Economics of solar PV

Transcription

1 Economics of solar PV after COP21 Paolo Frankl Head, Renewable Energy Division Energy Agency IEA PVPS workshop, EUPVSEC, Munich, 20 June

2 The start of a new energy era? Universal agreement from COP21 is a historic milestone Pledges of 185+ countries account for 95% of energy related emissions Renewables explicitly referred to in around 100 pledges New records for renewables Record renewable capacity additions in 2014 and 2015 led by wind Lowest ever announced prices in countries with excellent resources, sound regulatory and market frameworks 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

3 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 OECD/IEA 2015

4 PV prices declining sharply Recent announced long term contract prices for new renewable power to be commissioned over Jordan India India USD/MWh (nominal) South Africa South Africa Uruguay Chile Canada Brazil Brazil Brazil USA UAE Germany France Jordan Australia South Africa Brazil Germany USA South Africa Egypt Morocco India Peru Peru Mexico UAE Solar PV Wind onshore Best results occur where price competition, long term contracts and good resource availability are combined

5 But large price ranges remain OECD/IEA 2015

6 Greater competition is coming to the European gas market 12 US LNG is competitive in Europe USD/Mbtu European hub prices (TTF) Henry Hub indexed LNG delivered to Europe Oversupply in global LNG markets will intensify competition; flexible US LNG volumes are well placed to compete in Europe 6 Nb: Based on cash costs and on forward curves as of June 7 th 2016

7 Coal prices keep hitting new lows 250 Development of thermal coal prices Global financial crisis 200 New supply capacity meets slowing demand 150 $/t 100 meets slowing demand CIF Prices in North West Europe (ARA) Global overcapacity & weaker than expected demand look set to put further downward pressure on coal prices through

8 Gas price decline prevents PV to be competitive in Germany Possible LNG price in Europe Gas price June 2015

9 Towards double digit shares of wind and solar PV Share of variable electricity generation in 2014 and 2020 Denmark Ireland Germany ESP & PRT UK Italy Sweden Australia Brazil India China France USA Japan 0% 10% 20% 30% 40% 50% 60% Share wind 2014 Share PV 2014 Share Wind 2020 Share PV 2020 Source: GIVAR Programme and Medium Term Renewable Market Report

10 Integrating large shares of PV requires more flexibility 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

11 Increase solar shares with storage or heat Distributed PV + battery (e.g. Germany) of electricity Utility scale PV + CSP (e.g. South Africa) Utility scale PV + pumped hydro (e.g. Chili)

12 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

13 A decisive moment for solar COP 21 Paris Agreement set to accelerate energy sector transformation Now the focus needs to be on implementation & raising ambition But governments need to be mindful of the risk low fossil fuel prices pose to renewables & energy efficiency in the medium term While variability of renewables is a challenge energy systems can learn to adapt to, variability of policies poses a far greater risk Falling cost of solar PV (and wind) calls for paradigm shift in policies towards an enabling environement to attract investments Fostering long term and predictable policies and providing appropriate market design Based on system approach maximising value in space and time Ensure a level playing field implementing a robust carbon pricing and phasing out fossil fuel subsidies