1. Global Energy Market Trends and Learnings from German Energiewende Dr
Global Energy Market Trends and Learnings from German Energiewende Dr. Peter Kluesener, Senior Strategist Siemens Power Generation, Erlangen, Germany
Restricted © Siemens AG 2016
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2. Energy Policy: Balance affordability, sustainability and security of power supply
117_84 9_84
The challenges of power generation …
… solved by renewables/gas power plants
LCoE 1
Affordable power –
low LCoE, low Capex
-x%
Time 2
Low emissions and
high efficiency
η > 62%
<330 gCO2/kWh
Renewables
Affordability
Sustainability 3
Generation flexibility to complement renewables
Plant Load
Time 4
Switch from Coal/Oil to Gas
η<40%
>0.9 kg/kWh
η >60%
<0.35 kg/kWh
Installed Capacity 5
Reserve Margin
Reliable power supply
Peak Load
Efficiency
Energy Security
Firm Capacity

3. COP21 put new pressure on nations to reduce their GHG emissions, still gap between INDC vs. 2°C target
Greenhouse gas (GHG) emission projections until 2050
The emission gap
Current policy trajectory
INDC case
As major CO2 emitting countries are going to sign the COP21 agreement (e.g. US, China, India, EU, Australia) the threshold value of 55% of global emissions is reached and the commitment is going to come into force. But nevertheless there will still remain a huge gap in emission reduction to reach the 2° or even 1.5° C targets.
Source: UNEP; INDC: Intended Nationally Determined Contributions

4. Current trajectory: power generation is shifting towards Renewables and Gas, but not enough
Power Generation 2015 and 2030 (TWh)
Power Plant Capacity Balance 2015 and 2030 (GW)
Share of RE:
24%
31%
CO2 from
Power Gener.
3,984
9,434
11.5 Gt
13.6 Gt 38 39
Battery Storage
117
Renew.: GW
Conv.: GW
241
Other RE
34,361
1,097
Solar
+2.5%
920 (3%)
Other renewables
1,575 (5%)
Solar
1,161
Wind
2,996 (9%)
Wind 69
194
6,325
874
4,935 (14%)
Hydro
215
133
145
1,569
Hydro
23,896
222
829
236
3,551 (10%)
Nuclear
1,202
Nuclear
3,900
Oil
2,552
8,360 (24%)
Natural gas
2,204
Gas
5,488 (23%)
853 (2%)
Oil
1,605
1,044
10,983 (32%)
9,162 (38%)
Coal
still 32%
2,269
Coal
1,936
2015
2030
Cap2015
Retirements
16-30
Additions
16-30
Cap2030
Source: IHS Energy, Global Energy Scenarios, Rivalry scenario July 2016

5. Investment in Renewables on record level globally due to lower cost, with regional investment cycles
Global average investment cost for wind and solar PV
Wind
Solar PV
-55%
Significant cost reduction for Solar PV of about 55% over the last 5 years, but cost decrease becoming more moderate in the recent past
Cost reduction for Wind Onshore less steep as technology is already in a mature development phase, but still a decrease of about 25% over the last 5 years
Wind Offshore still challenged by requirement of cost reduction to get competitive to other renewables in a more market based environment
Nevertheless Renewables still dependent on financial support schemes
Investment in Renewables is cycling regionally with Europe currently with a moderate investment level, while China is booming so far
-25%
Investment in RE-based power by technologies and regions
Source: IEA, World Energy Investment Outlook 2016

6. Coal-to-Gas switch would reduce CO2 emissions by half, but requires carbon price of more than 25 €/t
Marginal power generation cost
Specific CO2 emissions by power plant type
(variable costs only)
gCO2/kWh
-63%
€ct/kWh
Generation cost position in Europe (Jan 2016)
CCPP: 61.5% efficiency, gas price 5.8 €/GJ
SPP: % efficiency, coal price 1.9 €/GJ
Gas Price high
9.0 €/GJ
Coal Price high
3.0 €/GJ
(38% eff.)
(45% eff.)
(61% eff.)
Coal Price low
1.8 €/GJ
Gas Price low
5.0 €/GJ
Energy mix and impact on CO2 emissions
In 1,000 TWh and Gt CO2
-42%
16.1 TWh
16.1 TWh
Assumptions Net Efficiency
Existing Coal SPP: 38.0%
CCPP new build: 61.5%
Gas
12.3 Gt
5.7
Oil
0.9
7.1 Gt
7 €/t
25 €/t
Coal
9.5
CO2
€/t CO2
Status quo
Only Gas
2015

7. Global LNG supply improves competitiveness of power generation by gas and supply security
Global LNG liquefaction capacity
Global LNG liquefaction capacity grows faster than demand
US just entered global LNG trade and will significantly expand exports in the future
Gas markets are getting more global through LNG supply options
Gas price is under pressure through LNG import options
Enhanced global gas trade improved competitiveness and supply security
LNG-to-Power project Delimara in Malta
200 MW combined cycle power plant (3 Siemens SGT-800)
Gas turbines feature an inlet air cooling system to absorb the required chilling power from the regasification of the LNG
Inlet air cooling improves power output and power plant efficiency
Commissioning in August 2016
Symbiosis of LNG regasification and combined cycle power plant offers substantial options for improved power output and efficiency
Sources: IGU, IHS

8. Increasing implementation pressure after COP21
Power generation from Renewables already >30%, but reduction of CO2 emissions stagnating
Targets of German ‚Energiewende’ …
… and Status of Implementation
Share of Renewables in gross power generation growing
Ongoing strong generation from Coal
in % of total generation
in TWh
Renew-
ables
607
624
628
646
610
527
20%
23%
24%
Renewables 3%
26%
30%
29%
18%
16%
Nuclear
15%
16%
14%  7%
Fossil
14%
12%
11%
10% 9%
Gas
Oil/Other
59%
43%
44%
46%
44%
42%
Coal
Nuclear 5%
2015
2020
2030
2050
1990
2011
2012
2013
2014
2015
Reduction of GHG Emissions
GHG Emissions and Reduction Targets
Increasing implementation pressure after COP21
in Mt CO2e
1.247
in Mt CO2e
-27%
-40%
1,247
-55%
Other
GHG
-1%
Other
(non-CO2 + CO2
from non-power)
750
-80%
922
927
946
902
908
565 
Other
250
-1%
Power Sector
Power 73
1990
2020
2030
2050
1990
2011
2012
2013
2014
2015

9. Renewables generation varying between 10 and 50 GW
1H2016: Renewables power generation reached new record levels challenging conventional plants
Energy Mix in Power Generation in Germany (1H2016)
Renewables generation varying between 10 and 50 GW
40 GW difference between maximum and minimum power generation for intermittent renewables
50 GW
10 GW
Conv. Power Plants
Solar
Wind Onshore
Wind Offshore
Hydro Power
Biomass
Power Demand
Power Generation by Conventional Power Plants (1H2016)
Up to 45 GW cycling, requirements for conventional power even impacting baseload power plants such as Nuclear and Lignite, Gas acting in mid- and peak load operation
Maximum ramp-rate: GW/h
Residual load for conventional power plants vary from 15 to 60 GW (∆= 45GW!)
60 GW
15 GW
Hard Coal
Lignite
Nuclear
Hydro Pump
Nat. Gas
Other
Source: Agora Energiewende

10. Wholesale baseload electricity price varying between -15 and 52 €/MWh
1H2016: Limited flexibility of coal/ nuclear power caused high price fluctuations and need for exports
Power Generation, Demand and Electricity Price (1H2016)
Wholesale baseload electricity price (€/MWh)
Wholesale baseload electricity price varying between -15 and 52 €/MWh
Ø €/MWh in
+52 €/MWh
<30 €/MWh
Ø27 €/MWh
Q1 2008Q1 2008
Q1 2009Q1 2009
Q1 2010Q1 2010
Q1 2011Q1 2011
Q1 2012Q1 2012
Q1 2013Q1 2013
Q1 2014Q1 2014
Q1 2015Q1 2015
Q1 2016Q1 2016
-15 €/MWh
Conv. Generation
Renewables Generation
Price
Demand
Wholesale price (EPEX Spot) at a very low level: 2015: 31.2 €/MWh,
H1-2016: <30 €/MWh
Power Exchange of Germany with other Countries (1H2016)
Max. 13 GW export
Ø7 GW export
Power export to neighboring countries is used to balance the German power system with a high share of fluctuating renewables
Export at low, even negative power prices
Subsidized by German consumers as they pay the EEG allocation
Export >40 TWh in 1H2016 (~15% of consumption)
Source: Agora Energiewende; FhG-ISE

11. Moderate fuel and carbon prices ahead
Despite greatly low gas prices, clean spark spread still negative – no investment stimulus
Wholesale prices in Germany(real 2014€/MWh)
Clean Spark/Clean Dark Spreads in Germany (real 2014€/MWh)
Statistic
Projection
Clean Spark Spread
Gas CCPP 54.5 % efficiency, incl. CO2-tax
Continuing low power prices
Disappearing spread between Base and Peak load
Slightly positive clean spark spread not sufficient to stimulate CCPP new build
Peakload
Baseload
2009
2011
2013
2015
2017
2019
2021
2008
2010
2012
2014
2016
2018
2020
2021
Fuel/ Carbon Prices for Continental Europe) (2014 €/MWh/€/t)
Clean Dark Spread
From 2017 Gas more competitive than Coal due to extraordinary low gas price, shifting back by 2021 in case CO2 price remains at low level
Coal SPP 37.8 % efficiency, incl. CO2-tax
-60%
Moderate fuel and carbon prices ahead
Gas (EU)
CO2 ETS
Coal (ARA)
2009
2011
2013
2015
2017
2019
2021
Source: IHS Energy, August 2016

12. >25 bn € EEG budget per year
Retail electricity prices in Germany at the upper end in comparison to other countries, driven by levies
Retail Electricity Price Development and Price Structure in Germany (€/kWh)
2016 Electricity Price Structure
+21%
28.7
>25 bn € EEG budget per year
Tax
2.1
0.9
Other Levies
+28%
6.4
EEG Levy
concession levy
6.2
15.0
0.5
1.5
Households
Grid
7.1
6.4
Industry
0.1
Households 3,500 kWh/a, Industry: 160, million kWh/a
& Grid
Generation
6.1
6.5
Households
Industry
Comparison of 2015 Retail Electricity Prices by Countries (€ct/kWh)
28.7
30.7
21.5
20.8
21.3
24.5 x3
16.2
14.4
Households
8.5
9.2
10.8
x1.5 x3
14.4
15.0
15.2
16.0
11.1
6.5
8.5
9.5
8.6
9.1
Industry
5.6
x1.3
Japan
China
India
USA
Germany
EU28
France
Poland UK
Italy
Den- mark

13. Dispatchable capacity balance 2015 to 2022 Dispatchable capacity 2015
Gap in dispatchable capacity after 2020 endangering supply security as not sufficient new plants are built
272_84 281_84
Power generation capacity (GW, net), status Sep 2015 – Germany in total
191
Dispatchable capacity balance 2015 to 2022
Hydro PS
Geothermal
Grid peak load (85 GW)
plus 15% reserve margin
Gap of ~10 GW!
Biomass
Solar PV
106
-17%
Wind Offshore 3 5 13
Wind Onshore 8 2 98 3 6 5 10 1 3 7 88
Hydro 7 2 2 1 6 2 5 8 1
Nuclear 3 8 3 10
e.g. CCPP Lichterfelde (Berlin)
Nuclaer Phase-out
Lignite plants retirement
Plants older than 45 years in 2022
e.g. CCPP Marzahn 8
Other Fossil 3 3 1
Gas 22 28 3
Oil 3 4
Hard Coal 24 23
Lignite 19 14
Installed
capacity
Sep 2015
Dispatchable capacity 2015
Special operations
(seasonal closures)
Additions firm
(under construction)
Retirements firm
(regulated)
Retirements planned
(as anounced to BNetzA)
Retirements likely
(plant lifetime)
Additions planned
2022
Source: BNetzA Kraftwerksliste, Sep 2015; own analysis

14. Lessons learned from German 'Energiewende'+
High renewable installations supported by effective subsidy schemes
However, CO2 emissions in Power Sector stagnating since years
High amount of levies pushing electricity retail prices (households: ~30 €ct/kWh)
Low wholesale price (~30 €/MWh) not providing sufficient revenue inflow for power plant operators – no incentives for investment in required new thermal power plant capacity
Security of Supply at risk, at least at a national level for Germany with need to rely on power plant capacity from neighboring countries after 2020 - - - -

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