Renewables investment boost in a global uncertain context 31/3/217 Claudio Machetti 1
Technology cost reduction Cost evolution for selected technologies 28-216 12 Index 28 = 1 8 6 4 2 Upstream oil & gas Onshore wind Grid-scale batteries Solar PV utility scale Light emitting diodes (LEDs) 28 21 212 214 216 Rapid technology evolution strongly affects the energy sector Source: IEA, World Energy Outlook, November 216 2 2
Electric vehicles deployment Global Electric Vehicle Sales 25-24 mn vehicles per year 45 4 35 3 25 2 15 1 5 25 RoW Japan China USA Europe 21 215 22 225 23 235 24 Electric Vehicles sales driven by rapid progress on technology Source: BNEF, The future of electricity demand, June 216 3 3
,6,5,4,3,2,1, 3/29/217 Energy demand trend Final consumption by source (%) 17% +11 p.p. 28% Electricity 14% 16% Gas 15% 11% Coal 213 25 Increasing use of electricity due to the switching from other sources Source: IEA, Energy Technology Perspectives 216 4 4
Electricity demand trend Global electricity consumption, 25-24 World off-grid population, 25-24 1, TWh 215-24: +42% 3 25 Other APAC Australia South Korea Japan 1.2 1. Billions India 2.8 RoW Southern Africa 15 China.6 Central Africa 1 Other AMER Brazil Canada.4 West Africa 5 USA EU 25 21 215 22 225 23 235 24 SSA MENA Other Europe Source: BNEF. Note: MENA=Middle East and North Africa, SSA=Sub-Saharan Africa.2. 25 21 215 22 225 23 235 24 Source: Eurostat, BNEF East Africa Other APAC Bangladesh India 5 5
Supply mix evolution Global installed generation capacity GW 12 1 8 6 4 2 215 22 225 23 235 24 New capacity additions: Renewables Nuclear Gas & oil Coal Existing capacity: Renewables Nuclear Gas & oil Coal Renewables take centre stage to meet tomorrow electricity demands Source: IEA, World Energy Outlook, November 216 6 6
World Commodity Balance 1 98 95 93 9 88 Source: IEA Oil (MMb/d) 85-7 21 211 212 213 214 215 216 217 Demand vs Supply (rh sc) Demand Supply 1.2 1. 8 6 4 2 Coal (Mmton) 21 211 212 213 214 215 216 217 Source: IHS Connect 8 3-2 13-2 Demand vs Supply (rh sc) Demand Supply 8 3 3.7 3.6 3.5 3.4 3.3 3.2 3.1 Gas (Bcm) 21 211 212 213 214 215 216 217 1 5-5 -1 Demand vs Supply (rh scale) Demand Supply Source: Oxford Economics Scandinavia 1% Coal Demand 216 Asia 78% Nord West Europe 8% Iberia 2% Mediterranean/North Africa 7% Americas 4% 7
World Commodity Prices Spot commodity prices 6 55 5 45 4 35 3 25 Jan-16 Feb-16 Mar-16 Source: Reuters Apr-16 May-16 Jun-16 Jul-16 Oil ($/bbl) Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 51,8 3 25 2 15 1 5 Source: Reuters Gas ( /MWh) NBP HH Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 16, 9,2 95 85 75 65 55 45 35 25 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Source: Reuters Coal ($/ton) Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 71,9 8
Chinese environmental concerns shapes the coal price dynamics The Chinese environmental concerns has relevant effects on the coal price; in particular: The announced cuts of domestic coal production is increasing the tightness in the spot prices Measures call for delaying or cancelling coal-fired power projects and the planned expansion of renewable power capacity reduce the price expectation for the future 1 9 8 7 6 5 Fwd - mar 17 Fwd - feb 17 Fwd - nov 16 Fwd - set 16 Fwd - giu 16 Spot Coal ($/ton) 4 ago-13 dic-14 mag-16 set-17 feb-19 giu-2 9
Focus Italiy Demand & Prices Power, Gas, Coal Power Demand (TWh) Gas Demand (Bcm) Coal Import (Mt) Italy all coal Italy steam coal 26 25 26 24 22 2 2 2 19 2 18 18 17 16 16 15 16 16 17 14 27 28 29 21 211 212 213 214 215 216 Source: IHS Connect Power Prices Spark Spread Dark Spread /Mwh 6 Cal'16 Cal '17 Cal '18 Spot (dx) 5 4 3 gen-16 apr-16 lug-16 ott-16 gen-17 8 7 6 5 4 3 /Mwh Cal '16 Cal '17 Cal '18 16 14 12 1 8 6 4 2 gen-16 apr-16 lug-16 ott-16 gen-17 /Mwh 2 Cal '16 Cal '17 Cal '18 16 12 8 4 gen-16 apr-16 lug-16 ott-16 gen-17 1 1
Coal Power Plants Born to be BaseLoad Acting as a Peaker What could happen to a Coal Power Plant How RES generation and reduction in demand/dark Spread have affected Coal Power Plant exploitation: Increasing in load modulation (higher machines consumption) Average operational load lower than the design one (lower efficiency) Lowering Minimum Power in order to reduce costs when Dark Spread < (hardware investments) Increasing in shut down/start up for each produced TWh(higher machines consumption) Reducing in ramp rate timing (redesign of shut down/start up procedures and hardware investments) Catch market opportunities oblige to an higher complexity in technical and commercial management of Coal Power Plants 11
Coal Power Plants POWER volatility affects COAL supply chain Increasing in Power Market volatility KEY DRIVERS: Decrease in power demand Growth of renewables Gas to coal competition Hydraulicity Impact on Enel-Italy coal supply chain Unpredictables(i.e. decrease of nuclear production in France) MAIN IMPACTS: Fast changing production/consumption forecasting versus longer sourcing timeframe of reaction Limited storage capacity management New coal supply chain operational and commercial challenges New paradigm of high consumption volatility address new operational and commercial challenges in the coal supply chain 12
Boosting power plant flexibility with energy storage An innovative project concept currently under study What battery energy storage can do, where compliant with local regulatory framework Provide frequency regulation services, allowing a steadier operation of conventional machinery, thus increasing lifetime Improve power plant response time to ancillary services, going beyond the state of the art performance of conventional plants P Allow the power plant to run closer to its optimal efficiency, storing any excess power until needed by the grid and thus contributing to lowering emissions Minimize power plant unbalances vs. scheduled programs, contributing to reduce ancillary services needs procurement by the TSO Allow the power plant to temporary power boosts, above its current nominal power Countries of potential application 1 Italy Spain Peru Colombia Chile 1) Regulatory framework for Energy Storage Systems still under definition in ALL target Countries. Evaluations in progress. 13