fin rev ief-plenary session 4 uptake of clean technologies ... · in exporting countries •gas...

India New Delhi

Background Paper

Plenary session 4: Uptake of Clean Technologies: Disruption and Coexistence of New and Existing Technologies –the Way Ahead

1IEF16 Plenary Session 4

The observations presented herein are meant as backgroundfor the dialogue at the 16th International Energy Forum. Theyhave been prepared in collaboration with The BostonConsulting Group and should not be interpreted as the opinionof the International Energy Forum or The Boston ConsultingGroup on any given subject.

Disclaimer


• Energy related technology is evolving at a fast pace impacting operations and business models. To ensure a reliable and sustainable transition, clear and predictable policies are needed• There is certain uncertainty related to which

new technologies should be promoted, if any, and how to ensure limited impact on existing assets and technologies• Policy makers face challenges around how to

achieve a well-balanced regulatory framework to foster innovation balancing sustainable, cheap and reliable/secure energy

• Discuss the role of energy policy and the regulators in the technological progress in the sector

• Share experiences on potential initiatives that can be implemented to foster technological progress without endangering market stability and/or energy security

• Seek common goals that could be pushed in a coordinated manner at international level to foster introduction of new technologies in the energy sector

Introduction

Market Context Session Objectives

Key Question: How can energy policy makers foster new technologies as a way to achieve long term energy strategy: cheap, sustainable, reliable and secure energy?


100

50

020162014201220102008

Smart Appliances

Smart Meters

EV batteries

Utility-sacle PV

Data storage

Sensors

Price in 2008 = 100

Price reduction in different technologies

Fast technological progress allowing to produceand consume clean energy cheaper than ever

Source: IEA. Based on BNEF (2017), Utilities, Smart Thermostats and the Connected Home Opportunity; Holdowsky et al. (2015), Inside the Internet of Things; IEA (2017), Renewables; Tracking Clean Energy Progress; World Energy Investment; Navigant Research (2017), Market data: Demand Response. Global Capacity, Sites, Spending and Revenue Forecasts


Internet of things and sensors

Robotization Renewablesand DER

Smart grids

Batteries Peer to peer trading

Shale gas Smart energy efficiency

Vehicle electrification

Electrification of thermal load

Fostering a number of disruptions in the energy industry


At the same time, policy makers trying to reformthe market through a set of initiatives

Illustrative example from Europe

Can we have it all?

Innovation

Securityof supply

No nuclear

No CO2

Energyindependence

Low prices

Competition

New business models


Residential, C&I Customers

Transmission

Centralized Generation Sources–various sources

Uti

liti

es—

Dis

trib

utio

n

Uti

liti

es—

Dis

trib

utio

n

Uti

liti

es—

Dis

trib

utio

n

Uti

liti

es—

Dis

trib

utio

n

Retailers

Transmission

Smart Grid–meters, devices, systems, sensors:Tech solutions, services and systems to enable platform

(e.g., MDMS, ADMS, DERMS)

Industrials–cogene, highest reliability,

customized solutions

Micro-grids

Power plants-various

Retailers and Aggregators

Retail Customers–consuming storing

generating

Generation

Transmission

Distribution

Customers

A fundamental shift in power sector stack architecture is underway in the Power sector

Source: BCG Research


60

0

20

40

2016 ($B)

2014 India power sector(2016 investment)

Global gas-fired power generation(2016 investment)

20162015

+14%

+27%

Other elecricity systems software

Industrial energy mgmnt. Smart gris infrastructure

Building energy controls Smart meters

EV chargers

Investments in smart electricity infrastructure and software vsinvestment in global gas generation or the Indian power sector

Leading to shifts in investment and value pools

Note: Calculations for investment in digital infrastructure and software based on Markets and Markets (2016), Internet of Things in Utility Market; BNEF (2016), Digital Energy Market OutlookSource: IEA


Worldwide installed powergeneration capacity 2016-2040 Net capacity additions 2016-2040

2040

GW

11,960

2030

9,725

2025

8,647

2016

6,677

Oil

CoalGasHydro

Renewables Nuclear

0.8%

CAGR2016-2040

2.2%

-2.6%

0.9%

1.6%

6.5%

-210

103271

589413

1,150

Oil

Nuclear

GW

Other renewables1

Hydro

Coal

Solar PV

1,769

Wind

Gas

1,199

Renewables expected to gradually replace conventional technologies in the future power generation mix

1. Bioenergy, Geothermal, CSP, MarineSource: IEA (2017) World Energy Outlook (IEA New Policies Scenario), BCG analysis


Technology and regulation drive...• Technology drives down costs of

low-carbona technologies• Regulatory push based on environmental

concerns: clear push to limit CO2• Government play a strong role

...Electrification, efficiency and renewables• Solar and wind fully competitive by 2025:

Build-out rate ~300 GW/y• Action on coal for power: active coal closure

in OECD; China follows with 10y delay• Investments in smart grids

Solid push for energy efficiency• Central coordination of efficiency standards

and investment in efficient lighting, cooking and appliances

BCG Green Revolution Scenario BCG Energy Scenario Model

5,535

2025

5,455

2020

5,319

2015

5,178

Total Primary Energy for Power Generation - mtoe (%)

2040

6,143

2035

5,961

2030

Nuclear Other RenewablesBaselineBioenergyGas

OilCoal

Even in the most 'green' scenario traditional technologies will still play an important role in the mix by 2040

Source: BCG analysis (BCG Energy Scenario Model—Dec 2016);IEA (World Energy Outlook 2015, New Policies Scenario)


0.0

2.0

0.5

1.5

1.0

K mtoe

15 3530 40351535 2525 25 151540 204025 35 40 15 20 352030 25 304020 15 2520 30 2015 3020 2540304035 4015 30 20 35 153525 402540 1530 2535 303035 2020

BioenergyCoal BaselineGasNuclear Other RenewablesOil

non-OECD E.Europe/

Eurasia

non-OECD Middle East

non-OECD Africa

non-OECD LATAM

India Rest of non-OECD

Asia

China OECD Oceania

OECD Europe

OECD Americas

Specially in developing economies: i.e., China and India

BCG Green Revolution Scenario: total Primary Energy for power generation 2015-2040


BCG Blue Gas Economy Scenario BCG Energy Scenario Model

Abundant unconventional gas drives…• The US leads the way• Shale gas boom in China and Argentina

… A drop in gas prices…• Gas prices below 5$/mmbtu

in exporting countries• Gas prices below 10$/mmbtu

in importing countries

… And a switch to gas• Power, industry and buildings: switch

in China and Argentina• Decreased efficiency improvements in

buildings: Slower deployment of building standards compared to Baseline

Total Primary Energy for power generation – mtoe (%)

2040

7,367

2035

6,899

2030

6,410

2025

5,946

2020

5,595

2015

5,253

Other RenewablesBioenergy Baseline

NuclearGas

OilCoal

Actuals

Coal and Gas could still be predominant in a scenarioof abundant and cheap unconventional gas


Major Sources in the US Energy Mix (1825-2008)

100

80

60

40

20

0Other RenewablesNuclearHydroelectric

Gas

Petroleum & NGLs

Coal

Wood & Biomass

200820001990197519501925190018751825

Consumption (in %)Illustrative

Replacement of fuel sources is not new and takes time


40

30

20

10

0UKSpain EU-28Germany France

-45%

9.916.9

12.717.7

11.420.4

10.6

23.015.2

30.5

Price (€ cents/kWh)

IndustrialHousehold

Transition towards RES resulting on electricity prices

+40% more expensive than less RES reliant countries

Cheapest of major Western EU economies—Heavily

reliant on nuclear

Electricity prices in different countries

The different policy choices do have an impact on prices


Solar PV: Auction prices Wind onshore: Auction price

20

02018201620142012

120

100

80

60

40

Mexico

MexicoMexico

$/MWh

60

80

40

20

02018201620142012

$/MWh

Mexico

Mexico

A 'wait and see' strategy can allow to benefit from a cheaper and more mature technology: e.g., Mexico

Mexico started later than other countries in Renewable developmentand is now achieving some of the cheapest prices around the world


Utilities

Digital innovatorsDG players

Equipment OEMs

Contracting players

Others

A new landscape of players is emerging

"Utilities are crazy if they don't start offering customers innovative financing packagesfor solar and distributed generation … because others will." — Honda Executive


2002 2007 2012 2017

ICT

Other

New environment impacting market capitalization of energy companies, limiting capacity to invest in large scale assets

Digital companies are now leaders by market capitalization

Energy

Note: circle sizes relative to market capitalization in 2Q 2017. Source: IEA


However, the energy industry still requires a significant amount of long term investment in the coming years

2026-2040

99

42

58

2017-2025

108

41

67

2026-2040

43

20

23

2017-2025

36

17

19

2026-2040

127

42

85

2017-2025

117

44

73

42

20

22

2026-2040

77

39

37

2017-2025

2026-2040

30

11

19

2017-2025

30

11

19

2026-2040

37

15

23

2017-2025

23

9

15 2026-2040

422

185

237

2017-2025

392

160

232

Average yearly investments in power sector, 2016 ($B)

Growth%

Generation investments

T&D investments

EurasiaEurope

North America

Central & South America

Africa

Middle East

Asia Pacific

-14%

+2%

+20%

+18%

+66%

+97%

+15%

-3%

+0%

+0%

+2%

+16%

+54%

+71%

Source: IEA World Energy Outlook 2017, BCG analysis


Should policy regulate/constrain technological progress?

Can technology in Energy be a source of competitive advantage for countries?

Is it possible to develop a leveled and sustainable regulatory framework to achieve the various goals and functionalities required (clean, cheap, access for all)?

Is there a mature technology that should be promoted?

How to foster innovation and competition without compromising long term investment required?

What to do with previous investments and potential stranded assets?

Key Questions

1

2

3

4

5

6


India New Delhi

Background Paper

Plenary session 4: Uptake of Clean Technologies: Disruption and Coexistence of New and Existing Technologies –the Way Ahead

fin rev ief-plenary session 4 uptake of clean technologies ... · in exporting countries •gas...

Documents