1. Challenges of the current European Energy Policy Rafael Miranda CEO of Endesa President of Eurelectric Athens, 22th of May of 2008

2. 2 The global energy scenario will face profound change The world's population will grow to 8 billion in 2030 Global primary energy consumption will increase by 55% over the next 25 years China and India will increase their primary energy demand by 125%, equal to 45% of worldwide growth Source: World Energy Outlook 2007 (IEA) WorldChina Primary energy consumption (Mtoe) India 20052030 +55% 11.429 17.721 2.279 5.018 +125%

3. 3 The energy industry will need a huge investment effort in the future Electricity industry will represent 53% (US$ 11,560 billion) of total investments. Electricity sector will gain ground versus other energy uses. 15% (US$ 1,728 billion) is earmarked for Europe. In the next 25 years new global installed capacity will be equivalent to the one commissioned on the last 125 years. Source: World Energy Outlook 2007 (IEA) 53% 19% 3% 25% OilCoalElectricityGas 2006-2030 investments in the energy industry: US$ 21.936 billion

4. 4 The combat on climate change will be a relevant driver in the energy industry If the European target of a 2ºC rise in temperatures is reached, by 2080: 2,7 billion people will be exposed to the risks of drought, 250M to malaria and 30M to hunger. IPCC :”Most of the observed increase in global average temperatures since the mid-20th century is very likely due to the observed increase in anthropogenic greenhouse gas concentrations” Source: Intergovernmental panel on climate change (ONU) Global population affected by global warming in 2080 (*)

5. 5 35% 25% 2% 21% 6% Total 100% 32% 28% 2% 22% 5% 100% Heavy dependence on fossil fuels 2005 WEO 2030 Fossil fuels will remain as the dominant technology for decades Renewables will grow significantly in absolute terms (2.800-3.500 TWh in 2030) 11% 11% Renewables Oil Coal Hydro Natural gas Nuclear Global primary en ergy mix Source: World Energy Outlook 2007 (IEA) Baseline Scenario: No inclusion of Government new energy policies Alternative Scenario: Inclusion of additional measures from Governments to face SoS and Climate Change Issues. 450 millions of particles in the atmosphere Baseline Scenario 31% 23% 3% 22% 7% 100% 14% Alternative Scenario

6. 6 Commodity prices would be driven in the future by its scarcity Sources: EIA y BP Statistical Energy Review. Reserves (in years of consumption) and main countries where they are located Saudi Arabia, Iran, Iraq, Kuwait and Venezuela Russia, Iran, Qatar, Saudi Arabia and A.U.E. U.S.A., Russia, China, India and Australia … and its prices have risen sharply +319% +143% +90% Price increases (dic03 vs. May08) Oil Natural Gas Coal Energy commodities are scarce and mainly located in geopolitically unstable countries… 41 years (down from 41 years in 1996) 63 years (down from 66 years in 1996) 147 years (down from 224 years in 1996)

7. 7 20% of renewables in primary energy mix 20% CO 2 emissions reduction in the EU (vs 1990), up to 30% reduction may be set 20% increase in energy efficiency In this challenging global environment, the EU has set the guidelines of its energy policy 12 fossil-fuel plants with CCS 50% CO 2 emissions reduction by 2050 (vs 1990) A real pan-European energy market Strategic European Energy Review 2007 (SEER) 2009 2015 2020 2050 Developments in the Green Package

8. 8 climate change is a global … however, climate change is a global problem where Europe's impact is not significantly relevant EU is leading the combat on climate change Source: World Energy Outlook 2007 (IEA) World CO2 Emissions World CO2 Emissions (MtCO2) EU Emissions Targets % World CO2 Emissions 2020 -20% or -30% (vs. 1990) 2020 -50% Europe ambitious Europe has set an ambitious emission reduction targets … 2005 26.620 2030 41.905 (15.285) +57% China Others 2005 2030 44%47% Europe15%10% 19%27% USA 22%16%

9. 9 The EU is clearly committed to achieve its emission target through a further development of renewables General characteristics: Increase of 5.5% for all + individual additional based on the GDP of the country No consider historical effort and potential of renewable is not consider 10% of biofuels in transport in 2020 “National Action Plan” before march 2010 EU Renewables policy and breakdow by country 2020 X,X X,X% Renewables a 2005 Renewable effort 2006-2020 Renewables 2020 + = Nota: the EU considers that renewable energy includes wind, solar, hydro, biomass, but do not include cogeneration. Only main countries represented. 27% 15% 18% 20% 18% 23% 20% 15% 11,1 11,3 11,5 12,2 12,7 13,7 21,8 6,9 8,7 8,5 5,8 10,3 5,2 1,3 9. Greece 8. Spain Average UE 6. Germany 5. France 2. UK 1. Italy 7,8 7,2 21. Poland Industry views of the European energy policy: Main effort made by the electricity sector Electricity prices will increase Incentives for renewables should be market based Homogeneous European policy in renewables is needed.

10. 10 Renewables growth have significant benefits for Europe Renewables evolution in Europe Renewables evolution in Europe (ex-hydro) 2030 (TWh) Impacts of renewables to the European Industry: 9 17 170 429 850 14 146 84 217 259 78 552 58 1990200520122030 Biomass and waste Wind Geothermal Solar Tide and wave No CO2 emissions No contribution to the acid rain formation Reduce external dependency Acomplishment of Kioto targets Create jobs Tech development that can benefit trade Some contributes with distributed generation to the electrical system High volatility Backup power needed Need to be subsidized Source: World Energy Outlook 2007 (IEA)   

11. 11 A balanced energy policy is required Energy efficiency Diversification of technologies Agreements with energy commodities producers More R&D investment Development of interconnections Market development Sustainability Security of supply Competition Minimising impact on the environment and climate change Energy policy

12. 12 Moving towards a single European market will be crucial The EU ultimate objective is to create a single electricity market Regional markets could be a necessary interim step To achieve an efficient and competitive single market it is key to define an homogeneous and stable regulation based on market mechanisms

13. 13 All generation technologies must be considered Natural gas Coal Nuclear energy Wind energy No single technology meets all these goals, but combined provide an optimal solution Energy dependency Security of supply Reserves Cost Price volatility Emissions

14. 14 To solve the energy quiz it will be necessary the development of new technologies 20102050202020302040  CCS technologies  4G nuclear fission  Electric cars  2G Biofuels  Wave energy  Competitive solar  Smart Grids  Nuclear fusion  Hydrogen car and turbine  Unknown technologies nowadays  Offshore wind  3G nuclear fission  Hybrid cars  1G Biofuels  Subsidized solar  Smart meters Towards a cero-emission and efficient energy

15. 15 The EU should promote energy efficiency more actively significant room for improvement … however Europe still has significant room for improvement Europe high levels of energy efficiency Europe and Japan are economic regions with the high levels of energy efficiency… Energy intensity (base 100: EU15 2004) Primary energy intensity (kpte / M€)

16. 16 Summary leading the combat on climate change The European Union is leading the combat on climate change. A critical levers will be the development of renewables Renewables have significant benefits Renewables have significant benefits for both the European electricity system and the European economy, with some “cons” that must be offset Europe should not leave aside the other main drivers of a balanced energy policy: Security of Supply and Competitiveness

17. Rafael Miranda CEO of Endesa President of Eurelectric Athens, 22th of May of 2008 Challenges of the current European Energy Policy