemented dynamic voltage control in substations, adapted the grid structure for renewables, applied the “N minus zero” rule for planning grid operation and used the capability of renewable energy systems to provide reactive power. For grid expansion, DSOs have installed voltage regulators, voltage-regulated distribution transformers, substations used exclusively for renewables, and express feeders that connect substations with the generation centers. This practical experience should also prove relevant for other countries currently planning the expansion of distributed renewable energy systems.

How does small-firm employment respond to exogenous labor productivity risk? We find that this depends on the capitalization of firms' local banks. The evidence comes from firms offering (quasi-) fixed employment to workers whose productivity depends on the weather. Weather risk reduces this employment, and the effect is stronger in regions where the regional banks have less equity capital. Bank capitalization also proxies for the extent to which the regional banks’ borrowers can obtain liquidity when the regions are hit by weather shocks. We argue that, as liquidity providers, well-capitalized banks support economic adaptation to climate change.