Challenges of the current European Energy Policy Rafael Miranda CEO of Endesa President of Eurelectric Athens, 22th of May of 2008

Challenges of the current European

Energy Policy


Energy Policy

Rafael Miranda CEO of Endesa

President of Eurelectric

Athens, 22th of May of 2008




2

The global energy scenario will face profound change

The global energy scenario will face profound change

The world's population will grow to 8 billion in 2030

Global primary energy consumption will increase by 55% over the next 25

years

China and India will increase their primary

energy demand by 125%, equal to 45% of worldwide

growth

Source: World Energy Outlook 2007 (IEA)

World China

Primary energy consumption Primary energy consumption (Mtoe)(Mtoe)

India

2005 2030

+55%+55%

11.429

17.721

2.279

5.018

+125%+125%

3

The energy industry will need a huge investment effort in the future

The energy industry will need a huge investment effort in the future

Electricity industry will represent 53% (US$ 11,560 billion) of total investments. Electricity sector will gain ground versus other energy uses.

15% (US$ 1,728 billion) is earmarked for Europe.

In the next 25 years new global installed capacity will be equivalent to the one commissioned on the last 125 years.


53%

19%

3%

25%

Oil Coal Electricity Gas

2006-2030 investments 2006-2030 investments in the energy industry: in the energy industry:

US$ 21.936 billionUS$ 21.936 billion

4

The combat on climate change will be a relevant driver in the energy industry

The combat on climate change will be a relevant driver in the energy industry

If the European target of a 2ºC rise in temperatures is

reached, by 2080: 2,7 billion people will be exposed to the risks of

drought, 250M to malaria and 30M to hunger.

IPCC :”Most of the observed increase in global average temperatures since the mid-20th century is very likely

due to the observed increase in anthropogenic greenhouse gas concentrations”

Source: Source: Intergovernmental panel on climate change (ONU)Intergovernmental panel on climate change (ONU)

Global population affected by Global population affected by global warming in 2080global warming in 2080

(*)(*)

5

35%35%

25%25%

2%2%

21%21%

6%6%

TotalTotal 100%100%

32%32%

28%28%

2%2%

22%22%

5%5%

100%100%

Heavy dependence on fossil fuelsHeavy dependence on fossil fuels

20052005WEO 2030 WEO 2030

Fossil fuels will remain as the

dominant technology for

decades

Renewables will grow significantly in absolute terms

(2.800-3.500 TWh in 2030)

11%11% 11%11%RenewablRenewableses

Oil Oil

CoalCoal

HydroHydro

Natural gasNatural gas

NuclearNuclear

Global primary enGlobal primary energy ergy mixmix


Baseline Scenario: No inclusion of Government new energy policiesAlternative Scenario: Inclusion of additional measures from Governments to face SoS and Climate Change Issues. 450

millions of particles in the atmosphere

Baseline Baseline ScenarioScenario

31%31%

23%23%

3%3%

22%22%

7%7%

100%100%

14%14%

Alternative Alternative ScenarioScenario

6

Commodity prices would be driven in the future by its

scarcity

Commodity prices would be driven in the future by its

scarcity

Sources: EIA y BP Statistical Energy Review.

Reserves Reserves (in years of consumption)(in years of consumption) and main countries where they and main countries where they

are locatedare locatedSaudi Arabia, Iran, Iraq, Saudi Arabia, Iran, Iraq, Kuwait and VenezuelaKuwait and Venezuela

Russia, Iran, Qatar, Russia, Iran, Qatar, Saudi Arabia and A.U.E.Saudi Arabia and A.U.E.

U.S.A., Russia, China, U.S.A., Russia, China, India and AustraliaIndia and Australia

… and its prices have

risen sharply

+319%+319%

+143+143%%

+90%+90%

Price increasesPrice increases (dic03 vs. May08)(dic03 vs. May08)

Oil Oil

Natural Natural GasGas

CoalCoal

Energy commodities are scarce and mainly located in

geopolitically unstable countries…

41 years41 years(down from (down from

41 years in 1996)41 years in 1996)


66 years in 1996)66 years in 1996)


224 years in 1996)224 years in 1996)

7

20% of renewables in primary energy 20% of renewables in primary energy mixmix

20% CO20% CO22 emissions reduction in the EU emissions reduction in the EU (vs 1990), up to 30% reduction may be (vs 1990), up to 30% reduction may be setset

20% increase in energy efficiency20% increase in energy efficiency

In this challenging global environment, the EU has set the guidelines of its energy policy

In this challenging global environment, the EU has set the guidelines of its energy policy

12 fossil-fuel plants with CCS12 fossil-fuel plants with CCS

50% CO50% CO22 emissions reduction by 2050 (vs emissions reduction by 2050 (vs 1990)1990)

A real pan-European energy market A real pan-European energy market

Strategic European Energy Review 2007 (SEER)Strategic European Energy Review 2007 (SEER)

2009

2015

2020

2050

Developments in the Green

Package

Developments in the Green

Package

8

… however, climate change is a climate change is a globalglobal problem where Europe's

impact is not significantly relevant

EU is leading the combat on climate changeEU is leading the combat on climate change


World CO2 Emissions World CO2 Emissions (MtCO2)EU Emissions TargetsEU Emissions Targets % World CO2 % World CO2

EmissionsEmissions

20220200

-20% or --20% or -30%30%

(vs. 1990)

20220200

-50%-50%(vs. 1990)

EuropeEurope has set an ambitiousambitious emission reduction targets …

2005

26.620

2030

41.905

(15.285)

+57%+57%

ChinaChina

OthersOthers

2005 20320300

44% 47%47%

EuropeEurope 15% 10%10%

19% 27%27%

USAUSA 22% 16%16%

9

The EU is clearly committed to achieve its emission target through a further development of

renewables

The EU is clearly committed to achieve its emission target through a further development of

renewables

General characteristics:General characteristics:• Increase of 5.5% for all + individual additional

based on the GDP of the country

• No consider historical effort and potential of renewable is not consider

• 10% of biofuels in transport in 2020

• “National Action Plan” before march 2010

EU Renewables policy and breakdow by country 2020

X,X X,X X,X%

Renewables a 2005

Renewable effort

2006-2020

Renewables 2020+ =

Nota: the EU considers that renewable energy includes wind, solar, hydro, biomass, but do not include cogeneration. Only main countries represented.

27%

15%

18%

20%

18%

23%

20%

15%

11,1

11,3

11,5

12,2

12,7

13,7

21,8

6,9

8,7

8,5

5,8

10,3

5,2

1,3

9. Greece

8. Spain

Average UE

6. Germany

5. France

2. UK

1. Italy

7,8 7,221. Poland

Industry views of the Industry views of the European energy policy:European energy policy:

• Main effort made by the electricity sector

• Electricity prices will increase

• Incentives for renewables should be market based

• Homogeneous European policy in renewables is needed.

10

Renewables growth have significant benefits for Europe

Renewables growth have significant benefits for Europe

Renewables evolution in Renewables evolution in Europe Europe (ex-hydro) 2030 (TWh)

Impacts of renewables to Impacts of renewables to the European Industry:the European Industry:

99

1717

170170

429429

850850

1414

14684

217

259

78

552

58

1990 2005 2012 2030

Biomass and waste

WindGeothermal

Solar

Tide and wave

•No CO2 emissions

•No contribution to the acid rain formation

•Reduce external dependency

•Acomplishment of Kioto targets

•Create jobs

•Tech development that can benefit trade

•Some contributes with distributed generation to the electrical system

•High volatility

•Backup power needed

•Need to be subsidizedSource: World Energy Outlook 2007 (IEA)

11

A balanced energy policy is requiredA balanced energy policy is required

Energy efficiency

Diversification of technologies

Agreements with energy commodities

producers

More R&D investment

Development of interconnections

Market development

Su

sta

inab

ilit

yS

usta

inab

ilit

y

Security Security of supplyof supplyCompetitionCompetition

Minimising impact on the Minimising impact on the environment and climate environment and climate

changechange

Energy policy

12

Moving towards a single European market will be crucial Moving towards a single European market will be crucial

The EU ultimate The EU ultimate objective is to objective is to create a single create a single

electricity marketelectricity market

Regional markets Regional markets could be a could be a

necessary interim necessary interim stepstep

To achieve an efficient and competitive single market it is key to define an homogeneous and

stable regulation based on market mechanisms

CENTRAL WESTNORTHERNUK & IRELANDSOUTH WESTCENTRAL SOUTHCENTRAL EASTBALTIC

CENTRAL WESTNORTHERNUK & IRELANDSOUTH WESTCENTRAL SOUTHCENTRAL EASTBALTIC

13

All generation technologies must be considered

All generation technologies must be considered

NaturNatural gasal gas

CoalCoal

NucleNuclear ar

energenergyy

Wind Wind energenerg

yy

No single technology meets all these goals, but combined provide an optimal solution

Energydependency

Security ofsupply

Reserves

Cost

Price

volatility

Emissions

14

To solve the energy quiz it will be necessary the development of new

technologies

To solve the energy quiz it will be necessary the development of new

technologies

20102010 2050205020202020 20302030 20402040

CCS CCS technologiestechnologies

4G nuclear 4G nuclear fissionfission

Electric carsElectric cars 2G Biofuels2G Biofuels Wave energyWave energy Competitive Competitive

solarsolar Smart GridsSmart Grids

Nuclear Nuclear fusion fusion

Hydrogen car Hydrogen car and turbineand turbine

Unknown Unknown technologies technologies nowadaysnowadays

Offshore windOffshore wind 3G nuclear 3G nuclear

fissionfission Hybrid carsHybrid cars 1G Biofuels1G Biofuels Subsidized Subsidized

solarsolar Smart metersSmart meters

Towards a Towards a cero-emission cero-emission and efficient and efficient

energyenergy

15

The EU should promote energy efficiency more activelyThe EU should promote energy efficiency more actively

… however Europe still has significant room significant room

for improvementfor improvement

40%

60%

80%

100%

120%

140%

160%

180%

200%

220%

1994 2004

EU25 EU15 USA J AP

Europe Europe and Japan are economic regions with the

high levels of energy high levels of energy efficiencyefficiency…

Energy intensity Energy intensity (base 100: EU15 2004)

Primary energy intensityPrimary energy intensity(kpte / M€)

16

Summary Summary

The European Union is leading the combat on leading the combat on climate changeclimate change. A critical levers will be the development of renewables

Renewables have significant benefitsRenewables have significant benefits for both the European electricity system and the European economy, with some “cons” that must be offset

Europe should not leave aside the other main drivers of a balanced energy policy: Security of Supply and Competitiveness








Energy Policy


Energy Policy

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Challenges of the current European Energy Policy Rafael Miranda CEO of Endesa President of Eurelectric Athens, 22th of May of 2008