Medium- Term Renewable Energy Market Report Heymi Bahar Project Manager Renewable Energy Division International Energy Agency

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1 Medium- Term Renewable Energy Market Report 2016 Heymi Bahar Project Manager Renewable Energy Division International Energy Agency Energy and Mines World Congress, Toronto, November 2016

2 Context n A year of records for renewable electricity Ø A record amount of new capacity was installed in 2015 Ø Total capacity has now overtaken coal n COP21 Paris Agreement gives momentum to renewables n Local air pollution & energy security are also key drivers n Energy investment flows confirm shift to renewables n But policy makers need to heighten their commitments and provide investors more clarity & certainty

3 Investment flows signal a reorientation of the global energy system Global Energy Investment, 2015 USD 1.8 trillion Electricity Networks 14% Energy Efficiency 12% Thermal Power 7% Power Generation Renewables 23% 17% Coal 4% Biofuels and Solar Heat 1% Oil & Gas 46% Source: IEA World Energy Investment Report 2016 An 8% reduction in 2015 global energy investment results from a $200 billion decline in fossil fuels, while the share of renewables, networks and efficiency expands

4 New policies underpin a more bullish forecast for renewables Net additions (GW) Renewable electricity capacity growth (GW) in MTRMR s main case % Others Brazil India China Japan United States MTRMR 2015 Forecast MTRMR 2016 Forecast EU28 China remains key growth market for renewable capacity, while the United States surpasses the EU for the first time

5 Solar PV and wind to represent almost ¾ of all renewable investment Cumulative renewable electricity investment over USD billion Solar PV 35% Other renewables 3% Hydropower 17% Bioenergy 8% Offshore wind 7% Onshore wind 30% Annual investment in renewable electricity to be around USD 240 billion on average over , lower than USD 290 billion in 2015

6 Renewables to remain fastest growing source of electricity generation 2001=100 Indexed electricity generation by fuel ( ) Global power generation Coal Natural gas Renewable electricity generation Generation from renewables to rise by almost two-fifths over , pushing their share of total electricity generation from 23% to 28%

7 A two-speed world for renewable electricity Electricity and renewable generation growth by country/region TWh China India ASEAN Africa EU28 United States Japan Electricity generation growth ( ) Renewable generation growth ( ) Source: Total electricity generation from World Energy Outlook 2016, forthcoming. The increase in generation from renewables in represents 60% of the global increase in electricity output, but prospects vary across regionally

8 Wind and solar PV compensate for slower hydropower growth Renewable electricity capacity additions by technology ( ) China FiT reduction boom Annual additions (GW) US PTC boom Italy PV boom Japan PV bust Hydropower Wind Solar Other renewables Predicting policy-driven boom and bust cycles remains a challenge, which is expected to continue over the medium-term.

9 Renewable costs reductions to remain an important driver for future growth USD 2015/MWh Weighted average generation costs for solar PV and wind Onshore wind Offshore wind Solar PV - utility scale Utility-scale solar PV generation costs to fall by another quarter and onshore wind by 15% over , largest absolute cost reduction expected from offshore wind

10 Policy transition from government-set tariffs to policy-driven auctions/tenders Jordan Recent announced long-term contract prices for new renewable power to be commissioned over India India Denmark USD/MWh (nominal) South Africa South Africa Uruguay Chile Canada Brazil Brazil Brazil US UAE Germany France Jordan Australia South Africa Brazil Germany US South Africa Egypt Morocco Netherlands India Chile Peru Mexico Peru UAE Chile Solar PV Onshore wind Offshore wind Best results occur where price competition, long-term contracts and good resource availability are combined

11 Mining and related industries to represent around 15% of energy consumption Total final energy consumption by sector in 2014 Mining and quarrying 1% Coal mines 1% Buildings and agriculture 37% Other industry 19% Metals and minerals 6% Iron and steel 6% Transport 30% Mining, quarrying and processing of metals represent over 1/5 of total industrial energy consumption with iron and steel industries accounting for another 18%

12 Electricity to provide almost half of mining energy needs globally Industrial energy consumption by source 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Mining and quarrying Coal mines Metals and minerals Iron and steel Other industry District heating Electricity Renewables Other Oil Natural gas Coal Globally, mining activities consumed over 50% of Canada s total electricity generation last year while oil provided the majority of the rest

13 Renewable capacity projected to grow fast in top mining countries Renewable capacity and share of renewables 2015 and % 60 60% GW USA China Canada 70% 60% 50% 40% 30% 20% 10% 0% % of RES Capacity Capacity 2015 GW % RES % RES Australia Chile South Africa Mexico 50% 40% % of RES 30% 20% 10% 0% More renewables in electricity mixes will indirectly decarbonise the mining industry. How much of this investment will come from mining companies?

14 New business models expanding the sources of investment for renewables Contracting of utility-scale renewables by non-energy companies in North America GW Philips Salesforce Owens Corning HPE Cisco Dow Chemical General Motors Yahoo IKEA BD Apple Walmart Corning Bloomberg Equinix Switch Amazon Kaiser Permanente Procter & Gamble Mars Facebook Microsoft Google Source: IEA World Energy Investment Report 2016 Consumer-led spending e.g. distributed solar PV and corporate buying comprised over USD 50 billion of renewable investment, led by United States, Europe and Japan

15 More ambitious policies could further enhance the outlook in line 2 C target Renewable electricity capacity additions in Accelerated Case vs. Main Case GW Main case Accelerated case Renewables are in line with NDC pledges by 2030 but reducing policy uncertainty and overcoming financing & grid integration challenges remain key to achieve 2 C target

16 Renewables to dominate electricity growth, but less progress in heat and transport Share of renewables in sector demand Share of renewables in electricity, heat and transport sectors 30% 25% 20% 15% 10% 5% 0% Renewable electricity Renewable heat Biofuels in road transport The share of renewables rises in all sectors, despite persistent challenges in heat & transport; interactions between energy efficiency & renewables become critical

17 Conclusions n n n n n Prospects for renewables electricity revised upwards, driven by policy improvements, cost reductions & efforts to improve air quality The impact of lower fossil fuel prices on renewables varies by sector. Wind (onshore) & solar PV are the only technologies on track for a 2 o C scenario Competition in Asia between renewables & coal/gas will be critical to meeting global decarbonisation targets Attracting investment in renewables hinges on appropriate market rules & regulations, particularly in markets with slow electricity demand growth IEA is working to accelerate energy transition with its analysis on policy & technology and system integration of renewables.