© World Energy Council 2013 World Energy Scenarios Impact of the Energy Governance Model to the Future of the European Energy Sector Einari Kisel 23 rd FORUM: Energy Day in Croatia Zagreb, 28. November 2014

© World Energy Council 2013 Table of contents ► Brief overview about World Energy Scenarios ► Global and European results ► Impact of the current geopolitics to the energy sector ► Concerns arising from the current EU Energy governance model

© World Energy Council 2013 Before we go… Do you prefer to listen Jazz or Symphony?

© World Energy Council 2013 The World Energy Scenarios

© World Energy Council 2013 Brief outline of Global Scenario stories JazzSymphony World where there is a consumer focus on achieving energy access, affordability, and individual energy security with the use of best available energy sources. World where there is a voter consensus on driving environmental sustainability and national energy security through corresponding practices and policies. There is an International Climate Change agreement by 2015 Main players are multi-national companies, banks, venture capitalists, and price- conscious consumers Main players are governments, international agencies, local public-sector and private companies, NGOs and environmentally-minded voters Technologies are chosen in competitive markets Governments pick technology winners Energy sources compete on basis of price & availability Select energy sources are subsidised and incentivized by governments 5

© World Energy Council 2013 Results: Global level

© World Energy Council Global total primary energy supply JAZZ: Upstream liberalized; technology development, supply surge/more producers Coal remains dominant in some regions SYMPHONY: Tighter supply Higher infrastructure costs Energy security drives reduced fossil use

© World Energy Council Global Electricity Production and Capacity JazzSymphony coal: expected to remain dominant gas: share increases (esp. N. America), nuclear: mainly non-OECD coal: share drops, CCS increasingly required nuclear: increasing; led by governments More stable & quicker transition to renewables

© World Energy Council 2013 Results for Europe

© World Energy Council Total primary energy supply in Europe JazzSymphony Functioning carbon markets (albeit low prices). Biomass, wind and solar play a key role after Energy policy implemented via a central mechanism, specific technologies chosen for investment (incl. CC(U)S). The share of fossil fuels drops to 52% in 2050.

© World Energy Council Electricity production and capacity in Europe Source: PSI (2013): Latest modelling run as of 28 June 2013 Jazz Functioning carbon market (albeit low CO 2 prices) Gas investments until the medium term High penetration of onshore wind after 2040 Symphony Coal electricity generation switches to CCS in 2050 Nuclear, wind and solar displace gas after 2030 (strong climate policy, govt. support)

© World Energy Council 2013 Impact of the Current Geopolitics to the European Energy Sector

© World Energy Council 2013 Question 1: Have you observed a shift in discussion focus on the dimensions of the Trilemma versus last year? © World Energy Council 2014 The WEC Europe Survey 2014 Conclusion: Trilemma discussion focus in Europe has moved towards competitiveness, but even more towards security of supplies

© World Energy Council 2013© World Energy Council 20 The WEC Europe Survey 2014 In mid-term discussions power sector SoS policy has the similar weight as gas sector

© World Energy Council 2013© World Energy Council 2014 The WEC Europe Survey 2014 Power market faces more regulatory changes in mid-term, gas cooperation strong

© World Energy Council 2013 Concerns arising from the current EU Energy governance model

© World Energy Council 2013 Implications of the „European Symphony“ ► Concern 1: if the EU continues with „Symphony“ and the US continues with „Jazz“, then European competitiveness will be strongly hampered „Jazz“ delivers lower energy prices to the US, energy intensive industries will leave from Europe. As a result, European energy consumption (and emissions) will decrease more than expected, which makes the expectation of high CO2 prices unrealistic. Unemployment is expected to increase even more. ► Concern 2: Different „Symphonies“ in different regions may create conflicts Government led energy policies may easier bring along national and international conflicts (for example Russia-Ukraine crisis). ► Concern 3: Political and regulatory risks will ruin the investment climate in the EU Energy Sector „Symphony“ is very much influenced from political cycles. Constant „development“ of regulatory frameworks by governments and the EU (without admitting mistakes made) creates confusion among investors.

© World Energy Council 2013 Einari Kisel Thank you Any questions?