Current Developments and Trends in Energy Markets Dr. Paolo Frankl Head, Renewable Energy Division International Energy Agency

Transcription

1 Current Developments and Trends in Energy Markets Dr. Paolo Frankl Head, Renewable Energy Division International Energy Agency Berlin Energy Transition Dialogue, March 2015 OECD/IEA 2014

2 Oil and LNG prices have dropped to multi-year lows USD/Mbtu Oil and LNG prices in 2014 Asian LNG Spot Brent Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec LNG prices were already falling well ahead of the drop in oil USD/bbl 140 Cheap oil linked gas from the new Australian contracts will reduce demand for spot gas

3 Has electricity demand peaked in OECD countries? 1,1 1,08 1,06 1,04 Germany power Germany GDP USA power USA GDP 1,02 1 0,98 0,96 0,94 0,92 0,

4 It is not only about power generation Steel and cement in China consume more coal than the US Preliminary data: coal consumption stalled in China in 2014

5 TWh Sustained growth for renewable electricity but some barriers persist Global renewable electricity production, by region (TWh) % OECD Americas OECD Asia Oceania OECD Europe Asia China Non-OECD Europe Non-OECD Americas Middle East Africa % of renewables (right axis) 30% 25% 20% 15% 10% 5% Renewable electricity set to grow by 45% betw and 2020 Growth led by non-oecd countries

6 What has been working Recent long-term remuneration contract prices (e.g. auctions and FITs) Ireland 69 $/MWh Germany $/MWh US 48 $/MWh US ~75 $/MWh UK $/MWh UK 120 $/MWh Turkey 73 $/MWh China $/MWh Dubai <60 $/MWh India 88 $/MWh Onshore wind Utility PV Chile 89 $/MWh 85 $/MWh Brazil 81 $/MWh Brazil 54 $/MWh SA 76 $/MWh 60 $/MWh SA 76 $/MWh Australia 65 $/MWh Combination of technology cost reduction, better resources, appropriate regulatory framework attracting financing Long-term PPAs and price competition effective drivers

7 Even with lower oil and gas prices, renewable electricity can be price competitive USD/MWh 300 Weighted average annual renewable investment costs, historical and projected 250 LCOE New OCGT LCOE New CCGT Range of solar PV costs from previous slide USA: avg HH spot, Jan 2015 EU: avg NG import, Jan 2015 Japan: avg contracted spot LNG, Jan 2015 Japan: avg contracted spot LNG, Mar USD/MMBTU Note: Based on EGC median case, LCOE for OCGT is calculated using a 15% capacity factor and 7% discount rate and LCOE for CCGT is calculated using a 65% capacity factor and 7% discount rate. No carbon pricing is included in LCOEs. Range of wind costs from previous slide

8 What has not worked (yet) Source: SETI Alliance Low carbon prices insufficient to trigger investment in low-c technologies Fossil fuel subsidies act as an incentive to emit Other barriers persist, e.g. policy uncertainty in OECD countries and access to grids and markets in some non OECD countries

9 High % v-re require flexible systems Share of v-re on annual electricity generation Denmark Ireland Iberia Germany Great Britain Italy NW Europe ERCOT Sweden France India (South) Brazil Japan 0% 10% 20% 30% 40% Wind PV Additional Wind Additional PV Grids Storage Generation Demand Side OECD/IEA 2014

10 Local content requirements related to solar PV Source: SETI Alliance

11 Concluding remarks High levels of financial support no longer required for RE electricity if appropriate market and regulatory framework in place Policies should focus on fostering competition, innovation and flexible energy systems Electricity market designs sub-optimal today for low-carbon generation RE heat and biofuels need more policy attention

12 Reserve slides

13 Legitimate doubts about the Golden Age of Gas have emerged in Gas had the slowest growth among primary energy sources in ,0% 4,5% 4,0% 3,5% 3,0% ,5% 2,0% 1,5% 1,0% 0,5% 0,0% Oil Gas Coal

14 Global oil demand to recover but strong growth as prior to financial crisis not expected Medium-term oil demand ( ) A structurally-driven reduction in the oil intensity supported by fuel switching out of oil and increased energy efficiency somewhat blunts the demand impact of forecast economic growth

15 What has not worked (yet) - continued European gas prices might need to drop towards $5/mmbtu if gas-to-coal switching is the way to rebalance the market 10,0 9,0 TTF forward curve (USD/Mbtu) Gas price required to trigger gas to coal switching 8,0 7,0 6,0 5,0 4,0 3,0 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Note: Based on gas, coal, and carbon forward curves as of May approximate switching price

16 USD 2013/kW Renewable investment costs falling 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 Large scale wind and solar now increasingly competitive

17 Cost of capital increasingly key for cost reductions Components of solar PV generation costs Average awarded tender prices under South Africa Renewable Energy Independent Power Producer Procurement Programme Cost of capital an increasingly important component of cost WACC can be reduced by: Sustainable long-term power purchase agreements that provide revenue certainty and facilitate access to debt and equity capital markets Reducing non-economic barriers, reducing grid integration risks, increasing the creditworthiness of off-takers and reducing currency risks Competition for long term PPAs have been effective at driving cost reductions

18 Renewable heat economic where resource and market conditions right, but wide variations Comparison of building sector heating costs Heating Source Oil Electricity Gas Solar district heating (C Europe) Solar water and space heating Solar water pumped (C and N Europe) Solar water thermosiphon (S Europe) Solar water thermosiphon (China) Geothermal district heating Solid biomass commercial ( kW) Solid biomass domestic (1-10kW) USD/MWh th In heating sector, renewable options (e.g. biomass) remain cost-competitive for building space heating in many cases, unless oil prices continue to decrease substantially OECD/IEA 2014 Current developments may, however, delay investment decisions by private households as well as industry stakeholders

19 Only some 50 countries have Renewable Heat Policies Countries with targets and support policies for renewable heat 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. Non economic barriers holding back adoption Broader adoption and higher priority for support policies for renewable heat needed Integration with energy efficiency measures

20 Varied impact of lower oil prices on renewables in transport Conventional biofuels attractiveness determined by blending requirements and agricultural fundamentals, in part influenced by oil prices For advanced biofuels, at a much more nascent level of development and with weaker policy support, lower oil prices may delay or lead to cancelled projects