Etp 2010

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Total electricity demand

4 800 TWh

4 900 TWh

3 600 TWh

Electricity demand in transport

1 520 TWh

800 TWh

360 TWh

* Scenario with 60% renewables in the power mix. Sources: Eurelectric, 2010; ECF, 2010; IEA, 2010a.

* Scenario with 60% renewables in the power mix. Sources: Eurelectric, 2010; ECF, 2010; IEA, 2010a.

3. 211 GW of gas in Energy Technology Perspectives 2010 (IEA, 2010a) and 200 GW of gas and oil capacity in Power Choices (Eurelectric, 2010).

Among the numerous policy assumptions underlying these scenarios for a low-carbon electricity system in Europe, the price put on CO2 emissions plays an important role in directing investments away from traditional fossil-fueled plants. All three low-carbon scenarios are based on the continuation of the EU Emissions Trading System, but policy strategies differ significantly. In ETP2010, the CO2 price plays a growing role over the years, while subsidies to alternative low-carbon sources (renewables in particular) are important in the first decades. The assumed price of CO2 reaches USD 175 per tonne (t) of CO2 (EUR 120/tCO2) in 2050. Power Choices projects a roughly similar carbon price at EUR 100/tCO2 - skyrocketing to EUR 300 if efficiency policies were to fail. These levels are in sharp contrast with Roadmap 2050 which assumes a much more modest EUR 20-30/tC02 by 2050. By this point in time, the assumed learning effects and economies of scale in renewable electricity supply will have greatly reduced the cost difference with fossil-fuel technologies. A caveat accompanies this result: A significantly higher CO2 price may be required to provide incentives for new investments. In other words, the price of CO2 may have to rise before it settles at the level that maintains the competitive advantage of new low-carbon sources; otherwise, additional support measures will be needed in the interim (ECF, 2010). WEO 2010 illustrates the critical and effective role of renewable energy (RE) subsidies in the period to 2035 under its 450 Scenario, but also shows how the rising price of CO2 would allow governments to greatly reduce these subsidies (IEA, 2010b).

This raises an important policy question on the design of government measures for the massive deployment of not-yet-competitive technologies, and on their articulation, where possible, with a price on CO2. Further, the competitiveness of low-carbon technologies probably lies in the future organisation of electricity markets, which should be able to provide adequate returns to high-capital investments with low operating costs. At present, the rapidly increasing share of renewable sources (especially wind) creates volatility in some regional electricity markets, which could discourage future investors in power generation.

This brief comparison of ETP 2010, Roadmap 2050 and Power Choices scenarios for a low-carbon European electricity system already raises important energy and climate policy issues; more will no doubt arise from the review of other regions' electricity policy frameworks and approaches to sustai nability and electricity security.

About the Climate & Electricity Annual 2011

First in a series, the IEA Climate & Electricity Annual2011 is intended to serve two purposes:

F To publish authoritative statistics on the current evolution of the power sector from the angle of CO2 emissions and low-carbon generation.

F To draw the attention of decision makers and others engaged in the electricity and climate world to important policy, technology and analytical issues, based on analyses and findings in new IEA work.

The IEA statistics presented in the Data section are essential to show progress towards a lower CO2 path—or to sound the alarm on the limited effectiveness of efforts to date. The global trend, until 2008, showed constant increases in electricity demand as well as CO2 emissions from power generation. The year 2008 represents an anomaly, as the economic recession drove electricity and emissions down in OECD regions and slowed the global growth in electricity demand. As the recession continued in 2009, IEA countries recorded the first decline in electricity consumption in over 50 years, with a 4% drop (IEA Statistics, 2011). But electricity demand grew outside the OECD region, with much coal-based generation capacity driving up CO2 emissions. Leaving aside a few exceptional years, the amount of CO2 emitted per megawatt hour of electricity produced has been on an upward trend since 1990 (Figure 2).

Despite these past trends, there is hope for a shift away from this trajectory. The rapid growth in new renewables is particularly promising, even if their total output of 525 terawatt hours (TWh) accounted for only 2.4% of total electricity output in 2008 — hydro generation accounted for another 3 208 TWh. 2009 will, no doubt, show sustained global growth in renewable energy, driven by Chinese investments among others. The data on newly installed, under-construction and planned capacities reveal that changes are on the way in some regions. Yet, other factors continue to raise uncertainty. For example, will the rapid construction of coal-fired power plants witnessed in several countries in recent years continue? Will a postulated "Golden Age" of natural gas in power generation come to pass? How rapidly will carbon capture and storage technologies be developed and become commercially competitive? Will all planned nuclear projects come to fruition? The answers to such questions will have considerable bearing on the pace and cost at which electricity and CO2 can be decoupled.

To be fair, the inertia of the power sector's capital stock makes last year's output and emissions data only a poor indicator of what may come: a number of new policies and incentives are being implemented to discourage CO2 emissions from electricity generation, and climate-change mitigation goals are becoming part of energy policy decisions in all regions of the world.

Figure 2

Global evolution of the CO2 intensity of power generation (1990-2008)

Figure 2

Global evolution of the CO2 intensity of power generation (1990-2008)

Co2 Intensity Electrity Future
Note: OECD+ includes all OECD member countries as of2009 and non-OECD European countries (see section on geographical coverage). Source: IEA statistics, 2011.

In addition to these data, the Analyses part of Climate & Electricity Annual 2011 edition brings a selection of the latest IEA work, to inform policy and technology debates and to pose important questions on the future decarbonisation of electricity:

F Electricity market design for decarbonisation questions whether current electricity markets are the most conducive to investment in low-carbon supply technologies.

F Funding energy efficiency discusses the theoretical and practical pros and cons of earmarked environmental taxes versus system-wide public benefit charges to support energy efficiency programmes.

F Early retirement of coal-fired generation in the transition to low-carbon electricity systems draws attention to what could become a major policy issue as the world embarks on cutting CO2 emissions from power generation in the presence of locked-in coal-based capacity.

F Renewable-energy policy and climate policy interactions addresses the topical issue of how subsidies to the deployment of renewable electricity hamper or support climate policy goals in the presence of a carbon market.


F Integrating electric vehicles and plug-in hybrid electric vehicles into the electric grid details the contribution of EVs and PHEVs to global CO2 emissions mitigation by 2050, including their impact on electricity-related emissions.

F Carbon capture in the power sector: from promise to practice gives an update on this critical CO2 emissions-mitigation technology, including major demonstration projects, and discusses policy incentives to foster its deployment at scale.

F Carbon leakage in the European Union's power sector considers whether the existence of a cap on the EU-27 power generation sector has given competitive advantages to generators in neighbouring countries, at the expense of the European Union's environmental objectives.

F CO 2 and fuel switching in the power sector shows how advanced economic analysis provides information on the near-term potential for CO2 reductions through fuel switching.

EC (European Commission) (2011 ), Roadmap for Moving to a Competitive Low-Carbon Economy in 2050, European Commission, Brussels.

ECF (European Climate Foundation) (2010), Roadmap 2050: A Practical Guide to a Prosperous, Low-Carbon Europe, Technical Analysis, Vol. 1, Eurelectric (2010), Power Choices: Pathways to Carbon-Neutral Electricity in Europe by 2050, Eurelectric, Brussels.

IEA (2010a), Energy Technology Perspectives: Scenarios & Strategies to 2050, OECD/IEA, Paris.

IEA (2010b), World Energy Outlook2010, OECD/IEA, Paris. IEA (2009), Gadgets and Gigawatts: Policies for Energy Efficient Electronics, OECD/IEA, Paris. IEP (2010), Statement by the International Electricity Partnership, Cancun, 8 December.

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