© OECD/IEA POWER SECTOR OUTLOOK IN OECD COUNTRIES 28 May 2010 Roundtable: Russian Federal Tariff Service Ian Cronshaw, Head, Energy Diversification Division, IEA

© OECD/IEA OVERVIEW: OECD Markets The last decade—the role of gas The next decade The competitors - nuclear and coal Outlook for Generation costs Conclusions

© OECD/IEA OVERVIEW The last decade

© OECD/IEA Gas – Main contributor to the growth in OECD electricity generation Source: IEA

© OECD/IEA Gas demand growth in the power generation sector has slowed down Source: IEA, NGMR 09 Note: OECD countries

© OECD/IEA OECD Europe electricity generation ( )

© OECD/IEA Gas – Main contributor to the growth in OECD Europe electricity generation

© OECD/IEA WHY GAS?—Many Good Reasons Low Capex Short lead times Flexible, ideal with renewables Low carbon signature, and A natural hedge to power prices

© OECD/IEA The future role of gas in the power generation mix could evolve Source: Enagas Summer: Less wind availability Gas is used to replace wind Winter: Increased wind availability Use of gas is minimum

© OECD/IEA OVERVIEW The next decade

© OECD/IEA What would be the future energy demand path? 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-CO 2 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

© OECD/IEA Gas is still the fuel of default in OECD Source: IEA, NGMR 09

© OECD/IEA OECD Europe (TwH) WEO reference case

© OECD/IEA EU27 installed power generation capacity in the 450 Scenario

© OECD/IEA OVERVIEW The competitors - nuclear and coal

© OECD/IEA Planned Generating Capacity Additions – United States GW

© OECD/IEA 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?

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

© OECD/IEA Chinese steam and coking coal imports surged in 2009 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.

© OECD/IEA China’s coal imports and exports, , with forecast to 2030 from WEO 2007 Net imports of c.100 Mt by 2015, forecast in WEO 2007, have been reached 6 years earlier.

© OECD/IEA 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)

© OECD/IEA OVERVIEW Outlook for Electricity Generation Costs

© OECD/IEA ‘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 data Fossil 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.

© OECD/IEA 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

© OECD/IEA OVERVIEW Conclusions

© OECD/IEA 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