Prospects for renewable energy
developments and role of natural gas
Sid Ahmed Hamdani
Energy, Environment & Policy Analyst – GECF
40th IAEE International Conference
18-21 June 2017, Singapore
Contents
• Recent trends in renewables’ evolution
• Key drivers affecting future development of renewables
• Prospects of renewables and role of natural gas
Recent trends: Renewables in primary energy mix
Primary Energy consumption by source (Mtoe)
Average Annual
Growth Rate
(2005-2015)
Fuels’ shares in primary energy consumption (%)
35%
Coal, Oi l& Gas: 81%
in 2015
Ren:3.0%
31%
Nuc:-0.8%
26%
28%
Coal:2.7%
21%
22%
NG:2.3%
10%
Oil:0.8%
6%
11.6%
5%
2%
2%
Source: GECF GGM
o Non- hydro renewables: Fastest growing source of energy; but its share in global primary
energy mix remains far below natural gas and coal.
o Major part of growing energy needs is still satisfied by conventional sources.
Recent trends: Renewables by sectors and sources
Renewables consumption by sector (Mtoe)
Shares’ evolution of renewable sources (%)
Renewable power (Average
Annual Growth Rate 2005/2015:
10%)
Source: GECF GGM
o Power generation as the most important driver of renewable growth,
o Penetration of wind and solar (increase from 10 Mtoe in 2005 to 97 Mtoe in 2015).
o Still dominance of biomass and waste in renewable consumption (88% of renewable
energy in 2015) of which nearly 60% are traditional biomass.
Regional dynamics of renewables vs. natural gas
Incremental primary energy consumption by energy sources and regions (between 2005 and 2015), (Mtoe)
Gas has observed
second largest
incremental demand
after coal
Source: GECF GGM
Over the last ten years…
• Non OECD Asia: Highest incremental renewables increase compared to other regions, but coal has been main driver. Natural gas has
increased significantly by more than 200 bcm (driven by industrial and residential sectors)
• OECD Europe: Important progress of renewables associated to incremental decrease in conventional energy consumption
• North America: Significant renewables growth, but natural gas has been the most important driver in this region. We can see a
substitution of coal by gas.
• Other developing regions:, Progress of renewables and gas consumption to meet growing energy needs. (Africa: significant increase
of renewables driven by biomass used to satisfy energy needs of growing population)
Regional dynamics in power generation sector
Incremental Power generation by fuels’ inputs and regions (between 2005 and 2015), (Mtoe)
Regions observing increase in
incremental power generation
Regions observing decrease in
incremental power generation
Source: GECF GGM
• Important electricity additional demand has supported
consumption of all energy sources in emerging and
developing regions
• Despite large penetration of renewables, coal and gas has
increased in Non OECD Asia driven by China and India
• Large penetration of gas in power generation in Middle East
and Latin America
Different fuels dynamics observed in a context of
penetration of renewables and stagnation of electricity
demand
• OECD Europe: All energy sources decreased except
renewables
• OECD Asia Pacific: Gas and coal progress at the expense
of nuclear (Nuclear is key determinant in the region)
• North America: Important substitution of gas to coal
(largest increase of gas between 2005 and 2015)
Contents
• Recent trends in renewables’ evolution
• Key drivers affecting future development of renewables
• Prospects of renewables and role of natural gas
Key drivers of renewable developments
Renewable investments
Renewable investments trends by region (BN.$)
Renewable investments trends by technology (BN.$)
Source : Bloomberg 2016
• Recovery in renewable investments following
the downward trend after the 2011 peak
• Investment largely driven by the boom in
emerging regions, especially China and India
which offset largely the investment decline in
Europe.
• Large progress in solar investments exceeding wind
investments in 2010
• Solar and wind represent respectively 55% and 38%
of total investments
• Cost reduction of solar and wind has contributed in
the recent boom of investments for adding new
capacities
Key drivers of renewable developments
Renewable costs
Global average levelised costs of renewable
technologies ($/Mwh)
Parabolic trough
with storage
Offshore wind
Solar crystalline
silicon (PV)
Onshore wind
Source : Bloomberg 2016
• Cost reduction is a key driver for renewables
capacity addition
• Solar has observed largest cost reduction last 5
years (-60%) followed by onshore wind (-13%)
• Further decrease of costs is expected, but there
is a need to be cautious about renewable costs’
estimations:
• Critical parameters can affect significantly
these estimations in different regions
(capacity factors, cost and availability of
land for project development)
• Costs usually does not include costs for
integration of renewables
Key drivers of renewable developments
Policy support in the Post Paris Agreement era
Announced renewable and GHGs mitigation objectives
European Commission
REN: 20% (2020); 27% (2030)
GHGs: 20% reduction
(2020/1990 level); 40%
reduction (2030/1990 level),
United States
China
REN: State level target (Ex:
California , 33%(2020)
50%(2030)
GHGs: 26- 28% reduction
(2020/2005 level); 32%
(2030/2005 level)
•
India
40% of N. Fossil in PG
installed Cap. (2030)
CO2 per unit of GDP:
Reduce 33 to 35%
(2030/2005 level)
•
•
N. Fossil in energy mix:
15% (2020), 20% (2030).
CO2 per unit of GDP:
Reduce by 60% to 65%
(2030/2005 level)
Peaking of carbon
dioxide emissions around
2030
Policies are elaborated to cope with Paris Agreement commitments. But, many uncertainties and challenges do exist regarding the effective
implementation of these policies and their efficiency in supporting renewable energy
Key drivers of renewable developments
Policy drivers and main uncertainties for renewable development
Uncertainties and challenges
Policy drivers for renewables
United States
•
•
•
China
•
•
•
•
Federal taxes credit for renewable
projects.
State level initiatives: Renewable
Portfolio Standards (RPS), State level
•
Regulations and incentives
Climate action plan and Clean power plan
(under revision by new administration,
but potential implementation actions at
states and cities levels )
Trump policy (withdrawal from PA,
environmental regulation
dismantling, budget restrictions for
climate actions)
RPS issues (opposition to high
electricity prices due to renewable
integration, some legal issues
regarding particularly the
competition rules)
Policy drivers for renewables
Uncertainties and challenges
Adoption of more ambitious
renewables’ targets in the framework
of the 13th plan
Renewable supports schemes: Feed In
Tariffs schemes, purchase obligation
and priority in power dispatch
Implementation of subsidies cutting
plan in power sector
•
•
•
•
Ability of power systems to integrate
a large share of intermittent
renewables
Adjustment of support schemes to
more market based approach
(aiming to improve efficiency of
policy support)
Progress of power market and price
reforms
Power generation over capacities
Contents
• Recent trends in renewables’ evolution
• Key drivers affecting future development of renewables
• Prospects of renewables and role of natural gas
Future prospects: Renewables in primary energy
mix
Primary Energy consumption forecasts by source of
Energy, Mtoe
Fuels’ Shares in primary energy consumption
Average Annual
Growth Rate
(2015-2030)
Ren:2.4%
Coal:1.5%
NG:1.7%
Oil:0.9%
Source: GECF GGM
o
o
o
Expected renewable growth driven by supporting policies, progress in renewable technologies and reduction of their
costs.
Natural gas is expected to be the fastest-growing fossil fuel and to play a key role in meeting growing energy needs in
the Post Paris Agreement era;
Renewable share still far below gas and coal by 2030 (Gas share will catch up with coal share in primary energy mix by
2030)
Future prospects: Renewables expected progress
by region
Incremental renewable consumption
2000 – 2015: 523 Mtoe
Incremental renewable consumption
2015 – 2030: 700 Mtoe
Expected shift in future growth of non hydro renewable consumption :
o Emergence of Non OECD Asia as key driver; Increasing role of North America, and less role
of Europe
o Africa is expected to see less contribution in future renewable growth due to decreasing
role of traditional biomass
Renewables and natural gas in future power
generation mix : a complex interaction
Competition vs. complementarity
 Large renewable capacity development can
affect conventional power plants, but high
costs, low energy content and intermittency
are still constraining reliability of renewables
in supplying growing electricity needs.
 Renewables are often prioritized in
supplying power (Policy support schemes,
low marginal costs) and this can affect
operating hours of gas power plants in
mature electricity markets.
 Renewables penetration can increase
competition between conventional sources
to supply residual electricity.
 Gas power plants can play a key role to
provide efficient back up for renewables
(rapid ramping up, energy efficiency,
competitive cost).
 Gas power plants can increase flexibility
of power systems (they can operate both
in Peak, Intermediate and Base load
regimes).
 Gas power plants contribute in improving
affordability of power.
 Gas power plants contribute significantly
in reducing GHGs and pollutants
emissions.
Gas power plants and renewables can be good partners in a
sustainable transition to low carbon power systems
Renewables and natural gas in future power
generation mix : Power capacities vs. power flows
Forecasts based on power module of GECF Global Gas Model which includes 2 interlinked sub-models:
• Investment model forecasts capacities required to meet electricity demand
• Dispatch model forecasts power produced by different capacities
Power capacities (GW)
25%
total
cap.
22%
total
cap.
Power generation by fuels inputs (Mtoe)
12% of
total
power
23%
total
power
Largest growth expected for renewables power generation capacities but less contribution in
power supply compared to natural gas due to low capacity factors.
Future prospects: Regional dynamics of renewables
and natural gas in power sector
Incremental Power generation by fuels’ inputs and regions (between 2015 and 2030), (Mtoe)
Natural gas and renewables
based power expected to
increase in all regions, except
in OECD Asia affected by
nuclear restart in Japan
All energy sources will see an increase to meet the expected
growing electricity demand
Renewable energies are expected to raise significantly
benefiting from policies’ supports, lower costs for solar and
wind and progress of local equipment industry.
Gas for power will grow but will be affected by competition of
coal and by attractiveness of other gas consuming sectors,
especially the industry.
Source: GECF GGM
Renewables and natural gas
progress at the expense of coal
(driven by environmental
restrictions at state level and
competitive gas prices in US).
Stagnation of electricity demand,
Renewables’ increase will be at the
expense of coal and nuclear power.
Natural gas expected to grow driven
by environmental restrictions,
expected rise of carbon prices, and
flexibility advantage to ensure an
efficient back up of renewables
Conclusion
 Despite renewable growth, major part of global energy needs would remain
satisfied by conventional energy (fossil fuels represent almost 78% in the
energy mix by 2030),
 Power generation is the main driver of intermittent renewables’ progress, which
requires power systems to be more flexible to integrate renewables and to deal
with their output variability. Gas can support flexibility and cost efficiency of
power systems.
 Given its environmental, technical and economic advantages, natural gas
would play a key role in meeting growing energy needs and contributing in
sustainable development in the Post Paris Agreement era.