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					Challenges of the current
  European Energy Policy


                          Rafael Miranda
                          CEO of Endesa
                 President of Eurelectric

             Athens, 22th of May of 2008
                                            The global energy scenario will face
                                                               profound change


The world's population will grow             Primary energy consumption (Mtoe)
      to 8 billion in 2030                           +55%
                                                                      17.721
      Global primary energy
   consumption will increase by
                                                11.429
    55% over the next 25 years
                                                              +125%
  China and India will increase                                            5.018
their primary energy demand by                        2.279
     125%, equal to 45% of
       worldwide growth                             2005                 2030


                                                      World     China     India

Source:   World Energy Outlook 2007 (IEA)
                                                                                   2
                                                                 The energy industry will need a huge
                                                                      investment effort in the future

    2006-2030 investments in
      the energy industry:                                           Electricity industry will
                                                                     represent 53% (US$ 11,560
            US$ 21.936 billion                                       billion) of total investments.
                    3%                                               Electricity sector will gain
                                                                     ground versus other energy
                                                                     uses.
                                                                     15% (US$ 1,728 billion) is
          25%                                                        earmarked for Europe.
                                         53%
                                                                     In the next 25 years new
                19%                                                  global installed capacity will
                                                                     be equivalent to the one
                                                                     commissioned on the last 125
     Oil                 Coal                Electricity   Gas       years.
Source:    World Energy Outlook 2007 (IEA)
                                                                                                        3
                                                          The combat on climate change will be a
                                                            relevant driver in the energy industry

      IPCC(*) :”Most of the observed increase in global average
 temperatures since the mid-20th century is very likely due to the
observed increase in anthropogenic greenhouse gas concentrations”
          Global population affected by
             global warming in 2080

                                                                 If the European target of a 2ºC
                                                                rise in temperatures is reached,
                                                                              by 2080:
                                                                    2,7 billion people will be
                                                                     exposed to the risks of
                                                                 drought, 250M to malaria and
                                                                         30M to hunger.



Source: Intergovernmental panel on climate change (ONU)
                                                                                                     4
                                                                                      Heavy dependence on fossil fuels

                                            Global primary energy mix
                                                               WEO 2030
                            2005                   Baseline                     Alternative                           Fossil fuels will
                                                   Scenario                      Scenario                              remain as the
          Coal             25%                         28%                          23%                                  dominant
                                                                                                                       technology for
             Oil           35%                         32%                          31%                                   decades
Natural gas                21%                         22%                          22%                           Renewables will
Renewables                 11%                         11%                          14%                         grow significantly in
                                                                                                                   absolute terms
    Nuclear                  6%                         5%                            7%
                                                                                                                (2.800-3.500 TWh in
       Hydro                 2%                         2%                            3%                               2030)
        Total             100%                       100%                          100%
 Baseline Scenario: No inclusion of Government new energy policies
 Alternative Scenario: Inclusion of additional measures from Governments to face SoS and Climate Change Issues. 450
            millions of particles in the atmosphere
 Source: World Energy Outlook 2007 (IEA)
                                                                                                                                          5
                                                                 Commodity prices would be driven
                                                                      in the future by its scarcity

                               Reserves (in years of consumption) and                Price increases
                               main countries where they are located                (dic03 vs. May08)

                                     41 years           Saudi Arabia, Iran, Iraq,
                     Oil               (down from                                       +319%
                                    41 years in 1996)
                                                         Kuwait and Venezuela


                                      63 years            Russia, Iran, Qatar,
  Natural Gas                          (down from
                                                        Saudi Arabia and A.U.E.
                                                                                         +90%
                                    66 years in 1996)


                                    147 years           U.S.A., Russia, China,
                  Coal                (down from                                        +143%
                                   224 years in 1996)
                                                          India and Australia


                                    Energy commodities are scarce                   … and its prices
                                  and mainly located in geopolitically                have risen
                                         unstable countries…                            sharply

Sources: EIA y BP Statistical Energy Review.
                                                                                                        6
                     In this challenging global environment, the EU has
                                   set the guidelines of its energy policy

       Strategic European Energy Review 2007 (SEER)



2009   A real pan-European energy market



2015   12 fossil-fuel plants with CCS

                                                       Developments
       20% of renewables in primary energy mix          in the Green
       20% CO2 emissions reduction in the EU (vs           Package
2020   1990), up to 30% reduction may be set
       20% increase in energy efficiency


2050   50% CO2 emissions reduction by 2050 (vs 1990)
                                                                             7
                                            EU is leading the combat on climate change

             Europe has set an                 … however, climate change is a global
            ambitious emission                 problem where Europe's impact is not
            reduction targets …                       significantly relevant

                                                World CO2 Emissions          % World CO2
          EU Emissions Targets                        (MtCO2)                 Emissions
                                                              41.905

                      -20% or -30%                     +57%                       2005   2030
   2020
                             (vs. 1990)                (15.285)
                                              26.620                     China    19%    27%
                                                                           USA    22%    16%

   2020                       -50%                                       Europe   15%    10%
                             (vs. 1990)
                                                                         Others   44%    47%


                                               2005               2030

Source:   World Energy Outlook 2007 (IEA)
                                                                                                8
                                                       The EU is clearly committed to achieve its emission
                                                      target through a further development of renewables
    EU Renewables policy and breakdow
            by country 2020
                                                                       General characteristics:
     1. Italy               21,8                5,2    27%
                                                                         • Increase of 5.5% for all + individual additional based
                     13,7            1,3     15%                           on the GDP of the country
      2. UK
                                                                              • No consider historical effort and potential of
  5. France         12,7             10,3           23%                          renewable is not consider
                                                                         • 10% of biofuels in transport in 2020
6. Germany          12,2           5,8       18%
                                                                         • “National Action Plan” before march 2010
Average UE         11,5            8,5         20%


   8. Spain        11,3            8,7         20%

                                             18%
                                                                       Industry views of the European
 9. Greece          11,1           6,9
                                                                       energy policy:
                            7,2          15%
 21. Poland      7,8                                                     • Main effort made by the electricity sector
      Renewable        Renewables Renewables                             • Electricity prices will increase
        effort
      2006-2020
                    +    a 2005      2020=
                                                                         • Incentives for renewables should be market based
           X,X              X,X              X,X%
                                                                         • Homogeneous European policy in renewables is
Nota: the EU considers that renewable energy includes wind, solar,
hydro, biomass, but do not include cogeneration. Only main countries
                                                                           needed.
represented.
                                                                                                                                    9
                                                    Renewables growth have significant benefits for
                                                                                           Europe

                                                                 Impacts of renewables to the
    Renewables evolution in Europe
                                                                     European Industry:
                   (ex-hydro) 2030 (TWh)
                                                          850
                                                     14    58       • No CO2 emissions                     
                                                      9
                                                                    • No contribution to the acid rain
                                                                     formation                             
                                             429           552
                                                                    • Reduce external dependency           
                                                                    • Acomplishment of Kioto targets       
                                              259
                            170
                                                                    • Create jobs                          
          17
                            78
                                              146
                                                           217      • Tech development that can benefit    
                            84
                                                                     trade
      1990                 2005              2012         2030
                                                                    • Some contributes with distributed    
     Biomass and waste                                               generation to the electrical system
     Wind
                                                                    • High volatility                      
     Geothermal
     Solar                                                          • Backup power needed
                                                                                                           
     Tide and wave                                                  • Need to be subsidized
                                                                                                           
Source:    World Energy Outlook 2007 (IEA)
                                                                                                               10
                                      A balanced energy policy is required


                        Energy          Diversification of
                       efficiency         technologies
Sustainability


                 Energy policy
                                                              More R&D
                                          Security           investment
                     Competition
                                          of supply

                                                             Agreements
                         Minimising impact on the
                                                             with energy
                         environment and climate
                                                             commodities
                                  change                      producers



                  Development of              Market
                 interconnections          development

                                                                             11
                Moving towards a single European market will be crucial




                                                     The EU ultimate
                                                    objective is to create
                                                     a single electricity
L WEST
RN
                                                           market
 LAND
WEST
L
                                                  Regional markets could
                                                       be a necessary
L EAST




                                                        interim step




         To achieve an efficient and competitive single market it
          is key to define an homogeneous and stable regulation
                        based on market mechanisms
                                                                          12
          All generation technologies must be considered


 Wind                          Energy
energy                       dependency


                                            Security of
                 Emissions
Natural                                       supply
  gas


                 Price                       Reserves
 Coal           volatility


                                Cost

Nuclear         No single technology meets all these
energy
                  goals, but combined provide an
                           optimal solution
                                                           13
                                   To solve the energy quiz it will be necessary
                                          the development of new technologies



        2010               2020         2030      2040     2050
                                                                    Towards a
                                                                  cero-emission
                                                                  and efficient
                                                                     energy

 Offshore wind         CCS technologies       Nuclear fusion
 3G nuclear            4G nuclear fission
                                                Hydrogen car
  fission               Electric cars
                                                 and turbine
 Hybrid cars           2G Biofuels
 1G Biofuels           Wave energy            Unknown
 Subsidized solar      Competitive solar       technologies
 Smart meters          Smart Grids             nowadays



                                                                                   14
                           The EU should promote energy efficiency more actively


            Energy intensity                       Primary energy intensity
         (base 100: EU15 2004)                           (kpte / M€)
  220%

  200%

  180%

  160%

  140%

  120%

  100%

   80%

   60%

   40%
             1994                2004

           EU25     EU15   USA     JAP




    Europe and Japan are                           … however Europe still
economic regions with the high                    has significant room for
 levels of energy efficiency…                           improvement

                                                                               15
                                                 Summary


The European Union is leading the combat on climate
change. A critical levers will be the development of
renewables

Renewables have significant benefits for both the
European electricity system and the European
economy, with some “cons” that must be offset

Europe should not leave aside the other main drivers of
a balanced energy policy: Security of Supply and
Competitiveness



                                                          16
Challenges of the current
  European Energy Policy


                          Rafael Miranda
                          CEO of Endesa
                 President of Eurelectric

             Athens, 22th of May of 2008