INTERNATIONALENERGY AGENCY© OECD/IEA - 2009

Renewable Energy Developments in

Europe and the EU Targets

Convegno “Le Incentivazioni alle fonti rinnovabili

e gli obiettivi europei: analisi e proposte”GSE

Rome, 27 April 2009

Dr. Paolo FranklHead, Renewable Energy

UnitInternational Energy

Agency

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Drivers for an energy transition and long-term global objectives

Current trends and EU targets

Need for effective and efficient policies

Impacts of the current crisis and outlook

Contents

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8WEO 2008 Energy-related CO2 emissions

In both 550 and 450 policy scenarios energy efficiency and renewables account for more than 75% of total CO2 emission reductions 7

20

25

30

35

40

45

2005 2010 2015 2020 2025 2030

Gig

aton

nes

Reference Scenario 550 Policy Scenario 450 Policy Scenario

CCS Renewables & biofuels

Nuclear

Energy efficiency

550 Policy

Scenario

450 Policy

Scenario

54%

23%

14% 9%

[Source: WEO 2008]

Current trends in energy supply and use are patently unsustainable, economically, environmentally and socially

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8Renewable share of global electricity in WEO2008 450 policy scenario

Renewables account for 40% of global electricity in 2030

[Source: WEO 2008]

0%

25%

50%

75%

100%

2006 2030

Wind

Other Renewables

Biomass & Waste

Hydro

Nuclear

Gas

Oil

Coal

41%

19%

2%

6%

22%

18%

20%

5%

9%

21%

16%

15%

1% 1%

4%18%

40%

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20/20/20 Targets by 2020 and burden sharing 10% of energy from RE in transport

The Challenge: EU Targets

[Data Source: RES EU Directive Proposal, 2008 ]

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Indicative RES-E target: 34% by 2020 [PRIMES Policy Scenario]

Current Trends in EU27 - Electricity

[Data Source: Reference Scenario

WEO 2008]

2006 2020 2030 Ann ual Growth (%)

Total Generation (TWh)

3316 3885 4158 0.9

RES-E Gener. (TWh) 491 1074 1375 4.4

Effective and efficient policies are needed to achieve the objective

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Comparative assessment of effectiveness and efficiency of renewables support policies in OECD countries plus Brazil, Russia, India, China, South Africa (BRICS)

Chosen policy effectiveness indicator on a yearly basis:

Global Renewable Energy Markets and Policies Programme (GREMPP)

Incremental RE generation in a given

year

Remaining additional realisable

potential (by 2020)

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8Achieved (2005) and Additional realisable mid-term potential (2020) for RES-Electricity

Achieved (2005) and additional realisable mid-term (up to 2020) potential for RES-Electricity by country (OECD+BRICS) – in absolute

terms (TWh)

0

500

1000

1500

2000U

SA

Can

ada

Mex

ico

Japa

n

Kor

ea

Aus

tral

ia

New

Zea

land

Icel

and

Nor

way

Sw

itzer

land

Tur

key

Rus

sia

Chi

na

Indi

a

Bra

zil

Sou

th A

fric

a

EU

27

Rea

lisab

le R

ES

-Ele

ctri

city

_ g

ener

atio

n p

ote

nti

al u

p t

o 2

020

[TW

h/y

ear] Additional potential

up to 2020

Achieved potential2005

Source: IEA & EEG, 2008

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Effectiveness IndicatorWind on-shore Average 2000-05 vs. average 2004-05

Source: IEA & Fh-ISI, 2008

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

AU

T

BE

L

CZ

E

DE

U

DN

K

ES

P

FIN

FR

A

GB

R

GR

C

HU

N

IRL

ITA

LUX

NLD

PO

L

PR

T

SV

K

SW

E

AU

S

CA

N

CH

E

ISL

JPN

KO

R

ME

X

NO

R

NZ

L

TU

R

US

A

BR

A

CH

N

IND

RU

S

ZA

F

Eff

ectiv

enes

s in

dica

tor -

Win

d on

shor

e -

Average effectiveness indicator 2000-2005

Average effectiveness indicator 2004/2005

Feed-in tarif f Quota / TGC Tender Tax incentives / Investment grants

OECD - EU

Other OECD BRICS

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8Effectiveness & EfficiencyWind On-shore 2005 (OECD & BRICS)

Source: IEA & Fh-ISI, 2008

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0,00 2,00 4,00 6,00 8,00 10,00 12,00 14,00 16,00 18,00

Annualised renumeration in [US cent / kWh]

Eff

ectiv

enes

s in

dica

tor

2004

/200

5

EU Countries Non EU OECD BRICS EU Countries Non EU OECD BRICS

X

Y

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8Effectiveness & EfficiencyWind On-shore 2005 (OECD & BRICS)

Source: IEA & Fh-ISI, 2008

DEU

ESP

IRL

PRT

NLD

AUT

LUX

JPN

KOR

ITAGBRIND

BELUSA

AUSSWE

NZL

POLFRANOR

CHN

BRA FINTURRUS ZAF MEX

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00

Eff

ect

ive

ne

ss in

dic

ato

r 20

04

/20

05

Annualised remuneration in [US cent / kWh]

OECD - EU Other OECD BRICS

Long-term predictable incentives(FIT or FIP)

+Appropriate framework

Higher risk (TGC)+

Non-economic barriers

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Effective policies only in a limited set of countries Sometimes depending on specific technology

Perceived risk, more than profit, is key to policy effectiveness & efficiency

Price support can not be adequately addressed in isolation; non-economic barriers must be addressed concurrently Grid barriers Administrative barriers Social acceptance issues Other barriers (e.g. training, information, financial, etc.)

Effective systems have, in practice, frequently been the most cost efficient

Move beyond ‘FIT vs TGC’ debate Both systems show success and failures depending on

specific country framework and/or technology

Main Lessons Learnt

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8Recent TrendsPolicy Effectiveness IndicatorWind and PV

[Data Sources: IEA Deploying Renewables and Renewables Information, 2008 ]

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8Recent TrendsNon-Hydro Renewable Electricity

[Data Sources: IEA Renewables Information, 2008 ]

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1. Remove non-economic barriers to improve market functioning

2. Establish predictable support framework - to attract investments

3. Set up transitional incentives decreasing over time – to foster and monitor technological innovation and move towards market competitiveness

4. Ensure specific support in function of technology maturity to exploit potential of large RET range

5. With increasing mass-scale RET penetration impact on overall energy system must be taken into account

Continuity

Certainty

Key Principles for Effective Renewable Energy Policies

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8Fostering RE’s transition towards mass market integration

Niche markets Mass market

Low cost-gap

(e.g. wind onshore)

High cost-gap

(e.g. PV)

Mature tech

(e.g. hydro)

Prototype & demo stage

(e.g. 2nd gen biofuels)

Time

Mar

ket D

eplo

ymen

t

Development

1. Development

RD&D financing,

capital cost support,

investment tax credits, rebates,

loan guarantees

4. Technology-neutral competition TGC, Carbon trading (e.g. EU ETS)

[Source: Adapted from IEA Deploying Renewables, 2008 ]

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Impacts of the crisis

10% of global energy

infrastructure spend

But the top-line hides what is happening in the past few

quarters

5x increase from low level

by around between 2004

and 2007

5% Growth

59% Growth

58% Growth

68% Growth

$35bn

2004

$60bn

2005

$93bn

2006

$148bn

2007

$155bn

2008

Source: New Energy Finance, 2009

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RE policy framework is improving in several EU countries, including Italy

However, additional efforts needed to achieve targets and improve effectiveness and cost-efficiency

Recognise major potential of RETs

Focus on coherent implementation of key policy design principles

Address non-economic barriers, in particular in the current economic downturn conjuncture

Conclusions

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Economic crisis must not make us lose focus on long-term goal of a more secure and sustainable energy future

Energy technology is key to this future

An integrated and strategic policy approach is required that bridges the short to the long-term Initial emphasis on energy efficiency Roadmaps and international co-operation Increasing RD&D funding for new technologies Tailored deployment policies, including for

renewables

Clean Energy New Deal can provide win-win benefits

Recommendations

Nobuo Tanaka, IEA Executive Director

G8 Environment Ministers meeting, Siracusa, Italy22 April, 2009