1. © OECD/IEA - 2007 Renewable Energy Perspectives Roberto VIGOTTI Chair Renewable Energy Working Party International Energy Agency

2. © OECD/IEA - 2007 Mapping a Better Energy Future The Energy Future Absent New Policies: Security of oil supply is threatened Gas security is also a growing concern Investment over the next decade will lock in technology that will remain in use for up to 60 years CO2 emissions by 2050 will be almost 2.5 times the current level! On current trends, we are on course for an “ unstable, dirty & expensive energy future ” as the carbon intensity of the world economy will increase

3. © OECD/IEA - 2007 A New Energy Revolution…. Cutting Energy Related CO 2 emissions Improved efficiency and decarbonising the power sector could bring emissions back to current levels by 2050. To achieve a 50% cut we would also have to revolutionise the transport sector.

4. © OECD/IEA - 2007 The priorities areas Strategies for key technologies to make a difference: strong energy efficiency gains in transport, industry and buildings; electricity supply becoming significantly de-carbonised as the power generation mix shifts towards, natural gas, coal with CO2 Capture and Storage (CCS), renewables and nuclear power, increased use of biofuels for road transport

5. © OECD/IEA - 2007 Electricity Generation Scenarios Renewables would have to play a particularly significant role in the power sector, increasing from 18% today to nearly 50% by 2050. Non-hydro renewables show the highest growth rate.

6. © OECD/IEA - 2007 No single solution….a portfolio of technologies is required

7. © OECD/IEA - 2007 Average Annual Power Generation Capacity Additions to achieve a 50% cut in emissions, 2010 – 2050 175 million m 2 20 CCS gas-fired plants (500 MW) 26 nuclear plants (1000 MW) 1/3 Canadian hydropower capacity 222 CHP Plants (50 MW) 80 CSP plants (250 MW) 38 CCS coal-fired plants (500 MW) 132 Geothermal Units (100 MW) 17,500 Turbines (4 MW)

8. © OECD/IEA - 2007 Effective policy only in a limited set of countries  Sometimes depending on specific technology Potential and perceived risk, more than profit, is key to policy effectiveness & efficiency Price support can not be adequately addressed in isolation; non- economic barriers must be addressed concurrently  Grid barriers  Administrative barriers  Social acceptance issues  Other barriers (e.g. training, information, financial, etc.) Effective systems have, in practice, frequently been the most cost efficient  Technology-specific support is key for both effectiveness and cost-efficiency Main Lessons Learnt

9. © OECD/IEA - 2007 1. Establish stable support framework - to attract investments 2. Remove barriers to improve market functioning 3. Set up transitional incentives decreasing over time – to foster and monitor technological innovation and move towards market competitiveness 4. Ensure technology-specific support to exploit full RET basket potential Continuity Certainty Key Principles for Effective Renewable Energy Policies Move towards a combination framework of incentive schemes in function of technology maturity level in order to foster RETs’ transition towards mass market integration

10. © OECD/IEA - 2007 Market Deployment Time DevelopmentNiche Niche marketsMass Mass market Wind offshore Modern biomass technologies Solar PV Concentrating solar power Tidal Ocean Wave Wind onshore Hydro Traditional biomass Solar thermal heat 2 nd generation biofuels Biodiesel from oil-seed rape Sugarcane ethanol Conventional geothermal Shallow geothermal heat High cost- gap technologi es Low cost- gap technologi es Mature technologies Prototype & demonstration stage technologies Renewable Energy : Today and Tomorrow…. Renewable Energy Technologies: Today and Tomorrow….

11. © OECD/IEA - 2007 Combination framework of policy incentives versus technology maturity Market Deployment Time Development Niche marketsMass market Imposed market risk, guaranteed but declining minimum return Price-based: FIP Quantity-based: TGC with technology banding Wind offshore Modern biomass technologies Solar PV Concentrating solar power Tidal Ocean Wave Wind onshore Hydro Traditional biomass Solar thermal heat Stability, low-risk incentives Price-based: FIT, FIP Quantity-based: Tenders 2 nd generation biofuels Continuity, RD&D, create market attractiveness Capital cost incentives: investment tax credits, rebates, loan guarantees etc. Biodiesel from oil-seed rape Technology-neutral competition TGC Carbon trading (EU ETS) Stimulate market pull Voluntary (green) demand Sugarcane ethanol Conventional geothermal Shallow geothermal heat High cost-gap technolo gies Low cost- gap technologi es Mature technologies Prototype & demonstration stage technologies

12. © OECD/IEA - 2007 1. Focus on coherent and rigorous implementation of key policy design principles  only then can ambitious targets be reached 2. Exploit substantial potential for improvement of policy effectiveness and efficiency: learn from international experiences 3. Remove non-economic barriers first 4. Deploy full basket of available RETs besides exploiting “low- hanging fruit”  Minimise time and total costs in the long term 5. Allow a combination framework of incentive schemes in function of technology maturity level Key question: How to lead the transition from the present system to a level playing field in an open and fully competitive market Recommendations

13. © OECD/IEA - 2007 Public Sector Energy R&D in IEA Countries R&D investment is not adequate given the magnitude of the climate challenge. Government spending on energy R&D has fallen, while the private-sector is focused on projects with short-term payoffs

14. © OECD/IEA - 2007 Relative Cost of Electricity Generation from Wind and Solar Wind power generation can already compete in certain locations, Concentrated solar power is not far away in the sunbelt. Solar photovoltaics has costs decreasing by up to 18% with every doubling of cumulative production, but as yet remains economic only in remote locations. Source: World Energy Outlook 2006 and IEA databases

15. © OECD/IEA - 2007 Capital Costs of Renewables-Based Power Generation Technologies The capital costs of renewables are expected to continue to fall in the future, with solar PV registering the biggest decline

16. © OECD/IEA - 2007 The learning curve effect Deployment cost can be derived from the learning curves, Which show a constant reduction of the investment cost to each doubling of the installed capacity. Average figures of the learning rate is: CSolarPower: 5% Wind on shore: 7% Wind off shore: 9% Photovoltaics : 20% i.e. pv investment cost reduces by 20% each doubling of the capacity installed

17. © OECD/IEA - 2007 RE added value to the energy mix enhancing security of supply - both for geopolitical-concentrated in few countries in critical regions- and infrastructure-power plants, pipeline, sea straits… allowing energy sources diversification & reducing imports for consumers/ deferring production for exporters mitigating risks in current energy portfolio and trends, due to volatility and instability of fossil prices; creating framework for investment, enhancing industrial competitiveness – and opportunities for export,creating new jobs, favouring economic development advancing environmental targets; providing unique access to energy services;

18. © OECD/IEA - 2007 Create fair market rules Energy prices do not reflect the true costs of generation options - a market failure:  the social and environmental costs of polluting energy are not internalised  the added values of RE for diversification, reduced portfolio risk, job creation, industrial competitiveness not accounted for  there are also massive subsidies to ‘conventional’ energy sources To acknowledge the benefits of Renewable Energy, support frameworks are established – not just “subsidies”  they should be viewed as compensation mechanisms for correcting these market failures and  a learning investments to reduce cost and improve performance

19. © OECD/IEA - 2007 Cheaper than conventional sources Other costs Average value of external costs GAS 0 2 4 6 8 10 12 14 16 Tensions due to scarcity of other fossil fuels Price volatility Resource shortage Concentrated reserves Transport, reprocessing and storage of waste Scarcity of uranium Geostrategic risks COALGASWIND + 0.19 + 0.51 Nuclear + 2.35 + 7.47 Cents $ / kWh Maximum & minimum. generation costs Energy storage Comparison of costs for different technologies External costs are expressed as the average value estimated for each technology, based on a 2003 report by the European Commission showing maximum and minimum external cost figures for electricity production in the EU

20. © OECD/IEA - 2007 Conclusions A sustainable energy future is possible with a portfolio of clean and efficient technologies, RE definitely among them. The task will take decades and it will require significant investments costs. But Business As Usual would cost more!! The task is urgent: it must be carried out before a new generation of inefficient and high-carbon energy infrastructure is locked into place. Implementing sustainable scenarios will require a transformation in: the way power is generated, the way homes, offices and factories are built and use energy, the technologies used for transport. It will also take unprecedented co-operation between the developed and emerging economies to achieve the results implied

21. © OECD/IEA - 2007 Contact RenewablesInfo@iea.org http://renewables.iea.org http://www.iea.org roberto.vigotti@libero.it Thanks to Enel for the support to IEA