© OECD/IEA, 2016

Global Renewable Market Outlook

Marrakech – China Pavillon, 15 November 2016

Cédric Philibert

Renewable Energy Division International Energy Agency

© OECD/IEA 2016

An 8% reduction in 2015 global energy investment results from a $200 billion decline in fossil fuels, while the share of renewables, networks and efficiency expands

Power Generation

23% Biofuels and Solar

Heat 1%

Renewables 17%

USD 1.8 trillion

Investment flows signal a reorientation of the global energy system

Oil & Gas 46%

Coal 4%

Electricity Networks

14%

Energy Efficiency

12%

Global Energy Investment, 2015

Thermal Power

7%

Wind = 6%

© OECD/IEA 2016

Renewables investment buys much more electricity

Investment in renewables-based capacity more than covers 2015 global electricity growth. Wind leads, surging 35% in 2015 on economics and record offshore growth

0

50

100

150

200

250

300

350

2011 2013 2015

USD (2015) billion

Hydropower Solar PV Wind Other renewables

0

50

100

150

200

250

300

350

400

2011 2013 2015

TWh +33%

+0%

Global renewable power investment Generation from investment in capacity

© OECD/IEA 2016

New capacity in renewables, led by wind, exceeds fossil-fired plants

Net capacity increases, 2015 (in GW)

2015 saw record level annual additions in wind and

solar, compensating a decrease in hydropower

© OECD/IEA 2016

2015: a record year for renewables

Renewable additions (2014-15) and cumulative installed power capacity

Cumulative renewable capacity surpassed coal at the end of 2015

0

500

1000

1500

2000

2500

2014 2015

Cumulative installed

capa

city (GW)

Coal Gas Oil Nuclear Renewables

0

20

40

60

80

100

120

140

160

180

2014 2015

Annu

al a

ddition

s (GW)

Wind Solar PV Hydropower Other renewables

5

© OECD/IEA 2016

Recent announced long-term contract prices for new renewable power to be commissioned over 2016-2019

Record low price announcements

Best results occur where price competition, long-term contracts and good resource availability are combined

Onshore wind Utility-scale solar PV

Chile USD 30/MWh

Brazil USD 75-81/MWh

United States USD 65-70/MWh

Mexico USD 45/MWh

India USD 55-94/MWh

United Arab Emirates USD 30/MWh

South Africa USD 65/MWh

United States USD 47/MWh

Brazil USD 49/MWh

Mexico USD 55/MWh

South Africa USD 51/MWh

Australia USD 69/MWh

Turkey USD 73/MWh

China USD 80–91/MWh

Germany USD 67-100/MWh

Egypt USD 41-50/MWh

Jordan USD 61-77/MWh

Uruguay USD 90/MWh

Germany USD 87 /MWh

Canada USD 62-66/MWh

This map is without prejudice to the status or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area

Morocco USD 30-35/MWh

Note: Values reported in nominal USD includes preferred bidders, PPAs or FITs. US values are calculated excluding tax credits. Delivery date and costs may be different than those reported at the time of the auction.

© OECD/IEA 2016

Renewables to meet new generation needs and replace old power capacity

Between 2015-21 wind generation doubles and solar PV almost triples,

with renewables reaching around 27% of total electricity by 2021

Global renewable electricity generation

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

TWh

Ocean

STE

Geothermal

PV

Offshore wind

Onshore wind

Bioenergy

Hydropower

7

© OECD/IEA 2016

More ambitious policies could further enhance the outlook in line 2°C target

Renewables are in line with NDC pledges by 2030 but reducing policy uncertainty and overcoming financing & grid integration challenges remain key to achieve 2°C target

Renewable electricity capacity additions in Accelerated Case vs. Main Case

0

50

100

150

200

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

GW

Main case Accelerated case

© OECD/IEA 2016 Source: IEA estimates from IEA Medium-Term Renewable Energy Market Report 2016.

Towards high shares of variable renewables

Share of variable electricity generation in 2015 and 2021

0% 10% 20% 30% 40% 50% 60%

Indonesia

Thailand

South Africa

China

United States

Chile

Mexico

Australia

Sweden

Italy

Morocco

Spain

Belgium

United…

Germany

Ireland

Denmark

PV share 2015 Wind share 2015 Additional PV share 2021 Additional wind share 2021

Experience in a number of countries shows how to integrate significant shares of VRE

© OECD/IEA 2016

Global electricity mix changes in the 2DS

A shift reversal is needed with renewables providing over 60% of global electricity by 2050 or before

© OECD/IEA 2016

Electricity mixes by 2050 in the 2DS vary widely

Electricity mixes by 2050 in the 2DS in selected regions

9%

8%

5%

10%

8%

6%

9%

14%

14%

11%

7%

10%

16%

20%

12%

10%

21%

32%

24%

14%

10%

14%

7%

14%

15%

19%

16%

11%

14%

63%

5%

7%

5%

5%

7%

15%

9%

17%

17%

20%

16%

15%

22%

10%

4%

28%

29%

12%

23%

28%

11%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

OECD Americas

OECD Europe

China

India

Middle East

RSA

ASEAN

Brazil

Other renewables

STE

Solar PV

Wind

Hydro

Biomass and waste

Nuclear

Natural gas

Coal

Oil

Resources and shape of the demand explains the variations

© OECD/IEA 2016

Industry, led by iron & steel, cement

and chemicals, becomes 1st

CO2 source

2DS 36%

20%

29% 45%

31%

9%

36%

28%

30%

24%

38%

31% 2DS

© OECD/IEA 2016 - 13

Next-generation policies needed

Next-generation wind and solar PV need ‘next-generation policies’ focusing on system value and not just costs

Focus on five main areas: • System services

• Location of deployment

• Technology mix

• Generation time profile

• Integrating planning, monitoring and revision

Examples of best practice in Denmark, Germany, Spain, US, Mexico, Brazil, China, South Africa

© OECD/IEA 2016 - 14

3) Increase flexibility of other power system

components

Grids Generation

Storage Demand Side

1) Foster System-friendly

RE

Increasing variable RE will need more system flexibility

2) Better market design & operation

© OECD/IEA 2016 - 15

Complementary roles of PV and STE

©

Thanks to thermal storage, STE is generated on demand when the sun sets while demand often peaks and value of electricity increases

Source: IEA Technology Roadmap (2014)

Possible power mix in a sunny country, 2030

GWh

© OECD/IEA 2016 - 16

Optimising generation time profile

The design of wind and solar plants can be optimised to increase value Spreading the energy on more hours

Making generation match the demand more closely

Policy mechanisms need to signal difference in value depending on time

Partial exposure to market prices via premium systems

Power purchase agreements adjusting remuneration to time of delivery (TOD)

Premiums for system friendly deployment choices

Policy example: California, USA

• West-facing PV systems produce closer to peak demand and receive payments up to 15% higher than south-facing systems

• TOD factors integrated into PPAs for large scale solar systems

DC to AC ratio by mounting type and installation year, United States

1.15

1.20

1.25

1.30

1.35

2010 2011 2012 2013 2014 2015

DC/AC ratio

Fixed PV

plants

Tracking PV

plants

All PV plants

© OECD/IEA 2016

Policies remain crucial to attract financing

Sharp cost reductions of wind and solar costs change policy needs

• From providing financial support to creating a framework for investment

• Innovation must extend from renewable technology to system integration

Financing system-friendly RE deployment

• Securing long term remuneration is key to investment and low-cost finance

• But short term price signals must reflect the value of power

• Time-structured power purchase agreements, and feed-in premiums combined with spot market prices, are the main options

Energy policies must be consistent and extend beyond power

• Electrification of end-use sectors will ease integration of variable renewable and promote decarbonisation of buildings, transport and industry

• Removing fossil fuel subsidies and pricing carbon is both easier and more necessary when fossil fuel prices are low