Medium-Term Renewable Energy Market Report 2012

Michael Waldron Senior Renewable Energy Market Analyst

OECD/IEA 2012

Objective and scope

With the increasing role of a portfolio of maturing renewable technologies in the power mix The IEA is publishing its first medium-term report focused on renewable energy
Bottom-up, global renewable forecast of renewable electricity capacity and generation over 2011-17 Detailed analysis of 12 OECD countries (Austria, Denmark, France, Germany, Italy, Japan, Norway, Spain, Sweden, Turkey, UK, US) and China, India, Brazil (~80% of world renewable electricity)

For 2012 edition, focus on 8 technologies in power sector with some analysis on solar thermal heating Completes slate of IEA MT forecasts: oil, gas, coal Methodology consistent with other MT reports
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Global Overview

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Key trends
As a portfolio of renewable technologies matures, global renewable power generation is forecast to rise 40%
Supported by policy/market frameworks and economic attractiveness in increasing range of countries and circumstances Technology cost developments, grid/system integration, cost/availability of financing also weigh as key variables High level of economic/policy uncertainty in some countries

This projected growth is an acceleration vs previous period

Growth is 60% higher over 2011-17 versus 2005-11

Renewable deployment is projected to spread out geographically, with increased activity in emerging markets
Deployment spurring economies of scale in some technologies virtuous cycle of improved competition and cost reductions
OECD/IEA 2012

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.)
TWh 7 000 6 000 5 000 4 000

Global renewable electricity production and forecast

3 000
2 000 1 000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Hydropower Wind onshore Bioenergy Solar PV

Geothermal

Wind offshore

CSP

Ocean
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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
TWh
7 000 6 000 5 000 4 000

Global renewable electricity production and forecast

3 000 2 000
1 000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
OECD Americas China OECD Asia-Oceania Brazil OECD Europe 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
Number of countries with installed capacity above 100 MW
Non-OECD 60
OECD

80

40

20

0
2011 2005 2017 2011 2017 2011 2005 2017 2011 2005 2011
2005 2017 2011 2005 2005 2017 2011 2005 2017 2017
OECD/IEA 2012

Onshore wind

Offshore wind

Bioenergy

Solar PV

CSP

Geothermal

Ocean

Annual growth patterns for non-hydro technologies vary significantly

China becomes deployment leader OECD Europe deployment growth slows OECD Americas growth reflects US policy uncertainties
GW 40 35 30 25

Annual capacity additions , non-hydro technologies

20 15 10 5
0 2010 2011 OECD AO 2012 OECD AM 2013 2014 2015 China 2016 2017

OECD EUR

Rest of non-OECD
OECD/IEA 2012

Generation additions over 2011-17 differ across regions and technology portfolios
OECD Americas (+179 TWh)
Wind onshore
Bioenergy Bioenergy Solar PV Solar PV

OECD Asia-Oceania (+77 TWh)

Wind onshore

Other technologies
Other technologies

OECD Europe (+365 TWh)

Hydropower

Non-OECD (+1 220 TWh)

Hydropower

Wind onshore

Wind onshore Bioenergy Solar PV

Bioenergy
Solar PV

Other technologies

Other technologies

OECD/IEA 2012

Investment in renewable electricity

Annual investment topped USD 250 billion in 2011
Most recent quarterly data suggest some slowing

Economic and credit risks weigh on medium-term picture

European bank project finance and utility finance more strained

Other sources/structures of finance play increasing role

Development banks New institutional and non-traditional corporate investors Smaller scale financial innovation for small distributed capacity

Ultimately, cost and availability of financing to depend most on prevailing policy and technology environments

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Renewable technologies compete better in a wider range of circumstances

Renewable generation in general still more expensive than bulk power but
Hydropower and geothermal mostly competitive Onshore wind competes well in good resource areas Solar PV approaches peak gen. costs in places with summer peak Residential PV can be cheaper than average retail power prices
USD/MWh 500 400 300 200 100

Levelised costs of power generation

Utility scale Small scale

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Country and Regional Outlooks

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US renewable generation to grow steadily

Average renewable growth of 2.4% annually over 2011-17 Non-hydropower growth at stronger rate, + 8.4% annually
Onshore wind, solar PV and bioenergy grow strongest CSP and geothermal growth are large in global terms

% of total power gen: 9% (2005), 13% (2011), 14-15% (2017)

TWh 700 600 500 400 300 200 100 0 2005

United States renewable generation and forecast

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015 CSP

2016

2017

Hydropower

Wind onshore

Bioenergy

Solar PV

Geothermal

Wind offshore
OECD/IEA 2012

State mandates drive the US picture

Main US deployment drivers: state RPSs, federal financial incentive levels, ample grid capacity, innovative financing

Source: DSIRE (March 2012).

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But other challenges remain in the US

Main US deployment challenges:
Duration of federal incentives
Wind production tax credit (PTC) expires at end-2012; but investment tax credit for solar goes through 2016

Competition with natural gas Cost and availability of tax equity finance
GW 10

US wind capacity growth

Forecast based on expiration of PTC at end-2012

6 Expiration of federal PTC 4

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016
OECD/IEA 2012

China accounts for 40% of global growth

Drivers:
Growing energy needs Diversification Government targets Ample low-cost finance Robust manufacturing
TWh 1 800 1 500 1 200 900 600 300 0 2011 Hydropower

Challenges:
Pricing framework Priority dispatch Grid upgrades Prohibitive licensing for small-scale systems
TWh 8 000

Challenges:

China forecast renewable generation

China power demand vs GDP growth

Y-o-Y Chg 18% 16%

Pricing framework Priority dispatch Grid upgrades Prohibitive licensing for small-scale systems
2012 2013 2014 Bioenergy 2015 Solar PV 2016 Wind offshore 2017 CSP

6 000

14% 12% 10%

4 000 8% 6% 2 000 4% 2% 0 2005 Demand

Source:

2008

2011 Demand, Y-o-Y (RHS)

2014

0% 2017 GDP, Y-o-Y (RHS)

OECD/IEA 2012

Wind onshore

India sees strong hydropower, wind and solar growth

Drivers:
Supportive policy environment: Five-Year Plan targets, diverse financial incentives Low-cost financing from dev. banks and private sector Rural electrification needs distributed generation
TWh 250

Challenges:
High distribution losses and regulated prices Grid strengthening and expansion needed Complex administrative requirements for projects

India forecast renewable generation

TWh 1 000

India domestic electricity supply and distribution losses

100%

200

800

80%

150

600

60%

100

400

40%

50

200

20%

0 2011

2012

2013

2014 Bioenergy

2015 Solar PV

2016 CSP

2017 Ocean

0 2000

2002

2004

2006

2008

0% 2010

Hydropower

Wind onshore

Domestic electricity supply

Percentage losses (RHS)

OECD/IEA 2012

Brazils hydropower and wind grow strongly

Drivers:
Government sponsored power auctions Cost reductions wind recently outbid natural gas Pipeline of hydropower projects Low-cost financing from dev. banks and private sector
TWh 600 500 400

Challenges:
Adequate margins for wind projects (?) Environmental licensing Economic attractiveness of solar PV (?)

Brazil forecast renewable generation

160 140 120 100

Brazil average auction price for new wind

300

80
200 100 0 2011

60

40
BRL per megawatt-hour 20
2012 2013 2014 2015 Bioenergy 2016 2017

USD per megawatt-hour 0 2009 Reserve 2010 A-3 2010 Reserve 2011 A-3 2011 Reserve 2011 A-5
OECD/IEA 2012

Hydropower

Wind onshore

Solar PV

Thank You & Questions

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