© oecd/iea 2013 the outlook for electricity in western europe matthew wittenstein iea gas, coal...
TRANSCRIPT
© OECD/IEA 2013
The outlook for electricity in Western Europe
Matthew WittensteinIEA Gas, Coal & Power Markets Division
26 November 2014
CERN
© OECD/IEA 2013
Outline of Presentation1. The outlook for demand
I. OECD versus Non-OECDII. The changing shape of demand
2. The outlook for supplyI. The rise of renewables
3. The outlook for electricity pricesI. A brief aside on wholesale electricity price formationII. The components of electricity pricesIII. Prices in Europe
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1. The outlook for demand
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Demand growth to 2040 Globally, expected to be 2.1 % p.a.
But slower in OECD economies
Source: IEA, World Energy Outlook 2014, New Policies Scenario
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The changing shape of demand: the duck curve
Source: Regulatory Assistance Project
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2. The outlook for supply
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Europe will see significant investment
Source: IEA, World Energy Outlook 2014
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Most investment will be in renewables
Source: IEA, World Energy Outlook Investment Report
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Competitive markets are not driving investment
Source: IEA, World Energy Outlook Investment Report
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What will drive investment?
How much generation?Demand will play a limited role (slow growth)Replacement of existing generation (retirements)
What kind of generation?Cost of generation
Renewables will continue to get cheaper The future of natural gas and coal prices is uncertain
Global (and EU) climate policies New climate agreement in 2015?
National policies Security of supply Support for renewables, nuclear
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The rise of renewables
Source: IEA, World Energy Outlook Investment Report
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Cost convergence of renewables
Source: IEA, Energy Technology Perspectives 2014
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EU 2030 Framework for Climate and Energy
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3. The outlook for electricity prices
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Retail prices for industrial customers, 2013
France Germany Switzerland United States0
20
40
60
80
100
120
140
160
180
Ret
ail
Ele
ctri
city
Pri
ce f
or
Ind
ust
rial
Cu
sto
mer
(U
ISD
/MW
h)
OECD Europe
OECD Average
Source: IEA statistics
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A brief aside on price formation in wholesale power markets
D1
$120/MWh
D2
$400/MWh
Hydro/RE NuclearCoal CCGT
OCGT
The marginal unit sets the price for
all generators
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The impact of renewables
Hydro/RE NuclearCoal CCGT
OCGT
Increasing renewables
lowers wholesale prices
D1
$120/MWh
$36/MWh
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Investors are unable to recover costs
Variable Cost
= Marginal Cost
Source: IEA, World Energy Outlook Investment Report
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The components of electricity prices
Lower wholesale prices more than offset by other costs
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Prices: going up
Wholesale prices in EU are projected to increase by 50%, on average, by 2040Current prices average around 70 USD/MWh
Not high enough to recover fixed costsTo recover the cost of needed investment, prices will need to
rise to around 100 USD/MWh by 2030, and 110 USD/MWh by 2040 Prices in EU will be higher, on average, than in other OECD countries,
because of the relatively high investment needs
This is highly dependent on the future of EU renewable policies and wholesale market reforms
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Annex
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Energy intensity decoupling from GDP growth
Global Demand:2012 = 19 5622030 = 26 761
37% growth
EU demand:2012 = 3 188 TWh2030 = 3 529 TWh
11% growth
Source: IEA, World Energy Outlook 2014, New Policies Scenario
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Europe is already quite efficient
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Electricity and economic growth have decoupled
Source: The Wall Street Journal, “Electric Utilities Get No Jolt From Gadgets, Improving Economy”, July 28, 2014
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Low-carbon technologies are capital intensive
Source: Energy Technology Perspectives 2014