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Taking stock of clean energy policy and private sector investment
Robert Gross and Becky MawhoodCentre for Energy Policy and Technology
Imperial College London
Imperial College Energy Futures Lab
Outline
• Context – the decarbonisation challenge and growth in green energy
• The policy map• The investment challenges• What’s policy been doing and what does policy
need to do?• Conclusions
The scale of the climate challenge
IEA, 2010 “Energy Technology Perspectives: Scenarios & Strategies to 2050”
Investment flows
Ren 21 Global Status Report 2012
Global new investment in renewable energy increased17% in 2011, to a new recordof USD 257 billion.
This was more than six timesthe figure for 2004, and 94%more than the total in 2007,the last year before the acutephase of the recent globalfinancial crisis.
Proportion of investment in developing countries
Source: Frankfurt School-UNEP Centre/BNEF (2013). Global Trends in Renewable Energy Investment 2013.
Increasing policy
interest
• 138 countries have targets
• 127 countries have support policies
• Two-thirds of these are emerging economies
Source: REN21(2013) Global Status Report
Diverse targets and policiesLocation Targets Policies & fiscal incentivesGermany 18% of final energy consumption by 2020; 60% by 2050
35% of electricity production by 2020; 80% by 205014% renewables in total heat supply by 2020
FIT/premium paymentBiofuels obligation/mandateHeat obligation/mandateCapital subsidyTax credits/reductionProduction payment
India 10% of electricity production by 20123.5 GW new renewables over 2011-129 GW wind by 201220 GW grid-connected solar by 20222 GW off-grid solar by 202020 million solar lighting systems by 202214 GWth solar thermal by 2022
FIT/premium paymentUtility quota obligationNet meteringBiofuels obligationHeat obligation (State)Tradable certificatesCapital subsidyTax credits/reductionProduction payment
Guatemala 80% of final energy consumption by 202660% of electricity production by 2022
Net meteringBiofuels obligationTax credits/reduction
Senegal 15% of primary energy by 202560% rural electrification by 2017 (not exclusively renewables)
FIT/premium paymentTax credits/reduction
Source: REN21 (2013) Global Status Report
BUT all is not entirely well….
• Swinging FiT cuts in some countries • Dissatisfaction and reaction against price
impacts amongst some publics• The ‘solar bubble’ and trade war• The ‘shale gas effect’ – cheaper coal,
changed perception of scarcity, rewards to FF innovation
• Climate scepticism (or boredom?)
OECD issues – financing the transitione.g. Britain’s investment challenge - scale
What do we need?– £75b required for new gen capacity *
– £30b alone for offshore wind ?**
– Current big 6 spend around £5b/year
– Dash for gas was about £11b total
– Total market value of all existing UK generation plant is c. £50b***
– Huge plans for economic infrastructure at UK, EU and global level
– UK policy/investment environment attractive vs peers?•EMR WP, Chapter 2 ** DECC Roadmap (at current prices) *** SSE, An Energy White Paper
Africa’s is scale too – but also source
Source data: AFD/WB (2010). Africa’s Infrastructure – A Time for Transformation
Capital investment in Sub Saharan Africa’s electricity sector by source
Increasing private investment?
Source: World Economic Forum (2013) .The Green Investment Report.Source data: AFD/WB (2010). Africa’s Infrastructure – A Time for Transformation
Capital investment in Sub Saharan Africa’s electricity sector by source
Average module price reduction over time (left) versus annual PV cell/module production (right)O'Rourke et al., 2009 in FITT Research Report. Deutsche Bank. May 2008. 2009.
PV – policies and buy down….
EPIA and EU PV Technology Platform, Solar Europe Industry Initiative (SEII). Summary implementation plan 2010-1012, in EPIA Draft Report, April 2010. 2010.
2. Create stability, meet investor needs
-1,500
-1,000
-500
-
500
1,000
1,500
2,000
Gas Coal -low
Coal -high
nuclear nuclear- lowcap
nuclear- highcap
Net
Pre
sen
t Val
ue
(£/k
W)
0
10
20
30
40
50
60
Gas Coal -low
Coal -high
nuclear nuclear -low cap
nuclear -high cap
Lev
elis
ed C
ost
£/M
Wh
Spread in levelised costs arising from different CO2 and fuel price scenarios (taken from UK Energy Review ) (Working Paper by Will Blyth 2006)
Net present value representation of the spread of returns arising from different CO2 and fuel price scenarios (taken from UK Energy Review ) (Working Paper by Will Blyth for UKERC 2006)
But also 3. suit the context….
• Institutional and political feasibility are key– E.g. Senegal ASER
• conceptually strong, popular with donors, good leverage but… slow progress, turbulent management, ‘blocking’ by Senelec, etc…
• Need to avoid tail wags dog – liberalised approach to suit donor beliefs not beneficiary needs
• Affordability and believability also essential• Who does what, with what?
• Incumbents/new entrants, large scale/small scale, new tech/old tech, government/companies, community/profit….
Conclusions/thoughts
• Green growth is already a reality • Policy more contested, trade offs now central• Continuation is not a given, FF renaissance…? • Policy essential, we know (broadly) what works• What works is context specific – IF is key• Decades of experience
– opportunity to learn from what works– Avoid pointless policy ‘innovation’ = ground hog day?
• Interesting times…!