© OECD/IEA 2015 © OECD/IEA 2015

Renewable development and climate change in China

Keisuke SADAMORI 貞森恵祐 Director, Energy Markets and Security

International Energy Agency China-IEA High Level Side Event,

4 December, 2015

© OECD/IEA 2015

INDCs are very good first step, but not enough

Global energy-related GHG emissions

20

25

30

35

40

2000 2014 2020 2025 2030

Gt C

O2-

eq

Bridge Scenario

INDC Scenario Energy

efficiency

49%

Reducing inefficient coal

Renewables investment

Upstream methane reductions

Fossil-fuel subsidy reform

17%

15%

10%

Savings by measure, 2030

9%

Five measures – shown in a “Bridge Scenario” – achieve a peak in emissions around 2020, using only proven technologies & without harming economic growth

Source: IEA World Energy Outlook Special Report: Energy and Climate Change (2015)

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Power mix: a shift reversal Evolution of the global power mix in the 450 Scenario

Renewables should account for over 50% of global electricity generation by 2040

Source: IEA World Energy Outlook 2015

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Renewables set to account for almost two thirds of global net capacity growth over the medium-term

Over the next five years, renewables dominate new power capacity

World net additions to power capacity – main case

0

200

400

600

800

1 000

1 200

1 400

1 600

2008-2014 2014-20

GW

Fossil fuels Nuclear Hydropower Non-hydro renewables Source: IEA Medium-Term Renewable energy Market Report 2015

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China leading global RE growth

China alone will add more renewable power capacity than all OECD countries together, and than all other non-OECD countries together

Shares of net additional renewable capacity, 2014-20

EU - 28 13%

United States 9%

Japan 5%

Rest of OECD 8%

China 38%

India 9%

Brazil 5%

Africa 4%

Rest of non - OECD

9%

Source: IEA Medium-Term Renewable energy Market Report 2015

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Wind power, followed by solar power, are the most dynamic technologies

Renewable electricity generation is on the rise

Renewable generation by technology (2005-20)

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Gene

ration

(TWh)

Hydropower Bioenergy Onshore wind Offshore wind Solar PV Geothermal STE Ocean

10%

25%

37% Share of non-hydro renewables in overall RE generation

Natural gas 2013

Nuclear 2013

Share of renewables in overall electricity generation

22%

26%

18%

Source: IEA Medium-Term Renewable energy Market Report 2015

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Wind and PV prices declining

Price competition, long-term contracts, good resources and financial de-risking measures create lower-cost deployment opportunities in newer markets

Long-term contract prices for new renewable power to be commissioned in 2016-2018

Utility-scale solar PV Onshore wind

Chile USD 65-70/MWh

Brazil USD 81/MWh

United States USD 65-70/MWh

India USD 88-116/MWh

United Arab Emirates USD 58/MWh

South Africa USD 65/MWh

United States USD 47/MWh

Brazil USD 49/MWh

South Africa USD 51/MWh Australia

USD 69/MWh

Turkey USD 73/MWh

China USD 80–91/MWh

Germany USD 67-100/MWh

Egypt USD 41-50/MWh

Jordan USD 61-77/MWh

Uruguay USD 90/MWh

Germany USD 96 /MWh

Canada USD 66/MWh

Source: IEA Medium-Term Renewable energy Market Report 2015

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Two important challenges to further renewable growth

Still, grid integration of renewables and non-economic barriers to distributed solar PV remains as major challenges to China’s accelerated deployment

Solar PV capacity additions by segment (2010-20)

0

2

4

6

8

10

12

2010 2012 2014 2016 2018 2020GW

Residential-scale Commercial-scale Utility-scale Off-grid

Share of curtailed wind generation in China and ERCOT

0%

5%

10%

15%

20%

25%

2009 2010 2011 2012 2013 2014 2015H1

% o

f wind

gen

eratio

n

China Texas ErcotSource: IEA Medium-Term Renewable energy Market Report 2015

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Total

50

100

150

200

2015 2020 2025 2030 2035 2040 M

illio

n Vehicle sales

System innovation to enable wind and solar power

Cost reductions & deployment of electric vehicles in the 450 Scenario

An emissions goal would give greater clarity & certainty to the energy sector, strengthening the case for RD&D investment & technology transfer

100

200

300

400

Dolla

rs p

er k

Wh

Electric

Battery costs Electric vehicles (right axis)

Invest in necessary flexibility to integrate large shares of vRE

Internal combustion

Grids Generation

Storage Demand Side

Source: IEA World Energy Outlook Special Report: Energy and Climate Change (2015) Source: IEA The Power of Transformation (2014)

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Transport grid is key to integrate variable renewables

By 2020, more than 22 UHVDC lines will link over 200 GW wind power turbines and 100 GW solar power plants to the Chinese load centers

Source: SGCC, 2015

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Enhanced policies can get renewables growth back on track to meet climate goals

Policy enhancements can accelerate renewables growth by 25% vs. the main case and increase annual investment to over USD 315 billion by 2020

World renewable power annual capacity additions, main vs. accelerated case

0 20 40 60 80

100 120 140 160 180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

GW

United States Japan EU-28 Other OECD India China Brazil Other non-OECD

Historical Forecast

0

20

40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

GW

United States Japan EU-28 Other OECD India China Brazil Other non-OECD Main case

Historical Accelerated case

Source: IEA Medium-Term Renewable energy Market Report 2015

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Onshore wind and solar PV to lead China’s renewable growth

Renewable capacity to increase by 60% over 2014-20 but could increase by 75% if challenges concerning power sector reform implementation and grid integration are

tackled

China cumulative additions to renewable capacity (2014-2020)

0

50

100

150

200

250

300

350

2014 2015 2016 2017 2018 2019 2020

Cumu

lative

add

itions (G

W)

Hydropower Onshore wind Solar PV STE Geothermal Bioenergy Accelerated Case

70 $ billion The necessary annual investment amount for China to realize the

Accelerated Case in 2020

Source: IEA Medium-Term Renewable energy Market Report 2015

© OECD/IEA 2015

Meeting climate change objectives requires more renewable growth in all sectors

Historical and forecast share of renewables in electricity, heat and transport sectors 2005-20 (Base Scenario)

Growth of renewable electricity generation is increasing but under levels required to meet 2DS scenario, while renewable heat and transport are falling behind.

0%

5%

10%

15%

20%

25%

30%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Share of

rene

wable

s in

secto

r de

mand Renewable

electricity

Renewable heat

Biofuels intransport

ForecastHistorical

Source: IEA Medium-Term Renewable energy Market Report 2015

© OECD/IEA 2015

China drives global solar thermal deployment

Global installed capacity is expected to almost double over 2014-2020, with over three-quarters of the growth from China alone

0

250

500

750

1 000

1 250

1 500

2013 2014 2015 2016 2017 2018 2019 2020

Cumu

lative

Cap

acity

(GWth)

China OECD Europe OECD Americas OECD Asia Oceania Africa

Asia Latin America Eurasia Middle East

Cumulative solar thermal capacity by region 2013-20

Source: IEA SHC Programmes, Solar Heat Worldwide 2015 edition, IEA Medium-Term Renewable energy Market Report 2015, IEA Renewables Information 2015 (database)

© OECD/IEA 2015

IEA Technology Collaboration Programmes on Renewables and Hydrogen

8 3

7

8 9 7

4

9

4

1 6 1 2 2

6 1

1 1

10

2

7 1

1

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A decisive moment for renewables Accelerated growth of renewables and efficiency can help

meet energy security and access, air quality and climate protection goals

Increasingly affordable renewables are set to dominate the growing power systems of the world, with China leading global growth

A better alignment, consistency and predictability of policies is crucial to foster effective and cost-efficient energy transitions

A well-thought market reform could help China in accelerating renewables deployment towards a cleaner energy mix

The IEA stands ready to support China in its energy transition

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Thank you for your kind attention