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Global Trends in Energy, Power & Utilities

Manfred WiegandGlobal Power & Utilities LeaderSeptember 2011

www.pwc.com/utilities

19.08.2011

Content

Part 1 – Global Primary Energy Trends

Part 2 – Global Power & Utilities Trends

Part 3 – China

Part 4 – Global Renewable Energy Trends

Part 5 – Wind Energy

Part 6 – Solar Power

Part 7 – Biomass

Part 8 – Industry Consolidation

Part 9 – Investments in Power & Utilities in Brazil

2September 2011

PwC

PwC

Global Primary Energy Trends

PartSeptember 2011Global Trends in Energy, Power & Utilities

Source: IMF World Economic Outlook, July 2011


Global Economy on a Path of Fragile Recovery after strong Rebound 2009

September 20111

PwC

Presenter

Presentation Notes

Anstieg absolut Nuklear: Kapazitäten 17,6%; Erzeugung 23,8%


Development of Primary Energy¹ consumption

1.7

-1.5

0.7

2.8

5.05.4

8.7

3.8

-2.2

-0.2-1.0

1.2

3.42.6

4.2

7.3 7.3

-5.0 - 5.9 -4.9

-1.5

3.0

7.5

8.0

3.13.7

3.2 3.5

5.6

7.5

8.5

11.2

9.2

5.4

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

10,0

12,0

USA EU OECD World Non-OECD Asia Pacific China India Middle East

Growth rate by region in %

% Change 2007 over 2006% Change 2008 over 2007% Change 2009 over 2008% Change 2010 over 2009

1.8

• Strong rebound in 2010 in all regions of the world after “first time ever” negative growth in 2009• Global growth 5.6 % highest since 1973 reaching a total of ≈ 12,000 Mio toe• China (20.3 % share) surpassed US (19 % share) in 2010 as the world’s largest energy consumer• About 70 % of worldwide consumption growth occurred in non-OECD countries (thereof 38.4 % in China)

Source: BP Statistical Review of World Energy, 2011¹) incl. Renewable Energy used in Power Generation

September 20112

PwC


Development of Primary Energy¹ Consumption

-4.5

4.4

2.3

3.9

6.0

0.8

3.0

-1.4

3.6

4.3

0.8

-5.9

1.72.2

-0.4

-5.3

3.93.5

1.7

4.6

8.5

5.5

-8

-6

-4

-2

0

2

4

6

8

10

Germany Africa South Africa South & Central America

Brazil Russia

Growth rate by region in %


-0.8

1.6

Source: BP Statistical Review of World Energy, 2011¹) incl. Renewable Energy used in Power Generation

September 20112a

PwC

-2.1

1.5

3.64.3

1.7

12.4

-0.5 -0.3

2.6

1.1

3.9

13.6

-0.9

-2.2 -2.6

-1.1

1.6

10.9

2.03.0

7.4 7.6

5.3

13.4

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

Nuclear Energy Oil Natural Gas Coal Hydroelectricity Renewables for Power Generation

Growth rate by fuel type in %% Change 2007 over 2006% Change 2008 over 2007% Change 2009 over 2008% Change 2010 over 2009

Source: BP Statistical Review of World Energy, 2011


Development of Primary Energy Consumption by Fuel Type

6.5 %

33.6 % 23.8 % 29.6 % 5.2 % 1.3 %

2010 Share of total global PE consumption

87 % 6.5 %

September 20113

PwC

Oil 28%

Gas22%

Coal24%

Nuclear Power

8%

Hydro3%

Biomass (traditional)

4%

Other Renewables

4%Biomass (modern) 7%

+ 36%

2035

16.750 MtoeØ 1,2% p.a.1)

Source: WEC: Energie für Deutschland; International Energy Agency: World Energy Outlook 2010, New Policies Scenario, PwC1) CAAGR (Compound average annual growth rate)

41%


Future Prospects of Primary Energy Consumption and Fuel Mix (2008 – 2035)

Oil33%

Gas21%

Coal27%

Nuclear Power

6%

Hydro2%

Biomass (modern)

4%

Other Renewables

1%

Biomass (traditional)

6%

12.300 Mtoe

2008

1990 2010 2035OECD countries Non-OECD countries

16,7 Mtoe12,7 Mtoe8,8 Mtoe

World energy consumption in Mtoe

46%

54%

56%

44%

67%

33%

• Fossil fuels continue to dominate but their relative share reducesfrom 81% (2008) and 87% (2010) to 74% in 2035

• Gas is the fastest growing fossil fuel (+43%)• „Modern renewables“ are tripling and their share doubles to 14%• Nuclear growth +25% = pre-Fukushima• OECD countries growth 3%; Non-OECD countries growth 64%• 2035 Non-OECD accounts for 2/3 of world PE demand

September 20114PwC

Presenter

Presentation Notes



Fossil Fuels dominate Global Growth in Demand

• Demand for each fuel sourceincreases

• Fossil fuels (FF) represent 53% of growth in demand up to 2035− Gas incurrs the largest growth

(+43%) followed by coal andoil

• Other Renewables are the fastest growing fuel type with almost Φ8 %/year but come from a smallshare of 0.7 % total PE demandin 2008

Primary Energy

Source: International Energy Agency: World Energy Outlook 2010, New Policies Scenario, PwC

September 20115

PwC


Primary Energy Consumption by Region and Fuel Type

Non OECD-countries drive consumption offossil fuels and demand in primary energyand electricity (2008 – 2035)

World primary energy demand by region

+ 36%

Incremental primary energy demand by fuel and region, 2008-2035

RegionPrimary Energy

Consumption

ElectricityConsumption

India + 127% + 274%

China + 75% + 175%

Middle East + 69% + 109%

EU - 1% + 18%

OECD + 3% + 22%

Source: International Energy Agency: World Energy Outlook 2010, New Policies Scenario, PwC

September 20116

PwC


Renewables becoming the Mainstream

Primary Energy demand of modern renewable energy

Source: IEA: WEO 2010, New Policies Scenario, PwC

= Total: 840 Mtoe

= Total: 2.400 Mtoe

The consumption of modern renewable energy will triple between 2008 and 2035

September 20117

Driving force: Power sector share of RE in generation mix rises from 19 % in 2008 to 32 % in 2035

PwC


Global Investment Needs for the Energy Sector: 32.8 Trillion US$¹ over 2010-2035 CumulativeEnergy-Supply Investment

Power

generation60 %

Transmission & distribution

40% Mining

91%

Transportation

9%

Exploration and development

85 %

Refing12%

Transportation3 %

Exploration & development

64 %LNG chain

9 %

Transmission & distribution

27 %

Power 51%

$16.6 trillion

Oil 24%

$ 8.1 trillion

Gas22%

$7.1 trillion

Coal3%

$0.7 trillion

Distribution

69 %

5,900 GW

$4.8 trill. $3,3 trill.

$ 7.0 trill.$ 9.6 trill.

• Over US$1.200 bn/year is needed to modernize the global energy sector, of which 64 % will take place in non-OECD countries (16 % in China).

• Oil, gas and coal investments to supply power stations bring share of power investments up to 62 % or US$20.5 trillion.

Distribution69 %

4.8 trillion

Transmission31 %

$2.2 trill.

Renewables60 %

2,800 GW$ 5.7 trill.

Thermal40 %

3,100 GW$ 3.9 trill.

Biofuels<1%

$0.2 trillion

Source: International Energy Agency; World Energy Outlook 2010, New Policy Scenario, PwC ¹in 2009 US$

September 20118PwC


Driving Forces behind Global Energy Demand

6.9 bn

8.6 bn9.2 bn

201020352050

P

Source: WEC, UN, IEA, PwC

• + ¼ until 2035 and 1/3 until 2050.

• Slowing pace Φ 0.9 – 0.7 %/year.• All growth in Non-OECD

countries and in urban areas.• After 2035 between 7 bn and8 bn in developing countries

• India becomes most populatedcountry.

• More than doubling until 2035 with Φ 3.2 %/year.

•Non-OECD growth fastest led by China and finally India (7.9 % / 5.9 %).

• OECD growth projectedΦ 1.8 % .

• Down-side risk: debt crisis, double dip recession

• Increase of more than 20 %until 2035 and almost 1/3until 2050.

• Since 2009 more people incities than in rural areas.

• Development of Megacitiesrapidly increasing.

• 2050 = 2/3 or 6 bn people in urban areas .

• US$ 312 bn in 2009.• 37 countries ≈ 95 % of

global subsidized FF consumption.

• Almost all Non-OECD.•Universal phase out by2020 would reduce PEdemand by 5 % and CO2by 5.8 % (IEA).

Population Growth ConsumptionSubsidies

(2009/bn US$)

September 20119

51 %

62 %67 %

GP 74

153

280

P

6

8595

126

PCoal

Gas

Power

Power

Oil

Coal

UrbanizationGrowth

GDP Growth (Global GDP in

trill. US$)

PwC

Source: IEA, World Energy Outlook 2010, PwC


Limiting Factors to Global Energy Demand Growth

Drivers:• Better energy efficiency• Fuel switching• Change to less energy-intensive industries

Energy intensity (Energy needed to produce 1 Unit of GDP)

Technology Development

• Technological breakthroughs• Ongoing technological improvements

- advanced technologies- energy efficiency

• Commercialization- longevity of capital stock

• Currently approaching- CCS- Advanced Biofuels- Large CSP- Smart Grids

Projected change in Global Primary Energy intensity

September 201110

• NPS:34 % decline by 2035 projected; Φ 1.5 % p.a.

PwC


Economic Crisis brought some Relief on CO2 growth

Source: International Energy Statistics

Kyoto Target 2012

• Total global CO2 emissions rose by almost 40% until 2008 and decreased5% in 2009 recession both compared to 1990

• In 2009 we are about 9 Gt or 41% above the 2012 target set in the Kyoto protocol

September 201111PwC

22.7 22.5 22.6 22.5 22.723.1

23.9 24.1 24.1 24.124.7 24.9

25.9

27.0

28.4

29.430.0

30.931.5

30.4

20

22

24

26

28

30

32

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Global total CO2 emissions in Gt

21,5

7,711

5,425

1,602 1,5721,098 766 541 528 527 520

5.8

17.7

1.4

11.2

8.6 9.3

16.2

10.9

6.98.4

02468101214161820

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000

China USA India Russia Japan Germany Canada Korea Iran UK

Mn. t CO2 (left)

t CO2/cap. (right)

Source: US Energy Information Administration, PwC

Total global CO2 emissions:30.398 mt

Φ 4.5 t / capita


Who are the main Emitters today?Ten biggest CO2 emitters and the corresponding per capita emissions (2009)

September 201112

15.3 %25.4 % 5.2 % 1.7 %3.6 % 2.5 % 1.8 % 1.7 %17.8 % 1.7 %

PwC

Share in total global CO2 emissions


What has caused historic Aggregation?

•From 1900 to 2005: the US & EU accounted for >50% of the cumulative global emissions

•China accounted for only 8% and India 2%

•In 2007 China overtook US as the biggest CO2 emitter

•Industrialization is the main driver of growth in China and India by 2005

Energy-related CO2 emissions by Region, 1900-2005

mn

tonn

es

Historic cumulative emissions were mainly driven by OECD industrialization

Source: IEA World Energy Outlook 2008, Reference Scenario September 201113

PwC

Presenter

Presentation Notes

CO2 emissions emanating from China and India is the wild card, and there is no doubt that the percentages will rise. How can we be sure that emissions from power plants are responsible for the rising CO2 in the atmosphere? There are several lines of evidence. Fossil fuels were formed millions of years ago. They therefore contain virtually no carbon-14, because this unstable carbon isotope, formed when cosmic rays hit the atmosphere, has a half-life of around 6000 years. So a dropping concentration of carbon-14 can be explained by the burning of fossil fuels. Studies of tree rings have shown that the proportion of carbon-14 in the atmosphere dropped by about 2% between 1850 and 1954. After this time, atmospheric nuclear bomb tests wrecked this method by releasing large amounts of carbon-14. Fossil fuels also contain less carbon-13 than carbon-12, compared with the atmosphere, because the fuels derived from plants, which preferentially take up the more common carbon-12. The ratio of carbon-13 to carbon-12 in the atmosphere and ocean surface waters is steadily falling, showing that more carbon-12 is entering the atmosphere. Finally, claims that volcanoes emit more CO2 than human activities are simply not true. In the very distant past, there have been volcanic eruptions so massive that they covered vast areas in lava more than a kilometre thick and appear to have released enough CO2 to warm the planet after the initial cooling caused by the dust. But even with such gigantic eruptions, most of subsequent warming may have been due to methane released when lava heated coal deposits, rather than from CO2 from the volcanoes. Measurements of CO2 levels over the past 50 years do not show any significant rises after eruptions. Total emissions from volcanoes on land are estimated to average just 0.3 Gt of CO2 each year – about a hundredth of human emissions. While volcanic emissions are negligible in the short term, over tens of millions of years they do release massive quantities of CO2. But they are balanced by the loss of carbon in ocean sediments sub-ducted under continents through tectonic plate movements. Ultimately, this carbon will be returned to the atmosphere by volcanoes. Sources: Scientific American 2006/2008, MIT Ongoing Research (2005/2008), IPCC background research (unpublished), HM Periodic Publications on the state of the World.


Development of Global Energy-related CO2 Emissions 2008 – 2035

12.5 12.2 11.8 11.3 10.7 10.0

15.7

19.520.8

21.923.0

24.0

28.2

31.732.6 33.2 33.7

34.0

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

2008 2015 2020 2025 2030 2035

OECD

Non-OECD

World

Source: U.S. Energy Information Administration / International Energy Outlook 2010 NPS

Global energy related CO2 emissions are expected to increase by 21 %, with OECD countries‘ emissions decreasing by 20 % and Non-OECD emissions increasing by about 53 %

September 201114

PwC

10

15

20

25

30

35

40

2008 2015 2020 2025 2030 2035New Policies Scenario450 ppm Scenario

- 13.7 Gt

+21 % over 2008650 ppm CO2eq+3.5°C²)

-26% over 2008450 ppm CO2-eq+2.0°C²)


Energy demand drives CO2 emissions

Measures:

New Policies Scenario

450 ppm Scenario

35.4 Gt

21.7 Gt

Renewables andBiofuels

Source: IEA, World Energy Outlook, 20101: IPCC 2007, 2: 450 Scenario: 2015 und 2025 estimated

Energy Savings Global CO2 Price

Nuclear Power/CCS

Development of “Clean Energy”

Subsidy reduction for fossil fuels

September 201115

Annual total global CO2 Emissions (GT)

Sustainability?

PwC


What does the 2°C Target mean for the Power & Utilities Sector?

• Decrease energy consumption byan increase in energy efficiency

• Consumers• Buildings• Industry

• Power plants• Transportation

• Decarbonisation of power generation„Clean“ energy

• Modern renewable energy• Wind on- and offshore• Solar und photovoltaik• Solar heat• Biomass/waste• Geothermal• Tidal/wave

• Conventional energy• Hydro• Nuclear

• CO2 capture and storage (coal / gas / oil)

Dramatic changes required! Continuously until 2020 but much faster and deeper:- 13.5 Trillion US$ additional investment required- China is a key contributor Reach 35 % of abatement- Phase out of fossil fuel subsidies most important in Middle East

Reduction of annual CO2 emission by ~14 Gt until 2035:1)

• Increase the use of biofuels• Ethanol• Biodiesel• Biofuel of 2nd generation

September 201116

1) Compared to the IEA WEO 2010 New Policies Scenario PwC

PwC

Global Power and Utilities Trends



Development of Power Generation¹

2.3

0.5

2,1

4.7

7.98.7

14.5

8.0

7.0

-0.9-0.1

0.3

2.0

3.9 3.6

5.6

3.3

7.4

-4.1-4.9

-4.1

1.0

2.63.3

7.1

5.5

2.1

4.33.7 3.7

5.9

8.39.1

13.2

6.0

4.5

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

USA EU OECD World Non-OECD Asia Pacific China India Middle East

Power generation growth rate in %


• Strong rebound 2010 in all regions of the world• Global growth 5.9 % highest in last 10 years; faster growth than Primary Energy and GDP• China had strongest rebound (13.2 %) and is world’s 2nd largest electricity generator with a share

of 19.7 % (USA 20.3 %)• About 67 % of power generation growth occurred in Non-OECD countries (thereof 41.3 % in China)

Source: BP Statistical Review of World Energy, 2011¹) incl. final consumption plus own power used in power plants and network losses

September 201117

PwC


Development of Power Generation¹

4.33.8

4.5

6.0

2.7

1.6

-2.0

3.44.2

2.1

0.1

-0.7

-4.2

-0.2

-1.4

-4.5

-6.9

7.78.4

3.5

6.2

4.4 4.7

-8

-6

-4

-2

0

2

4

6

8

10

Africa South Africa South & Central America

Brazil Russia Germany

Power generation growth rate in %

% Change 2007 over 2006




0.0

Source: BP Statistical Review of World Energy, 2011¹) incl. final consumption plus own power used in power plants and network losses

September 201117a

PwC

Oil1%

Gas21%

Coal32%Nuclear Power

14%

Hydro16%

Biomass& Waste

4%

Wind8%

Photovoltaic2%

Other Renewables2%

Oil 5%

Gas21%

Coal41%

Nuclear Power14%

Hydro16%

Biomass& Waste

1%

Wind1%

Other Renewables

1%

+ 75%

2008 2035

35.300 TWh20.183 TWh Ø 2,2% p.a.2)

Source: International Energy Agency: World Energy Outlook 2010, New Policies Scenario, PwC1) Consisting of final consumption plus power plant own use and network losses2) CAAGR (Compound average annual growth rate)


21st Century the Era of Electricity?Development of electricity generation1) and fuel mix 2008 – 2035

• Unprecedented growth of 75 % to more than double PE increase• Significant transition towards low carbon technologies• Non-hydro renewables grow by more than 830% and their share increases from 3% to 16%• Coal-fired generation growth around 37% and remains the most dominant fuel source• Absolute usage of fossil fuels increases by 1/3 but their relative share reduces from 67% to 54%

mainly related to coal (minus nine% points)

September 201118PwC

Presenter

Presentation Notes



China and India driving Coal-fired Generation

A 34 % drop in coal-fired generation led by Europe in the OECD is offset by an almost 100% increase in non-OECD countries, especially China (+ 90 %), where 600 GW of new planned capacity exceeds the current capacity of the US, EU & Japan and India is increasing by +180%

Source: IEA: World Energy Outlook 2010 New Policies Scenario, PwC

Coal-fired electricity generation by region

September 219

+ 36 %

PwC


Global Fuel Mix Trends in Power Generation• Coal remains dominant fuel for

power generation− Coal fired power generation will

increase by 36 % until 2035 − Growth rate for power generated by

coal until 2035o China: ≈ + 90 %o India: ≈ + 180 %o OECD: ≈ ./. 50 %o EU: ≈ ./. 60 %

• Gas with + 75 % fastest growing fossil fuel

• Nuclear needs to be watched• Renewable energy (incl. hydro) are

tripling and their share in power production rises from 18% to 32%− Hydro grows by 72 % and accounts

for half of RE share− Wind and biomass lead modern

renewables increasing 13-fold and6-fold, respectively

− Solar follows with dramatic growthrates (i.e. Solar PV x 53)

World electricity generation by type

Source: International Energy Agency: World Energy Outlook 2010, New Policies Scenario

September 201120

PwC


Global Electricity Generation by Fuel Type and Region

Source: International Energy Agency: World Energy Outlook 2010, New Policies Scenario

Coal: absolute + 36 % (China + 90 %, India + 180 %)

September 201121

PwC


The Global Access Challenge: Number of People without Electricity (million)

• 1.4 billion people (>20% of global population) lack access to electricity, mainly in sub-SaharanAfrica where only 28 % have access¹)

• Achieving universal access to electricity requires investment of US$ 700 bn or $33 bn per year over the next two decades. Additionally, 2.6 billion/Year would be needed for clean cooking facilities

Source: IEA: World Energy Outlook 2010,¹ )Excluding South Africa

September 201122

PwC

PwC

China


China/the Asian Leap

The crucial Role of China in Global Energy Markets

September 201124

The increase in China’s energy consumption between 2000 and 2008 was more than four times greater than in the previous decade. The prospects for further growth remain very strong: energy demand per capita in China is still only 35% of the OECD average.

Source: International Energy Agency: World Energy Outlook 2010 NPS, PwC

China‘s primary energy demand is projected to climb by 2,1% per year, reaching 2/3 ofthe OECD consumption by 2035.

Total primary per-capita energy demand in China and the OECD in the New Policies Scenario

PwC

China‘s growing importance in Global Energy Market

September 201125PwC

Energy demand (in quadrillion BTU²)

CO2 Emissions (in Gt)

Population 2010: 1.34 bnGDP-Growth 2009/2010/2011: 8.7 %/9.8 %/>10 % estShare of total global GDP12.5 %/16.9 % = 2009/2015

1.3 %

5.2%

23.8%

6.5%

33.6%

29.6%

1.7 %

8.4%

27.1%

2.6%

37.2%

23.0%

0.5 %

0.7%

4.0 %

6.7%

17.6%

70.5%

Other

Nuclear

Gas

Hydro

Oil

Coal

China

U.S.

World

Primary Energy Mix 2010Total = 2,432 Mio. toe

Cumulative power generation capacity

5.17.47.6

9.410.610.711.4

14.516.5

14.0

Singapore

Israel

Switzerland

Sweden

Portugal

Belgium

Greece

Ecuador

Netherlands

China migration, 2010

Urbanization (in Mio.)

Total p

opu

liation20

10

Source: The China Greentech Report 2009, IMF 2010, UN 20119, IEA, WEO 2010 NPS²) Quadrillion BTU = 293 TWH, ¹) excl. Hong Kong and Macao

2030 China‘s CO2 emission will exceed the sum of North America, Japan and EU and 2035 that of total OECD

China

The crucial Role of China in Global EnergyMarkets and CO2-Emissions

September 201126PwC Source: International Energy Agency: World Energy Outlook 2010 NPS,

PwC

China‘s share of the projected net global increase for selectedindicators CO2 impact

• 58% of the global increase in CO2 emissions to 2035 comes from China alone.

• China‘s own emissionsincrease by 54% to 10.1 Gt, surpassing the emissionsfrom the entire OECD by2035.

• China already emits 12 % more CO2 per capita thanthe global average and is saidto overtake the per-capitalevel of EU soon after 2020.

Global Power China

Increasing Role in Renewables Manufacturing

September 201127

PwC Source: REN 21 Renewables Global Status Report 2011

Market Shares of Top 10 wind Turbine Manufacturers, 2010

Market Shares of Top 15 Solar PV Cell Manufacturers, 2010

4 top 10 manufacturersfrom China ≈ 31 % total market share end of2010

7 top 15 manufacturersfrom China ≈ 29 % total market share

PwC

Global Renewable Energy Trends



Global Case for Renewable Energy

Technological progress

Improve accessto modern

energy

Sustainability

Affordability

Employmentcreation

Security ofsupply

Heat production Power generation Transportation

Govern

men

talsup

port

Fin

ance

Renewableenergy

September 201128

PwC

Presenter

Presentation Notes

We can assume that the use of renewables in the overall energy mix supports the objectives of the energy industry triangle. In the main focus of the current debates is sustainability. And when we look at the full "life cycle" of renewables we know that their CO2 emissions are relatively low. But globally the access to energy resources is becoming more and more difficult due to physically and politically reasons. So the factor of security of supply gains importance. Renewables are seen as a way to decrease dependence of individual countries and regions on rising energy imports. Keywords are to diversify and optimise the energy mix. We assume that renewable will be economically and commercially competitive – after a transitional phase – as their sources are freely available and unlimited. In the case of renewables, wider economic objectives are important factors in the global scenario, in addition to the energy-economic objectives. They provide access to modern energy and economic growth for regions far away from major consumption centres. In many countries, their enormous potential for innovation and growth is seen as a driver of technological progress. Ultimately, the creation of jobs by developing the technologies further is essential. Nowadays, the use of renewable energy plays the biggest role in power generation. But also in the sectors such as heat generation and transportation, somewhat neglected in past, renewable are becoming increasingly important. Absolutely vital for realising the objectives outlined in this scenario are the support governments and the financial sector respectively. Concrete policy framework and energy concepts are just as important as open capital markets, willing to take risks, to finance investments in the renewables sector as they are usually high at the beginning.


Global Renewable Energy PotentialIn theory, available renewable energy exceeds global demand

Source: BMU/PwC1) Trans-Mediterranean Renewable Energy Cooperation (TREC)

September 201129

PwC


Commercial Maturity of RE is a Function ofComparable Costs

Source: RWE EIA incl. Infrastructure costs and an implicit $ 20 CO2 Price

September 201130PwC

100% 300% 500% 700%

Coventional coal

Advanced coal with CCS

Natural gas advanced combined cycle

Advanced nuclear

Wind onshore

Wind offshore

Solar PV

Solar thermal

Geothermal

Biomass

Hydro

More than twice as expensive as the least cost option

• Nearly all renewable technologies are more expensive than the least cost generating option at the moment – gas combined cycle turbine

• Wind offshore, Solar (thermal & PV) are up to 4x more expensive than current electricity costs

• Costs are expected to come down within next 20 years

• Geothermal and hydro have limited scaleability due to locational restrictions

• Wind onshore is at par with conventional coal…

• Intermittency

• Balancing/reserve costs

• Biomass (incl. biogas) offers biggest potential


Dramatic historical Investment Growth in Renewable EnergyGlobal New Investment in Renewable Energy (US$)

Source: Blomberg New Energy Finance

SDC = small distributed capacity. New Investment volume adjusts for reinvested equity. Total values include estimates for undislosed deals

September 201131

• Global investment increased by 32% to US$ 211bn or 0.3% of world GDP.

• Drivers: Wind farm development in China and small rooftop PV in Europe.

• 2010 Developing countries overtook developed countries for the first time in new financial investments (US$ 72bn vs 70bn respectively).

• Total RE investment is comparable to the value of the global luxury goods market (US$ 234bn).

• Continuing low natural gas prices are a limiting factor.

PwC


Average Annual Growth Rates of RenewableEnergy Production

September 201132

Source: Renewable Energy Policy Network for the 21 CenturyPwC


Actual Renewable Power Capacity by Region

September 201133

Source: Renewable Energy Policy Network for the 21st centuryPwC


Dynamic Global Developments of Renewable Energy

Source: REN 21 Renewables, Global Status Report 2011, PwCNotes: Rankings are based on absolute amounts of power generation capacity or biofuels production; per capita rankings would be quite different for many categories. Country rankings for hydropower would be different if power generation (TWh) were considered rather than power capacity (GW) because some countries rely on hydropower for baseload supply while others use it more to follow the electric load and match peaks.1 Feed-in policies total for 2010 also includes early 2011.

TOP five countries – existing capacity as of end 2010

• Lots of global activity in supportive policy making

• 96 countries have policy to support renewable power generation

• Reviews of targets ongoing in a number of countries (achievable/realistic/integrationin long-term policies)

• Policy overhauls/funding cuts for PV, retroactive (S, CZ) or for new projects (G, I)

September 201134PwC


Investments into Renewable Energy PowerProduction

Cumulative investment in RES for electricity totals $5.7 trillion over 2010-2035;another $335 billion goes into biofuels.

Cumulative Investment in RES, 2010-2035

Source: IEA: World Energy Outlook 2010 New Policies Scenario, PwC

September 201135

PwC


Developments of Renewables in the Power, Heatand Fuel Sector until 2035 Increase of power generation with renewables 2035

Heat generation with renewables in the industryand buildings per regions

Biofuel consumption per region

Portion of total consumption:2008: 2 %2035: 8 %

Portion of total production:2008: 19%2035: 32%

Portion oftotal consumption:2008: 10%2035: 16%

Source: IEA: WEO 2010, New Policies Scenario, PwCSeptember 2011

36PwC


Sufficient governmental Support necessary forRenewable Energy

Global governmental support for renewables-based electricity generation by technology

• Government support remains a decisive factor for RE investments

• A total increase of 260 % from 57 bn in 2009 to 205 bn$ in 2035 is expected and for renewableenergy based electricity an increase of 250% from 40bn$ to 140bn$ in 2035

• Additional factors: increasing fuel prices and decreasing investment costs

Source: International Energy Agency: World Energy Outlook 2010, PwC

September 201137

PwC


Political Instruments in selected Countries

Country Direct subsidies, grants

Investment orother tax deductions

Consumptiontaxes, energytaxes, turnover-tax deduction

Public investments, loans orfinancing

Australia X - - X

Canada X X X -

China X X X X

France X X X X

Germany X X X X

India X X X X

Japan X X X X

Russia X - - -

Spain X X X X

South Africa X - X X

UK X - X X

USA X X partly partly

September 201138

Source: REN21, RWE Factbook Renewable Energy 04/2010, PwC

PwC


The Variability Challenge!Shares of variable RES in total electricity generation¹

The share of electricity generation from variable RES is set to increase considerably,imposing additional costs on power systems (+$16-$17 per MWh in EU and USA in 2035)

Source: IEA → NPSSeptember 2011

39PwC


Impact of variable Renewable Energy on Output of Conventional Plants

September 201140

Western US simulation featuring 30% wind and 5% solar

Source: Western Wind and Solar Integration Study, GE Energy for NREL (2010)

PwC


System Balancing: The Key Challenge of intermittent Renewable Energy

September 201141

Source: IEA PwC


Key Considerations related to Variability and Flexibility

September 201142

Source: IEA PwC


Major Investment Flows in Renewable Energy in 2010 (bn US$)

September 201143

Center of gravity shifting to the developing world

Source: REN 21 Renewables Global Status Report 2011, PwC, WWEA

Wind16.1 Solar

5.5

Biomassw-t-e 1.4

Other1.9

Wind andother 6.7 Small-scale

projects mainlyroof top PV34.5

Wind4.5 Solar

3.1Biomass0.8

IPO 3.5

Wind41.4 Solar

3.8

Biomassw-t-e3.7

Biofuels2.4

Wind 2.4 Small hydro 1.2

Biomassw-t-e 0.9

PwC

PwC

Wind Energy


Wind Energy

Development of Global Wind Energy

Fossile Brennstoffe 81%

Capacity Growth 2010 = 24.5 %

September 201144Source: REN 21 Renewables Global Status Report 2011, PwC

WWEA

Worldwide total: 198 GW+39 GW

Total existing wind power capacitycontributed 2 – 2.5 % to global power consumption

World Market Growth Rates (%)

PwC

24.5

2010

Wind Energy

Global wind power capacity in 2010 – China surpasses Germany and USA

September 201145Source: Global Wind Energy Council – Global Wind Report 2010

• End of 2010 83 countries use windpower on a commercial basis.

• Asia, especially China (50 % of a global addition) showed the most dynamic progress in 2010.

• China doubled its wind capacity the fifth year in a row and plans >30 GW new capacity for 2011 + 12.

• With about 9.5 GW additions EU is 2 largest market. But in additions 2010 wind lost out to gas and solar PV.

• Significant construction in US (5.6 GW) and UK (1.9 GW).

PwC

Wind Energy

Offshore Windpower

September 201146

Characteristics• Better wind resource than onshore

(load factors > 35 %)• Maturing technology/industrial

scale projects• High generation rate/limited track

record of best practices• Good cost reduction potential• Growth areas: Europe, especially

UK and Germany− first projects in China and Japan− first approval in USA (CAPE

Wind/East Coast)• Tight supply situation across value

chain− for suppliers with proven

technologies− Vestas and Siemens Wind > 90%

of markets for turbines• High generation cost per Mwh• Attractive support policies• High maintenance risks

Engineering skills and scale game!

Source: GWEC – Global Wind Power Market PotentialRWE Innogy Factbook Renewable Energy

3100

1200

2010

PwC

Wind Energy

Costs

September 201147

Component costs for typical wind plants Cost structure of a typical 2 MW wind turbine installed in Europe

O & M Costs

• Insurance • Regional maintenance

• Repair • Spare parts

• Administration

Source: GWEC – Global Wind Power Market Potentialwww.wind-energy-the-facts.org

PwC

Calculation based on selected data for European wind turbine installations

Wind Energy

Financing

September 201148

Financial new investment in renewableenergy: Developed / Developing countries, 2010, and total growth on 2009, $bn

• Wind is outpacing all other RE sectors in terms of a new financial investment in 2010: + 30% to reach US$ 95bn

• More than 70% of all asset finance of newbuilt RE went into wind energy

− China: mega wind bases

− Europe: large projects EIB debt

− USA: Treasury grant proposals from 2009

• 2010: wind led public market investmentsinto RE with US$ 8.2bn (mainly b/o Enelwind power flotation)

• VC/PE amounts to 5.5 bn US$ in 2010

• Leading Development Banks: Europe: EIB, KfW, Brazil: BNDES,China: CDB

Source: Bloomberg New Energy Finance, UNEPPwC

Wind Energy

TechnologyBesides the introduction of direct drives the evolution of wind turbines is remarkable

September 201149

> Onshore turbines are now dominated by 1.5 + 2MW turbines with a recent resurgence of 800kw turbines

Source: RWE Innogy/Factbook Renewable Energy 15/03/2011

PwC

PwC

Solar Power


PwC

Fossile Brennstoffe 81%

September 201150

Source: REN 21 Renewables Global Status Report 2011EPIA Global Market Outlook 2015, PwC¹) Grid connected and not grid connected

Worldwide total: 38 GW

Solar Power

Solar Photovoltaic• Solar photovoltaic (PV) capacity was added in

more than 100 countries during 2010, ensuring that PV remained the world’s fastest growing power-generation technology.

• Capacity growth rate 2010 of all PV 72 % to reach 40 GW

• PV installations producting some 50 TWh/year• PV market driver: falling costs, new

applications, strong investor interest, and continued strong policy support, accelerated tariff digressions in some countries

• For the first time since 2005: thin film‘s shareof the market declined (from 17 % in 2009 to13 % in 2010)

• EU dominates the global PV market with about 80 % or 30 GW of total installations as well as 2010 growth (≈ 13 GW)

• Germany = leading market 56 % or 7.4 GW of 2010 additions and 17.6 GW (44 %) of total installations

• The vast majority today is grid connected PV capacity in Europe; other regions have more off-grid PV

• For the first time ever, Europe added more PV than wind capacity during 2010.

Global PV growth¹)

Solar Photovoltaic: Future Prospects

Evolution of Global Cumulative installed Capacity 2010-2015 (MW)

PwCSeptember 2011

51Source: EPIA Global Market Outlook for Photovoltaik until 2015¹) National Renewable Energy Action Plan

Business as usual Condusive political support (i.e. FIT)

• PV stays incentivedriven market

• EU-growth slows

• Future markets turnto US and Asia

• Today NREAP‘s¹) inEurope targetingabout 84.4 GW PV by 2020.

• ROW expected topick up impact

Renewables Solar; Concentrating Solar Power

CSP-Technologies

PwC September 201152

Fresnel Mirrors

Solar Power Tower

Parabolic TroughCollectors

Dish/enginePlants

Source: The Climate Group, PwC, 2009

September 201153

Source: IEA: Technology Roadmap - Concentrating Solar Power,REN 21 Renewables Global Status Report 2011

PwC

• Small worldwide capacity 2010 ≈ 1.1 GW

• Spain global leader adding 400 MW in 2010 to a total of 632 MW in operation.

• Notable interest in MENA (1.2 GW pipeline/construction) incl. UAE, Algeria, Egyt, Jordan, Tunisia, and Morocco (aim 2 GW of CSP by 2010) as well as India and China

• End of 2010 2.6 GW in construction (mainly US + Spain)

• Inclusion of thermal storage and hybrid plants (ISGCC) increasing → improving base load capability

• Dramatic cost reductions in PV increasing resign risk

• Technologies / Desertec

Electricity from CSP plants as shares of total electricity consumption

Expected Growth of CSP power production by region (TWh/y)

Solar Power

Concentrated Solar Power

Renewables Desertec

Desertec : The “Solar” Vision (1)Plan: Harnessing abundant solar power in deserts to:- Promote global energy security and support climate protection- Drive local economic development- Meet renewable energy requirements of developing countries- Supply around 15% of Europe’s electricity by 2050

Promoter: - TREC: Trans-Mediterranean Renewable Energy Cooperation- Club of Rome- Hamburg Climate Protection Foundation- Jordan National Energy Research Center

Content:- Development of an integrated trans-regional renewable energy network based in Europe,

Middle East, North Africa (EUMENA)- Use range of renewable technologies CSP/PV/Wind and as option

hydro/biomass/geothermal- Transmitting power through high voltage direct current line (HVDC)- Use power to operate seawater desalination plants


Renewables Desertec

Desertec : The “Solar” Vision (2)The proposed Desertec concept

PwC Source: DESERTEC Foundation September 201155

PwC

Biomass


Biomass

The Renewable Energy – Biomass Spectrum


Biomass

Heat ProductionPower Production

Transport

Solid BM MOW Biogas Liquid Biofuels

Direct FiringCO-Firing

Off-Grid Grid-connected Coal Natural Gas

Global capacity end 2010 ≈ 62 GW (est.)Total global production 2010≈ 200 + Twh (est.)

September 201157Source: IEA, Energy Progress Report

¹) CEM = Clean Energy MinisterialPwC

Biomass

Bioenergy power deployment:Bioenergy for electricity production – CEM¹ countries

• Growth in electricity production from solid biomass, biogas and renewable municipal waste and liquid biofuels has been steady since the beginning of the decade (2000 130 TWh to over 200 TWh in 2009)

• US is the leader, followed by Germany (over 22% growth per year during the last decade), Brazil has increased its capacity from less than 4 GW in 2005 to nearly 8 GW in 2010, plans to reach 11.5 GW by 2015

0

200

400

600

800

1.000

1.200

1.400 Biomass production on surplus agricultural landBio-materials

Biomass production on degraded landAgricultural residues

Animal manure

Forest residues

Organic waste

CurrentEnergyDemand

Biomass potential versus global demand (EJ)

Europe is developing rapidly:

• 800 solid biomass plants (end 2010)

• Power generation ≈ 70 Biomass≈ 30 Biogas

• 50 % are CHP-Plants

Wind onshore

Wind offshore

Biomass/biogas

Hydro Solar PV Solar CSPGeo-thermal

Direct cost <+100% >+100% <+100% <+100% >+100% >+100% <+100%

Indirect cost

Infrastructure Low High Low Low Low High Low

Dispatchability/ Predictability

Low Moderate High High Low Moderate High

Scaleability Moderate High High¹) Moderate Low Low Low

September 201158

Source: PwC ResearchPwC

Biomass

Biomass and Biogas: Big Story for Europe

¹) Limitation could be trough feedstock availabilityand logistic cost issues

September 201159

Source: Fact Book RenewableEnergy, RWE 2011

PwC

Biomass

Biomass is a viable option for “green” Capacitybut Feedstock is Key

Opportunities:

• Key advantage over other renewable technologies: ability to operate at high utilization rates and to generate base load electricity

• Still attractive market growth: Biomass potential not yet exploited by far

• Efficiency improvements of existing facilities possible through extensions and modifications

Challenges:

• Large Feedstock share of full costs; cannot be effectively hedged: strong position in feedstock supply is thus crucial

• Only limited scalability of power plants especially due to feedstock availability and logistic cost issues limit growth potential

• Securing sustainability of biomass fuel sourcing

Levelised cost structure for biomass (in €/MWh)

Operational expenditure is very dependent on feedstock costs – no possibility of hedging/long-term supply contracts Feedstock share on overall costs: 25 – 40% Feedstock costs differ depending on

feedstock type and transportation

• Nearly all renewable technologies are more expensive than the least cost generating option at the moment – gas combined cycle turbine

• Wind offshore, Solar (CSP & PV) are up to 4x more expensive than current electricity costs

− Costs are expected to come down within next 20 years

• Geothermal and hydro have limited scaleability due to geographical restrictions

• Wind onshore is at par with conventional coal…

− Intermittency

− Balancing/reserve costs

• Biomass (incl biogas) offers biggest potential

100% 200% 300% 400% 500% 600%

Coventional coal

Advanced coal with CCS

Natural gas advanced …

Advanced nuclear

Wind onshore

Wind offshore

Solar PV

Solar thermal

Geothermal

Biomass

Hydro

More than twice as expensive as the least cost option

September 201160

Source: EIA, includes infrastructure costs and an implicit $20 CO2 price

PwC

Biomass

High Cost Competitiveness and political Support are Drivers of Biomass

PwC

Industry Consolidation


Power Deals

• Total deal value in the power and gas utility sectors, excluding renewables, was up 19% year-on-year, from US$98bn in 2009 to US$116bn in 2010.

• Asia Pacific bidders were involved in US$25bn worth of deals, nearly a fifth of all power deal activity worldwide and up 35% on the previous year.

• Power deals remain in the lowlands compared with the mountains of deal value in the 2005-2008 period. But the conditions are in place for a return

Renewables Deals

• The number of deals has grown by two-thirds year-on-year2009 to 2010, although total deal value is down by a third

• Solar deal volume is rivaling wind, each with just under a third share of all renewables deals.

• Chinese renewables companies are looking at major expansion with a series of IPOs on the Hong Kong stock exchange in 2010 and more planned in 2011.

• Chinese wind turbine companies Sinovel and Xinjiang Goldwind will provide competition for western manufacturers such as Vestas, Gamesa, GE and Siemens

61September 2011PwC


Global Power & Renewables Deals Activity

62


Power Deals in 2010

Source: PwC 2010 Power DealsPwC September 2011

All electricity and gas deals by value (US$bn)

63


Power Deals in 2010

Source: PwC 2010 Power DealsPwC September 2011

2010 deal percentages by continent (2009 percentages shown in parenthesis)

Total sector deal activity – 2009 and 2010

64


Renewables Deals in 2010

Source: PwC 2010 Renewables DealsPwC September 2011

Renewables deals total deal value and percentage share by sector (Deal numbers shown in parenthesis)

All renewables deals by value (US$bn) and number of deals

65


Renewables Deals in 2010

PwC September 2011Source: PwC 2010 Renewables Deals

2010 deal percentages by continent by value of transactions(2010 total: US$33,416m)

(2009 percentages shown in parenthesis – 2009 total: US$48,799m)

66


Renewables Deals in 2010 – by Type of Investor

PwC September 2011Source: Bloomberg New Energy Finance, UNEP

VC/PE new investment excludes PE buy-outs. Total values include estimates for undisclosed deals.

VC/PE New investment in renewable energy by technology, 2010, $bn

Public markets new investment in renewable energy by technology, 2010, $bn

Total values include estimates for undisclosed deals

Asset finance of new-build renewable energy assets by technology, 2010, $bn

PwC

Investments in Power & Utilities in Brazil



Major International Players are active

PwCSeptember 2011

67

• Brazil is on a new E.ON global expansion plan 2011

• Has strong interest in renewables assets

• By 2010 invested over €2,785 mln in Brazil• By 2015 will add 30,000MW installed capacity

and lay 52,000 km of transmission lines

• Has plans to return to Brazil after 5 years strategy of putting on hold its presence in the region.

• Bidding for thermal energy project, has small solar/PV presence, interest in biomass

• Plans to invest USD 581m by 2012• Major investments in hydro and recent

stock in 70MW wind farm in Tramandai

• 2010 investments totaled €583 million• Headcount in Brazil is 3.000 employees• Owns generation, transmission and distribution assets

• No 1 private power produce in Brazil• Hydropower: Sao Salvador 241MW, Jirau hydro plant• Numerous biowaste power production projects

• Part of international consortium for gas distribution in Rio de Janeiro

• 54,2% stock in CEG, the oldest Brazilian power company

• 2010 investment of $1bn in buying 7 Brazilian power transmission companies

• AES's largest generation business is AES Tuete in Brazil• AES Electropaulo is the largest electricity distribution company in Brazil

Source: PwC research

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68


China’s Outbound Investments by Country

PwC September 2011Source: Published by The Heritage Foundation(http://report.heritage.org/wm3133)

69


China’s Investments to Brazil by SectorInvestment by sector – for 2006–2010, in bn US$

PwC September 2011

Source: The Heritage Foundation, “China’s Outward Investment,” at http://thf_media.s3.amazonaws.com/2010/xls/China_Global_Investment_Tracker2009.xls.

• Renewables is one of the major sectors for Chinese investments in Brazil due to government incentives

• Chinese companies experience challenges in Brazil due to:

− Overall formalities for Brazilian companies

− Registrations

− Bookkeeping

− Management (special request for foreign shareholders)

− Visa application for foreign investors

− Government approvals

− Registration of foreign capital

− Tax considerations

− Regulations on Foreign Investments in Brazil

70September 2011PwC


Challenges for Chinese Companies in Brazil

Thank you!

And looking forward to your questions


global energy trends - pwc · 2015-06-03 · part 1 – global primary energy trends. part 2 –...

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