Implications of IEA s WEO 2011

Energy Security in the Uncertain Energy World Implications of IEA s WEO 2011 December 2, 2011 EU Energy Security Seminar Nobuo TANAKA Former Executive Director of the IEA GlobalAssociate of Energy Security andsustainability, IEEJ OECD/IEA 2011

The context: A time of unprecedented uncertainty Is Euro zone crisis becoming global crisis? Growing Asian economies will shape the global energy future where will their policy decisions lead us? More volatile Oil market? MENA turmoil raised questions about region s investment plans. Natural gas markets are in the midst of a revolution a golden era for gas? Climate Change Mitigation, Fossil Fuel Subsidy Phase Out by G20 do they go far enough & will they be implemented? What is the implication of Fukushima Nuclear accident to the global energy landscape? 2

Emerging economies continue to drive di global lenergy demand d Mtoe 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 Growth in primary energy demand 0 2010 2015 2020 2025 2030 2035 IEA WEO 2011 China India Other developing Asia Russia Middle East Rest of world OECD Global energy demand increases by one third from 2010 to 2035, with China & India accounting for 50% of the growth 3

Primary Energy Demand by Region (World) Reference 8,000 7000 7,000 6,000 5,000 4,000 Mtoe AAGR* 80-09- 09 35 World 1.8% 1.7% Asia 4.6% 2.6% N. America 0.7% 0.4% *Average annual growth rate IEEJ Outlook 2011 3.9 bil. toe 7.6 bil. toe Asia 3,000 N.Amerca 2,000 OECD Europe Non-OECD Europe 1,000 0 World 2009 11.2 bil. toe 2035 17.3 bil. toe (1.5-fold increase) Asia 2009 39bil 3.9 bil. toe 2035 7.6 bil. toe (1.9-fold fldi increase) L. America Middle East Africa Oceania 1971 1980 1990 2000 By 2035, primary energy demand of Asia will double from the current level, reflecting high economic growth; 3.9 billion toe(2009) 7.6 billion toe(2035). Non-OECD will represent 90% of incremental growth of global energy demand toward 2035. 4 2009 2020 2030 2035

Oil demand is driven higher by soaring car ownership IEA WEO 2011 Vehicles per 1000 people in selected markets 800 700 600 2010 2035 500 400 300 200 100 0 United States European Union China India Middle East The passenger vehicle fleet doubles to 1.7 billion in 2035; most cars are sold outside the OECD by 2020, making non OECD policies key to global oil demand 5

Changing oil import needs are set to shift concerns about oil security Net imports of oil IEA WEO 2011 mb/d 14 12 10 8 6 4 2 2000 2010 2035 0 China India European Union United States Japan US oil imports drop due to rising domestic output & improved transport efficiency: EU imports overtake those of the US around 2015; China becomes the largest importer around 2020 6

What impact would deferred investment inmena have on markets? IEA WEO 2011 MENA is set to supply the bulk of the growth in oil output to 2035, requiring investment of over $100 billion/annum Deferred Investment Case looks at near term investment falling short by one third possible drivers include new spending priorities, higher perceived risks MENA output tfalls 3.4 mb/d b/dby 2015 and 6.2 mb/d b/dby 2020 Consumers face a near term rise in oil prices to $150/barrel MENA earns more initially, but then less as market share is lost 7

Petroleum Supply Security as Energy Security of the 20 C Need for cooperation during oil supply disruptionsi IEA stockholding cover of global oil demand 60% 40 % share of wor rld oil demand 50% 40% 30% 20% 10% 0% 35 30 25 20 15 10 5 days of world oil demand cover IEA 90 days of stockholding, share of world demand with China with India with ASEAN Share of non OECD in global oil demand Growing share of non OECD oil demand results in declining global demand cover from IEA oil stocks 8

Natural gas & renewables become increasingly i important t World primary energy demand IEA WEO 2011 Mt toe 5 000 4 000 3 000 Additional to 2035 2010 2 000 1 000 0 Oil Coal Gas Renewables Nuclear Renewables & natural gas collectively meet almost two thirds of incremental energy demand in 2010 2035 9

Golden prospects for natural gas Largest natural gas producers in 2035 IEA WEO 2011 Russia United dstatest China Iran Qatar Canada Algeria Australia India Norway Conventional Unconventional 0 200 400 600 800 1 000 Unconventional natural gas supplies 40% of the 1.7 tcm increase in global supply, but best practices are essential to successfully address environmental challenges bcm 10

Coal won the energy race in the first decade d of the 21st century Growth in global energy demand, 2000 2010 IEA WEO 2011 Mt toe 1 600 1 400 1 200 1 000 800 600 Nuclear Renewables Oil 400 Natural gas 200 0 Total non coal Coal Coal accounted for nearly half of the increase in global energy use over the past decade, with the bulk of the growth coming from the power sector in emerging economies 11

Power investment focuses on low carbon technologies IEA WEO 2011 Share of new power generation and investment, 2011 2035 40% Generation 35% Investment 30% 25% 20% 15% 10% 5% 0% Coal Gas Nuclear Hydro Wind Solar PV Renewables are often capital intensive, representing 60% of investment for 30% of additional generation, but bring environmental benefits & have minimal fuel costs 12

The overall value of subsidies to renewables is set to rise Billio on dollars (2 2010) 250 200 150 100 IEA WEO 2011 Biofuels Electricity 50 0 2007 2008 2009 2010 2015 2020 2025 2030 2035 Renewable subsidies of $66 billion in 2010 (compared with $409 billion for fossil fuels), need to climb to $250 billion in 2035 as rising deployment outweighs improved competitiveness 13

Russia remains a cornerstone of the global l energy economy Russian revenue from fossil fuel exports IEA WEO 2011 2010 $255 billion 2035 $420 billion China 2% Other 21% Other Europe 16% European Union 61% Other 17% China 20% Other Europe 15% European Union 48% An increasing share of Russian exports go eastwards to Asia, providing Russia with diversity of markets and revenues 14

Sustainability Constraint IEA WEO 2010 IEA 450 Scenario: Abatement by technology World energy related CO2 emission savings by technology in the 450 Scenario relative to the New Policies Scenario Gt 45 40 35 30 25 Current Policies Scenario New Policies Scenario 42.6 Gt 7.1 Gt 35.4 Gt 13.7 Gt Share of cumulative abatement between 2010-2035 Efficiency 50% Renewables 18% Biofuels 4% Nuclear 9% CCS 20% 450 Scenario 21.7 Gt 20 2008 2015 2020 2025 2030 2035 Inmovingfrom the New PoliciesScenarioto the 450Scenario, more expensive abatement options such as CCS play a growing role 15

The door to 2 C is closing, but will we be locked in? CO 2 em missions (gig ggatonnes ) 45 40 35 30 25 20 15 6 C trajectory 2 C trajectory IEA WEO 2011 Delay until 2017 Delay until 2015 10 Emissions from existing 5 infrastructure 0 2010 2015 2020 2025 2030 2035 Without further action, by 2017 all CO 2 emissions permitted in the 450 Scenario will be locked in by existing power plants, factories, buildings, etc 16

Second thoughts on nuclear would have far reaching reaching consequences IEA WEO 2011 Low Nuclear Case examines impact of nuclear component of future energy supply being cut in hlf half Gives a boost to renewables, but increases import bills by $90B pa, reduces diversity & makes it harder to combat climate change By 2035, compared withthe the New Policies Scenario: coal demand increases by twice Australia s steam coal exports natural gas demand increases by two thirds thirds Russia s naturalgas net exports Renewables power increases by 550TWh = 5 times of RE in Germany power sector CO 2 emissions i increase by 6.2% or 0.9 Gton. Biggest implications for countries with limited energy resources that planned to rely on nuclear power 17

Low Nuclear 450 Case IEA WEO 2011 Figure 12.7 World energy-related CO 2 emissions i abatement in the Low Nuclear 450 Case relative to the New Policies Scenario Gt 38 New Policies Scenario Abatement 36 2020 2035 34 Efficiency 72% 42% 32 Renewables 21% 29% 30 Biofuels 2% 4% 28 CCS 4% 25% 26 Total (Gt CO 2 ) 2.4 15.0 24 22 Low Nuclear 450 Case 20 2010 2015 2020 2025 2030 2035 the cost of achieving the same cumulative emissions increases by some $1.5 trillion in real 2010 dollars, compared with the 450 Scenario (or 10%) over the period 2011 to 2035 18

Low Nuclear Case: implications for spending on energy imports IEA WEO 2011 Figure 12.5 Mtoe 5 000 4 000 3 000 2 000 Global primary coal and gas demand and annual spending on imports in the Low Nuclear Case 750 600 450 300 Billion dollar rs (2010) 2009 2035: New Policies Scenario 2035: Low Nuclear Case 1 000 150 0 Coal Gas Spending on coal Spending on gas demand demand imports imports Note: Calculated as the value of net imports at prevailing average international prices. 0 In the Low Nuclear Case, global gas import bill rises by $67 billion than New Policies Scenario in 2035. Japan shares more than 20% of this rise ($14billion). 19

Gas Glut disappearing? i Nuclear Outages See Japan s Power Sector Turn to Thermal TWh 25 Japan: Nuclear Power Generation Scenarios k b/d 500 Japan: Forecast Incremental Oil Demand For Power vs Normal 20 15 10 5 0 400 Shortfall to be filled by oil and gas 300 Apr 11 Aug 11 Dec 11 Apr 12 Aug 12 Dec 12 No nuclear restart Normal nuclear power Some nuclear restart 200 100 - Sep 11 Feb 12 Jul 12 Dec 12 Fuel Oil Crude Oil Some nuclear restart case suggests additional annual 230 kb/d of oil and 10 bcm of LNG demand in 2011 and an extra 270 kb/d and 18 bcm in 2012 versus an outlook of normal nuclear generation. Under No nuclear restart case, requirements for additional oil and gas would stand at 460 kb/d and 30 bcm respectively. 20

Gas will be needed d to deliver CO2 reductions twh 700 600 500 400 300 200 others Renewables nuclear Gas Coal 100 0 Current Policy 2022 IEA estimate German electricity mix with 10% demand reduction, no nuclear, 35% renewables and CO2 at the target level 21

Power grid in Europe イギリス UK 最大発電容量 75.5GW 2GW 0.5 GW 2 GW France フランス 最大発電容量 110.9GW 2.4 GW 2.4 GW 3.2 GW Netherlands オランダ 最大発電容量 19.8GW Belgium ベルギー 最大発電容量 15.8GW 2.7 GW 3.5GW 3.6 GW 3.2 GW 3GW Germany ドイツ ノルウェー Norway 最大発電容量 29.8GW 3.9 GW 0.6 GW 最大発電容量 129.1GW 3.6 GW スウェーデン Sweden 最大発電容量 32.6GW 0.6 GW :Generation capacity スペイン Spain 1.3 GW 1.5 GW スイス Swiss :maximum powerflow 最大発電容量 93.5GW 1 GW 2.6 GW イタリア Italy 最大発電容量 93.1GW 1.8 GW 1.1 GW 4.2 GW 最大発電容量 17.9GW 0.3 GW 0.2 GW 0.5 GW 1.2 GW オーストリア Austria 最大発電容量 18.9GW 2.2 GW 2 GW 出典 :IEA Electricity Information 2010 Indicative value for Net Transfer Capacities (NTC) in Continental Europe 22

Harnessing Variable Renewables 23

Power grid in Japan Hydro Gas Coal Oil Nuclear Other Power utility company 60 hz <------- Generating company In house generation Tohoku Hokkaido Chugoku Kansai Hokuriku Tokyo Kyushu 29GW Shikoku Okinawa Chubu 40GW --- 50 hz Source: 資源エネルギー庁 電気事業連合会 電力系統利用協議会 I EA 算定 24

Energy mix as Energy Security Mix ASEAN 96% 30% 0% IEA 51% 8% 11% EU 27 26% 10% 14% 0% 20% 40% 60% 80% 100% 120% 140% Self sufficiency =inland production / tpes (2010 estimates) Nuclear is an important option for countries with limited indigenous energy resources (low energy sustainability). 25

Low Nuclear Case: implications for energy security Self sufficiency rates in selected regions 100% Nuclear 80% Fossil fuel 60% Renewables x 40% 20% 0% NPS LNC 2009 2035 2009 2035 2009 2035 2009 2035 2009 2035 Japan United States EU Korea China Less nuclear would further reduce Japan and Korea s energy self sufficiency, i intensifying if i concerns about energy security 26

Connecting MENA and Europe Energy for Peace" Source: DESRETEC Foundation 27

Existing and proposed ASEAN Power Grid Interconnections 28

Demand Leveling (TimeZone & Climate Difference) Stable Supply (through regional interdependence) Fair Electricity Price Gobi Desert Beijing j g Seoul Vladivostok Seoul Phase 3 Delhi Bhutan Chengdu Shanghai Tokyo Asia Dacca Hong Kong Taipei Super Grid Mumbai Bangkok Manila Kuala Lumpur Singapore Total 36,000km Presentation by Mr. Masayoshi SON 29

One cannot enhance energy security by risking someone else s EU Model of Collective Energy Security for growing Asia Focus on Comprehensive Energy Security Enlarge IEA s oil emergency preparedness Develop Regional Power Grid interconnection & Gas Pipelines Adopt a green growth paradigm by Efficiency, Renewables, Nuclear, EVs, Smart Grids etc. Develop unconventional gas resources and infrastructure For coal to remain the backbone of power supply, CCS & higher h efficiency i plants are needed dd Energy access can be improved via decentralised solutions Japan s role after Fukushima: share the lessons learned. 30

Annex 31

Energy is at the heart of the climate challenge Gigato onnes IEA WEO 2011 Cumulative energy related CO 2 emissions in selected regions 500 2010 2035 1900 2009 400 300 200 100 0 United States China European Union India Japan By 2035, cumulative CO 2 emissions from today exceed three quarters of the total since 1900, and China s per capita emissions match the OECD average 32

Low Nuclear Case IEA WEO 2011 Table 12.3 Key projections for nuclear power in the New Policies Scenario and thelow Nuclear Case Low Nuclear Case New Policies Scenario OECD Non OECD World OECD Non OECD World Gross installed capacity (GW) in 2010 326 68 393 326 68 393 in 2035 171 164 335 380 252 633 Share in electricity generation in 2010 21% 4% 13% 21% 4% 13% in 2035 9% 5% 7% 21% 8% 13% Gross capacity under construction o (GW)* 14 54 69 14 54 69 New additions in 2011 2035 (GW)** 6 84 91 111 167 277 Retirements in 2011 2035 (GW) 176 42 218 71 36 107 *At the start of 2011. **Includes new plants and uprates, but excludes capacity currently under construction. 33