Competitive energy landscape in Europe

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1 Member of the Managing Board of Siemens AG, CEO Energy Sector Competitive energy landscape in Europe Brussels, siemens.com/answers

2 Agenda Europe s competitiveness depends on an affordable and reliable energy system Lessons from Germany s energy transition Our request: Utilize optimization potential in Europe Page 2

3 The markets are shifting Growth mainly outside Europe 3.2% 0.9% 2.5% 0.2% 1.9% Europe Russia -0.2% 6.8% USA 6.9% 0.2% 4.3% 1.1% China 0.6% India Population Growth per year GDP Growth per year, real, Brazil Page 3

4 The basis of a successful economy Capital Resources Prosperous economy People Energy Page 4

5 Majority of Siemens Energy production is located in Europe Brande/ Denmark: Wind turbine facility Berlin/ Germany: Gas turbine facility Finspang/Sweden: Small gas turbine facility Weiz/Austria: Transformer facility Budapest/Hungary: Gas turbine blades facility Nearly 61% of the Energy Sector employees (53.000) work in Europe, but we generate only 33% of our revenue here.. A strong Europe imports work! Page 5

6 Europe needs competitive electricity pricing for economic growth Comparison of electricity prices, ct/kwh Industry 5,2 9,1 7,2 11,2 7,6 9,4 8,1 10,8 10,4 16,7 11,6 14,0 9,3 Private households 29,8 25,2 1) 8,9 5,9 5,9 18,4 11,5 13,5 14,2 14,7 15,8 20,8 20,9 USA China India EU27 Turkey Polen France Czech Great Britain Italy Spain Denmark Germany Quelle: Eurostat; IEA. 1) Preliminary forecasts for 2013: 28.5 ct Page 6

7 Major differences among energy transitions in Europe Sweden Nuclear new build, hydro power, wind Denmark Wind on-/offshore, CHP Germany United Kingdom France Nuclear phase-out, PV, wind off-/onshore new build, grid expansion Nuclear new build, wind offshore, CCS, CO 2 floor price, shale gas Nuclear lifetime extension, wind offshore, moderate solar PV Italy Solar PV, reduction of power imports Spain Moderate renewables new build, support for domestic coal Poland Clean Coal, diversification of energy mix: wind offshore, shale gas Page 7

8 Agenda Europe s competitiveness depends on an affordable and reliable energy system Lessons from Germany s energy transition Our request: Utilize optimization potential in Europe Page 8

9 Renewable energy should cover 45 percent of Germany s power needs by 2030 Power generation in Germany in TWh Share of renewable energy in 2030: 45% Nuclear ~600 ~125 (21%) ~20 (3%) ~100 (16%) ~600 ~270 (45%) Renewable energy Wind Onshore 88 (15%) 35 (6%) Biomass, waste 76 (13%) Solar PV Oil ~90 (15%) ~5 (1%) ~20 (4%) ~120 (20%) Hydro Gas 67 (11%) Wind Offshore ~260 (44%) ~190 (32%) Coal in TWh Page 9

10 Driven by the energy transition, installed capacity will increase 35% to over 250 GW Development of power plant capacity in Germany in GW 253 Share of renewable energy in 2030: 54% +35% + 66GW Nuclear (37%) 11 (6%) 13 (7%) 28 (15%) 137 (54%) 12 (5%) Renewable energy Hydro Wind onshore Wind offshore 39 (15%) 17 (7%) 5 (2%) 76 (30%) Biomass, waste Photovoltaic 14 (8%) 44 (17%) Gas in GW 52 (28%) 21 (8%) 40 (16%) Oil Coal Page 10

11 EEG subsidies cost more than 20 billion in 2013: Massive redistribution in Germany EEG 2013 (preliminary forecast): Total expenditures 2) Page billion Marketing TSOs: billion Direct marketing: + 4,0 billion Difference in costs: billion German states Baden-Württemberg Bayern Berlin Brandenburg Bremen Hamburg Hessen Mecklenburg-Vorpom. Niedersachsen Nord-Rhein-Westfalen Rheinland-Pfalz Saarland Sachsen Sachsen-Anhalt Schleswig-Holstein Thüringen Renewable Feed-in-Legislation induced net cash flow (billions of ) 1) -1,8 1) Data for ) Inclusive direct marketing and one-time effects (liquidity reserves and balance 2012) Quelle: BDEW; ÜNBs.

12 Without storage, there is always the challenge of simultaneity of generation and consumption Germany, day with minimal peak load in summer 2012 (Sunday, August 26, 2012) GW Temporary surplus renewable energies Solar PV Wind onshore 0 4h 8h 12h 16h 20h Maximum load 2012 Daily load pattern Germany, August 26, 2012 Minimum load h Assumption: Maximum available capacity (GW) wind onshore + photovoltaic on windy and sunny days 1) 1) Assumption: Both wind onshore and solar PV have 80% of total installed capacity available Page 12

13 Without storage, there is always the challenge of simultaneity of generation and consumption GW Germany, day with maximum peak load in 2012 (Wednesday, February 8, 2012) Coverage of demand by other sources required (such as fossil power plants and imports) h 8h Maximum load 2012 Minimum load h Daily load pattern Germany, February 8, ) Assumption: Wind onshore has 6%, solar PV has 4% of total installed capacity available h 20h 24h Assumption: Minimum available capacity (GW) wind onshore + photovoltaic 1) Solar PV Wind onshore Quelle: ENTSOE; eigene Annahmen und Analysen Page 13

14 Despite increase in renewable energy, CO 2 target in Germany will not be reached Share of renewable energy in gross power generation Development of CO 2 emissions in power generation sector TWh Mt CO 2 ~600 ~600 ~600 ~ Current development 82% 76% 63% 51% Fossil generation Reference path 2) % % % % target 49% % target Renewable generation 1) Source: Umweltbundesamt; Siemens 1) Including hydropower 2) Assumption: National targets are proportionally assigned to power sector Page 14

15 Current situation in Germany s energy market: The energy economic triad is threatened Economic efficiency Electricity cost for industry: +25% above EU average Energy supply Sustainability 230 Mt CO 2 in 2030 (target: 161 Mt CO 2 ) Supply security Currently over 1,000 grid interventions annually Page 15

16 Agenda Europe s competitiveness depends on an affordable and reliable energy system Lessons from Germany s energy transition Our request: Utilize optimization potential in Europe Page 16

17 Three requirements for a sustainable European power market 1. Support of technologies based on maturity and marketability Differentiated procedures based on maturity level (e.g. PV vs. Offshore Wind) Competitive environment for support of technologies (e.g. auctions) 2. Best-solution Model Technology and Regions Location-optimized use of renewable energies (wind and sun) Optimization of energy mix through a coal-to-gas shift 3. Clear and reliable targets for CO 2 reduction Definition of long-term and binding CO 2 targets for the EU Measures for preventing price fluctuations (e.g. price corridor) Fleet benchmarking (as already implemented for the automotive sector) Page 17

18 Support is differentiated based on level of technological maturity and marketability Technological maturity level (marketability) Support of through PV Efficiency Free & fair competition 1) Wind onshore Market penetration Auctions Wind offshore Electrolyzer (as storage) R&D, demonstration projects Programs, invitations to tender Time frame 1) If necessary with financial corrections, such as internalization of external effects through CO 2 prices Page 18

19 Optimally utilize potential for wind and solar National targets Balanced choice of location *) Optimum location choice Capacity additions (GW): Solar PV 138 GW Wind onshore 101 GW Wind offshore 80 GW 50% of renewables in best locations Saved PG invest. ~32 bn (until 2030) Additional grid invest. ~5 bn (lifetime 40 years) on top of existing invest. programs (power consumption close to generation) 50% of grid invest incl. (40 year lifetime) Net savings ~ 30 billion *) only 50% of non optimum located installations shifted to consider decentral self-supply applications Page % of renewables in best locations Saved PG invest. ~60 bn (until 2030) Grid investment for energy transport to Germany (800 kv DC) ~30 bn (lifetime 40 years) on top of exist. invest. programs 50% of grid invest incl. (40 year lifetime) Net savings ~ 45 billion Shift of wind power installations Shift of solar PV installations

20 A reform of EU Emission Trading System would be desirable Preferred: Reform of EU ETS Definition of long-term, binding CO 2 targets for the EU (to 2030 or beyond) Possible simultaneous measures to prevent massive price fluctuations (e.g. through a minimum price or a price corridor) Alternative: CO 2 limits in sector Europe-wide limits for the CO 2 intensity of electricity from generators or providers Reduce limits to, for example, 300 g CO 2 /kwh in 2030 Raising CO 2 price for emissions above the limits Corresponding to a fleet benchmark (already successfully used in the automotive sector) Page 20

21 Thank you! siemens.com/answers

Germany's energy transition: Status quo and Challenges.

Ulrich Benterbusch Germany's energy transition: Status quo and Challenges. 2 nd Session Group of Experts on Renewable Energy, UNECE, Geneva 1 Agenda. Energy transition: Status quo and official goals. German