Fostering Long-Term Investment in Energy Dr. Paolo Frankl Head of Renewable Energy Division International Energy Agency B20 Energy Forum, 2 October 2015
Billion dollars Oil price drop and short-term Global upstream oil and gas investment investment climate 750 20% 500 250 2012 2013 2014 2015 (est.) Announced capex cuts for 2015 are highest (at up to 40%) in North America & Brazil; for tight oil, a decision to stop drilling feeds through quickly into production levels
Long-term investment needs Cumulative global energy supply investment by fuel and type, 2014 2040 ($billion) Gas Upstream Transmission and distribution LNG Coal Mining Transportation infrastructure Oil Upstream Transport Refining 368 1 027 1 757 1 167 8 034 1 395 2 448 793 11 275 17 308 14 385 Biofuels 437 2 281 Total: 51 259 6 405 3 240 20 843 1 541 7 377 Power Transmission Distribution Fossil-fuel plants Nuclear Renewables Larger share of the investment is required to offset declining production from existing oil and gas fields and to replace power plants
A mix moving towards natural gas & low-carbon energy Fuel shares in world primary energy demand 2012 13 361 Mtoe 2040 18 290 Mtoe 5% 14% 29% Coal Oil 7% 19% 24% 21% Gas Nuclear 31% Renewables 24% 26% Declining shares of oil & coal in the mix bring the overall share of fossil fuels down to just under three-quarters by 2040, with gas on the way to becoming first fuel Renewable Energy grows the fastest!
The global power mix continues to evolve World electricity generation by source TWh 15 000 12 000 historical projected Renewables Coal 9 000 Gas 6 000 Nuclear 3 000 1990 2000 2010 2020 2030 2040 Oil Renewables overtake coal as the largest source of power generation by around 2035; natural gas also sees an increase in market share
Gt CO 2 -eq IEA strategy to raise climate ambition Peaking emissions (Bridge Scenario) Global energy-related GHG emissions Savings by measure, 2030 40 35 30 INDC Scenario Bridge Scenario Upstream methane reductions Fossil-fuel subsidy reform 15% 10% 49% Energy efficiency 25 Renewables investment 17% 9% 20 2000 2014 2020 2025 2030 Reducing inefficient coal Five measures shown in a Bridge Scenario achieve a peak in emissions around 2020, using only proven technologies & without harming economic growth
IEA strategy to raise climate ambition Staying below 2 C (450 Scenario) Global energy-related GHG emissions by scenario Investments in Renewables should reach $400 bn/y by 2030 in the Bridge scenario. In the 450 scenario, the $400 bn/y should be reached by 2025 already, then reach $470 bn/y on average over 2026-2040
USD 2014/MWh How quickly can RE costs converge towards best world benchmarks? Typical onshore wind levelised costs of electricity generation (2006-2020) 300 250 200 150 100 50 0 2006 2008 2010 2012 2014 2016 2018 2020 Brazil PPA Egypt PPA US PPA South Africa Round 4 Medium-Term Benchmark cost 60-80$/MWh A combination of price competition, long-term contracts, good resources and financial derisking measures is creating deployment opportunities in newer markets and at lower costs
Financing costs can dominate Impact of cost of capital on the levelised generation cost of solar PV 2X X Dubai Central Africa Market and regulatory risks can increase weighted average cost of capital and undermine competitiveness of PV and Wind power
Increasing variable RE will require more system flexibility 1) Foster System-friendly RE 2) Better market design & operation 3) Increase flexibility of other power system components Grids Generation Storage Demand Side
Billion dollars (2014) Fossil-fuels subsidies remain persistent, but reforms make a difference Contributing factors to the change in the value of subsidies between 2009 and 2014 700 600 500 400 Consumption International prices Subsidy reforms 300 200 100 2009 In the absence of the reforms that have been taken since the G20 in 2009, fossil fuel consumption subsidies would have been 24% higher in 2014 at $610 billion 2014
IEA as partner of G20 energy agenda Emergence of G20 as forum for global energy collaboration Modernisation of IEA with strong bilateral cooperation with emerging economies and international organisations, incl. G20 IEA high-quality data and analysis across all fuels and countries Energy access IEA role in global tracking framework (WEO 2014 energy access in SSA, WEO 2015 energy access in India and South East Asia) support to SE4ALL Renewable energy IEA grid integration work, cost analysis, RE policies database and assessment, benchmarking, cooperation with IRENA Energy efficiency data and policies (JEUDI, E4) Outreach partner for global technology and innovation collaboration (IEA Implementing Agreements) Energy security beyond oil, to gas and electricity
Energy Security Environmental Protection Economic Growth Engagement Worldwide