CLEAN ENERGY INVESTMENT OUTLOOK The 3

17 December 2015
CLEAN ENERGY
INVESTMENT
OUTLOOK
The 3rd Northeast Asia Energy
Security Forum – Seoul, Korea
Justin Wu
KEY DISCUSSION POINTS
1) Bloomberg New Energy Finance introduction
2) Clean energy investment snapshot
3) What drives clean energy investment?
4) Coal and gas in Asia
1
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4
PRODUCTS TO HELP YOU UNDERSTAND
THE FUTURE OF ENERGY
Solar
Wind
Americas
Other
Renewables
Gas
Energy Smart
Technologies
Europe, Middle East
& Africa
Advanced
Transport
Carbon &
RECs Markets
Asia Pacific
5
CLEAN ENERGY
INVESTMENT
SNAPSHOT
NEW INVESTMENT IN CLEAN ENERGY
2004–14 ($BN)
Fossil fuel generation
investment in 2014 =
$289bn
400
600
7%
350
35%
-7%
-8%
12%
500
300
12%
400
250
-9%
Expected
27%
Large hydro
200
300
Other
50%
Solar
150
200
30%
Wind
100
100
50
0
0
2004
2005
2006
2007
2008
2009
2010
2011
20122012
20132013
20142015
Q1
2004
2005
2006
2007
2008
2009
2010
2011
2014
Note: Total values include estimates for undisclosed deals. Includes corporate and government R&D, and spending for
digital energy and energy storage projects (not reported in quarterly statistics), as well as a BNEF estimate for large hydro
investment.
Source: Bloomberg New Energy Finance
7
CLEAN ENERGY INVESTMENT BY REGION
2004 – 2014 ($BN)
Europe
United States
$119
$129
$98
$87 $89
$72
$28
04
$38
$66 $66
$52
$65
$48
$44
$35
$35 $41
$52 $48 $52
$10 $17
05
06
07
08
09
10
11
12
13
14
04
05
06
China
07
08
09
10
11
12
13
14
Asia ex-China
$89
$3
$17
$9 $11
04
05
06
07
$26
08
$40 $43
09
10
$53
$67 $68
$24 $26 $25
$15 $17 $20
11
12
13
14
04
05
06
07
08
09
$36
10
$46 $46
11
12
$59 $65
13
14
Source: Bloomberg New Energy Finance
8
CLEAN ENERGY INVESTMENT IN ASIA
2004 – 2014 ($BN)
China
Japan
$426bn
$190bn
$89
$3
$17
$9 $11
04
05
06
07
$26
08
$40 $43
09
10
$53
11
$67 $68
12
13
14
India
$73bn
South Korea
$17bn
Source: Bloomberg New Energy Finance
9
CLEAN ENERGY INVESTMENT BY SECTOR
2004 – 2014 ($BN)
Wind
Solar
$156
$150
$144
$120
$99
$62
$18
04
$29
05
$75 $81
$84 $84 $89
$103
$99
$61 $64
$40
$38
$22
$12 $16
06
07
08
09
10
11
12
13
14
04
05
06
07
Energy Smart Technologies (EST)
05
06
07
08
09
10
11
12
13
09
10
11
12
13
14
$10 $10 $10 $7
$5
$5
09
13
14
Biofuels
$35 $35 $34 $37
$27 $33
$20
$13 $13 $14 $18
04
08
14
$28 $29
$4 $10
04
05
06
07
$19
08
10
11
12
Source: Bloomberg New Energy Finance
10
CLEAN ENERGY INVESTMENT BY ASSET CLASS
2004 – 2014 ($BN)
Asset finance
Public markets
$181
$163
$155
$171
$155
$135
$120
$110
$85
$53
$30
04
05
06
07
08
09
10
11
12
13
14
$1
$5 $10
04
05
Venture capital and private equity
06
$24
$12 $15 $14 $11 $5 $12 $19
07
08
09
10
11
12
13
Small distributed capacity
$76 $79
$62
$1
$2
$6
$8 $12 $7
$9
$8
$6
$4
$5
$9 $10 $9 $14
04
05
06
07
10
11
12
13
14
04
08
09
14
05
06
07
$22
08
$74
$55
$33
09
10
11
12
13
14
Source: Bloomberg New Energy Finance
11
POWER GENERATION CAPACITY ADDITIONS BY REGION
2015 – 2040 (GW)
Fossil fuels
4.8
TW
Asia
Pacific
1.3
TW
Americas
1.1
TW
Rest of
World
0.9
TW
Europe
28%
Nuclear
Solar
5%
39%
15% 2%
53%
72%
8% 3%
60%
Wind
Other renewables
21%
19%
7%
10%
3%4%2% 18%
27%
2%
Source: Bloomberg New Energy Finance
12
TOTAL INVESTMENTS PER TECHNOLOGY, 2015-40
(US$ REAL)
RENEWABLES TAKE
65% OF THE $12.2
TRILLION POWER
INVESTMENT TO 2040
Source: Bloomberg New Energy Finance
13
RENEWABLE ENERGY PROPORTION OF POWER
GENERATION- INTERMITTENT ENERGY (WIND &
SOLAR), 2014 (%)
France
3%
UK
9%
Germany
16%
US
4%
Japan
5%
Mexico
3%
China
5%
0
1-5%
6-10%
11-25%
26-50%
50+%
Brazil
3%
ME +
Africa
0%
Note: This only shows the combination of wind and solar energy generation. All numbers come
from BNEF’s New Energy Outlook 2015
India
3%
Australia
8%
Source: Bloomberg New Energy Finance
14
RENEWABLE ENERGY PROPORTION OF POWER
GENERATION- INTERMITTENT ENERGY (WIND &
SOLAR) , 2040 (%)
France
30%
UK
63%
Germany
77%
US
24%
Japan
20%
Mexico
32%
China
37%
0
1-5%
6-10%
11-25%
26-50%
50+%
Brazil
34%
ME +
Africa
26%
Note: This only shows the combination of wind and solar energy generation. All numbers come
from BNEF’s New Energy Outlook 2015
India
32%
Australia
52%
Source: Bloomberg New Energy Finance
15
WIND AND SOLAR CAPACITY FORECASTS SINCE 2010
BNEF, IEA
3,500
BNEF - 2014
BNEF - 2015
BNEF - 2013
3,000
2,500
2015 wind and solar capacity = 673GW
BNEF - 2011
2,000
IEA - 2015
IEA - 2014
IEA - 2013
IEA - 2012
IEA - 2011
1,500
1,000
IEA - 2010
500
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
0
BNEF renewables forecasts have always outpaced IEA forecasts, and were closer to
actual installed wind and solar capacity.
Source: Bloomberg New Energy Finance, IEA
16
WHAT DRIVES CLEAN
ENERGY
INVESTMENT?
WIND AND SOLAR LEVELISED COSTS
2015 – 2040 ($/MWH)
Onshore wind levelised cost of energy
Solar PV levelised cost of energy
$150 /MWh
$150 /MWh
$100 /MWh
$100 /MWh
Grid-competitive in
major electricity markets
$50 /MWh
$50 /MWh
$0 /MWh
2015 2020 2025 2030 2035 2040
Source: Bloomberg New Energy Finance
$0 /MWh
2015 2020 2025 2030 2035 2040
Source: Bloomberg New Energy Finance
18
THE SOLAR PV EXPERIENCE CURVE
Solar PV modules increase in efficiency, decrease in cost
Cost per W (2013 $)
$100.00
1976
• Crystalline
silicon PV
module prices
decline 24% with
each doubling of
cumulative
production.
1985
$10.00
• In 2011-2012,
2003
oversupply drove
solar module
prices below the
experience curve.
2006
$1.00
Q4
2013
2013
decline to USD
0.28/W (2014
dollars) in 2030.
$0.10
1
10
100
Experience curve
Chinese c-Si module prices (BNEF)
First Solar thin-film module cost
1,000
10,000
• c-Si modules will
100,000
Historic c-Si prices (Maycock)
Thin-film experience curve
1,000,000
Cumulative
capacity
(MW)
• Costs have
fallen 99% in 40
years.
Source: Bloomberg New Energy Finance, Battery University, MIIT, IIT
19
LEVELISED COST, WIND ENERGY
(2014 EUR/MWH)
1,024
y = 3,582.42x-0.30
R² = 0.91
1985
512
H1 2015
256
2009 Thailand
1999
128
2025
2014
64
Learning rate =19%
R² = 0.91
32
Germany
US
Brazil
16
100
1,000
10,000
100,000
Note: Pricing data has been inflation corrected to 2014. We assume the debt ratio of 70%, cost of debt (bps to LIBOR) of 175, cost of equity of
8%. H1 2015 average LCOE data refers to H1 2015 Wind Levelised cost of electricity update. We convert US dollar to Euro based on the
exchange rate of 0.8979 (exchange rate on 30 July 2015). Learning curve is least square regression: R 2 = 0.91 and learning rate=19%
1,000,000
Source: Bloomberg New Energy Finance
20
H2 2015 LCOE – APAC
UTILITY-SCALE PV (NO TRACKING) ($/MWH)
●
Japan
●
Vietnam
Indonesia
Thailand
●
Philippines
Malaysia
China
India
●
Australia
0
100
LCOE range
200
H2 2015
300
H1 2015
400
●
●
●
The cost of fixed-axis solar PV projects in the APAC region has
fallen since H1, particularly in Southeast Asia where technology
risk has declined with ongoing deployment – the region now has
around 1.5GW of installed solar capacity.
A combination of high capacity factors and low finance costs
(provided projects can secure a long term offtake contract) mean
Australia is the most competitive country to build solar projects
with an average LCOE of $88/MWh.
India overtook China as the second-cheapest location to build
solar projects, with an average LCOE of $96/MWh. This was due
to a 10% decline in capex since the beginning of 2015 as a
result of competitive bidding policies, and a small reduction in
interest rates.
A slight increase in capex and interest rates made the average
cost of new-build solar PV in China rise to $109/MWh. In this
analysis we do not assume any grid curtailments, but most
projects in China do face problems with grid availability.
Reduced equity hurdle rates on solar projects in Malaysia,
Philippines and Indonesia drove their PV LCOEs down
15%,14% and 15% to $133/MWh, $153/MWh and $156/MWh
respectively.
Thailand’s PV LCOE fell slightly, as its installed base exceeded
1GW and higher deployments brought down the project capex.
However project transaction costs are escalating due to further
delays in implementing the FiT policy and this may offset the
capex reduction.
LCOE declined slightly in Japan to $218/MWh due to the
depreciation of the Japanese Yen.
Source: Bloomberg New Energy Finance
21
H2 2015 LCOE – APAC
UTILITY-SCALE SOLAR PV LCOE BREAKDOWN BY COMPONENT
Capacity factors (%)
Breakdown by component
LCOE ($/MWh)
Japan
Vietnam
Indonesia
Thailand
Philippines
Malaysia
China
India
0%
20%
40%
Capex
F O&M
Tax
60%
80%
100%
Interest
Equity
Financing
Developing countries have a higher contribution from
equity cashflows. Taxes are a substantial portion of
project costs in India, Philippines and Indonesia.
Finance costs dominate the LCOE of solar PV in India.
0%
10%
Capacity factor
20%
30%
Global (17%)
0
100
200
300
CAPEX
Capex accounts for around 15-30% of total lifetime costs
for solar projects in the region. The exception is Japan,
where capex accounts for over 40% due to large upfront
investments and relatively low equity hurdle rates.
Source: Bloomberg New Energy Finance
22
THE FUTURE OF
COAL AND GAS IN
ASIA
INDIA THERMAL COAL PRODUCTION AND DEMAND
2010-25
1,200Mt
1,000Mt
800Mt
600Mt
400Mt
200Mt
0Mt
2010
2015
2020
Coal India production
Other domestic production
•
•
2025
Demand
India will drive coal demand in Asia over the next few decades.
However, growing domestic production, increased thermal efficiency and competition from renewables will mean the
country will stop needing to import thermal coal from 2023.
Source: Bloomberg New Energy Finance, Coal
India, Ministry of Coal
24
CHINA LNG CAPACITY AND DEMAND
2010-25
100MMtpa
75MMtpa
50MMtpa
25MMtpa
0MMtpa
2010
Operational
Demand
•
•
•
2015
2020
Under Construction
Planned
Long-term contracts
2025
There is already an overcapacity of LNG in China, which has already quadrupled LNG import capacity since 2010.
Despite falling LNG prices, LNG that lands in China is still considerably more expensive than pipeline capacity or
domestic production.
Demand for gas in China will be limited as the economy slows. China will unlikely swap coal for gas to power its
economy.
25
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26
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