Renewables Deployment Market and Policy Best-practices · 2014-11-25 · © OECD/IEA 2014...
Transcript of Renewables Deployment Market and Policy Best-practices · 2014-11-25 · © OECD/IEA 2014...
© OECD/IEA 2014
Renewables Deployment Market and Policy Best-practices
UNECE RE Expert 1st Session Group, Geneva, 18 November 2014
Paolo Frankl
Head, Renewable Energy Division International Energy Agency
© OECD/IEA 2014 Medium-Term Renewble Energy Market Report 2014
Strong momentum for renewable electricity
Renewable electricity projected to scale up by 45% from 2013 to 2020
Global renewable electricity production, historical and projected
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Hydropower Bioenergy Onshore wind
Offshore wind Solar PV Geothermal
STE/CSP Ocean % total generation (right axis)
Historical data and estimates Forecast
Natural gas
2013 Nuclear
2013
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Renewables are major source of new generation
Renewables account for 80% of new generation in OECD
Limited upside in stable markets with slow demand and growing policy risks
Cumulative change in gross power generation by source and region, 2013-20
Renewables are largest new generation source in non-OECD, but meet only 35% of growth
Large upside for dynamic markets with fast-growing demand
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Renewable investment has risen to high levels
Investment in 2013 relatively steady at USD 250 billion, but lower than peak in 2011
Slowing capacity growth and falling technology costs limit investment in new
renewable power capacity over medium term
Investment in new renewable power capacity
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OECD Americas Net capacity growth (right axis)
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Renewable electricity increasingly competitive
Levelised cost of electricity generation continue to decrease for most renewable technologies
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Renewable energy use for heat to grow in buildings and industry
Buildings sector’s renewable heat use only growing slowly due to opposing trends in bioenergy use: Traditional biomass use set to decline (China, Brazil) or growth slowing down
Modern biomass continues to grow driven by support policies and attractive economics
Renewable heat in industry growing slowly in absence of strong (policy) drivers
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Shifting policy grounds slow down growth of transport biofuels
After virtual halt in growth 2010-12, 2013 saw 9 billion litre (130 kb/d) increase in biofuel production biofuels accounted for 3.6% of world road transport fuel demand
Global production set to grow by 2.6% /year to 139 bn L (2.3 mb/d) in 2020
Growing political uncertainty in the EU and US might undermine the medium-term growth prospects, while emerging markets ramp up support policies
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Policy Developments and Best Practice
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Strategic Drivers for RE
Leading countries
New opportunities
New opportunities
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• System
integration
• Market
design
• Consistent
with long
term policy
goals
• Create level
field for
competition
• Predictable
and rapidly
adapting
incentives
• Tackle non-
economic
barriers
• Manage total
support
costs
•Clear RE
strategy and
targets
•Attractive
support
•Clear regulatory
framework
•Expand RE
market to more
countries
Policy challenges change over time
Take-off Consolidation Inception
Time
De
ploym
en
t
Policy
Experience ??
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Policies impact on risk profile and on prices Increased
•Political Risk
•Policy risk
•Technology Risk
•Fuel risk
•Market risk
•Higher returns
•Lower debt/equity ratios
•Shorter debt terms
Higher WACC
Higher
prices
LCOE for new-built
wind and CCGT in
Germany
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All incentive schemes can work well or badly – the overall policy framework that matters
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Renewal of tax credits to create policy uncertainty in the US
Policy uncertainty over the extension of production tax credit to result in boom and bust cycles.
13 GW deployed in 2012, only 1 GW in 2013…
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US annual onshore wind additions
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South African Auctions
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Round1
Round2
Round3
Total
MW Wind PV
CSP Round 4
Allocated and remaining capacity under REIPPP rounds
Notes: Total to allocate* refers to 6 724 MW which is the sum of the capacity allocated in Rounds 1 through 3 plus
the remaining to allocate as listed in the Preferred Bidders’ announcement published November 4, 2013 (DOE,
2013) . This amount differs from the sum of the capacity announced in the two ministerial determinations (2 735
MW and 3 200 MW). Other* refers to small hydro in Round 2 and landfill gas and biomass in Round 3. Price caps
and average prices were converted using average exchange rates of ZAR/USD 0.116 from December 2011 for
Round 1, ZAR/USD 0.123 from May 2013 for Round 2, and ZAR/USD 0.098 from November 2013 for Round 3.
Source: DOE (Department of Energy)(2013), Bid Window 3, Preferred Bidders’ announcement, Pretoria, 4
November.
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caps
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Role of renewable heat is increasing, but policy support still limited
Only around 50 countries worldwide have support measures for renewable heat in place compared to more than 110 for renewable electricity
Broader adoption of support policies for renewable heat critical to reduce fossil fuel consumption and enhance energy security
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.
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Four Key Policy Ingredients
Clear Strategy and Targets
Smart Incentives
Non Economic
Barriers
System
Integration
Only as
strong as the
weakest link!
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Flexible power systems will be key
Flexibility of other power system components
©
Grids Generation
Storage Demand Side
More v-RE require flexible power systems
No optimal market and regulatory framework for flexibility so far
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Main messages to policy makers Given capital-intensive nature, renewables require
market context that assures reasonable and predictable returns
Policy risk main barrier to investment
Policies to focus on cost-efficiency
But policy changes must be predictable, and retroactive changes must be avoided
More focus on heat and transport needed
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Thank you for your attention!
Medium-Term Renewable Energy Market Report 2014 www.iea.org/topics/renewables
The Power of Transformation – Wind, Sun and the Economics of Flexible Power Systems, IEA 2014
Heating Without Global Warming www.iea.org/publications
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