new opportunities and challenges for business in the...
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New opportunities and challenges for business in the renewable energy sector
Prof. Dr. Rolf Wüstenhagen Good Energies Chair for Management of Renewable Energies Director, Institute for Economy and the Environment University of St. Gallen Tel Aviv, 5 June 2014
[email protected] http://goodenergies.iwoe.unisg.ch
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2 Outline
1. Three challenges to extending the energy status quo 2. Renewable energy: A case of disruptive innovation 3. Integration of a high share of renewables in the electricity
market: issues and solutions 4. Conclusions
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3 Why an energy transition? Three challenges to extending the energy status-quo
1. Risk
2. Social Acceptance 3. Cost
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4 1. Risk premium of non-renewable energies: Fukushima has turned the concept of external cost into reality
Fukushima 2011
190-230 bn NLS
Kostenschätzungen: Angekündigte Staatshilfe der japanischen Regierung für TEPCO (Mai 2011): 45 Mrd €. Zum Vergleich: Differenz in Marktkapitalisierung binnen 3 Monaten bei TEPCO ca. 30 Mrd. €. *) Update 7.11.2012, http://www.tagesschau.de/ausland/tepco160.html
440 bn NLS
440
7
Insurance Coverage Swiss Nuclear Power
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5 Risk of climate change
Zurich Insurance Sees $700 Million of Hurricane Sandy Claims (2012)
Sour
ce: U
nive
rsity
of C
ambr
idge
201
4
www.carbontracker.org www.forbes.com/sites/ashoka/2013/07/29/
divesting-from-fossil-fuels-means-a-cleaner- safer-and-more-resilient-future/
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6 Energy import dependence – a significant risk which can partly be mitigated by investing in RE & EE
¾
Energy Intensity of GDP
CH / EU
Energy Import Dependence
Ukraine
Ukrainian gas
Russian gas
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7 2. Social Acceptance: Nuclear power‘s approval rates dropped below critical threshold in some Western democracies post-Fukushima
Fukushima 2011
Source: Feb. 2011 public vote on nuclear power plant Mühleberg in canton of Berne; Jan. 2014 survey of representative sample of Swiss population.
2014 Approval Rate for Swiss Nuclear Power
Yes, 51%
No, 49%
Pre-Fukushima
Yes, 23%
No, 77%
Post-Fukushima
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8 Social Acceptance is an issue for many large-scale infrastructure projects…
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9 …that should be carefully managed for large energy projects, both renewable and non-renewable
Source: Wüstenhagen, Wolsink, Bürer 2007
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10 3. Cost: Increases in oil prices have been a driver for renewable energy & efficiency
2.6.2014 109 $ / Barrel
http://www.finanzen.ch/rohstoffe/oelpreis?rd=fn
US
D p
er B
arre
l (B
rent
)
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11 Shale gas has reversed price trend in the US in the short-term…
Source: http://ourfiniteworld.com/2012/03/23/ why-us-natural-gas-prices-are-so-low-are-changes-needed/
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12 …but the long-term price trend for unconventional oil & gas is uncertain
– Profitability of shale gas? – Environmental impacts? – Water? – Energy pay-back? – Carbon price?
„We are all losing our shirts today. You know, we‘re making no money. It‘s all in the red“
Rex Tillerson, CEO, Exxon Mobil Corp. on shale gas in the US
cit. in Bloomberg New Energy Finance VIP Brief Oct. 2012
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13 Energy technology learning curves: Countervailing cost trends for nuclear vs solar
Kernenergie FRA / USA Photovoltaics worldwide
A. Grubler / Energy Policy 38 (2010) 5174-5188 IPCC 2011, based on Maycock (1976-2003), Bloomberg NEF 2010
The gap between cost of conventional energy vs. cost of renewable energy is about to close (Grid Parity).
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14
Grid Parity Zone
Timely transition to renewables optimizes risk-return profile of future energy supply
Pre-Fukushima
Today 2030 2050
non- renewable Energies
Non-renewable Energies (incl. Risk)
Renewable Energies (high energy efficiency)
Renewable Energies (low energy efficiency)
$
Time
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15 Outline
1. Three challenges to extending the energy status quo 2. Renewable energy: A case of disruptive innovation 3. Integration of a high share of renewables in the electricity
market: issues and solutions 4. Conclusions
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16 Renewable Energies: A Broad Portfolio
Concentrated Solar Power
Solar (Photovoltaics)
Hydropower
Geothermal
mature
new
Centralized Decentralized
Step Generator
Biomass
Wind Energy
Wave Energy
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17 Investment in new Power Plants in EU 2013
Source: EWEA 2014
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18 In 2013, wind and solar accounted for 72% of new EU power generation capacity
Source: EWEA 2014
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19 Cost of rooftop PV & retail electricity prices have converged in Germany
From homeowner’s perspective, rooftop solar is becoming an increasingly attractive proposition
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20 European solar markets exhibit policy risk, offer diversification opportunities
Source: EPIA 2012
Cumulative total in 2011:
51’716 MW
2008/2009: Spanish collapse absorbed by German growth
2010/2011: Czech standstill more than compensated by Italian growth
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21 The “Price of Policy Risk”
0
3
6
9
12
15
0 6 12 18 24
Impl
icit
Will
ingn
ess
to
Acc
ept [
ct/k
Wh]
Duration of Admin Process [in months]
0
3
6
9
12
15
0 1 2 3 Impl
icit
Will
ingn
ess
to
Acc
ept [
ct/k
Wh]
Number of Policy Changes
0
3
6
9
12
15
15 20 25 Impl
icit
Will
ingn
ess
to
Acc
ept [
ct/k
Wh]
Duration of Support [in years]
0
3
6
9
12
15
Tight Cap (1 y.)
Loose Cap (4 y.)
No Cap (unltd.)
Impl
icit
Will
ingn
ess
to
Acc
ept [
ct/k
Wh]
Sou
rce:
Lüt
hi &
Wüs
tenh
agen
201
2
Policy risk increases cost of capital for renewable projects
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22
www.solarsiedlung.de
Marché International in Kemptthal/ZH www.neuemonterosahuette.ch
Schwyz
“Solar prosumers“: Net positive energy houses disrupt existing business models
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23 Wind Power Generation
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24 Worldwide Growth of Wind Energy Market
Source: GWEC
Cum
ulat
ive
Inst
alle
d C
apac
ity [
MW
]
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
200000
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Top 5 in 2010: 1) China, 2) US, 3) India, 4) Spain, 5) Germany
50 %
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25 U.S. Wind Turbine Prices – from near grid parity to rebound and back
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26 Wind energy in 2011: up to 25.9 % of power generation in European countries
0.2% Source: EWEA 2012
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27 Outline
1. Three challenges to extending the energy status quo 2. Renewable energy: A case of disruptive innovation 3. Integration of a high share of renewables in the electricity
market: issues and solutions 4. Conclusions
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28 Do the lights go out if the wind does not blow and the sun does not shine?
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29 Germany: solar & wind = the new “baseload”
Solar ~ Peak Demand
Electricity generation in Germany 3.5.-3.6.2014
http://www.agora-energiewende.de/service/aktuelle-stromdaten/stromerzeugung-und-verbrauch
Sun May 11, 1 p.m.: 74 % Renewables PV 15 GW (15%) Wind 21 GW (35%)
Mon May 5, 2 a.m.: 16 % Renewables PV 0 GW (0%) Wind 1 GW (2%)
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30
Source: Wolfram Krewitt † (2008)
Understanding the problem conceptually: Key challenge of electricity supply has always been to match demand and supply in space and time
The New Energy World
Supply Demand
The Old Energy World
Supply Demand
From „Base Load“ & „Peak Load“... ...towards Smart Grids
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31
-40 -30 -20 -10
0 10 20 30 40 50 60
0 2 4 6 8 10 12 14 16 18 20 22
Day
-ahe
ad m
arke
t pric
es [d
evia
tion
from
dai
ly a
vera
ge in
€/M
W]
Apr.-Sept. 2006 Apr.-Sept. 2007 Apr.-Sept. 2008 Apr.-Sept. 2009 Apr.-Sept. 2010 Apr.-Sept. 2011
Growth of wind and solar power generation has changed electricity trading patterns
Day-ahead
• Auction by EPEXSpot at 12:00 noon
• Products: hours
Intra-day
• Continues trading at EPEXSpot
• Up to 45' before delivery
• Products: 15 min., hours
Control reserve
• Primary (0.5 – 5 ')
• Secondary (5 – 15 ')
• Tertiary (> 15 ')
Source: adapted from Josef Janssen, BKW (2014)
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32 Demand for control reserve is not increasing, due to portfolio effects and better forecasts
- Forecast error solar DE -
- Forecast error wind DE -
Source: Josef Janssen, BKW (2014)
- Balance of control reserve DE -
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33 Geographical diversification reduces volatility
Even on a cloudy day, the sun tends to shine somewhere
http://ww
w.sm
a.de/unternehmen/pv-leistung-in-deutschland.htm
l
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34 What did wind and solar do to electricity prices? Sum of EEG surcharge + wholesale electricity prices = nearly constant
Source: Christian Friege 2014
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35 Ownership diversification: Market entry of new investors, especially in PV
Ownership of German RE capacity 2010 (total 53 GW) Source: trend:research 2011
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36 Outline
1. Three challenges to extending the energy status quo 2. Renewable energy: A case of disruptive innovation 3. Integration of a high share of renewables in the electricity
market: issues and solutions 4. Conclusions
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37 Conclusion – The world is at a crossroads – we are facing the transition from
non-renewable to renewable energy supply. – Risk, social acceptance and cost are three important challenges to
extrapolating the energy status quo – With countervailing cost trends and increasing internalization of
external cost, “grid parity” has started to transform markets – renewable energy is a case of disruptive innovation.
– Experience in Germany shows that solar and wind are profoundly transforming the electricity market, with expected and unexpected effects. This has resulted in a creative destruction of established business models, and opened up opportunities for new players.
– Building up a balanced portfolio of renewables allows to diversify key risks of current energy supply.
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38
Executive Education Programme
Renewable Energy Management
http://www.es.unisg.ch/rem
Questions?