THE ELECTRICITY BILL OF THE FUTURE

Transcription

1 Group Economics THE ELECTRICITY BILL OF THE FUTURE Hans van Cleef, Sr. Energy Economist November 2018

2 What determines the electricity price? The three D s: 2

3 How serious should we take price predictions? 3

4 Oil price forecasting a hell of a job X USD/bbl $80 in 2015 $60 end of 2016, $70 end of 2017 $75 end of ABN AMRO Forecast Brent WTI Source: Bloomberg 4

5 Example of external factors affecting prices X USD/bbl jul-17 okt-17 jan-18 apr-18 jul-18 okt-18 ABN AMRO Forecast Brent WTI Source: Bloomberg 5

6 Oil and geopolitics X USD/bbl jul-17 okt-17 jan-18 apr-18 jul-18 okt-18 ABN AMRO Forecast Brent WTI Source: Bloomberg 6

7 Other example of external factors affecting prices X USD/mmBtu 3,6 3,4 3,2 3 2,8 2,6 2,4 jan feb mrt apr mei jun jul aug sep okt ABN AMRO Forecast US Henry Hub Source: Bloomberg 7

8 Gas and weather forecasts X USD/mmBtu 4,9 4,4 3,9 3,4 2,9 2,4 jan feb mrt apr mei jun jul aug sep okt nov ABN AMRO Forecast US Henry Hub Source: Bloomberg 8

9 Group Economics THE SOCIAL ASPECTS

10 Dutch Climate Agreement: five focus areas => 49% carbon reduction Electricity (20.2 Mt) 2. Industry (14.3 Mt) 3. Mobility (7.3 Mt) 4. Buildings (3.4 Mt) 5. Agricultural (3.5 Mt) 10

11 The mismatch - Government Security of supply Climate Economics 11

12 The reality 12

13 Do U nrg 2? 1. Gas from Groningen 2. Gas from Russia 3. LNG (US shale gas) 4. Nuclear 5. Coal 6. Onshore wind (Nimby / Nivea) 7. Offshore wind 8. CCS 9. Subsidies renewable energy projects 13

14 Comfort and money the real drivers? but only willing to do so if we: a)keep the current level of comfort, and b)won t have to pay more BUT 14

15 Awareness, support and involvement 15

16 Group Economics THE TRENDS

17 Trends in gas Source: IEA WEO

18 Trends in the global electricity mix Source: IEA WEO

19 Trends in the European electricity mix Source: IEA WEO

20 Climate effects: Windspeed Windspeed (m/s) Source: KNMI 20

21 Climate effects: Radiation Radiation (J/cm2) Source: KNMI 21

22 ETS Carbon Emission Pricing X EUR/tonne CO EC presented proposal te revise EU ETS for period after 2020 The revised EU ETS Directive entered into force on 8 April 2018 EC Council formally supported the revision EU carbon emission price (ETS) Source: Bloomberg 22

23 ETS Carbon Emission Pricing X EUR/tonne CO National minimum carbon price? EU carbon emission price (ETS) Source: Bloomberg 23

24 Grid changes require investments 24

25 Group Economics THE BUILDING BLOCKS

26 Current building blocks electricity bill 26

27 Cost electricity bill per user / per net Source: VEMW 27

28 Power prices and relevant uncertainties Source: Bloomberg 28

29 Electricity bill drivers: current situation Indirect effect on gas future prices Accounts for large part of the electricity bill Coal accounts for 27% of our electricity mix Nuclear accounts is 2.9% of the Dutch electricity mix Biomass makes up for 4% of the NL electricity mix EU ETS prices are currently trading around EUR 20/ton Besides fixed costs, due to import/export the Dutch electricity prices are also affected by production changes abroad Renewable energy (wind and solar) cover currently 11% of the electricity mix Dutch GoO s are more expensive than European certificates as demand is bigger than supply Taxes, levies and ODE are added to the electricity bill (% depending on type of client) 29

30 Electricity bill drivers: 2030 Effect continues to deteriorate due to decoupling gas contracts Gas demand will ease from +/- 40 bcm, to roughly 35 bcm and thus is still a dominant driver Coal usage in NL will be phased out Borssele nuclear power plant will be closed in 2033 latest Will be used in heat nets, although coal power plants will be closed by then Minimum EU ETS price of EUR 43/ton? EU policy will push for optimum market efficiency Interconnection will be even larger NL Gvt is aiming at 23% minimum in Main goal is lower carbon emission More demand for GoO in NL than supply? Or better balanced? More and more renewables as well as local grids. Taxation should be changed while ODE will be reduced to zero towards

31 Electricity bill drivers: 2050 DNA DNA DNA DNA DNA? DNA Interconnection will be even larger, grid costs will dominate the bill +/- 100%Renewable energy triggers a strong need for flex: back-up and storage capacity DNA Up to the government how to tax the future electricity bill 31

32 Changes to the electricity bill Current situation

33 What determines the electricity price in the future? The three X s: Grid conne-x-ion 33

34 Thanks for your attention! Hans van Cleef Senior Energy Economist ABN AMRO Bank N.V. Group Economics ABN AMRO Group Economics on the internet or (in NL & EN) 34

35 Important information ABN AMRO Group Economics on the internet Nederlandse publicaties English publications The views and opinions expressed in this document may be subject to change at any given time. Individuals are advised to seek professional guidance prior to making any investments. This material is provided to you for information purposes only and should not be construed as an advice nor as an invitation or offer to buy or sell securities or other financial instruments. Before investing in any product of ABN AMRO Bank N.V., you should obtain information on various financial and other risks and any possible restrictions that you and your investments activities may encounter under applicable laws and regulations. If, after reading the presentation, you consider investing in a product, you are advised to discuss such an investment with your relationship manager or personal advisor and check whether this product considering the risks involved- is appropriate within your investment activities. The value of your investments may fluctuate. Past performance is no guarantee for future returns. ABN AMRO Bank N.V. has taken all reasonable care to ensure that the information contained in this document is correct but does not accept liability for any misprints. ABN AMRO Bank N.V. reserves the right to make amendments to this material. 35