XI KAZENERGY Eurasian Forum Key Global Energy Trends: Affordable, Reliable, and Sustainable Energy Sources 07 September, 2017 Paulina Mirenkova, Associate Director , Paulina.Mirenkova@ihsmarkit.com

Between 2016 and 2040 global primary energy demand to grow by 31% XI KAZENERGY Eurasian Forum Traditional hydrocarbon sources will continue to support the bulk of global energy consumption for many years to come Hydrocarbons to remain largest component of global energy consumption in 2040, with oil remaining largest single segment Between 2016 and 2040 global primary energy demand to grow by 31% Natural gas consumption grows most in absolute terms among energy sources through 2040 Renewables remain small share of total energy, but grow rapidly from a small base (highest percentage growth)

XI KAZENERGY Eurasian Forum High regional variability: Europe’s demand for gas and renewables to grow, China’s energy demand includes more nuclear and gas, while US relies heavily on natural gas Source: IHS Markit Note: Renewables include solar, wind, geothermal, and tide/wave/ocean energy. Other includes biofuels, solid waste, biomass, and net trade of electricity and heat.

Electricity generation grows at 0.9% on average between 2016-2040, XI KAZENERGY Eurasian Forum Kazakhstan’s natural gas consumption set to grow in base case scenario, but coal to remain an important fuel Electricity generation grows at 0.9% on average between 2016-2040, while primary energy consumption grows at 0.6% per year on average over the same period

XI KAZENERGY Eurasian Forum Renewable energy will be fastest-growing source of new energy supply for global power generation Global cumulative installed renewable capacity by technology, 2000–40 © 2015 IHS 4% CAGR (2030–40) 6% CAGR (2021–30) 11% CAGR (2016–20) 15% CAGR (2000–15) Note: Solar PV capacity is in AC. CAGR = compound annual growth rate. Source: IHS Markit Renewables (excluding large hydropower) are forecast to increase nearly fivefold and reach almost 4,000 GW of installed capacity and more than US$7 trillion of capital investment from 2016 to 2040. Globally, in 2016 there were record additions of renewable energy capacity (150 GW), more than for any other form of energy. This is more than half of the total capacity added, and reflects falling capital costs and strong policy support for solar photovoltaics and onshore wind. The trend is expected to continue into 2017 and beyond.

XI KAZENERGY Eurasian Forum Share of incremental power capacity coming from renewable sources to increase significantly between now and 2040 Wind and solar together accounted for 10% of installed power generation capacity at year-end 2015, but they are expected to capture more than 50% of total net power capacity added in 2016-40.

XI KAZENERGY Eurasian Forum Renewables becoming competitive on generation level: cost of wind and solar vs marginal fossil fuel price moving closer together History But the economics of renewables are much more nuanced than just LCOE comparisons and still require policy support Comparing intermittent and dispatchable generating technologies with full-cost levelized analysis yields misleading results Intermittent renewable power technologies alone cannot reliably provide all the capacity and energy needed by consumers

up from 4% and 1% in 2015, respectively. XI KAZENERGY Eurasian Forum Share of total power generation from wind and solar to increase to ~16% by 2040 On-shore wind and solar base case forecast to reach 8% and 6%, respectively, of total global power generation by 2040, up from 4% and 1% in 2015, respectively. Wind and solar will continue to depend on policy support in majority of large global power markets, despite their improving cost profiles.

XI KAZENERGY Eurasian Forum Renewable power penetration in the world’s 25 largest power markets in 2040, with United Kingdom and Germany in lead Largest share of renewables penetration expected in United Kingdom and Germany, driven by offshore wind growth; Russia remains exception, with little renewables despite being world’s fifth-largest power generator.

XI KAZENERGY Eurasian Forum Europe, as global trendsetter, intermittent generation increases to 43% of total EU-15 generation in 2040 in base case In our latest update of the Rivalry outlook (published January 2017) we have decreased build in Poland (new RES act does not favour intermittent renewables), slightly in UK (delay of CFD round post 2020 reduce amount built per year post 2025) but increased PV slightly in Germany, France, Turkey, Spain 2016 a turning point for offshore wind. Dutch govt roadmap that forsees acceleration of about 1 GW per year in period 2023-2030 (IHS assume 0.23 GW vs 0 previously). Roadmap yet to be approved, govt is to detail size and scale of tenders. SDE+ up 33% vs 2016 auction to €12bn

XI KAZENERGY Eurasian Forum Kazakhstan’s electric power capacity to remain robust, particularly from renewable sources, growing by ~2% annually to 2040, albeit with low utilization rates

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