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POWER SECTOR OUTLOOK IN OECD COUNTRIES

28 May 2010

Roundtable: Russian Federal Tariff Service

Ian Cronshaw, Head,Energy Diversification Division, IEA

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OVERVIEW: OECD Markets

The last decade—the role of gas The next decade The competitors - nuclear and

coal Outlook for Generation costs Conclusions

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OVERVIEW

The last decade

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Gas – Main contributor to the 2000-08 growth in OECD electricity generation

806

192 15587

26

-26

-226

1015

-400

-200

0

200

400

600

800

1000

1200

Gas Coal Wind Other renewables

Nuclear Hydro Oil Total

Incr

emen

tal G

row

th [T

Wh]

Source: IEA

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Gas demand growth in the power generation sector has slowed down

Source: IEA, NGMR 09Note: OECD countries

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OECD Europe electricity generation (1972-2008)

19721973 1974 19751976 1977 197819791980 19811982 19831984 1985 198619871988 1989 19901991 1992 19931994 1995 199619971998 1999 20002001 20022003 200420052006 2007 2008

0

500

1000

1500

2000

2500

3000

3500

4000

Coal Oil Gas Nuclear Hydro Other

TWh

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Gas – Main contributor to the 2000-08 growth in OECD Europe electricity generation

GasCoa

lW

ind

Other re

newab

les

Nuclea

r

Hydro Oil

Total

-100

0

100

200

300

400

500

348

-44

9871

-13 -20

-76

389

Incremental Growth [TWh]

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WHY GAS?—Many Good Reasons

Low Capex

Short lead times

Flexible, ideal with renewables

Low carbon signature, and

A natural hedge to power prices

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The future role of gas in the power generation mix could evolve

Source: Enagas

Summer: Less wind availabilityGas is used to replace wind

Winter: Increased wind availabilityUse of gas is minimum

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OVERVIEW

The next decade

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What would be the future energy demand path?

20092000 2020

bcm

• How long will it take for demand to rebound?• How quickly will it recover?

Source: IEA, NGMR 09

Slow economic recovery, focus on efficiency and non-CO2 emitting technologies

Business as usual, gas is the fuel of default

No investment in power generation and economic recovery lead to increased use of gas for power

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Gas is still the fuel of default in OECD

Source: IEA, NGMR 09

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OECD Europe 2008-2020 (TwH)WEO reference case

GasCoa

lW

ind

Other re

newab

les

Nuclea

r

Hydro Oil

Total

-300

-200

-100

0

100

200

300

400

97

-14

299

111

-178

71

-52

285

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EU27 installed power generation capacity in the 450 Scenario

Other renewables

Wind

Hydro

Nuclear

Coal and gas with CCS

Gas without CCS

Coal without CCS

0 50 100 150 200 250 300

2007

2020

2030

GW

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OVERVIEW

The competitors - nuclear and coal

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Planned Generating Capacity Additions – United States 2009-2013

2009 2010 2011 2012 20130

2

4

6

8

10

12

4.8

5.9

2.8

7.2

0.22

11.4

10

8.8

10.2

0.600000000000001

9.5

2.6

1.6

0.22

5.2

CoalGasWind

GW

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A Nuclear renaissance?

56 nuclear plants underway But in Europe and North America?

US loan guarantees

Many nations talking (UK, Italy)

But when would new plants enter service?

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0

20

40

60

80

100

120

140

160

180

200

220

US

D/to

nne

(6,0

00 k

cal/t

net

)

McCloskey Asian CIF

McCloskey NWE CIF

Central Appalachia

Powder River Basin

North-West European / Asian coal import spot prices and US spot prices

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Chinese steam and coking coal imports surged in 2009

0

2

4

6

8

10

12

14

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Mill

ions

steam07

steam08steam09

coking07

coking08

coking09

China became a net coal importer for the first time in 2009 (104 Mt). Imports trebled to 127 Mt, while exports halved to 22 Mt.

Global seaborne hard coal trade was 850 Mt in 2008.

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China’s coal imports and exports, 1970-2009, with forecast to 2030 from WEO 2007

-100

-80

-60

-40

-20

0

20

40

60

80

100

120

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

coal

impo

rts a

nd (e

xpor

ts),

mill

ion

tonn

es

coking coal imports

steam coal imports

coking coal exports

steam coal exports

net hard coal trade

WEO2007

Net imports of c.100 Mt by 2015, forecast in WEO 2007, have been reached 6 years earlier.

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Queues at ports reflect tight coal market driven by Chinese demand

55 vessels waiting at Newcastle at beginning of February 2010(down from peak of 60 in December 2009)

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OVERVIEW

Outlook for Electricity Generation Costs

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‘Projected Costs of Generating Electricity’ – 2010 Edition

Current context is of great uncertainty over future input costs and concerns of confidentiality of commercially sensitive cost dataFossil fuel price assumption based on WEO

2009 ~ 90 $ barrel oil, $11 gas. Data for almost 200 plants in 17 OECD and 4

non-OECD countries (Brazil, China, Russia and South Africa)

LCOE methodology Publication date is 25 March.

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Key Messages

No technology has a clear overall advantage globally or even regionally.

Looking at detailed country numbers, the study provides a large variety of results. The real added value of the study is the detailed country data

With financing costs at 5%, nuclear, followed by CC(S) -both capital-intensive, low-carbon technologies- are the most competitive solutions

With financing costs at 10%, coal-fired generation, followed by coal with CC(S), and CCGTs are the cheapest sources of electricity

For the first time, on-shore wind is shown to be competitive in cases where local conditions are favourable and system costs are not included

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OVERVIEW

Conclusions

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Conclusions

Gas is the fuel of Choice in OECD Countries

It dominates plants under construction

Nuclear and coal will struggle to compete in near term

Ambitious renewable goals may lower gas use, but

Even in 450 case, gas is a key transition fuel until after 2020