EU ENERGY POLICY Context and Challenges Objectives, 2020 Targets, RM 2050, GP 2030, Growth and Jobs… MARC DEFFRENNES DG ENERGY

EU energy challenges 1. Sustainability (= Env Protection: GHG, +…) 2. Security of energy supply (ia stability and reliability of electricity supply…) 3. Competitiveness (incl "affordability for final consumer") In which order ??? To tackle these challenges, EU needs: an ambitious set of energy efficiency measures a proper mix of a wide range of low carbon energy sources (+ large investments!!!)

Energy policy for Europe Integrated energy and climate policy Objective: 80 to 95 % GHG reduction in 2050 Year 2020 targets (2007): 3x20% AND SET Plan – needs 80 Billion Euros over 10 y 2nd Strategic Energy Review (2008) CO2 free electricity in 2050 Energy Strategy 2020 (2010): 5 priorities (EE, Market Operation and Infrastructures, Innovation SET Plan, Safety and Security, International Cooperation) Year 2020 objectives: increase energy efficiency by 20% reduce CO2 emissions by 20% increase share of renewable sources to 20% 2nd Strategic Energy Review: low carbon electricity share: 2/3 by 2020 low carbon electricity share: close to 100% by 2050 Energy Strategy 2020: competitive, sustainable & secure energy means to achieve 2020 objectives

Energy Strategy 2020 and MFF(ia!): - PM: EERP and NER300: 1.5 BEuros for CCS and Wind + 1.2 BEuros for 43 RES Projects - Critical Infrastructures – ia energy networks EC proposed 10 Beuros – reduced in Council proposal - SET Plan: H2020 EC proposed 6.5 BEuros for Energy + Euratom - Regional/Structural Funds Energy and Innovation are priorities NEEDS ARE MUCH BIGGER - global endeavour: need MS and Industry on board… INVESTMENTS !!! Will the "Market" deliver ??? Improving safety and security: 1. EU legal framework further enhanced through: review of the Nuclear Safety Directive implementation of the Nuclear Waste Directive redefinition of the basic safety standards European approach on nuclear liability regimes 2. Harmonisation of plant design and certification

Energy Roadmap 2050 Adopted by the Commission in December 2011; Presidency conclusions in June 2012 An exploration of possible futures for the EU energy system: 7 scenarios Diverse Long-term Perspectives and Mixes Discussion with Member States and stakeholders A basis for policy action = regulatory framework and financing/investment policy

Context: Low-Carbon Economy Roadmap (Mar 2011) Basis of scenarios 80% domestic GHG reduction in 2050 Efficient pathway: -25% in 2020 -40% in 2030 -60% in 2040 6

Energy Roadmap 2050 - scenarios 1 Business as usual (Common Reference Scenario) 1bis Current Policy Initiatives scenario 2 High Energy Efficiency 3 Diversified supply technologies 4 High Renewables 5 Delayed CCS 6 Low Nuclear Several meaningful scenarios can be proposed for a complex analysis of teh decarbonisation of the energy system. Together with stakeholders, the Ec has identified 4 main decarbonisation routes EE reducing energy demand and RES, nuclear and CCS reducing the carbon content of energy consumption. 5 scenarios analysed are different combinations of the 4 decarbonisation routes. The main driver are carbon prices for ETS and non-ETS sectors complemented in some scenarios by additional targeted support measures to EE and RES. The last two scenarios present cases where due to technological difficulties or public acceptance issues some technologies are delayed or abandoned.

EU-27 results Reference scenario: GDP, energy consumption and CO2 emissions 40 years back and ahead (1990 = 100) Doubling of GDP in 2005-2050; energy consumption down slightly from its peak in 2005-2006 CO2 emissions decline faster than energy consumption; are driven by the ETS sectors which decreases emissions by almost 50% in 2005-2050 compared to around 20% for non-ETS sector Results in 40% decrease in CO2 emissions below 1990 level in 2050 and 39% decrease in GHG emissions

Results Current Policy initiatives scenario: Primary energy demand, savings from REF and carbon intensity Mtoe Carbon intensity Savings from REF due to the implementation of the EEP impact on final energy demand mainly in residential and tertiary Fossil fuels reduce their importance in the fuel mix with solids undergoing the biggest decline (-8% in 2005-2050) The share of nuclear is lower in comparison to the Ref scenario reflecting post –Fukushima (no nuclear in Italy, nuclear phase-out in germany, in case of nuclear lifetime extension increase in generation costs of up to 20% reflecting higher safety requirements

Results Gross energy consumption: range in current trends and decarbonisation scenarios (in Mtoe) REF/CPI: effects of additional policies and updated assumptions Decarbonisation cases: effects from different policy focus / technology availability

Results Share of electricity in final energy demand under current trends and with decarbonisation (in %) Range regarding decarbonisation scenarios FROM 3100 to 4800 TWh PA Range for current trends scenarios: Electricity generation in TWh is lower in High EE scenario than in CPI in all others scenarios it is higher reflecting more electrification of heating and transport.

Results Import dependency under current trends and decarbonisation in (%) While the difference in 2030 is rather small; it increases to 13-23 pp in 2050 (as compared to CPI).

Results Ratio of energy system costs to GDP under current trends and decarbonisation (average over 2011-2050) Despite the fact the differences as % of GDP looks very small, they are important- 65 bn EUR between High RES and Delayed CCS corresponding to the GDP of Slovakia for 2010. Total costs included - capital costs for energy installations, energy suing equipment, appliances, vehicles -fuels and electricity costs -direct efficiency investment costs (insulation, control systems, energy management) While capital and efficiency cosst are higher in decarbonisation, fuel costs are significantly llower due to lower consumption and assumed lower import prices. * EU GDP = 15 Trillion Euros per year – 0.5% is 75 Billion Euros !!! per year

Results: Shares in the energy mix

Decarbonisation of the energy system: Some conclusions Decarbonisation under global climate action is feasible; several pathways are possible and costs do not differ substantially from current trends Reduction of energy consumption through energy efficiency improvements All decarbonisation options can contribute: EE, RES, nuclear, CCS But Renewables increases a lot in all cases Electricity will play a greater role in energy supplies (20% of final energy demand today, almost 40% by 2050) also in areas such as transport and heating = 4800 TWh per year in 2050 Power generation almost carbon free by 2050 Electricity prices increase up to 2030 and slightly decline afterwards (besides the High RES scenario where electricity is 25% more expensive) Transition from high fuel / operational expenditure to high capital expenditure Reduced import dependency and external fuel bill Massive investments in generation capacity and grids to ensure stable and reliable energy supply

Energy Roadmap 2050 – scenarios (2/2) Renewables move centre stage – but all fuels can contribute in the long-run Decarbonisation scenarios - fuel ranges (primary energy consumption in %) 2030 2050 75% 0% 25% 50% 75% RES Gas Nuclear Oil Solid fuels 2005 50% RES dominates energy mix in long-run. 2030 shows already significant increases in RES. If it were measured in final demand – as in RES directive – this would go up to around 30%. In electricity generation, RES share by 2030 would be between 51 and 60%. In 2050, RES dominates the energy mix by far. High RES scenario has 65 percentage points more RES in final demand than today reaching 75%. Gas will be critical for the transformation of the energy system. Substitution of coal (and oil) with gas in the short to medium term could help to reduce emissions with existing technologies until at least 2030 or 2035. Although gas demand in the residential sector, for example, might drop by a quarter until 2030 due to several energy efficiency measures in the housing sector, it will stay high in the power sector over a longer period. In the Diversified Supply Technologies scenario for example, gas-fired power generation accounts for over 800 TWh in 2050, significantly higher than current levels. Nuclear energy will be needed to provide a significant contribution in the energy transformation process in those Member States where it is pursued. It remains a key source of low carbon electricity generation. Oil is likely to remain in the energy mix even in 2050 and will mainly fuel parts of long distance passenger and freight transport. Coal in the EU adds to a diversified energy portfolio and contributes to security of supply. With the development of CCS, coal could continue to play an important role in a sustainable and secure supply in the future. 25% 0% RES Gas Nuclear Oil Solid fuels 16

A 2030 framework for climate and energy policies Marten Westrup European Commission, DG ENER Unit A1 Energy

EMPLOYMENT ??? - Not properly taken into account in the RM2050 scenarios - Study ongoing (DG ENR A1): "Understanding of the labour market implications of the energy system transformation. The study should provide an analysis of employment effects for selected scenarios of En RM 2050 - 5 Tasks: 1. Collection of statistical data (base Eurostat disagregation) 2. Literature review about recent analysis of the labour market challenges associated with the transition of the energy system 3. Develop of employment scenarios assessing employment effects of the scenarios RM2050 4. Sensitivity Analysis (5 parameters) 5. Provision of "Employment Coefficients" for future En Scenarios (ia jobs created by 1 GW, of per Euro invested…) - Contractor: COWI – Warwick+Cambridge+ErnstYoung+Exergia - Planning: 7 months – input for Impact Assessment Communication 2030 Low carbon economy Roadmap is based on Ref scenario and show higher shares of nuclear also in decarbonisation scenarios due to - CPI and RM 2050 are based on revised assumptions - electricity demand is lower than in Low carbon economy Roadmap due to stringent energy efficiency requirements - revised assumptions on the potential of electricity in transport, following more closely the transport White paper leading to lower utilisation rates of nuclear ^power plants in RM 2050. EVs flatten electricity demand and thus incentivise base load power generation.

Energy Roadmap 2050 – scenarios (1/2) GHG reduction target in 2050 Energy RM 2050 Scenarii Nuclear in electricity generation in %in 2050 [eq. capacity operating in GWe vs 125 GWe today] 40% Reference Scenario 26,4% [161 GWe] Current Policy Initiatives 20,6% [117 GWe] 80% High Energy Efficiency 14,2% [79 GWe] Diversified supply technologies 16,1% [102 GWe] High Renewables 3,6% [41 GWe] Delayed CCS 19,2% [127 GWe] Low Nuclear 2,5% [16 GWe] Energy Roadmap 2050 - scenarios Several meaningful scenarios can be proposed for a complex analysis of the decarbonisation of the energy system. Together with stakeholders, the EC has identified 4 main decarbonisation routes Energy Efficiency (EE)- reducing energy demand, Renewable Energy Sources (RES), Nuclear Energy and Carbon Capture Storage (CCS) - reducing the carbon content of energy consumption. The Energy Roadmap 2050 analysed 5 decarbonisation scenarios (target 80% Greenhouse Gas reduction in 2050) which are different combinations of the 4 decarbonisation routes. The main driver are carbon prices for ETS (Emission Trading System) and non-ETS sectors complemented in some scenarios by additional targeted support measures to EE and RES. The last two scenarios present cases where due to technological difficulties or public acceptance issues some technologies are delayed or abandoned. Decarbonisation Scenarii impacts on the share of electricity in final energy demand The decarbonisation scenarii identify a common trend: The share of electricity in the final energy demand will increase drastically (from 20 to 40% by 2050) Electricity will play a greater role in energy supplies also in areas such as transport and heating It represents a mean figure of 4800 TWh per year in 2050

For info - EURELECTRIC Study 2050 2010 « PowerChoices » Scenario Target: EU 75% GHG reduction in 2050 vs 1990 to respect IPPC 4th Assessment: 440 ppm CO2 eq and 2 deg C 50% GHG reduction worldwide and 60 to 80% OECD Means carbon-free electricity in 2050 in EU = 2nd SER Lot of energy efficiency and savings – primary energy needs decrease from 1800 Mtoe (2005) to 1400 Mtoe (2050) Electricity demand increases from 3100 to 4800 TWh Mainly RES – from 15% to 40 % – mainly wind 2x15 % by Coal and Gas Nuclear from 950 TWh to 1300 TWh (31 to 28%) Overall cost of PowerChoices: Investment needed: 2 trillion Euros for 2050 (of 2005)… EC estimation Power Infrastructures 2020 1 trillion Euros= 600B plants + 400B grid – of which 200B priority interconnections (10B from MFF Infrastructures Interconnecting Europe

Nuclear in Energy Roadmap 2050 (2/2) Share of nuclear in decarbonisation scenarios vary depending on assumptions taken from 3 to 19 % in electricity – of 4800 TWh … 3 scenarios on 5 between 15 and 20%... BUT what does it mean: 20% of 4800 TWh electrical capacity needed in 2050 in terms of Investments ? Growth and Jobs ? Nuclear in Energy Roadmap 2050 Share of nuclear in decarbonisation scenarios vary depending on assumptions taken from 2 to 18% in primary energy, 3 to 19 % in electricity In the following slides, the assumption will be: 20% of the electrical capacity needed in 2050 will be generated by nuclear power plants BUT what does it mean: 20% of 4800 TWh capacity needed in 2050 in terms of Investments; Growth and Jobs Based on those assumptions what will be the challenges for: The regulators, The licencees The vendors The different suppliers

20% Nuclear Scenario 2050 (1/2) EU Roadmap 2050 up to 20% Nuclear Electricity 4800 TWh per year ~140 Gwe (for 7000 hour per year) 100 Units of 1400 MWe avg Today 28% Nuclear Electricity = 125 Gwe – 135 Units Closing DE+BE+UK AGRs rest 100 Units – LTO Average age of NPPs 30 years (today in EU)

20% Nuclear Scenario 2050 (2/2) Vision: LTO: between 2015 and 2035 New Built: between 2025 and 2045 Investment ? LTO to 60 y 900 M€ per Unit New Built (ex EPR) 5 B€ for 7 Years Jobs ? 900 000 (Base) + 50 000 (LTO) + 250 000 (New Built) Value added: 70 B€/y + 5 B€/y + 25 B€/y

20% Nuclear Scenario 2050 - Impact on Investments, Growth and Jobs Long Term Operation (100 Units) New Built (100 Units) Several units in construct in parallel Long term operation (2015-2035) New Built (2025-2045) Investments 900 M€ per Unit 5 B€ per Unit Jobs 900000 (base) In addition 50 000 jobs (LTO + ST upgrades) In addition 250 000 jobs (New Built) Value added 70 B€/y (base) In addition 5 B€/y In addition 25 B€/y Scenario 2050 - Impact on Investments, Growth and Jobs Assumptions Primary assumption 20% of Nuclear Electricity Which corresponds to 100 Units (1400 MWe Avg – Load factor 80%: 7000h/y) Today 135 units are operating EU-Wide (average age ~ 30 years) – GRAPH IN BACKUP SLIDES Phase-out and closing ~ 35 Units (short-term forecast) This implies that (20% share target) 100 Units which will have to go through life time extension programs New builts will have to replace progressively the existing fleet of NPPs The translation in figures Long term operation upgrades programs (40 to 60 years) will start "immediately" until 2035 and will have to include the EU stress tests follow-up requirements. According to extrapolation of a Pricewaterhousecoopers (PWC) study and the recent "rapport de la Cour des Comptes française": Investment needed per unit: 900 M€ Additional job created: 50 000 Additional added value 5 B€/year New built to replace the existing fleet will massively (6 units under construction in parallel) have to start around 2025 Investment needed per unit: 5 B€ (over 7 years of construction) Additional job created: 250 000 Additional added value 25 B€/year The translation of the EU Energy roadmap 2050 in the nuclear area will generate multiple challenges for all the stakeholders (regulators, licencees, vendors, suppliers, the public …) we should better be prepared of and anticipate the actions which could already be anticipated

(Perspectives for nuclear in EU…???) Further development is contingent on: high level of nuclear safety & security - at large (technology, waste mgnt, emerg mgnt, liability,…) public acceptance + MS position on nuclear climate targets maintained + how well are "others" doing positive investment climate international cooperation and opportunities research and innovation critical – leadership/knowledge

THANK YOU FOR YOUR ATTENTION marc.deffrennes@ec.europa.eu Nuclear marten.westrup@ec.europa.eu Energy Policy dinko.raytchev@ec.europa.eu Employment study