The Paris meeting: the vision of an international power utility (BC3 Summer School _July 2015)

1
The Paris Summit on Climate
Change: the vision of an
international power utility
Gonzalo Sáenz de Miera
San Sebastián, 15th of July 2015

22
Index
1. The urgency of an international agreement on global warming
2. The Paris summit: challenges and perspectives
3. Our vision on the Paris summit
4. The role of the electricity sector
5. Iberdrola’s contribution
6. Summary and conclusions

33
The evidence of climate change induced by human activity is
overwhelming
* http://www.rtcc.org/2013/10/08/world-bank-and-imf-we-must-think-about-climate-change-every-day/
http://www.euractiv.com/sections/climate-environment/eu-demands-more-urgency-climate-negotiations-315365
• What we know about the consequences of climate change is bad, but what we
don’t know appears to be worse
• Science, Governments and multilateral institutions acknowledge the urgency to act
• The later we act, the costlier it will be
• We have also to consider very unlikely extremely negative scenarios
Scenario Probability Consequences
2 – 4,5 oC Likely 66‐90% Extremely costly
Economically, socially and ecologically
> 6oC Very unlikely 10% Catastrophic
For society as we know ( ≈30% GDP losses)
Climate Scenarios: probability and consequences in BAU scenarios (IPCC)
Source: IPCC

44
Climate change is the result of GHG emissions
Global GHG emissions
Source : International Energy Agency (2014), CO2 Emissions from Fuel Combustion 2014. Highlights, OECD/IEA, Paris
Other*
33%
CO2
energy
sector
67%
Electricity
42%
Transport
23%
Industry
20%
Residencial
6%
Other
9%
* Includes GHG emissions from other sectors y and GHG emissions from energy sector with the exception of CO2.
Split of energy-related CO2 emissions
CO2 emissions from fossil fuel combustion represents 2/3 of GHG
emissions
Energy sector is the main cause of the problem… And key to solve it

55
Index

66
Climate change is a complex phenomenon…
GHG is “public bad”
and mitigation is a
“public good”
Free riding
Dynamic problem
Problems of
intergenerational
equity
High level of
uncertainty on
impacts
Impacts are
different across
regions and sectors
Burden sharing of
mitigation costs
…That makes an international agreement extremely difficult
(with a long term global government, the solution would be easier)
• Non excludability
• No rivalry
• Trade off: cost
today vs future
benefits
Present
features

77
Results on the INDCs so far
INDCs * representing ¾ of global GHG have been presented to UN
Country/
Region
Commitment Gases
Emissions
inter-annual
variation
2020-2030*
Key sectors
EU-28 Base year:1990. 40% of reduction in 2030 100% -2,8% -
USA
Base year: 2005. 26%-28% of reduction in
2025
100%
-2,8%
Transport, building, oil and
natural gas.
Canada Base year: 2005. 30% of reduction in 2030 100% -1,7%
Electricity, transport, oil and
natural gas, CCS.
Russia
Base year: 1990. 25%-30% of reduction in
2030
100% -0,7% -
China
Base year: 2005. 60-65% of carbon intensity
reduction in 2030
CO2 1,6%
Energy, building, transport and
chemical industry.
Updated to 02/07/2015
* Note: The emissions annual rate of change corresponds to the period 2020‐2030, except the US, which corresponds to the period 2020‐2025.
Source: United Nations Framework Convention on Climate Change (UNFCC) http://unfccc.int/ghg_data/ghg_data_unfccc/time_series_annex_i/items/3814.php;
https://unfccc.int/files/ghg_data/ghg_data_unfccc/ghg_profiles/application/pdf/chn_ghg_profile.pdf
Summary of the main INDCs
INDCs reflect wide differences on ambition across the main economic
blocs
Base year makes a big difference when setting goals
* Intended Nationally Determined Contributions

88
Contributions results on the 2030 horizon
3.376
5.204
515
2.357
16.613
USAEU‐28 Canada Russia China
GHG emissions 2030*
(Mt CO2 eq.)
149
245
200
969
750
Carbon Intensity 2030*
(tCO2/Real GDP 2010 US$m)
7
15
12
17
12
Emissions per capita 2030*
(tCO2 per capita)
Nota: GHG emissions exclude land sector emissions.(UTCUTS).* USA Data for 2025
Source: World Resources Institute http://wri.org/our‐work/project/cait‐climate‐data‐explorer. United Nations Framework Convention on Climate Change (UNFCC)
http://unfccc.int/ghg_data/ghg_data_unfccc/time_series_annex_i/items/3814.php;
https://unfccc.int/files/ghg_data/ghg_data_unfccc/ghg_profiles/application/pdf/chn_ghg_profile.pdf.United States Department of Agriculture Economic Research Service
http://www.ers.usda.gov/
USAEU‐28 Canada Russia ChinaUSAEU‐28 Canada Russia China
EU 28 will be the economy with the lowest carbon intensity
(Absolute level, per capita and ratio on GDP)

99
Perspectives of reaching the 2oC goal
(Peak emissions 2020)
3 oC
2 oC
INDCs scenario is not able to achieve the 2oC goal
Global energy-related CO2 emissions by scenario
uncertainty
uncertainty
High level of uncertainty to achieve INCDs scenario
Much of the assumptions are based on CCS, EE achievements…
Source: IEA. WEO Energy and Climate Change

1010
Index...

1111
6 Key Elements Of A Potential Agreement in Paris
Stable
framework
for
investments
Ambitious
goals
CO2 pricing
Burden
sharing
R&D
PPPs
Awareness
Efficiency
and
emissions
standards
Paris
COP

1212
Ambitious Goals and Stable Framework to drive the required
investment
• A global emissions reduction target that is compatible with 2ºC goal.
• A working schedule with a firm commitment to submitting ambitious
contributions within a reasonable timeframe.
Ambitious
Goals
• The terms and legal format of the agreement should provide the long-
term view and stability that are needed for the investment volume
it requires.
• Thoroughness in measuring and verifying targets, in establishing
transparent and equivalent efforts, and transparent framework to
enable countries and companies to negotiate and exchange
verifiable emissions.
• From the governance perspective, it is important to establish five-
year action periods in order to verify the degree of progress being
made in the contributions and adapt them according to the results that
are achieved.
Stable
Framework

1313
Energy Sector Decarbonisation Cost Burden Sharing
• The cost of the decarbonisation of the energy sector has been
borne by electricity consumers, to date.
– Particularly true in Europe, where electricity tariffs have been
financing the attainment of energy policy targets that affected the
economy as a whole.
• The electricity sector is going to continue to make the biggest
effort in reducing emissions, given its technological and economic
characteristics
– The energy policy framework should ensure that this cost is
distributed on a balanced basis by all energy consumers
(natural gas, fuels,…)
– Right price signals should be sent to energy consumers and avoid
negative distortions (environmental and industrial competitiveness)
• Ensure “Polluter pays” principle, to distribute the cost of the
policies needed for the decarbonisation of the economy among
energy consumers
– Thus removing subsidies to emitters and reducing the taxes that
apply to non-emitting technologies.
Burden
Sharing

1414
Global CO2 Pricing Signal (I)
• Progress should be made towards a global CO2 price signal
covering all sectors of the economy
• Signals to industry operation and investments
• Fund collection to achieve goals
• Stringent and transparent carbon pricing systems
• Incentives should be provided for decarbonisation from a
technologically neutral perspective that fosters the development of
the most efficient energy sources.
• This CO2 signal should be sufficient to provide incentives for
technological change, and should constitute the basic tool to
promote the most efficient renewable energy technologies.
• ≈ 40 € / ton (social cost)
• Taxation and ETS may play a significant role in transferring the CO2
cost signal.
Global
CO2
pricing

1515
Global CO2 Pricing Signal (II)
Energy-related CO2 emissions, carbon pricing mechanism and fossil fuel
subsidies in selected regions, 2014
Source: IEA. WEO Energy and Climate Change

1616
Global CO2 Pricing Signal (III)
The question is not whether there should be a price for CO2 but
When? At what level? How?
This situation should be tackled now
The later… The worse
Only 12% of emissions
covered by CO2 pricing
Massive subsidies to
fossil fuels
Transport not covered (as
in the EU ETS) or with a
lower level of stringency
“Great disparity between
regions but on average
global price is closer to
negative 15 $ per ton.”
Source: Wagner & Weitzman. Climate
Choice. P. 49.
Main conclusions from the global map of CO2 emissions under carbon
pricing schemes and those subject to subsidies…

1717
Global Standards That Spur Emissions Reductions,
Specially In Sectors Not Subject To CO2 Pricing Schemes
• Current carbon pricing systems do not provide a
sufficiently strong signal to decarbonize economy…
Additional instruments are required.
• Energy efficiency standards, emissions standards or
mandatory regulations for consumer equipment (vehicles,
heating systems, etc.) should contribute to promote the use
of low-carbon technologies and ultimately reduce emissions.
• For instance, emissions standards set in the car manufacturing
sector (CO2 emissions per km) at regional level.
Efficiency
and
emissions
standards

1818
Other Topics
• R&D progress is key for technological deployment
(supply and demands side) under an efficient path for
emissions reduction
– One of the basic challenges in this area should be to
improve the relative competitiveness of carbon-free
technologies compared to those that are based on fossil
fuels
• Public-Private collaboration (PPPs) is a basic factor in
achieving the high volume of investment and the major
technological roll-out that to attain the 2ºC scenario
• Information and awareness measures are very important in
making progress in the field of sustainable consumption of
all resources, particularly energy resources.
R&D
PPPs
Awareness

1919
Index

2020
Essential role of the electricity sector in achieving the 2oC scenario
Source: Energy Technology Perspectives 2015. IEA
Accumulated reduction in CO2 emissions per sector and technology by 2050
“Transport energy and CO2 emissions have
increased by 28% since 2000. The sector is not on
track to meet 2DS targets. Stark changes to the
trends of the last decade are required: energy
demand needs to stabilize at least, while CO2
emissions need to fall.”
Source: ETP 2015
“Transport energy and CO2 emissions have
increased by 28% since 2000. The sector is not on
track to meet 2DS targets. Stark changes to the
trends of the last decade are required: energy
demand needs to stabilize at least, while CO2
emissions need to fall.”
Source: ETP 2015
As a result of its economic and technology advantages, the growth in the
final demand for electricity by 2050 is three times higher than the overall
increase in the demand for energy (ETP, 2015)…
Electricity sector is the one that will make the greatest effort in terms of
reducing CO2 emissions
Electricity represents 40% of accumulated reduction by 2050 vs 20% of transport

2121
Essential role of the electricity sector in achieving the 2oC scenario:
the role of utilities
The 2oC scenario requires a major technological and infrastructure roll‐out at
every stage of the electricity sector value generation chain…
…and a significant technological and managerial capacity in order to tackle all of
these challenges that are as yet unmet.
9 Trillion * dollars of additional investments to achieve 2oC Scenario
associated to electricity sector
High penetration rate of renewable energies will require stronger and smarter
grids, back-up energy and new services offered by the system in order to
guarantee the quality and continuity of supply
Utilities have the business know-how and the technological and investment
capacity to face these challenges on a competitive basis
* 1 Trillion = 1.000.000.000.000

2222
Index

2323
Increased relevance Of non-state players
+2.700 Specific Actions already submitted to UN *
660 from Businesses
* Source: Platform NAZCA-Non-State Actor Zone for Climate Action
Businesses, Cities, Local Administrations, Investors, Communities
Non-state players engagement and commitment required to keep pressure
towards a new and ambitious agreement beyond 2020 in Paris

2424
IBE Target (I)
Iberdrola is already acknowledged as world leader in sustainability …
Selected 16 times for the Dow Jones Sustainability index
(only European utility)
FTSE4Good index
most sustainable companies worldwide (5th year in a row)
Green Growth Platform
(for economic growth and decarbonisation of the economy)
CEO Climate Leadership Group ‐ World Economic Forum
(tangible solutions to limit global warming to 2ºC)
# 1 European electric utility
for its response to the challenges posed by climate change
(CDP Driving Sustainable Economies)
Endorsed the targets set by the CDP Driving Sustainable Economies
“One Million for the Climate” – Spanish administration initiative
One of the first companies to commit

2525
IBE Target (II)
… and is committed to keep its strong track-record going forward
Achieved New targets
GHG
emissions
IBE emissions per MWh
lower than sector average
of total production
emissions-free
-30%-30%
62%62%
In emissions intensity vs
2007 by 2030-50%-50%
by 2030
Renewable
energy
World leader in renewable energy
Installed as of YE2014
Large renewable pipeline
14GW14GW
2014-2016 investment
Longer-term projects ongoing
• Wikinger 350MW (Germany) - offshore
• East Anglia 714MW (UK) - offshore
2,4bn€2,4bn€
R&D
R&D is the basic pillar in energy solutions
Networks: Smart Grids and remote management
Mobility: Electric Vehicle special programmes
150
gCO2/kWh
150
gCO2/kWh
Supply neutral on CO2 by 2050

2626
Index

2727
Summary and conclusions (I)
• There is an urgency to act. Postpone action will be extremely costly
• The Paris agreement will probably not be enough to attain the 2ºC
objective
• Governments and also firms will have to work on additional
contributions
• Achieving a carbon free economy will required a transformation of the
entire energy sector
• Within the energy sector, the electricity sector is the one that will make
the most significant contribution, (basically RES), increasing its share
in the energy mix
• The development and management of the electricity network will be
extremely relevant
• The cost of decarbonistion of the economy, should be paid by all energy
consumers, applying the “Polluter pays” principle

2828
• CO2 pricing is a key element for an efficient transition:
• Signals to industry operation and investments
• Raise funds to achieve goals
• Stringent and transparent carbon pricing systems that provides
signals throughout all economy
• Energy standards could complement the CO2 signal, specially if CO2
prices are below the necessary levels
• Iberdrola has a strong commitment to achieve a sustainable energy
model:
• Leadership in RES and sustainability indexes
• Goals : 50% reduction CO2 intensity by 2030; CO2 neutral by 2050
• d
Summary and conclusions (II)

3030
INDCS. Assessment of the efforts. GHG emissions reduction
Country/
Region
GHG emissions (Mt CO2 eq.)
1990 1994 2005 2020 2025 2030
EU-28 5.626 5.178 4.501 3376
USA* 6.220 7.228 6.000
5.204
5.349
-
Canada 591 736 611 515
Russia 3.368 2.138 2.526 2357
China 4.058 7.466
14.106
15.388
16.613
18.987
Note: GHG emissions GHG emissions exclude land sector emissions.(UTCUTS).* USA  has two possible scenarios according to the different GHG emissions commitment in 2025 (26% or 28%)..
** The GHG emissions  annual rate of change corresponds to the period 2020‐2030, except the US, which corresponds to the period 2020‐2025.
http://unfccc.int/ghg_data/ghg_data_unfccc/time_series_annex_i/items/3814.php;https://unfccc.int/files/ghg_data/ghg_data_unfccc/ghg_profiles/application/pdf/chn_ghg_profile.pdf .
United States  Department of Agriculture Economic Research Service http://www.ers.usda.gov/
‐2,8 ‐2,8
‐1,7
‐0,7
1,6
GHG emissions annual rate of
change
(%). 2020- 2030**

3131
INDCS. Assessment of the efforts. Carbon Intensity reduction
Country/
Region
Carbon Intensity 2030
(tCO2/Real GDP 2010 US$m)
1990 1994 2005 2020 2025 2030
EU-28 492 331 239 149
USA* 686 502 312
238
245
-
Canada 586 486 298 200
Russia 2.382 1.668 1.422 969
China 3.244 2.141
1.178
1.285
750
857
Carbon Intensity annual rate
of change
(%). 2020- 2030**
‐4,6
‐5,3
‐3,9 ‐3,8
‐4,42

3232
INDCS. Assessment of the efforts. Emissions per capita reduction
Country/
Region
Emissions per capita 2030
(tCO2 per capita)
1990 1994 2005 2020 2025 2030
EU-28 11,9 10,5 8,8 6,6
USA* 24,9 24,5 17,6
14,6
15,0
-
Canada 21,3 22,8 16,1 12,2
Russia 22,7 14,9 17,9 17,3
China 3,40 5,7
10,2
11,1
11,9
13,6
Emissions per capita annual
rate of change
(%). 2020- 2030**
‐2,8
‐3,7
‐2,7
‐0,4
1,6

The Paris meeting: the vision of an international power utility (BC3 Summer School _July 2015)

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The Paris meeting: the vision of an international power utility (BC3 Summer School _July 2015)