The role of The role of

nuclear & nuclear & renewablesrenewables

© OECD/IEA 2013

Dr. Fatih BIROL

IEA Chief Economist

Paris, 3 April 2013

The contextThe context

� Foundations of global energy system shifting

� Resurgence in oil & gas production in some countries

� Retreat from nuclear in some others

� Signs of increasing policy focus on energy efficiency

© OECD/IEA 2013

� Signs of increasing policy focus on energy efficiency

� Changing global energy map likely to have significant

implications for competiveness & geopolitics

� All-time high oil prices acting as brake on EU economic recovery

� Economy & energy: a delicate balancing act in the context of need

for decisive & effective global climate change policy

Emerging economies steer energy markets Emerging economies steer energy markets

Share of global energy demand

60%

80%

100%

Middle East

India

China

Non-OECDRest of non-OECD

6 030 Mtoe 12 380 Mtoe 16 730 Mtoe

© OECD/IEA 2013

Global energy demand rises by over one-third in the period to 2035,

underpinned by rising living standards in China, India & the Middle East

20%

40%

60%

1975 2010 2035

China

OECD

A United States oil & gas transformation A United States oil & gas transformation

US oil & gas production

Unconventional gas

mboe/d

15

20

25

© OECD/IEA 2013

The surge in unconventional oil & gas production has implications

well beyond the United States

Conventional gas

Unconventional oil

Conventional oil

5

10

15

1980 1990 2000 2010 2020 2030 2035

Different trends in oil & gasDifferent trends in oil & gas

import dependencyimport dependency

Net oil & gas import dependency in selected countries

60%

80%

100%Gas Imports

European Union

Japan

2010

2035

© OECD/IEA 2013

While dependence on imported oil & gas rises in many countries,

0%

20%

40%

20% 40% 60% 80% 100%

Oil imports

United States

ChinaIndia

20%Gas Exports

the United States swims against the tide

Unconventional gas: implicationsUnconventional gas: implications

for both energy security & economyfor both energy security & economy

10

12

14

16

Do

lla

rs p

er

MB

tu (

20

12

)

5

6

7

8

Mil

lion

to

nn

es US steam coal exports to EU

(right axis)

US gas price

(Henry Hub)

© OECD/IEA 2013

At its highest level in 2012, EU gas prices traded about 5 times higher than in the US;

a price decoupling stemming from oil indexation & the unconventional gas revolution

0

2

4

6

8

1Q2007 1Q2008 1Q2009 1Q2010 1Q2011 1Q2012

Do

lla

rs p

er

MB

tu (

20

12

)

0

1

2

3

4 Europe gas price

(German import)

4Q2012

EU gas imports:EU gas imports:

prospects for improved pricingprospects for improved pricing

156 bcm per year of EU gas import contracts expiring before 2025 by source

Russia: pipe

Egypt: LNG

Qatar: LNG

Other: LNG

© OECD/IEA 2013

Gas contracts equal to two-thirds of EU imports from external sources are expiring

before 2025, at time when LNG & unconventional gas is expected to grow strongly

Algeria: pipeAlgeria: LNG

Nigeria: LNG

Economics of power generationEconomics of power generation

& CO& CO22 pricesprices

European Union, January 2013

CO2 cost

Fuel cost

60

80

100$/MWh

© OECD/IEA 2013

Current CO2 price

8 $/tonneBreak-even CO2 price

67 $/tonne

Each $1 per MBtu of additional gas-coal spread requires

a further $15 per tonne of CO2 price to achieve cost parity

0

20

40

60

Coal plant Gas plant

A power shift to emerging economiesA power shift to emerging economies

Change in power generation, 2010-2035

China

Coal Gas Nuclear Renewables

India

© OECD/IEA 2013

3 000 4 000 5 000 6 000

TWh

2 000

Need for electricity in emerging economies drives a 70% increase in global demand,

with renewables accounting for half of new global capacity

-1 000 0 1 000

Japan

European Union

United States

TWh

90

120

150GW 2011

2035

Nuclear installed gross capacity in selected regions

Asia leading the rise in nuclear capacityAsia leading the rise in nuclear capacity

© OECD/IEA 2013

0

30

60

90

China EuropeanUnion

UnitedStates

Japan & Korea

Russia India

Majority of nuclear additions come from just four countries – China, Korea,

India & Russia – with half of world net incremental capacity from China alone

Wide variations in the price of powerWide variations in the price of power

Average household electricity prices, 2035

15

20

25cents/kWh

2011

OECD

© OECD/IEA 2013

Electricity prices are set to increase with the highest prices persisting

in the European Union & Japan, well above those in China & the United States

5

10

15

China United States European Union Japan

2011

Non-OECD

average

OECD

average

60%

80%

100%

Sha

re o

f e

lect

rici

ty g

en

era

tio

n

800

1 000

1 200TWh

EUEU moving towards cleaner formsmoving towards cleaner forms

of electricity generationof electricity generation

EU electricity generation by selected low carbon technology

& share of generation by scenario

450

Change to

2035 over 2010:

2010

© OECD/IEA 2013

0%

20%

40%

60%

Low

carbon

Sha

re o

f e

lect

rici

ty g

en

era

tio

n

0

200

400

600

Nuclear Hydro Wind Bio-

energy

Solar

PV

Other

renew.

CCS

450

NPS

Wind & solar push up the share of renewables, with low-carbon reaching

two-thirds of total generation in the NPS & around 90% in the 450 Scenario

Gas

15%

Potential emissions from

Staying within a 2Staying within a 2°°°°°°°°C worldC world

CO2 equivalent of today’s fossil fuel reserves

2°C carbon

budget

© OECD/IEA 2013

Coal

63%

Oil

22%

Potential emissions from

fossil fuels reserves

2 860 Gt CO2

In a 2°C world, more than two-thirds of current fossil fuel reserves

cannot be consumed before 2050 unless CCS is widely deployed

budget

ConclusionsConclusions

� Policy makers face critical choices in reconciling energy,

environmental & economic objectives

� Changing outlook for energy production & use may redefine

energy pricing, economic competiveness & geopolitical balances

© OECD/IEA 2013

energy pricing, economic competiveness & geopolitical balances

� Shifting away from nuclear can have significant implications for a

country’s energy security, electricity prices & climate change objectives

� Other key policies to improve European energy cost competitiveness:

leverage prospect of many long-term gas contracts expiring; bolster

domestic gas supply & energy efficiency; effective renewables policy