What do "stranded assets" refer to in energy systems?

Stranded assets refer to investments that have lost value due to changes in market conditions, particularly in the context of energy systems. This situation often arises when shifts in regulations, advancements in technology, or changing consumer preferences reduce demand for certain types of energy sources or infrastructure. For instance, fossil fuel assets can become stranded as the world moves towards renewable energy sources, thereby making those assets less economically viable.

Stranded assets can lead to significant financial losses for investors, as the expected returns on invested capital no longer materialize due to declining market value. This concept is increasingly important in discussions about climate change and the transition towards sustainable energy systems, as it underlines the need for careful evaluation of energy investments in light of evolving economic and environmental landscapes.