© OECD/IEA 2014

Role of Electricity and Renewables in IEA Scenarios

Dr. Paolo Frankl,

Head, Renewable Energy Division International Energy Agency

IEA-SGCC Dialogue on Global Energy Interconnections, Beijing 22 July 2015

© OECD/IEA 2015

Contents

Towards COP21 - Climate pledges: a first step in the right direction

Renewables deployment: drivers, recent trends and medium-term forecast

The role of electricity in long-term scenarios

Flexible power systems to integrate large shares of wind and solar

The importance of transmission and interconnections

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Climate pledges shift the energy sector

One-quarter of the world’s energy supply is low carbon in 2030; energy intensity improves three-times faster than the last decade

Renewables reach nearly 60% of new capacity additions in the power sector; two-thirds of additions are in China, EU, US & India

Natural gas is the only fossil-fuel that increases its share of the global energy mix

Total coal demand in the US, Europe & Japan contracts by 45%, while the growth in India’s coal use slows by one-quarter

Climate pledges for COP21 are the right first step towards meeting the climate goal

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1. Peak in emissions: IEA strategy to raise climate ambition

Global energy-related GHG emissions

Five measures – shown in a “Bridge Scenario” – achieve a peak in emissions around 2020, using only proven technologies & without harming economic growth

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%

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Renewable electricity projected to scale up by 45% from 2013 to 2020

Around 26% of world electricity from RE in 2020

Strong momentum for renewable electricity

Global renewable electricity production, historical and projected

0%

5%

10%

15%

20%

25%

30%

5001 0001 5002 0002 5003 0003 5004 0004 5005 0005 5006 0006 5007 0007 500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

TWh

Hydropower Bioenergy Onshore wind

Offshore wind Solar PV Geothermal

STE/CSP Ocean % total generation (right axis)

Historical data and estimates Forecast

Natural gas 2013

Nuclear 2013

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Different Drivers and Growth Trends

Renewables account for 80% of new generation in OECD

Decarbonisation main driver

Limited upside in stable markets with slow demand and growing policy risks

Cumulative change in gross power generation by source and region, 2013-20

Renewables are largest new generation source in non-OECD, but meet only 35% of growth

Main drivers:

Fast-growing demand

Energy security and diversification

Local pollution

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

2013 2014 2015 2016 2017 2018 2019 2020

TWh

OECD

Renewable generation Conventional generation

2013 2014 2015 2016 2017 2018 2019 2020

Non-OECD

Renewable generation Conventional generation

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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

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• Combination of technology cost reduction, better resources, appropriate regulatory framework attracting financing

• Long-term PPAs and price competition effective drivers for reducing costs

Recent progress in RE electricity generation costs

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Utility PV

Recent long-term remuneration contract prices (e.g. auctions and FITs)

STE

India 88 $/MWh

Chile 87 $/MWh

USA 75 $/MWh

South Africa 65 $/MWh

Brazil 81 $/MWh

Dubai 60 $/MWh

Morocco 160 $/MWh

South Africa Base 124 $/MWh Peak 335 $/MWh

South Africa 51 $/MWh

USA 48 $/MWh China

80 - 100 $/MWh

Brazil 54 $/MWh

Turkey 73 $/MWh

Germany 67-100 $/MWh

Ireland 69

$/MWh

Australia 65 $/MWh

Egypt 41 $/MWh

Germany 96 – 106 $/MWh

Wind onshore

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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%

Source: ETP 2014

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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

Source: ETP 2014

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Electricity Penetration increases everywhere in 2DS

Differences in growth of electricity demand and sectoral distribution require targeted systems development plans

Source: ETP 2014

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Spillover effect of decarbonising electricity in the 2DS

Electricity decarbonisation reduces emissions from sectors already electrified, without the need for further end-use investments.

Source: ETP 2014

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Systems thinking and integration

Today’s energy system paradigm is based on a unidirectional energy delivery philosophy

A sustainable electricity system is a smarter, multidirectional and integrated energy system that requires long-term planning for services delivery

Source: ETP 2014

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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

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Importance of grids

4 000 km 4 000 km 4 000 km

Continental Dimension

BRAZIL EUROPE

Interconnected continental-scale balancing areas smoothen out variability and allow to exploit seasonal complementarities

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Future possible interconnections – Solar Thermal Electricity

Source: Adapted from STE Roadmap 2014

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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 streams

• 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

• Electrification of end-use

• Interconnections

• Demand side response

• Storage

• System-friendly RE design

• Market design

• Smart grids

Areas for innovation

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For more info on Smart Grids and RE

“The Power of Transformation: Wind, Sun

and the Economics of Flexible Power

Systems” (2014)

“Medium-Term

Renewable Energy

Market Report” (2014)

“Energy Technology Perspectives

2015”

“Technology Roadmap How2Guide for Smart Grids in Distribution

Networks: Roadmap Development and Implementation” (2015)

“Smart Grids, IEA Technology Roadmaps” (2011)

Thank you for your

attention!