Medium Term Energy Market Outlook IEEJ Energy Seminar October 213 Keisuke Sadamori, Director, Energy Markets & Security, IEA

Primary Energy Supply from Fossil Fuels Mtoe 5 45 4 35 3 25 2 15 1 5 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218 *Whereas coal, oil and gas displays Coal primary energy, renewables Oil only refers Gas to power generation

OIL

Oil: Comfortable Balance mb/d 7. Medium-Term Oil Market Balance 6. 5. 4. 3. 2. 1.. -1. 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218 Implied OPEC Spare Capacity World Demand Growth World Supply Capacity Growth

Oil demand: 96.7 mb/d by 218 1 Global Oil Demand, mb/d 75 5 25 26 28 21 212 214 216 218 OECD, Am ericas OECD, Europe OECD, Asia Oceania Non-OECD

Growth led by non-oecd 7.5% Global Oil Demand Growth 5.% 2.5%.% -2.5% -5.% 2 24 28 212 216 OECD Non-OECD

China to lead Global Growth mb/d 12 Chinese Oil Demand Share of the World 13% 1 11% 8 9% 6 7% 4 1998 22 26 21 214 218 5%

Global Liquid Growth 212-18 mb/d 1 8 6 Global Liquids Growth 212-18 Crude US Light Tight Oil NGLs Non-Conv Biofuels Processing Gain 6. 8.4.5 2. 4 2 2.4.6 1.8 1.4 2.3 1. 2.3 2.8 OPEC* Non-OPEC Total * OPEC crude is capacity additions Global Refinery processing gains included in Non-OPEC

Share of Capex (%) Price Rise Drives Increase in Capex $Billion Annual Capex by Oil Type 1% 9% 8% 7% Total Capex (RHS) 6% 5% Other 4% 3% Tight Oil 14% 7% 2% Deepwater 22% 1% 16% % Oil Sands 24 26 28 21 212 214 216 218 22 Source: IEA Analysis of Rystad Energy. Oil deposits only. 6 5 4 3 2 1 -

Supply: West Side Story mb/d 1.4 1..6.2 -.2 -.6-1. Non-OPEC Supply - Yearly Change 1995 1998 21 24 27 21 213 216 NAM LAM OECD EUR FSU China Africa PG & Biofuels Other Non-OPEC Total

OPEC Capacity mb/d OPEC Crude Oil Production Capacity 38. 37. 36. 35. 34. 33. 212 213 214 215 216 217 218 October 212 May 213

OPEC Capacity Growth Iraq Angola UAE Nigeria Libya Venezuela Kuwait Algeria Qatar Ecuador Saudi Arabia Iran Incremental OPEC Crude Production Capacity 212-18 mb/d -1.2 -.8 -.4..4.8 1.2 1.6 2.

Non-OCED lead CDU additions mb/d 3. Crude Distillation Additions 2. 1.. -1. 212 213 214 215 216 217 218 OECD China Other Asia Middle East Latin America Other Non-OECD Net Additions

Rise of the non-oecd Refining Titans Regional Share of CDU Expansions China 45% Other Asia 14% Latin America 14% Other 5% Middle East 22%

US Crude Oil Carloads 1 Carloads 1 8 6 4 2 1 Q 9 1 Q 1 1 Q 11 1 Q 12 1 Q 13 estimate Source: Association of American railroads

New Map, New Challenges Crude Exports in 218 and Growth in 212-18 for Key Trade Routes* (million barrels per day) * Excludes Intra-Regional Trade North America.3 (-.8) 3.1 OECD Europe (-.6) 3.9 (-.3) (+.3) (-.9) China 1.2 (+.4) -.3 2.9 (-1.4) 1.3 1.5 1.7 (+.8) (-1).7.3 (+.1) 1.4 (+.7) 6.2 (+.8) Other Asia OECD Pacific 2.9 1.6 (.3).5 (+.4).5 Red number in brackets denotes growth in period 211-18 (+)

GAS

Gas Demand by Region (21-218) Bcm 45 4 35 3 25 2 15 1 5 21 211 212 213 214 215 216 217 218 Europe North America Asia Pacific Africa non OECD-Asia China FSU Latin America Middle East MTGMR 212

Gas Demand Growth by Region (21-218) Bcm 12 8 4 21 218 Europe North America Asia Pacific Africa non OECD- Asia China FSU Latin America Middle East

LNG flows in 212 (bcm)

LNG re-exports, 29-12 mcm 5 45 4 35 3 25 2 15 1 5 29 21 211 212 Portugal France Brazil Belgium Spain United States

Tight LNG Supply LNG liquefaction plants with political instability with declining gas output with surging domestic demand

LNG Projects under Construction bcm 5 4 3 2 1 212 213 214 215 216 217 218 Australia Indonesia Other Asia Pacific Qatar Other ME Latin America Norway Algeria Angola Other Africa Russia United States LNG with delays

LNG backed by Long-Term Contracts bcm 16 14 12 1 8 6 4 2 213 214 215 216 217 218 Portfolio LNG The rest of the world Other Asia China Japan Capacity

Regional Gas Price Disparity

Gas Demand in the Transport Sector bcm 12 1 8 6 4 2 2 22 24 26 28 21 212 214 216 218 Asia China Latin America Middle East Africa FSU/Non-OECD Europe OECD

Non-Conventional Road Transport Demand 6.% 4.% 2.%.% 199 2 21 215 218 Natural gas LPG Others

RENEWABLES

Renewables on Track in Clean Energy Scenarios 8 7 Global renewable electricity generation versus ETP 2DS ETP 2DS 6 5 4 3 2 1 25 26 27 28 29 21 211 212 213 214 215 216 217 218 219 22 Hydro Bioenergy Wind onshore Wind offshore Solar PV Solar CSP Geothermal Ocean MRMR 212 RES-E

Non-OECD Leading Growth Global renewable electricity production, by region (TWh)

Renewable power spreading out everywhere Total Renewable Annual Capacity Additions, by region (GW) This map is without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

China accounts for 4% of renewable power growth 2, China renewable power generation 26-18 (TWh) 1,8 1,6 1,4 1,2 1, 8 6 4 2 26 27 28 29 21 211 212 213 214 215 216 217 218 Hydro Bioenergy Wind onshore Solar PV Solar CSP Geothermal Ocean Wind offshore

Growth of renewable power accelerating 25 Historical cumulative additions (TWh) 25 Forecast cumulative additions (TWh) 2 2 15 15 1 1 5 5 26 27 28 29 21 211 212 212 213 214 215 216 217 218 Geothermal Solar Bioenergy Wind Hydro Geothermal Solar Bioenergy Wind Hydro

Global RE capacity additions led by wind 25 Total wind (onshore + offshore) annual capacity additions by region (GW) 2 15 1 5 27 28 29 21 211 212 213 214 215 216 217 218 OECD Americas OECD Asia Oceania OECD Europe China Rest of Non-OECD

Solar PV growing out of Europe PV Annual Capacity Additions (GW) 2 15 1 5 3 2 1 212 215 218 212 215 218 2 15 1 5 212 215 218 1 212 215 218 8 6 4 2 3 2 1 212 215 218 5 4 3 2 1 212 215 218 5 4 3 2 1 212 215 218 2 1 212 215 218 212 215 218 1 8 6 4 2

But other technologies lagging behind TWh 9 8 7 6 5 4 3 2 1 Wind offshore generation projection 26 27 28 29 21 211 212 213 214 215 216 217 218 OECD Americas OECD Asia Oceania OECD Europe Africa Asia China Non-OECD Europe Non-OECD Americas Middle East MTRMR 212 TWh 4 35 3 25 2 15 1 5 Concentrating solar power generation projection 26 27 28 29 21 211 212 213 214 215 216 217 218 OECD Americas OECD Asia Oceania OECD Europe Africa Asia China Non-OECD Europe Non-OECD Americas Middle East MTRMR 212

Improving Competitiveness 5 Utility scale Small scale 4 3 2 1

RES-E: 6% of new OECD Generation TWh 1 1 OECD incremental gross generation by source and region 212-218 Total generation Fossil fuels Nuclear Renewables Other 9 7 5 3 1-1 Total OECD OECD Americas OECD Asia Oceania OECD Europe

Over the long term, the power generation mix is set to change TWh 14 Global electricity generation by source, 21-235 12 1 8 6 4 Coal Renewables Gas Nuclear 2 Oil 199 1995 2 25 21 215 22 225 23 235 Source: IEA World Energy Outlook 212

Global climate-friendly electricity mix by 25 TWh 45, 4, 35, 3, 25, 2, 15, 1, 5, - RE 57% RE 57% VRE 22% RE 71% 29 25 2DS 25 High Renewables VRE 32% Ocean Geothermal Wind offshore Wind onshore Solar CSP Solar PV Hydro (incl. pumped storage) Nuclear Biomass w CCS Biomass and waste Oil Natural gas w CCS Natural gas Coal w CCS Coal

Four Key Policy Ingredients System Integration Non Economic Barriers Smart Incentives Clear Strategy and Targets

Policy uncertainty is the number one risk to reaching a climate friendly power mix 3.5 3 2.5 2 1.5 Spain solar PV + CSP annual additions (GW) Deep financial incentive cuts and cap for solar PV Assumed moratorium on new projects under Special Regime from Jan 212 onwards Abrupt, retroactive policy changes 1.5 26 27 28 29 21 211 212 213 214 215 216 217 218 Annual additions Projected additions 14 12 1 US onshore wind annual additions (GW) Uncertainty over PTC renewal at end-212 Assumed expiration of PTC at end-213 Stop & go policies 8 6 4 2 Expiration of federal PTC 1998 2 22 24 26 28 21 212 214 216 218 Annual additions Projected additions

Conclusions for policy-making Many renewables no longer require high economic incentives But they do need long-term policies that continue to provide a predictable and reliable market and regulatory framework compatible with societal goals Consistent policy framework more important than specific RE incentive type Competitiveness of renewables depends on market design Fair rules for up-front capital intensive technologies and distributed generation will be key

Grid Parity

Distributed PV reaching grid parity in some markets USD/MWh 45 Residential solar PV LCOE vs average retail power prices (variable tariff) 4 35 3 25 2 15 1 5 Average residential electricity price (variable tarif f) 21 211 212 213 Residentialsolar PV, LCOE estimates: Germany Italy California Examples correspond to Southern Germany, Southern California and Southern Italy, based on actual average cost of capital, full load hours and variable tariffs

Electricity Security

Electricity Security Action Plan (ESAP): a two-years work programme Generation Networks Emergency Preparedness Regional Market Integration Demand Response

Thank you keisuke.sadamori@iea.org www.iea.org