Phase II of Renewable Energy in America

National Policy Conference

November 28-29

Cannon Caucus Room, Washington, DC

American Council On Renewable Energy (ACORE)

Starting with now saying I don't want to create a competition of who's working the most renewable energies, U.S., Europe, China.  I believe we need all to work together in order to make a sustainable shift from what's the system today to what's sustainable now happening.  So it's not a competition that I'm creating there but just outlining our views from Europe.  Second remark in response to what Antonio said.  It's not happening very often that I can say I am really pleased to hear a presentation from the IEA.  Today I was.  It's not actually given, but we are really happy about that.  But still I need to check on one thing that you mentioned at the beginning because it's important.  It's more important than just in my nation, it's a question of statistics.  There were a few where I've looked very carefully at the first two slides that Antonio presented that could see that in the IEA statistics hydropower produces about 16.2 percent of our energy production, 16.2 percent, the IEA number.  <inaudible> is about 15.6 percent, our electricity output.  And then remember the total primary energy supply, there you see hydropower at two percent and nuclear power at six percent.  How comes that nuclear power as long as it has the same output as hydropower plays three times the role in the statistics of the IEA.  This is something that is not my imagination.  It is important because this makes nuclear power in decision maker's minds three times as important as hydropower.  And this is a major issue we are asking the IEA to really change something.  And the third remark I have, Mechtild mentioned it, we're based in Brussels.  We are the umbrella organization of the renewables industry.  We are all together with our member associations and some others in the house and this is the third remark.  We have a house that is based on 100 percent renewable energies.  So we are 60 people, 60 staff in one house that's transferred into a building that's based on 100 percent renewable energies.  And what I can say here is a remark this house, based on biomass, solar, thermal, geothermal and other technologies is much warmer in winter here because it's probably based on conventional sources.  So renewables do work if you integrate them wisely.  I want to go through three things.  First one I'll skip because I want to stay on time more or less because Janet maybe already talked about the market development.  Second is what is happening in Europe today and what can we expect from Europe in the future.  And why do we do what we do in Europe at the moment.  So <inaudible>, as I said I came Europe's a global renewable development.  I have some slides to prove it but I don't want to get into competition.  We have at least 300,000 jobs already in Europe in the renewable sector and an annual turnover, well I guess this year it's going to be more than 35 billion than 25 billion last year.  We have one of the most rapidly growing business sectors in the EU and also globally I guess.  Proving that, instead I jump through those, you can get all these numbers, but <inaudible> a world leader you see the light blue bar is Europe and the purple bar is the rest of the world.  You'll see that wind makes up not just something, you have an example that Europe is still at the forefront of market development wares.  Indeed other countries are lucky.  I'm really happy about that taking up as well as investing in wind power and other renewables.  Same another example is photovoltaics.  The important thing that you need to see here, I want to show you is the trend that we have seen already.  I mean it's much better figures than I have with me that we've seen in earlier presentations how the investment in renewable energies are changing, how they're increasing, same thing only also for the electricity technologies.  We see it also in the heating technologies like solar thermal.  We have in Europe quite interesting impressive market trend which is already doubling every year the capacities.  Bio-ethanol is a field where the EU is definitely behind the U.S. and other countries like Brazil, but we are trying to take up there as well in Bio-ethanol as well as other biofuels.  The trend is very clear.  Europe is investing in creating policy frameworks that are necessary to drive renewables investments.  Europe is in the forefront of creating forward framework that is increasing investment in renewable energy sources.  This is what I wanted to bring you here.  And one thing, it was in a similar way already mentioned, it's not just a little bit of investments here and there, it is a major investment.  You see, what you see here, what happened in EU in terms of new capacity installed.  You see very clearly renewables, whether it's wind plus other renewables is clearly a number two in new investment in each district.  So renewables is not just a minor issue any more, maybe in the past it was, but today's investments over the last 10 years, renewable plays significant role and a much more significant role than it did in the past and this trend will continue.  Oops, wrong button.  So this was surprised.  I say this will continue and I will explain why I believe it will continue in Europe and why we do what was just already briefly mentioned this morning by Mechtild about the detail.  I think the leaders of Europe, the 27 heads of states learned a lesson over the last couple of years.  One lesson was maybe what is described here before by <inaudible>, the Chairman of the Independent Committee of Foreign Affairs, who said a very wise sentence last year.  From this and for many, many other reasons, the world leaders or the EU leaders learned that we need to change our energy supply structure.  We've heard a lot of reasons already today ranging from climate change, specifically to supply issues and many, many other issues.  And what the EU many learned is that we have a problem.  Today we are dependent to about more than 55 percent of managed imports.  This will increase to 75 percent by 2030 if we do not act at present.  Even if the EU would manage to secure the supplies in whatever ways, whether it's energy diplomacy or with starting to ask questions of other leaders in the world <inaudible>, like how did our oil get under their sands?  We don't want to ask these questions we want to find other ways, because even if we manage to secure our supplies in whatever way, we don't know at what costs.  But as you see we are not able to forecast oil prices over 12 months, but if we invest today in renewable energy infrastructure it will last 30, 40, 50 years.  So any energy investment in gas infrastructure, for example, will bring costs in 40 years still.  And I don't know what these costs will be but I guess they won't be in the range by the European Commission since they said last year of an oil barrel at 448 dollars in 2030.  I don't believe in that.  So this is what the EU leaders understood and they made a conclusion that said you don't want to continue like this.  But can we change without the rest of the world?  There was a major discussion there.  But they came to a conclusion that necessarily we will have to change.  Not acting is not an option.  And a delay in acting is also not an option because of climate change, but also because of secure supply reasons.  So what they understood, or what most of them understood, is that we have an enormous challenge in front of us but we can turn this challenge into an opportunity for us.  Because they looked very deeply into it and they came up with numbers.  For example like a German consultancy, Wilhelm Bagger (ph), one of the biggest consultants in Europe, which is not known as being <inaudible>.  They came up with a study saying, OK, necessarily if we take climate change seriously, which we will, most likely if we act against them globally in whatever way, they came to the conclusion that by 2020 environmental <inaudible> chiefs would have to turn off 500 billion a year annually, five hundred billion annually, which is a major business area.  And this is why in Europe said we must come to the conclusion that what we are discussing today, the change of our energy supply structure is something similar to a third industrial revolution.  It's much more than putting the nitty gritty details here and there to get them to install some geothermal power plant and fans on the roofs of some houses.  No, it's much more than that.  It is a third industrial revolution.  This is for our commission president who also announced recently saying go away from this <inaudible> that we had in the past of market versus the environment to conclusion that those who invest today in environmental technologies will be the winners of tomorrow, because the markets of the future are green markets.  And renewables are a huge part of that.  From that they came to the conclusion that obviously if we want to act we must change the policy framework because energy markets are policy-driven markets.  They are since 100 years, since ever, and they are still today.  We just heard subsidies were introduced to all technologies.  Europe was based in two founding treaties, one for the support of coal and steel and one for the support of nuclear.  This is the history of Europe.  So we were shaping an energy <inaudible> infrastructure that was based on subsidies and policy frameworks for these technologies and now we've come to the conclusion that still these are driving those technologies and we need to change the technology framework or the policy framework for renewables as well.  In order to make that happen what we realized it is necessary to do, start an industrial revolution.  Because the existing policy framework just brought us some sluggish growth in different technologies which you see here.  The main effect that we had at that place where we introduced real policy measures, the renewables and electricity directives as we call it in Europe, from 2001 they made the most rapid and who shaped that thing where you see the blue line is the development of renewables and electricity.  And even that development in Europe is mainly based on a couple countries so we could do much more and that's what we realized we need to do. So what is the formula for doing much more?  The formula is very easy.  It's three times 20. Three times 20 is what the 27 heads of state unanimously agreed on in March this year.  Three times 20, one times 20 for reaching 20 percent energy efficiency by 2020, second reducing greenhouse gasses by 20 percent by 2020, or even going beyond that, if we find a new international agreement the EU is willing to reduce greenhouse gasses by 30 percent by 2020 which is by the way scientifically what they should do I think.  And the important target for us here today is to reach a share of 20 percent renewables by 2020.  From today about seven percent to 20 percent is an increase of renewable share by one percent each year modest.  And what does it mean, I mean 20 percent renewables is one thing, but if you calculate the target and make up the numbers and the statistics well you might end up that means that we will have 35 percent of the use of electricity coming from renewables in 2020.  From today from 15 percent to 35 percent in 2020 renewables heating will have a share of about 20 percent and renewables in transport will have a share of at least 10 percent.  I guess it's going to be 12 percent in order to move the target depending on if we achieve our energy <inaudible>.  What will the EU do for that?  They will introduce, as announced, a new renewable energy policy, going away from this framework that we had into a much stronger much more binding much more committing framework, the framework that will increase the share of renewables from seven percent to day to 20 percent in 2020.  This will be introduced by targets that each member state will get.  Target setting, I mean you can call it communistic or whatever, but still it is a good guideline, an important guideline for investments.  And if you have a binding target at the membership level that means you have 27 heads of states agreeing on a number.  Each of the individual members saying OK, this is what we as a country reach in 2020 in order to contribute to our share in 2020 that is necessary to reach it.  And this is binding.  That means that if a member state will not meet its target, including the <inaudible>, they will have to pay penalties, high penalties.  So what that member state can think of is, do I invest in renewables with all the benefits I have or do I pay penalties at a certain moment to the administration in Brussels.  I guess it's very clear what a clever member state administration would choose for.  And obviously setting targets is just one part of the story.  The more important part is the message behind it that they have commissions working hardly and introducing them now.  This will be a broad range, ranging from the introduction of obligations for example in you know, this heating, but an obligation on every new house that is built to have a certain amount of renewable heating in its energy share and obligations for public procurement to have the administration as the example, the leading example.  And all these things in the renewables heating sector it will introduce new priority <inaudible> for using electricity in the European grids.  It will introduce more fair and transparent regulations for renewables electricity transmission, industry transmission, all these things will be there.  Skipping that.  And coming back again we can sit here and say enough I believe, why are we doing that, or what are the effects of it?  As I said, I mean you can discuss it from the Western perspective, you can discuss it from a pure cost perspective or whatsoever, or you can also look behind it and see what is the real result or what are the impacts of it.  The impacts are very clear.  The EU has said, I mean that renewables <inaudible> contribute to fulfilling the CO2 target or the greenhouse gas reduction target to a large extent.  So if we meet the 20 percent renewables target we reduce our CO2 emissions by something between six and nine hundred megatoes  which is about 12 percent of the EU's Kyoto target and, no, sorry, which is about reduction of 12 to 14 percent compared to 1990 levels.  At least as important, is that meeting the target would reduce the endless fossil demand, the demand that the European Union is dependant on by about 250 million tonnes of oil equivalent which means the reduction of imports by about 20 percent.  This is quite significant.  And this is probably one of the main driving forces for the EU.  Apart from that you have all these kind of soft impacts.  You promote a leading industry which already has a certain amount of <inaudible> and the turnover, the financial power that is not legible any more.  You create additional jobs obviously and additional investment.  And you come up again <inaudible> and you pick up also the cost of it.  Renewables are more costly than other technologies.  Well if you calculate it right I don't believe that.  If you calculate the emissions from the alternatives as well for example, because so far it's virtually free to destroy the environment.  It's virtually free.  You can destroy the environment and you pay nothing for it.  If you calculate all these extra <inaudible> with it and all the benefits you have by job creation by reducing the dependency you have a completely different picture.  And if you calculate it based on the alternatives with probably the high priced oil scenario, I would like to know what the IEA, because I don't it in mind what the IEA's high price oil scenario is because I remember a couple of years ago I discussed this <inaudible> role, and he said <inaudible> would never, never, never go to $100 because if it's so high the demand will decrease and so the price will drop again.  This was what the IEA said a couple of years ago so I would really like to know what the higher oil price demand scenario of the IEA is.  You know if you calculate it with the <inaudible> at $50 or $200 dollar you have a completely different picture.  And I believe that might help.  So, but to briefly sum it up, we need to come from these target setting and the principle issues so we can then create a point at a certain moment.  As I said the EU will come up, hopefully in January this year, next year, sorry, with a single comprehensive directive including binding national targets for the member states, the 27 member states, and additional measures.  So the binding targets will be there.  It will include national action plans that will be drafted coming from the member states saying how they're going to meet their target, how they plan to meet the target.  So from the first moment this directive is in place there will be a very high invested security because everybody has to say what they want to do, what measures they introduce.  And they notify to Brussels and if they don't meet their own obligations they have set themselves then they have a problem.  So you can be sure from the very first moment we can be sure that there's a lot happening.  The proposal will maintain and strengthen the existing legislation.  As you have seen in the electricity we have already quite successful legislation.  And then again the most important question, when 2008 is very soon, 2020 is already tomorrow more or less, so we need to introduce it very quickly.  And third we expect that in January to come up proposed by the commission and if everything is going well and everybody is in his mind, we will have new legislation adopted.  Possibly by the middle of next year before the EU Parliament is going to be elected, so by the middle of 2009 we hope to have a very strong EU legislation that will enforce the EU investors, the private sector to come forward to take the money into their hand and to make the 20 percent renewables target in Europe happening.  Thanks very much.