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Abu Dhabi, 1 November 2016
Decarbonisation pathways to 2050
CONTEXT AND SCOPE
2
1. Analysis of RE costs,
cost reduction potentials and
best practice exchange
2. Best practice exchanges on
(i) enabling policy framework
(ii) integration of high shares of
variable renewables
3. Development of a renewable
energy specific risk mitigation
facility
Five Actions on a voluntary opt-in basis
4. Assessment of country
renewable energy technology
potentials and development of
roadmaps
5. Accelerate deployment of
modern bioenergy
The G20 Toolkit
September 2016
4
Decarbonisation study
• New study: “Global Energy Transition: Shifting Investments for
Decarbonisation”
• Objective: identify investments in low-carbon technologies in
the areas of power generation, transport, buildings and industry
to enable energy sector decarbonisation, whilst supporting
security of energy supply, sustainable development and
poverty alleviation
• Commissioned by Germany as input to the G20 discussions
• Closely coordinated with the International Energy Agency (IEA)
• Feeding to final OECD study of decarbonisation of the global
economy
5
IRENA decarbonisation study content
• Builds on IRENA’s REmap 2030 analysis, and expand to 2040/50 with
national plans & credible third-party sources
• Assess renewable energy, energy efficiency technology potential (CCS
& nuclear, if needed) by G20 country and sector
• Combine options into scenarios that meet the climate objective
• Assess the economics of scenarios: investments, stranded assets
• Macro-economic assessment: welfare, GDP, trade, jobs - E3ME model
• REmap country expert group for review
• With support and consultation of academia:
Institute for Sustainable Futures (University of Technology Sydney),
Smith School of Enterprise and Environment (Oxford University)
Numerous globally acknowledged climate experts (IPCC; IDDRI/DDPP;
Global Carbon Project; PBL; Climate Analytics; IIASA)
6
Initial observations from IRENA’s
2050 decarbonisation analysis (DRAFT)
• Global temperatures have risen by 0.9 oC and continue to rise by 0.03 oC/yr
• By 2045, 2 oC will be reached – need to stop concentration rise by 2050
• Large uncertainty remains what this means for carbon budget
• IRENA study energy emission budget: 640 Gt (2015-2050)
• Very little room to delay, and delayed action means failure
• Renewables and efficiency can account for more than 85% of energy
emission mitigation
• RE share in TPES needs to reach >70% by 2050. Uncertainties remain:
Development of country energy use patterns
Costs, maturity and availability of low-carbon technologies
• Efficiency, electrification and bioenergy as major end-use sector solutions
• Average annual investments needs to 2050 USD 840 bln/yr, efficiency
uncertain
• First estimates of stranded assets show significant impact of delayed policy
action – buildings are key, especially in cold climates
• Air pollution, climate and GDP benefits outweigh the costs
DETAILED DRAFT
FINDINGS
7
8
Global temperature change – 0.9 oC
Source: NASA (2016)
~0.03 oC/year fairly linear increase over the past 25 – 30 years
At this rate, by 2050 2 oC will be reached
+0.9oC
9
IRENA’s carbon emission budget
(DRAFT)
0
5
10
15
20
25
30
35
2015 2025 2035 2045 2055 2065
[Gt
CO
2/yr
]Energy emissions pathways for 2 degrees/66%
Total CO2 emission budget for 2015-2050: 825 Gt CO2
Max level emissions for decarbonisation: 2030 20 Gt & 2050 5 Gt
On average 25 Gt per year in 2015-2050, and annual decline of 0.7 Gt CO2
Energy-related:
640 Gt CO2
Non-energy-related
(industry, waste, fugitive):
185 Gt CO2
10
Role of renewable energy and
energy efficiency
Doubling the share of renewables by 2030 would put the world on a pathway
to limiting global warming to 1.5-2.0 degrees
Renewable energy reduction potential on par with efficiency potential
Source: IRENA (2016)
11
Country Reference Cases (DRAFT)
0
5
10
15
20
25
30
35
40
45
50
2010 2011 2012 2013 2014 2030 2050
China
India
USA
Indonesia
Russian Fed.
Other EU-28
Japan
Brazil
Mexico
Canada
Australia
South Africa
Rep. of Korea
Saudi Arabia
Germany
Argentina
Turkey
United Kingdom
Italy
France
Non-G20
Energy-related CO2 emissions (Gt/yr)
640 Gt CO2
+940 Gt CO2
<2C pathway
Reference Case growth in total energy-related CO2 emissions of 40% in
2015-2050
Emissions must decline by 85% to remain in the proposed carbon budget
65% of the
global CO2
emissions
20%
15%
12
Sector Reference Cases (DRAFT)
0
10
20
30
40
50
2014 2030 2050
Power and district heat Industry
Transport Buildings
Other Non-G20
Energy-related CO2 emissions (Gt/yr)
Largest effort required in
power, RE progress well
Transport & industry are
largest emitting end-users,
but large tech challenges
Small emitter, but large
investment implicationsBuildings
Transport
Industry
Power
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Doubling 2030 REmap 2050 - biomass REmap 2050 -electrification/biomass
REmap 2050 -electrification
Ren
ewab
le e
ne
rgy
shar
e
Coal Oil Gas Nuclear Hydro Biofuels Other renewable energy
20-22 Gt/yr
13 Gt/yr
8 Gt/yr
3 Gt/yr
Total primary energy supply (PJ/year)
13
Developments in energy sector to
2050 (DRAFT)
70-90% RE
Realising RE share of 70-90% in TPES by 2050, from 30% in 2030
GHG policy implies 1.5-2 percent point per year growth in RE share
About 10x growth from current progress
14
Developments in the power sector
(DRAFT)
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Doubling 2030 REmap 2050 - biomass REmap 2050 -electrification/biomass
REmap 2050 -electrification
Coal Oil Natural gas
Nuclear Hydro Solid biofuels
Biogas Solar PV Wind
CSP Geothermal Ocean / Tide / Wave
Installed power generation capacity (GW)
Electrification will be key. With limited biomass available it
implies even more ambitious electricity end-use coupled with
RE power
15
Renewable energy by sector &
application (DRAFT)
0% 20% 40% 60% 80% 100%
Power generation
District heat generation
Low temp. (food, textile, others)
Medium temp. (chemicals, pulp &…
High temp. (cement, iron steel)
Space heating
Water heating
Cooking
Road (passenger cars)
Road (freight)
Railways (for diesel)
Aviation, Shipping
Road (others)
Ind
ust
ry (
hea
t)B
uild
ings
Tran
spo
rt
REmap 2050 - electrification REmap 2050 - Mix REmap 2030 2013/14
RE share
Largest challenges in industry and transport sectors
16
Renewable energy by sector &
application (DRAFT)
Focus so far on 1/3 of the global energy use of sectors RE
knowledge limited
Industry, low and medium
temperature15%
Buildings, heating20%
Buildings, electricity
5%Transport,
passenger road18%
Transport, rail1%
Transport, other6.7%
Other sectors3%
Non-energy use8%
Petroleum refineries
2%
Industry, high-temperature
15%
Buildings, cooling3%
Transport, aviation
1.1%
Transport, navigation
0.5%
Transport, public0%
Transport, freight1%
17
Building stock developments
(DRAFT)
• About 80% growth in building stock between now and 2050
About 85% of the global growth will be in China and India
• To achieve 2050 targets, >90% of existing building stock needs to be retrofitted and
2/3 of new buildings to 2050 need to be built very efficient (-80% energy use)
0
50
100
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Global building stock evolution
Existing buildings - no retrofit Existing buildings - mild retrofit (-20%)
Existing buildings - strong retrofit (-30%) New built - efficient (-50%)
New built - very efficient (-80%)
floor space, billion m2
MACRO-ECONOMIC
IMPACTS
18
19
Renewable energy boost global GDP
Source: IRENA (2016)
• Doubling the share of renewables by 2030 would increase global
GDP by up to 1.1% or USD 1.3 trillion
• The increased investment in renewable energy deployment
triggers ripple effects throughout the economy
20
Renewable energy will create more jobs
Source: IRENA (2016)
24.4 million
13.5
million
From 9 million today, to 24 million jobs
in renewable energy in 2030 (13
million in the Reference Case)
Overall energy sector employment
effects are slightly positive
As could be expected, all large
employers are G20 countries
ECONOMIC COST
INDICATORS &
STRANDED ASSETS
21
22
A number of economic cost indicators
will be assessed
• Annualized system cost increase in addition to the
Reference Case
Annualized incremental RE+EE cost – FF cost savings +
stranded assets
• Investment support for renewable energy – net cost
of all options with incremental cost
• Investment volume of RE and EE options (absolute,
incremental)
• Stranded assets
• Net investment impact (Incremental RE+EE –
reduced fossil fuel investments)
• Welfare effect – cost minus savings
• Possible definitions in the energy context
Loss in valuation of fossil fuel reserves (e.g. Exxon this week)
Remaining value of assets (e.g. power plants, industrial equipment) that is
depreciated
Lost value of supporting physical infrastructure (e.g. gas stations), human
resources (e.g. oil sector expertise), etc.?
Definitions for stranded assets vary significantly, risking its under-estimation
• IRENA’s proposed approach to stranded assets
Stranded asset definition used in this case:
Remaining book value of upstream, power generation and end-use
sector assets that would be substituted - before the end of their
economic lifetime and without recuperation of any remaining value - to
achieve 2050 decarbonisation targets 23
What are stranded assets?
• Preliminary findings:
Upstream: - up to USD 5.1 trillion, 85% oil
- based on current market valuation of upstream producers,
adjusted by a reduced outlook for production levels
Power: - up to USD 2.4 trillion, 60-70% coal
Buildings: - up to USD 1.3 trillion in Germany; for other countries work in
progress, but greatly exceeds stranded assets in other sectors
• Stranded assets between two pathways compared:
REmap: accelerated renewables deployment as per REmap up to 2030 and 2050
Delayed policy action: business as usual up to 2030, accelerated path afterwards to
reach same outcomes by 2050
• Industry, other infrastructure TBD but probably of secondary importance
• Stranded assets depend critically on CO2 emission reduction objective
• New infrastructure over the next 2 decades that is incompatible with deep
CO2 emission reduction will result in additional stranded assets 24
Estimating stranded assets (DRAFT)
-
500
1,000
1,500
2,000
2,500
201
6
201
8
202
0
202
2
202
4
202
6
202
8
203
0
203
2
203
4
203
6
203
8
204
0
204
2
204
4
204
6
204
8
205
0
Stranded power generation assetsREmap 2030 - REmap 2050
Oil Gas CoalCumulative
USD bn
-
500
1,000
1,500
2,000
2,500
201
6
201
8
202
0
202
2
202
4
202
6
202
8
203
0
203
2
203
4
203
6
203
8
204
0
204
2
204
4
204
6
204
8
205
0
Stranded power generation assets Reference Case 2030 - REmap 2050
Oil Gas CoalCumulative
USD bn
• Stranded assets increase significantly if policy action is delayed:
USD 1 650 billion with REmap, ~60% of which coal
USD 2 390 billion (+45%) with delayed policy action, ~70% of which coal
• Assumed full decarbonisation of power sector by 2050 (0 GW coal, gas, oil)
With gas still online in 2050, stranded assets reduce by c. USD 600 billion
3
Stranded assets –
preliminary findings (power) (DRAFT)
26
• With delayed policy action, 2/3 of stranded assets in US, EU, China, India
China and India account for more than half of all coal stranded assets
US, EU, Russia account for nearly half of all gas stranded assets
China, 458
Rest of World, 267
US, 220
India, 183
EU, 169
Russia, 87
Indonesia, 70
Australia, 36
KSA, 34
Japan, 31
RoK, 27
Turkey, 18
Mexico, 17 Brazil, 13
Canada, 11
Argentina, 8
RSA, 0
Stranded power generation assets -REmap 2030-2050
Cumulative
USD bn in
2050
China, 588
US, 583
Rest of World, 357
India, 246
EU, 188
Russia, 89
Indonesia, 87
Australia, 49
Japan, 46 KSA,
34
Mexico, 31
RoK, 30
Turkey, 19
Brazil, 18
Canada, 14
Argentina, 9
RSA, 0
Stranded power generation assets -Reference Case 2030 - REmap 2050
Cumulative
USD bn in
2050
Stranded assets –
preliminary findings (power) (DRAFT)
Building stock evolution (Germany)
(DRAFT)
• With REmap:
Reduction in direct use of fossil fuels of 58% by 2030: 90% by 2050
100% of new buildings from 2020 without direct fossil fuel use
Both retrofits and new buildings not consuming fossil fuels include EE/RE measures
(insulation, efficient doors/windows, heat pumps)
- 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0
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Germany building stock evolution REmap 2030 - REmap 2050
New buildings - not consuming fossil fuels New buildings - consuming fossil fuels
Existing stock - not consuming fossil fuels Existing stock - consuming fossil fuels
floor space, billion m2
• Estimating buildings stranded assets:
Construction value lost when undertaking a deep retrofit:
• Estimated as difference between:
1. % of construction value for retrofit to achieve zero fossil fuel use, and
Estimated at ~20% of construction value for residential buildings
2. premium to construction value to achieve zero fossil fuel use in new building
Estimated at ~10% of construction value for residential buildings
• Intuition: e.g. difference between cost of installing double-glazed windows vs. first
installing single-glazed windows, and then replacing by double-glazed windows:
– Stranded asset: value of single-glazed windows
• Estimated for Germany at:
REmap: USD 540 billion over 2016-2050 (undiscounted)
Delayed policy action: USD 560 billion over 2016-2050 (undiscounted)
• Higher than REmap because more buildings are constructed (until 2030) that
consume fossil fuels, which later have to be retrofitted
Stranded assets –
preliminary findings (buildings) (DRAFT)
• For a 100% reduction of direct fossil fuel use in buildings, the construction value
of the remaining building stock is unsuitable for retrofit (~10% of building stock
today) would need to be added to this:
– Estimated for Germany at ~USD 750 billion (present value)
• Up to ~USD 1.3 trillion in total stranded assets in Germany for full
decarbonisation of building sector by 2050;
– Germany only 3% of global building stock today, so worldwide can reach
up to USD 100 trillion
• Analysis for other countries in progress;
– Rest of EU: similar dynamics to Germany
– US: faster building stock turnover, more opportunities to avoid stranded
assets
– Asia, RoW: most parts direct use of fossil fuels in buildings is lower, higher
share of electricity due to lower demand for space heating and fewer
Stranded assets –
preliminary findings (buildings) (DRAFT)
THANK YOU!WWW.IRENA.ORG/REMAP
30
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