Why a share of 80% electricity from renewable energy sources is no utopia and why a share of 80% fossil fuels will soon be history. International Forum on Low-Carbon Industry and Green Economy November 20th 2013, Beijing Dr. Sven-Uwe Mueller Head of Energy Sector, Director of the Sino-German Renewable Energy Programme Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Because… Levelized Cost of Electricity (LCOE) of RES are rapidly catching up with fossil fuels – as proven by: World Energy Council (WEC) World Energy Perspective: Cost of Energy Technologies Fraunhofer ISE Levelized Cost of Electricity: Renewable Energy IRENA Renewable Power Generation Costs Grid integration of variable RES is technically feasible provided that … Grid integration of variable RES is economically feasible provided that …

WEC: Most RE technologies close to reaching parity LCOE analysis shows that the cost range across RE technologies is wider than those of conventional energies. But the most mature and widely deployed clean technologies (i.e. hydro and onshore wind) are close to reaching parity with traditional sources. LCOE of onshore wind electricity by region (USD/MWh) China USD 49-93/MWh India USD 47-113/MWh WEC study published in 2013 Explanations: JAPAN: is on the high end globally as the Japanese market just recently kicked off in late 2012; reasons: a market with exceptionally high equipment costs, a lack of development experience, one of the most expensive labor costs in the world US (LCOE: 61-136 USD/MWh) & BRAZIL (LCOE: 55-93 USD/MWh): characterized by large-scale projects CHINA (LCOE: 49-93 USD/MWh) & INDIA (LCOE: 47-113 USD/MWh): low capital expenditure helps pull down the LCOEs of onshore wind making well-sited projects there among the cheapest in the world; in China: best project economics for wind parks can be found in Inner Mongolia FOSSIL FUELS: For LCOE coal see p. 33 in China 35-39 USD/MWh; Australia 93-126 USD/MWh LCOE of coal electricity by region (USD/MWh) China USD 35-39/MWh Source: World Energy Council. World Energy Perspective: Cost of Energy Technologies. 2013. http://about.bnef.com/white-papers/world-energy-perspective-cost-of-energy-technologies/

Australian wind power: A success story CCGT  combined-cycle gas & steam turbine power plant = GuD Source: RE New Economy: Tracking the next Industrial Revolution. By Giles Parkinson. July 25, 2013. http://reneweconomy.com.au/2013/bugger-the-utilities-wind-and-solar-will-be-built-anyway-74216

Fraunhofer ISE: LCOE in Germany: Renewables are catching up rapidly Levelized Cost of Electricity Fraunhofer (as of Nov 2013) The LCOE of RE is continuously decreasing due to: Innovative technological development More efficient materials Less material consumption More efficient production processes Increased efficiencies Mass production caused by worldwide market growth Lignite Coal CCGT Source: Fraunhofer ISE. ““Stromgestehungskosten Erneuerbare Energien.“ November 2013. http://www.ise.fraunhofer.de/de/veroeffentlichungen/veroeffentlichungen-pdf-dateien/studien-und-konzeptpapiere/studie-stromgestehungskosten-erneuerbare-energien.pdf.

IRENA: LCOE for RE technologies are continuing to decline (as of Nov 2012) Chart shows cost-effectiveness of today’s RE technologies. However, the cost ranges are wide and very site-specific. A rapid deployment of RE technologies has a significant impact on costs due to the high learning rates for RE. IRENA (general cost study): LCOE is declining for wind, solar PV, CSP and some biomass technologies, while hydropower produced at good sites is still the cheapest way to generate electricity. Wind, solar PV, CSP, biomass have high learning rates, i.e. that capital costs decline by a fixed, average percentage for every doubling of installed capacity; for solar PV this can be up to 22%. “typical island electricity prices”  as an argument for the deployment of RE technologies = the most economic solution for off-grid electrification; high oil prices & declining costs of RE technologies made renewables the default option for off-grid electrification (p. 5). IRENA’s findings are from November 2012  here, further declining LCOEs for RE technologies were already predicted The LCOE for Renewable Power Generation Technologies Note: Assumes the cost of capital is 10%. The bands reflect ranges of typical investment costs (excluding transmission and distribution) and capacity factors. PT = parabolic through, ST = solar tower, BFB/CFB = bubbling fluidized bed, AD = anaerobic digester, CHP = combined heat and power. Source: IRENA. Summary for Policy Makers: Renewable Power Generation Costs. November 2012; http://www.irena.org/menu/index.aspx?mnu=Subcat&PriMenuID=36&CatID=141&SubcatID=261

Because… Levelized Cost of Electricity (LCOE) of RES are rapidly catching up with fossil fuels – as proven by: World Energy Council (WEC) World Energy Perspective: Cost of Energy Technologies Fraunhofer ISE Levelized Cost of Electricity: Renewable Energy IRENA Renewable Power Generation Costs Grid integration of variable RES is technically feasible provided that … Grid integration of variable RES is economically feasible provided that …

… wind and solar fluctuation patterns are compensated for by a more flexible electric system Fossil Fuels Solar Wind Offshore Wind Onshore Hydro Biomass Electricity Demand Fluctuation is the main technical challenge for an electric system with high levels of RE penetration. Source: AGORA. “12 Insights on Germany’s Energiwende.” Feburary 2013. http://www.agora-energiewende.org/fileadmin/downloads/publikationen/Impulse/12_Thesen/Agora_12_Insights_on_Germanys_Energiewende_web.pdf

Technical requirements for the successful integration of variable RES Ways of thinking must change, a new approach is needed! Conventional plants as baseload providers Zero flexibility of dispatchable generation Hierarchical grids as distribution mechanism Electricity as an isolated system Conventional plants as residual load providers Maximum flexibility of dispatchable generation Grids as an aggregation and balancing instrument Electricity as part of the overall energy, heat and transportation system Zu Agora-These 3: Grids are cheaper than storage facilities Grids decrease the need for flexibility, fluctuations in generation (wind and PV) are equilibrated across large distances Cost-effective flexibility options in Germany and Europe via grids Transmission grids reduce overall system costs with relatively small investment costs New storage technologies will only become necessary as the share of RE exceeds 70% Source: AGORA. “12 Insights on Germany’s Energiwende.” Feburary 2013. http://www.agora-energiewende.org/fileadmin/downloads/publikationen/Impulse/12_Thesen/Agora_12_Insights_on_Germanys_Energiewende_web.pdf

The NREL Renewable Electricity Futures Study comes to similar conclusions… Conventional plants as baseload providers Conventional plants as energy-providers Zero flexibility of dispatchable generation Electric Sector not flexibile enough to accommodate higher levels of RE generation Hierarchical grids as distribution mechanism Today’s grid infrastructure poses a constraint Conventional plants as residual load providers Conventional plants as reserve-providers Maximum flexibility of dispatchable generation Increased flexibility of the electric system Grids as an aggregation and balancing instrument Expansion of transmission infrastructure to share and balance reserves NREL Study = NREL study focuses on US electricity sector; study models various scenarios; scenarios with different levels of RE generation in 2050 (from 30-90%) with a focus on 80% Source: National Renewable Energy Laboratory (NREL). “Renewable Electricity Futures Study.” 2012. http://www.nrel.gov/analysis/re_futures/

Because… Levelized Cost of Electricity (LCOE) of RES are rapidly catching up with fossil fuels – as proven by: World Energy Council (WEC) World Energy Perspective: Cost of Energy Technologies Fraunhofer ISE Levelized Cost of Electricity: Renewable Energy IRENA Renewable Power Generation Costs Grid integration of variable RES is technically feasible provided that … Grid integration of variable RES is economically feasible provided that …

… new market rules and regulations are designed Today's electricity market is about trading kilowatt hours – it does not guarantee system reliability;  Wind and PV cannot be principally refinanced via marginal-cost-based markets – with good weather conditions they create excess electricity and thereby destroy there own market value The new market design must actively engage the demand-side; Source: AGORA. “12 Insights on Germany’s Energiwende.” Feburary 2013. http://www.agora-energiewende.org/fileadmin/downloads/publikationen/Impulse/12_Thesen/Agora_12_Insights_on_Germanys_Energiewende_web.pdf

Mechanism of an energy only market works against RES Source: AGORA. “12 Insights on Germany’s Energiwende.” Feburary 2013. http://www.agora-energiewende.org/fileadmin/downloads/publikationen/Impulse/12_Thesen/Agora_12_Insights_on_Germanys_Energiewende_web.pdf

Mechanism of an energy only market works against RES Source: AGORA. “12 Insights on Germany’s Energiwende.” Feburary 2013. http://www.agora-energiewende.org/fileadmin/downloads/publikationen/Impulse/12_Thesen/Agora_12_Insights_on_Germanys_Energiewende_web.pdf

A transformed energy system needs a new market design and regulations Source: AGORA. “12 Insights on Germany’s Energiwende.” Feburary 2013. http://www.agora-energiewende.org/fileadmin/downloads/publikationen/Impulse/12_Thesen/Agora_12_Insights_on_Germanys_Energiewende_web.pdf

Thank You for Your Attention！ For more information please go to: BMU: http://www.erneuerbare-energien.de/en/ Think Tanks: http://www.agora-energiewende.org/ Agora Paper online: http://climatepolicy.cn/en/capacity-building-for-climate-change-mitigation-and-adaptation/40 GIZ Projects： Climate Change: www.climatepolicy.cn Biogas: www.biogas-china.org Wind Energy Programme: www.cwpc.cn/cwpc (temporarily not available) Fed. government Page 16