Energy Transitions in G20 countries Energy transitions towards cleaner, more flexible and transparent systems Ministerio de Energía INTERNATIONAL ENERGY AGENCY The IEA examines the full spectrum of energy issues including oil, gas and coal supply and demand, renewable energy technologies, electricity markets, energy efficiency, access to energy, demand side management and much more. Through its work, the IEA advocates policies that will enhance the reliability, affordability and sustainability of energy in its 30 member countries, 7 association countries and beyond. The four main areas of IEA focus are: n Energy Security: Promoting diversity, efficiency, flexibility and reliability for all fuels and energy sources; n Economic Development: Supporting free markets to foster economic growth and eliminate energy poverty; n Environmental Awareness: Analysing policy options to offset the impact of energy production and use on the environment, especially for tackling climate change and air pollution; and n Engagement Worldwide: Working closely with association and partner countries, especially major emerging economies, to find solutions to shared energy and environmental IEA member countries: concerns. Australia Austria Belgium Canada Czech Republic Denmark Estonia Finland France Germany Greece Secure Hungary Sustainable Ireland Together Italy Japan Korea Luxembourg Mexico Netherlands New Zealand Norway Poland Portugal Slovak Republic © OECD/IEA, 2018 Spain International Energy Agency Sweden Website: www.iea.org Switzerland Turkey United Kingdom United States Please note that this publication is subject to specific restrictions The European Commission that limit its use and distribution. The terms and conditions are also participates in available online at www.iea.org/t&c/ the work of the IEA. Preface This report was produced by the International Energy Agency (IEA) at the request of Argentina’s G20 Presidency 2018, as a key input for the activities of the Energy Transitions Page | 1 Working Group (ETWG). The G20 (Group of the Twenty) was created in 2008, in response to a severe international financial crisis, and its members currently account for 85% of the global economy, 75% of world trade and two-thirds of the global population. Argentina took over the G20 Presidency on 1 December 2017, and its term ends on 30 November 2018. The motto of Argentina’s G20 Presidency, which is “Building consensus for fair and sustainable development”, focuses on three key themes: the future of work, infrastructure for development, and sustainable food future. (For an overview of Argentina’s G20 Presidency vision and priorities, see https://g20.argentina.gob.ar/ en/overview-argentinas-g20-presidency-2018). Within this framework, Argentina defined eight priority areas for G20 collaboration under its presidency, one of which is “Energy transitions towards cleaner, more flexible and transparent systems”. Under this motto, the ETWG developed most of its activities between December 2017 and June 2018, resulting in collective energy policy recommendations contained in the Bariloche Energy Ministers’ Communiqué (see https://g20.org/sites/default/files/media/energy_communique.pdf). Additionally, Argentina prepared five substantive technical documents, with the support of several international organisations. The present report is one of these outputs and should be considered an “Argentine Presidency deliverable”, given that its contents were discussed and enriched by the ETWG but not submitted to formal approval by the Energy Ministers, for which reason it does not necessarily reflect the G20 membership’s national or collective views. © OECD/IEA 2018 OECD/IEA © Table of contents Executive summary ............................................................................................................ 5 Page | 2 Diverse energy transitions in G20 countries ................................................................. 5 Transitions towards cleaner energy systems ................................................................ 5 Developing more flexible energy systems ..................................................................... 7 Increasing transparency of energy markets and systems ........................................ 8 Opportunities for G20 collaboration on energy transitions..................................... 8 1. G20 energy transition trends .......................................................................................11 1.1. G20 energy transitions: Energy sector trends ........................................................11 1.2. Energy sector investment trends ..............................................................................13 1.3. The energy sector’s role in meeting sustainable development goals for 2030 ...........................................................................................................................................15 1.3.1. Progress towards energy-related SDGs ...................................................... 16 1.3.2. Towards the integrated achievement of energy-related SDGs .......... 19 1.3.3. Investment needs for the transition to sustainable energy systems .............................................................................................................................. 21 2. Cleaner energy systems across G20 countries .................................................... 22 2.1. Status of global energy efficiency action .............................................................. 22 2.1.1. Energy efficiency in key sectors .................................................................... 24 2.1.2. Policy progress ................................................................................................... 28 2.2. Status of global renewable energy development ............................................ 30 2.2.1. Global renewable energy trends .................................................................. 30 2.2.2. Renewable energy trends and outlooks in G20 countries .................. 32 2.3. Cleaner energy technologies .................................................................................... 37 2.3.1. Energy storage .................................................................................................... 37 2.3.2. Nuclear energy .................................................................................................. 43 2.3.3. Carbon capture, utilisation and storage (CCUS) ................................... 45 2.3.4. Investment in energy technology research, development and demonstration ............................................................................................................... 47 3. Towards flexible energy systems and transparent markets ........................... 48 3.1. Power markets in transition ...................................................................................... 49 3.1.1. The roles of coal and natural gas in the power sector transition ...... 49 3.1.2. Market reforms ................................................................................................... 50 3.2. Power system flexibility .............................................................................................. 52 3.2.1. Demand-side flexibility ..................................................................................... 52 3.2.2. Flexible supply from dispatchable power plants ................................... 54 3.2.3. Regional market integration ......................................................................... 56 2018 OECD/IEA © 3.2.4. Principles of regional power system security .......................................... 57 3.3. Flexibility from regionally interconnected and global gas markets ........... 60 3.3.1. Natural gas supply and demand trends ...................................................... 61 3.3.2. From regional gas markets to more flexible globalised LNG ............ 62 3.3.3. Regional gas market integration ................................................................. 65 Page | 3 3.4. Digitalization and the smart and flexible energy system .............................. 67 3.4.1. Transforming the electricity system ........................................................... 68 3.4.2. Digitally enabled sector coupling: Smart charging of electric vehicles ............................................................................................................................ 69 3.4.3. Impacts on energy end-use sectors ........................................................... 70 4. The role of G20 in fostering energy transitions .................................................. 72 4.1. Opportunities for G20 collaboration ...................................................................... 72 4.2. Guidelines for G20 actions ........................................................................................ 73 References ..........................................................................................................................74 List of figures Figure 1. Growth in energy demand and income per capita .......................................................... 11 Figure 2. G20 total primary energy demand, 2015 ............................................................................ 12 Figure 3. G20 electricity generation by source, 1990-2015 ............................................................ 13 Figure 4. Global energy investments, 2016 ...........................................................................................