1. © OECD/IEA - 2009 Renewable Energy Developments in Europe and the EU Targets Convegno “Le Incentivazioni alle fonti rinnovabili e gli obiettivi europei: analisi e proposte” GSE Rome, 27 April 2009 Dr. Paolo Frankl Head, Renewable Energy Unit International Energy Agency

2. © OECD/IEA - 2008 Drivers for an energy transition and long- term global objectives Current trends and EU targets Need for effective and efficient policies Impacts of the current crisis and outlook Contents

3. © OECD/IEA - 2008 WEO 2008 Energy-related CO2 emissions In both 550 and 450 policy scenarios energy efficiency and renewables account for more than 75% of total CO 2 emission reductions 7 20 25 30 35 40 45 200520102015202020252030 Gigatonnes Reference Scenario550 Policy Scenario450 Policy Scenario CCS Renewables & biofuels Nuclear Energy efficiency 550 Policy Scenario 450 Policy Scenario 54% 23% 14% 9% [Source: WEO 2008] Current trends in energy supply and use are patently unsustainable, economically, environmentally and socially

4. © OECD/IEA - 2008 Renewable share of global electricity in WEO2008 450 policy scenario Renewables account for 40% of global electricity in 2030 [Source: WEO 2008] 0% 25% 50% 75% 100% 20062030 Wind Other Renewables Biomass & Waste Hydro Nuclear Gas Oil Coal 41% 19% 2% 6% 22% 18% 20% 5% 9% 21% 16% 15% 1% 4% 18% 40%

5. © OECD/IEA - 2008 20/20/20 Targets by 2020 and burden sharing 10% of energy from RE in transport The Challenge: EU Targets [Data Source: RES EU Directive Proposal, 2008 ]

6. © OECD/IEA - 2008 Indicative RES-E target: 34% by 2020 [PRIMES Policy Scenario] Current Trends in EU27 - Electricity [ Data Source: Reference Scenario WEO 2008] 200620202030 Ann ual Growth (%) Total Generation (TWh) 3316388541580.9 RES-E Gener. (TWh) 491107413754.4  Effective and efficient policies are needed to achieve the objective

7. © OECD/IEA - 2008 Comparative assessment of effectiveness and efficiency of renewables support policies in OECD countries plus Brazil, Russia, India, China, South Africa (BRICS) Chosen policy effectiveness indicator on a yearly basis: Global Renewable Energy Markets and Policies Programme (GREMPP) Incremental RE generation in a given year Remaining additional realisable potential (by 2020)

8. © OECD/IEA - 2008 Achieved (2005) and Additional realisable mid-term potential (2020) for RES-Electricity Achieved (2005) and additional realisable mid-term (up to 2020) potential for RES-Electricity by country (OECD+BRICS) – in absolute terms (TWh) Source: IEA & EEG, 2008

9. © OECD/IEA - 2008 Effectiveness Indicator Wind on-shore Average 2000-05 vs. average 2004-05 Source: IEA & Fh-ISI, 2008

10. © OECD/IEA - 2008 Effectiveness & Efficiency Wind On-shore 2005 (OECD & BRICS) Source: IEA & Fh-ISI, 2008 -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 0,002,004,006,008,0010,0012,0014,0016,0018,00 Annualised renumeration in [US cent / kWh] Effectiveness indicator 2004/2005  EU Countries  Non EU OECD  BRICS

11. © OECD/IEA - 2008 Effectiveness & Efficiency Wind On-shore 2005 (OECD & BRICS) Source: IEA & Fh-ISI, 2008 Long-term predictable incentives (FIT or FIP) + Appropriate framework Higher risk (TGC) + Non-economic barriers

12. © OECD/IEA - 2008 Effective policies only in a limited set of countries  Sometimes depending on specific technology 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 Move beyond ‘FIT vs TGC’ debate  Both systems show success and failures depending on specific country framework and/or technology Main Lessons Learnt

13. © OECD/IEA - 2008 Recent Trends Policy Effectiveness Indicator Wind and PV [Data Sources: IEA Deploying Renewables and Renewables Information, 2008 ]

14. © OECD/IEA - 2008 Recent Trends Non-Hydro Renewable Electricity [Data Sources: IEA Renewables Information, 2008 ]

15. © OECD/IEA - 2008 1. Remove non-economic barriers to improve market functioning 2. Establish predictable support framework - to attract investments 3. Set up transitional incentives decreasing over time – to foster and monitor technological innovation and move towards market competitiveness 4. Ensure specific support in function of technology maturity to exploit potential of large RET range 5. With increasing mass-scale RET penetration impact on overall energy system must be taken into account Continuity Certainty Key Principles for Effective Renewable Energy Policies

16. © OECD/IEA - 2008 Fostering RE’s transition towards mass market integration Niche marketsMass market Low cost-gap (e.g. wind onshore) High cost-gap (e.g. PV) Mature tech (e.g. hydro) Prototype & demo stage (e.g. 2 nd gen biofuels) Time Market Deployment Development 1. Development RD&D financing, capital cost support, investment tax credits, rebates, loan guarantees 2. Stable, low-risk, sheltered FIT, FIP, Tenders 3. Shared/imposed market risk, guaranteed minimum but declining support FIP, TGC (technology banding) 4. Technology-neutral competition TGC, Carbon trading (e.g. EU ETS) [Source: Adapted from IEA Deploying Renewables, 2008 ]

17. © OECD/IEA - 2008 Impacts of the crisis 10% of global energy infrastructure spend But the top-line hides what is happening in the past few quarters 5x increase from low level by around between 2004 and 2007 5% Growth 59% Growth 58% Growth 68% Growth $35bn 2004 $60bn 2005 $93bn 2006 $148bn 2007 $155bn 2008 Source: New Energy Finance, 2009

18. © OECD/IEA - 2008 RE policy framework is improving in several EU countries, including Italy However, additional efforts needed to achieve targets and improve effectiveness and cost-efficiency Recognise major potential of RETs Focus on coherent implementation of key policy design principles Address non-economic barriers, in particular in the current economic downturn conjuncture Conclusions

19. © OECD/IEA - 2008 Economic crisis must not make us lose focus on long-term goal of a more secure and sustainable energy future Energy technology is key to this future An integrated and strategic policy approach is required that bridges the short to the long- term  Initial emphasis on energy efficiency  Roadmaps and international co-operation  Increasing RD&D funding for new technologies  Tailored deployment policies, including for renewables Clean Energy New Deal can provide win-win benefits Recommendations Nobuo Tanaka, IEA Executive Director G8 Environment Ministers meeting, Siracusa, Italy 22 April, 2009