Paolo Frankl Head, Renewable Energy Division International Energy Agency Brussels, 18 July 2012

1. Medium-Term Renewable Energy
Market Report 2012
Paolo Frankl
Head, Renewable Energy Division
Brussels, 18 July 2012
© OECD/IEA 2012

2. Objective and scope
 With the increasing role of a portfolio of maturing
renewable technologies in the power mix…
 The IEA is publishing its first medium-term report focused
on renewable energy
 Bottom-up, global renewable forecast of renewable electricity
capacity and generation over the next 5 years
 Detailed analysis of 12 OECD countries (Austria, Denmark, France,
Germany, Italy, Japan, Norway, Spain, Sweden, Turkey, UK, US) and
China, India, Brazil (~80% of world renewable electricity)
 For 2012 edition, focus on 8 technologies in power sector
with some analysis on solar thermal heating
 Completes slate of IEA MT forecasts: oil, gas, coal
 Methodology consistent with other MT reports
© OECD/IEA 2012

3. Analytical framework – Japan example
 Generation and capacity
Y-o-Y
forecast based on - TWh
1 100
Power demand vs GDP Chg
8%
 Power demand 1 050 4%
 Power sector structure 1 000 0%
950 -4%
 Grid and system integration
900 -8%
 Economic attractiveness 2005
Demand
2008 2011 2014 2017
Demand, Y-o-Y (RHS)
GDP, Y-o-Y (RHS)
 Financing Sour
 Policy framework
robustness
TWh
Power generation
1 200
 Identify drivers and 800
challenges for 400
renewable 0
2005 2006 2007 2008 2009 2010 2011
deployment Coal
Nuclear
Oil
Hydro
Natural gas
Bioenergy
Wind Solar PV Geothermal
© OECD/IEA 2012

4. Global Overview
© OECD/IEA 2012

5. Growth in renewable power is forecast
to accelerate
 Hydropower remains the main renewable power source (+3.1% p.a.)
 Non-hydro renewable sources grow at double-digit annual
percentage rates (+14.3% p.a.)
TWh
Global renewable electricity production and forecast
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Hydropower Wind onshore Bioenergy Solar PV
Geothermal Wind offshore CSP Ocean
© OECD/IEA 2012

6. Growth is led by non-OECD countries
 Non-OECD accounts for two-thirds of the overall growth
 China, Brazil, India lead; others grow significantly as well
 OECD growth still largely driven by Europe but Americas
and Asia-Oceania make significant contributions
TWh Global renewable electricity production and forecast
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
OECD Americas OECD Asia-Oceania OECD Europe
China Brazil India Rest of non-OECD
© OECD/IEA 2012

7. Non-hydro technology deployment
spreads out
 Number of countries with cumulative capacity larger than 100MW
(can cover consumption of 100k households) increases significantly
 Growth areas include Asia, Africa, Latin America and the Middle East
Number of countries with installed
capacity above 100 MW
80
Non-OECD
OECD
60
40
20
0
2011
2005
2017
2011
2017
2011
2005
2017
2011
2005
2011
2005
2017
2011
2005
2005
2017
2011
2005
2017
2017
Onshore Offshore Bioenergy Solar PV CSP Geothermal Ocean
wind wind
© OECD/IEA 2012

8. Generation additions over 2011-17 differ
across regions and technology portfolios
OECD Americas (+179 TWh) OECD Asia-Oceania (+77 TWh)
Wind onshore
Wind onshore
Bioenergy
Bioenergy
Solar PV
Solar PV
Other
technologies
Other
technologies
OECD Europe (+365 TWh) Non-OECD (+1 220 TWh)
Hydropower
Hydropower
Wind onshore
Wind onshore
Bioenergy
Bioenergy
Solar PV
Solar PV
Other Other
technologies technologies
© OECD/IEA 2012

9. Annual growth patterns for non-hydro
technologies vary significantly
 China becomes deployment leader
 OECD Europe deployment growth slows
 OECD Americas growth reflects US policy uncertainties
GW
Annual capacity additions , non-hydro technologies
40
35
30
25
20
15
10
5
0
2010 2011 2012 2013 2014 2015 2016 2017
OECD AO OECD AM OECD EUR China Rest of non-OECD
© OECD/IEA 2012

10. Progress tracked on different scales
Incremental TWh (2011-17) RE share growth (2011-17)
1. China + 700 1. Denmark + 20.3% (tot 61%)
2. USA + 85 2. Austria + 18.5% (tot 87%)
3. Brazil + 80 3. UK + 11.5% (tot 22%)
4. India + 80 4. Turkey + 10.1% (tot 36%)
5. Germany + 58 5. Italy + 9.5% (tot 35%)
Avg annual growth (2011-17)  Detailed reporting only on
1. UK + 14.2% 15 focus countries
2. China + 10.6%  Other countries also show
3. Turkey + 9.8%
very significant progress
(e.g. Kenya)
4. France + 8.3%
5. Denmark + 7.8%
© OECD/IEA 2012

11. Country and Regional Outlooks
© OECD/IEA 2012

12. China accounts for 40% of global growth
 Drivers:  Challenges:
 Growing energy needs  Pricing framework
 Diversification  Priority dispatch
 Government targets  Grid upgrades
 Ample low-cost finance  Prohibitive licensing for
 Robust manufacturing small-scale systems
TWh
1 800
 Challenges: generation
China forecast renewable TWh
8 000
China power demand vs GDP growth Y-o-Y
Chg
18%
1 500
 Pricing framework 16%

14%
1 200 Priority dispatch 6 000
12%
900  Grid upgrades 4 000
10%
8%
600  Prohibitive licensing for 6%
300
small-scale systems 2 000
4%
2%
0
0 0%
2011 2012 2013 2014 2015 2016 2017 2005 2008 2011 2014 2017
Hydropower Wind onshore Bioenergy Solar PV Wind offshore CSP Demand Demand, Y-o-Y (RHS) GDP, Y-o-Y (RHS)
Source: © OECD/IEA 2012

13. State mandates drive the US picture but
uncertainties persist over some federal policies
 US is 50% of OECD/AM
TWh
United States forecast renewable generation
700
generation growth 600
500
 Drivers: 400
300
 State level RPSs 200
100
 Federal incentives levels 0
2011 2012 2013 2014 2015 2016 2017
 Ample grid capacity Hydropower Wind onshore Bioenergy Solar PV
 Innovative financing Geothermal CSP Wind offshore
GW US wind capacity growth
 Challenges:
10
Forecast
based on
expiration of
 Duration of federal 8 PTC at end-
2012
incentives 6
 Competition with 4
Expiration of federal PTC
natural gas
 Cost and availability of 2
tax equity finance 0
1998 2000 2002 2004 2006 2008 2010 2012 2014OECD/IEA 2012
© 2016

14. OECD Europe growth slows with policy
adjustments and the macroeconomic situation
 Germany, UK and Turkey are largest growers
 Nordic countries grow steadily
 Economic conditions and overcapacity challenge Italy, Spain
 Eastern Europe growing despite crisis and has a long way to
go to fulfill EU 2020 goals
TWh
OECD Europe forecast renewable generation
1 400
1 200
1 000
800
600
400
200
0
2011 2012 2013 2014 2015 2016 2017
Hydropower Wind onshore Bioenergy Solar PV
Geothermal Wind offshore CSP Ocean
© OECD/IEA 2012

15. OECD Europe – Capacity Additions
 Growth slows down, particularly for solar PV
40
35
30
Annual capacity additions (GW)
Ocean
25 Geothermal
Bioenergy
20 Wind offshore
Wind onshore
CSP
15
PV
Hydro
10
5
0
2010 2011 2012 2013 2014 2015 2016 2017
© OECD/IEA 2012

16. Germany shows the largest absolute growth
in Europe
TWh
Germany forecast renewable generation
200
 Drivers: 180
160
 Robust policy framework 140
 Need to compensate for
120
100
nuclear phase-out 80
60
 Ample availability of low 40
cost financing 20
0
2011 2012 2013 2014 2015 2016 2017
Hydropower Solar PV Wind onshore Bioenergy
Geothermal CSP Wind offshore
 Challenges: Ownership shares of renewable
 Maintaining dynamic generation, Oct 2011
Project developers
approach FIT adjustments 14%
Individuals 4 large
 Grid upgrades needed 40%
utilities 7%
 Technical and supply chain
Other
utilities 7%
bottlenecks for offshore
Funds/
wind banks 11%
Farmers Others 2% Commercial
11%
9%
© OECD/IEA 2012

17. In Italy weakening economy and rising
financing costs weigh upon deployment
TWh
Italy forecast renewable generation
 Drivers: 140
120
 Policy commitment to 100
renewable deployment 80
 Increase of targets 60
40
 Improved renewable 20
competitiveness in 0
good resource areas 2011 2012 2013 2014 2015 2016 2017
Hydropower Solar PV Wind onshore Bioenergy Geothermal
 Challenges: 120
Italy power capacity vs. peak load (GW)
 Policy costs for solar PV
80
 Overcapacity of power
system 40
 Cost and availability of
0
finance 2005 2006 2007 2008 2009 2010
Hydropower Combustible fuels
 Grid upgrades Geothermal Solar
Wind Peak load
© OECD/IEA 2012

18. Renewable electricity will continue to rise in
Turkey
TWh
Turkey historical and projected renewable generation
120
100
80
60
40
20
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Hydropower Wind onshore Bioenergy Solar PV
Geothermal Wind offshore CSP Ocean
 Generation from hydropower and wind
expected to grow strongly
© OECD/IEA 2012

19. Renewable Energy Financing
© OECD/IEA 2012

20. Investment in renewable electricity
 Annual investment topped USD 250 billion in 2011
 Most recent quarterly data suggest some slowing
 Economic and credit risks weigh on medium-term picture
 European bank project finance and utility finance more strained
 Other sources/structures of finance play increasing role
 Development banks
 New institutional and non-traditional corporate investors
 Smaller scale financial innovation for small distributed capacity
 Ultimately, cost and availability of financing to depend
most on prevailing policy and technology environments
© OECD/IEA 2012

21. Quarterly investment trend slowing (?)
 Macroeconomic and credit concerns
 Short-term policy uncertainty in some countries
 Still, dip may partly cost reductions; and quarterly data do
not account for small distributed capacity
USD billion
New investment in renewable electricty capacity
50
45
40
35
30
25
20
15
10
5
0
1Q2004 1Q2005 1Q2006 1Q2007 1Q2008 1Q2009 1Q2010 1Q2011 1Q2012
Wind Solar Biomass and waste Geothermal Small hydro Marine
Note: investment volumes include new build asset finance, new investment by VC/PE investors in renewable
energy companies, and new equity raised by renewable energy companies on the public markets. Estimates
for corporate R&D, government R&D and small distributed capacity are not included here. There is no
adjustment for re-invested equity. Data excludes large hydropower.
Source: Bloomberg New Energy Finance (2012). © OECD/IEA 2012

22. Conclusions
© OECD/IEA 2012

23. Key trends
 As a portfolio of renewable technologies matures, global
renewable power generation is forecast to rise 40%
 Supported by policy/market frameworks and economic
attractiveness in increasing range of countries and circumstances
 Technology cost developments, grid/system integration,
cost/availability of financing also weigh as key variables
 High level of economic/policy uncertainty in some countries
 This projected growth is an acceleration vs previous period
 Growth is 60% higher over 2011-17 versus 2005-11
 Renewable deployment is projected to spread out
geographically, with increased activity in emerging markets
 Deployment spurring economies of scale in some technologies -
virtuous cycle of improved competition and cost reductions
© OECD/IEA 2012

24. Thank You
&
Questions
michael.waldron@iea.org
zuzana.dobrotkova@iea.org
paolo.frankl@iea.org
© OECD/IEA 2012