10 June 2015 RENEWABLES AND FOSSIL FUELS COST TRENDS APERC Annual Conference, 9-10 June 2015, Hotel New Otani, Tokyo Ali Izadi
NEW INVESTMENT IN CLEAN ENERGY 2004 2014 ($BN) 32% 17% $318bn -7% $294bn -9% 16% $310bn 0.5% $272bn $268bn 17% 36% $175bn $205bn $206bn 46% 46% $128bn $60bn $88bn 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Note: Total values include estimates for undisclosed deals. Includes corporate and government R&D, and spending for digital energy and energy storage projects. Source: Bloomberg New Energy Finance 1
CLEAN ENERGY INVESTMENT BY REGION 2004 2014 ($BN) Europe United States $119 $129 $98 $28 $38 $52 $72 $87 $89 $66 $66 $10 $17 $35 $41 $44 $35 $48 $65 $52 $48 $52 04 05 06 07 08 09 10 11 12 13 14 China 04 05 06 07 08 09 10 11 12 13 14 Asia ex-china $89 $3 $9 $11 $17 $26 $40 $43 $53 $67 $68 $15 $17 $20 $24 $26 $25 $36 $46 $46 $59 $65 04 05 06 07 08 09 10 11 12 13 14 04 05 06 07 08 09 10 11 12 13 14 Source: Bloomberg New Energy Finance 2
CLEAN ENERGY INVESTMENT BY SECTOR 2004 2014 ($BN) Wind Solar $156 $144 $150 $18 $29 $40 $62 $75 $81 $99 $84 $84 $89 $99 $12 $16 $22 $38 $61 $64 $103 $120 04 05 06 07 08 09 10 11 12 13 14 Energy Smart Technologies (EST) 04 05 06 07 08 09 10 11 12 13 14 Biofuels $13 $13 $14 $18 $20 $27 $33 $35 $35 $34 $37 04 05 06 07 08 09 10 11 12 13 14 $4 $10 $28 $29 $19 $10 $10 $10 $7 $5 $5 04 05 06 07 08 09 10 11 12 13 14 Source: Bloomberg New Energy Finance 3
WIND TURBINE PRICE INDEX MEAN PRICE BY DATE OF DELIVERY H1 2008 H1 2015 ( M/MW) 1.21 1.20 1.11 1.10 1.06 0.99 1.00 1.01 0.97 0.94 0.93 1.02 0.99 0.91 0.94 0.90 0.86 0.82 0.88 0.86 0.83 0.82 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 2008 2009 2010 2011 2012 2013 2014 2015 WTPI <95m rotor diameter >95m rotor diameter Source: Bloomberg New Energy Finance Note: Contract prices include turbine plus towers and transport to site, and they exclude VAT. Turbine contracts signed for delivery in China are excluded from this Index. 4
Historical price (USD/W) SOLAR PV EXPERIENCE CURVE Solar PV module experience curve: 24% cost reduction for every doubling of capacity 100 1976 Crystalline Si PV module 10 1988 1998 2004 2008 1 2014 m=24.3% 0.1 1 10 100 1,000 10,000 100,000 1,000,000 10,000,000 Cumulative production (MW) Note: Prices are in real (2014) USD. Source: Bloomberg New Energy Finance, Maycock, Battery University, MIIT 5
Historical price (USD/W, USD/Wh) LITHIUM-ION EV BATTERY EXPERIENCE CURVE COMPARED WITH SOLAR PV EXPERIENCE CURVE 100 1976 Crystalline Si PV module 10 1988 1998 2004 2008 1 0.1 2010 2014 H1 2014 Li-ion EV battery pack m=24.3% m=21.6% 1 10 100 1,000 10,000 100,000 1,000,000 10,000,000 Cumulative production (MW, MWh) Note: Prices are in real (2014) USD. Source: Bloomberg New Energy Finance, Maycock, Battery University, MIIT 6
AVERAGE RESIDENTIAL ELECTRICITY PRICE (USD/MWH) AGAINST AVERAGE ANNUAL OUTPUT PER WATT INSTALLED (KWH/KW/YEAR) 450 Germany 400 Denmark Hawaii 50GW 350 300 250 200 150 100 50 Netherlands UK Slovakia Czech Republic Switzerland Romania Italy Slovenia Japan France Canada Southern China: Hainan New Jersey USA China Spain Portugal Greece South Korea Australia California Northern China: Qinghai Texas South Africa Brazil Mexico Chile 100GW Saudi Arabia 0 750 950 1150 1350 1550 1750 1950 2150 2350 LCOE 2014 LCOE 2020 Note: Bubble size represents approximate total residential rooftop PV market potential Source: Bloomberg New Energy Finance 7
AVERAGE COMMERCIAL ELECTRICITY PRICE (USD/MWH) AGAINST AVERAGE ANNUAL OUTPUT PER WATT INSTALLED (KWH/KW/YEAR) 350 Denmark Hawaii 50GW 300 Germany Italy Australia 250 200 UK Czech Republic Switzerland Romania Spain Portugal Greece Mexico 100GW 150 100 Southern China: Hainan Japan USA France China South Korea California South Africa Brazil Chile Saudi Arabia LCOE 2014 50 Canada Northern China: Qinghai LCOE 2020 0 750 950 1150 1350 1550 1750 1950 2150 2350 Note: Bubble size represents approximate total commercial rooftop PV market potential Source: Bloomberg New Energy Finance 8
H1 2015 LEVELISED COST OF ELECTRICITY ($/MWH) GLOBAL AND APAC PV - c-si Biomass - incineration Geothermal - flash plant Wind - onshore Small hydro Natural gas CCGT Coal fired 0 50 100 150 200 250 300 350 400 APAC H1 2015 Global H1 2015 APAC H2 2014 The cost of electricity generated from renewable energy sources in APAC remains noticeably higher than the global average. However, the gap between renewable and fossil-fuel LCOEs in Asia continues to decrease. Onshore wind power is more competitive than gas power in China and India due to deteriorating gas power economics. The cost of PV continues to fall. In China, the average PV LCOE is now in parity with gas LCOE at $100/MWh. Other countries will follow suit, with Japan having the biggest medium-term potential in PV LCOE reduction given lower financing costs. Coal-fired electricity remains the cheapest among all energy sources under review due to the increasing use of more efficient supercritical technologies mandated by policy and slumping coal prices. Indonesia, China and India manage the lowest coal LCOEs at below $40/MWh The average cost of gas power has increased across Asia as gas prices are rising under many countries gas pricing reforms. In China, gas LCOEs are pushed up to $100/MWh by lower capacity factors in addition to rising gas prices In contrast, the cost of PV continues to fall thanks to further reductions on equipment cost and improved capacity factors. The region s average PV LCOE currently stands at $150/MWh. As lower cost Chinese solar modules gain larger market shares in current high cost regions such as Japan and Southeast Asia, APAC s average PV LCOE could fall to as low as $120/MWh in the medium term 9
PUBLIC BENCHMARKS OF RESIDENTIAL PV SYSTEM CAPEX, $/W(DC) 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Germany California Japan Chinese multi module Australia (3kW) Source: Bloomberg New Energy Finance, Solarchoice, METI, BSW-Solar, California Solar Initiative 10
LEVELISED SUPPORT MECHANISMS FOR ONSHORE WIND BY MARKET VS NEW BUILD 2014 LEVELISED SUPPORT MECHANISMS (EUR/MWH) 2014 NEW BUILD (MW) Japan Philippines UK (ROC) UK (CfD) Canada - Ontario Italy India - Maharashtra Z1 Romania China - Shandong France Germany (EEG 2012) Germany (EEG 2014) Finland Turkey Ireland US - California China - Inner Mongolia West India - Maharashtra Z4 South Africa Spain (incentive freeze) Brazil US - Texas 54 54 86 70 82 46 78 62 83 73 43 22 40 54 57 55 51 50 42 33 8 45 23 158 158 144 144 48 4 106 45 4 103 86 15 85 82 32 78 78 11 73 5 87 73 32 75 67 Feed-in tariff 63 8 62 Electricity 57 REC ROC 55 51 50 42 40 Production tax credit Premium Japan Philippines UK (ROC) UK (CfD) Canada - Ontario Italy India - Maharashtra Z1 Romania China - Shandong France Germany (EEG 2012) Germany (EEG 2014) Finland Turkey Ireland US - California China - Inner Mongolia India - Maharashtra Z4 South Africa Spain (incentive freeze) Brazil US - Texas 143 303 690 690 103 358 571 39 1,042 212 790 222 1,277 1,871 2,315 2,315 2,877 3,655 4,438 4,438 9,936 10,764 Source: Bloomberg New Energy Finance 11
WTI CRUDE OIL PRICES, 2000 14 ($2014 / BARREL) 180 160 140 120 100 80 60 or? 40 20 0 2000 2002 2004 2006 2008 2010 2012 2014 Note: WTI crude oil prices adjusted to inflation Source: Bloomberg New Energy Finance, World Bank 12
OIL PRICE CRASH V OR L? Abdalla El-Badri, Secretary General, OPEC If you don t invest in oil and gas, you will see more than $200 Bob Dudley CEO, BP You won t see $100 oil again for a long time Images: Bloomberg 13
Jan 12 Apr 12 Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 ANY IMPACT FROM LOW CRUDE PRICES? PRIMARILY INDIRECTLY VIA LOWER GAS PRICES BRENT CRUDE, HISTORICAL AND THREE SCENARIOS (US$/BBL) FUEL COSTS FOR ELECTRICITY GENERATION IN JAPAN (JPY/kWh) 140 120 100 80 60 40 20 0 Scenario 3 Scenario 2 Scenario 1 20 18 16 14 12 10 8 6 4 2 0 2014 Q1 2015 Q4 Scenario 1 2015 Q4 Scenario 2 2015 Q4 Scenario 3 Coal LNG Oil Source: Bloomberg New Energy Finance. Note: Petroleum and coal tax is included in the calculation for the three fuels. Thermal efficiency is assumed at oil 38.4%, coal 40.5%, LNG 44.1%, which are the 10 utilities average in FY2013. Forex assumed at US$1=JPY118 in Q4 2015. 14
GAS PRICES: HENRY HUB, NBP, BAFA, AND NE LNG, 2004-2015 (US$/MM BTU) 20 18 16 14 12 10 8 6 4 2 20 18 16 14 12 10 8 6 4 2 ~ $5 spread to Henry Hub > $8 spread to Henry hub 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ~ $5 spread to Henry Hub? NBP (UK) Henry Hub (US) BAFA (Germany border price for Russian gas) North East Asia LNG Note: Japan-Korea Marker is based on broker assessments of the spot price of un-contracted LNG cargoes delivered into the Northeast Asia market. Source: Bloomberg New Energy Finance, ICAP, Platts 15
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Operational, under construction or post-fid Pre-FID LNG EXPORT CAPACITY BY COUNTRY/REGION (MMTPA) 800 700 600 500 400 300 200 100 0 Other North America Russia East Africa West Africa Australia Other North America Russia West Africa North Africa Indonesia Malaysia Australia Qatar Demand Source: Bloomberg New Energy Finance 16
IMPACT OF LOWER OIL AND GAS PRICES ($BN/YR) Canada - $40 billion Norway - $53 billion Europe + 300 billion Russia & C. Asia - $218 billion??? Asia + 393 billion USA + 180 billion Latin America - $60 billion North Africa - $62 billion Sub-Saharan Africa - $89 billion Middle East - $357 billion Note: Calculation based on $5 drop in natural gas price and $50 drop in oil price; based on import/export volumes 2011-2013, excluding impact of changes in volumes since then Source: Bloomberg New Energy Finance; CIA Fact Book; IEA; EIA; World Bank; IMF 17
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 US CAPACITY BUILD, 2008 20 (GW) 50 Up to 23GW of US coal capacity coming offline in 2015 40 30 20 10 0-10 -20-30 Coal Gas Oil Nuclear Hydro Renewables Other Notes: Bloomberg New Energy Finance base case build forecasts; historical build from EIA Form 860 Source: Bloomberg New Energy Finance 18
CHINA COAL CONSUMPTION, 2000-14 (MILLION TONS) 3,000 2,500 2,000 1,500 1,000 500 0 2000 2002 2004 2006 2008 2010 2012 2014 Source: Bloomberg New Energy Finance, Chinese Government 19
CLEAN VS FOSSIL ENERGY INVESTMENT ($BN) 600 600 500 500 400 400 600 300 300 500 200 200 400 100 100 300 0 0 200 Capex of top 20 quoted oil and gas companies plus top 20 quoted coal companies 30% 50% 27% 12% -9% 35% 7% -7% -8% 12% -15% 2004 20042005 20052006 20062007 20072008 20082009 20092010 20102011 20112012 20122013 201320142015 20142015 Q1 Q1 Expected Large hydro Other Solar Wind Expected Large hydro Other Solar Wind 100 Note: Nominal values. Renewable energy includes large hydro, investment made at financial close. Fossil fuel is gross investment on coal, gas and oil capacity. We assume capacity retirement of 3.3%/yr for coal, 4%/yr for gas and 2.5%/yr for coal in all countries where fossil capacity is net positive. We assume retiring capacity is replaced in countries where fossil fuel capacity additions are net positive and not where additions are zero or negative. We count fossil fuel investment in the year when capacity was commissioned (owing to a lower visibility of data). Q1 2015 figures do not include corporate & governmnet R&D, or EST asset finance estimates which are compiled on an annual basis only. 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20142015 Q1 Source: Bloomberg New Energy Finance 20
ASIA PACIFIC LEVELISED COST OF ELECTRICITY ($/MWh NOMINAL) 200 180 160 140 120 100 80 60 40 20 0 2015 2020 2025 2030 2035 2040 Coal Gas Onshore wind Utility-scale PV Source: Bloomberg New Energy Finance 21
POWER GENERATION MIX BY REGION 2013 AND 2030 Asia Americas 20% 18% 4% 12% 2% 17% 5% Other renewables Wind Solar 24% 23% 5% 10% 8% 15% 6% Other renewables Wind Solar 72% 48% Nuclear Fossil fuels 63% 47% Nuclear Fossil fuels 2013 2030 2013 2030 Europe Rest of world 22% 16% 11% 24% 7% 12% 24% Other renewables Wind Solar 20% 18% 3% 8% 6% 19% 6% Other renewables Wind Solar 48% 8% 28% Nuclear Fossil fuels 69% 49% Nuclear Fossil fuels 2013 2030 2013 2030 Source: Bloomberg New Energy Finance 22
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MARKETS Renewable Energy Energy Smart Technologies Advanced Transport Gas Carbon and RECs SERVICES Americas Service Asia Pacific Service EMEA Service Applied Research Events and Workshops Unique analysis, tools and data for decision-makers driving change in the energy system Ali Izadi-Najafabadi aizadinajafa@bloomberg.net sales.bnef@bloomberg.net