Challenges and Opportunities in the Central and Northern European Renewables Market

Transcription

1 Challenges and Opportunities in the Central and Northern European Renewables Market Mark Porter Director, Onshore Wind - Northern Europe European Power Generation Strategy Summit Prague 4 th December 2012

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3 About E.ON What we do At facilities across Europe, Russia, and North America, our more than 78,000 employees generated just under 113 billion in sales in Our objective is to make energy cleaner & better wherever we operate. We are implementing a new strategy to transform our company into a global provider of specialized energy solutions. Our focus We focus on what we do best and where we can add the most value: Making and marketing energy in competitive, converging international markets. E.ON s core businesses are: exploration and production, conventional generation, new build and technology, optimization and trading, renewables generation, energy distribution and innovative energy solutions for customers. 3

4 Our installed generation capacity in wind, solar and dedicated biomass already exceeds 4.2 GW Current Status Technology focus: Industrial-scale renewables 2, Wind Onshore We expand on our main portfolio driver Wind Offshore We build on a leading industry position 8bn invested >4,200 MW capacity Global no. 8 in onshore wind Global no. 3 in offshore wind Further activities in biomass, PV, CSP Activities in 12 countries >800 colleagues, 35 nationalities Biomass We focus on converting fossil plants Photovoltaic (PV) We optimize large-scale ground farms Solarthermal (CSP) We learn from our existing assets We plan further multi-billion euro investments to significantly grow our renewables capacity by

5 Market Renewables have significantly grown and further closed the gap to conventional technologies in capacity and cost Global installed capacity 2011 (GW) Small hydro Solar Biomass Geothermal 566 Marine Renewables Wind Nuclear 74% Existing 2010 Added ,300 Gas % Top-5 Countries China United States Germany Spain India 1,700 Coal 239 Key facts Investments 17% YoY increase in global investments in bn global investments now en par with fossil generation investments ( 210bn) Drivers Climate change: Low-carbon generation Security of supply: Fuel independence Competitiveness: Renewables cost decreasing Market developments Stable policy commitment for 2020 targets, but high volatility in national support schemes Financial investors more critical regarding long-term sustainability of growth pipelines and national support schemes / economic impact Renewables continue their remarkable growth and become ever more competitive 5 Sources REN21 (Aug 2012), IHS Emerging Energy Research (Jul 2012), BNEF (Mar 2012), IAEA (Feb 2012), McIlvaine (May 2012), UNEP (Jun 2012)

6 EU 2020 targets are achievable, but not all markets are in fit shape nor are renewables fit for the market yet Policy frameworks in E.ON s Renewables focus countries 1 Several EU countries are still amongst the most attractive renewables investment locations, at least for some renewables technologies 2 However, growing uncertainty in some countries endangers future growth:? Support under discussion Retro-active cuts or additional tax Grid bottlenecks & connection delays 52 MW Unclear future support schemes 207 MW Retroactive cuts and abrupt policy changes Grid bottlenecks and slow grid extension? 449 MW 198 MW? 86 MW Delayed offshore grid connection 94 MW While costs of renewable technologies significantly decreased in the last years, they still depend on financial support.? 75 MW 431 MW? 371 MW EU Renewables Strategy addresses essential issues, but there is need for immediate and concrete action from both politics and industry 6 1 Including E.ON s installed capacity in wind, solar and dedicated biomass plants (as of 30 June 2012) 2 According to Ernst & Young Renewable Energy Country Attractiveness Indices 2012

7 Changes in regulation can make markets more or less attractive for renewables investments very quickly Opportunities Norway: Joint certificate system with Sweden introduced viable support for onshore (Jan 2012) Germany: Recent agreement on offshore grid connection tackles significant challenge France: Biomass tender rules adjusted to allow acceptance of Provence 4 (biomass conversion) Italy: CSP winner of new renewables legislation increased support levels until 2015 Challenges US: Uncertainty on PTC 1 support for onshore wind post 2012 remains UK: New ROC 2 bandings make future biomass projects less attractive Spain: Moratorium freezes support for onshore wind post 2012 and for CSP post 2013 Italy: New tariffs make large PV unattractive. Robin Hood tax weakened trust of investors Pressure in US & Southern Europe, stability in Northern Europe 1) Production Tax Credit 2) Renewable Obligation Certificate 7

8 Northern Europe potential 2010 realised vs goals for onshore wind (MW) 8 European Works Council 26 September 2012

9 Summary We are one of a few market leaders in offshore wind Our ambition: Realize a new project every 18 months and reduce CAPEX by 40% by 2015 EC&R s offshore wind pipeline Water depth [m] 0 London Array I 1 Kårehamn Blyth Utgrunden II Rødsand II 10 = 200 MW Scroby Sands Robin Rigg Rampion Humber Gateway In operation alpha ventus 2 Arkona Amrumbank West Södra Midjösbanken The experience across a wide range of projects makes E.ON one of the world s leading companies in the global offshore wind energy business Under construction Delta Nordsee 60 Distance to shore [km] 70 Under development 80 Key facts E.ON project portfolio 467 MW installed capacity (global #3) 1.6 TWh electricity produced in 2011, equivalent to demand of ~415,000 homes London Array (UK) at up to 1,000 MW the world s largest offshore wind park currently under construction Kårehamn (SE), Humber (UK) and Amrumbank (DE) to be constructed next 560 MW in total E.ON ambition Bring a new project in operation every 18 months Focus regions: North Sea, Baltic Sea Target to reduce CAPEX by 40% by 2015: Major saving potential in hardware costs Standardized, integrated design approach E.ON is a global leader in offshore wind, determined to keep pace 9 1 JV of EC&R (30%), DONG Energy (50%) and Masdar (20%) 2 JV of EC&R (26.25%), EWE (47.5%) and Vattenfall (26.25%) Note Project portfolio MW as of 30 June 2012, rounded

10 To ensure sustainable growth, renewables have to get more competitive and less reliant on support systems The sector needs new investors Renewables require significant investments Investments 2010 Required EU 35bn 500bn Global 90bn 1,500bn Compared to other sectors, this is feasible EU gas imports from Russia (2010) 31bn OECD oil imports (2010) 630bn US national defense budget (2010) 480bn Utilities alone cannot finance the investments Total 2010 investments by Top-10 utilities 1 60bn Average debt ratio of Top-10 utilities Dependence on political support Renewables still require financial support Support frameworks are very diverse and volatile Concerns about government debt lead to political action, also affecting renewables: Retroactive renewables tariff cuts in Spain Robin Hood tax on all generation in Italy Support volumes are comparatively small, but often more visible to the public: EU total customers electricity cost (2020) of this: Renewables net support cost EU agriculture subsidies (2010) EU rail subsidies (2010) EU road subsidies (2010) 550bn < 50bn 50bn 75bn 125bn Renewables must get more competitive to limit policy risk and attract investors 10 1 Top-10 US/EU RES owners: Iberdrola, NextEra, EDP, Acciona, Enel, E.ON, GDF Suez, RWE, EDF, Vattenfall 2010 investments are total plant investments made by utilities, not only in renewables Sources EU Commission, IHS Emerging Energy Research, IEA, McKinsey, NREAPs, E.ON

11 To ensure sustainable growth, renewables have to get more competitive and less reliant on support systems EU net cost of renewables support bn Wind offshore Wind onshore Biomass PV More than 300bn total cost through % to be covered by Germany, Italy, Spain, UK Isolated national efforts lead to higher costs National 2020 renewables targets of EU states are based on economic not renewables potential Isolated national efforts lead to inefficient renewables deployment and higher total costs Under the current schemes, annual EU renewables support cost will reach 35 to 50 bn by Despite these financial burdens, most EU states will still miss their 2020 renewables targets 1 International cooperation and more efficient deployment could be facilitated by EU-wide trading of Green Certificates An EU-wide Green Certificate trading could more than halve the extra costs of renewables 2 Harmonized and cost-oriented frameworks support efficient technology deployment 11 1 IHS Emerging Energy Research: Europe s renewable targets challenged by policy costs (2012) 2 Eurelectric & Pöyry: Reaching the EU RES targets in an efficient manner: Benefits of trade (2008)

12 Renewables generation cost can be significantly reduced further through innovation and economies of scale Absolute generation cost development to 2020 Relative generation cost reductions by 2020 CSP Spain CSP and biomass still highest cost but dispatchable 100% Biomass UK Onshore UK 20% Biomass UK 1 PV Italy Offshore UK Offshore UK 25% PV Italy 30% PV and Offshore cost very close Onshore UK Onshore cost still decreasing CSP Spain 40% In some regions with good renewable resources, onshore wind and PV will become competitive within the next few years 12 European Works Council 26 September New build of a dedicated biomass plant Source: E.ON view on Levelized Cost of Energy (LCOE), adjusted for inflation

13 Since 1980, the size and capacity of wind turbines has significantly increased Capacity Rotor diameter Nacelle height Costs per kwh 30 kw 15 m 30 m ,500 7,500 kw m m Improving competitiveness means industrialization, standardization, and efficiency 13 European Works Council 26 September 2012

14 By increasing our performance we contribute to the sustainability of renewables and add shareholder value Optimizing our portfolio Energy yield Label E.ON benchmark Exploiting sites with best resources Increasing energy yield Best turbine for specific location (micro-siting) Higher availability Improved average performance Realizing projects with economies of scale: E.ON strategy Reducing CAPEX Central procurement Standardization of technical components Close cooperation with suppliers Existing E.ON projects Future E.ON projects Other projects Economies of scale Reducing OPEX Technical excellence, building on experience with more than 3,200 wind turbines O&M strategy incl. continuous monitoring, spare parts logistics, predictive maintenance We aim for top quartile assets and performance 14

15 With significant and specific cost reduction targets across our technologies we act as industry role model Cost structure: Example onshore wind E.ON ambitions & levers CAPEX LCOE ( /MWh) 71% Turbine 19% Balance of Plant 3% Contingency 7% Other Reduce onshore wind CAPEX by 25% by 2015 Use tier 2 suppliers, bring Asian OEMs to the US Fit-for-purpose design, new tower materials Non-EPC approach with volume bundling Reduce offshore wind CAPEX by 40% by 2015 Major potential in hardware costs Standardized, integrated design approach OPEX Reducing turbine costs is key to improve the competitiveness of onshore wind Reduce PV CAPEX by 35% by 2015 Competitive modules remain major driver Expected BOS cost reduction similar to modules Identify further potential in operational costs Investigate OPEX levers for all technologies We pursue ambitious CAPEX reduction targets and will identify further OPEX savings potential 15 European Works Council 26 September 2012

16 For a clean energy future, we need competitive RES technologies, efficiently embedded in our power systems Reduce generation costs & increase yield Industrialize the whole value chain Reduce technology prices Facilitate competition and innovation Make clean energy better Optimize support mechanisms Drive competitive and efficient deployment Reduce system costs Drive efficient system integration 16

17 Industry and governments need to do their part to make renewables competitive and less dependent on support Industry Governments Optimize renewables performance Ensure optimal use of capital by selecting the best sites Industrialize the whole value chain: Reduce capital and operational costs Collaborate to leverage competencies and to drive performance Facilitate supplier competition Reduce Levelized Cost of Energy (LCOE) Drive efficient system integration Design reliable, cost-oriented support mechanisms to drive competition Harmonize support mechanisms to ensure the most effective deployment Ensure reliable and consistent planning and licensing regimes Drive grid extensions and wider technical integration measures + Make benefits of renewables visible and tangible to ensure broad public acceptance 17