challenges for the growth of renewable energy …eneken.ieej.or.jp/data/4845.pdfchallenges for the...

© OECD/IEA 2013

Challenges for the Growth of Challenges for the Growth of Renewable Energy MarketsRenewable Energy Markets

Paolo Frankl

Head, Renewable Energy DivisionInternational Energy Agency

IEEJ Seminar, 22 January 2013, Tokyo

IEEJ: January 2013 All Right Reserved

© OECD/IEA 2013

Today’s Contents

Overview of global energy markets

Projection of renewables market in Asia

Japan’s challenges for deploying renewables

Grid integration of variable renewables

Conclusions


© OECD/IEA 2013

Today’s Contents

Overview of global energy marketsWEO 2012

1st Medium‐term RE Market Report 2012




Conclusions


© OECD/IEA 2012

The context

Foundations of global energy system shifting Resurgence in oil & gas production in some countries

Retreat from nuclear in some others

Signs of increasing policy focus on energy efficiency

All‐time high oil prices acting as brake on global economy Divergence in natural gas prices affecting Europe (with prices 5‐times US

levels) and Asia (8‐times)

Symptoms of an unsustainable energy system persist Fossil fuel subsidies up almost 30% to $523 billion in 2011, led by MENA

CO2 emissions at record high, while renewables industry under strain

Despite new international efforts, 1.3 billion people still lack electricity


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3 000 4 000 5 000 6 000TWh

2 000

A power shift to emerging economiesA power shift to emerging economies

The need for electricity in emerging economies drives a 70% increase in worldwide demand, with renewables accounting for half of new global capacity

Change in power generation, 2010‐2035

‐1 000 0 1 000

Japan

European Union

United States

China

TWh

Coal Gas Nuclear Renewables

India


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Outlook for renewablesOutlook for renewables

IEA, WEO 2012

Shares of renewables in different scenarios


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The multiple benefits of renewablesThe multiple benefits of renewablescome at a cost come at a cost

Renewable subsidies were $88 billion in 2011; over half the $4.8 trillion required to2035 has been committed to existing projects or is needed to meet 2020 targets

Global renewable energy subsidies

$50

$100

$150

$200

$250

2011 2015 2020 2025 2030 2035

Billion

2012‐2035

$960 billion

$2 600 billion

$1 200 billion

Existing capacity

Electricity:

2011‐2035Biofuels:


© OECD/IEA 2012

RE Market Report Analytical Framework Japan example

Generation and capacity forecast based on ‐ Power demand

Power sector structure

Grid and system integration

Economic attractiveness

Financing

Policy framework robustness

Identify drivers and

challenges for

renewable

deployment

-8%

-4%

0%

4%

8%

900

950

1 000

1 050

1 100

2005 2008 2011 2014 2017

Y-o-YChgTWh Power demand vs GDP

Demand Demand, Y-o-Y (RHS)GDP, Y-o-Y (RHS)

0

400

800

1 200

2005 2006 2007 2008 2009 2010 2011

TWh Power generation

Coal Oil Natural gasNuclear Hydro BioenergyWind Solar PV Geothermal


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Growth in renewable power is forecast to accelerate Hydropower remains the main renewable power source (+3.1% p.a.)

Non‐hydro renewable sources grow at double‐digit annual percentage rates (+14.3% p.a.)

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

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

Global renewable electricity production and forecast

Hydropower Wind onshore Bioenergy Solar PV

Geothermal Wind offshore CSP Ocean

TWh


© OECD/IEA 2012

Growth is led by non‐OECD countries Non‐OECD accounts for two‐thirds of the overall growth

China, Brazil, India lead; others grow significantly as well

OECD growth still largely driven by Europe but Americas and Asia‐Oceania make significant contributions

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

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

TWh Global renewable electricity production and forecast

OECD Americas OECD Asia-Oceania OECD EuropeChina Brazil India Rest of non-OECD


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Non‐hydro technology deployment spreads out Number of countries with cumulative capacity larger than 100MW

(can cover consumption of 100k households) increases significantly

Growth areas include Asia, Africa, Latin America and the Middle East

0

20

40

60

80

2005

2011

2017

2005

2011

2017

2005

2011

2017

2005

2011

2017

2005

2011

2017

2005

2011

2017

2005

2011

2017

Onshore wind

Offshore wind

Bioenergy Solar PV CSP Geothermal Ocean

Number of countries with installedcapacity above 100 MW

Non-OECD

OECD


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Today’s Contents

Overview of global energy market




Conclusions


© OECD/IEA 2012

OECD Asia‐Oceania growth mostly in solar PV

Japan grows (mostly solar PV) under generous FiTs and uncertain nuclear situation

Australia’s growth is centered around wind and solar PV

New Zealand continues its steady growth

Korea and Israel grow from a low base

0

50

100

150

200

250

300

2011 2012 2013 2014 2015 2016 2017

OECD Asia-Oceania forecast renewable generation

Hydropower Wind onshore Bioenergy Solar PVGeothermal Wind offshore CSP Ocean

TWh

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11

Japan power generation by share, 2011

Nuclear Combustible Fuels Hydro Other


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ASEAN a significant source of other Asia growth

Geothermal expands in Indonesia and the Philippines

Significant hydropower additions expected in Vietnam

Thailand continues to grow a portfolio of renewable power sources – biomass, biogas, waste‐to‐power, solar PV, wind

0

2

4

6

8

10

12

14

16

2011 2012 2013 2014 2015 2016 2017

GW Global geothermal capacity forecast

USA Philippines Indonesia Mexico New Zealand RoW


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China accounts for 40% of global growth

Drivers: Growing energy needs

Diversification

Government targets

Ample low‐cost finance

Robust manufacturing

Challenges: Pricing framework

Priority dispatch

Grid upgrades

Prohibitive licensing for small‐scale systems

0

300

600

900

1 200

1 500

1 800

2011 2012 2013 2014 2015 2016 2017

China forecast renewable generation

Hydropower Wind onshore Bioenergy Solar PV Wind offshore CSP

TWh

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

2 000

4 000

6 000

8 000

2005 2008 2011 2014 2017

Y-o-YChg

TWh China power demand vs GDP growth

Demand Demand, Y-o-Y (RHS) GDP, Y-o-Y (RHS)

Challenges: Pricing framework

Priority dispatch

Grid upgrades

Prohibitive licensing for small‐scale systems


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Today’s Contents



Japan’s challenges for deploying renewables A specific focus on solar PV


Conclusions


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Japan’s Power Sector: Renewables & energy efficiency leading the charge

0

200

400

600

800

1 000

1 200

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

TWh Renewables

Oil

Nuclear

Gas

Coal

Japan electricity generation by source

A decline in nuclear is compensated by a 3‐fold increase in electricity from renewables, a continued high reliance on LNG imports & improvements in efficiency


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Japan grows strongly under uncertain nuclear situation and new feed‐in tariff policy

Drivers: Uncertainties about

nuclear restart

New feed‐in tariffs

Good match of solar PV for shaving peak load

Challenges: Power system

fragmentation

Relatively high capital costs of renewable energy

Location of wind and geothermal resources far from demand centres

0

20

40

60

80

100

120

140

160

180

2011 2012 2013 2014 2015 2016 2017

Japan forecast renewable generation

Hydropower Bioenergy Solar PV

Wind onshore Geothermal Wind offshore

TWh

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11

Japan power generation by share, 2011

Nuclear Combustible Fuels Hydro Other


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Solar PV ‐ from volatility to smoother growth Short term volatility and slowing growth in Europe

• In some markets, cost reductions outpaced incentive reductions

Japan’s high incentives could cause deployment to surge to unsustainable levels if incentives are not adjusted over time

0

5

10

15

20

25

2010 2011 2012 2013 2014 2015 2016 2017

GW Annual capacity additions , solar PV

OECD AO OECD AM OECD EUR China Rest of non-OECD


© OECD/IEA 2012

Ongoing Issues for PV

Demand in 2011(New Installations 30GW)

Supply in 2011(Manuf. Capacity 55 GW) Impact on electricity

bills in some countries German EEG‐surcharge

will increase 45% in 2013

But likely to stabilise from 2014 on

Emerging trade disputes Imbalance is smaller if

whole value chain is taken into account


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PV Module Prices

Technology improvements and economies of scale drive sharp cost reduction

Overcapacity leads to price setting below costs

Short-term silicon shortage

Sustainable priceLowest market price


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2012 PV Market stronger than expected

Another >7 GW year in Germany

Italy slows down but less than expected, other markets accelerate

Cumulative world capacity around 100 GW


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Today’s Contents





Conclusions


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Variability and uncertainty are not new But at high shares (of VRE) the challenge will be considerable

Residual demand shape is irregular (particularly wind, wave)

A power system perspective is important

Demand

Residual demand


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Grid Integration of Variable Renewables(GIVAR) 2011: IEA published technical assessment of integration

Key points: Feasible share of variable RE depends on system flexibility; no principle ceiling

Technical assessment of power system flexibility based on case studies

New phase: Refined definition of flexibility

Assess Economics of Flexibility


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There are 4 flexible resources

Dispatchablepower plants

Energy storage facilities

Interconnection with adjacent

markets

A biomass‐firedpower plant

A pumped hydro facility

Scandinavian interconnections

Demand side Response

(via smart grid)

Industrial

residential

Flexibility is key

Source: IEA Harnessing Variable Renewables 2011


© OECD/IEA 2012

GIVAR IIIPublicationGIVAR IIIPublication

Case Studies• Market review • Quantitative methods

Case Studies•• Market review Market review •• Quantitative Quantitative methodsmethods

Variable RE ImpactAnalysis

Variable RE ImpactAnalysisAnalysis

Market designand policy

recommendations

Market designMarket designand policy and policy

recommendationsrecommendations

Flexible ResourcesAnalysis

Flexible ResourcesAnalysisAnalysis

GIVAR III Scope & ObjectivesIEEJ: January 2013 All Right Reserved

© OECD/IEA 2012

Case Study Regions

JapanES&PT

PJM, ERCOTPJM, ERCOT

USIndia

Tamil Nadu for wind, Rajasthan for

solar

Tamil Nadu for wind, Rajasthan for

solar

China

Inner MongoliaInner Mongolia

NW Europe

NOR, DNK, SWE, FIN, DEU, GBR, IRL,

FRA

NOR, DNK, SWE, FIN, DEU, GBR, IRL,

FRA


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FAST 2.0

FAST FAST 2.02.0

Input

Flexible Resources

Flexible Generation

DSMInter-connection

Storage

Variable Resources

Wind

Load

Solar

Output

Wind and solar statistics

Net loadstatistics

Penetration / curtailment

curves

Start-up of conventional

units

Revised FAST Tool


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Relevance for Japan

Grid integration of renewables will be key issue with growing shares of v‐RE

IEA analysis brings together expertise from leading institutions world wide

Co‐operation could be very fruitful: Benefit from international best practice

Help the IEA to better understand the situation in the Japanese system, which is an important and special case


© OECD/IEA 2012

Is renewable energy under pressure? In the short term, there are pressure indicators, particularly

in the most dynamic segments: solar PV and wind Challenging macroeconomic and financing conditions

Policy uncertainty, (e.g. stop‐and‐go decision making) in some key markets

Economic incentives cut in some markets

Market competition from other energy sources, particularly gas in the US

Industry upheaval and integration challenges

In the long term, larger integration issues to emerge Renewables becoming more competitive over time

Market design reforms needed for high penetrations of low marginal cost, variable renewables into power systems

Yet, the overall renewable outlook is quite positive Robust fundamentals and drivers remain; huge long‐term potential of RE

Outlook will depend on policy robustness


© OECD/IEA 2012

Policy messages

Clarity, predictability and a long‐term orientation of RE policy frameworks are keys to maintaining investment Policymakers should avoid stop‐and‐go decision making, which can

cause investment to stall

These frameworks should focus on the whole portfolio of renewables (incl. hydropower, bioenergy, RE heat, etc.)

Meanwhile, there needs to be increased focus on market designs that integrate higher levels of renewables in power systems (both variable and dispatchable)

A radical turn away from renewables now would be more costly in the long run in terms of climate costs and energy import bills


© OECD/IEA 2012

For further insights and analysis…

The Medium‐Term Renewable Energy Market Report 2012 online at:

www.iea.org

Thank you for your attention!

[email protected]


Contact: [email protected]

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