Renewables after COP-21 A global perspective. Cédric Philibert Renewable Energy Division International Energy Agency

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1 Renewables after COP-21 A global perspective Cédric Philibert Renewable Energy Division International Energy Agency Energy Change Institute, Canberra, 5 May 2016

2 COP21 a historic milestone Universal agreement on: GHG emissions peak asap Stay below 2 C temperature increase, get close to 1.5 Reach carbon-neutrality in second half of this century Renewables around COP21 Renewables explicitly referred to in around 100 pledges Record renewable capacity additions in 2014 and 2015 Lowest-ever announced wind and solar prices Downturn in prices for all fossil fuels Oil & gas set to face a second year of falling upstream investment in 2016 Coal prices remain at rock-bottom as demand slows in China

GW Renewables set to dominate additions in power systems World net additions to power capacity 1 600 1 400 1 200 1 000 800 600 400 200 0 2008-2014 2014-20 Fossil fuels Nuclear Hydropower Non-hydro

3 GW Renewables set to dominate additions in power systems World net additions to power capacity Fossil fuels Nuclear Hydropower Non-hydro renewables Analysis from the IEA Medium-Term Renewable Energy Market Report 2015 and the New Policies Scenario of the World Energy Outlook The share of renewables in net additions to power capacity continues to rise with non-hydro sources reaching nearly half of the total

4 Deployment shifting to emerging markets and developing countries Shares of net additional renewable capacity, India 9% Brazil 5% Africa 4% Rest of non-oecd 9% EU-28 13% United States 9% Japan 5% Rest of OECD 8% China 38% As the OECD slows, non-oecd countries account for two-thirds of renewable growth, driven by fast-growing power demand, diversification needs and local pollution concerns

5 2010 = 100 Innovation and scale-up are driving costs down 120 Indexed generation costs Onshore wind Solar PV - residential Solar PV - utility scale High levels of incentives are no longer necessary for solar PV and onshore wind, but their economic attractiveness still depends on regulatory framework and market design

6 Wind and Solar PV prices declining sharply Recent announced long-term contract prices for new renewable power to be commissioned over Onshore wind Utility-scale solar PV Morocco USD 30-35/MWh Germany USD /MWh Germany USD 87 /MWh United States USD 47/MWh Canada USD 66/MWh Turkey USD 73/MWh United States USD 65-70/MWh China USD 80 91/MWh Brazil USD 81/MWh India USD 67-94/MWh Peru USD 38/MWh Mexico USD 35+5/MWh Jordan USD 61-77/MWh Peru USD 49/MWh United Arab Emirates USD 58/MWh Brazil USD 49/MWh Chile USD 65-68/MWh Uruguay USD 90/MWh South Africa USD 51/MWh South Africa USD 65/MWh Egypt USD 41-50/MWh Australia USD 69/MWh This map is without prejudice to the status or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area Note: Values reported in nominal USD includes preferred bidders, PPAs or FITs. US values are calculated excluding tax credits. Delivery date and costs may be different than those reported at the time of the auction. Best results occur where price competition, long-term contracts and good resource availability are combined

7 High capex: WACC matters Impact of cost of capital on the levelised cost of solar PV (assuming same system costs and same resource ) 2X X Dubai Central Africa Market and regulatory risks can increase weighted average cost of capital and undermine competitiveness of PV and Wind power

8 Gt Greater efforts are still needed to reach a 2 C pathway Trend post-cop Gt Energy efficiency Fuel & technology switching in end-uses Renewables Nuclear C Scenario CCS Other Source: World Energy Outlook 2015 In a 2 C Scenario, energy efficiency and renewables, notably solar and wind, deliver the bulk of GHG emission reductions OECD/IEA 2015

Global power mix needs a shift reversal Source: Energy Technology Perspectives 2014 2011 6DS 2DS hi-ren

9 Global power mix needs a shift reversal Source: Energy Technology Perspectives DS 2DS hi-ren Generation today: Generation 2DS 2050: Fossil fuels: 68% Renewables: 65-79% Renewables: 20% Fossil fuels: 20-12%

10 Where CST fits in the picture 1. Generate dispatchable electricity 2. Provide high-temperature industrial process heat 3. Manufacture energy vectors as «solar fuels»

semi-arid countries Mostly for utilities Firm, dispatchable Peak to base-load }{

11 Solar Electricity PV takes all light PV almost everywhere Scalable from kw to GW Variable and mid-day Peak & mid-peak Smart grids STE takes direct light STE only in semi-arid countries Mostly for utilities Firm, dispatchable Peak to base-load }{ backup storage HVDC lines for transport Firm & flexible CSP capacities can help integrate more PV

12 Integrating large shares of PV is challenging California: - expected evolution of the net load of a typical spring day Flexibility of other power system components Grids Generation Source: California ISO, expected evolution of the value of PV and CST Storage Demand Side Source: Jorgenson, Denholm & Mehos, 2014

13 Complementary roles of PV and STE Thanks to thermal storage, STE is generated on demand when the sun sets while demand often peaks and value of electricity increases OECD/IEA 2014

14 Global generation in TWh Share of total electricity generation New roadmap vision for solar electricity % % % % % % Solar PV Solar CSP Share of PV Share of PV+STE 0% Together, PV and STE could become the largest source of electricity worldwide before 2050 OECD/IEA 2014

15 Future possible interconnections Source: Adapted from STE Roadmap 2010

16 Power from CST compares with Distributed PV + battery (e.g. Germany) Utility-scale PV + pumped-hydro storage (e.g. Chile) PV + wind (e.g. South Africa)

17 or PV + CST! Tomorrow? (e.g. ARPA-E s Focus programme, USA) Lesedi, Jasper and Redstone Power Projects. Source: SolarReserve Today (almost) (e.g. South Africa)

18 Cost matters, but value too! Ten years ago, LCOE of CST power was half that of PV Now, the reverse holds true CST power will not beat PV on costs, but compares with PV + storage Time-of-delivery payments reflect the true value of storage CST Power was born in the 1980s in California thanks to time-of-delivery energy and capacity payments CST is being developed in South Africa thanks to a x2.7 multiplier of Base Price during 5 hours a day

19 Renewable electricity generation is more than a hydropower story Generation (TWh) % 10% Renewable generation by technology ( ) Share of renewables in overall electricity generation Share of non-hydro renewables in overall RE generation 22% 25% 26% 37% Hydropower Bioenergy Onshore wind Offshore wind Solar PV Geothermal STE Ocean Natural gas 2013 Nuclear 2013 Share of non-hydropower in renewable electricity generation is expected to increase significantly OECD/IEA 2015

20 Share of renewables in sector demand Persistent challenges slow growth in heat and transport Historical and forecast share of renewables in electricity, heat and transport sectors % 25% 20% Forecast Renewable electricity 15% Renewable heat 10% 5% 0% Biofuels in road transport Growth of renewable electricity generation is increasing, while renewable heat and transport are falling behind. OECD/IEA 2015

21 2050 Low-Carbon Economy Roadmap 80% GHG decarbonisation in 2050 (cf global 2 C objective) 100% 100% 80% Power Sector Current policy 80% 60% Residential & Tertiary 60% 40% Industry 40% Transport 20% 20% Non CO 2 Agriculture 0% Non CO 2 Other Sectors 0% Source: European Commission 2050 Roadmap,

22 Industry next to power, mostly heat Global CO2 emissions Germany (final energy consumption)

Electric heat technologies Least efficient:

in parallel with existing fossil fuel boilers

100 C output Reaching 140 C output would double

Microwaves (food, rubber, plastics) Foucaut

23 Electric heat technologies Least efficient: resistances (Joule) Could play a transitory role in parallel with existing fossil fuel boilers Industrial heat pumps Commercially available to 100 C output Reaching 140 C output would double potential Induction heating and smelting Microwaves (food, rubber, plastics) Foucaut currents, electric ovens, electric arcs, plasma torches, etc Photo Credit : SAIREM

24 Solar heat for industries Solar air drying of coffee beans (Columbia) Solar water heaters in a service area (Austria) Source: AEE INTEC. Experimental mid-size industrial solar oven (France) Source: SolarWall. Deepak Gadhia Cooking with Scheffler dishes (India)

25 Oil men turn to solar to save gas Mirrah, Oman, 2017: 1 GWth for EOR Glasspoint technology

26 Solar fuels From hydrocarbon or water Source: PSI/ETH-Zürich. H 2 can first be blended with natural gas Can be converted into various energy carriers: methane, methanol, DME, ammonia Other options based on redox cycles, flow batteries OECD/IEA, 2011

27 Various CST paths to carbon-free ammonia, steel, cement Solar thermal electro pr Source: Licht et al. Including process CO2 emissions Also to support CO2 capture from coal plants (ARENA), biomass plants or perhaps from air

28 Interconnections reconsidered

29 Subsidies to fossil fuels dominate over carbon pricing Energy-related CO 2 emissions, 2014, shares of coverage by CO 2 prices or subsidies

A decisive moment for the future of renewables Paris Agreement accelerates virtuous circle already started before COP Increasingly affordable renewables are set to dominate the growing power systems

30 A decisive moment for the future of renewables Paris Agreement accelerates virtuous circle already started before COP Increasingly affordable renewables are set to dominate the growing power systems of the world Sharp cost reductions of RE change policy and market design needs From providing financial support to creating a framework for investment Long-term remuneration crucial to attract financing Innovation must extend from renewable technology to system integration While variability of renewables is a challenge energy systems can learn to adapt to, variability of policies poses a far greater risk Low fossil fuel prices are a good time window to introduce robust longterm carbon pricing and make progress in phasing out fossil fuel subsidies

32 Net load (GW) Integrating larger shares of VRE: the balancing challenge Higher uncertainty Larger and more pronounced changes Illustration of Residual power demand at different VRE shares Larger ramps at high shares 0.0% 2.5% 5.0% 10.0% 20.0% Lower minimum Hours Note: Load data and wind data from Germany 10 to 16 November 2010, wind generation scaled, actual share 7.3%. Scaling may overestimate the impact of variability; combined effect of wind and solar may be lower, illustration only.

33 Net load (GW) Integrating larger shares of VRE: the utilisation challenge Netload implies different utilisation for non-vre system Maximum remains high: Scarcity % 2.5% 5.0% 10.0% 20.0% Changed utilisation pattern Lower minimum: Abundance Hours Note: Load data and wind data from Germany 10 to 16 November 2010, wind generation scaled, actual share 7.3%. Scaling may overestimate the impact of variability; combined effect of wind and solar may be lower, illustration only. Peak Baseload Midmerit Midmerit Baseload Peak

34 System-friendly VRE deployment Complementarity of wind and solar generation in Germany System-friendly design of wind turbines reduces variability Source: adapted from Agora, 2013

35 Importance of grids EUROPE Continental Dimension BRAZIL km km Interconnected continental-scale balancing areas smoothen out variability and allow to exploit complementarities

36 120 kw Commercial 3 kw Residential.13 kw Residential Self-use and self-sufficiency Comparison of self-use and self-sufficiency shares by system size and customer (A temperate country example) Generation 100% self-use Consumption 4% self-sufficiency Generation Consumption 37% self-use 35% self-sufficiency Generation 94% self-use Consumption 29% self-sufficiency Annual kwh Consumption from the grid Generation surplus Prosumed

places, the hard limit to solar penetration in power system is

37 Self-consumption with DSI and small storage Self-consumption: 40% With DSI: 50% with DSI and small storage: 60% In most places, the hard limit to solar penetration in power system is the seasonal imbalance, as interseasonal storage is usually expensive

38 Grid cost issues with selfconsumption and net-metering Depending on the time match demand vs. sunshine, grid costs may be reduced or increased T&D costs 30-50% of retail costs, but only 0-15% recovered through fixed payments for efficiency/equity reasons Self-consumers pay less but still benefit from the grid Net-energy metering only increases the size of the issue Recovering grid costs over lesser sales may require tariff increase, but this leads to cross-subsidies, and further incentivizes selfconsumption Load-defection will not (likely) lead to grid defection, but financing of grid development is a real issue. Grids have high value to integrate large shares of variable renewables

39 Regional power mixes differ by 2050 in 2DS hi-ren Source: Energy Technology Perspectives 2014 Differences in resources but also in load shapes lead to quite different technology mixes

CST after COP-21 A global perspective. Cédric Philibert Renewable Energy Division International Energy Agency

CST after COP-21 A global perspective Cédric Philibert Renewable Energy Division International Energy Agency ASTRI Workshop, Melbourne, 2 May 2016 COP21 a historic milestone Universal agreement on: GHG