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

0%

5%

10%

15%

20%

25%

30%

5001 0001 5002 0002 5003 0003 5004 0004 5005 0005 5006 0006 5007 0007 500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

TW

h

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


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

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

2013 2014 2015 2016 2017 2018 2019 2020

TW

h

OECD

Renewable generation Conventional generation

2013 2014 2015 2016 2017 2018 2019 2020

Non-OECD

Renewable generation Conventional generation


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

0

20

40

60

80

100

120

140

0

50

100

150

200

250

300

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

GW

.US

D 20

13 b

illion

Middle East Non-OECD Americas Non-OECD Europe China

Asia Africa OECD Europe OECD Asia Oceania

OECD Americas Net capacity growth (right axis)


Renewable electricity increasingly competitive

Levelised cost of electricity generation continue to decrease for most renewable technologies


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


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


Policy Developments and Best Practice


Strategic Drivers for RE

Leading countries

New opportunities

New opportunities


• 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 ??


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


All incentive schemes can work well or badly – the overall policy framework that matters


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…

0

2

4

6

8

10

12

14

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

GW

Result of expiration of

production tax credit in previous year

US annual onshore wind additions


South African Auctions

0 1 250 2 500 3 750 5 000 6 250 7 500

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.

0.00 5.00 10.00 15.00 20.00

0

50

100

150

200

250

300

350

400

450

Wind PV CSP Other*

USD

/MW

h

Round 1 Round 2 Round 3 Price cap

Average awarded tender prices under the REIPPP vs ceiling

caps


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.


Four Key Policy Ingredients

Clear Strategy and Targets

Smart Incentives

Non Economic

Barriers

System

Integration

Only as

strong as the

weakest link!


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


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


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

Contact [email protected]

http://www.iea.org/topics/renewables

Renewables Deployment Market and Policy Best-practices · 2014-11-25 · © OECD/IEA 2014...

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Transcript of Renewables Deployment Market and Policy Best-practices · 2014-11-25 · © OECD/IEA 2014...