Medium-Term Renewable Energy Market Report 2012

Medium-Term Renewable Energy Market Report 2012 Paolo Frankl Head, Renewable Energy Division Brussels, 18 July 2012© 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 the next 5 years  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 © OECD/IEA 2012

Analytical framework – Japan example Generation and capacity Y-o-Y forecast based on - TWh 1 100 Power demand vs GDP Chg 8%  Power demand 1 050 4%  Power sector structure 1 000 0% 950 -4%  Grid and system integration 900 -8%  Economic attractiveness 2005 Demand 2008 2011 2014 2017 Demand, Y-o-Y (RHS) GDP, Y-o-Y (RHS)  Financing Sour  Policy framework robustness TWh Power generation 1 200  Identify drivers and 800 challenges for 400 renewable 0 2005 2006 2007 2008 2009 2010 2011 deployment Coal Nuclear Oil Hydro Natural gas Bioenergy Wind Solar PV Geothermal © OECD/IEA 2012

Global Overview © OECD/IEA 2012

Growth in renewable power is forecastto 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 Global renewable electricity production and forecast 7 000 6 000 5 000 4 000 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 © OECD/IEA 2012

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 Global renewable electricity production and forecast7 0006 0005 0004 0003 0002 0001 000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 OECD Americas OECD Asia-Oceania OECD Europe China Brazil India Rest of non-OECD © OECD/IEA 2012

Non-hydro technology deploymentspreads 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 80 Non-OECD OECD 60 40 20 0 2011 2005 2017 2011 2017 2011 2005 2017 2011 2005 2011 2005 2017 2011 2005 2005 2017 2011 2005 2017 2017 Onshore Offshore Bioenergy Solar PV CSP Geothermal Ocean wind wind © OECD/IEA 2012

Generation additions over 2011-17 differacross regions and technology portfolios OECD Americas (+179 TWh) OECD Asia-Oceania (+77 TWh) Wind onshore Wind onshore Bioenergy Bioenergy Solar PV Solar PV Other technologies Other technologies OECD Europe (+365 TWh) Non-OECD (+1 220 TWh) Hydropower Hydropower Wind onshore Wind onshore Bioenergy Bioenergy Solar PV Solar PV Other Other technologies technologies © OECD/IEA 2012

Annual growth patterns for non-hydrotechnologies vary significantly China becomes deployment leader OECD Europe deployment growth slows OECD Americas growth reflects US policy uncertainties GW Annual capacity additions , non-hydro technologies 40 35 30 25 20 15 10 5 0 2010 2011 2012 2013 2014 2015 2016 2017 OECD AO OECD AM OECD EUR China Rest of non-OECD © OECD/IEA 2012

Progress tracked on different scales Incremental TWh (2011-17) RE share growth (2011-17)1. China + 700 1. Denmark + 20.3% (tot 61%)2. USA + 85 2. Austria + 18.5% (tot 87%)3. Brazil + 80 3. UK + 11.5% (tot 22%)4. India + 80 4. Turkey + 10.1% (tot 36%)5. Germany + 58 5. Italy + 9.5% (tot 35%)Avg annual growth (2011-17)  Detailed reporting only on1. UK + 14.2% 15 focus countries2. China + 10.6%  Other countries also show3. Turkey + 9.8% very significant progress (e.g. Kenya)4. France + 8.3%5. Denmark + 7.8% © OECD/IEA 2012

Country and Regional Outlooks © OECD/IEA 2012

China accounts for 40% of global growth  Drivers:  Challenges:  Growing energy needs  Pricing framework  Diversification  Priority dispatch  Government targets  Grid upgrades  Ample low-cost finance  Prohibitive licensing for  Robust manufacturing small-scale systems TWh1 800  Challenges: generation China forecast renewable TWh 8 000 China power demand vs GDP growth Y-o-Y Chg 18%1 500  Pricing framework 16%  14%1 200 Priority dispatch 6 000 12% 900  Grid upgrades 4 000 10% 8% 600  Prohibitive licensing for 6% 300 small-scale systems 2 000 4% 2% 0 0 0% 2011 2012 2013 2014 2015 2016 2017 2005 2008 2011 2014 2017 Hydropower Wind onshore Bioenergy Solar PV Wind offshore CSP Demand Demand, Y-o-Y (RHS) GDP, Y-o-Y (RHS) Source: © OECD/IEA 2012

State mandates drive the US picture butuncertainties persist over some federal policies US is 50% of OECD/AM TWh United States forecast renewable generation 700 generation growth 600 500 Drivers: 400 300  State level RPSs 200 100  Federal incentives levels 0 2011 2012 2013 2014 2015 2016 2017  Ample grid capacity Hydropower Wind onshore Bioenergy Solar PV  Innovative financing Geothermal CSP Wind offshore GW US wind capacity growth Challenges: 10 Forecast based on expiration of  Duration of federal 8 PTC at end- 2012 incentives 6  Competition with 4 Expiration of federal PTC natural gas  Cost and availability of 2 tax equity finance 0 1998 2000 2002 2004 2006 2008 2010 2012 2014OECD/IEA 2012 © 2016

OECD Europe growth slows with policy adjustments and the macroeconomic situation Germany, UK and Turkey are largest growers Nordic countries grow steadily Economic conditions and overcapacity challenge Italy, Spain Eastern Europe growing despite crisis and has a long way to go to fulfill EU 2020 goals TWh OECD Europe forecast renewable generation 1 400 1 200 1 000 800 600 400 200 0 2011 2012 2013 2014 2015 2016 2017 Hydropower Wind onshore Bioenergy Solar PV Geothermal Wind offshore CSP Ocean © OECD/IEA 2012

OECD Europe – Capacity Additions Growth slows down, particularly for solar PV 40 35 30 Annual capacity additions (GW) Ocean 25 Geothermal Bioenergy 20 Wind offshore Wind onshore CSP 15 PV Hydro 10 5 0 2010 2011 2012 2013 2014 2015 2016 2017 © OECD/IEA 2012

Germany shows the largest absolute growth in Europe TWh Germany forecast renewable generation 200 Drivers: 180 160  Robust policy framework 140  Need to compensate for 120 100 nuclear phase-out 80 60  Ample availability of low 40 cost financing 20 0 2011 2012 2013 2014 2015 2016 2017 Hydropower Solar PV Wind onshore Bioenergy Geothermal CSP Wind offshore Challenges: Ownership shares of renewable  Maintaining dynamic generation, Oct 2011 Project developers approach FIT adjustments 14% Individuals 4 large  Grid upgrades needed 40% utilities 7%  Technical and supply chain Other utilities 7% bottlenecks for offshore Funds/ wind banks 11% Farmers Others 2% Commercial 11% 9% © OECD/IEA 2012

In Italy weakening economy and rising financing costs weigh upon deployment TWh Italy forecast renewable generation Drivers: 140 120  Policy commitment to 100 renewable deployment 80  Increase of targets 60 40  Improved renewable 20 competitiveness in 0 good resource areas 2011 2012 2013 2014 2015 2016 2017 Hydropower Solar PV Wind onshore Bioenergy Geothermal Challenges: 120 Italy power capacity vs. peak load (GW)  Policy costs for solar PV 80  Overcapacity of power system 40  Cost and availability of 0 finance 2005 2006 2007 2008 2009 2010 Hydropower Combustible fuels  Grid upgrades Geothermal Solar Wind Peak load © OECD/IEA 2012

Renewable electricity will continue to rise inTurkeyTWh Turkey historical and projected renewable generation120100 80 60 40 20 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 Generation from hydropower and wind expected to grow strongly © 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 © OECD/IEA 2012

Quarterly investment trend slowing (?) Macroeconomic and credit concerns Short-term policy uncertainty in some countries Still, dip may partly cost reductions; and quarterly data do not account for small distributed capacity USD billion New investment in renewable electricty capacity 50 45 40 35 30 25 20 15 10 5 0 1Q2004 1Q2005 1Q2006 1Q2007 1Q2008 1Q2009 1Q2010 1Q2011 1Q2012 Wind Solar Biomass and waste Geothermal Small hydro Marine Note: investment volumes include new build asset finance, new investment by VC/PE investors in renewable energy companies, and new equity raised by renewable energy companies on the public markets. Estimates for corporate R&D, government R&D and small distributed capacity are not included here. There is no adjustment for re-invested equity. Data excludes large hydropower. Source: Bloomberg New Energy Finance (2012). © OECD/IEA 2012

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

Medium-Term Renewable Energy Market Report 2012

by International Energy Agency on Aug 09, 2012

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