It s innovation, stupid! Marcus Franken, Brussels Office E.ON SE Bruegel Panel Debate: Making low-carbon technology support smarter 10 September 2015

Transcription

1 It s innovation, stupid! Marcus Franken, Brussels Office E.ON SE Bruegel Panel Debate: Making low-carbon technology support smarter 10 September 2015

2 The energy system has changed considerably over the last decade Market liberalization Unbundling Short-term trading Market integration European markets & global interlinkages Renewable energy sources Decentralization Technological innovation 2

3 Dynamic innovation and technology are driving changes on energy markets Examples Renewable energy: substantial size Europe 2014: 72% of new installations (22% in 2000) global PV 139 GW 1 GW global wind 318 GW 17 GW KNOWN KNOWNS PV: cost decrease beyond expectations Price decreased by 20% each time the installed capacity doubled Module price Cumulative production Shale gas: technology Hydraulic fracturing Increasing gas resources change global macro economics 2012 Net importer with 42 bcm US Gas 2040 Net exporter with 165 bcm Source:

4 Megatrends will guide future innovation Already realized Renewables Decentralization Shale Gas Will come Energy Storage Digitalization Rising efficiency Unknown future Further developments Megatrends 4

5 Photovoltaic + Batteries: Continuous cost reduction Costs for batteries [ /kwh] KNOWN KNOWNS PV electricity costs vs. end-customer costs [ ct/kwh] Investment in PV + battery: positive End-customer price Germany End-customer price Italy PV costs Germany PV costs Italy Electric vehicles reduce costs for Li-ion batteries by > 50% by Market leader Tesla Giga-factory will produce more than the current global production volume Source: UBS, Tesla, Umicore

6 Digitalization, Big Data & Internet of things : Integral part of our life in the future KNOWN UNKNOWNS Exploding data volumes Estimated annual data Improved automation DSO-grid Roll-out of GIS in the grids Terminals & automated substations Smart home and end customer data Control center intelligent grid Improved operations management OMS New smart home Appliances and internet Intelligent thermostat 3 rd generation of the internet the internet of things connects 1 bn people via PCs 6 bn. People via mobile phones 28 bn. things in 2020 Today Intelligent Power Meters Time Source: based on EPRI (assuming a 1 million customers energy supply company incl. grid and sales activities)

7 Energy transition is happening in a weak market and challenging regulatory environment Weak macroeconomics GDP-forecast EU 1 2.2% 1.7% Forecast Oct % 7 1. Source: IHS Global Insight 2. Price for delivery next year 1.0% Forecast Oct % 0.7% Forecast May % Further decreasing power prices 1.2% Forecast Nov 2013 Power Price Germany Base (y+1, /MWh) 2 <60 <50 <40 1/11 7/11 1/12 7/12 1/13 7/ Regulatoy challenges Examples Jun 2010 Sep 2010 Nov 2010 Feb 2011 Mar 2011 Mar 2011 May 2011 Aug 2011 Nov 2011 Mar 2012 Apr 2012 Jul 2012 Feb 2013 Apr 2013 Jun 2013 Nov 2013 Nuclear fuel tax Preferential treatment Spanish coal Retroactive tax on solar power Reduction of solar subsidies Retail Market Review Tax increase North Sea oil and gas Withdrawal of nuc. lifetime extension Increase Robin Hood tax Doubling of nuclear tax 1. tax package to finance tariff deficit Coal tax increase Adjustments of RES promotion Energy tax Tariff cut for grid business Robin-Hood Tax on PV Change in promotion scheme for RES

8 Questions customer put forward to E.ON Climate protection and energy cost savings are at the top of the agenda of many businesses and public-sector institutions. Industrial end-user power prices 1 Key customer questions % change from How can I cut my energy bill? EU 28 17% How can I reduce my CO 2 footprint? Germany UK Italy 23% 25% 26% Should I produce my own energy? How can I ensure security of supply? What is the best technology? What is the regulatory regime? How do I make this all happen? 1 All taxes included. Source: Eurostat, June 2014; Band IC ( GWh).

9 Ready for a radical re-thinking in this context? The company owning the most media content globally does not produce content. The world largest taxi company owns no cars. The globally most valuable trader has no inventory or stocks The largest provider for accommodations owns no real-estate. Source: E.ON Technology &Innovation; wetp@int

10 Well designed tender can bring cost down and attract new investors 1 State aid for environmental protection and energy - Due to cost inefficiencies and distortion of competition EU Commission adopted in April 2015 new rules on public support for RES generation. - From 2017 public support must be allocated in competitive bidding process. 2 Why tenders are good? Price discovery Competitive auctions can be a path for a gradual phase out of subsidies for more mature technologies like onshore wind and PV. In the long term also for less mature technologies like offshore wind. Cost control In contrast to FIT regime build out of capacity can be better steered and by that cost to consumers and grid operators is more predictable. Grid Better coordination of grid enhancement. Stable income Remuneration in form of market premium reduces for operators the income risk. 3 Key elements of clever auction design Rigorous Prequalification Competition Only price matters Uniform pricing Realistic delivery window Penalties for non realization 10

11 What do we expect from the EU? 2030 targets A robust governance system for the Energy Union and 2030 Framework Rules harmonization cooperation mechanism Regulatory barriers (e.g. European Birds and Habitats Directive) Carbon pricing ETS: Robust CO2 price signal for investment allocation R&D Provide funding for R&D (e.g. floating foundations, maritime logistics, disruptive technologies) Grid Coordinated development of grid (e.g. North Seas Countries' Offshore Grid Initiative, NSCOGI) 11

12 Thanks for your attention!