Transforming the GCC Power Sector Frank Wouters

content EU-GCC Clean Energy Network Global Trends and Issues Electricity Sector Flexibility Power in the GCC

EU-GCC Clean Energy Network 1 EU-GCC Clean Energy Network

The Network at a Glance We catalyze and coordinate cooperation on clean energy We support the development of partnerships in the area of clean energy technologies: Renewable Energy Technologies; Energy Efficiency and Demand Side Management; Clean Fossil Fuels and related technologies; Carbon Capture, Storage and Usage (CCS and CCU) Regional Electricity Market Integration; and Climate Change Policy. 2010 Creation 2016 Phase II

Trends and Issues 2

The World of Energy is Transforming Rapidly Increasing integration of new technologies Democratization of the energy system New players such as Google and Tesla New financial instruments such as Green Bonds Rapidly falling prices of renewables

Falling prices of solar panels

2015 power prices in the Middle East 2.99 ct/kWh ! Source: NBAD “Financing the Future of Energy”

Moving to the Majority in New Capacity Additions Worldwide, well over 100 GW of new renewable capacity has been added every year since 2011. That is equivalent to the total installed generation capacity of brazil, or twice that of Saudi Arabia. Renewables have accounted for more than half of net capacity additions in the global power sector since 2011 – meaning more reneawbles capacity is being installed than new capacity in fossil and nuclear power combined. More than half of the new electricity generation capacity worldwide is based on renewable energy. Source: IRENA

Distorted Energy Pricing Pre-tax Energy Subsidies and Spending on Education for each percentage point of GDP in MENA countries, 2011 Fossil-fuel subsidies divert spending from health, education, more inclusive growth Pre-tax subsidies are difference between what the consumer pays at the pump for gasoline vs. international prices. Tax subsidies are difference between energy tax and normal consumer tax. Should also include tax on pollution. Post tax subsidies are normally 4 times pre-tax subsidies but (e.g. MENA)

Electricity sector at a crossroads 3

We can show similar pictures for wind energy and other renewables.

Average daily summer spot price profile in Germany, 2010 and 2013 (EUR/MWh) On the short term there are already bad things happening for the incumbents in the electricity sector. In only three years spot prices have almost halved and according to the Deutsche Bank, 50% of the European profit pool will be gone by 2020. Source: EEX; BNEF

Conventional Set-up Integrated Utility Consumers $ Generation Transformation Consumption Transmission Distribution

Unbundling Utility Utility Consumers Generation Transformation Consumption Transmission Distribution

Privatization Utilities Utilities Consumers Generation Transformation Consumption Transmission Distribution

Democratization Utilities Utilities Prosumers $ Generation Transformation Consumption Transmission Distribution

Impact on incumbents Impact on incumbent utilities

RWE’ and EON’s share price

Flexibility 4

The future is flexible The examples show the limitations of inflexible baseload in the new paradigm. The challenge is to make it work in a new and much more complex system, enriched with non-traditional players and “prosumers”.

Power in the GCC 5

Power in the GCC IPP Model saves money in times of fiscal pressure Increase solar and wind power Integrate GCC grid and introduce wholesale market Focus on efficiency, storage and demand side management Reduce dependence on baseload power