World Energy Investment 2004-2030

INTERNATIONAL ENERGY AGENCY

Euroheat & Power Conference Euroheat & Power Conference Brussels, 22 June 2006Brussels, 22 June 2006

Electricity Markets Outlook to Electricity Markets Outlook to 2030: 2030:

Challenges and OpportunitiesChallenges and Opportunities

Francois NguyenFrancois NguyenSenior Policy Advisor Senior Policy Advisor

Office of Long-Term Co-operation and Policy Office of Long-Term Co-operation and Policy AnalysisAnalysis

INTERNATIONALENERGY AGENCY

World Energy Investment2004-2030

The power sector will need $10 trillion, over 60% of total energy-related investment

T&D

Power Generation

Electricity 61%

Coal 2%

Oil 19%

Gas 18%

54%

46%

Total investment: 17 trillion dollars


Electricity Market Context

Market reforms at varying stages of implementation worldwide Most advanced in OECD countries Pace slow but steady

Surging fossil-fuel prices make investment climate uncertain

Blackouts in some OECD countries have heightened concerns about system reliability and generation adequacy

Governments increasingly looking to energy efficiency and renewables to promote sustainability

Current market instability and uncertainties complicate preparation of long-term strategies


Generating Capacity Requirements 2004-2030

Some regions need to speed up investment to prevent the ‘lights going out’

0 100 200 300 400 500 600 700 800 900

IndonesiaBrazil

Middle EastOther Latin America

IndiaAfrica

OECD PacificTransition economies

Other AsiaOECD Europe

OECD North AmericaChina

GW

Under construction Planned Additions needed by 2030


World Electricity Generation

Gas-based electricity production will triple, but coal will remain the dominant fuel worldwide

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

2004 2030

TW

h

Coal Oil Gas Nuclear Hydro Other renewables


Power Sector CO2 Emissions

In 2030, coal plants in developing countries will produce more CO2 than the entire power sector in the OECD

0 2 000 4 000 6 000 8 000 10 000 12 000

Oil

Gas

Coal

Oil

Gas

Coal

Mt of CO2

OECD Developing countries Transition economies

2004

2030


Age of Installed CapacityAge of Installed Capacityin Europe

0

20

40

60

80

100

120

140G

W

Oil

Gas

Coal

Nuclear

< 10 years 10 - 20 years 20 - 30 years > 30 years

Europe's power plants are ageing: more than half thecurrent capacity could be retired by 2030


EU-25 Capacity Increases, 2005-2030

0

200

400

600

800

1000

1200

2005 2010 2015 2020 2025

GW

Existing New

2030


EU-25 Electricity Generation, 1990-2030

0

500

1000

1500

2000

2500

3000

3500

4000

4500

1990 1995 2000 2005 2010 2015 2020 2025 2030

Coal Oil Gas Nuclear Hydro Wind Other renewables


Share of Natural Gas in Electricity Generation in EU

The share of gas in power generation increases from 19% today to 34% in 2030

0

1000

2000

3000

4000

5000

1992 2002 2010 2020 2030

TW

h

Natural gas Other fuels


Key Policies in Alternative Scenario for European Union

Power generationRenewable energy directiveCHP directive

Transport sectorProlongation and tightening of Voluntary Agreement with car manufacturersBiofuels target

Residential and commercial sectorsEnergy performance in buildings directiveEnergy labelling


Share of Non-Hydro Renewables in Electricity Generation, 2030

New policies would boost the share of non-hydro-renewables in EU power generation – already the highest

in the world

0% 5% 10% 15% 20% 25%

Transition economies

Africa

Middle East

South Asia

China

Latin America

East Asia

OECD Pacific

OECD North America

European Union

Alternative Scenario RSReference Scenario

0% 5% 10% 15% 20% 25%

Transition economies

Africa

Middle East

South Asia

China

Latin America

East Asia

OECD Pacific

OECD North America

European Union

Alternative Scenario RSReference Scenario


Share of CHP Electricity

2004

2030 RS

2030 AS

0%

5%

10%

15%

20%

25%


EU CO2 Emissions in the Reference & Alternative Scenarios

With new policies, EU CO2 emissions stabilise by 2010 and fall after 2020

Reference Scenario Alternative Scenario

2 000

2 500

3 000

3 500

4 000

4 500

5 000

1990 2000 2010 2020 2030

Mt

of

CO

2

2 000

2 500

3 000

3 500

4 000

4 500

5 000

1990 2000 2010 2020 2030

Mt

of

CO

2

Kyoto Target


Comparison of Various Electricity Generating Options

(1)Gas CCGT

Main choice in 1990s and continuing (significant increases by 2010)

Lowest capital cost (~$550/kW), quick cost recovery, low risk in liberalised markets

Low CO2 emissions per kWh (less than half the emissions of a coal plant)

Very low or zero emissions of SO2, NOx, particulates Flexibility (can be operated at different load factors) Short construction time (~2 years now) Fuel costs 70% to 80% of total costs – sensitive to fuel

price changes (high and volatile gas prices) Security of supply in gas-importing countries



(2)On site CHP

Saves fuelSaves emissionsSaves investment in networkHeat load required for efficient operations Main options: gas and biomassRegulatory issues



(3)Coal

High initial investment (twice the cost of CCGT, $1000 to $1200 per kW)

High CO2 emissions per kWh

Additional costs for scrubbersLonger construction time (4-5 years)Low and relatively stable fuel costsCoal: abundant reserves, stable supply



(4)Wind

High initial investment ($1000 per kW)No fuel costs No emissionsEconomics fairly good at windy locationsVariable output- additional costs for

backup and grid reinforcement (additional cost $5 to $15 per MWh)



(5)Nuclear

Large initial investment ($1700 to $2000 per kW)

Low fuel costs – stable generating costs No CO2 emissions, no SO2, NOx,

particulatesPublic acceptance (waste, proliferation)Secure, sustained power


WEO 2006: Main Themes

World Alternative Policy ScenarioBeyond the Alternative ScenarioImpact of high energy pricesEnergy Investment ProspectsOutlook for BiofuelsSustainable Use of BiomassOutlook for Nuclear PowerCountry in focus: Brazil


Summary & Conclusions

Electricity sector will dominate global energy investment needs

About 5 000 GW of new capacity will be needed to meet rising electricity demand and plant retirements

Generation mix will change over the next two decades

More vigorous policies would curb rate of increase in energy demand and emission significantly

Energy efficiency (including CHP), renewables and nuclear can play a role in promoting sustainability

CHP has the potential to increase its share and can benefit from government and regulatory policies

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World Energy Investment 2004-2030

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