Constanza Jacazio

Senior Gas Analyst

International Energy Agency

Climate change and the shifting energy mix

© OECD/IEA 2015 © OECD/IEA 2015

Costanza Jacazio,

Senior Gas analyst, IEA

November 2015

Natural gas in a sustainable energy system

© OECD/IEA 2015

The usual gas industry view is:

Coal to gas switch in power generation is a large and cost efficient climate policy option

Consequently we should raise the CO2 price to make gas competitive

Renewable targets/subsidies distort markets

In any case, gas is the ideal back up for renewables so it is needed anyway

© OECD/IEA 2015

Meanwhile views from the green community

Gas is a fossil fuel which will have to be phased out

Cheap gas risks locking out renewables

Earthquakes, methane leakage, water contamination - fracking is bad

“the utility death spiral” – with solar and batteries we will not need large energy companies anyway

© OECD/IEA 2015

EU and USA: the biggest gas consuming sector is not electricity

© OECD/IEA 2015

Industrial gas demand: a modern society without plastics and fertiliser?

© OECD/IEA 2015

Electricity in Asia: the taste of things to come

1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Asia ex China and Japan from 1990USA from 1950

Growth of power generation

Developing Asia 2013: 1400

kwh/capita

USA 1950:

2200 kwh/capita

Years

© OECD/IEA 2015

Coal mainly compete with long distance gas imports and will not disappear quickly

0

1000

2000

3000

4000

5000

6000

7000

8000

countries with domestic gas countries with imported gas

Other

US

China

Global coal-fired generation 2013 TWh

© OECD/IEA 2015

60 $/MWh

Is LNG still competitive with wind and solar?

Onshore wind

SA

52 $/MWh

US

48 $/MWh

China

80 - 100 $/MWh

Brazil

54 $/MWh

Turkey

73 $/MWh

Germany

67-100 $/MWh

Ireland

69 $/MWh

Australia

65 $/MWh

UK

120 $/MWh

India

88 $/MWh

Chile

89 $/MWh

85 $/MWh

US

~75 $/MWh

Utility PV

SA

65 $/MWh

Brazil

81 $/MWh

Dubai

<60 $/MWh

UK

120 $/MWh

Recent long-term remuneration contract prices (e.g. auctions or FITs)

Combination of technology cost reduction, better resources, appropriate regulatory framework attracting financing

Long-term PPAs and price competition effective drivers

Egypt

41 $/MWh

© OECD/IEA 2015

Electrification in Asia without coal?

0

1

2

3

4

5

India, Indonesia, Vietnam Malaysia

15 times EU wind and solar or 6 times EU gas imports from Russia

Per capita electricity supply, Mwh/year

© OECD/IEA 2015

Integration of renewables: innovation in the “software” of clean energy

Better forecasting algorithms

Close to real time operation

Improved grid monitoring and TSO collaboration

System friendly renewables

© OECD/IEA 2015

Very large capacity with very low load factors

0

100

200

300

400

500

600

700

800

capacity, GW generation, Twh

© OECD/IEA 2015

Does cheap gas kill renewable investment?

© OECD/IEA 2015

Who is cleaning the air in China?

Expansion of energy sources with low particulate and SO2 emissions 2014-2020

© OECD/IEA 2015

Power generation: On a 450ppm path, gas becomes a HIGH carbon fuel within a decade

t/mwh

© OECD/IEA 2015

Supply security concerns

Conflict with potential

gas supply security

implications

Gas production or

infrastructure

affected by conflict

or terrorism

© OECD/IEA 2015

Global production growth shifts towards OECD countries

Incremental gas supply by region, 2014 - 2020

- 40

- 20

0

20

40

60

80

100

120

140

OECD

Americas

OECD Asia

Oceania

Middle East FSU/non-OECD

Europe

China Africa Non-OECD

Asia

Latin America OECD Europe

Bcm

Major downward revisions 2015 v 2014

© OECD/IEA 2015

Resilient production turns North America into a major exporter

Marcellus

Cost deflation

Technological progress

Access to capital

© OECD/IEA 2015

The next wave of additional LNG supply is coming soon

Additional LNG export capacity by year, 2005 -20

0

10

20

30

40

50

60

70

2005 2007 2009 2011 2013 2015 2017 2019

Bcm

United States

Russia

Southeast Asia

Qatar

Other Middle East

Latin America

Norway

Africa

Australia

© OECD/IEA 2015

Methane leakage can move gas from solution to part of the problem

0

200

400

600

800

1000

1200

1400

coal gas

worst case leakage best case leakage

combustion

kg/MWh

Greenhouse gas emissions from power generation

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