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INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE
Conférence
Coriolis
Cédric Philibert
AIE
Polytechnique
October 19, 2015
© OECD/IEA 2015
1. The boom of renewables 2. Renewables in climate change mitigation 3. Policy frameworks 4. Giving up fossil fuels? 5. Ambition or « certainty »?
How the boom of renewables is changing the climate of the talks on climate change
© OECD/IEA 2015
1. The boom of renewables 2. Renewables in climate change mitigation 3. Policy frameworks 4. Giving up fossil fuels? 5. Ambition or « certainty »?
How the boom of renewables is changing the climate of the talks on climate change
© OECD/IEA 2015 © OECD/IEA 2015 G20 Energy Ministerial, Istanbul, 2 October 2015
© OECD/IEA 2015
The share of renewables in net additions to power capacity continues to rise
with non-hydro sources reaching nearly half of the total
Renewables are becoming the largest source of new power generation capacity
World net additions to power capacity
Analysis from the IEA Medium-Term
Renewable Energy Market Report
2015 and the New Policies Scenario
of the World Energy Outlook 2015.
0
200
400
600
800
1 000
1 200
1 400
1 600
2008-2014 2014-20
GW
Fossil fuels Nuclear Hydropower Non-hydro renewables
© OECD/IEA 2015
Share of non-hydropower in renewable electricity generation is expected to increase significantly
Renewable electricity generation is more than a hydropower story
Renewable generation by technology (2005-20)
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Gene
ratio
n (TWh)
Hydropower Bioenergy Onshore wind Offshore wind Solar PV Geothermal STE Ocean
10%
25%
37% Share of non-hydro renewables in overall RE generation
Natural gas 2013
Nuclear 2013
Share of renewables in overall electricity generation
22%
26%
18%
© OECD/IEA 2015
As the OECD slows, non-OECD countries account for two thirds of renewable growth, driven by fast-growing power demand, diversification needs and pollution concerns
Growth shifting to emerging markets and developing countries
Shares of net additional renewable capacity, 2014-20
EU
13%
USA
9%
Japan
5%
Rest OECD
8%
China
38%
India
9%
Brazil
5%
Rest non - OECD
13%
© OECD/IEA 2015
Renewable investment costs falling
With scale up of deployment and learning, investment costs of most dynamic technologies (e.g. solar PV and onshore wind) continue to fall
Notes: Average unit investment costs are based on gross additions, which include capacity refurbishments that are typically lower cost than new capacity. Costs
vary over time due to technology changes as well as where deployment occurs in a given year..
Weighted average annual renewable investment costs, historical and projected
0
1 000
2 000
3 000
4 000
5 000
6 000
2010 2012 2014 2016 2018 2020
Other non-OECD
0
1 000
2 000
3 000
4 000
5 000
6 000
2010 2012 2014 2016 2018 2020
China
0
1 000
2 000
3 000
4 000
5 000
6 000
2010 2012 2014 2016 2018 2020
USD
2013
/kW
OECD
Hydro Bioenergy Onshore wind Offshore wind Solar PV residential/commercial Solar PV utility
© OECD/IEA 2015
Evidence of lower costs on the horizon
A combination of price competition, long-term contracts, good resources and financial de-risking measures is creating deployment opportunities in newer markets and at lower costs
Recent announced long-term contract prices for new renewable power
Utility-scale solar PV Onshore wind
Chile USD 85-89/MWh
Brazil USD 81/MWh
United States USD 65-70/MWh
India USD 88-116/MWh
United Arab Emirates USD 58/MWh
South Africa USD 65/MWh
United States USD 47/MWh
Brazil USD 49/MWh
South Africa USD 51/MWh Australia
USD 69/MWh
Turkey USD 73/MWh
China USD 80–91/MWh
Germany USD 67-100/MWh
Egypt USD 41-50/MWh
Jordan USD 61-77/MWh
Uruguay USD 90/MWh
Germany USD 96 /MWh
Canada USD 66/MWh
This map is without prejudice to the status or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area
© OECD/IEA 2015
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
CCGT Total CCGT Fuel OCGT Fuel
Generation Cost USD/MWh
US - 2.9 $/MBTU
Europe/Japan Spot - 7.3 $/MBTU
Asia LNG Contracts - 13.4 $/MBTU
Wind - competition with gas
Depending on region, recent long-run wind generation costs are below costs of gas fired generation
Note: assumptions CCGT load factor 63.4%, efficiencies, CCGT 58.9%, OCGT 39%, no carbon price
Benchmark cost 70-80$/MWh in dynamic wind markets
© OECD/IEA 2014
PV comes at all scale - « socket parity »
Commercial in the US
Residential in Australia
© OECD/IEA 2015
More renewables for less money
Wind and solar PV comprise two thirds, or USD 900 billion, of new investment needs to 2020 and capacity increases are being made at lower cost than in the past
Renewable power capacity – net additions versus new investment
USD 2014 GW
0
200
400
600
800
1 000
1 200
1 400
1 600
Capacity growth Capacity growth New investment New investment
2008-14 2014-20 2008-14 2014-20
GW / U
SD 2
014
billion
Ocean Geothermal STE Solar PV Offshore wind Onshore wind Bioenergy Hydropower
© OECD/IEA 2015
Enhanced policies can get renewables growth back on track to meet climate goals
Enhanced policies can accelerate global deployment by 25% with better domestic policies and more coordinated action
World renewable power annual capacity additions, main vs. accelerated case
0
20
40
60
80
100
120
140
160
180
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
GW
United States Japan EU-28 Other OECD India China Brazil Other non-OECD
Historical Forecast
© OECD/IEA 2015
Enhanced policies can get renewables growth back on track to meet climate goals
Enhanced policies can accelerate global deployment by 25% with better domestic policies and more coordinated action
World renewable power annual capacity additions, main vs. accelerated case
0
20
40
60
80
100
120
140
160
180
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
GW
United States Japan EU-28 Other OECD India China Brazil Other non-OECD Main case
Historical Accelerated case
© OECD/IEA 2015
Meeting climate change objectives requires more growth in all sectors
Historical and forecast share of renewables in electricity, heat and
transport sectors 2005-20
Growth of renewable electricity generation is increasing but under levels required to meet 2DS scenario, while renewable heat and transport are falling behind.
0%
5%
10%
15%
20%
25%
30%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Share of renew
ables in sector deman
d Renewable
electricity
Renewable heat
Biofuels in
transport
ForecastHistorical
© OECD/IEA 2015
Renewables contribute to energy security
In Europe, renewables increase local energy procurement despite declining gas fields
© OECD/IEA 2015
Profound changes underway in energy markets
Signs of decoupling of energy-related CO2 emissions and global economic growth
Oil prices have fallen precipitously, raising questions over the competitiveness of renewables
But policy drivers for renewable electricity – energy diversification, local pollution and decarbonisation – remain robust
Renewables key to the unprecedented pledges ahead of COP 21
Renewables to become first source for electricity in the longer term, but addressing policy uncertainty in the next five years is crucial
© OECD/IEA 2015
1. The boom of renewables 2. Renewables in climate change mitigation 3. Policy frameworks 4. Giving up fossil fuels? 5. Ambition or « certainty »?
How the boom of renewables is changing the climate of the talks on climate change
© OECD/IEA 2015
IEA strategy to raise climate ambition Peak in emissions (Bridge Scenario)
Global energy-related GHG emissions
20
25
30
35
40
2000 2014 2020 2025 2030
Gt
CO
2-e
q
Bridge Scenario
INDC Scenario
Energy efficiency
49%
Reducing inefficient coal
Renewables investment
Upstream methane reductions
Fossil-fuel subsidy reform
17%
15%
10%
Savings by measure, 2030
9%
Five measures – shown in a “Bridge Scenario” – achieve a peak in emissions around 2020, using only proven technologies & without harming economic growth
© OECD/IEA 2015
IEA strategy to raise climate ambition Staying below 2°C (450 Scenario)
Global energy-related GHG emissions by scenario
Investments in Renewables should reach $400 bn/y by 2030 in the Bridge scenario. In the 450 scenario, the $400 bn/y should be reached by 2025 already,
then reach $470 bn/y on average over 2026-2040
© OECD/IEA 2013
Electricity can power sustainable growth
2011
© OECD/IEA 2013
An Energy Revolution is needed
2011 6DS 2DS hi-Ren
Generation today: Fossil fuels: 68%
Renewables: 20%
Generation 2DS 2050: Renewables: 65 - 79%
Fossil fuels: 20 - 12%
© OECD/IEA 2013
Different optimal power mixes in different regions by 2050
Sou
rce:
En
erg
y Te
chn
olo
gy
Per
spec
tive
s 2
01
4
© OECD/IEA 2013
Contributions to cumulative CO2 emission cuts (hi-REN vs. 6DS)
© OECD/IEA 2010 © IEA/OECD 2010
Vision for Hydropower IEA Roadmap
Hydropower generation will double by 2050 and reach 2 000 GW and 7 000 TWh, mostly from
large plants in emerging/developing economies
© OECD/IEA 2012
China
India
Asean Other Asia Pacific
Africa M. East
OECD Europe
Russia Transition eco.
Canada
Other LAM+Mex
Brazil
USA
Asia Pacific
Africa
Europe & Eurasia
Central & South America
North America
Middle East
16%
19%
17%
© OECD/IEA 2013
Wind turbines have grown in height, size and capacity
The specific rating is reducing (electric capacity over swept area) Augmentation de l’aire balayée par MW de capacité: Allows tapping a much bigger potential with lower speed winds
Delivers a more regular output with higher capacity factors
Hub height and blade length Capacity factors vs. wind speed
Wind power: the silent revolution
© OECD/IEA 2013
PV experience curve, extended
Different explanations of “anomalies” lead to different cost predictions as PV continues to be rolled out
© OECD/IEA 2013
Concentrating solar thermal power
Turning the light into heat before power allows full disconnection between the variable resource and power generation
© OECD/IEA 2015
Integration challenge: Balancing
Note: Load data and wind data from Germany 10 to 16 November 2010, wind generation scaled, actual share 7.3%. Scaling may overestimate the impact of variability; combined effect of wind and solar may be lower, illustration only.
© OECD/IEA 2014 29
0
10
20
30
40
50
60
70
80
1 10 20 30 40 50 60 70 80 90 100 110 120 130 140 Hours
Net
load
(G
W)
0.0% 2.5% 5.0% 10.0% 20.0%
Larger ramps at high shares
Higher uncertainty
Larger and more pronounced changes
Illustration of Residual power demand at different VRE shares
Lower minimum
© OECD/IEA 2015
Netload implies different utilisation for non-VRE system
Integration challenge: Utilisation
Note: Load data and wind data from Germany 10 to 16 November 2010, wind generation scaled, actual share 7.3%. Scaling may overestimate the impact of variability; combined effect of wind and solar may be lower, illustration only.
© OECD/IEA 2014 30
0
10
20
30
40
50
60
70
80
90
1 2 000 4 000 6 000 8 000
Net
load
(G
W)
Hours
0.0% 2.5% 5.0% 10.0% 20.0% Maximum
remains high: Scarcity
Lower minimum:
Abundance
Changed utilisation pattern
Base - load
Mid - merit
Peak
Mid - merit
Peak
Mid - merit
Base - load
-
-
© OECD/IEA 2015
EDF study of the European power system with 60% RES
© OECD/IEA 2015
3) Increase flexibility of other power system
components
Grids Generation
Storage Demand Side
1) Foster System-friendly
RE
Increasing variable RE will need more System Flexibility
2) Better market design & operation
Geographical spread
Technology spread
Plant design
Output forecast
Policy framework
Market operations
© OECD/IEA 2014
0% 5% 10% 15% 20% 25%
RUSSIA
INDONESIA
ARGENTINA
SAUDIARABI
KOREA
SOUTHAFRIC
CANADA
INDIA
JAPAN
FRANCE
USA
BRAZIL
MEXICO
CHINAREG
TURKEY
AUSTRALI
ITALY
UK
SPAIN
GERMANY
Source: IEA estimates derived in part from IEA Medium-Term Renewable Energy Market Report 2014.
Large-scale integration accomplished today, but more to come
© OECD/IEA 2014 33
Instantaneous shares reaching 60% and above
Wind 2013 PV 2020 PV 2013 Wind 2020
Annual share in electricity generation in G20 countries – 2013/20
Denmark, Ireland
Over 30% already
© OECD/IEA 2015
Pumped-storage hydropower makes it all - almost
Thermal storage in
CSP plants
~1500 MW • Arbitrage
• Weekly storage
• Black start
• « Flexing » power
system w. variable RE
after nuclear power…
Reservoir
hydropower
~ 500 GW?
© OECD/IEA 2015
Still large potential for new-built PSH plants
© OECD/IEA 2014
Seawater PSH project in Atacama
Valhalla project: 600 MW PV + 300 MW seawater PSH
© OECD/IEA 2015
Potential for storage in key regions
Attractiveness of storage is highly context-specific, but increases greatly across all scenarios
Depending on the system, flexibility from demand response could provide greater returns
© OECD/IEA 2014
STE and PV have different roles
Figurative power mix in 24 hours
Thermal storage allows generation in late afternoons -
early evenings at peak times
© OECD/IEA 2014
New roadmaps vision for solar electricity: PV + STE
Together, PV (16%) and STE (11%) could become the largest source of electricity worldwide before 2050
0%
5%
10%
15%
20%
25%
30%
0
2 000
4 000
6 000
8 000
10 000
12 000
2015 2020 2025 2030 2035 2040 2045 2050
Shar
e of
tota
l ele
ctric
ity ge
nera
tion
Glob
al ge
nera
tion
in T
Wh
Solar PV Solar CSP Share of PV Share of PV+STE
© OECD/IEA 2014
1. The boom of renewables 2. Renewables in climate change mitigation 3. Policy frameworks 4. Giving up fossil fuels? 5. Ambition or « certainty »?
How the boom of renewables is changing the climate of the talks on climate change
© OECD/IEA 2015
In the absence of the reforms that have been taken since the G20 in 2009, fossil fuel consumption subsidies would have been 24% higher in 2014 at $600 billion
Subsidies to fossil fuels remain stubbornly persistent, but reforms are making a difference
100
200
300
400
500
600
700
2009 2014
Bill
ion
do
llars
(2
01
4)
International prices
Consumption
Currency effects
Subsidy reforms
Contributing factors to the change in the value of subsidies between 2009 and 2014
© OECD/IEA 2015
High capex: WACC matters
Market and regulatory risks can increase weighted average cost of capital and undermine competitiveness of PV and Wind power
Impact of cost of capital on the levelised cost of solar PV
(assuming same system costs and same resource…)
Dubai
Central
Africa X
2X
© OECD/IEA 2015 A growing gap increases the risk of miscalculations
Low opex destabilise markets
LCOE and short-run marginal costs in the EU power markets, 2DS, by 2050
© OECD/IEA 2015
Policy implications: Enabling environment is crucial
Providing financial
support
Cost reduction through
• Technology development
• Scale up
• Learning
before 2013
Enabling policy and
market framework which
allows low cost financing
and generation
• Competition
• Predictable long-term
income stream
• Short-term market value
signals
• Portfolio development
• System Integration
Cost reduction through
• Technology innovation
• Financial innovation
• New markets with best resources
2014-2020
Main Policy
Key Characteristics
Cost reduction
• Demand side response
• Storage
• Interconnections
• Electrification of end-use
• System-friendly design
• Market design
• Smart grids
Areas for innovation
© OECD/IEA 2015
1. The boom of renewables 2. Renewables in climate change mitigation 3. Policy frameworks 4. The end of fossil fuels? 5. Ambition or « certainty »?
How the boom of renewables is changing the climate of the talks on climate change
© OECD/IEA 2015
“100% RENEWABLES” –feasible?
Various studies « prove » that a 100% energy mix is feasible
Not always clear is this refers to the broad energy mix (i.e. Greenpeace Energy [R]evolution), or the power mix (ADEME)
However, the ADEME study suggests that the last 10-20% of the annual electricity generation may be costly to meet with renewables, mostly due to seasonal imbalance
A better climate mitigation strategy would be to use mostly-renewable power to substitute direct uses of fossil fuels in industry, transports and buildings
100% renewable energy mix would require significant technology breakthroughs in industry and transport, where their energy density gives fossil fuels a tremendous advantage
© OECD/IEA 2015
Direct fossil fuel use matters!
© OECD/IEA 2015 47
Direct energy-related CO2 emissions from industry
second to power (2014)
© OECD/IEA 2015
Electrifying transports
Urban density favors shift towards public transports
Electric and plug-in hybrid vehicles
On-road electrification of trucks on highways
Not so many options for marine and air transports
© OECD/IEA, 2011
Plug-in hybrid Golf GTE:
the VW that doesn’t cheat?
© OECD/IEA 2015
Fossil fuels dominate industrial energy use
© OECD/IEA 2015 49
Final energy demand by sub-
sectors
Final industrial energy supply
by sources
© OECD/IEA 2010
Beyond 2050: testing the limits A possible vision, under severe climate constraints, if
other low-carbon energy options are not available...
Where are the technical limits to solar energy?
Many options converging towards USD 100/MWh
Cost no longer main limit, but footprint, variability and convenience issues
Solar energy dominated by power (STE and PV)
Space heating needs reduced and satisfied with ambient heat through heat pumps
Assuming efficiency improvements and further electrification of buildings, industry and transport
© O
ECD
/IEA
, 20
11
© OECD/IEA 2010
Testing the limits: Electricity by 2060
© OECD/IEA, 2012
------ 3000
© OECD/IEA 2010
500 000 km2 of possible ground-based solar plants
© OECD/IEA 2010
Solar energy, wind power, hydro power and biomass provide most of the world’s final energy demand
Other renewables important in some places
Some uses of fossil fuels still required, but CO2 emissions reduced to 3 Gt or less if CCS is available
Testing limits: key results
© OECD/IEA 2014
1. The boom of renewables 2. Renewables in climate change mitigation 3. Policy frameworks 4. Giving up fossil fuels? 5. Ambition or « certainty »?
How the boom of renewables is changing the climate of the talks on climate change
© OECD/IEA 2014
© OECD/IEA 2014
Short term certainty on emission levels may be costly but has little value: for climate change is cumulative
Flexibility (price corridor) reduce expected costs
helps get more countries on board
Allows for more ambitious policies
More ambitious targets can be chosen
higher benefits and lower costs (on expectation)
especially useful if benefits are deeply uncertain
helps match marginal costs with benefits despite uncertainties (Economic efficiency)
helps accomodate differing visions
Certainty versus Ambition
© OECD/IEA 2014
What about climate catastrophes? If a GHG threshold is known and close:
Use a quantity target to stop emissions
If a GHG threshold is a possibility but its level is unknown: Favour the most ambitious policy
How do we go to stabilisation? Level and agenda left undecided
Ensure action, not exact results
Favour the most ambitious policy
Over time, adjust the target and the price cap
In sum: favour ambition, not certainty better be roughly right than exactly wrong!
Certainty versus Ambition
© OECD/IEA 2014
To sum up
The boom of renewables facilitates the conversation: short term mitigation efforts seem affordable and have multiple benefits (air quality, energy security, jobs)
Looking farther it becomes more difficult to commit
No government wants to risk its economic growth
COP21 will not deliver a Kyoto-type agreement with binding targets for all countries
But it may deliver an agreement building and strengthening countries’ self-determined action agendas
Renewable and energy efficiency at the heart of action
© OECD/IEA 2014
© OECD/IEA 2014
After
Copenhagen…
Rethinking
Climate
Policy
Cédric Philibert
© OECD/IEA 2014
The problem of climate change is fraught with uncertainty
Decision making under uncertainty rests on ‘expected’ costs or benefits, i.e. all possible outcomes times their probabilities of occurrence
However, this presentation does not offer a cost benefit analysis of climate change
It provides a stylised analysis of instrument choice under uncertainty
Certainty versus Ambition
Energy Policy Cédric Philibert
€
Reductions BaU Target
Marginal benefit
Marginal cost
Price
(tax)
General case: Optimum when marginal
benefit equals marginal cost
Cost uncertainty matters for instrument choice
Certainty versus Ambition
Energy Policy Cédric Philibert
Emission reductions
CO2 Concentrations : 384 ppmv (No KP) 383 ppmV (Full KP)
xx €
x €
0
Possible
Unlikely ?
Possible
Climate change is cumulative: damages relate to
concentrations, abatement costs relate to emission
reductions
Marginal benefit curve is roughly flat
Certainty versus Ambition
Energy Policy Cédric Philibert
€
Reductions BaU Target
Marginal benefit
Marginal cost
Uncertain
costs
Far from the
optimum
Certainty versus Ambition Climate change ~ flat marginal benefit curve
Energy Policy Cédric Philibert
€
Reductions BaU
Marginal benefit
Marginal cost
Tax
Price instruments minimise the error due to cost
uncertainty
Uncertain
abatement Close to the
optimum
Certainty versus Ambition
Energy Policy Cédric Philibert
€
Reductions BaU Target
Price instrument vs. the equivalent quantity instrument:
Marginal benefit
Marginal cost
Greatly reduces expected costs
added saved
Tax
Climate change ~ flat marginal benefit curve
Certainty versus Ambition
Energy Policy Cédric Philibert
€
Reductions BaU Target
Marginal benefit
Marginal cost
May slightly reduce expected benefits
Increases expected NET benefits (benefits minus costs)
gained lost
Price instrument vs. the equivalent quantity instrument:
Greatly reduces expected costs
Tax
Climate change ~ flat marginal benefit curve
Certainty versus Ambition
Energy Policy Cédric Philibert
€
Reductions BaU
Marginal benefit
Marginal cost
Tax
Compared to the equivalent best-guess target,
a price instrument makes possible a more
ambitious policy at lower expected costs
Target
Certainty versus Ambition
Energy Policy Cédric Philibert
€
Reductions BaU
Marginal benefit
Marginal cost
Tax
Price cap
Target
But targets have political advantages over taxes
Target Target
Certainty versus Ambition Compared to the equivalent best-guess target,
a price instrument makes possible a more
ambitious policy at lower expected costs
Energy Policy Cédric Philibert
- Same expected benefits. Lower expected costs (e.g. fairness) Lower expected costs
Higher expected benefits
€
Reductions BaU
Marginal benefit
Marginal cost
Tax
Target
- Same expected costs. Higher expected benefits (e.g. environment)
Introducing a price cap makes
possible a more ambitious policy:
Price cap
Especially useful when benefits are deeply uncertain…
Certainty versus Ambition
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