Energy Policy after the Paris Climate Agreement

Transcription

1 Energy Policy after the Paris Climate Agreement Dr Barbara Praetorius BERLIN, 27 OCTOBER 2016

2 Agora Energiewende Who we are Think Tank with more than 20 Experts Independent and non-partisan Project duration Financed with 29 Mio. Euro by Mercator Foundation & ECF Mission: How do we make the energy transition in Germany and worldwide a success story? Methods: Analyzing, assessing, understanding, discussing, putting forward proposals, Council of Agora 2

3 The age after Paris: What will it take to limit warming below 2 C?

4 How to reach a < 2 C path: Phase out unabated coal by 2040, ramp up renewables and efficiency (and beware of expensive technologies like nuclear and CCS) Contribution of energy technology and sector to global cumulative CO2 reductions between a 6 Degrees and a 2 Degrees Scenario IEA (2015): Energy Technology Perspectives

5 In 2014, renewables account for 19% of global energy demand and almost a quarter of global power supply Share of renewables in global energy demand 2014 Share of renewables in global power supply 2014 REN Global Status Report REN Global Status Report 5

6 MW Two technologies are increasing rapidly: Wind Energy has become a mature technology, with windmills of 2-3 MW (or more) being standard Size development of wind turbines : up to 3.0 MW : up to 0.1 MW 1995: up to 0.3 MW 2000: up to 0.8 MW 2005: up to 1.5 MW 2010: up to 1.8 MW IEA (2013) 6

7 and solar power is gaining speed with the global installation rate rising rapidly and the costs continuing to decline. Global Capacity of Solar PV The learning curve for PV modules REN Global Status Report Fraunhofer ISE (2015): Current and future costs of photovoltaics 7

8 Wind and solar are already cost competitive to all other newly built power plants Range* of levelized cost of electricity (LCOE) 2015 Agora Energiewende (2015) * based on varying utilization, CO 2 -price and investment cost 8

9 The integration costs of wind and solar do not change the picture they amount to some 5-15 EUR/MWh Agora Energiewende

10 Around 60% of newly installed capacities in the power sector are renewable energies. Global power capacity additions % 80% 60% 40% 20% 0% * RES % 19% 17% 23% 24% 31% 26% 28% 39% 46% 41% 49% 50% 58% 58% Non-renewables % 81% 83% 77% 76% 69% 74% 72% 61% 54% 59% 51% 50% 42% 42% RES GW Non-renewables GW IRENA 2014; *own estimate on basis of IRENA

11 Electrical Capacity in GW Capacity additions of wind and solar PV have been systematically underestimated Actual capacity of wind & solar and WEO projections in NPS scenarios WEO 2004 WEO 2008 WEO 2009 WEO 2010 WEO 2011 WEO 2012 WEO 2013 WEO 2014 History 450ppm with nuclear substitution Metayer/Breyer/Fell (2015): The projections of the future of the WEO, IEA (2015): World Energy Outlook

12 So what remains to be done to meet 2 C - and some other important targets?

13 Global Capacity in GW To achieve the 2 C target (or even more), we need to install about 200 GW RES globally - per year Renewable Energy Gap Renewable Capacity Additions in in GW/a GW* GW/a in 450ppm Scenario IEA 2015, IRENA 2015a, WNA 2015, own calculations IRENA 2015a *excluding hydro 13

14 In parallel, we need a smart retirement strategy for unabated and inefficient old coal Open lignite mine in Nochten, Germany The first area in terms of coal we should focus would be to ban inefficient coal-fired power plants and this can save a lot of emissions and this is not out of reach. Fatih Birol, Chief Executive IEA,

15 Germany, for example, has an impressive record of ramping up renewables Share of renewable energies in gross electricity consumption and targets AGEB (2016), EEG (2017) * preliminary 15

16 . but is not on track regarding its climate protection targets. CO 2 emissions from electricity generation and climate targets** UBA (2015), own calculations *preliminary, **application of a sectoral 40%-target 16

17 Challenges ahead 17

18 Solar and wind are the least cost options of the future how to manage this transformation? Expected cost digression for large-scale PV systems The future is all about wind and LOTS of PV. (Now cheapest low-carbon power source and cost competitive to newly built fossil power plants and integration cost do not really change the picture.) Fraunhofer ISE (2015)

19 The electricity system is increasingly guided by flexibility what framework conditions to trigger it at reasonable cost? Electricity generation* and consumption* in the CWE region in a week in late summer 2030 (calendar week 32) The future is all about wind and solar. (Now cheapest low-carbon power source and cost competitive to newly built fossil power plants and integration cost do not really change the picture.) Flexibility is the new paradigm of managing reliable power systems. (Many flexibility options available already, others upcoming, incl. digitalisation as an enabler.) Fraunhofer IWES (2015) *Modelling based on 2011 weather and load data

20 Almost no new investment will manage to recover cost in the market how can we minimize risk premiums then? Wholesale electricity prices* The future is all about wind and solar. (Now cheapest low-carbon power source and cost competitive to newly built fossil power plants and integration cost do not really change the picture.) Flexibility is the new paradigm of managing reliable power systems. (Many flexibility options available already, others upcoming, incl. digitalisation as an enabler.) High upfront cost / low operating cost techs dominating the system. Wholesale prices down to historical low existing fossil plants struggling, and new plants unlikely to recover cost in EOM EEX (2015) * rolling annual futures

21 Example: With wind and solar having high investment and low operating cost, capital costs become crucial to their success. Cost of electricity of solar PV at different costs of capital, example southern Germany and southern Spain in 2025 Fraunhofer ISE

22 Bln. tonnes CO2 Emissions are still not priced right so there is a need for complementing energy policy measures Cumulated allowance surplus in the EU Emissions Trading System The future is all about wind and solar. (Now cheapest low-carbon power source and cost competitive to newly built fossil power plants and integration cost do not really change the picture.) Flexibility is the new paradigm of managing reliable power systems. (Many flexibility options available already, others upcoming, incl. digitalisation as an enabler.) High upfront / low operating cost dominate the system. (Wholesale prices down to historical low existing fossil plants struggling, and new plants unlikely to recover cost in EOM.) Cummulated, structural surplus JI/CDM certificates Agora Energiewende (2016) Verified/projected emissions Allocated certificates + backloading The ETS is not performing - for the foreseeable future. (Huge CO 2 allowance surplus in EU ETS will keep CO 2 prices well below 30 EUR/t for another 15 years)

23 Some very brief concluding remarks 23

24 Markets need a different design. A real-world market-based system that meets all targets consists of more than pure text book economics. The Power Market Pentagon Real-life constraints of EOM and ETS require broadening of perspective and considering policy interactions: Refining EOM design is no-regret, but reaches limits due to old, high carbon, inflexible capacity in legacy mix Smart retirement of old, high-carbon, inflexible capacity is prerequisite for market design reform to be fully effective Reformed ETS will not deliver smart retirement, but must complement it Reformed ETS will not close revenue gap for RES-E investments System adequacy safeguards must be consistent with RES-E integration and retirement of high-carbon assets Agora Energiewende (2016)

25 Yes we can! RES are the key driver for staying well below 2 degrees Global Solar Potential Global Wind Potential 3TIER (2011) 3TIER (2011) 25

26 (And yes - there are business opportunities!) Global new investment in renewable power and fuels, REN 21 Renewables 2016 Global Status Report 26

27 Agora Energiewende Rosenstraße Berlin T +49 (0) F +49 (0) info@agora-energiewende.de Please subscribe to our newsletter via Thank you for your attention! Questions or Comments? Feel free to contact me: barbara.praetorius@agora-energiewende.de Agora Energiewende is a joint initiative of the Mercator Foundation and the European Climate Foundation.