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© OECD/IEA 2013
Challenges for the Growth of Challenges for the Growth of Renewable Energy MarketsRenewable Energy Markets
Paolo Frankl
Head, Renewable Energy DivisionInternational Energy Agency
IEEJ Seminar, 22 January 2013, Tokyo
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Today’s Contents
Overview of global energy markets
Projection of renewables market in Asia
Japan’s challenges for deploying renewables
Grid integration of variable renewables
Conclusions
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Today’s Contents
Overview of global energy marketsWEO 2012
1st Medium‐term RE Market Report 2012
Projection of renewables market in Asia
Japan’s challenges for deploying renewables
Grid integration of variable renewables
Conclusions
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The context
Foundations of global energy system shifting Resurgence in oil & gas production in some countries
Retreat from nuclear in some others
Signs of increasing policy focus on energy efficiency
All‐time high oil prices acting as brake on global economy Divergence in natural gas prices affecting Europe (with prices 5‐times US
levels) and Asia (8‐times)
Symptoms of an unsustainable energy system persist Fossil fuel subsidies up almost 30% to $523 billion in 2011, led by MENA
CO2 emissions at record high, while renewables industry under strain
Despite new international efforts, 1.3 billion people still lack electricity
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3 000 4 000 5 000 6 000TWh
2 000
A power shift to emerging economiesA power shift to emerging economies
The need for electricity in emerging economies drives a 70% increase in worldwide demand, with renewables accounting for half of new global capacity
Change in power generation, 2010‐2035
‐1 000 0 1 000
Japan
European Union
United States
China
TWh
Coal Gas Nuclear Renewables
India
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Outlook for renewablesOutlook for renewables
IEA, WEO 2012
Shares of renewables in different scenarios
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The multiple benefits of renewablesThe multiple benefits of renewablescome at a cost come at a cost
Renewable subsidies were $88 billion in 2011; over half the $4.8 trillion required to2035 has been committed to existing projects or is needed to meet 2020 targets
Global renewable energy subsidies
$50
$100
$150
$200
$250
2011 2015 2020 2025 2030 2035
Billion
2012‐2035
$960 billion
$2 600 billion
$1 200 billion
Existing capacity
Electricity:
2011‐2035Biofuels:
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RE Market Report Analytical Framework Japan example
Generation and capacity forecast based on ‐ Power demand
Power sector structure
Grid and system integration
Economic attractiveness
Financing
Policy framework robustness
Identify drivers and
challenges for
renewable
deployment
-8%
-4%
0%
4%
8%
900
950
1 000
1 050
1 100
2005 2008 2011 2014 2017
Y-o-YChgTWh Power demand vs GDP
Demand Demand, Y-o-Y (RHS)GDP, Y-o-Y (RHS)
0
400
800
1 200
2005 2006 2007 2008 2009 2010 2011
TWh Power generation
Coal Oil Natural gasNuclear Hydro BioenergyWind Solar PV Geothermal
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Growth in renewable power is forecast to accelerate Hydropower remains the main renewable power source (+3.1% p.a.)
Non‐hydro renewable sources grow at double‐digit annual percentage rates (+14.3% p.a.)
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Global renewable electricity production and forecast
Hydropower Wind onshore Bioenergy Solar PV
Geothermal Wind offshore CSP Ocean
TWh
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Growth is led by non‐OECD countries Non‐OECD accounts for two‐thirds of the overall growth
China, Brazil, India lead; others grow significantly as well
OECD growth still largely driven by Europe but Americas and Asia‐Oceania make significant contributions
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
TWh Global renewable electricity production and forecast
OECD Americas OECD Asia-Oceania OECD EuropeChina Brazil India Rest of non-OECD
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Non‐hydro technology deployment spreads out Number of countries with cumulative capacity larger than 100MW
(can cover consumption of 100k households) increases significantly
Growth areas include Asia, Africa, Latin America and the Middle East
0
20
40
60
80
2005
2011
2017
2005
2011
2017
2005
2011
2017
2005
2011
2017
2005
2011
2017
2005
2011
2017
2005
2011
2017
Onshore wind
Offshore wind
Bioenergy Solar PV CSP Geothermal Ocean
Number of countries with installedcapacity above 100 MW
Non-OECD
OECD
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Today’s Contents
Overview of global energy market
Projection of renewables market in Asia
Japan’s challenges for deploying renewables
Grid integration of variable renewables
Conclusions
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OECD Asia‐Oceania growth mostly in solar PV
Japan grows (mostly solar PV) under generous FiTs and uncertain nuclear situation
Australia’s growth is centered around wind and solar PV
New Zealand continues its steady growth
Korea and Israel grow from a low base
0
50
100
150
200
250
300
2011 2012 2013 2014 2015 2016 2017
OECD Asia-Oceania forecast renewable generation
Hydropower Wind onshore Bioenergy Solar PVGeothermal Wind offshore CSP Ocean
TWh
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11
Japan power generation by share, 2011
Nuclear Combustible Fuels Hydro Other
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ASEAN a significant source of other Asia growth
Geothermal expands in Indonesia and the Philippines
Significant hydropower additions expected in Vietnam
Thailand continues to grow a portfolio of renewable power sources – biomass, biogas, waste‐to‐power, solar PV, wind
0
2
4
6
8
10
12
14
16
2011 2012 2013 2014 2015 2016 2017
GW Global geothermal capacity forecast
USA Philippines Indonesia Mexico New Zealand RoW
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China accounts for 40% of global growth
Drivers: Growing energy needs
Diversification
Government targets
Ample low‐cost finance
Robust manufacturing
Challenges: Pricing framework
Priority dispatch
Grid upgrades
Prohibitive licensing for small‐scale systems
0
300
600
900
1 200
1 500
1 800
2011 2012 2013 2014 2015 2016 2017
China forecast renewable generation
Hydropower Wind onshore Bioenergy Solar PV Wind offshore CSP
TWh
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
0
2 000
4 000
6 000
8 000
2005 2008 2011 2014 2017
Y-o-YChg
TWh China power demand vs GDP growth
Demand Demand, Y-o-Y (RHS) GDP, Y-o-Y (RHS)
Challenges: Pricing framework
Priority dispatch
Grid upgrades
Prohibitive licensing for small‐scale systems
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Today’s Contents
Overview of global energy market
Projection of renewables market in Asia
Japan’s challenges for deploying renewables A specific focus on solar PV
Grid integration of variable renewables
Conclusions
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Japan’s Power Sector: Renewables & energy efficiency leading the charge
0
200
400
600
800
1 000
1 200
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
TWh Renewables
Oil
Nuclear
Gas
Coal
Japan electricity generation by source
A decline in nuclear is compensated by a 3‐fold increase in electricity from renewables, a continued high reliance on LNG imports & improvements in efficiency
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Japan grows strongly under uncertain nuclear situation and new feed‐in tariff policy
Drivers: Uncertainties about
nuclear restart
New feed‐in tariffs
Good match of solar PV for shaving peak load
Challenges: Power system
fragmentation
Relatively high capital costs of renewable energy
Location of wind and geothermal resources far from demand centres
0
20
40
60
80
100
120
140
160
180
2011 2012 2013 2014 2015 2016 2017
Japan forecast renewable generation
Hydropower Bioenergy Solar PV
Wind onshore Geothermal Wind offshore
TWh
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11
Japan power generation by share, 2011
Nuclear Combustible Fuels Hydro Other
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Solar PV ‐ from volatility to smoother growth Short term volatility and slowing growth in Europe
• In some markets, cost reductions outpaced incentive reductions
Japan’s high incentives could cause deployment to surge to unsustainable levels if incentives are not adjusted over time
0
5
10
15
20
25
2010 2011 2012 2013 2014 2015 2016 2017
GW Annual capacity additions , solar PV
OECD AO OECD AM OECD EUR China Rest of non-OECD
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Ongoing Issues for PV
Demand in 2011(New Installations 30GW)
Supply in 2011(Manuf. Capacity 55 GW) Impact on electricity
bills in some countries German EEG‐surcharge
will increase 45% in 2013
But likely to stabilise from 2014 on
Emerging trade disputes Imbalance is smaller if
whole value chain is taken into account
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PV Module Prices
Technology improvements and economies of scale drive sharp cost reduction
Overcapacity leads to price setting below costs
Short-term silicon shortage
Sustainable priceLowest market price
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2012 PV Market stronger than expected
Another >7 GW year in Germany
Italy slows down but less than expected, other markets accelerate
Cumulative world capacity around 100 GW
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Today’s Contents
Overview of global energy market
Projection of renewables market in Asia
Japan’s challenges for deploying renewables
Grid integration of variable renewables
Conclusions
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Variability and uncertainty are not new But at high shares (of VRE) the challenge will be considerable
Residual demand shape is irregular (particularly wind, wave)
A power system perspective is important
Demand
Residual demand
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Grid Integration of Variable Renewables(GIVAR) 2011: IEA published technical assessment of integration
Key points: Feasible share of variable RE depends on system flexibility; no principle ceiling
Technical assessment of power system flexibility based on case studies
New phase: Refined definition of flexibility
Assess Economics of Flexibility
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There are 4 flexible resources
Dispatchablepower plants
Energy storage facilities
Interconnection with adjacent
markets
A biomass‐firedpower plant
A pumped hydro facility
Scandinavian interconnections
Demand side Response
(via smart grid)
Industrial
residential
Flexibility is key
Source: IEA Harnessing Variable Renewables 2011
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Snapshot of present penetration potentials
GIVARIEEJ: January 2013 All Right Reserved
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GIVAR IIIPublicationGIVAR IIIPublication
Case Studies• Market review • Quantitative methods
Case Studies•• Market review Market review •• Quantitative Quantitative methodsmethods
Variable RE ImpactAnalysis
Variable RE ImpactAnalysisAnalysis
Market designand policy
recommendations
Market designMarket designand policy and policy
recommendationsrecommendations
Flexible ResourcesAnalysis
Flexible ResourcesAnalysisAnalysis
GIVAR III Scope & ObjectivesIEEJ: January 2013 All Right Reserved
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Case Study Regions
JapanES&PT
PJM, ERCOTPJM, ERCOT
USIndia
Tamil Nadu for wind, Rajasthan for
solar
Tamil Nadu for wind, Rajasthan for
solar
China
Inner MongoliaInner Mongolia
NW Europe
NOR, DNK, SWE, FIN, DEU, GBR, IRL,
FRA
NOR, DNK, SWE, FIN, DEU, GBR, IRL,
FRA
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FAST 2.0
FAST FAST 2.02.0
Input
Flexible Resources
Flexible Generation
DSMInter-connection
Storage
Variable Resources
Wind
Load
Solar
Output
Wind and solar statistics
Net loadstatistics
Penetration / curtailment
curves
Start-up of conventional
units
Revised FAST Tool
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Relevance for Japan
Grid integration of renewables will be key issue with growing shares of v‐RE
IEA analysis brings together expertise from leading institutions world wide
Co‐operation could be very fruitful: Benefit from international best practice
Help the IEA to better understand the situation in the Japanese system, which is an important and special case
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Today’s Contents
Overview of global energy market
Projection of renewables market in Asia
Japan’s challenges for deploying renewables
Grid integration of variable renewables
Conclusions
IEEJ: January 2013 All Right Reserved
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Is renewable energy under pressure? In the short term, there are pressure indicators, particularly
in the most dynamic segments: solar PV and wind Challenging macroeconomic and financing conditions
Policy uncertainty, (e.g. stop‐and‐go decision making) in some key markets
Economic incentives cut in some markets
Market competition from other energy sources, particularly gas in the US
Industry upheaval and integration challenges
In the long term, larger integration issues to emerge Renewables becoming more competitive over time
Market design reforms needed for high penetrations of low marginal cost, variable renewables into power systems
Yet, the overall renewable outlook is quite positive Robust fundamentals and drivers remain; huge long‐term potential of RE
Outlook will depend on policy robustness
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Policy messages
Clarity, predictability and a long‐term orientation of RE policy frameworks are keys to maintaining investment Policymakers should avoid stop‐and‐go decision making, which can
cause investment to stall
These frameworks should focus on the whole portfolio of renewables (incl. hydropower, bioenergy, RE heat, etc.)
Meanwhile, there needs to be increased focus on market designs that integrate higher levels of renewables in power systems (both variable and dispatchable)
A radical turn away from renewables now would be more costly in the long run in terms of climate costs and energy import bills
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For further insights and analysis…
The Medium‐Term Renewable Energy Market Report 2012 online at:
www.iea.org
Thank you for your attention!
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Contact: [email protected]