Thank you very much for the kind introduction, Ms Lins.
Let me start by expressing my deepest condolences and sympathy to the victims of last Thursday’s earthquake. On behalf of the entire IEA, our thoughts and prayers are with the Mexican people for a quick recovery and reconstruction. I also commend the Mexican governments for its rapid and decisive response to the crisis.
Notwithstanding these horrific events, it is a great pleasure for me to be here with you for the opening of the MEXIREC Ministerial meeting. Mexico is a particularly well chosen location for this meeting, in view of the ongoing Energy Reform, which under the leadership of President Peña Nieto and Secretary Joaquín Coldwell has turned this country into a pioneer of energy policy and inspiration for other countries worldwide.
According to our scenario analyses, by 2040, the reform is set to create benefits in the order of a trillion USD for the Mexican state, citizens and economy. This is not only thanks to bold opening of the oil and gas sector to private investment (recently we saw the first private shale gas investment in the Burgos basin) but also to the revamping of the power sector and forceful tapping of Mexico’s renewable energy potential.
Indeed the reform has already created new policy solutions which are recognized by experts as global best practices – such as the Mexican clean energy auction mechanism that take into account system integration aspects of renewables.
Such intelligent mechanisms are of crucial importance to fostering the deployment of clean energy going forward, in order to meet our goals of secure, sustainable and affordable energy.
Before I enter the topic of this conference, let me provide some broader context.
First of all, global energy markets are undergoing rapid change.
Triggered by the shale gas revolution in the US and a new dynamism thanks to the Mexican Energy Reform, North America is entering an age of energy prosperity.
Renewables keep breaking records thanks to continued policy support and faster than expected cost reductions
Electric cars are booming, although growth comes from a low base.
All of this is good news, BUT there are three large “buts” here:
There are still 1.2 billion people worldwide lacking access to electricity. 2.7 billion lack access to clean cooking, with huge health and development implications. I commend the organizers of this event for including a session on access & renewables on the agenda.
The energy sector is still contributing way too much to air pollution, which causes millions of premature deaths each year due to NOx and SOx emissions.
Last but not least, energy related climate pledges are by far not sufficient to meeting emission mitigation goals.
Turning to the topic of this panel, as you can see on this slide, the measures contained in the NDCs which are incorporated in our Central Scenario, are a good start – but are far from sufficient to reach our goals.
Indeed, the full spectrum of technologies will have to be deployed even more forcefully in the future than currently planned.
Our global analysis shows the key importance of renewables and energy efficiency for the attainment of emission reduction goals, along with other options, notably Carbon Capture and Storage – (which combined with bioenergy can lead to negative emissions)
This has important implications for investment flows – our below 2D scenario analysis shows that
- while supply-side investment need to be re-directed (but do not need to substantially increase),
- demand-side investment for energy efficiency, and use of electricity and renewables in buildings, industry and transport need to significantly accelerate.
As regards the state of play in the deployment of different clean energy technologies, at the IEA we monitor progress of deployment with a yearly tracking report.
Results are mixed.
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Four technologies have made impressive progress, but many more need either accelerated improvement or are not on track at all.
Within the field of renewables, solar and wind stand out as technologies that have seen impressive progress towards a trajectory in line with the two degree goal,
Strong annual capacity growth continued for both solar PV and onshore wind in 2016, with record low long-term contract prices in Asia, Latin America and the Middle East.
However, biofuels are on the opposite side of the scoreboards, as they are lagging far behind the deployment levels needed for a two degree trajectory. Advanced biofuels would need a 25-fold scale-up in production volumes by 2025 to be on track with a 2DS!
- Pushed by support policies and impressive technology improvement cost reductions in recent years, wind and solar PV have been the two fastest growing sources of electricity worldwide since 2010.
[CLICK] In many countries, the share of wind and solar on total average annual electricity generation has increased very significantly in just six years:
- It reached double-digit shares in several European countries (with world record levels in Denmark); It increased by a factor two-to-five in other major countries, including the US, Mexico, China and India.
- Strong growth of solar and wind will continue in coming years. You will hear more on that at the launch of the Renewables Market Report on 4 October.
- Therefore system integration of variable renewables is increasingly becoming important.
- To integrate large shares of wind and solar in cost effective way while ensuring security of electricity supply at all times, we will need more flexible power systems. That means
Stronger grids and interconnections
More flexible power plants
Affordable electricity storage
And demand side response,
Most importantly, new policies need to be designed to maximize the value of renewable electricity, taking into account both time and location of generation. This is exactly one of the main achievement of recent legislation reform in Mexico.
The next chapter in the rise of renewables will also require a much stronger effort to foster renewable heating and cooling and transport biofuels.
Part of the solution to speeding up our progress towards ambitious climate goals is to boost research and development. Now, looking at clean energy R&D – renewables, nuclear, storage, electric mobility, CCS, LEDs – and electricity networks, which are essential for a clean energy system, we have identified $37 billion of spending in 2012.
The good news is that clean energy is as much as two-fifths of all the energy sector R&D.
The bad news is that it has been stable since 2012 and indications for 2016 do not show an increase.
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Although the private sector’s share spending on clean energy has risen slightly, we have tracked more public sector spending than private sector spending. There is clearly much more that can be done to raise R&D spending, especially in the private sector.
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Just the top three IT companies for R&D spending have a combined research budget higher than $37 billion.
To support this outcome, the IEA is working with governments and others through the Clean Energy Ministerial and Mission Innovation and will continue to develop its R&D tracking capabilities.
To conclude, I would like to underline once more that the attainment of our climate change, energy security, air pollution, and energy access goals requires a transformation at the global level that constitutes an extraordinary challenge for policy makers, industry stakeholders and indeed every citizen.
The solution is to rely on all the technologies available in our portfolio – and even make renewed innovation push, to develop new ones.
Renewables, and energy efficiency, are key pillars here, but not all renewable energy technologies are currently on track to reach the required levels of deployment going forward. Renewables growth so far has been a wind and solar success story alone - This is good, but by far not enough.
There remains important homework for policy makers, researchers and business to exploit the full potential of renewables, in particular regarding systems integration and the creation of more applications for renewables in buildings, industry and transport sectors. Some of those are brand new and open a range of completely new opportunities.
For instance the possibility of producing clean fertilizers has been discussed yesterday in an IEA side event.
Finally, I am convinced that international exchanges are key to speeding up the clean energy transition. One of the pillars of my tenure as IEA ED is therefore the opening of the doors of the IEA to more participation by emerging countries and we are proud to have China, India, Indonesia, amongst other countries as our association countries. We are also delighted about Mexico’s interest to join the IEA as a our 30th full member and look forward to completing this process very soon.
Thank you very much for your attention.
