Global trends in Renewables and the Chilean context Carlos Gascó Travesedo Senior Analyst International Energy Agency Santiago de Chile 3 September 2011 OECD/IEA 2011
Drivers for Renewables Deployment Energy Security Energy availability Energy affordability Sustainability and diversification Economic Development Green growth and Job creation Innovation and industrial development Rural development CO2 emissions reductions Other environmental benefits
Recent trends in Renewables Renewable electricity is growing younger brothers are growing faster
and moving East Top 10 wind cumulative capacity and markets 2010 Source: GWEC 2011
Investing in renewables Financing is growing steadily, most rapidly in Asia $bn Source: Bloomberg New Energy Finance, 2011
Renewables enter the mainstream Renewable primary energy demand in the New Policies Scenario OECD Pacific Africa 2008 2035 India Brazil China United States European Union 0 100 200 300 400 500 Mtoe The use of renewable energy triples between 2008 & 2035, driven by the power sector where their share in electricity supply rises from 19% in 2008 to 32% in 2035
TWh Renewable electricity is vital in all scenarios 15 000 45% RE share 12 000 9 000 32% RE share 23% RE share 6 000 3 000 450 Scenario New Policies Scenario 0 Current Policies Scenario 2000 2005 2010 2015 2020 2025 2030 2035 Global electricity from RE increases from 3 800 TWh (2008) to 14 500 TWh (2035) in the 450 Scenario
Gt The 450 Scenario: How do we get there now? World energy-related CO2 emission savings by country in the 450 Scenario relative to the New Policies Scenario 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% 20 450 Scenario 2008 2015 2020 2025 2030 2035 21.7 Gt Renewables are the second most important contributors to CO2 emissions reduction
Growing shares of renewables in all sectors, for all scenarios 50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2008 CPS scenario 2035 NPS scenario 2035 450 scenario 2035 Electricity Heat Transport All scenarios point out a large growth of renewables
Renewable electricity in OECD 1.15 OECD power generation, 2007=1.00 1.1 1.05 1 0.95 0.9 Total Thermal Conventional generation is 300 Twh below 2007 0.85 Renewable 2007 2008 2009 2010 2010 OECD gas demand is 3% over pre-financial crisis levels but largely due to temperature effects 2
Principles of good policy design still hold Many OECD countries have entered new phase of RE policy which requires dynamic transformation Inception/ Onset Phase Take-Off/ Mass Deployment Phase Consolidation Phase Address non-economic barriers Predictable and transparent incentives Transitional decreasing over time Tailored to adapt to technology and market maturity Take system integration into account Deployment
Market Deployment The policy journey 4. Technology-neutral competition TGC, Carbon trading (e.g. EU ETS) Mature tech (e.g. hydro) 1. Development RD&D financing, capital cost support, investment tax credits, rebates, loan guarantees Low cost-gap (e.g. wind onshore) 3. Shared/imposed market risk, guaranteed minimum but declining support FIP, TGC (technology banding) High cost-gap (e.g. PV) 2. Stable, low-risk, sheltered FIT, FIP, Tenders Prototype & demo stage (e.g. 2 nd gen biofuels) Development Niche markets Mass market Time [Source: Adapted from IEA Deploying Renewables, 2008 ] IEA/OECD 2010
Policy effectiveness in 2007/2008 Efficiency and effectiveness: Wind onshore 10.00% 9.00% 8.00% Denmark* Germany Long-term predictable incentives (FIT or FIP) + Appropriate framework 7.00% Netherlands Italy 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% New Zealand India Sweden France Spain Czech Republic United Kingdom Higher risk (TGC) + Non-economic barriers Korea Austria Poland Note: All China remuneration levels Japan and generation costs normalised to 20 year support at 6.5% - 50.00 Remuneration 100.00 [USD/MWh] 150.00 200.00 250.00 discount rate. Source: Preliminary IEA analysis OECD/IEA 2011
New issues are emerging Unexpected PV growth raises policy cost concerns in several EU countries (Czech Rep., Spain, France, Germany, Italy) Accumulated global PV capacity MW 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Rest of the world Czech Republic USA Italy Japan Spain Germany 2005 2006 2007 2008 2009 2010 Sources: IEA PVPS, BP Statistical Report, BNEF
Importance of var-re WEO 450 Scenario electricity projections EU 4% 15% 25% 29% 17% 32% 46% 51%
Flexibility is key There are 4 flexible resources Dispatchable power plants Demand side Response (via smart grid) Energy storage facilities Interconnection with adjacent markets Industrial A biomass-fired power plant residential A pumped hydro facility Scandinavian interconnections
Chile s Electricity System
Market Context Chile Series of energy crises 1998/1999 drought (worst in 40 years) in SIC 2004 onwards: Argentine gas restricted 2007-8: Arg. gas cut + drought in SIC + outages 2010 Earthquake (refineries + SIC blackout) Market design High level of concentration Independent system operator needed Ancillary services market Separate grids SIC is hydro-, SING is thermal-dependent
Energy Security. 2009 recommendations Continue to diversify energy sources, including the active development of indigenous energy sources i.e. renewable energy and energy efficiency Create an investment framework based on long-term cost benefit analysis including a carbon price and downward cost curve of certain technologies Review the effectiveness and coherence of emergency measures currently in place Move towards harmonizing Chilean emergency preparedness with international best practice
Renewables. 2009 recommendations Give clear long-term signals to the market based on: Technical and economic assessment of renewable energy potential Evaluate the full socio-economic benefits of renewables Continuous monitoring and adjustment of policies including obligation targets and penalty for non compliance Facilitate access of new market entrants and realization of small-size projects Accelerate action to introduce emerging renewable technologies, e.g. by focusing on those which Chile has a competitive advantage
Conclusions Chilean Energy Sector, like counterparts around the globe, faces energy security and environmental sustainability challenges. How to incorporate these elements in market orthodoxy is a challenge. Part of the answers are in the deployment of its large renewables potential. Learning curves, both technological and regulatory, allow for harnessing at a reasonable cost.
Links www.iea.org RE Publications Home > Publications > Search per Topic: Renewables RE Policy Database http://renewables.iea.org Contacts carlos.gasco@iea.org renewables@iea.org
Levelised cost of energy Q2 2011 Recent levelised costs in $/MWh (averages) Costs depend on country, resource, source of financing, etc. Some renewables are already competitive Source: Bloomberg New Energy Finance, 2011