Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Meta-review of long-term energy & carbon prices

254 views

Published on

This report presents the findings of a study on future energy and carbon costs, based on a review of 13 long-term scenarios for the energy transition

- Coal, oil, gas, electricity, and carbon future prices are included (throughout this report referred to as “energy vectors”)
- Facts and trends impacting future prices are identified, but not analyzed
- EU countries with available information and in different stages of the energy transition are included

The findings can be summarized as follows:

- Most scenarios expect coal prices will remain virtually flat, with yearly price increases that are lower than those of other fossil fuels.
- Oil prices will be affected by limited supply and a decreasing demand. Most scenarios project a moderate growth of oil real prices from 2020 to 2050, except for particular extreme cases.
- Natural gas demand is projected to increase, but price increases will be moderated by abundant global supply. Natural gas demand is projected to increase, but price increases will be moderated by abundant global supply.
- It is expected that end-user electricity prices will rise driven by fossil fuel prices, carbon prices, and increasing generation costs from RES. Industrial electricity prices are projected to increase in the short term and then stabilize towards 2050. Industrial electricity prices rise under scenarios with higher RES
- CO2 prices will increase and will shift the profitability of carbon intensive technologies towards less carbon intensive ones. All considered scenarios project a strong yearly growth of carbon prices . However, there is a wide variation of estimates.
- Coal, oil or gas prices are not correlated with RES penetration.

The above findings are essentially assumptions behind some of the major scenarios using in energy policy planning. The analysis includes scenarios from Ecofys, the European Commission, DNV GL, Greenpeace, Eurelectric, European Climate Foundation, McKinsey, Enerrgynautics, Fraunhofer, Stanford, Imperial College and NERA.

Published in: Business
  • Be the first to comment

  • Be the first to like this

Meta-review of long-term energy & carbon prices

  1. 1. ESCOConsulting SoftwareEngineering Meta-review of long-term energy & carbon prices ECI - Creara Workshop / 2017
  2. 2. 2 • Introduction: Objective and Methodology • Energy Vectors: Price Forecasts • Summary • Discussion • Annex Agenda
  3. 3. 3 INTRODUCTION Objective and Methodology of the Study • The objective of this Study is to perform a meta study on future energy and carbon costs, by reviewing existing scenarios of the energy transition - Coal, oil, gas, electricity, and carbon future prices are included (throughout this study referred to as “energy vectors”) - Facts and trends impacting future prices are identified, but not analyzed - EU countries with available information and in different stages of the energy transition are included • The methodology includes 3 main steps: Source: RFQ; CREARA Analysis 1 2 3REVISION of views Near 100% RES Enerdata Other sources Coal Oil Gas Electricity Carbon “horizontal analysis” “vertical analysis” EXTRACTION of views for each energy vector TAKEAWAYS • FUTURE PRICES • TRENDS, e.g.: Supply Demand
  4. 4. 4 Author Title (year) Coal Oil Gas Electricity Carbon 1 Ecofys / WWF The Energy Report (2011) 2 European Commission Energy Roadmap 2050 (2012) 3 DNV GL / Imperial College / NERA Integration of Renewable Energy in Europe (2014) 4 Eurelectric Power Choices (2013) 5 European Climate Foundation Roadmap 2050 (2010) 6 McKinsey Transformation of Europe's power system (2010) 7 EWI / Energynautics Roadmap 2050 (2011) 8 Greenpeace Energy [R]evolution (2012) 9 Greenpeace Powe[r] 2030 (2014) 10 Energynautics European Grid Study 2030/2050 (2011) 11 Fraunhofer ISI Tangible ways towards climate protection in the European Union (2011) 12 Jacobson, M. et al. A roadmap for repowering California for all purposes with wind, water, and sunlight (2014) 13 Jacobson, M. et al. Examining the feasibility of converting New York State’s all-purpose energy… (2013) ✓ ✓ ✓ ✓ ✓✓ ✓✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓  ✓ ✓  ✓ ✓ ✓  ✓ ✓ ✓ ✓  ✓ ✓ ✓  ✓✓   ✓ ✓ ✓ ✓  ✓   ✓ ✓ ✓  Main documents reviewed with relevant data for the meta study Σ=10 Σ=10 Σ=11 Σ=6 Σ=7 Note: (x) indicates other document on which values are based Source: CREARA Analysis INTRODUCTION 1 2 3 (8) (2)  (2) (5) (8) (2) (8) (8)
  5. 5. 5 INTRODUCTION Reviewed data: Enerfuture 3 scenarios Source: CREARA Analysis • Enerdata scenarios vary depending on climate policies, commitments, and targets - Green: more stringent climate policies with countries fulfilling their NDC commitments and then regularly revising their emissions goals. Ambitious efforts are made to phase out fossil fuel subsidies and to enable a strong deployment of renewables. Under this new green deal, world emissions are divided by 2 by 2050, the global temperature increase is limited at +2°C - Blue: based on the successful achievement of the 2030 NDCs’ targets as announced at the COP21 and revised since then. Global energy demand increases, driven by the growth in China and other emerging countries, but NDCs enable to control the energy demand growth and CO2 emissions until 2030. These efforts are compatible with a 3-4°C objective - Brown: describes a world of durably low fossil fuel energy prices; exploitation and production of unconventional oil and gas resources intensifies and expands globally, however confirmed energy commitments in some regions as well as technological innovation foster the deployment of renewables. Without a global agreement, global CO2 emissions soar towards a +6 °C temperature increase 1 2 3
  6. 6. 6 • Introduction: Objective and Methodology • Energy Vectors: Price Forecasts • Summary • Discussion • Annex Agenda
  7. 7. 7 FUTURE PRICES Source: Reviewed documents; CREARA Analysis Coal prices are expected to follow the trend of oil and the rest of fossil fuels but remaining at a much lower level • Overall, there is no upturn forecasted for global coal demand, with lower demand in higher income countries and higher demand elsewhere • On the one hand, efforts towards a strong reduction of greenhouse gas emissions will take place, which has a negative impact on the demand for fossil fuels (Fraunhofer, 2011) - The decarbonization scenarios are based on "global climate action" price trajectories for oil, gas and coal reflecting that global action on decarbonization will reduce fossil fuel demand worldwide and will therefore have a downward effect on fossil fuel prices (DNV GL / Imperial College / NERA, 2014) - The EU will make large strides in displacing coal with lower carbon alternatives (coal demand in the EU falls by over 60% towards 2040 according to WEO 2016) • On the other hand, the increase in coal price in the medium-term is driven by high demand in emerging countries (Eurelectric, 2009, WEO 2016) - Import demand in Asia, especially in China and India, is projected to rise in the future which will support firm trade market prices. However, it is unlikely that prices rise strongly, as coal production costs are relatively low compared to production costs of other fossil fuels and the amount of reserves will be sufficient to meet the increasing demand (Energynautics, 2011) • The search for market equilibrium depends on cuts to supply capacity, mainly in China and the United States (WEO 2016) - China is administering a number of measures to cut mining capacity, a move that has already pushed coal prices higher in 2016 (after four straight years of decline) • Most of the studies (e.g. Eurelectric) expect coal prices to increase at far lower rates than gas prices. A slight decoupling can be observed in most of the scenario studies. - Alongside measures to increase coal-plant efficiency and reduce pollutant emissions, the long-term future of coal is increasingly tied to the commercial availability of carbon capture and storage, as only abated coal use is compatible with deep decarbonisation 1 2 3 Coal
  8. 8. 8 FUTURE PRICES Source: EC; Ecofys; Energynautics; Eurelectric; Enerdata; Greenpeace; IEA; CREARA Analysis CAGR (2020-2050) Enerdata UK3, Blue, Ind. (EUR 2005) 3.94%2 Enerdata UK, Brown, Ind. (EUR 2005) 1.80%2 Energynautics (EUR 2010) 0.29% Greenpeace [R]evolution (EUR 2009) 0.53% EC - Roadmap 2050 Current Policy Initiatives (EUR 2008) 0.53% Eurelectric (EUR 2008) 0.40% EC - Roadmap 2050 Decarbonization Scenarios (EUR 2008) -0.52% Ecofys (EUR 2005) 0.96% IEA – 450 Scenario -0.64%2 Most scenarios expect coal prices will remain virtually flat, with yearly price increases that are lower than those of other fossil fuels Note: 1Except for Enerdata scenarios, which are final user prices; 2CAGR is calculated for 2020-2040; 3UK was chosen because it better reflects wholesale prices; Green Scenario has not been plotted since it is considered an outlier within the sample’s projections 1 2 3 Coal 0 50 100 150 200 250 300 2020 2025 2030 2035 2040 2045 2050 EUR/tonofcoal Coal prices in different scenarios, 2020-2050
  9. 9. 9 • There is consensus in that oil will become scarcer in the future - IEA assumes production from known oil and gas reserves will fall by around 40-60 per cent by 2030, and there is significant uncertainty about the volume of undiscovered conventional oil reserves - Supplies of cheap, conventional oil and gas are declining while our energy demands continue to increase - Technological improvements may play a role: technology improvements may delay the price increases that would result from the eventual depletion of coal, oil, natural gas, and uranium resources • However, the reviewed scenarios assume efforts will be made to decrease GHG emissions (increasing energy efficiency in energy demand combined with de-carbonisation of the energy system), which has a negative impact on oil demand • This will create a “paradigm shift in demand”, where oil will be increasingly replaced by other technologies, leading to relatively oversupply - The Roadmap to 2050 (…) aims to introduce profound changes in passenger and freight transport patterns, resulting in a competitive transport sector which allows increased mobility and cuts CO2 emissions - Oil and gas will be replaced by efficient electric technologies (road transport and household heating). Electricity-powered air- and ground-source heat pumps, heat exchangers, and back up electric resistance heaters will replace natural gas and oil for home heating and air conditioning. As such, electricity requirements will increase, but the use of oil and gas for transportation and heating/cooling will decrease - In WEO 2016, over the longer term, oil demand concentrates in freight, aviation and petrochemicals, areas where alternatives are scarce, while oil supply – despite a strong outlook for US tight oil – increasingly concentrates in the Middle East. There are few substitutes for oil products as a fuel for trucks and planes and as a feedstock for the chemicals industry; these three sectors account for all of the growth in global oil consumption • Other trends that will affect future prices include economic growth (GDP) and technological improvements (for instance for shale gas extraction) 1 2 3 Oil Oil prices will be affected by limited supply and a decreasing demand Source: Reviewed documents; CREARA Analysis FUTURE PRICES
  10. 10. 10 1 2 3 Oil Most scenarios project a moderate growth of oil real prices from 2020 to 2050, except for particular extreme cases (Enerdata green scenario) Note: 1 Enerdata prices are heavy fuel oil for industries and include taxes; max is Sweden in the green scenario and min UK in brown scenario Source: Documents as indicated; CREARA Analysis CAGR 20-50 0 50 100 150 200 250 300 350 400 450 2020 2030 2040 2050 Enerdata max1 (EUR05/boe) EWI/Energynautics (EUR10/boe) Jacobson (EUR09/boe) Greenpeace (EUR10/bbl) EU Commission (EUR08/bbl) ECOFYS (EUR05/boe) EU Climate foundation (EUR/bbl) Enerdata min1 (EUR05/boe) Fraunhofer ISI (EUR05/boe) 6.1% 0.5% n.a. 1.0% 1.2% 2.3% 0.0% 3.1% -1.6% FUTURE PRICES Oil Prices in different scenarios 2020-20501
  11. 11. 11 • Most projections forecast a more flexible global market, linked by a doubling of trade in liquefied natural gas (LNG) - It is expected that an effective gas market will develop using the existing global distribution network for liquid gas via tankers and loading terminals. With greater competitiveness regards price fixing, it is expected that the oil and gas prices will no longer be linked. Having more liquid gas in the energy mix (currently around 10 % of overall gas consumption) significantly increases supply security, e.g. reducing the risks of supply interruptions associated with international pipeline networks. (Greenpeace Energy [R]evolution, 2012) • Gas consumption increases almost everywhere, but gas exporters have to work hard to control costs in the face of strong competition from other fuels, especially in the power sector (WEO 2016) - In the mid-2020s, in gas-importing countries in Asia, new gas plants would be a cheaper option than new coal plants for baseload generation only if coal prices were $150/tonne (double the anticipated 2025 price) - The space for gasfired generation is also squeezed by the rising deployment and falling costs of renewables - The higher oil prices result in substitution of oil for gas in markets where the two fuels compete. The reduction in oil discoveries also implies a reduction in future reserves of associated gas. On the other hand gas price increases are moderated by an increasing share of unconventional gas from shales, as technology improves and the interest in its potential spreads beyond North America. (European Commission, 2010) • Future rise in discoveries of natural gas reserves will moderate the increase of natural gas prices - It is assumed that 130 trillion cubic meters of gas will be discovered to 2050, compared to 170 trillion cubic meters of gas reserves known today. This volume of gas includes tight gas and coal-bed gas exploited today or expected to be exploited in North America but not unconventional gas, such as hydrates. (Eurelectric, 2011) • The reviewed studies forecast an increment in natural gas power plants as a backup technology due to the increased amount of RES in the system Natural gas demand is projected to increase, but price increases will be moderated by abundant global supply Source: Reviewed documents; CREARA Analysis 1 2 3 Gas FUTURE PRICES
  12. 12. 12 Natural gas wholesale price, 2020-20501 1 2 3 Gas Natural gas prices are projected to increase in all reviewed scenarios Note: 1 Except for Enerdata scenarios, which are final user prices. For the Enerdata scenario, it has been selected the country with the highest natural gas price for the industry sector; 2 CAGR is calculated for 2020-2040 Source: Greenpeace; European Commission; Eurelectric; McKinsey; IEA; Energynautics; Fraunhofer; CREARA Analysis CAGR (2020-2050) Greenpeace [R]evolution (USD 2010) 1.52% Enerdata Sweden, Blue, Ind. (USD 2005) 2.24%2 Enerdata Sweden, Brown, Ind. (USD 2005) 1.67%2 EC - Roadmap 2050 Current Policy Initiatives (USD 2008) 1.54% Eurelectric (USD 2008) 1.54% McKinsey (USD 2009) 1.36% IEA WEO (USD 2013) 0.99%2 Energynautics (USD 2010) 0.75% Fraunhofer ISI (USD 2005) 0.34% FUTURE PRICES 0 1 2 3 4 5 6 7 8 9 10 2020 2030 2040 2050 EURcent/kWh
  13. 13. 13 • Most scenarios estimate that average electricity prices will rise and that demand for electricity will increase with a considerable shift towards RES with a strong increase in wind • Increasing RES penetration will lead to renewables-based generation being competitive without any subsidies. - The rapid deployment of technologies with low short-run costs, such as most renewables, increases the likelihood of sustained periods of very low wholesale electricity prices • End user prices are projected to increase in the shorter term (until 2025-2030), driven by the 3 main trends (European Commission, 2010) - The increase in world fossil fuel prices (which is projected to take place during the period of recovery of world economic growth) - The carbon price within the ETS - The additional costs of power generation induced by carbon emission reductions and RES policies • With declining costs and an anticipated rise in end-user electricity prices, by the 2030s global subsidies to renewables are on a declining trend (WEO 2016) • In the longer term, it is expected that electricity prices will stabilize - Beyond 2025, electricity prices are projected to remain rather stable, as fossil fuel prices increase at a slower pace and technology performance in power generation succeeds in offsetting the fuel price effects (Eurelectric, 2011) - The techno-economic improvements of various power generation technologies that limit the effects of higher input fuel prices and CO2 prices (European Commission, 2010) Industrial electricity prices are projected to increase in the short term and then stabilize towards 2050 Source: Reviewed documents; CREARA Analysis 1 2 3 Elec FUTURE PRICES
  14. 14. 14 Industry electricity price in Europe, 2020-20501 Note: 1For the Enerdata scenario, it has been selected the country with the highest and lowest electricity price for the industry sector; 2CAGR is calculated for 2030-2050; 3CAGR is calculated for 2030-2040; Source: Eurelectric; Enerdata; European Commission; IEA; CREARA Analysis CAGR (2020- 2050) Enerdata Germany, Green (EUR 2005) 1.85% Eurelectric – Baseline scenario (EUR 2005) 0.19% Eurelectric – Power choice scenario (EUR 2005) 0.09% EC - Roadmap 2050 – Scenario 6 (Low nuclear) (EUR 2008) 0.02%2 EC - Roadmap 2050 – Reference scenario (EUR 2008) -0.13%2 Enerdata Sweden, Brown, (EUR 2005) -0.96% 1 2 3 Elec Industrial electricity prices rise under scenarios with higher RES FUTURE PRICES 0 50 100 150 200 250 2020 2030 2040 2050 EUR/MWh
  15. 15. 15 FUTURE PRICES Source: Reviewed documents; CREARA Analysis CO2 prices will increase and will shift the profitability of carbon intensive technologies towards less carbon intensive ones • Carbon price directly affects energy costs, having a major impact on the generation mix of conventional generation technologies • Most of the considered scenarios forecast a decrease in fuel consumption, a trend which is reinforced by increasing carbon prices - High carbon prices would lead to a further reduction in CO2 emissions in 2030, due to a major shift form coal to natural gas • It is assumed that beyond a certain transition period all countries and sectors will operate in an ideal market for carbon allowances clearing at a single carbon price - It is assumed that developing countries will start participating with gradually increasing commitments and achieve full participation after 2025 • Between 2015 and 2020 only ETS sectors pay for carbon emissions, whilst consumers in non ETS sectors are not subject to direct emission constraints but rather reduce emissions as a result of bottom-up policies; after 2020, carbon prices apply on a uniform way for all sectors and countries • WEO 2016 forecasts higher and more widespread CO2 prices in the 450 scenario, which raises the market value of renewables in most cases - CO2 price raise average market prices by as much as 50% to 2030 - after 2030, even higher CO2 prices have a diminishing impact on average market prices over time, as the power mix becomes almost completely decarbonised - Increasing CO2 prices and extended policy support to low-carbon generation facilitate additional reduction of emissions intensity 1 2 3 Carbon
  16. 16. 16 FUTURE PRICES Source: EC; Energynautics; Eurelectric; Greenpeace; CREARA Analysis CAGR (2020-2050) DNV GL / Imperial College / NERA (EUR 2010) 7.6%1 Fraunhofer (EUR 2005) 3.95% Greenpeace [R]evolution (EUR 2010) 3.73% EC - Roadmap 2050 (EUR 2005) 3.77% Eurelectric (EUR 2008) 1.77% All considered scenarios project a strong yearly growth of carbon prices Note: 1 CAGR is calculated for 2020-2030 10 20 30 40 50 60 70 80 90 2020 2025 2030 2035 2040 2045 2050 EUR/tonofCO2 Summary of projections for CO2 price 1 2 3 Carbon IEA WEO 2016 (450) , EUR2015
  17. 17. 17 • Introduction: Objective and Methodology • Energy Vectors: Price Forecasts • Summary • Discussion • Annex Agenda
  18. 18. 18 Source: Reviewed documents; CREARA Analysis EXECUTIVE SUMMARY Coal prices will be moderated by cuts to supply capacity and less demand in the EU (in contrast to increasing demand from emerging countries) CAGR (2020-2050) Max 0.33% Min 0.96% Note: 1Upper range is the Greenpeace [R]evolution scenario in EUR 2009; lower range is the Ecofys scenario (EUR’05); assuming 2% annual inflation, 2005 values can be translated to 2009 values by multiplying prices times 1.08; Only average EU prices are plotted (Enerdata country forecasts are excluded); IEA 450 scenario has not been plotted since it does not include projections to 2050 It is expected that real price increases will be moderate, driven by demand from emerging countries and possibly supply cuts 154 159 164 170 64 69 80 85 0 20 40 60 80 100 120 140 160 180 2020 2030 2040 2050 EUR/tonofcoal Range of projected hard coal prices in EUR/ton1 • Overall, there is no upturn forecasted for global coal demand • On the one hand, efforts towards a strong reduction of greenhouse gas emissions will take place, which has a negative impact on the demand for fossil fuels (Fraunhofer, 2011) - Coal demand in the EU falls by over 60% towards 2040 according to WEO 2016 • On the other hand, the increase in coal price in the medium-term is driven by high demand in emerging countries • The search for market equilibrium depends on cuts to supply capacity, mainly in China and the United States (WEO 2016) • Most of the studies expect coal prices to increase at far lower rates than gas prices • The future of coal largely depends on plant efficiency to reduce pollutant emissions, and the commercial availability of carbon capture and storage COAL
  19. 19. 0 50 100 150 200 250 300 350 20% 30% 40% 50% 60% 70% 80% 90% 100% Coalprice(EUR/ton) RES penetration in 2050 2020 2030 2040 2050 19 Ecofys EWI / Energynautics Eurelectric EC – Roadmap 205 Greenpeace Fraunhofer Enerdata, UK, Blue (industrial) Enerdata, UK, Brown (industrial) Coal prices are not correlated with RES penetration; large price increases are only expected in particular markets under extreme scenarios IEA – 450 Scenario (steam coal) Source: Reviewed documents; CREARA Analysis Note: For Enerdata scenarios, UK industrial price is chosen as it resembles EU wholesale prices; IEA – 450 Scenario is lower than the other ones as it reflects prices for steam coal rather than hard coal EXECUTIVE SUMMARY Wholesale hard coal prices (unless indicated) and RES penetration (%) per reviewed scenario (2020-2050) COAL
  20. 20. 20 215 239 248 252 79 74 56 49 0 50 100 150 200 250 300 2020 2030 2040 2050 EUR/bbl Real oil prices could remain fairly flat (or even decrease) in the long run, mainly due to the expected decline in demand Note: 1 Upper range is EWI/Energynautics (EUR10/boe); lower Fraunhofer (EUR05/boe); assuming 2% annual inflation, 2005 values can be translated to 2010 by multiplying prices times 1.1; Only EU averages have been plotted (Enerdata scenarios are excluded; to consult country forecasts see Annex) Source: Reviewed documents; CREARA Analysis Range of oil prices 2020-2050 in EUR/bbl1 EU Averages • The reviewed scenarios assume efforts will be made to decrease GHG emissions - Oil (and coal) demand will fall in countries making the transition to low-carbon energy systems - Worldwide, in the following decades, it is expected that fossil fuels, in particular natural gas and oil, will continue to be a bedrock of the global energy system (WEO 2016) • Progress in the transition will create a “paradigm shift in demand”, where oil will be increasing replaced by other technologies, leading to a relative oversupply - Oil and gas will be replaced by efficient electric technologies (road transport and household heating) - As such, electricity requirements will increase, but the use of oil and gas for transportation and heating/cooling will decrease • Over the long term, oil demand according to WEO 2016 concentrates in freight, aviation and petrochemicals (areas with few substitutes), while oil supply increasingly concentrates in the Middle East EXECUTIVE SUMMARY Oil projections show uncertainty regarding demand and supply matching, but ultimately only sectors with few oil substitutes will drive demand CAGR (2020-2050) Max 0.5% Min -1.6% OIL
  21. 21. 0 50 100 150 200 250 300 350 400 450 20% 30% 40% 50% 60% 70% 80% 90% 100% Oilprice(EUR/boe) RES penetration in 2050 2020 2030 2040 2050 21 There is no correlation between projected oil prices and RES penetration Enerdata, UK, Brown Enerdata, Sweden, Green IEA – 450 Scenario EWI / Energynautics European Climate Foundation Fraunhofer Ecofys Greenpeace EC – Roadmap 2050 Source: Reviewed documents; CREARA Analysis Note: Enerdata scenarios only include the maximum and minimum prices within the sample EXECUTIVE SUMMARY Oil prices and RES penetration (%) per reviewed scenario (2020-2050) OIL
  22. 22. 22 Real gas prices are projected to increase, but the rate of increase is moderated by the rise in gas supply Note: 1 Upper range is Greenpeace Energy [R]evolution (USD’2010); lower range is Fraunhofer (EUR’2005); assuming 2% annual inflation, 2005 values can be translated to 2010 values by multiplying prices times 1.1; Only EU wholesale averages have been plotted Source: Reviewed documents; CREARA Analysis Max Min CAGR (2020-2050) 1.52% 0.42% Range of wholesale natural gas prices 2020-2050 in EURcent/kWh1 (EU averages) EXECUTIVE SUMMARY Natural gas prices show an increasing trend in the EU, as a result of a strong demand, albeit moderated by expected abundant supply • Most projections forecast a more flexible global market, linked by a doubling of trade in liquefied natural gas (LNG) • Gas consumption increases almost everywhere, but gas exporters have to work hard to control costs in the face of strong competition from other fuels, especially in the power sector (WEO 2016) - High carbon prices would lead to a major shift form coal to natural gas • Future rise in discoveries of natural gas reserves will moderate the increase of natural gas prices • The reviewed studies forecast an increment in natural gas power plants as a backup technology due to the increased amount of RES in the system 6,0 7,0 8,0 9,5 2,8 3,1 3,1 3,2 0 1 2 3 4 5 6 7 8 9 10 2020 2030 2040 2050 EURcent/kWhNATURAL GAS
  23. 23. 0 5 10 15 20 25 20% 30% 40% 50% 60% 70% 80% 90% 100% Gasprice(EURcent/kWh) RES penetration in 2050 2020 2030 2040 2050 23 There is no correlation between assumed RES penetration and future gas prices; future wholesale prices show much less dispersion than industrial Enerdata, Sweden, Brown (industrial) Eurelectric Enerdata, Sweden, Green (industrial) IEA – 450 Scenario EWI / Energynautics Fraunhofer Greenpeace EC – Roadmap 2050 Source: Reviewed documents; CREARA Analysis Note: Enerdata scenarios only include the maximum and minimum prices within the sample and show industrial prices (inc. taxes) EXECUTIVE SUMMARY Wholesale gas prices (except where indicated) and RES penetration (%) per reviewed scenario (2020-2050) Enerdata, Sweden, Blue NATURAL GAS
  24. 24. 24 It is expected that real electricity prices will increase and then stabilize, as techno-economic improvements limit the effects of higher input fuel prices and CO2 prices Note: 1 Upper range is Enerdata Green scenario for Germany and lower range is Enerdata brown scenario for Sweden, both in EUR 2005 Source: Reviewed documents; CREARA Analysis EXECUTIVE SUMMARY It is expected that end-user electricity prices will rise driven by fossil fuel prices, carbon prices, and increasing generation costs from RES CAGR (2020-2050) Max 1.27% Min -0.96% Range of industrial electricity prices in Europe (max: Germany; low: Sweden) in EUR/MWh1 • Most scenarios estimate that average end-user electricity prices will rise and that demand will increase with a considerable shift towards RES - With declining RES costs and an anticipated rise in end-user electricity prices, global subsidies to renewables are on a declining trend (WEO 2016) • Industrial prices are projected to increase in the shorter term driven by the 3 main trends - The increase in world fossil fuel prices - The carbon price within the ETS - The additional costs of power generation induced by carbon emission reductions and RES policies • Wholesale electricity prices, on the other hand, could remain low, as a result of the rapid deployment of RES • In the longer term, it is expected that electricity prices will stabilize, as fossil fuel prices increase at a slower pace and technology performance in power generation succeeds in offsetting the fuel price effects (Eurelectric, 2011; WEO 2016) 140 160 199 205 86 60 64 64 0 50 100 150 200 250 2020 2030 2040 2050 EUR/MWh ELECTRICITY
  25. 25. 0 50 100 150 200 250 20% 30% 40% 50% 60% 70% 80% 90% 100% Electricitywholesaleprice (EURcent/kWh) RES penetration in 2050 2020 2030 2040 2050 25 Enerdata, Sweden, Brown (industrial) Enerdata, Germany, Green (industrial) IEA - WEO 2014 Eurelectric (average price) Source: Reviewed documents; CREARA Analysis Note: Enerdata scenarios show the maximum and minimum values within the analyzed sample EXECUTIVE SUMMARY Wholesale electricity prices (unless indicated) and RES penetration (%) per reviewed scenario (2020-2050) EC – Roadmap 2050 DNV GL / Imperial College / NERA Ecofys It is expected that industrial prices will increase with RES penetration, while wholesale prices could remain fairly flat ELECTRICITY
  26. 26. 26 Source: Reviewed documents; CREARA Analysis EXECUTIVE SUMMARY It is expected that carbon prices will increase almost 4% p.a. towards 2050, making emission-intensive technologies less competitive 25 52 55 80 16 34 38 40 0 20 40 60 80 100 120 140 2020 2030 2040 2050 EUR/tonofcoal Range of projected CO2 prices in EUR’05/ton1 CAGR (2020-2050) Max 3.95% Min 3.38% Note: 1 An annual inflation rate of 2% has been considered; IEA WEO 2016 projections for CO2 are illustrated separately as values are significantly higher than those within most of the other reviewed documents and as it does not include 2050 estimations Carbon prices will rise at an annual rate between 3 and 4%, and will ultimately play an important role in the energy transition • CO2 prices will play a major role in decarbonization strategies making emission- intensive technologies less competitive - Most of the scenarios forecast a decrease in fuel consumption, a trend which is reinforced by increasing carbon prices - High carbon prices would lead to a further reduction in CO2 emissions, due to a major shift form coal to natural gas (among other shifts) • Beyond a certain transition period all countries and sectors will operate in an ideal market for carbon allowances clearing at a single carbon price • Between 2015 and 2020 only ETS sectors pay for carbon emissions, whilst consumers in non ETS sectors are not subject to direct emission constraints but rather reduce emissions as a result of bottom-up policies. After 2020, carbon prices apply on a uniform way for all sectors and countries IEA WEO 2016 (450) CARBON
  27. 27. 27 0 20 40 60 80 100 120 140 160 30% 40% 50% 60% 70% 80% 90% 100% Carbonprice(EUR/ton) RES penetration in 2050 2020 2030 2040 2050 Eurelectric IEA – 450 Scenario DNV GL / Imperial College / NERA EWI / Energynautics European Climate Foundation Fraunhofer EC – Roadmap 2050 All projections see carbon pricing as a driver towards low carbon investments; however, there is a wide variation of estimates Source: Reviewed documents; CREARA Analysis Carbon prices and RES penetration (%) per reviewed scenario (2020-2050) EXECUTIVE SUMMARYCARBON
  28. 28. 28 • Introduction: Objective and Methodology • Energy Vectors: Price Forecasts • Summary • Discussion • Annex Agenda
  29. 29. 29 Discussion around key questions For instance… • …Which trends can we expect from this overview? • …How will long-term energy prices affect industry’s long-term energy strategy? • …Does electrification make sense for energy-intensive industry?
  30. 30. 30 • Introduction: Objective and Methodology • Energy Vectors: Price Forecasts • Summary • Discussion • Annex Agenda
  31. 31. 31 Author Summary of views 1 Ecofys / WWF • PRICE: Energy prices are derived from a comprehensive price set for 2010 and forecasted using annual growth rates of 2% on average, with a range of 1–4% depending on fuel, sector and customer [EIA, 2009] • DEMAND: According to the Ecofys scenario, the world will still need to burn a small amount of coal in 2050 (less than 5 per cent of total energy supply) 2 European Commission, Roadmap 2050 • PRICE: Coal prices increase during the economic recovery period to reach almost 26 USD/boe in 2020 and stabilize at around 30 USD/boe from 2030 onwards • TRENDS: Prices were derived with world energy modelling that shows largely parallel developments of oil and gas prices whereas coal prices remain at much lower levels 3 DNV GL / Imperial College / NERA • PRICE: A moderate increase of coal prices is assumed in most of the scenarios • TRENDS: Same as document 2 (EC – Roadmap 2050) • DEMAND: The decarbonization scenarios reflect that global action on decarbonization will reduce fossil fuel demand worldwide and will therefore have a downward effect on fossil fuel prices 4 Eurelectric • PRICE: The projection shows coal prices between $135 and $150/t of coal (in constant 2008 money terms) between 2020 and 2050 • TRENDS: The model-based analysis also shows that opportunity costs, i.e. the relative prices of competing fuels, drive up coal prices when gas prices increase • DEMAND: The sharp increase in coal price in the medium-term is driven by high demand for coal used in power generation in emerging countries 5 European Climate Foundation • PRICE: Coal increases from $70 per tone today to $109 (real) in 2050 • DEMAND: Coal demand in the 40% RES pathway increases after 2030 due to: increasing coal share along with the increase in power demand FUTURE PRICES Source: Documents as indicated; CREARA Analysis Summary of projections 1 2 3 Coal
  32. 32. 32 Author Summary of views 6 McKinsey • PRICE: - For 2020, the prices for coal are assumed to be USD 100 per metric ton - Until 2030, the price evolution of coal follows the projections from the World Energy Outlook 2009 and would cost USD 109 per ton - From 2030 to 2050, prices are assumed to stay constant at 2030 levels (in real terms), as there are no reliable projections on commodity prices beyond 2030 • DEMAND: In Europe in 2020, 310 TWh would be generated from hard coal and 310 TWh from lignite 7 EWI / Energynautics • PRICE: - 2020: 154.1 USD/ton; 2030: 158.8 USD/ton; 2040: 163.5USD/ton; 2050: 168.1 USD/ton • TRENDS: It is unlikely that prices rise strongly as coal production costs are relatively low compared to production costs of other fossil fuels • DEMAND: Import demand in Asia, especially in China and India, is projected to rise in the future which will support firm trade market prices; however, the amount of reserves will be sufficient to meet the increasing demand 8 Greenpeace Energy [r]evolution • PRICE: - 2020: 145 USD/ton; 2030: 150 USD/ton; 2040: 160 USD/ton; 2050: 175 USD/ton • DEMAND: Reference scenario expects an increasing annual coal demand of almost 11,000 million tones by 2050 while the [R] scenario predicts a reduction from 2020 onwards, reaching around 1,000 million tones in 2050 9 Greenpeace Power[r] 2030 • PRICE: According to this scenario’s assumptions, costs for the year 2030 result to 8.30 € per MWh for coal and 2.10 € per MWh for lignite 11 Fraunhofer ISI • PRICE: This scenario assumes a moderate development of coal gas price from 13.74 USD/MWh in 2020 to 18.67 USD/MWh in 2050 • DEMAND: Worldwide efforts towards a strong reduction of greenhouse gas emission will take place, which has a negative impact on the demand for fossil fuels FUTURE PRICES 1 2 3 Coal Summary of projections Source: Documents as indicated; CREARA Analysis
  33. 33. 33 Author Summary of views 1 Ecofys / WWF • VOLUME: According to the IEA , production from known oil and gas reserves will fall by around 40-60 per cent by 2030. • DEMAND: Supplies of cheap, conventional oil and gas are declining while our energy demands continue to increase. • SUPPLY: Global energy provided by year (EJ/a), for electricity: 2010 3.1, 2020 2.5, 2030 1.4 , 2040 0.5, 2050 0.0 • PRICE: (Real price in 2005, 6.22 EUR/GJ (index:100)); in 2020 150, in 2030 180, in 2040 240, in 2050 300 2 European Commission • SUPPLY: The Roadmap (…) aims to introduce profound changes in passenger and freight transport patterns, resulting in a competitive transport sector which allows increased mobility, cuts CO2 emissions to 60% below 1990 levels by 2050 and breaks the transport system's dependence on oil. Oil products would still represent 88% of EU transport sector needs in 2030 and 2050 in the Reference scenario. • PRICE: Oil price: 88$’08/bbl in 2020, 106$’08/bbl in 2030 and 127 $08/barrel in 2050 with 2% inflation (ECB target) this corresponds to some 300 $ in 2050 in nominal terms. The scenarios achieving the European Council's GHG objective have lower fossil fuel prices as a result of lower global demand for fossil fuels reflecting worldwide carbon policies (oil price is 84 USD'08 per bbl in 2020; 79 in 2030 and 70 in 2050). • TRENDS: See slides in “Reviewed scenarios (Near 100% RES)” 3 DNV GL / Imperial College / NERA • PRICE: (same as 2: EU Commission, 2050 Roadmap) FUTURE PRICES 1 2 3 Oil Summary of projections (1/3) Source: Documents as indicated; CREARA Analysis
  34. 34. 34 Author Summary of views 4 Eurelectric • DEMAND/PRICE/IMPORTS: A paradigm shift on the demand side: oil and gas replaced by efficient electric technologies (road transport and household heating). Increasing energy efficiency in energy demand combined with de- carbonization of the energy system could lead to a relative oversupply of fossil fuels at World level. If that is the case, oil prices would collapse to values close to their historical lows when the World acts in unison . • Oil import requirements by 2050 are, in the Power Choices scenario, 52% below their level in 2005; this is a remarkable disengagement by the energy system from oil. For the whole period after 2010, the Power Choices scenario exhibits a steady decrease in net oil imports, which has important consequences also in terms of reducing oil import dependency. • VOLUME: There is significant uncertainty about the volume of undiscovered conventional oil reserves. The expectations accepted for the projection are that undiscovered conventional oil will deliver close to 750 billion barrels of oil to 2050; this compares to around 1350 billion barrels of oil in known reserves of conventional oil • PRICE (same as 2): Fossil fuel Prices as imported to the EU ($’2008), 2010: 71.9, 2015: 72.6, 2020:88.4, 2025: 101.6, 2030: 105.9, 2035: 111.2, 2040: 116.2, 2045: 120.4, 2050: 126.8 Source: Prometheus model (E3MLab) 5 European Climate Foundation • PRICE: The 450 scenario assumes an increase in oil price to $87 per barrel in 2015 and to $115 in 2030 (all numbers in real terms). Beyond 2030 prices are assumed flat in real terms (i.e., increasing at the general inflation rate) • VOLUME: This is likely conservative as a baseline assumption, as it assumes that none of the three primary fossil fuels used will become significantly scarcer in the two decades beyond 2030 • DEMAND: A rough estimate shows that the demand for oil and coal would reduce by about 60% (by 2050) 7 EWI / Energynautics • PRICE: After the price of oil peaked at 125 USD/barrel in 2008 it rapidly came down to values well below 70 USD/barrel. Since then the oil price has been subject to increase and is now at about 100 USD/barrel. In the LT, the oil price is expected to significantly increase until 2020 and at moderate rates from then on, such that it reaches 116 EUR10/MWh (see slides in “Reviewed scenarios (Near 100% RES)” for values in BOE) FUTURE PRICES 1 2 3 Oil Summary of projections (2/3) Source: Documents as indicated; CREARA Analysis
  35. 35. 35 Author Summary of views 8 Greenpeace ([R]evolution) • PRICE: The recent dramatic fluctuations in global oil prices have resulted in slightly higher forward price projections for fossil fuels. Under the 2004 ‘high oil and gas price’ scenario from the European Commission, for example, an oil price of just € 28 per barrel (/bbl) as assumed in 2030. More recent projections of oil prices by 2035 in the IEA’s WEO 2011 range from € 80/bbl in the 450 ppm scenario up to € 116/bbl in current policies scenario. Since the first Energy [R]evolution study was published in 2007, however, the actual price of oil has reached over € 83/bbl for the first time, and in July 2008 reached a record high of more than € 116/bbl. Although oil prices fell back to € 83/bbl in September 2008 and around € 66/bbl in April 2010, prices have increased to more than € 91/bbl in early 2012. Taking into account the growing global demand for oil we have assumed a price development path for fossil fuels slightly higher than the IEA WEO 2011 “Current Policies” case extrapolated forward to 2050 (see slides in “Reviewed scenarios (Near 100% RES)”; in 2050 prices are expected to reach 126 EUR10 per barrel) 9 Greenpeace (Powe[r] 2030) • PRICE: Same as nº8 11 Fraunhofer ISI • PRICE: Source: Schade & Jochem (2009) and own calculations, in EUR/MWh 2008 50.23, 2020 48.31, 2030 45.22, 2040 34.31, and 2050 30.15 • DEMAND: The moderate development of coal and gas prices and the decline in oil prices is surprising at first sight. This development can be explained by the underlying assumption in the ADAM scenario that worldwide efforts towards a strong reduction of greenhouse gas emission will take place, which has a negative impact on the demand for fossil fuels 13 Jacobson, M. et al. • DEMAND: Electricity-powered air-and ground-source heat pumps, heat exchangers, and back up electric resistance heaters will replace natural gas and oil for home heating and air conditioning. As such, electricity requirements will increase, but the use of oil and gas for transportation and heating/cooling will decrease to zero • VOLUME: Due to the eventual depletion of coal, oil, natural gas, and uranium resources, their prices should ultimately rise although technology improvements may delay this rise • PRICE: Gasoline, all grades (2009 dollars/MMBTU), 2009: $19.30 2030 $40.39 109% (Percent change 2009-2030) FUTURE PRICES 1 2 3 Oil Summary of projections (3/3) Source: Documents as indicated; CREARA Analysis
  36. 36. 36 Author Summary of views 1 Ecofys / WWF • VOLUME: According to the IEA , production from known oil and gas reserves will fall by around 40-60 per cent by 2030. • DEMAND: Supplies of cheap, conventional oil and gas are declining while our energy demands continue to increase. • SUPPLY: Global energy provided by year (EJ/a), for electricity: 2010 14.0, 2020 25.6, 2030 28.3 , 2040 20.1, 2050 0.0 • PRICE: (Real price in 2005, 3.15 EUR/GJ (index:100)); in 2020 160, in 2030 200, in 2040 300, in 2050 380 2 European Commission • SUPPLY: The power generation and capacity from solids decrease throughout the projection period due to increasing carbon prices that reduce the competitiveness of this technology; gas power generation capacity increases, also as peak load activated during backup periods due to the increased amount of RES in the system • DEMAND: The decarbonisation scenarios are based on "global climate action" price trajectories for oil, gas and coal reflecting that global action on decarbonisation will reduce fossil fuel demand worldwide and will therefore have a downward effect on fossil fuel prices. Oil, gas and coal prices are therefore lower than in the Reference scenario and Current Policy Initiative scenario. • PRICE: Gas prices follow a trajectory similar to oil prices reaching 62$’08/boe in 2020, 77$’08/boe in 2030 and 98 $(08)/boe in 2050 (...). The price development to 2050 is expected to take place in a context of economic recovery and resuming GDP growth without decisive climate action in any world region. Prices were derived with world energy modelling that shows largely parallel developments of oil and gas prices whereas coal prices remain at much lower levels. (...) The higher oil prices result in substitution of oil for gas in markets where the two fuels compete. The reduction in oil discoveries also implies a reduction in future reserves of associated gas. On the other hand gas price increases are moderated by an increasing share of unconventional gas from shales, as technology improves and the interest in its potential spreads beyond North America. 3 DNV GL / Imperial College / NERA • PRICE: (same as 2: EU Commission, 2050 Roadmap) FUTURE PRICES 1 2 3 Gas Summary of projections (1/3) Source: Documents as indicated; CREARA Analysis
  37. 37. 37 Author Summary of views 4 Eurelectric • DEMAND/PRICE/IMPORTS: A paradigm shift on the demand side: oil and gas replaced by efficient electric technologies (road transport and household heating). Increasing energy efficiency in energy demand combined with de-carbonisation of the energy system could lead to a relative oversupply of fossil fuels at World level. If that is the case, gas prices would tend to hold in the medium term but tend to be lower in the longer term. • VOLUME: It is assumed that 130 trillion cubic meters of gas will be discovered to 2050, compared to 170 trillion cubic meters of gas reserves known today. This volume of gas includes tight gas and coal-bed gas exploited today or expected to be exploited in North America but not unconventional gas, such as hydrates. • PRICE (same as 2): Fossil fuel Prices as imported to the EU ($’2008/MBTU), 2010: 7.7, 2015: 8.1, 2020: 10.1, 2025: 12.2, 2030: 12.5, 2035: 13.4, 2040: 14.2, 2045: 15.0, 2050: 16.1 Source: Prometheus model (E3MLab) 5 European Climate Foundation • PRICE: Fossil fuel prices are modeled as per the IEA WEO 2009 “450 Scenario” (which projects lower future prices than the WEO 2009 “Reference” scenario due to the assumption of lower future demand). The WEO 2009 projections carry out to 2030, after which prices have been assumed to stay flat in real terms through 2050 (...) Natural gas increases from $8.90 to $14.80 per mmBtu (...) This study assumes that the fossil fuel prices in the baseline are the same as in the decarbonized pathways, even though Europe will use less fossil fuel in the latter situation. 6 McKinsey • PRICE: For 2020, the price for coal and natural gas are assumed to be USD 100 per metric ton and, and USD 10 per million British thermal units (MMBtu), respectively (all numbers in real terms). Until 2030, the price evolution of coal, and natural gas follows the projections from the World Energy Outlook 2009, i.e. in 2030, coal would cost USD 109 per ton, and natural gas USD 15 per MMBtu in the European market. From 2030 to 2050, prices are assumed to stay constant at levels 2030 (in real terms), as there are no reliable projections on commodity prices beyond 2030 7 EWI / Energynautics • PRICE: The price of natural gas was historically closely linked to the oil price due to its substitutional relationship. However, it is expected that in the future gas markets will be more competitive and prices will be less influenced by oil price movements. Due to its characteristic of being a scarce resource, prices are assumed to increase from 28 EUR2010/MWhth to 35 EUR2010/MWhth in the long term – Price of gas for generation (EUR’2010/MWhth): in 2008 25.1, in 2020 28.1, in 2030 31.3, in 2040 33.2, in 2050 35.2 FUTURE PRICES 1 2 3 Gas Summary of projections (2/3) Source: Documents as indicated; CREARA Analysis
  38. 38. 38 Author Summary of views 8 Greenpeace Energy [R]evolution • DEMAND: Demand is expected to grow in Europe from 89 PJ/a in 2009 to 125 PJ/a in 2015, 131 PJ/a in 2020, 175 PJ/a in 2030, 222 in PJ/a in 2040 and 227 PJ/a in 2050 • PRICE: As the supply of natural gas is limited by the availability of pipeline infrastructure, there is no world market price for gas. In most regions of the world the gas price is directly tied to the price of oil. Gas prices are therefore assumed to increase to $24-30/GJ by 2050 – Energy [R] evolution 2012 ($’2010/GJ): in 2010 7.91, in 2015 14.22, in 2020 16.78, in 2025 18.22, in 2030 19.54, in 2035 20.91, in 2040 22.29, in 2050 26.37 It is expected that an effective gas market will develop using the existing global distribution network for liquid gas via tankers and loading terminals. With greater competitiveness regards price fixing, it is expected that the oil and gas prices will no longer be linked. Having more liquid gas in the energy mix (currently around 10 % of overall gas consumption) significantly increases supply security, e.g. reducing the risks of supply interruptions associated with international pipeline networks. 9 Greenpeace Powe[r] 2030 • PRICE: 21.60 €/MWh in 2030 (based on the 2020 and 2030 assumptions of the Energy [R]evolution for EU 27 report published in December 2012) 11 Fraunhofer ISI • PRICE: The moderate development of coal and gas prices and the decline in oil prices is surprising at first sight. This development can be explained by the underlying assumption in the ADAM scenario that worldwide efforts towards a strong reduction of greenhouse gas emission will take place, which has a negative impact on the demand for fossil fuels. – Input prices for natural gas (€/MWh): in 2008 27.11, in 2020 28.74, 2030 30.84, 2040 31.07, 2050 31.82. Source: Schade & Jochem (2009) and own calculations 13 Jacobson, M. et al. • PRICE: Projected unit costs of natural gas over the period 2009-2030 in New York State. Source: New York State Energy Planning Board, 2009) – Natural gas – electric ($’2009/MMBtu): in 2009 19.30, in 2030 40.39 – Natural gas – residential ($’2009/MMBtu): in 2009 13.58, in 2030 16.19 – Natural gas – commercial ($’2009/MMBtu): in 2009 10.27, in 2030 13.06 – Natural gas – industrial ($’2009/MMBtu): in 2009 8.73, in 2030 11.98 FUTURE PRICES 1 2 3 Gas Summary of projections (3/3) Source: Documents as indicated; CREARA Analysis
  39. 39. 39 Author Summary of views 1 Ecofys / WWF • PRICE: (Wholesale real price in 2005, 0.03 EUR/kWh (index:100)); in 2020 160, in 2030 200, in 2040 300, in 2050 380 2 European Commission • SUPPLY: The demand for electricity continues rising and there is a considerable shift towards RES with a strong increase in wind. • DEMAND: Electricity demand is particularly sensitive to variations in economic activity. With limited possibilities for electricity imports this translates into a similar requirement on the generation of electricity in the EU. In the high economic growth case with 15% higher GDP in 2050, gross electricity generation exceeds the 2050 reference case level by 9.2%. Similarly, 14.7% lower economic activity in 2050 entails 10.2% less electricity generation in 2050. • PRICE: Average electricity prices rise up to 2030 and stabilize thereafter. The price increase up to 2030 is due to three main elements: RES supporting policies, ETS carbon price and high fuel prices due to the world recovery after the economic crisis. Thereafter electricity prices remain stable because of the techno-economic improvements of various power generation technologies that limit the effects of higher input fuel prices and CO2 prices. – Reference Scenario (EUR/MWhe): Industry: in 2005 74.7, in 2030 107.0, in 2050 104.2; Household: in 2005 140.7, in 2030 207.2, in 2050 201.3; Services: in 2005 131.3, in 2030 173.1, in 2050 166.3 – Scenario 6 – Low nuclear scenario (EUR/MWhe): Industry: in 2030 118.8, in 2050 119.2; Household: in 2030 218.4, in 2050 208.3; Services: in 2030 180.9, in 2050 171.6 Effects on cost components allow for a decrease in electricity prices between 2030 and 2050 in all decarbonisation scenarios, except for the High RES scenario. This is in stark contrast to the period up to 2030, in which electricity prices increase due notably to increases in capital cost, grid costs and auctioning payments. The High RES case is an exception from other cases because of the very high investment requirements combined with stronger requirements on the electricity grid extension, which is not fully compensated by savings in fuel and other variable costs. 3 DNV GL / Imperial College / NERA • PRICE: Average wholesale electricity price (EUR/MWh): – Scenario 1: 60, 75 and 75 in 2020, 2025 and 2030 – Scenario 2: 60, 75 and 82 in 2020, 2025 and 2030 – Scenario 3: 58, 81 and 98 in 2020, 2025 and 2030 FUTURE PRICES 1 2 3 Elec Summary of projections (1/2) Source: Documents as indicated; CREARA Analysis
  40. 40. 40 Author Summary of views 4 Eurelectric • DEMAND: Electricity accounted for 20% of total final energy demand in 2005. Business-as-usual projections, such as the Baseline 2009, show an increase of electricity’s share up to 28-29% of total final energy demand by 2050. • PRICE: The average price of electricity is projected to remain at a similar level in both Power choices and the Baseline 2009 scenarios. Prices strongly increase until 2025, driven by the increase in world fossil fuel prices (which is projected to take place during the period of recovery of world economic growth), carbon price within the ETS and the additional costs of power generation induced by carbon emission reductions and RES policies. Beyond 2025, electricity prices are projected to remain rather stable, as fossil fuel prices increase at a slower pace and technology performance in power generation succeeds in offsetting the fuel price effects. – Baseline 2009 scenario - average energy prices (EUR/MWh): in 2000 95, in 2015 125, in 2020 137, in 2030 145, in 2040 144, in 2050 145 – Power Choice scenario - average energy prices (EUR/MWh): in 2000 95, in 2015 130, in 2020 140, in 2030 146, in 2040 140, in 2050 144 10 EWI / Energynautics • PRICE: According to the advanced E[R] scenario, the aggregated electricity price in 2030 will be approximately 10 cents/kWh. 12 Jacobson, M. et al. • PRICE: Assumes a 2.85% increase in electricity cost per year from 2011 to 2030 for conventional generators, which is the average all-sector price increase in electricity in California from 2000 to 2012. FUTURE PRICES 1 2 3 Elec Summary of projections (2/2) Source: Documents as indicated; CREARA Analysis
  41. 41. 41 Author Summary of views 2 European Commission, Roadmap 2050 • PRICE: Different scenarios range between 15 to 25 EUR/ton in 2020 and between 30 to 52 EUR/ton in 2030 3 DNV GL / Imperial College / NERA • PRICE: All three scenarios considered in this study are characterized by increasing carbon prices; moreover, decarbonization scenarios assume a drastic increase in carbon prices post 2030 4 Eurelectric • PRICE: Evidently, carbon prices will increase from today’s levels, driving restructuring investments away from carbon intensive generation and, among others, favoring RES development • TRENDS: Beyond a certain transition period all countries and sectors will operate in an ideal market for carbon allowances clearing at a single carbon price; For 2020, carbon prices cover the ETS market only, whereas for subsequent years they cover a carbon market extended to all sectors of the EU 27 7 EWI / Energynautics • PRICE: The challenging CO2 target in 2020 induces prices in the range of 50-55 EUR’10/t CO2. In the long run, the costs of CO2 emissions level out at around 50 EUR’10/t CO2 • TRENDS: CO2 emissions are significantly reduced in both scenarios (by assumption), requiring strong CO2 price signals 8 Greenpeace Energy [r]evolution • PRICE: The CO2 costs assumed in 2050 are often higher than those included in this Energy [R]evolution study (75 USD/ton), reflecting estimates of the total external costs of CO2 emissions. The CO2 cost estimates in the 2010 version of Energy [R]evolution were rather conservative (50 USD/ton) 9 Greenpeace Powe[r] 2030 • PRICE: a range from 5 Euro per ton (price in February 2014), 20 EUR (price during the first half 2008) up to 40 EUR (Projection from Mantzos, Papandreou and Tasios 2008) has been calculated 11 Fraunhofer • PRICE: This study expects the highest carbon price, reaching 80 EUR/ton in 2050 • TRENDS: In the given scenarios, higher CO2 prices would slightly increase the profitability of additional RES-E generation or infrastructure; higher CO2 prices shift the profitability of CO2-intensive technologies towards less CO2 intensive technologies and vice versa FUTURE PRICES 1 2 3 Carbon Summary of projections Source: Documents as indicated; CREARA Analysis
  42. 42. 42 Author Country 2020E 2030E 2040E CAGR 10-20E CAGR 20-30E CAGR 30-40E Enerdata Bituminous Coal Households (incl. taxes) ($05/t) United Kingdom 516.8 1,713.7 2,824.3 0.5% 12.7% 5.1% France 594.4 1,916.6 3,175.1 -0.3% 12.4% 5.2% Industry (incl. taxes) ($05/t) United Kingdom 188.4 876.8 1,757.9 4.6% 16.6% 7.2% France 227.5 1134.4 2,295.0 6.3% 17.4% 7.3% Sweden 280.7 1,185.8 2,344.2 5.1% 15.5% 7.1% Germany 238.2 1,163.0 2,346.4 5.2% 17.2% 7.3% Electricity production (incl. taxes) ($05/t) France 137.2 736.2 1,502.8 3.8% 18.3% 7.4% Germany 134.8 740.0 1,514.6 2.8% 18.6% 7.4% United Kingdom 142.2 801.8 1,646.0 3.7% 18.9% 7.5% Sweden 203.2 1,108.4 2,266.8 5.1% 18.5% 7.4% Enerdata coal projections under Green Scenario FUTURE PRICES 1 2 3 Coal Note: Maximum values per year are coloured in red and minimum in green Source: Enerdata Global Energy & CO2 Database, POLES Global energy forecasting model
  43. 43. 43 Author Country 2020E 2030E 2040E CAGR 10-20E CAGR 20-30E CAGR 30-40E Enerdata Bituminous Coal Households (incl. taxes) ($05/t) United Kingdom 540.9 909.1 950.7 1.0% 5.3% 0.4% France 588.1 946.4 990.4 -0.4% 4.9% 0.5% Industry (incl. taxes) ($05/t) United Kingdom 133.6 256.3 289.4 1.0% 6.7% 1.2% France 132.5 273.1 311.2 0.7% 7.5% 1.3% Germany 141.4 284.8 323.6 -0.1% 7.3% 1.3% Sweden 185.9 326.3 364.2 0.9% 5.8% 1.1% Electricity production (incl. taxes) ($05/t) France 90.7 203.8 234.4 -0.4% 8.4% 1.4% Germany 88.1 203.9 235.2 -1.5% 8.8% 1.4% United Kingdom 91.7 219.9 254.6 -0.8% 9.1% 1.5% Sweden 108.4 248.8 286.7 -1.3% 8.7% 1.4% Enerdata coal projections under Blue Scenario FUTURE PRICES 1 2 3 Coal Note: Maximum values per year are coloured in red and minimum in green Source: Enerdata Global Energy & CO2 Database, POLES Global energy forecasting model
  44. 44. 44 Author Country 2020E 2030E 2040E CAGR 10-20E CAGR 20-30E CAGR 30-40E Enerdata Bituminous Coal Households (incl. taxes) ($05/t) United Kingdom 490.2 555.7 585.5 0.0% 1.3% 0.5% France 502.4 569.6 600.2 -2.0% 1.3% 0.5% Industry (incl. taxes) ($05/t) United Kingdom 133.7 165.0 191.0 1.0% 2.1% 1.5% France 127.6 162.8 192.1 0.4% 2.5% 1.7% Germany 138.4 174.3 204.1 -0.3% 2.3% 1.6% Sweden 182.4 217.5 246.7 0.7% 1.8% 1.3% Electricity production (incl. taxes) ($05/t) Germany 88.5 118.4 143.3 -1.4% 3.0% 1.9% France 91.5 121.4 146.3 -0.3% 2.9% 1.9% United Kingdom 92.1 125.2 152.8 -0.7% 3.1% 2.0% Sweden 104.9 140.0 169.2 -1.6% 2.9% 1.9% Enerdata coal projections under Brown Scenario FUTURE PRICES 1 2 3 Coal Note: Maximum values per year are coloured in red and minimum in green Source: Enerdata Global Energy & CO2 Database, POLES Global energy forecasting model
  45. 45. 45 Author Country 2020E 2030E 2040E CAGR 10-20E CAGR 20-30E CAGR 30-40E Enerdata Oil Light fuel oil ($05/kl) Germany 656.1 1,893.1 2,975.1 -1.2% 11.2% 4.6% Spain 698.9 1,998.7 3,082.8 -0.9% 11.1% 4.4% United Kingdom 689.8 2,028.8 3,167.3 -2.2% 11.4% 4.6% France 834.6 2,211.7 3,416.3 0.1% 10.2% 4.4% Sweden 1,561.0 3,305.1 4,747.6 1.0% 7.8% 3.7% Heavy fuel oil ($05/t) United Kingdom 451.2 1,205.3 2,139.1 -3.6% 10.3% 5.9% Germany 403.0 1,214.0 2,218.5 -1.1% 11.7% 6.2% Spain 450.4 1,278.9 2,305.0 -0.4% 11.0% 6.1% France 558.5 1,518.9 2,708.4 1.7% 10.5% 6.0% Sweden 1,050.0 2,117.1 3,438.5 0.2% 7.3% 5.0% Premium gasoline ($05/l) Spain 1.3 2.7 3.9 0.1% 7.7% 3.7% Germany 1.5 2.9 4.2 -0.7% 6.8% 3.6% France 1.6 3.0 4.3 0.0% 6.8% 3.6% United Kingdom 1.6 3.1 4.4 -1.4% 6.7% 3.5% Sweden 1.6 3.2 4.5 0.1% 6.9% 3.5% Enerdata oil projections under Green Scenario FUTURE PRICES 1 2 3 Oil Note: Maximum values per year are coloured in red and minimum in green Source: Enerdata Global Energy & CO2 Database, POLES Global energy forecasting model
  46. 46. 46 Author Country 2020E 2030E 2040E CAGR 10-20E CAGR 20-30E CAGR 30-40E Enerdata Oil Light fuel oil ($05/kl) Germany 728.4 1,223.2 1,387.7 -0.2% 5.3% 1.3% United Kingdom 766.7 1,330.4 1,505.6 -1.1% 5.7% 1.2% Spain 763.9 1,369.0 1,545.6 0.0% 6.0% 1.2% France 912.7 1,458.2 1,639.5 1.0% 4.8% 1.2% Sweden 1,579.9 2,287.3 2,493.7 1.1% 3.8% 0.9% Heavy fuel oil ($05/t) Germany 355.6 571.5 692.0 -2.4% 4.9% 1.9% United Kingdom 404.8 601.3 711.1 -4.6% 4.0% 1.7% Spain 400.6 618.6 740.4 -1.5% 4.4% 1.8% France 499.7 750.7 890.9 0.5% 4.2% 1.7% Sweden 979.8 1,250.3 1,401.4 -0.5% 2.5% 1.1% Premium gasoline ($05/l) Spain 1.4 2.0 2.1 0.5% 3.8% 0.8% Germany 1.6 2.1 2.3 -0.2% 2.9% 0.7% France 1.6 2.2 2.3 0.5% 2.9% 0.7% United Kingdom 1.7 2.3 2.4 -1.0% 3.0% 0.7% Sweden 1.7 2.3 2.5 0.6% 3.2% 0.7% FUTURE PRICES 1 2 3 Oil Enerdata oil projections under Blue Scenario Note: Maximum values per year are coloured in red and minimum in green Source: Enerdata Global Energy & CO2 Database, POLES Global energy forecasting model
  47. 47. 47 Author Country 2020E 2030E 2040E CAGR 10-20E CAGR 20-30E CAGR 30-40E Enerdata Oil Light fuel oil ($05/kl) Germany 628.0 871.8 1,135.7 -1.6% 3.3% 2.7% Spain 691.8 929.9 1,187.6 -1.0% 3.0% 2.5% United Kingdom 672.2 925.6 1,199.8 -2.4% 3.3% 2.6% France 792.1 1,041.2 1,310.8 -0.4% 2.8% 2.3% Sweden 1,311.7 1,525.3 1,756.4 -0.8% 1.5% 1.4% Heavy fuel oil ($05/t) United Kingdom 399.0 546.4 729.2 -4.8% 3.2% 2.9% Spain 401.4 574.4 788.9 -1.5% 3.6% 3.2% Germany 387.1 598.7 861.1 -1.5% 4.5% 3.7% France 499.9 698.1 943.9 0.5% 3.4% 3.1% Sweden 937.6 1,095.2 1,290.6 -1.0% 1.6% 1.7% Premium gasoline ($05/l) Spain 1.3 1.4 1.6 -0.2% 1.3% 1.2% Germany 1.5 1.6 1.8 -1.1% 1.1% 1.0% France 1.5 1.7 1.9 -0.4% 1.2% 1.1% United Kingdom 1.6 1.7 1.9 -1.7% 1.1% 1.0% Sweden 1.6 1.8 2.0 -0.1% 1.1% 1.0% FUTURE PRICES 1 2 3 Oil Enerdata oil projections under Brown Scenario Note: Maximum values per year are coloured in red and minimum in green Source: Enerdata Global Energy & CO2 Database, POLES Global energy forecasting model
  48. 48. 48 Author Country 2020E 2030E 2040E CAGR 10-20E CAGR 20-30E CAGR 30-40E Enerdata Natural Gas Household (USc05/kWh) Spain 6.5 16.8 24.4 0.5% 10.0% 3.8% France 6.2 18,0 27.2 -0.4% 11.2% 4.2% UK 6.0 18.6 28.1 0.3% 11.9% 4.2% Germany 7.0 19.8 29.8 -0.4% 10.9% 4.2% Sweden 12.4 27.0 37.8 0.2% 8.1% 3.4% Industry (USc05/kWh) UK 3.2 9.5 17.0 1.0% 11.4% 6.0% Spain 3.2 9.5 17.0 1.4% 11.4% 6.0% Germany 4.1 11.7 20.7 0.5% 11.0% 5.9% France 4.7 12.5 21.8 2.7% 10.2% 5.7% Sweden 5.5 13.3 22.7 0.1% 9.2% 5.5% Electricity production (USc05/kWh) Germany 3.5 11.1 20.1 1.0% 12.1% 6.2% Spain 3.5 11.3 20.6 5.3% 12.4% 6.2% UK 22.1 31.3 31.5 1.6% 3.5% 0.1% FUTURE PRICES 1 2 3 Gas Enerdata gas projections under Green Scenario Note: Maximum values per year are coloured in red and minimum in green Source: Enerdata Global Energy & CO2 Database, POLES Global energy forecasting model
  49. 49. 49 Author Country 2020E 2030E 2040E CAGR 10-20E CAGR 20-30E CAGR 30-40E Enerdata Natural Gas Household (USc05/kWh) France 7.1 11.9 12.7 0.9% 5.3% 0.6% Spain 7.1 12.0 12.7 1.4% 5.4% 0.6% UK 6.9 12.3 13.1 1.7% 6.0% 0.6% Germany 7.9 13.1 14.0 0.8% 5.2% 0.6% Sweden 12.9 19.0 19.9 0.5% 4.0% 0.4% Industry (USc05/kWh) UK 2.7 4.4 5.0 -0.6% 4.9% 1.2% Spain 2.8 4.4 5.0 -0.2% 4.9% 1.2% Germany 3.4 5.3 6.0 -1.4% 4.6% 1.2% France 4.0 6.0 6.6 1.0% 4.1% 1.1% Sweden 4.7 6.7 7.4 -1.3% 3.6% 1.0% Electricity production (USc05/kWh) UK 1.9 3.3 3.8 -2.0% 5.7% 1.4% Germany 2.8 4.7 5.4 -1.3% 5.4% 1.3% Spain 2.8 4.7 5.4 2.9% 5.5% 1.3% FUTURE PRICES 1 2 3 Gas Enerdata gas projections under Blue Scenario Note: Maximum values per year are coloured in red and minimum in green Source: Enerdata Global Energy & CO2 Database, POLES Global energy forecasting model
  50. 50. 50 Author Country 2020E 2030E 2040E CAGR 10-20E CAGR 20-30E CAGR 30-40E Enerdata Natural Gas Household (USc05/kWh) UK 5.9 7.0 8.0 0.2% 1.7% 1.3% France 6.0 7.1 8.0 -0.7% 1.6% 1.2% Spain 6.7 7.6 8.4 0.8% 1.3% 1.0% Germany 6.8 8.0 9.0 -0.7% 1.6% 1.2% Sweden 12.0 13.2 14.2 -0.1% 0.9% 0.7% Industry (USc05/kWh) UK 2.3 3.1 3.9 -2.1% 2.8% 2.4% Germany 2.8 3.6 4.5 -3.2% 2.5% 2.2% France 3.5 4.3 5.2 -0.4% 2.1% 1.9% Sweden 4.3 5.2 6.1 -2.2% 1.7% 1.6% Spain 4.3 5.2 6.1 -2.2% 1.7% 1.6% Electricity production (USc05/kWh) UK 1.6 2.2 2.9 -3.9% 3.4% 2.8% Spain 2.1 2.9 3.8 0.2% 3.3% 2.7% Germany 2.2 3.0 3.9 -3.6% 3.1% 2.6% FUTURE PRICES 1 2 3 Gas Enerdata gas projections under Brown Scenario Note: Maximum values per year are coloured in red and minimum in green Source: Enerdata Global Energy & CO2 Database, POLES Global energy forecasting model
  51. 51. 51 Author Country 2020E 2030E 2040E CAGR 10-20E CAGR 20-30E CAGR 30-40E Enerdata Electricity Household (USc05/kWh) France 19.1 29.0 29.3 2.8% 4.3% 0.1% Sweden 17.9 30.1 30.8 -0.8% 5.3% 0.2% UK 22.1 31.3 31.5 1.6% 3.5% 0.1% Spain 24.8 35.1 34.9 1.9% 3.5% 0.0% Germany 36.0 46.1 46.0 2.7% 2.5% 0.0% Industry (USc05/kWh) Sweden 6.7 9.8 10.2 -2.5% 3.9% 0.4% France 11.7 13.8 13.6 3.1% 1.7% -0.2% UK 14.8 15.8 15.4 1.8% 0.7% -0.3% Spain 16.3 19.1 18.9 4.0% 1.6% -0.1% Germany 16.0 19.9 20.5 3.1% 2.2% 0.3% FUTURE PRICES 1 2 3 Elec Enerdata electricity projections under Green Scenario Note: Maximum values per year are coloured in red and minimum in green Source: Enerdata Global Energy & CO2 Database, POLES Global energy forecasting model
  52. 52. 52 Author Country 2020E 2030E 2040E CAGR 10-20E CAGR 20-30E CAGR 30-40E Enerdata Electricity Household (USc05/kWh) France 20.4 24.7 23.1 3.5% 1.9% -0.7% Sweden 18.6 24.8 23.4 -0.4% 2.9% -0.6% UK 22.6 26.7 25.1 1.8% 1.7% -0.6% Spain 24.8 29.9 28.5 1.9% 1.9% -0.5% Germany 35.9 40.3 38.6 2.6% 1.2% -0.4% Industry (USc05/kWh) Sweden 6.4 7.7 7.7 -2.9% 1.9% 0.0% France 11.3 11.8 11.0 2.8% 0.4% -0.7% UK 14.0 13.1 11.9 1.2% -0.6% -1.0% Spain 15.7 15.9 14.7 3.6% 0.2% -0.8% Germany 15.0 15.7 14.8 2.4% 0.5% -0.6% FUTURE PRICES 1 2 3 Elec Enerdata electricity projections under Blue Scenario Note: Maximum values per year are coloured in red and minimum in green Source: Enerdata Global Energy & CO2 Database, POLES Global energy forecasting model
  53. 53. 53 Author Country 2020E 2030E 2040E CAGR 10-20E CAGR 20-30E CAGR 30-40E Enerdata Electricity Household (USc05/kWh) Sweden 16.5 16.1 15.4 -1.6% -0.2% -0.5% France 17.7 16.8 16.1 2.1% -0.5% -0.5% UK 20.4 19.8 19.1 0.8% -0.3% -0.4% Spain 22.7 21.2 20.6 1.0% -0.7% -0.3% Germany 33.0 32.4 31.7 1.8% -0.2% -0.2% Industry (USc05/kWh) Sweden 6.0 6.4 6.4 -3.6% 0.6% 0.1% France 10.3 9.6 9.5 1.8% -0.7% -0.1% UK 12.4 11.3 10.6 0.0% -0.9% -0.7% Spain 15.1 14.0 13.3 3.2% -0.7% -0.5% Germany 13.8 13.6 13.6 1.6% -0.1% 0.0% FUTURE PRICES 1 2 3 Elec Enerdata electricity projections under Brown Scenario Note: Maximum values per year are coloured in red and minimum in green Source: Enerdata Global Energy & CO2 Database, POLES Global energy forecasting model
  54. 54. 54 INTRODUCTION Enerfuture scenarios vary from 24% RES to 50% worldwide in 2040 Source: Enerfuture 1 2 3 24% RES 50% RES30% RES Primary Energy mix evolution by scenario (Enerfuture scenarios)
  55. 55. 55 WEO 2016 was published recently by the IEA and provides an updated baseline for comparison with the reviewed projections Source: IEA World Energy Outlook 2016, Chapter 1 1 2 3 • The New Policies Scenario (main scenario) incorporates existing energy policies as well as an assessment of the results likely to stem from the implementation of announced intentions (COP21) - Assumed that all net-importing regions phase out fossil-fuel subsidies completely within ten years • The Current Policies Scenario includes only those policies firmly enacted as of mid-2016 - Although during the recent period of lower oil prices many countries have signalled intent to remove fossil-fuel subsidies, their removal is not assumed in the Current Policies Scenario unless a formal programme is already in place • The 450 Scenario demonstrates a pathway to limit long- term global warming to 2 °C above preindustrial levels - All subsidies are removed within ten years in net- importing regions, and in all net-exporting regions, except the Middle East, within 20 years • Another influential policy variation between the scenarios is the scope and level of carbon pricing WEO 2016
  56. 56. 56 • Policies and market forces underpin the closure of mines that are unable to recoup their costs, which leads to a reduction of excess capacity and supports a balancing of supply and demand by the early 2020s, with the profitability of the industry by-and large restored • Global coal demand growth of 0.2% per year, in combination with gradual depletion of existing mines, partially absorbs overcapacity and requires investments in coal supply of $45 billion per year in the New Policies Scenario • Geological conditions are worsening, new mines are deeper or further away from markets and coal quality is deteriorating; all of these factors put modest upward pressure on costs that cannot be fully offset by productivity gains • Current exchange rates remain unchanged, while cyclically low input prices for steel, tyres and fuel trend upwards in the long term WEO 2016 price projections for coal show a recovery from current lows but long-term values remain below previous highs Source: IEA World Energy Outlook 2016 1 2 3 Coal WEO 2016
  57. 57. 57 The IMF and the World Bank have made projections for commodity prices where prices for coal and copper can be compared Source: International Monetary Fund (May 2017); World Bank (April 2017); CREARA Analysis 4.500 4.700 4.900 5.100 5.300 5.500 5.700 5.900 6.100 6.300 0 10 20 30 40 50 60 70 80 90 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 EUR/tonofcopper EUR/tonofcoal International Monetary Fund & World Bank Projections (Constant USD 2017) Coal (IMF) Coal (WB) Copper (WB) Copper (IMF) 1 2 3 Coal OTHER SOURCES
  58. 58. 58 • Higher demand in the Current Policies Scenario means a higher call on oil from costly fields in non-OPEC countries • Conversely, in the 450 Scenario, more aggressive policy action to curb demand means that a market equilibrium can be found at a lower price WEO 2016 price projections for oil vary widely by scenario, depending on the level of projected demand Source: IEA World Energy Outlook 2016 • Assumptions that impact oil demand, include: - Economic growth; phase out of fossil-fuel consumption subsidies; resilience among some non-OPEC sources of supply to a lower price environment; commitment by OPEC countries to give priority to market share and to a price that limits substitution away from oil; ability of the main oil-producing regions to weather the storm of lower hydrocarbon revenues 1 2 3 Oil WEO 2016
  59. 59. 59 • The POLES model is useful in forecasting possible “fundamental price” evolutions, to be understood as a proxy of the level of tension between demand and supply on the future oil market • From 2030 there are clear differences - Increasing social tension in the Baseline case (even though this scenario is based on a fairly optimistic estimates of recoverable resources over the long term – see Kitous et al, 2010) - Moderate increases in oil price in the ADAM 550 and ADAM 450 cases, and a disappearing oil consumption in the 400ppmv scenario that leads to very low oil prices (and thus to very low levels of tension on the oil market) • The peaks in conventional oil production can be related to a problem of supply in the Baseline case, leading to rising prices, while in the constrained scenario the peak is demand-related, triggered by the carbon value Future fossil fuel markets will greatly depend on GHG related policies, which determine the level of demand 1 2 3 Oil Source: World and European Energy and Environment Transition Outlook, 2011 OTHER SOURCES
  60. 60. 60 • The current period of over supply in gas markets, alongside the low level of oil prices, has brought down prices in all the major markets • In the New Policies Scenario, the global LNG market does not rebalance until the mid-2020s, a consideration that curbs profitable export opportunities in the meantime WEO 2016 price projections for natural gas are affected by the current oversupply, low oil prices, and an increasingly flexible global trade in LNG Source: IEA World Energy Outlook 2016 • Increased competition and the arrival of the US as a major LNG exporter creates movement towards more flexible pricing and trading arrangements - Large US resources and production flexibility, combined with an LNG export industry actively seeking arbitrage opportunities, means that Henry Hub is projected to become not only a regional but also a global reference point - As a result, the European import price settles at $4-5/MBtu above the US price (cost of delivering gas to exporting terminals, its liquefaction, shipping and then regasification in the importing country) 1 2 3 Gas WEO 2016
  61. 61. 61 1 2 3 Elec • Reform of wholesale markets will be necessary if prices are to rise to the price levels that would allow for full recovery of fixed variables costs - Such an increase would result in higher end-user prices in Europe • Wholesale prices and future trends vary across the EU; prices are projected to increase by almost 50% in the New Policies Scenario - Current wholesale price levels, of around $70/MWh, are not sufficient to fully cover the fixed costs of all power plants in the system • Electricity prices for industrial consumers in the EU are expected to increase by another 10% by the end of 2040 • Residential consumers' expenditure on electricity is expected to increase by 25% between 2013 and 2040, although prices decline in the long-run, after peaking in the late 2020s Source: IEA World Energy Outlook 2014; CREARA Analysis IEA estimates wholesale electricity and end-user prices will increase mainly to cover the increasing costs of the energy system Industrial electricity spending including taxes and savings New Policies Scenario (2013 and 2040) WEO 2014
  62. 62. 62 • As of mid-2016, 63 carbon pricing instruments were in place or scheduled for implementation, either cap-and-trade schemes or carbon taxes, with wide variations in coverage and price • In addition to schemes already in place, which are assumed to remain, the New Policies Scenario includes the introduction of new carbon pricing instruments where these have been announced but not yet introduced • In the 450 Scenario, the use of carbon pricing instruments becomes much more widespread, especially within the OECD, and prices are significantly higher WEO 2016 price projections for carbon show a wide range of schemes between countries, parts of the energy sector, and scenarios Source: IEA World Energy Outlook 2016 1 2 3 Carbon WEO 2016
  63. 63. 63 Conversion of units • 1 EUR = 1.1 USD • 1 GJ = 0.170604 boe • 1 boe = 0.13642 toe • 1 toe = 7.3529 bbl • 1 MWh = 0.6142 boe • 1 MMBtu = 0.180136 boe • 1 ton of coal equivalent = 4.79 boe Abbreviations and Acronyms • CAGR: Compound Annual Growth Rate • ETS: European Trading Scheme • EUR: Euro • GDP: Gross Domestic Product • IMF: International Monetary Fund • LNG: Liquefied Natural Gas • RES: Renewable Energy Sources • USD: US dollar • WB: World Bank • WEO: World Energy Outlook Annex UNITS, ABBREVIATIONS
  64. 64. ESCOConsulting SoftwareEngineering

×