Scenarios & Developments: The Energy Industry between the Conflicting Priorities of Global Warming, Energy & Security AGN International World Congress 2013 Dr. Felix Chr. Matthes Venice, 23 September 2013

Starting point #1: Future world energy (Oil) prices will be high and volatile BP, EIA, Öko-Institut

Starting point #1a: Will shale gas emerge as a game changer in Europe Starting point #1a: Will shale gas emerge as a game changer in Europe? Probably not! EIA, Energate, EEX, A.T. Kearney, Öko-Institut

Starting point #1b: Increasing wealth transfers to energy exporting countries (i.e. Germany) Destatis, Öko-Institut

Starting point #2: The transition phase towards a liberalized market comes to an end VDEW, BDEW, Öko-Institut 2012

Starting point #3a: Significant increase of conventional power investment costs CERA, Öko-Institut

Starting point #3b: Significant decrease of renewable power investment costs (e.g. PV) Öko-Institut

Starting point #4: Ambitious GHG emission reduction targets for the European Union Öko-Institut 2012

Starting point #4a: The European Union Emissions Trading Scheme in a deep crisis EvoMarkets, EEX, ECX, Öko-Institut

Some interim remarks Business as usual is not an option – in any case major investments needed, probably higher than ever in the past – due to higher costs price volatilities creates significant vulnerability – and wealth transfers new (renewable) technologies create major challenges for business models of the past climate change and climate policy will not disappear

Effects 1a: Record low prices at electricity exchanges (and for large customers) Evomarkets, EEX, ECX, Öko-Institut

Effects 1b: Record high prices for residential/commercial customers Evomarkets, EEX, ECX, Öko-Institut

Effects 2: Much less oil & natural gas imports than assumed in the past?! European Commission, Öko-Institut

The European Dimension Energy & climate policy towards 2030 & 2050 Heads of State decisions: long-term greenhouse gas emission reduction goals (2050) Emerging debate on goals, strategies and policies towards 2030 and beyond Roadmaps (Low-carbon economy, Energy 2050, Transport) from 2011 present background analysis longer-term greenhouse gas emission reduction targets strategies for a world with >60% power generation from renewables (market design!) different views and perceptions on competitiveness effects status quo is not (!) the counterfactual (in many dimensions, also costs), business as usual is not an option Emerging climate policies/action in many regions of the world (Ambitious) carbon pricing policies in US States, Australia, New Zealand, South Korea, South Africa, China etc.

European power system: Long-term trends from the Energy Roadmap 2050 1. higher system costs 2. (very) comparable system costs 3. capital-intensive 4. medium-term challenge: storage costs ≈ European Commission, E3MLab 2011, Matthes 2012

The new European diversity? Status on (emerging) capacity mechanisms Öko-Institut 2012

The new European diversity? Status on RES support schemes Öko-Institut 2012

Major infrastructure upgrades (in Germany) Driven by renewables and power trading Source: NEP 2012 as of August 2012, www.netzentwicklungsplan.de

Future energy and climate policy The challenges ahead Limiting the vulnerability to high and volatile fuel prices energy efficiency will be (back) on the agenda – again and again electrification as a new approach for transport and heat markets Transforming power market design building an enabling framework for the upcoming (necessary) phase of major investments dealing with an extremely capital-intensive system (transition to a market dominated by capacity payments) Limiting and re-balancing the cost burdens For the European Union: re-defining the role of Member States and the Union in energy policy New approaches to deal with the external dimensions (competitiveness, energy imports etc.)

Thank you very much Dr. Felix Chr. Matthes Energy & Climate Division Berlin Office Schicklerstraße 5-7 D-10179 Berlin f.matthes@oeko.de www.oeko.de