© OECD/IEA - 2007 Renewable Energy Perspectives Roberto VIGOTTI Chair Renewable Energy Working Party International Energy Agency

INTERNATIONALENERGY AGENCY© OECD/IEA - 2007

Renewable Energy Perspectives

Roberto VIGOTTI

Chair Renewable Energy Working Party

International Energy Agency

INTERNATIONALENERGY AGENCY

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Mapping a Better Energy Future

The Energy Future Absent New Policies: Security of oil supply is threatened Gas security is also a growing concern Investment over the next decade will lock in technology

that will remain in use for up to 60 years CO2 emissions by 2050 will be almost 2.5 times the

current level!

On current trends, we are on course for an “unstable, dirty

& expensive energy future” as the carbon intensity of theworld economy will increase


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7A New Energy Revolution….

Cutting Energy Related CO2 emissions

0

10

20

30

40

50

60

70

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Gt C

O2

/yr

CCS industry and transformation 9%

CCS power generation 10%

Nuclear 6%Renewables 21%

End use electricity efficiency 12%End use fuel efficiency 24%

End-use fuel switching 11%

Power generation efficiency & fuel switching 7%

Improved efficiency and decarbonising the power sector could bring emissions back to current levels by 2050. To achieve a 50% cut we

would also have to revolutionise the transport sector.


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7The priorities areas

Strategies for key technologies to make a difference:

strong energy efficiency gains in transport, industry and buildings;

electricity supply becoming significantly de-carbonised as the power generation mix shifts towards, natural gas, coal with CO2 Capture and Storage (CCS), renewables and nuclear power,

increased use of biofuels for road transport


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7Electricity Generation Scenarios

0

10000

20000

30000

40000

50000

60000

2005 Baseline 2030 Baseline 2050 Advanced Technologies 2050

50% CO2 emission reduction 2050

TW

h

Other renewablesSolarWindBio-CCSBiomassHydroNuclearGas-CCSGasOilCoal-CCSCoal

Renewables would have to play a particularly significant role in the power sector, increasing from 18% today to nearly 50% by 2050. Non-hydro renewables show the

highest growth rate.


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No single solution….a portfolio of technologies is required


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7Average Annual Power Generation

Capacity Additions to achieve a 50% cut in emissions, 2010 – 2050

0 20 40 60 80

CSP

PV

Geothermal

Wind

Biomass

Hydropower

Nuclear

Gas-fired with CCS

Coal-fired with CCS

[GW/yr]

175 million m2

20 CCS gas-fired plants (500 MW)

26 nuclear plants (1000 MW)

1/3 Canadian hydropower capacity

222 CHP Plants (50 MW)

80 CSP plants (250 MW)

38 CCS coal-fired plants (500 MW)

132 Geothermal Units (100 MW)

17,500 Turbines (4 MW)


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Effective policy only in a limited set of countries Sometimes depending on specific technology

Potential and perceived risk, more than profit, is key to policy effectiveness & efficiency

Price support can not be adequately addressed in isolation; non-economic barriers must be addressed concurrently Grid barriers Administrative barriers Social acceptance issues Other barriers (e.g. training, information, financial, etc.)

Effective systems have, in practice, frequently been the most cost efficient Technology-specific support is key for both effectiveness

and cost-efficiency

Main Lessons Learnt


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1. Establish stable support framework - to attract investments

2. Remove barriers to improve market functioning

3. Set up transitional incentives decreasing over time – to foster and monitor technological innovation and move towards market competitiveness

4. Ensure technology-specific support to exploit full RET basket potential

Continuity

Certainty

Key Principles for Effective Renewable Energy Policies

Move towards a combination framework of incentive schemes

in function of technology maturity level in order to foster RETs’ transition towards mass market

integration


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Mark

et

Dep

loym

en

t

TimeDevelopment Niche Niche markets Mass Mass market

Wind offshore

Modern biomass

technologies

Solar PV

Concentrating solar power

Tidal

OceanWave

Wind onshore

Hydro

Traditional biomass

Solar thermal

heat

2nd generation

biofuels

Biodiesel from oil-

seed rape

Sugarcane ethanol

Conventional geothermal

Shallow geothermal

heat

High cost-gap technolo

gies

Low cost-gap

technologies

Mature technologies

Prototype & demonstration

stage technologies

Renewable Energy Renewable Energy Technologies: : Today and Tomorrow….Today and Tomorrow….


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Combination framework of policy incentives versus technology maturity

Mark

et

Dep

loym

en

t

TimeDevelopment

Niche markets Mass market

Imposed market risk, guaranteed but

declining minimum return

Price-based: FIPQuantity-based: TGC

with technology banding

Wind offshore

Modern biomass

technologies

Solar PV

Concentrating solar power

Tidal

OceanWave

Wind onshore

Hydro

Traditional biomass

Solar thermal

heat

Stability, low-risk incentives

Price-based: FIT, FIPQuantity-based:

Tenders

2nd generation

biofuels

Continuity, RD&D, create market attractiveness

Capital cost incentives: investment tax credits, rebates, loan guarantees etc.

Biodiesel from oil-

seed rape

Technology-neutral competition

TGCCarbon trading (EU

ETS)

Stimulate market pullVoluntary (green)

demand

Sugarcane ethanol

Conventional geothermal

Shallow geothermal

heat

High cost-gap

technologies

Low cost-gap technologies

Mature technologies

Prototype & demonstration

stage technologies


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1. Focus on coherent and rigorous implementation of key policy design principles only then can ambitious targets be reached

2. Exploit substantial potential for improvement of policy effectiveness and efficiency: learn from international experiences

3. Remove non-economic barriers first

4. Deploy full basket of available RETs besides exploiting “low-hanging fruit” Minimise time and total costs in the long term

5. Allow a combination framework of incentive schemes in function of technology maturity level

Key question: How to lead the transition from the present system to a

level playing field in an open and fully competitive market

Recommendations


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Public Sector Energy R&D in IEA Countries

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

1974 1978 1982 1986 1990 1994 1998 2002 2006

Mill

ion

US

$ (

20

06

pri

ces

an

d P

PP

)

-1%

1%

3%

5%

7%

9%

11%

13%

15%

Sh

are

of E

ne

rgy

R&

D in

To

tal R

&D

Energy efficiency Fossil fuels Renewable energy sources Hydrogen and fuel cells Other Nuclear Share of energy R&D in total R&D

R&D investment is not adequate given the magnitude of the climate challenge. Government spending on energy R&D has fallen, while the private-sector is focused on

projects with short-term payoffs


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Relative Cost of Electricity Generation

from Wind and Solar

Wind power generation can already compete in certain locations,

Concentrated solar power is not far away in the sunbelt.

Solar photovoltaics has costs decreasing by up to 18% with every doubling of cumulative production, but as yet remains economic only in remote locations.

Source: World Energy Outlook 2006 and IEA databases

0 10 20 30 40 50 60 70 80

CCGT

Coal Steam

Wind

Concentrated SolarPower

Solar PV on good sites

US cents per kWh


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7Capital Costs of Renewables-Based

Power Generation Technologies

0

1 000

2 000

3 000

4 000

5 000

6 000

Windonshore

Windoffshore

Hydro Geothermal Biomass Solarthermal

Tide/wave Solar PV

dolla

rs (

2000

) pe

r kW

2002 2030

The capital costs of renewables are expected to continue to fall in the future, with solar PV registering the biggest decline


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7The learning curve effect

Deployment cost can be derived from the learning curves,

Which show a constant reduction of the investment cost to each

doubling of the installed capacity.

Average figures of the learning rate is: CSolarPower: 5% Wind on shore: 7% Wind off shore: 9% Photovoltaics : 20%

i.e. pv investment cost reduces by 20% each doubling of the

capacity installed


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7RE added value to the energy mix

enhancing security of supply - both for geopolitical-concentrated in few countries in critical regions- and infrastructure-power plants, pipeline, sea straits…

allowing energy sources diversification & reducing imports for consumers/ deferring production for exporters

mitigating risks in current energy portfolio and trends, due to volatility and instability of fossil prices;

creating framework for investment, enhancing industrial competitiveness – and opportunities for export,creating new jobs, favouring economic development

advancing environmental targets;providing unique access to energy services;


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7Create fair market rules

Energy prices do not reflect the true costs of generation options - a market failure:

the social and environmental costs of polluting energy are not internalised

the added values of RE for diversification, reduced portfolio risk, job creation, industrial competitiveness not accounted for

there are also massive subsidies to ‘conventional’ energy sources

To acknowledge the benefits of Renewable Energy, supportframeworks are established – not just “subsidies”

they should be viewed as compensation mechanisms for correcting these market failures and

a learning investments to reduce cost and improve performance


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Cheaper than conventional sources

Other costs

Average value of external

costs

GAS

0

2

4

6

8

10

12

14

16

Tensions due to scarcity of other fossil fuels

Price volatility

Resource shortage

Concentrated reserves

Transport, reprocessing and storage of waste

Scarcity of uranium

Geostrategic risks

COAL GAS WIND

+ 0.19

+ 0.51

Nuclear

+ 2.35+ 7.47

Cents $ / kWh

Maximum & minimum. generation

costs

Energy storage

Comparison of costs for different technologies

External costs are expressed as the average value estimated for each technology, based on a 2003 report by the European Commission showing maximum and

minimum external cost figures for electricity production in the EU


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Conclusions

A sustainable energy future is possible with a portfolio of clean

and efficient technologies, RE definitely among them.

The task will take decades and it will require significant investments

costs. But Business As Usual would cost more!! The task is urgent: it must be carried out before a new generation

of inefficient and high-carbon energy infrastructure is locked into place.

Implementing sustainable scenarios will require a transformation in: the way power is generated, the way homes, offices and factories are built and use energy, the technologies used for transport.

It will also take unprecedented co-operation between the

developed and emerging economies to achieve the results implied


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7Contact

[email protected]://renewables.iea.org

http://www.iea.org

[email protected]

Thanks to Enel for the support to IEA

Documents

© OECD/IEA - 2007 Renewable Energy Perspectives Roberto VIGOTTI Chair Renewable Energy Working Party International Energy Agency