De-Risking Transformative Technology Operation: Applying the Case of the German CCfD Scheme

The transition towards deep decarbonization in basic industries necessitates redirecting investments towards near-zero emission technologies. These investments face significant barriers including missing infrastructure, lack of competitiveness, and heightened risk exposure. This study identifies technological, regulatory, input prices and uncertain revenues as the main investment risks and indicates higher risk exposure for clean technologies. To quantify input price and revenue risks, we conduct a case study on cost disparity and sensitivity to changes of input prices for the three most emitting industrial sectors in Germany. The case study reveals that, besides CO
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cost, energy prices are a significant risk, yet cannot be offset by market forces dominated by conventional production. While long-term solutions involve establishing risk-hedging markets, initial projects require support schemes to bridge cost differences. Germany's Carbon Contract for Difference (CCfD) scheme, addressing CO
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price changes and dynamic payment adjustments based on energy prices, presents promising opportunities but also entails limitations.