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What are the limits to     current policy success?     Paolo Frankl     Head, Renewable Energy Division     International ...
Policies push RE growth              Wind    Bioenergy   Solar PV   Hydro   other Generation               338      296   ...
Costs are Falling                   • Hydro and some                                             100                      ...
Mature Markets Facing NewChallengesDeployment                Inception                 Take-off                  Consolida...
Grid may act as a constraint Strong wind, low  load case depicted Expected load  flows for 2013  (based on 2009  analysi...
Flexibility is key for managing v-RE                  There are 4 flexibility resources                       Demand side ...
Grid expansion vs RE Deployment              Example: Germany                                               Example: Spain...
Hydro & pump-hydro: enablers of vRE growth • Hydropower generation continues growing as fast as all non-hydro renewables t...
Lack of Policy Coordination Jeopardising Outcomes?                            Today’s        1990s                        ...
Variable RE penetration impact on electricity prices               (Merit Order Effect)                           Source: ...
Reducing Conventional Capacity Factors   Example: Spain                                                                   ...
Exposure to fuel price variability in spot markets                            Source: IEA, C. Hood, 2011                  ...
Market design and the “missing money” issue        • In liberalised markets, renewables not competitive:          too expe...
Conclusions RE policies successful in driving down costs and  deploying RE to take-off phase New challenges emerging at ...
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What are the limits to current policy success?

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Paolo Frankl
Renewable Energy Division
International Energy Agency
27 March 2012

Published in: Technology, Business
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Transcript of "What are the limits to current policy success?"

  1. 1. What are the limits to current policy success? Paolo Frankl Head, Renewable Energy Division International Energy AgencyREWP-RIAB Workshop ‘Renewables – Policy and Market Design Challenges’ Paris, OECD, 27 March 2012
  2. 2. Policies push RE growth Wind Bioenergy Solar PV Hydro other Generation 338 296 31 3503 74 2010 [TWh]CAGR 2005- 26.5% 8.8% 50.8% 3.1% 4.6% 2010 [%] © OECD/IEA 2012
  3. 3. Costs are Falling • Hydro and some 100 PV decreasing costs by biomass and < 1976 -19% for each doubling of cumulative installed capacity geothermal already PV Module Price (USD 2010/Wp) < 1980 cost-competitive • Additional technologies 10 getting competitive in a < 1990 broader set of < 2000 circumstances Learning Rate: 19.3% • Opens up new < 2010 deployment 1 1 10 100 1 000 10 000 100 000 opportunities Cumulative capacity (MW) Data from Breyer and Gerlach, 2010© OECD/IEA, 2011
  4. 4. Mature Markets Facing NewChallengesDeployment Inception Take-off Consolidation Hydro DNK – Wind onshore DEU – Wind DEU – Solar PV CHN – Wind onshore USA – PV CSP Time Adequate Possible Problems Progress Blocked © OECD/IEA 2012
  5. 5. Grid may act as a constraint Strong wind, low load case depicted Expected load flows for 2013 (based on 2009 analysis) Enhancement required Conv. generation EEG, CHP gen. Load Load flow (at max) Load flow Source: German TSOs, public data © OECD/IEA 2012
  6. 6. Flexibility is key for managing v-RE There are 4 flexibility resources Demand side Interconnection Flexible Energy storage Response with adjacentpower plants facilities (via smart grid) markets Source: IEA, Harnessing Variable Renewables, 2011 IndustrialA biomass-fired residential A pumped hydro Scandinavian power plant facility interconnections © OECD/IEA 2012
  7. 7. Grid expansion vs RE Deployment Example: Germany Example: Spain 30 30 30 25 25 25 25 20 20 20 20thousand km thousand km 15 GW GW 15 15 15 10 10 10 10 5 5 5 5 0 0 0 0 2000 2002 2004 2006 2008 2010 2000 2002 2004 2006 2008 2010 Source: IEA Wind, 380kV 220kV Wind UCTE, ENTSOE 380kV 220kV Wind © OECD/IEA 2012
  8. 8. Hydro & pump-hydro: enablers of vRE growth • Hydropower generation continues growing as fast as all non-hydro renewables together since 2000 • Global pumped-hydro capacities: 98 GW by 2005, 140 GW today, up to 200 GW by 2015 or soon thereafter © OECD/IEA 2012
  9. 9. Lack of Policy Coordination Jeopardising Outcomes? Today’s 1990s Tomorrow Policies • RE Power • EE • CO2 • Low carbon • Unbundling • Buildings generation • Liberalisation competitive? • RE Heat • Market Integration © OECD/IEA 2012
  10. 10. Variable RE penetration impact on electricity prices (Merit Order Effect) Source: IEA, C. Philibert, 2011 © OECD/IEA 2012
  11. 11. Reducing Conventional Capacity Factors Example: Spain GW 60% 90 80 50% 70 40% 60 50 30% 40 20% 30 20 10% 10 0% 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Conventional capacity Peak Load Conventional capacity factor Variable RE share Capacity markets emerging in several European countries  New Market Integration issues? © OECD/IEA 2012
  12. 12. Exposure to fuel price variability in spot markets Source: IEA, C. Hood, 2011 © OECD/IEA 2012
  13. 13. Market design and the “missing money” issue • In liberalised markets, renewables not competitive: too expensive and bearing the fuel volatility risk Past • FiTs and RPS-driven PPAs offset fuel risk and fill the cost gap Now • Renewables expand, learn and reach competitiveness • Larger shares of renewables drive spot market prices down (merit order effect) and squeeze capacity factors of conventional plants Now • With current market design and no support framework, further expansion of (competitive) renewables threatened by marginalNext? (running) cost pricing reduction and high fossil price volatility risk © OECD/IEA 2012
  14. 14. Conclusions RE policies successful in driving down costs and deploying RE to take-off phase New challenges emerging at system and market design level  How to foster investment in flexibility resources?  How to reduce investment risk in low-C, up-front capital intensive energy technologies?  How to coordinate with climate change policies? Portfolio-, system-, and investment risk-oriented policy approach needed © OECD/IEA 2012
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