2016 madrid forum on energy & sustainability

2016 MADRID FORUM ON ENERGY & SUSTAINABILITY BP Chair on Energy & Sustainability

Universidad Pontificia Comillas de Madrid

An energy transition for SpainVision and policy roadmap

Summary of the sessions

Madrid, 27-28-30 September, 2016

José Ignacio Pérez ArriagaDirector of the BP Chair on Energy & Sustainability

BP Chair of Energy and Sustainability – 2016 Madrid Forum 3

Slides & other material can be found at the BP Chair

websitehttp://www.comillas.edu/es/catedra-bp-

de-energia-y-sostenibilidad/presentacion


A permanent concern of these Forums

•  Promote a sustainable energy modelØ Guaranteed access to the diverse forms of

modern energy that allow the satisfaction of the needs of all people at an affordable price, now and in the foreseeable future.

Ø A transition to a future competitive low-carbon economy is needed to stabilize GHG concentration at levels such that the implications of climate change could be kept under “reasonable” limits


Previous BP Madrid Forums (1 of 2)

•  2004: Energy, sustainable development & European competitiveness

•  2005: Towards a sustainable energy model: Our short-term challenges

•  2006: Towards a global climate change strategy: The EU ETS & beyond

•  2007: Global climate strategies beyond 2012: The route ahead (jointly with Florence School of Regulation, European University Institute)

•  2008: Promoting investment in low-carbon energy technologies (back-to-back with the Center for European Policy Studies, CEPS, High Level Seminar on Positive incentives for climate action)


Previous BP Madrid Forums (2 of 2)

•  2009: Sustainable transportation policies•  2011: What really matters in security of energy supply? •  2012: A sustainable framework for biofuels in Europe •  2013: The future of gas markets in Europe •  2014: The sustainability and competitiveness of oil

refining in Europe •  2015: Making energy efficiency happen: The pending

challenges


The 2016 ForumAn energy transition for Spain:

Vision and policy roadmap

The program


Tuesday September 27th

•  Welcome lunch•  Afternoon

Ø IntroductionØ Long-term world energy scenarios:

Consequences for the Spanish Energy Sector

Ø Energy transitions in Europe: Learning from our neighbours

•  Social event & dinner


Wednesday September 28th

•  MorningØ An energy transition for Spain: Power &

Industrial sectorsØ Ídem: The transport sector

•  Lunch•  Afternoon

Ø Ídem: The residential sectorØ PANEL: Policy instruments for an energy

transition in Spain•  End of the internal session of the Forum


Friday September 30th

•  Morning (12:00-14:00)

Ø WelcomeØ Summary of the Internal sessions of the Forum

Ø Panel: La transición energética en España

•  Closing


The Forum operates under Chatham House rules… but not today


What do we mean by “energy transition”?


“Energy Transition”

•  Energy transition is generally defined as a long-term structural change in energy systems (World Energy Council, 2014)

•  The term 'energy transition' designates a significant change in energy policy (Wikipedia)

•  The Energy Transition is the set of policies and structural changes aimed at decarbonizing the economy (CERRE, Centre on Regulation in Europe)

14 Source: “A Roadmap for moving to a competitive low carbon economy in 2050”, EU Commission (DG Climate), COM(2011) 112 final, March-8-2011

One investment cycle away from very drastic decarbonization of the power sector

15

Translated to the Spanish case




The objectives


Objectives of the 2016 Forum (1 of 2)

•  What can we wish for in this Forum?•  Identify & understand the current

challenges that Spain presently faces, by itself & as part of the EU & the wider international community

•  Learn the best available practices from our immediate neighbors & also other countries


Objectives of the 2016 Forum (2 of 2)

•  What can we wish for in this Forum?•  Identify the key items that have to be

agreed at high political level to provide stability & confidence to the investors

•  Learn about the indicative planning methods to be used to come up with the alternative choices to be discussed

•  Learn about the regulatory instruments that can be used for implementation


An energy transition for Spain

Vision & Policy Roadmap


“When there is no vision, people perish”

(The Book of Proverbs, 29:18)


•  The Indicative Planning procedure is meant to characterize meaningful energy development paths that meet any prescribed high level (sustainability & others) targets, in order to facilitate political decisions

•  Note that, once one path is chosen, Indicative Planning: Ø is more than just prospective analysis (find

what could happen) Ø may have normative character (identify what

has to be done to make sure that a future with some desirable features happens)

21

Indicative planning?


Examples in other countries…

•  Energiewende, in Germany•  The Carbon Plan & the Electricity

Market Reform, in the UK•  Loi sur la transition énergétique pour

la croissance verte, in France•  Nuova Strategia Energetica

Nazionale, in Italy •  DK Energy Agreement, in Denmark•  Quadriennial Energy Review, in USA

The EU “Energy Union”

“To reach our goal, we have to move away from an economy driven by fossil fuels, an economy where

energy is based on a centralized, supply-side approach and which relies on old technologies and outdated business models. We have to empower consumers

through providing them with information, choice and through creating flexibility to manage demand as well as

supply. We have to move away from a fragmented system characterised by uncoordinated national policies, market barriers and energy-isolated areas”.

The EU “Energy Union”

The US Quadrennial Energy Review

“The approximately annual installments of the QER over the ensuing 4 years are to focus on different

components of the Nation’s energy system—resource extraction and processing, energy transport and storage infrastructure, electricity generation, energy end-use—

providing findings and recommendations on how Federal energy policy can best complement and incentivize state, local, tribal, and private sector

actions so as to meet ongoing and emerging challenges and take advantage of new

opportunities.”

The US Quadrennial Energy Review




The context


The global targets (COP 21, Paris)

•  Zero net emissions in 2050 – 2100•  Commitment to maintain the increase of

temperatures below 2 degrees above pre-industrial levels, and try to limit increase to 1.5 degrees.

•  Reach the ceiling of greenhouse gas emissions “as soon as possible”

•  Establish a financing mechanism with 100 b$ for mitigation and adaptation to climate change

Pledgessubmi,ed

The world post-Paris…the global coverage of climate pledges is impressive

Pledgesfromcountriesthataccountfor95%ofglobalenergy-relatedGHGemissions;theirfullimplementa=onwouldbeconsistentwithatemperaturerise

of2.7°C

OECDAsiaOceania

2.2Gt

RussiaandCaspian

2.0Gt Europe

3.8Gt

NorthAmerica

6.1Gt

SouthAmerica

1.2Gt

Africa

1.1Gt

MiddleEast

2.0Gt

1.7Gt

OtherAsia India

1.9Gt

China

8.6Gt

Mtoe

-300

0

300

600

900

1200

By2040,India’senergydemandclosesinonthatoftheUnitedStates,eventhoughdemandpercapitaremains40%belowtheworldaverage

EuropeanUnion

UnitedStates

Japan LaDnAmerica

MiddleEast

SoutheastAsia

Africa China India

Changeinenergydemandinselectedregions,2014-2040

Behlolpur (Bihar, India)

1400 million people without electricity access

Behlolpur (Bihar, India)

1400 million people without electricity access

“India’s energy needs are huge: there is a strong shared interest to support India’s push for clean &

efficient technologies” (IEA, 2015)


The EU targets

Energy-related GHG emissions by fuel & sector in Spain

(1) It includes rail, air and sea transport. It does not include emissions from air and maritime international routes(2) It includes fugitive emissions, emissions from energy consumption in fishing, agriculture, processing of solid fuels and othersNote: emissions from CHP/cogeneration are distributed between services, industry and oil refiningSource: MAGRAMA; UNFCCC; IDAE; Monitor Deloitte analysis

Energy-related GHG emissions by fuel and sector in Spain (2013)(%, MtCO2 equiv.)

Oil products

Coal

Natural gas

0% 0% 0% 0% 2%

Others(2)

19%

55%

26%

2%5

46

132

61

Residential Services Industrial

1%

31% 2% 4% 3% 5%2%

0% 0% 3% 3% 2%13%

7%17

5%12

18%42

8%19

24%58

100 %240 MtCO2

Road transport

Other transport(1)

Power generation

16%

3%

5%

31%75

0%

5%

0%

5%12

Oil refining


Energy-related GHG emissions by fuel & sector in Spain

•  31% road transport (31% oil)•  24% power generation (16% coal)•  18% industrial (13% natural gas)•  7% residential (4% oil products)•  5% services, 5% oil refining, 2% other

transport, 8% others


The power sector

Increasing presence of “policy costs” in the electricity tariff

Source: EURELECTRIC, 2016

TAXES AND POLICY COSTS

ELECTRICITY SUPPLY COST

NETWORK COSTS


Strategy for the power sector

•  Increasing electrification of the economy, & transport in particular

•  Clear trend towards renewable dominated generation plus storage, demand response, back-up generation (as clean as possible) & interconnections•  Coal-based generation must disappear•  It is necessary an ample consensus on the

trajectory in the generation mix•  Tariffs need a profound redesign; eliminate

costs that do not belong•  Market rules need adaptation to a very

different generation mix


The transport sector

Evolution of energy-related GHG emissions by fuel & sector in Spain

ROAD TRANSPORT

POWER GENERATION

INDUSTRIAL

RESIDENTIAL

Energy tax revenues by Member State(2012, % of GDP)

SPAIN


Strategy for the transport sector

Decarbonization of LIGHT transport (71% GHG)•  Electrification (longer term)•  Improve efficiency of combustion engine•  Biofuels•  Demand management•  Renovation of vehicle fleet

•  Effective price signal of emission costs•  New CO2 targets for vehicles

Decarbonization of HEAVY transport (29% GHG)•  Modal shift to railways•  Natural gas (LNG) in vehicles


The residential sector


The residential sector: Context

•  Spain has lots of needy buildings, a great Plan, but very limited activity

•  11% of Spanish homeowners can’t afford to heat their home properly in winter

•  The Autonomous Communities can be the essential administrative step for renovation

•  Financing is a major barrier for the energy rehabilitation of buildings

•  Lack of awareness of the multiple economic benefits of energy efficiency upgrades


Strategy for the residential sector

•  A regulatory framework that promotes a culture that upholds energy efficiency

•  Educate & train “accredited agents”, “technical tutors” & “project managers”

•  Industrialization & replication of “model types”


An energy transition for Spain: Vision and policy roadmap

If others do it…why not us?


Examples in other countries…

•  Energiewende, in Germany•  The Carbon Plan & the Electricity Market

Reform, in the United Kingdom•  Loi sur la transition énergétique pour la

croissance verte, in France•  Nuova Strategia Energetica Nazionale,

in Italy •  DK Energy Agreement, in Denmark•  Quadriennial Energy Review, in USA

Source: World Bank, EIA

UnitedStates

Canada

Mexico

Brazil

Chile

NorwaySweden

UK

FranceGermany

Italy

SaudiArabia India

China

Japan

Indonesia

Australia

UAE

SouthKorea

Denmark

•  Mission Innovation partners span five continents •  They represent nearly 60% of the world’s population and include the top five most populous countries in the world •  Coalition emits two-thirds of the world’s total greenhouse gas emissions and nearly 3/4ths of the CO2 emissions from electricity •  GDP in these countries represents almost 70% of the global total •  Mission Innovation countries represent over 80% of all government investment in clean energy R&D

53

R&D: Mission innovation

Source: World Bank, EIA

UnitedStates

Canada

Mexico

Brazil

Chile

NorwaySweden

UK

FranceGermany

Italy

SaudiArabia India

China

Japan

Indonesia

Australia

UAE

SouthKorea

Denmark

54

R&D: Mission innovation

If others do it…why not us?


Once upon a time…

“… La estrategia eléctrica resultante del ejercicio de planificación indicativa –que debe inscribirse en una

estrategia energética más amplia– debiera ser objeto de un acuerdo básico entre los diversos partidos políticos,

de forma que se aporte la estabilidad regulatoria tan necesaria para un sector con tanta inercia al cambio. Esta

estrategia o política energética fundamental debiera quedar en lo posible al margen de la alternancia política

inmediata, ya que las decisiones en este sector han de contemplar horizontes temporales mucho más largos que

los habituales periodos de gobierno.”

“Libro Blanco sobre la reforma del marco regulatorio de la generación eléctrica en España”, José Ignacio Pérez Arriaga, Julio 2005.

“… The power sector strategy derived from indicative planning –which has to be a component of a wider energy

strategy– should be the outcome of a fundamental agreement among the several political parties, so that it can provide the regulatory stability that is of essence for an industrial sector with so much inertia to be changed. This strategy, or fundamental energy policy, should be

shielded from the immediate political changes, since the investment decisions in this sector have to contemplate

time ranges that are much longer than the customary political terms.”

“Libro Blanco sobre la reforma del marco regulatorio de la generación eléctrica en España”, José Ignacio Pérez Arriaga, Julio 2005.


An official & comprehensive attempt (but not covering the entire

political spectrum) failed…


… and it has not been tried again at that level (although

several attempts by diverse organizations & think tanks followed)

Purpose & leadership are required …

… but also a minimum level of political consensus


Energy policy & regulation to develop it are critical


Policy needs to be “loud, long & legal”

•  Loud Ø Policy instruments make a difference, so that

investments in clean energy become commercially attractive

•  Long Ø Policy instruments are sustained for a period

that is consistent with the financial characteristics of the project

•  Legal Ø Policy instruments are based on a clear, stable

& well-established regulatory framework

Based on “Unlocking finance for clean energy”, www.chathamhouse.org.uk, 2009


The stakes are obviously high…

& (I hope) you do not need to be convinced about it!


The 2016 Forum

An energy transition for Spain Vision & policy roadmap

Summary of findings


Resumen de aportaciones

•  La transición energética “va de”…•  Mejora del nivel de vida, capacidad

tecnológica y empleos•  Mejora de la competitividad, eficiencia y

reducción de precios•  Reducir la pobreza energética•  Empoderamiento de los consumidores•  Mejor utilización de los recursos•  Transparencia y consenso… como parte de los compromisos internacionales de España en el contexto europeo



•  Se necesitan señales de largo plazo (amplio consenso y transparencia de los responsables de la política energética) para facilitar las inversiones necesarias para la transición energética•  Deben estar protegidas de las crisis de

corto plazo y de las alternancias políticas•  Deben aprovechar las fortalezas del

sector energético español•  Ahora es posiblemente un buen momento

para una reflexión conjunta



•  Sector eléctrico•  Abandonar el carbón y orientar la trayectoria

del mix energético•  Regulación se anticipe a los cambios:

rediseño de precios y tarifas y adaptación de reglas del mercado

•  Sector transporte•  Hacia una descarbonización radical•  Portfolio de medidas: mejora de motores,

biocombustibles y gas natural, vehículos eléctricos, restricciones en ciudades, promover ferrocarril, simplificar regulación



•  Sector residencial•  Concienciación, preparación de profesionales,

integración con otros objetivos y fórmulas de financiación adecuadas

•  Asociar a la lucha contra la pobreza energética•  Sector industria

•  Es difícil descarbonizar las industrias de materiales y manufactureras

•  Gas natural y cogeneración son claves•  Buscar alternativas de largo plazo que no

emitan CO2



Es imprescindible un diálogo amplio entre los agentes sociales, informado por análisis rigurosos y transparentes, que permita alcanzar la necesaria

visión común de largo plazo. El proceso debe ser liderado por políticos convencidos, decididos, con la ambición

necesaria y con visión de estado, –a nivel nacional, regional y local–, que sean capaces de ir más allá de

los senderos ya transitados y que transmitan a los ciudadanos la conveniencia de esta transición energética y de los beneficios que, si se hace correctamente, puede suponer para España.


Gracias por vuestra atenciónMás información

http://www.comillas.edu/es/catedra-bp-de-energia-y-sostenibilidad/presentacion


Extra slides…Researchers of the BP Chair have developed (in

a doctoral thesis) a computer tool able to perform comparative and detailed quantitative

analyses of the energy transition in Spain(information is available contacting the BP Chair)

2016 madrid forum on energy & sustainability

Documents