Medium-Term Renewable Energy Market Report Maria van der Hoeven Executive Director International Energy Agency

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1 Medium-Term Renewable Energy Market Report 214 Maria van der Hoeven Executive Director International Energy Agency

2 Strong momentum for renewable electricity Global renewable electricity production, historical and projected TWh Historical data and estimates Forecast Hydropower Bioenergy Natural gas 213 Onshore wind Offshore wind Solar PV Nuclear 213 Geothermal STE/CSP Ocean % total generation (right axis) 3% 25% 2% 15% 1% 5% % Renewable electricity projected to scale up by 45% from 213 to 22

3 Renewables are major source of new generation Cumulative change in gross power generation by source and region, TWh OECD Renewable generation Conventional generation Renewables account for 8% of new generation in OECD Limited upside in stable markets with slow demand and growing policy risks Non-OECD Renewable generation Conventional generation Renewables are largest new generation source in non-oecd, but meet only 35% of growth Large upside for dynamic markets with fast-growing demand

4 Increasing risks are expected to slow renewable growth Renewable power annual net capacity additions, historical and projected GW OECD China Other non-oecd World Policy and market risks threaten to slow deployment momentum

Role of renewable use in heat also increasing, but policy support still limited Countries with targets and support policies for renewable heat Modern renewable heat continues to grow, providing 9% of

5 Role of renewable use in heat also increasing, but policy support still limited Countries with targets and support policies for renewable heat Modern renewable heat continues to grow, providing 9% of world final energy use for heat in 22 Broader adoption of support policies for renewable heat could reduce energy consumption and enhance energy security This map is without prejudice to the status of or sovereignty over any territory to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

6 Transition to advanced biofuels for transport threatened by policy uncertainty Billion litres Projected biofuel production versus targets in IEA 2 C Scenario (2DS) Historical Projection Scenario 9% 8% Biodiesel (advanced) (2DS) 225 (2DS) 7% 6% 5% 4% 3% 2% 1% % Ethanol (advanced) Biodiesel (conventional) Ethanol (conventional) Biofuels share in total transport (energy content) Conventional biofuel production continues to grow, and will provide 4% of road transport fuel demand in 22 First commercial-scale advanced biofuel plants coming on line Without adoption of long-term policy framework, advanced biofuels sector faces grim future

7 Main messages to policy makers Solutions to future development rest in policy makers hands Policy risk main barrier to investment Policies to focus on cost-efficiency But policy changes must be predictable, and retroactive changes must be avoided Given their capital-intensive nature, renewable investments require market context that assures reasonable and predictable returns

8 Part Two Snapshots Technology and Regional Detail Paolo Frankl Head, Renewable Energy Division IEA

9 Renewable investment has risen to high levels USD 213 billion Investment in 213 relatively steady at USD 25 billion, but lower than peak in 211 Slowing capacity growth and falling technology costs limit investment in new renewable power capacity over medium term Investment in new renewable power capacity Middle East Non-OECD Americas Non-OECD Europe China Asia Africa OECD Europe OECD Asia Oceania OECD Americas Net capacity growth (right axis) GW

10 Renewable investment costs falling USD 213/kW Weighted average annual renewable investment costs, historical and projected OECD China Hydro Bioenergy Onshore wind Offshore wind Solar PV residential/commercial Solar PV utility Other non-oecd Notes: Average unit investment costs are based on gross additions, which include capacity refurbishments that are typically lower cost than new capacity. Costs vary over time due to technology changes as well as where deployment occurs in a given year.. With scale up of deployment and learning, investment costs of most dynamic technologies (solar PV and onshore wind) continue to fall

11 Renewables becoming a cost-competitive generation option in more cases In some dynamic markets with country-specific conditions and market frameworks, new onshore wind is the economically preferred option versus new fossil fuel plants (e.g. Brazil, Chile and South Africa) But fossil fuel subsidies can distort this picture In some stable markets, onshore wind with good financing cheaper than new CCGT plants But market design based on wholesale pricing may not provide adequate remuneration USD 213/MWh Germany LCOEs versus wholesale prices 2 Germany onshore wind LCOE Germany CCGT LCOE 15 Wholesale price (213 average) 1 5 Typical onshore wind LCOE Typical CCGT LCOE 3% 5% 7% 9% 11% 13% 15% Weighted average cost of capital (real) Notes: Onshore wind full load hours are assumed at 2 and that for CCGT is 35. Source: IEA analysis with day-ahead average base-load wholesale prices for 213 from Bloomberg LP.

12 Socket parity emerging as potential deployment driver for distributed PV 1 2 LCOE of residential PV vs variable portion of electricity tariff 1 8 LCOE USD/MWh Variable Portion of Residential Rate Australia France Germany Italy Korea Mexico Netherlands United Kingdom Economic attractiveness from offsetting electricity bill requires self-using most of the PV electricity Currently limits potential, in particular for households Reaching socket parity is a driver for private actors But PV may still have significant impact on total system costs, in particular depending on allocation of fixed network costs

13 Global RE capacity additions led by wind Annual additions (GW) Still, onshore outlook less optimistic than in MRMR 213 Policy uncertainties and grid integration challenges weigh upon outlook Offshore wind outlook also more pessimistic, with financing and integration challenges Total wind (onshore + offshore) annual capacity additions by region (GW) OECD Americas OECD Asia Oceania OECD Europe China Rest of Non-OECD GW World Onshore World Offshore

Stronger outlook for solar PV Solar PV annual capacity additions (GW) Strong growth in emerging markets and some OECD areas Policy debates over distributed PV a source of forecast uncertainty This

14 Stronger outlook for solar PV Solar PV annual capacity additions (GW) Strong growth in emerging markets and some OECD areas Policy debates over distributed PV a source of forecast uncertainty This map is without prejudice to the status of or sovereignty over any territory to the delimitation of international frontiers and boundaries and to the name of any territory, OECD/IEA city or area. 214

15 Higher solar PV under enhanced case 6 Solar PV cumulative capacity, baseline versus enhanced case Cumulative capacity (GW) Baseline Baseline Enhanced High Rest of World Australia France United Kingdom India Italy United States Japan Germany China With certain market and policy enhancements - Fair rules and appropriate electricity rate design for allocating the costs and benefits from fast-growing distributed solar PV Greater implementation of ambitious policy aims (e.g. Middle East) Faster-than-expected decreases in solar PV costs Solar PV capacity could top 5 GW globally in 22

16 Other technologies growing slowly Offshore wind generation Solar thermal electricity generation TWh OECD Americas OECD Asia Oceania OECD Europe Africa Non-OECD Asia China Non-OECD Europe Non-OECD Americas Middle East MTRMR 213 TWh OECD Americas OECD Asia Oceania OECD Europe Africa Non-OECD Asia China Non-OECD Europe Non-OECD Americas Middle East MTRMR 213 Potential of offshore power remains high, but technical, financial and grid connection issues pose challenges Storage adds value to CSP, but deployment hampered by relatively high costs

17 Progress tracked on different scales Incremental TWh increase (213-2) 1. China USA Brazil India Japan Germany Canada United Kingdom Turkey Mexico + 39 Average annual growth (213-2) 1. Saudi Arabia + 117% 2. Jordan + 67% 3. UAE + 53% 4. Qatar + 41% 5. Israel* + 28% 6. South Africa + 23% 7. Cambodia + 22% 8. Ethiopia + 2% 9. Nigeria + 15% 1. Morocco + 12% Memo: EU Note: countries with at least 1 GW of renewable capacity by 22 * The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

18 China accounts for 4% of global growth Strong generation needs, pollution reduction goals and policy environment with ambitious targets support China s deployment Renewables comprise 45% of new generation to 22, ahead of coal Some emerging challenges Slower demand outlook than in MTRMR 213 Integration of large amounts of variable renewables Uncertainties over favourable economics for distributed PV scale up 3 Evolution of China s power generation mix, Cumulative change in generation (212-2) Renewable generation (212-2) 25 Generation (TWh) Coal Oil Natural gas Nuclear Renewables Others Generation(TWh) Ocean Geothermal STE Solar PV Offshore wind Onshore wind Bioenergy Hydropower

19 For further insights and analysis The Medium-Term Renewable Energy Market Report 214 can be purchased online at: Thank you for your attention!

GLOBAL RENEWABLE ENERGY MARKET OUTLOOK 2013

GLOBAL RENEWABLE ENERGY MARKET OUTLOOK 213 FACT PACK GUY TURNER HEAD OF ECONOMICS AND COMMODITIES APRIL 26, 213 GLOBAL RENEWABLE ENERGY MARKET OUTLOOK, 26 APRIL 213 1 INTRODUCTION This year s Global Renewable