The start of a new energy era?

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2 The start of a new energy era? 2015 has seen lower prices for all fossil fuels Oil & gas could face second year of falling upstream investment in 2016 Coal prices remain at rock-bottom as demand slows in China Signals turn green to give COP21 significant momentum Pledges of 150+ countries account for 90% of energy-related emissions Renewables capacity additions at a record-high of 130 GW in 2014 Fossil-fuel subsidy reform, led by India & Indonesia, reduces the global subsidy bill below $500 billion in 2014 Multiple signs of change, but are they moving the energy system in the right direction?

3 Demand growth in Asia the sequel Change in energy demand in selected regions, Mtoe European Union United States Japan Latin America Middle East Southeast Asia Africa China India By 2040, India s energy demand closes in on that of the United States, even though demand per capita remains 40% below the world average

4 Policies spur innovation and tip the balance towards low-carbon Costs in 2040 for different energy sources/technologies, relative to % 40% 20% 0% -20% -40% -60% Solar PV Onshore wind Efficient lighting Efficient industrial heat production Upstream oil and gas Innovation reduces the costs of low-carbon technologies & energy efficiency, but for oil & gas the gains are offset by the move to more complex fields

5 A new balancing item in the oil market? Change in production ( ) of US tight oil for a range of 2020 oil prices mb/d $40/bbl $50/bbl $60/bbl $70/bbl $80/bbl $90/bbl $100/bbl Tight oil has created more short-term supply flexibility, but there is no guarantee that the adjustment mechanism in oil markets will be smooth

6 The big opportunities & uncertainties for natural gas are in Asia Natural gas demand and supply in developing Asia, & 2040 bcm Imports Conventional Unconventional Additional to Demand Production Developing Asia accounts for almost half of the rise in global gas demand & 75% of the increase in imports, but gas faces strong competition from renewables & coal

7 Power is leading the transformation of the energy system Global electricity generation by source TWh Renewables Coal Gas Nuclear Oil 2014 Change to 2040 Of which: Hydro Wind Solar Other renewables Driven by continued policy support, renewables account for half of additional global generation, overtaking coal around 2030 to become the largest power source

8 Efficiency measures on the rise, but significant potential still exists Share of global mandatory efficiency regulation of final energy consumption 40% 30% 20% 10% Industry Steam boilers Process heat Motors Buildings Heating/Cooling Lighting/Appliances Transport Cars Trucks Ships Energy efficiency policies are introduced in more countries and sectors; they continue to slow demand growth but more can be done

9 Conclusions Low prices bring gains to consumers, but can also sow the seeds of future risks to energy security: no room for complacency India s energy needs are huge: there is a strong shared interest to support India s push for clean & efficient technologies China s transition to a more diversified & much less energyintensive model for growth re-shapes energy markets The energy transition is underway, but needs a strong signal in the aftermath of Paris: governments must ring-fence policies against market swings With looming energy security & environmental challenges, international cooperation on energy has never been more vital

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11 Energy Technology Perspectives 2015: The Role of Energy Technology Innovation in Accelerating Low-Carbon Transitions 2016 Seminar for the Norwegian Delegates to Daniele Poponi Energy Technology and Policy Division International Energy Agency IEA Technology Network Oslo, 4 February 2016

12 ETP publication programme ETP 2014 ETP 2015 ETP 2016 ETP 2017 Part 1. Setting the Scene Global Outlook, Tracking Clean Energy Progress Part 2. Driving the Change (Thematic Focus) * Harnessing Electricity s Potential Partner Country Mobilising Innovation to Accelerate Climate Action Sustainable Urban Energy Systems India China Mexico TBD Securing sustainable resources Investing in sustainable infrastructure TBD (Indonesia?)

13 Energy Technology Perspectives 2015: Mobilising Innovation to Accelerate Climate Action

14 Energy Innovation is crucial in making the 2DS possible Contribution of technology area to global cumulative CO2 reductions Technologies 6DS 2DS Energy innovation has already yielded solutions, but needs support and guidance to deliver on its promises OECD/IEA 2014

15 Technology innovation has delivered in the past... Cost of electricity generated and utility-scale PV capacity installations in Germany 0,6 0,5 9 0,4 6 USD/kWh 0,3 0,2 3 GW 0, Source: ETP 2015 Levelised Cost of Electricity Installed capacity Thanks to 40 years of innovation efforts, solar PV generation is an increasingly cost competitive option

16 Innovation has also helped improve energy efficient technologies Average new Light-duty vehicle fuel economy evolution by country, 2005 to 2013 Fuel economy is improving as policy increasingly drives the deployment of more efficient vehicle technologies OECD/IEA 2014

17 Energy RD&D funding now targets the right issues, but is not enough IEA government energy RD&D expenditure Source: ETP 2015 Energy RD&D spending should reflect the importance of energy technology in meeting climate objectives

18 Supporting Energy Innovation: The right policy at the right time The right support depends on the maturity of the technology and the degree of market uptake OECD/IEA 2014

19 The cost gap needs to be closed, not just reduced During scale up, competitiveness rises due to cost reductions and increased costs of not using CCS

20 Innovation is essential for sustainable growth in the industrial sector Annual energy-related direct CO2 emissions in the industrial sector in the 2DS DS 10 GtCO DS Energy efficiency Fuel and feedstock switching Recycling Innovative processes Source: ETP 2015 The deployment of innovative technologies is crucial to making a 2DS scenario possible

21 Role of public private partnerships in catalysing innovation in industry PPP FEEDSTOCK / RAW MATERIAL SUPPLY MANUFACTURING FINAL PRODUCTS TO MARKETS PRIVATE SECTOR GOVERNMENT Partnerships can accelerate innovation while increasing the chances that a technology will be adopted

22 There is no one-size fits all solution that can meet all local requirements Regional technology shares in primary energy supply National circumstances and resources will drive different technology portfolios and pathways OECD/IEA 2014

23 Building innovation capacity is key to successful technology deployment Source: ETP 2015 Cooperation between industrial and emerging economies could be a win-win solution

24 Solutions exist to China s daunting energy challenge Long-term scenarios of China s 2030 emissions peak China can make the 2Ds possible with strong policies encouraging energy technology innovation

25 Patent and high-tech exports in China China s global export share by value of solar and LEDs has grown significantly to roughly 40%, with its share of patents doubling between 2005 and OECD/IEA 2014

26 Better understanding innovation can increase confidence in its outcomes In order to accelerate technological progress in lowcarbon technologies, innovation policies should be systemic

27 ETP 2016: Building Sustainable Urban Energy Systems Part 1: Setting the Scene Global Outlook Tracking Clean Energy Progress Part 2: Building Sustainable Urban Energy Systems The Urban Energy Challenge Energy Efficient Buildings in the Urban Environment Sustainable Urban Transport Urban Energy Supply and System Integration Innovative policy and finance frameworks to accelerate urban energy transitions Building a sustainable urban energy transition in Mexico

28 Cities development pathways will affect the global sustainable transition Global Urban Primary Energy Demand Primary Energy Use (EJ) Urban World Urban World Urban World DS DS Two-thirds of global primary energy use derives from urban activity Source: ETP2016 Preliminary Results

29 Cities as driver of climate change mitigation Urban contributions to 2DS CO 2 Emissions Reductions Source: ETP2016 Preliminary Results Most cost effective decarbonisation solutions lie in urban energy development options

30 ETP2017: Moving towards 1.5DS Source: IPCCC (2014)

31 A few questions to answer: ETP2017: Moving towards 1.5DS How the carbon reduction wedges and additional investments will change? When carbon neutrality will need to be achieved What changed role for CCS role for BECCS What differences with the 2DS? Stranded assets How fast mitigation actions will need to be scaled up Role of behavioral changes Policy and finance levers OECD/IEA 2014

32 Thank you