Renewables: challenges and opportunities for the power grid Cédric PHILIBERT Renewable Energy Division International Energy Agency

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1 Renewables: challenges and opportunities for the power grid Cédric PHILIBERT Renewable Energy Division International Energy Agency Atoms for the Future, Paris, 22 October 2013

2 Positive mid-term outlook for renewable electricity TWh Global renewable electricity production, by technology IEA 2 C Scenario 30% 25% 20% % % 5% 0 0% Hydropower Bioenergy Onshore wind Of f shore wind Solar PV CSP Geothermal Ocean % Total generation Gas-fired Nuclear generation 2016 generation 2016 Renewable electricity projected to scale up by 40% from 2012 to 2018 Broadly on track with 2020 IEA 2 C scenario targets Source: Medium-Term Renewables Market Report 2013

3 The whole RE power mix accelerating its growth Recent cumulative additions (TWh) Forecast cumulative additions (TWh) Hydro remains the largest increasing single renewable technology But for the first time additional generation from all non-hydro sources exceeds that from hydro

4 But other technologies lagging behind Wind offshore Concentrated Solar Power TWh OECD Americas OECD Asia Oceania OECD Europe Africa Asia China Non-OECD Europe Non-OECD Americas Middle East MTRMR 2012 TWh OECD Americas OECD Asia Oceania OECD Europe Africa Asia China Non-OECD Europe Non-OECD Americas Middle East MTRMR 2012 Potential of offshore power remains high, but technical, financial and grid connection issues pose challenges Storage adds value to CSP, but deployment hampered by relatively high costs

5 Improving competitiveness Most dynamic technologies onshore wind and solar PV increasingly competitive in a number of markets But market framework matters Deployment with little support occurring in some areas with rising energy needs, good resources, and predictable long-term revenues MRMR Utility scale Small scale 400 Global levelised costs of power generation ranges (USD per MWh) Note: costs reflect differences in resource, local conditions, and the choice of sub-technology.

Renewable power spreading out everywhere Total Renewable Annual Capacity Additions, by region (GW) Source: Medium-Term Renewables Market Report 2013 This map is without prejudice to the status of or

6 Renewable power spreading out everywhere Total Renewable Annual Capacity Additions, by region (GW) Source: Medium-Term Renewables Market Report 2013 This map is without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiersand boundaries and to the name of any territory, city or area. Emerging markets more than compensate for slowing growth and volatility in markets such as Europe and the US

7 Non-OECD accounts for two-thirds of growth TWh Global renewable electricity production, by region OECD Americas OECD Asia Oceania OECD Europe Africa Asia China Non-OECD Europe Non-OECD Americas Middle East MRMR 2012 In 2018, non-oecd comprises 58% of total renewable generation, up from 54% in 2012 and 51% in 2006 China leads with deployment of a broad portfolio of renewables Other key markets: Brazil (wind, bioenergy), India (wind, solar, bioenergy), South Africa and Morocco (wind, solar), Thailand (bioenergy), Middle East (solar)

8 RE largest contributor to total electricity increase in OECD TWh Changes in power generation by source and region, OECD, Renewables Nuclear Fossil fuels Others Total OECD OECD Americas OECD Asia Oceania OECD Europe Renewables expected to grow almost like fossils in America, and more than total demand in Europe

9 Over the longer term, the power generation mix is set to change Global electricity generation by source, TWh Coal Renewables Gas Nuclear 2000 Oil Source: IEA World Energy Outlook 2012 New Policies Scenario Renewables electricity generation overtakes natural gas by 2016 & almost coal by 2035; growth in coal generation in emerging economies outweighs a fall in the OECD

10 Global climate-friendly electricity mix by % Variables 32% Renewables 57% 71% Renewables to provide 57 to 71% of World s electricity by 2050 in 2 degree scenarios -VRE 22 to 32%

11 The IEA Technology Roadmaps: Hydropower IEA roadmaps look at technologies required to limit climate change at 2 C HP roadmpa co-authored with Brazil s Ministry of Mines and Energy Reviewers from agencies, academia, governments, industry, NGOs Support from CEPEL, ADEME, Iberdrola OECD/IEA 2012

12 Vision for Hydropower IEA Roadmap TWh Middle East 16% Share on total electricity generation 19% Asia Pacific Africa Europe & Eurasia Central & South America North America 17% China India Asean Other Asia Pacific Africa M. East OECD Europe Russia Transition eco. Brazil Other LAM+Mex Canada USA Hydropower generation will double by 2050 and reach GW and TWh, mostly from large plants in emerging/developing economies OECD/IEA 2012

13 Technical improvements Strengthened environmental requirements may reduce hydropower output and potential Technical improvements allow to increase or maintain performance and output, and reduce environmental impacts OECD/IEA 2012

14 IEA Wind Power Roadmap 2013 Update considers recent trends and revised long-term targets: By 2050, 15% to 18% of global electricity, vs. 12% targeted in the former roadmap Technology and cost evolution 2050 Vision based on global energy context and system optimization Barriers and policy recommendations

15 Wind power deployment to 2050 in the Roadmap Vision Wind power to provide 15% to 18% of global electricity China, Europe and the USA together account for two thirds

16 Land-based and offshore deployment and costs By 2050, 25% of total global wind capacity to be located at sea, up from 6% in 2020 Investment costs for wind power to decrease by 25% on land and 45% off shore by 2050

17 Technology Evolution Growth in size, height and capacity Greater capacity factors Easier access to sites with lower-speed winds Easing grid integration with more regular output

18 Wind costs decreasing Land-based wind getting cheaper Offshore not yet But significant cost decrease expected Land-based LCOE Evolution of LCOE to 2050 USD/MWh Land-based Low High Land-based turbines Offshore Low High

19 Solar PV growing out of Europe PV Annual Capacity Additions (GW) Strong growth seen in China, Africa, Middle East, and Latin America

20 Medium Term RE Market Report 2013 PV generation to 2018 by regions

21 PV Module Prices Technology improvements and economies of scale drive sharp cost reduction Overcapacity leads to price setting below costs

22 Rapid system cost cuts Solar PV system costs in Italy by size, EUR/W /W 1-3 kw 3-20 kw kw kw > 1 MW PV system Price ( /W) Median Source: GSE, Note: includes VAT.

23 PV LCOE depends on Solar Resource and Cost of Capital Best sustainable price ground-mounted PV systems: USD 1.7/W South Germany South France Sicily, Italy Murcia, Spain Costs soon to reach competitive levels when and where all favourable circumstances are met

24 Various IEA scenarios for PV Time GW TWh Scenario Source ( ) 368 Medium Term RE Market Report IEA Technology Roadmap (2010) NPS World Energy Outlook IEA Technology Roadmap (2010) DS hiren Energy Technology Perspectives 2012 > «Testing limits» Solar Energy Perspectives (2011)

25 Distributed PV reaching grid parity in some markets Economics of distributed PV for self-consumption improving rapidly Difficult to quantify deployment further monitoring needed USD/MWh 450 Residential solar PV LCOE vs. average retail power prices (variable tariff) Average residential electricity price (variable tarif f) Residentialsolar PV, LCOE estimates: Germany Italy California Examples correspond to Southern Germany, Southern California and Southern Italy. LCOEs use average residential system costs (include VAT and sales tax in California and Italy where they are applicable) and do not include financial incentives; ranges represent differences in financing costs and full load hours. The variable component of residential electricity prices calculated from average annual household electricity prices and estimation of fixed and variable components as reflected on a household electricity bill. In Germany and Italy, variable component is estimated at 91% while in California variable tariffs account for 99% of the bill electricity prices are taken as proxy for 2013 in Germany and Italy where data not yet available prices in California based on 1Q2013.

26 Variability limits self-consumption Daily self-consumption example a household with 5-kW PV system in Germany June - cloudy June - sunny June partly cloudy March partly sunny December cloudy December very cloudy In grey, electricity drawn from the grid. In blue, electricity injected into the grid. In green, selfconsumption. Numbers indicate the percentage of self-consumed electricity. Horizontal axes: hours. Vertical axes: watts. Source: Génin, Self-consumption higher for: Some office and commerce buildings with high daily consumption, and relatively small systems on multi-storey dwellings Self-consumption potentially increased with: Load management Decentralised electricity storage (if/when affordable)

27 Paying for grid injected excess power Payment System Where Observations FIT/FIP Germany FIT below LCOE Reduces FIT costs Net Metering Market based or avoided cost Denmark, US States, Australia (Italy since July) California Netting period critical Can over-reward generation Overall level often capped Likely to be more sustainable in long-term

28 Electricity System Implications Fixed Grid Cost Recovery Who pays as commercial power demand reduced? More time-based pricing and different user profile-adjusted tariffs System Concerns Integration Costs Depend on match of PV output and peak demand Need for better assessment Foregone Tax RE Surcharge

Pipe with thermal fluid Parabolic Trough

29 Solar thermal electricity (CSP plants) Linear Concentration Absorber Tube Absorber tube and reconcentrator Curved mirror C: 100 Curved mirror T: ~ 500 C Pipe with thermal fluid Parabolic Trough Linear Fresnel Point Concentration C: T: ~ C Receiver / Engine Reflector Solar Receiver Dish/Engine Heliostats Central Receiver

30 Why STE/CSP might survive the competition of PV Higher costs but built-in thermal storage When demand peaks after sunset! If PV (plus minimum load of back-up, if any) already saturates demand at noon Only competing option (for now): pump-hydro storage Saudi Arabia plans for 2032: PV 16 GW and 25 GW STE/CSP; China s plans for 2030 STE very flexible, helps accommodating more PV (when replacing coal)

Various IEA scenarios for STE/CSP Time GW TWh Scenario Source 2018 12.

31 Various IEA scenarios for STE/CSP Time GW TWh Scenario Source (14) 34 Medium Term RE Market Report IEA Technology Roadmap (2010) NPS World Energy Outlook IEA Technology Roadmap (2010) DS hiren Energy Technology Perspectives 2012 > «Testing limits» Solar Energy Perspectives (2011)

32 Ocean power to have a small absolute contribution to RE generation Small to medium size demonstration projects are expected to come online Two tidal barrages (France, Korea) represent the majority of generation Forecast is more optimistic than in MTRMR 2012 mainly due to Korea s plans to deploy large scale tidal barrages TWh Ocean generation and projection by region OECD Americas OECD Asia Oceania OECD Europe Africa Asia China Non-OECD Europe Non-OECD Americas Middle East MTRMR 2012

33 Geothermal advances but with slower growth rates Investment risks associated with drilling and exploration remains as a major challenge to deployment 60% of growth to come from OECD countries and the rest from Southeast Asia, Africa and Latin America Geothermal generation and projection by region TWh OECD Americas OECD Asia Oceania OECD Europe Africa Asia China Non-OECD Europe Non-OECD Americas Middle East MTRMR 2012

34 Bioenergy scales up with increased use of agricultural, municipal waste and co-firing China is largest grower, with ambitious targets and increasing renewable waste-to-energy plants Other non-oecd countries Brazil, India and Thailand also expected to add significant new generation OECD growth dominated by Europe, driven by 2020 targets TWh 600 Bioenergy generation and projection by region OECD Americas OECD Asia Oceania OECD Europe Africa Asia China Non-OECD Europe Non-OECD Americas Middle East MTRMR 2012

flexibility has to be reflected in the market Need for a suite of

35 Variable RE will need more Flexibility Grid infrastructure Dispatchable generation Storage Demand side integration Value of flexibility has to be reflected in the market Need for a suite of different flexibility options GIVAR III study to be published in January 2014

OECD/IEA, 2011 PSP: 99% of current on-grid storage Pumped-hydro plants the reference solution 140 GW in service, 50 GW in development PSP developed from existing hydro

36 OECD/IEA, 2011 PSP: 99% of current on-grid storage Pumped-hydro plants the reference solution 140 GW in service, 50 GW in development PSP developed from existing hydro plants off-stream or pumped-back schemes Small energy volumes but large power capacities Daily/weekly storage does not require large areas Source: Inage OECD/IEA 2012

37 Vision for PSP deployment by 2050 Low High vre/total energy Hydro/total energy PSP/total capacity vre/total energy Hydro/total energy PSP/total capacity China USA Europe Japan RoW Total 21% 24% 43% 18% 14% 6% 13% 12% 4% 4% 6% 11% 2% GW % 37% 48% 33% 15% 6% 11% 13% 5% 8% 10% 12% 3% GW

38 The way forward: testing the limits Under severe climate constraints What if other low-carbon energy options are not easily available? Where are the technical limits to solar energy? Assuming efficiency improvements and further electrification of buildings, industry and transport Not always least cost, but affordable options Footprint, variability and convenience issues Three broad categories of situations: Sunny and dry climates, where CSP dominates Sunny and wet climates, with PV backed by hydro Temperate climates, with wind power and PV backed by hydro, pumped-hydro and H2-NG plants OECD/IEA 2010

cp1 Testing limits: key role of electricity Electricity share keeps growing as efficient enduse technologies continue to penetrate markets Source: Heide et al.

39 cp1 Testing limits: key role of electricity Electricity share keeps growing as efficient enduse technologies continue to penetrate markets Source: Heide et al Solar energy dominated by power (STE and PV) Space heating needs reduced and satisfied with ambient heat through heat pumps Many options converging towards USD 100/MWh Solar PV (and wind) electricity storage where STE is not feasible: pumped-hydro plants OECD/IEA, 2011 OECD/IEA 2010

40 Diapositive 39 cp1 Paolo: add illustrations in these four slides ieauser; 26/08/2011

41 Testing the limits: Electricity by OECD/IEA 2010 OECD/IEA, 2012

Testing limits: key results Solar energy could provide a third of final energy after 2060 If energy efficiency is greatly improved Footprint and variability solvable issues Solar energy, wind power,

42 Testing limits: key results Solar energy could provide a third of final energy after 2060 If energy efficiency is greatly improved Footprint and variability solvable issues Solar energy, wind power, hydro power and biomass provide most of the world s final energy demand Other renewables important in places Some uses of fossil fuels still required, but CO 2 emissions reduced to 3 Gt or less if CCS is available OECD/IEA 2010

43 A reminder

Medium Term Renewable Energy Market Report 2013

Medium Term Renewable Energy Market Report 2013 Renewable Energy Market Report 213 Michael Waldron Renewable Energy Division International Energy Agency OECD/IEA 213 OECD/IEA 213 MTRMR methodology and scope Analysis of drivers and challenges for RE