Transitions to low carbon electricity systems: Key economic and investments trends - Changing course in a post-pandemic world

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Transitions to low carbon electricity systems: Key economic and investments trends - Changing course in a post-pandemic world
Transitions to low carbon electricity systems:
Key economic and investments trends
Changing course in a post-pandemic world

June 2021
Transitions to low carbon electricity systems: Key economic and investments trends - Changing course in a post-pandemic world
The clean energy transition has been too slow and
progress too uneven to prevent the most severe impacts
 of climate change. But the COVID-19 pandemic forces
 decision-makers to change their course of action and
prioritize green recoveries over unsustainable strategies.

Countries, financiers, innovators and the civil society are
increasingly rallying around carbon neutrality objectives
around mid-century. The years ahead will be decisive for
 climate action. Sustainable lifestyles are within reach if
 the challenges inherent to clean energy transitions are
                    suitably anticipated.
Transitions to low carbon electricity systems: Key economic and investments trends - Changing course in a post-pandemic world
From a global crisis                                           Clean electricity roll-out:
      to a global opportunity                          p.2           From marathon pace to sprint speed p.4

• Climate science underpins the considerable physical,         • The transition to clean electricity manifests itself in

                                                                                                                           Recent trends on the energy transition
  social and economic benefits of reaching carbon                many markets but remains too slow for net-zero
  neutrality by 2050.                                            emission targets to be met on time.
• The shift to clean and secure electricity will lay the       • Thirty five percent of global electricity was supplied
  foundations for end-use electrification. Coal                  by low carbon sources in 2018. This share barely
  displacement is now a political priority.                      evolved over the past thirty years.

      No more one-size-fits-all                                      Growing more with less:
      in an evolving nuclear landscape                 p.8           A sober electrification                        p.10
• Nuclear power provides predictable and reliable              • The availability of clean electricity alone does not
  electricity in 32 countries and is a direct alternative to     guarantee the sustainable transformation of the
  coal.                                                          energy sector.
• At a levelized cost of $30-35 per MWh, extending the         • Energy-saving measures are crucial to circumvent
  operation of existing nuclear plants by 10 to 20 years         the burst of electricity consumption foreseen in many
  is one the most cost-effective low-carbon options.             countries, often outpacing economic activity.
                                                                 Unmonitored electricity consumption would result in
                                                                 overinvestments and higher energy bills.

      The impact of the COVID-19                                     More flexible systems

                                                                                                                           Topical issues on the
      outbreak on the electricity sector              p.12           to enable the transition                       p.14

                                                                                                                             energy transition
• The COVID-19 pandemic transformed the operation              • Flexible electricity infrastructure revolves around
  of power systems across the globe and offered a                regional interconnectors, dispatchable power
  glimpse of a future electricity mix dominated by low           generation units, including natural gas assets,
  carbon sources.                                                pumped storage hydropower plants and nuclear
• The competitiveness and resilience of low carbon               plants operated flexibly.
  technologies have often resulted in higher market            • Energy storage and demand-response options are
  shares for nuclear, hydro, solar and wind power.               also indispensable to reach carbon neutrality.

      Setting the global decarbonization                             From recovery packages
      in motion: All roads lead to carbon                            to low carbon finance                          p.20
      neutrality                          p.18
                                                               • The proposed energy plans in response to the

                                                                                                                           Key features and drivers of the transition
• Electricity production and end-use energy                      pandemic remain largely at odds with climate goals.
  consumption require a swift displacement of                  • More than $600 billion are invested yearly in clean
  unabated fossil fuels and a convergence towards                electricity infrastructures. Clean energy investments
  clean energy technologies.                                     must double immediately to pave the way for carbon
• By 2040, over 80% of electricity should be low                 neutrality.
  carbon, more than double current levels.

      Linking up local pollution and                                 Factoring the changing natural environment
      climate change agendas                         p.23            into investments decisions             p.25
• Local air pollution and climate change have common           • Severe environmental conditions episodically affect
  origins: unsustainable urban infrastructures. Clean            infrastructures worldwide, at great economic and
  power, clean mobility and efficient energy used in             social expense for asset owners, insurers and local
  manufacturing improve air quality and reduce                   communities.
  societal costs.                                              • Investing in built-in resilience of future energy
• CO2 emissions are declining in high income countries           systems to cope with a broader range of external
  but often continue to rise elsewhere. Populations              shocks will largely offset risk mitigation costs.
  living in lower income countries are particularly
  exposed to outdoor (and indoor) pollution.

      Aligning actions to
                                                     p.26
                                                                                                                           Policy priorities

      build back better

• Governmental leadership and institutional initiatives,       • Green recovery measures are expected to stimulate
  incl. the establishment of sustainable finance                 employment and economic activity. Social and
  taxonomies based on objective, transparent and                 inequality concerns inherent to the transition must be
  science-based criteria, are critical to boost low              tackled to ensure successful and just outcomes.
  carbon investments.
Transitions to low carbon electricity systems: Key economic and investments trends - Changing course in a post-pandemic world
Transitions to low carbon electricity systems: Key economic and investments trends
Changing course in a post-pandemic world
The electricity sector1 acts as a catalyst for an economy-wide transition to a low carbon,
climate-resilient and sustainable future. This document shines a light on the nature and pace of
the ongoing transition to low carbon electricity systems, takes stock of the immediate impact of
the COVID-19 pandemic, and weighs prospects for accelerating the transition post-pandemic.
Will 2021 be a pivotal year for the energy transition?

             FROM A GLOBAL CRISIS TO A GLOBAL OPPORTUNITY

A year into the pandemic and a gradual recovery in                                                        Public and private leaders of the energy transition
sight. The social and economic shockwaves generated                                                       rally around high-stake opportunities to accelerate
by the COVID-19 outbreak laid bare the vulnerability of                                                   the recovery through clean energy adoption and
our societies and created one of the deepest economic                                                     pave the way to carbon neutrality. But countries’
recession in generations. Governments and the health                                                      progress and access to these opportunities remain
sector turned to scientific evidence to design and                                                        contrasted. The evidence compiled in this document
coordinate their responses. The World Bank and the                                                        points to a gradual and partial transformation of the
IMF foresee an uneven and uncertain recovery for 2021                                                     global energy landscape, as confirmed by the World
and beyond, and warn that the crisis hit the poorest                                                      Economic Forum (WEF): The Transition Readiness
nations hardest (Gopinath, 2021; Malpass, 2021),                                                          index reveals incremental progress in 94 of the 115
affecting their ability to respond to another looming                                                     countries monitored over the past six years (Fig. 1). High
challenge: the climate emergency.                                                                         income countries appear best prepared to pursue the
                                                                                                          domestic rollout of clean energy as they are to weather
A year for decisive climate action. Preliminary data
                                                                                                          the consequences of the pandemic. But fast progress
for 2020 points to a temporary drop in global CO2
                                                                                                          is also observed in South Asia, Southern Africa and
emissions but also a net increase in overall greenhouse
                                                                                                          Latin America, albeit starting from a lower base. The
gas emissions despite the economic slowdown (WMO,
                                                                                                          pandemic did not alter the fundamentals underlying
2020). A wide mobilization of scientific and financial
                                                                                                          WEF country scores. The success of a green recovery,
resources is thus as urgent as necessary if the world
                                                                                                          possibly giving new impetus to the energy transition,
is to avert the most severe impacts of climate change
                                                                                                          will depend greatly on governments’ ability to set
on our living environments. With firmed up political
                                                                                                          radical goals, implement policy reorientations and opt
ambitions, the emergence of integrated low carbon
                                                                                                          for sustainable supply chains across the entire energy
solutions and harmonized corporate strategies, the
                                                                                                          sector.
year 2021 can culminate at the UN climate change
conference in Glasgow with landmark outcomes.

Figure 1 – World Economic Forum Energy Transition Index 2

                    Change in ETI country score from 2015 to 2020                                                                 2020 Top 5 ETI scores by income group

                                                                                                                 High income              SWE    74%
                                                                                                                 Average ETI score: 62%   CHE    73%
                                                                                                                                           FIN   72%
                                                                                                                                          DNK    72%
                                                                                                                                          NOR    72%
                                                                                                                 Upper middle income      COL    63%
                                                                                                                 Average ETI score: 53%    CRI   62%
                                                                                                                                          MYS    59%
                                                                                                                                          PER    59%
                                                                                                                                          GEO    59%
                                                                                                                 Lower middle income        AR
                                                                                                                                          MAR    56%
                                                                                                                 Average ETI score: 48%    LKA   56%
                                                                                                                                          PHL    55%
                                                                                                                                           SLV   55%
                                                                                                                                          VNM    53%
                                                                                                                 Low income                TJK
                                                                                                                                            JK   50%
                                                                                                                 Average ETI score: 43%   ETH    46%
                                                                                                                                          MOZ    42%
         ETI                                                                                                                               HTI   36%
  difference from
     2015-2020

             +30%

              0%
   © 2021 Mapbox
          -5%    © OpenStreetMap

 Note: The Energy Transition Index benchmarks countries on the performance of their energy system, as
 well as their readiness for transition to secure, sustainable, affordable, and reliable future energy system.

                                                                                                    2
Transitions to low carbon electricity systems: Key economic and investments trends - Changing course in a post-pandemic world
Recent findings from climate science underpin                                  human resources means will see a more progressive
the considerable physical, social and economic                                 implementation. Recent country pledges suggest that
benefits of limiting the global temperature increase                           carbon neutrality may be reached by the wealthiest
well below 2ºC. A strict management of our carbon                              nations around mid-century and a decade later
budget is of the essence. Ongoing trends suggest                               elsewhere through piecemeal approaches compatible
a temperature rise in excess of 3ºC before the end                             with economic development.
of the century. At current levels of global greenhouse
                                                                               The adoption of low carbon technologies will
emissions, our carbon budget would be exhausted
                                                                               materialize as solutions gradually reach market
in about a decade, triggering warming beyond 1.5°C
                                                                               maturity. The shift to clean and secure electricity
irremediably (with one in two chances) (IPCC, 2018). Our
                                                                               will lay the foundations for end-use electrification.
energy systems rest on regular boundary conditions of
                                                                               Coal replacement has become a political priority.
water availability and temperature. Higher atmospheric
                                                                               Clean electricity is an indispensable precursor to
temperatures would raise the odds of extreme rainfalls,
                                                                               carbon neutrality in other sectors (Fig. 2). Electricity-
flooding and droughts, eventually impeding the
                                                                               related emissions, trending upward for decades, must
reliability of energy services; cooling demand in cities
                                                                               now drop by at least 6% every year through to 2030. In
would soar, amongst other and numerous impacts. The
                                                                               addition to nuclear and hydro, various clean electricity
Race to Zero, initiated by the UNFCCC, must therefore
                                                                               options have reached mass market in recent years ;
gain momentum. A quarter of greenhouse emissions
                                                                               their deployment can be immediately accelerated to
expected by 2030 could be avoided with the sole
                                                                               replace uncompetitive coal assets, at the origin of two
implementation of unconditional Nationally Determined
                                                                               thirds of power-related emissions (SystemIQ, 2020).
Contributions announced before the pandemic (UNEP,
                                                                               A coal-to-clean energy transition could generate over
2020a).
                                                                               $100 billion in net financial savings as early as 2025.
Policy makers gradually embrace holistic                                       But a clear path to phaseout, including the refinancing
approaches to decarbonization, addressing all                                  of existing assets, is lacking (RMI, 2020).
energy producing and consuming activities,
                                                                               The remainder of the document depicts ongoing trends
but also governmental aspirations in favour of
                                                                               and initiatives in support of the energy transition,
a just transition. The climate action instigated by
                                                                               including the overall impact of the COVID-19 outbreak
individual countries is more and more embedded
                                                                               on electricity systems. The emphasis is given on
in inclusive strategies aimed at generating income
                                                                               immediate opportunities for cleaner electricity in
and employment, in line with other industrialization
                                                                               various economic contexts and in an evolving financial
objectives. Comprehensive policy frameworks, based
                                                                               landscape. Some of the key enablers of the transition,
on fiscal, financial and other social protection measures,
                                                                               including various options for flexible operations, are
as well as behavioural and sector coupling policies,
                                                                               illustrated through selected examples. Broader policy
are necessary to create the conditions for a just and
                                                                               drivers are also discussed, such as air pollution and
cost-effective transition (IRENA, 2020a). Early adoption
                                                                               the vulnerability of energy infrastructures exposed to
of low carbon measures and a progressive shift away
                                                                               harmful climate conditions.
from fossil fuels is expected in high income countries.
Other jurisdictions with more limited financial and

Figure 2 – Illustrative transition to low carbon power systems in line with the Paris Agreement; 2019 serves as the reference year3

 Global GHG Emissions                      2010                       2019                                2030                                  2040

                                                                59.1Gt
                                                                                                                         2019
                          -14%
                                                                                                                       Total GHG
 Total GHG
                           -9%                                 33.3Gt
 Energy-related CO2                                                                        -27%

 Power-related CO2         -10%
                             0                                  13.7Gt                                                         -56%
                                  12.4Gt
                                                                                           -43%   7.8Gt
 2019 Total GHG                                                                                                                -77%                    3.2Gt

 CO2 emissions for
 electricity generation

                                   -10%                        13.7Gt
 Total                                                                           3.1Gt
                                                                                                  -43%
                                                  -16%                                                           -9%                   -77%          -41%
 Coal
                                  +30%                        0.7Gt                               -55%
 Oil                                                                                                      -53%                        -71%
                                              -10%                           9.9Gt
                                                                                                                                              -87%
 Natural Gas

                                                                         3
Transitions to low carbon electricity systems: Key economic and investments trends - Changing course in a post-pandemic world
CLEAN ELECTRICITY ROLLOUT: FROM MARATHON PACE TO SPRINT SPEED

Clean electricity is on its way to replace fossil fuels          production capacity to address both domestic needs
and become the main driving force of economic,                   and markets overseas have established China as the
social and environmental progress. The switch to                 global leader of clean power manufacturing. The year-
clean electricity is manifest in many markets but                on-year change in low carbon power approaches 11%
remains too slow for net-zero emission targets to be             in China while electricity consumption progresses at
met on time. Among the main energy carriers, electricity         more than 7%. At current rates of market penetration,
is growing the fastest confirming a general trend                about thirty years would be necessary to reach 100%
towards electrification of energy use. A fifth of energy         low carbon electricity in China and almost fifty years
consumption is electric, leaving vast opportunities for          globally, way too late to avoid severe hardships resulting
fossil fuel displacement in final consumption sectors            from climate change (IPCC, 2018).
(Fig. 3, top panel). Electricity usage has levelled off in
                                                                 Non-dispatchable electricity sources are now
North America, Europe and other high-income regions
                                                                 on par with most conventional sources in many
thanks to effective energy-saving measures and
                                                                 markets, stimulated by major technological
moderate economic growth. By contrast, consumption
                                                                 advances and cost reductions as well as robust
grows swiftly in fast-growing economies, resulting in
                                                                 regulatory frameworks. Comprehensive policy and
an acceleration of global electricity needs (on average
                                                                 regulatory frameworks, indispensable to accelerate the
+2.7% every year since 2010). Thirty five percent of
                                                                 clean energy transition, are now in place in a majority
global electricity was supplied with low carbon sources
                                                                 of countries (World Bank, 2020b). Direct mechanisms
in 2018 (Fig. 3, mid panel). This share barely evolved
                                                                 in support of renewable expansion are wisdespread,
in more than thirty years. Growing at an average 3.8%
                                                                 inlc. fiscal exemptions (e.g. production tax credits or
each year during the last decade, and 5% in the last
                                                                 investment tax credits), and various mechanisms to
five years alone, the expansion of low carbon electricity
                                                                 guarantee operators’ revenues independently from
only makes up for the incremental electricity needs
                                                                 market conditions. Auctions are often preferred
but remains insufficient to alter the sector’s emissions
                                                                 options to identify the most competitive vendors. The
perceptibly. Electricity generation is responsible for
                                                                 enforcement of such measures has created favourable
42% of global CO2 emissions, another stable figure for
                                                                 conditions for the uptake of modern renewable
more than two decades (Fig. 3, bottom panel).
                                                                 energy in a wide range of countries across all income
Progress is unevenly distributed across income                   segments. The surge in low carbon electricity from
groups. Contrasted realities and prospects for                   onshore wind and solar PV, but also small to mid-size
rapid evolution stem from current market drivers                 hydropower projects, has resulted in a doubling of
and other legacy assets, chief among them are                    renewable capacities since 2010. On average, 200 GW
inefficient coal power plants. High income countries             of renewable capacity is installed yearly, incl. 100 GW
tend to have relatively lower carbon footprints of               of solar, 50 GW of wind and another 20 GW of hydro
electricity largely as a result of early investments             (IRENA, 2020b). Solar and wind sources now supply
in hydro and nuclear power capacities. The carbon                7% of global electricity. In 2018, solar and wind supplied
intensity in high income countries operating nuclear             half of clean electricity in 27 countries. By comparison,
capacities is generally among the lowest, averaging              hydro and nuclear account respectively for 16% and
300 grams of CO2 per kWh, and as low as 50 grams                 10% (IEA, 2020b).
in Sweden (Fig. 4).Average intensities in other income
                                                                 Clean energy leapfrogging is increasingly
groups are closer to 500 grams. In 2018, half of the low
                                                                 within reach for low income countries thanks to
carbon electricity in countries with nuclear assets was
                                                                 adapted solutions and innovative finance. But
produced from nuclear power plants. However, clean
                                                                 some bottlenecks remain for the transition to be
power progresses half as fast in high income countries
                                                                 fully inclusive. Distributed and renewable electricity
as in lower income groups (resp. 3% and 7% on average
                                                                 access and mobile payments are accesible to the
since 2015). Rapid improvements in carbon intensities
                                                                 most vunerable populations. But stark regulatory
were realised in upper-middle to lower-middle countries,
                                                                 discrepancies between the wealthiest and the poorest
thanks to higher environmental standards and policy
                                                                 nations remain. Financially unhealthy power utilities,
reforms such as fossil fuel subsidy removals, direct
                                                                 “the main off-takers of renewable energy and principal
public support for low carbon programmes and waves
                                                                 implementers of energy efficiency programs”, should
of inefficient coal plant shutdowns. Strong policies,
                                                                 be at the centre of governments’ attention (World Bank,
the development of local supply chains and enough
                                                                 2020b).

                                                             4
Transitions to low carbon electricity systems: Key economic and investments trends - Changing course in a post-pandemic world
25

                                                                                                                                                                                                                                IDN
                                                                                                                                                                             I

                                                                                                                                                                                                                                                                USA
                                                                                                                                                                                                                J
     Domestic

                                                                                                                                                                                                                                DE

                                                                                                                                                                                                                                SA

                                                                                                                                                                                                                                                                                                                                            Electricity
                                                                                                                                                                                                                                                                                                                              42%
                                                                                                                                                                                                                                                                                                                40%

                                                                                                                                                                                                                                                                                                                                     |
                                                               0
                                                                   00                                       5                    10
                                                                                                                                  10                   15                20
                                                                                                                                                                         20                             25                          30
                                                                                                                                                                                                                                    30                                    35             40      45             2000          2018

                                                                                                                          CO2 emissions from electricity generation as share of global total (%)
                                                                                                                            Global CO2byemissions
    Figure 3 – Domestic vs global distribution of final consumption of electricity by country (Top panel); Low carbon electricity         country
    (Mid panel);  Electricity-related
             In 2000,                   CO2was
                      electricity production emissions   by of
                                               at the origin country
                                                               40% of(Bottom   panel),
                                                                      global CO2       2000-2018. Top 10 contributors are highlighted in blue.4
                                                                                 emissions
                                                                   In 2018, electricity production was at the origin of 42% of global CO2 emissions
   Domestic share of electricity in final energy

                                                             100
                                                             100
                                                                                                                                                                                                                                                                                               –– 2000
                                                                                                                                                                                                                                                                                               –– 2018                    9,938 Mtoe
              consumption (%)

                                                             75
                                                             75

                                                                                                                                                                                                                                                                                                             7,032 Mtoe
                                                             50
                                                             50                                                                                                                                                                                                                                                               81%
                                                                                             JPN
                                                                                                CAN FRA
                                                                                                                                                        USA GBR BRADEU
                                                                                                  | | |                                                                                                                                                                                                         84%
                                                             25
                                                             25                                                                                             | | | |                                             RUS             CHNIND

                                                                                                                                                                                                                    |            | |
                                                                            JPN

                                                                                                                           CHN

                                                                                                                                                        KOR
                                                                                                                                                        FRA

                                                                                                                                                                       CAN

                                                                                                                                                                                                                                       U
                                                                                                                                                                                                      USA

                                                                                                                                                                                                                                                                                                                                               Electricity
                                                                                                                                                                                                                                                    BRA

                                                                                                                                                                                                                                                                             IND

                                                                                                                                                                                                                                                                                         RUS
                                                                                                                                                                                                                                                                                                                              19%

                                                                                                                                                                                                                                                                                                                                     |
                                                              00                                                                                                                                                                                                                                                16%

                                                                   00                                                                  5 5                                   10            10                                       15                      15                            20     20             2000          2018

                                                                                                                                                  Final electricity consumption as share of global total (%)                                                                                             Global final energy consumption

                                                                   In 2000, electricity consumption accounted for 16% of global final energy needs
                                                                   In 2018, electricity consumption accounted for 19% of global final energy needs

                                                                                                                                                                                                                                                                          NOR
                                                                                                                                                                                                                                                                      SWE

                                                                                                                                                                                                                                                                            | |
                                  electricity

                                                                                                                                                                                                                                                    FRA             BRA
                                                                                                                                                                                                                                                                          NOR
                                                                                                                                                                                                                                                                      SWE
                                              100
                                               100
                                                                                                                                                                                                                                                     |                    |
                                                                                                                                                                                                                                                                            | |
                                                                                                                                                                                                                                                                                                                          26,619 TWh
                              electricity

                                                                                     –– 2000                                                                                                                                                        FRA             BRA

                                              100
                                               100                                   –– 2018
                                                                                     –– 2000
                                                                                                                                                                                                                           CAN
                                                                                                                                                                                                                                                     |                    |                                               26,619 TWh
                       low carbon

                                                                                     –– 2018                                                                                                                                |
                                                                                                                                                                                                                           CAN
                        (%) (%)

                                                             75
                                                             75
                    of carbon

                                                                                                                                                                                                                            |
               generation

                                                             75
                                                             75                                                                                                                                                                                                                                                               65%
                                                                                                                                                                                                                                                                                                             15,427 TWh
           generation

                                                                                                                                                                                   JPN
               of low

                                                                                                                                                             DEU                                                                                                                                                              65%
                                                             50
                                                             50                                                                                        RUS
                                                                                                                                                                                       |                                                                                                                     15,427 TWh
             share

                                                                                                                                                                                                                                                                           FRA FRA

                                                                                                                                                          |
                                                                                                                                                                                                                                                          BRA BRA

                                                                                                                                                                                   JPN
                                                                                                                                                                                                                                          CAN CAN

                                                                                                                                                       | DEU
                                                                                                                                                 USA
                                                             50
                                                             50                                                                                        RUS
                                                                                                                                                                                       |
                                                                                                                                                 |
         share

                                                                                                                                                                                                                                                                                                               65%
                                                                                                                                                       | |
                                                                                  CHN
   Domestic

                                                                                                                                                 USA
                                                                                                                                                                                                                GBR GBR

                                                                                     |                                                           |
                                                                                                                                                                                                      DEU DEU

                                                             25
                                                             25                   CHN
                                                                                                                                                                                                                                                                                                               65%
Domestic

                                                                                                                                                                                                                                                                                                                                            Low carbon
                                                                                                                                                        RUS RUS

                                                                                                                                                                         USA USA

                                                                                                                                                                                                                                                                                                                                              electricity
                                                                                                                             CHN CHN

                                                             25
                                                             25                      |                                                                                                                                                                                                                                        35%
                                                                                                  JPN JPN
                                                                                  IND IND

                                                                                                                                                                                                                                                                                                                                 | |
                                                                                                                                                                                                                                                                                                                                       Low carbon
                                                                                                                                                                                                                                                                                                                                        electricity
                                                                                                                                                                                                                                                                                                               35%
                                                              00                                                                                                                                                                                                                                                              35%
                                                                                                                                                                                                                                                                                                               35%
                                                              00 00                                             5                           10
                                                                                                                                            10                    15                       20
                                                                                                                                                                                           20                               25                              30
                                                                                                                                                                                                                                                            30                           35      40
                                                                                                                                                                                                                                                                                                  40           2000          2018

                                                                   0
                                                                   0                                            5                           10 Low carbon
                                                                                                                                            10         15 electricity 20
                                                                                                                                                                      as
                                                                                                                                                                      20 share of global
                                                                                                                                                                                    25   total (%)30
                                                                                                                                                                                                  30                                                                                     35      40
                                                                                                                                                                                                                                                                                                  40       Global electricity generation
                                                                                                                                                                                                                                                                                                               2000           2018

                                                                                                 Low carbon electricity as share of global total (%)                                                                                                                                                       Global electricity generation
                                                                   In 2000, 35% of global electricity consumption was low carbon
                                                                   In 2018,
                                                                      2000, 35% of global electricity consumption was low carbon
                                               electricity

                                                                   In 2018, 35% of global electricity consumption was low carbon
                                           electricity

                                                             100
                                                                                                                                                                                                                                                                                               –– 2000
                                      fromfrom

                                                             100                                                                                                                                                                                                                               –– 2018                    33.5 GtCO2
                                                                   ZAF                                                                                                                                                                                                                         –– 2000
                                emissions

                                                                    |                                                                                                                                                                                                                          –– 2018                    33.5 GtCO2
                                (%) (%)

                                                              75                                        RUS
                                                                   ZAF                                    POL
                            emissions

                                                                                                            | |
                                                                                                                    AUS
                                                                    |
                                                                                                                           IND                                                                                                                                               GBR
                         generation

                                                                                                        RUS
                                                              75                                          POL    | IND
                                                                                                                    |
                                                                                                                                                        CHN
                                                                                                                                                                                                                          USA
                                                                                                                                                                                                                                                                                     |                       23.2 GtCO2
                                                                                                            | |
                                                                                                                AUS                                                                                                              DEU                                         GBR                                              58%
                                                                                                                                                         |
                     generation
                        of CO2

                                                              50                                                 | |                                    CHN                                                                | DEU
                                                                                                                                                                                                                          USA
                                                                                                                                                                                                                               KOR JPN
                                                                                                                                                                                                                              |KOR                                                   |                       23.2 GtCO2

                                                                                                                                                         |                                                                      | JPN
                                                                                                                                                                                                                                    |
                                                                                                                                                                                                                                                                                                                              58%
                    of CO2

                                                              50                                                                                                                                                           | |                                                                                  60%
                                                                                                                                                                                                                                | |
                  share

                                                                        KOR KOR

                                                                                                                                                                                                                                                                                                                60%
                                                                                                                                       CHN CHN
                                                                                        ZAF ZAF

                                                                                                                                                                                            RUS RUS
                                                                                                                                                                             IND IND

                                                                                                                                                                                                                JPN JPN
              share

                                                              25
                                                                                                                                                                                                                                DEU DEU

                                                                                                                                                                                                                                SAU SAU
                                                                                                                                                                                                                                IDN IDN

                                                                                                                                                                                                                                                                USA USA
        Domestic

                                                                                                                                                                                                                                                                                                                                                 Electricity

                                                                                                                                                                                                                                                                                                                              42%
                                                              25
     Domestic

                                                                                                                                                                                                                                                                                                                40%
                                                                                                                                                                                                                                                                                                                                     | |
                                                                                                                                                                                                                                                                                                                                            Electricity

                                                                                                                                                                                                                                                                                                                              42%
                                                               0
                                                                                                                                                                                                                                                                                                                40%
                                                               0 00                                         5                    10
                                                                                                                                  10                   15                20
                                                                                                                                                                         20                             25                          30
                                                                                                                                                                                                                                    30                                    35             40      45             2000          2018

                                                                   00                                       5               10
                                                                                                                          CO2 emissions15
                                                                                                                             10                     20        25 as share30
                                                                                                                                                    20 generation
                                                                                                                                        from electricity                 30           35 (%)
                                                                                                                                                                          of global total                                                                                                40      45            2000
                                                                                                                                                                                                                                                                                                             Global       2018
                                                                                                                                                                                                                                                                                                                    CO2 emissions
                                                                                        CO2 emissions
                                                                   In 2000, electricity production     from
                                                                                                   was at theelectricity generation
                                                                                                              origin of 40%         asCO2
                                                                                                                             of global shareemissions
                                                                                                                                             of global total (%)                                                                                                                                             Global CO2 emissions
                                                                   In 2000,
                                                                      2018, electricity production was at the origin of 40%
                                                                                                                        42% of global CO2 emissions
                                                                   In 2018, electricity production was at the origin of 42% of global CO2 emissions
                         energy

                                                             100
                    energy

                                                             100
                in final

                                                             100                                                                                                                                                                                                                               –– 2000
                                                             100
                                                                                                                                                                                                                                5                                                              –– 2018                    9,938 Mtoe
   ricity in final

                                                                                                                                                                                                                                                                                               –– 2000
       (%) (%)

                                                             75                                                                                                                                                                                                                                                           9,938 Mtoe
   electricity

                                                             75                                                                                                                                                                                                                                –– 2018
   mption

                                                             75
                                                             75
                                                                                                                                                                                                                                                                                                             7,032 Mtoe
   on
Transitions to low carbon electricity systems: Key economic and investments trends - Changing course in a post-pandemic world
The integration of large volumes of non-dispatch-                                                         A wider adoption of carbon pricing regimes and
able electricity creates a challenging environment                                                        fossil fuel subsidy reforms can be transformative
for investors and operators. Low operating costs                                                          for the power sector. But concerns persist
characterizing wind and solar energy result in growing                                                    regarding the choice of instruments, the sectoral
market price volatility and pose significant risks for                                                    scope, their practical implementation, and the
investment in capital intensive technologies. Nuclear                                                     economic and social impacts. 46 national and 35
operators are directly exposed but large offshore wind                                                    subnational jurisdictions, representing 22.3% of global
and solar thermal developers are not exempt and can                                                       GHG emissions, have already integrated carbon pricing
have risky profiles to private financiers as well.                                                        in their portfolios, through either direct taxation or
                                                                                                          tradable emission rights and other implicit charges
The observed decline in fossil fuel generation in early
                                                                                                          stemming from regulatory standards (World Bank,
stages of the COVID-19 pandemic, as well as frequency
                                                                                                          2020c). For instance, Swedish utilities and end-users
deviations observed early 2021 in the Continental
                                                                                                          have been facing a combination of market and fiscal
Europe synchronous area, drew attention to additional
                                                                                                          instruments for years. With these instruments in place,
grid stability challenges likely to emerge further into the
                                                                                                          and large hydro and nuclear capacities, the Swedish
energy transition. Replacing heavy rotating steam and
                                                                                                          electricity is among the most carbon sober in the world.
gas turbines with variable renewables leads to a loss of
                                                                                                          National emissions dropped by 25% and the economy
inertia in the electricity system, and may result in greater
                                                                                                          grew by 60% since the carbon tax introduction in
instability, poorer power quality and increased incidence
                                                                                                          1991, demonstrating the environmental and economic
of blackouts. Large nuclear plants can alleviate the risk
                                                                                                          effectiveness of carbon penalties. Corporate decisions
of supply disruptions in fully decarbonized electricity
                                                                                                          are also increasingly driven by internal climate
systems. Grid managers without nuclear or natural gas
                                                                                                          objectives and carbon prices. Finally, reforms of fossil
capacities at hand are gradually turning to synchronous
                                                                                                          fuel subsidies were conducted successfully in many
condensers and storage solutions to integrate non-
                                                                                                          countries across all levels of income, e.g. Nordic
dispatchable renewable energy. New business models
                                                                                                          countries but also Argentina, Costa Rica, Ethiopia,
and revised pricing rules are foreseen to support this
                                                                                                          India, Indonesia and Zambia.
trend.

Figure 4 – Carbon intensity of electricity by income level, 1990-20185

                                                Lower middle income group                   Upper middle income group                              High income group
                                              1990                     2018a             1990                        2018a                1990                               2018a

                                                                                                                                                   Nuclear country
                                       1200                                      1200                                             1200             Non nuclear country
                                                                                                                                                   Country group average
                                                                                                                                                   Nuclear country average

                                       1000                                      1000                                             1000

                                                                                                                        ---ZAF
    Grammes of CO2 per kilowatt-hour

                                       800                                       800                                              800
                                                                        ---IND                                          ---CHN
                                                                                                                        ---RUS

                                       600                                       600                                                                                         ---CZE
                                                                                                                                  600
                                                                                                                                                                             ---KOR
                                                                       ---UKR
                                                                                                                         ---IRN
                                                                                                                        ---BGR                                               ---JPN
                                                                                                                      ---MEX                                                 ---NLD
                                                                                                                                                                             ---DEU
                                                                                                                      ---ROU
                                       400                              ---PAK   400                                              400                                        ---USA
                                                                                                                                                                             ---HUN
                                                                                                                                                                              ---ARG
                                                                                                                                                                              ---SVN

                                                                                                                                                                               ---FIN
                                                                                                                                                                              ---ESP
                                                                                                                                                                             ---GBR
                                                                                                                                                                              ---BEL
                                       200                                       200                                  ---ARM      200                                        ---SVK
                                              Long term target
                                                                                                                                                                             ---CAN
                                              50 gCO2 per kWh
                                                                                                                      ---BRA
                                                                                                                                                                             ---FRA
                                                                                                                                                                             ---SWE
                                                                                                                                                                             ---CHE
                                         0                                         0                                                0

                                       1990                         702 MtCO2     1990      RUS                 2,591 MtCO2        1990      USA                      4,189 MtCO2

                                       2018    IND                1,814 MtCO2     2018          CHN             6,441 MtCO2        2018      USA                      4,486 MtCO2

                                                                                                      6
Transitions to low carbon electricity systems: Key economic and investments trends - Changing course in a post-pandemic world
Figure 5 – Breakdown of low carbon electricity by country, 20186

   In 2018, nuclear power accounted for                                                                                                                  High Income                     Nuclear
                                                                                                                                                         Upper Middle Income
   at least half of low carbon electricity                                                                                                                                               Dispatchable Renewable
                                                                                                                                                         Lower Middle Income
   in 11 of 30 countries                                                                                                                                 Low Income                      Non-Dispatchable Renewable
                                                                                FIN          CHE     GBR
                                                                       SWE
                                                               ARM                                               ESP
                                                                                                                         IRN
                                                      ZAF
                                                                                                                                   ROU
                                              RUS
                                                                                                                                            JPN
                                       SVN
                                                                                                                                                  DEU
                                 USA
                                                                                                                                                        MEX
                           BEL

                                                                                                                                                               PAK
                     BGR

                                                                                SWE FIN    CHEGBR
                                                                                                    ESP
                                                                                                                                                                     CAN
               SVK                                                                                        IRN
                                                                   ZAF
                                                                RUS                                          ROU
                                                             SVN                                                JPN                                                       ARG                            2010
          CZE                                                                                                      DEU
                                                           USA
                                                                                                                     MEX
                                                         BEL
                                                                                                                                                                             NLD
                                                     BGR                                                                     PAK
        FRA
                                                                                                                               CAN
                                                   SVK
                                                                                                                                   ARG                                           CHN
    HUN                                        CZE                             Countries
                                                                                                                                     NLD
                                              FRA                            with operating                                                                                        IND
                                                                                                                                      CHN
   KOR                                       HUN                            nuclear capacity
                                                                                                                                      IND
                                             KOR
                                                                                                                                                                                   BRA
   UKR                                       UKR
                                                                                       2018                                           BRA                                                                2000

                                                                HI                          UMI
                                                               LMI                           LI

                                                                                     ZWECUWBEN BWA BRN
                                                                           UZB ZMB
                                                                     TJK                                   ERI
                                                               SYR                                               ISR
                                                         SDN                                                           KGZ
                                                  PRY                                                                        LIE
                                               LAO                                                                                 NER
                                        CRI                                                                                           SAU
                                     AGO                                                                                                 SSD
                                  ALB                                                                                                       YEM
                               MOZ                                                                                                             ARE                         In 2018, non-dispatchable accounted
                            ISL                                                                                                                         JOR
                                                                                                                                                                                    for at least half of renewable
                      MMR                                                                                                                                 TUN
                                                                                                                                                                                         electricity in 27 countries
                    COG                                                                                                                                        MHL
                COD                                                                                                                                             CYP
              COL                                                          ZMB
                                                                         UZB   CUW
                                                                             ZWE BEN
                                                                                   BWA
                                                                                     BRN
                                                                       TJK
                                                                     SYR               ERI
                                                                                         ISR                                                                         DZA
                                                                   SDN
                                                                 PRY
                                                                                           KGZ
                                                                                             LIE
          VEN                                                 LAO                              NER                                                                     IRL
                                                             CRI                                 SAU
                                                           AGO                                     SSD
         GAB                                             ALB                                         YEM                                                                   MNG
                                                      MOZ                                              ARE
                                                     ISL                                                 JOR
        NPL                                        MMR                                                     TUN                                                              MAR
                                                  COG                                                       MHL
    KHM                                         COD                                                           CYP                                                               DNK
                                               COL                                                             DZA
   CMR                                        VEN                                                               IRL                                                             JAM
                                             GAB                                                                MNG
                                            NPL                                                                   MAR
  NGA                                                                                                                                                                            GRC
                                           KHM                                                                    DNK
  HTI                                     CMR
                                         NGA
                                                                               Countries                            JAM
                                                                                                                    GRC
                                                                                                                                                                                 POL

  GHA                                     HTI                              without operating                         POL                                                           AUS
                                         GHA                                                                         AUS
  ECU                                    ECU                               nuclear capacity                          MAC                                                           MAC
                                         IDN                                                                         PRT
  IDN                                    VNM                                                                         TGO                                                           PRT

  VNM
                                          GEO
                                          SUR
                                                                                       2018                         URY
                                                                                                                   BLR                                                           TGO
                                           SRB                                                                     ITA                                                                                  2010
   GEO                                       BIH                                                                 EST                                                             URY
                                             MDV                                                                 NIC
   SUR                                        NAM                                                              HND                                                              BLR
                                                NOR                                                           TUR
    SRB                                          HKG                                                         DOM                                                             ITA
                                                   IRQ                                                      CHL
                                                    LBN                                                   CUB
        BIH                                          TZA                                                SGP                                                                EST
                                                       KEN                                            BGD
         MDV                                              ETH                                       THA                                                                   NIC
                                                            NZL                                   EGY
                                                             GTM                                LSO
                                                                AZE                           CIV
              NAM                                                 BOL                       SEN                                                                      HND
                                                                    MNE
                                                                      LKA                 AUT
                                                                                        HRV
                                                                        PER
                                                                          SLV
                                                                            KAZ
                                                                              MDA
                                                                                PAN
                                                                                  MUS PHL
                                                                                    KWT
               NOR                                                                                                                                                  TUR
                    HKG                                                                                                                                        DOM
                      IRQ                                                                                                                                     CHL
                           LBN                                                                                                                           CUB
                             TZA                                                                                                                    SGP
                                KEN                                                                                                               BGD
                                   ETH                                                                                                     THA                                                          2000
                                      NZL                                                                                               EGY
                                         GTM                                                                                         LSO
                                            AZE                                                                                CIV
                                                      BOL                                                                SEN
                                                         MNE                                                          AUT
                                                                LKA                                             HRV
                                                                      PER SLV                             PHL
                                                                                KAZ MDA PAN MUS KWT

                                                                HI                         UMI
                                                               LMI                           LI

Note: High income= HI, Upper middle income = UMI, Lower middle income = LMI, Low income = LI

                                                                                                                 7
Transitions to low carbon electricity systems: Key economic and investments trends - Changing course in a post-pandemic world
NO MORE ONE-SIZE-FITS-ALL IN AN EVOLVING NUCLEAR INDUSTRY

The merits of nuclear power and its place in the                Construction risks and capital costs can undermine
achievement of carbon neutrality are generally                  the financeability of nuclear projects in liberalised
acknowledged. The extent to which nuclear power                 markets. Tailored fiscal support and risk transfer
can favour the transition will depend on the industry’s         schemes to restore competitiveness are under
ability to bring costs down, accelerate innovation              examination. Financial innovation will be critical to
and garner enough public support. In 2019, the                  overcome project risk and fiscal burden associated
nuclear capacity installed globally saw a net decline of        with delays in project delivery and cost overruns (NEA,
4.5 gigawatts as the permanent shutdowns confirmed              2020a). Risk premiums can be substantial. In the case
in Japan offset new grid connections elsewhere (IAEA,           of UK’s Hinkley Point, where a contract for difference
2020a). But increased capacity factors, notably in the          guarantees the operator’s revenue irrespective of
United States, helped maintain global power generation          wholesale market conditions, risk premiums account
levels. Nuclear fleet extensions are at various stages          for more than a third of the strike price approved by the
of advancement in 16 countries while 5 new nuclear              government (£36 per MWh) (NSD, 2020). The proposed
programmes are in the construction phase (Fig. 6). The          Regulated Asset Base model aims at transferring risks
centre of gravity of nuclear operations is swiftly moving       to consumers with enhanced government protection
towards Central and Eastern Europe and Asia at large.           during the construction phase and could serve as a
                                                                model for other projects worldwide (UK BEIS, 2020).
The traditional economic model of nuclear power
is challenged by liberalised electricity markets in             Maintaining and extending the safe operations of
which many plants operate, by the diversification               existing plants preserves clean power capacity,
of power mixes as well as the rapidly evolving                  is economically sound and could, as such, be
policy, regulatory and technological landscape.                 incorporated into COVID-19 recovery packages to
Nuclear power provides predictable and reliable                 boost local economies and foster the transition.
electricity, providing 32 operating countries with a            Nuclear supply chains are generally considered
secured supply of electricity. The need for flexibility         valuable vectors of local economic development and
in electricity generation and system management – a             job creation: Every million-dollar invested in nuclear
trend accelerated by the pandemic – will increasingly           creates four jobs (IEA, 2020d). With a supportive
characterize future energy systems over the medium              investment environment, a 10-20-year licence renewal
to longer term. Improved frameworks for remunerating            can be realized at a levelized cost of around $30-
reliability, flexibility and other services would favour        35 per megawatt-hour, placing it among the most
nuclear operators.                                              cost-effective low-carbon options, while maintaining
                                                                dispatchable capacity (NEA, 2020b). Without such
The climate imperative and a wider value
                                                                extensions, 40% of the nuclear fleet in developed
proposition for better market adequacy may
                                                                economies may be retired within a decade, adding
boost nuclear developments in the mid-term. The
                                                                around $80 billion per year to electricity bills (IEA, 2019).
historical contribution of nuclear power to low carbon
                                                                Long term operation is common in the United States
electricity is widely acknowledged, nuclear power
                                                                with most licences renewed for 60 years, four reactor
remaining the second largest source of clean electricity
                                                                licences subsequently renewed to 80 years and others
globally. A single gigawatt-scale nuclear project can
                                                                set to follow. France’s Grand Carenage programme
dramatically improve climate compliance in mid-sized
                                                                aims at 10 to 20-year extensions for an estimated cost
countries, as shown by the recent start of United Arab
                                                                of EUR45-50 billion.
Emirates’s nuclear programme which will eventually
supply a quarter of national needs with clean power.            The nuclear industry has yet to find its niche in the
Nonetheless, a certain lack of governmental and                 supply of new services, including opportunities
policy support prevents nuclear energy from meeting             in a nascent hydrogen economy. Several business
its full mitigation potential. The inclusion of nuclear         models are being designed. Arizona’s public power
in taxonomies to channel sustainable investments                utility is looking to produce hydrogen from its nuclear
could encourage potential investors (OECD, 2020).               plant, blend it with natural gas to fuel another of its
Small modular reactor designs draw attention in many            plants, and thereby optimize its production and reduce
countries seeking a quick transition to low carbon              its overall carbon footpint. Alternatively, the UK Clean
power but with limited financial and physical capacity to       Energy Hubs in Sizewell and Moorside are fully-
absorb larger projects. Fast tracking the manufacturing,        integrated propositions, conceived in partnership with
shipping and installation of modules is expected to             local energy users, linking emerging technologies such
accelerate commercialization.                                   as low carbon hydrogen and energy storage.

                                                            8
Figure 6 – Nuclear electricity generation by income group, 2000 and 2019. Estimated annual electricity generation from nuclear power
plants currently under construction7

                                                                                                                                                              Income per capita group
Countries with operating capacity, new nuclear programmers with plants under
                                                                                                                                                              High Income
construction, and IAEA integrated Nuclear Infrastructure Review(INIR) missions                                                                                Upper Middle Income
                                                                                                                                                              Lower Middle Income
                                                                                                                                                              Low Income

                                           Countries with operating nuclear capacity                                                            Nuclear generation from plants
                                                                                                                                                under construction and new
                                                                                                                                                nuclear programmes

                                                                                                       USA

                         USA

                                                                                                                                                 ARE
                                                                                                                                                  BLR
                                                                                                                                                        TUR
                                                                                                                                                               EGY
                                                                                                                                                                 BGD

                                                                                                                                                113 TWh
                               FRA                                                                        FRA

                                     JPN                                                                                                        Nuclear generation from plants
                                                                                                                                                under construction in existing
                                                                                                                                                nuclear programmes

                                   DEU                                                                   KOR

                                                                                                          CAN                                    KOR
                               GBR                                                                                                                 GBR
                                     CAN                                                                     DEU                                      JPN
                                                                                                               JPN                                      USA
                                                                                                                                                          FIN   SVK        CHN
                                                                                                                 SWE
                                      ESP                                                                                                                   FRA
                                                                                                                   ESP
                                           SWE
                                                                                                                     GBR                                                RUS
                                           BEL
               2000                        CHE                                      2019                              BEL
                                                                                                                                                                        BRA
                                                                                                                     CZE                                                 IRN
                                            FIN
               2444 TWh                    SVN
                                                                                     2657 TWh                         CHE                       333 TWh                 ARG
                                                                                                                      FIN                                                   IND
                                           NLD
                                                                                                                     HUN                                                   UKR
                                                      KOR                                                            SVK                                                  PAK
                                            SVK                                                                     ROU
                                            HUN
                                                                                                                   SVN
                                          ZAF                                                                     NLD
                                         CZE
                                  MEX
                               ARG                                    PAK
                             BRA                                                                           BGR
PAK                                                                                                      BRA
                                                                                                   MEX ZAF
                 LUX
                  LIT CHN BGR                                                              ARG
   ARM                                                                               IRN
         IND                             RUS                              IND
                 ROU                                                                                                            RUS
                                                                             UKR    ARM                                                         IAEA Integrated Nuclear
                                                                                                                                          CHN   Infrastructure Reviews
           UKR
                                                                                                                                                conducted since 2009

                                                                                                                                                  GHA                    NGA
                                                                                                                                                  IDN                    PHL
                                                                                                                                                  JOR                    POL
  17% of global total electricity generation                                10% of global total electricity generation                            KAZ                    SAU
  48% of global low carbon electricity generation                           28% of global low carbon electricity generation                       KEN                    SDN
                                                                                                                                                  MDV                    THA
                                                                                                                                                  MAR                    VNM
                                                                                                                                                  NER                    ZAF

               High Income                                                                                        81%

  2000                       USA                            JPN              FRA             DEU                  Other   KOR

               High Income                                                                             72%
               0.0%     20.0%                     40.0%           60.0%            80.0%              100.0%              120.0%      140.0%
  2018                       USA                            FRA       KOR                  Other                  CHN           RUS

               0.0%    20.0%               40.0%            60.0%         80.0%              100.0%              120.0%          140.0%
  Note: Anticipated nuclear generation from reactors under construction

                                                                                                     9
GROWING MORE WITH LESS: A SOBER ELECTRIFICATION

Electricity demand is set to become one the main                  electricity consumption worldwide. Policies, fiscal
indices of energy transformation. Contrary to most                incentives and wider value propositions from car
mature economies where consumption growth                         manufacturers are boosting electrification of ground
has come to a halt, electricity remains an essential              transportation, now considered a major source of value
driver of development in fast-growing economies.                  creation in the near term. Low-carbon electricity-based
In high income countries, the yearly consumption of               solutions also have the potential to eliminate emissions
electricity per capita now lies above the 9,000 kWh               from cement, steel, plastics and aluminium production
mark, a slight decline since 2010, but also a 12%                 and increase industries’ profitability. This trend may
increase compared to levels observed in 2000 (Fig.                leave consumers better off given the small portion of
7, upper panel). Setting carbon neutrality goals may              electricity in the total cost of finished products. Plug-to-
delay the saturation in consumption across all income             wheel consumption of battery-powered electric vehicles
segments. By contrast, consumption keeps growing                  could be 73% lower than tank-to-wheel consumption of
in lower income countries, spurring industrialization             a typical gasoline car. Similarly, the tonne of green steel
and the emergence of middle class populations with                may increase by 20% but adding only $180 to the price
increased ownership of electrical appliances and other            of a car (ETC, 2020).
electronic devices. Each year, the average individual
                                                                  However, the sole availability of clean electricity does
consumption of electricity rises around 3% (resp. 4%)
                                                                  not guarantee a sustainable transformation of the
in upper-middle (resp. lower-middle) income countries.
                                                                  energy sector. Unmonitored electricity consumption
Per capita electricity consumption in China and India
                                                                  would result in overinvestments and higher energy
have reached respectively 5,000 kWh and 1,200 kWh
                                                                  bills, eventually altering the economic benefits of the
per year but growing significantly faster than their peers
                                                                  energy transition. Anticipating realistic future needs
in their respective income groups. The annual rate of
                                                                  is critical to schedule the cost-effective upgrade of
progress has been closer to 2% in the lowest income
                                                                  energy infrastructures. The EU Strategy for Energy
countries where large electrification gaps – and deficient
                                                                  System Integration addresses the issue by placing the
existing infrastructures – are closing only gradually.
                                                                  emphasis on more circular energy systems with an
Access to reliable electricity allows economies                   “energy-efficiency-first” principle (EC, 2020).
to flourish and living standards to improve. The
                                                                  Tailored incentives and mandates, which are
adoption of high-performance electrical equipment
                                                                  necessary to optimize electricity production and
is also deemed good value for money. A quick
                                                                  moderate consumption, remain the blind spots of
access to electricity services, simplified administrative
                                                                  existing policy frameworks. Incentives and mandates
procedures, moderate and transparent tariffs, are vital
                                                                  are decisive for power and grid utilities seeking
for businesses to thrive (World Bank, 2020d). Frequent
                                                                  efficiency gains and managing demand-side measures.
power outages and non-cost reflective tariffs, often
                                                                  But progress in regulatory frameworks is reportedly
the result of chronic under-investments, are common
                                                                  slow and penalties in case of non-compliance are often
in lower income economies and can be particularly
                                                                  lacking, including in high-income countries (World
harmful to local entrepreneurial activity.
                                                                  Bank, 2020b). Public budget financing, consumer
Electricity consumption is accelerating in many                   surcharges, combined with optimized time-of-use rate
countries, often outpacing economic activity (Fig. 7,             structures, can be used to compensate for revenue
lower panel). Every dollar generated globally embeds              losses induced by mandated energy efficiency activities
roughly 23 kWh of electricity. The decoupling between             but are implemented too sporadically. Incentives and
electricity and GDP was sizeable two decades ago but              mandates can also be beneficial to large industrial and
has been slowing down more recently. Since 2010,                  commercial consumers. But a lack of awareness and
the electricity intensity of the global economy has               inadequate energy management programmes prevent
been growing at 1% per year (1.8% in upper-middle                 the full optimization of electricity usage. Other incentives
countries). Generalizing the electrification of end-              for further energy efficiency gains can be applied to
use, either directly (potentially supplying 65% to 70%            public procurement rules with a binding obligation to
of final demand according to ETC, 2020) or indirectly             track realized savings in public administrations and
through e.g. water electrolysis for hydrogen production           other types of institutional infrastructures.
(potentially 15-20% of energy needs), is likely to boost

                                                             10
Figure 7 – Per capita electricity consumption and electricity intensity of GDP by income group, 2000-20188

                                                                                                                                                                                LI LMI UMI HI
Per capita electricity consumption (kWh per capita)

 2019
                                                                                              Togo                          India                        China             United States
 2018
                                                                                           Togo                    India                      China                        United States
 2010
                                                                                       Togo               India            China                                               United States

 2000

        1                                10                                100                               1,000                                       10,000

CAGR per capita electricity consumption (% per year)                                                                                                                            LI   LMI UMI HI
                                                                                                                                                                  2000-2010
    15%                                                                                                                                                           2010-2018

                   Togo                 India                         China
                                                                                                                                                                           United States
    10%

     5%

     0%

     -5%                                   2000-10 avg: 4.3%                          2000-10 avg: 3.0%                                    2000-10 avg: 1.5%
                                           2010-18 avg: 4.4%                          2010-18 avg: 1.9%                                    2010-18 avg: 0.5%

                                                                                                                                                                                LI   LMI UMI HI
Electricity intensity of GDP (kWh per US$ GDP)

 2019                                                                                                           Togo       India       United States     China
 2018
                                                                                               Togo                    India             United States    China
 2010
                                                                                                                Togo           India            China       United
                                                                                                                                                                e States
 2000

                               0.008                                      0.04                                          0.2                                                1

CAGR electricity intensity of GDP (% per year)                                                                                                                                  LI LMI UMI HI
                                                                                                                                                                  2000-2010
    10%                                                                                                                                                           2010-2018

                                                India                         China
     5%           Togo

                                                                                                                                                                            United States

     0%

     -5%

                                2000-10 avg: -1.3%                    2000-10 avg: -3.2%                                   2000-10 avg: -2.6%
   -10%                         2010-18 avg: -0.4%                    2010-18 avg: -1.3%                                   2010-18 avg: -2.4%

Note: High Income=HI, Upper middle= UMI, Lower middle=LMI, Low income=LI; CAGR = Compound Annual Growth Rate.

                                                                                        11
THE IMPACT OF THE COVID-19 OUTBREAK ON THE ELECTRICITY SECTOR

    The COVID-19 pandemic transformed the operation                                                                                                           the first period of global lockdowns. Then economic
    of power systems across the globe and offered a                                                                                                           activity – and electricity markets – resumed to more
    glimpse of a future electricity mix dominated by low                                                                                                      regular conditions. The large price drops in Europe
    carbon sources. The systemic economic and social                                                                                                          resulted from not only COVID-19 lockdown measures
    impact of the COVID-19 outbreak, and the accompanying                                                                                                     from March to June 2020, but also collapsing demand
    responses, have led to an unprecedented and sustained                                                                                                     due to an unusually warm winter, increased supply
    decline in demand for electricity in many countries, of                                                                                                   from renewables, and a slump in commodity prices
    the order of 10% or more relative to 2019 levels over a                                                                                                   (S&P, 2020). Such low prices create a challenging
    period of a few months, thereby creating challenging                                                                                                      environment for many electricity generators, including
    conditions for both electricity generators and system                                                                                                     nuclear plants. France’s EDF saw a 1% drop in its
    operators (Fig. 8, left panel). Early IEA projections                                                                                                     first quarter revenues. Similarly, Russia’s Rosatom
    anticipated a 2% reduction in global electricity usage                                                                                                    experienced a significant demand drop in April and May
    for the entire year 2020, with a record 5.7% decline                                                                                                      2020, contributing to an 11% decline in revenues for the
    foreseen in the United States alone (IEA, 2020d).                                                                                                         first five months of the year (President of Russia, 2020).
    Electricity generation from fossil fuels has been                                                                                                         The competitiveness and resilience of low carbon
    particularly hard hit, due to relatively high operating                                                                                                   technologies have resulted in higher market shares
    costs compared to nuclear power and renewables                                                                                                            for nuclear, solar and wind power in many countries
    and simple merit order effects. By contrast, low-                                                                                                         during the initial three months of lockdowns.
    carbon electricity prevailed during these extraordinary                                                                                                   Market conditions in the United States, India, Brazil
    circumstances. In the first weeks of the lockdowns,                                                                                                       or the Ukraine were noticeably favourable to solar and
    the contribution of renewable electricity rose in many                                                                                                    wind generation (Fig. 9, top panel). Severe restrictions
    countries thanks to low operating costs, priority                                                                                                         on movement in China during early February led to
    dispatch and favourable weather conditions (Fig. 8).                                                                                                      an overall 6.8% contraction in activity during the first
    Along with other measures, including curtailment of                                                                                                       quarter, forcing power production to dip by more than
    renewable generation in some cases, this has enabled                                                                                                      8% year on year: coal power decreased by nearly 9%
    grid operators to maintain a reliable system and largely                                                                                                  and hydropower by 12% due to a dry season (Tan and
    avoid supply disruptions despite the challenging                                                                                                          Cheng, 2020).
    conditions, while also accommodating increased
                                                                                                                                                              Nuclear power generation also proved to be
    shares of low-cost, variable renewable generation.
                                                                                                                                                              resilient, reliable and adaptable. The nuclear
    The contraction in electricity demand during the                                                                                                          industry rapidly implemented special measures to
    first lockdown accelerated recent reductions in                                                                                                           cope with the pandemic, avoiding plant shutdowns
    electricity prices, below already economically-                                                                                                           due to COVID-19, despite impacts on workforce and
    unsustainable levels. The most noticeable impacts                                                                                                         other supply chain challenges. With an average 2%
    of the pandemic on the power sector occurred during                                                                                                       reduction only during the lockdown, nuclear has proved

    Figure 8 – Weekly change in electricity demand relative to 2019 (left panel) and relative to week prior lockdown (right panel) in selected
    jurisdictions (Mar. 15–Jun. 6) 9

                Weekly change in electricity demand relative to 2019                                                                                                     Weekly change in electricity demand relative to week
                                (March 16-June 7)                                                                                                                                 prior lockdown (March 16-June 7)
                                                                                                                 Week 10
                                                                                                                                Week 11

                                                                                                                                                                                                                                                                                   Week 10
                                                                                                                                          Week 12

                                                                                                                                                                                                                                                                                             Week 11
                                                                                                                                                                                                                                                                                                       Week 12
                           Week 1
                                     Week 2

                                                                                                                                                                                              Week 1
                                              Week 3

                                                                                                                                                                                                       Week 2
                                                        Week 4

                                                                                                                                                                                                                Week 3
                                                                 Week 5

                                                                                                                                                                                                                          Week 4
                                                                           Week 6

                                                                                                                                                                                                                                    Week 5
                                                                                     Week 7

                                                                                                                                                                                                                                             Week 6
                                                                                              Week 8

                                                                                                                                                                                                                                                      Week 7
                                                                                                       Week 9

                                                                                                                                                                                                                                                               Week 8
                                                                                                                                                                                                                                                                         Week 9

      Average                                                                                                                                                 Average
      change                                                                                                                                                  change

1               Ukraine                                                                                                                              1                        USA

2               Sweden                                                                                                                               2                        India

3                Korea                                                                                                                               3                        Korea

4               Ontario                                                                                                                              4                    Ontario

5                USA                                                                                                                                 5                   Germany
6               Germany                                                                                                                              6                        Brazil
7                Brazil                                                                                                                              7                    Sweden
8                 UK                                                                                                                                 8                         UK
9               France                                                                                                                               9                    Ukraine
10               India                                                                                                                               10                   France

                          -28%                                                                                                            12%                                             -31%                                                                                                         15%

                                                                                         12 generation (March 16–June 7) relative to 2019
                                                       Weekly change in low carbon electricity

                                         Nuclear electricity generation                                                                   Solar and wind electricity generation                                             Other renewable electricity generation
                                                                                                       10
                                                                                                                11

                                                                                                                                                                                                 10
                                                                                                                           12

                                                                                                                                                                                                        11

                                                                                                                                                                                                                                                                                                       10
                                                                                                                                                                                                                12

                                                                                                                                                                                                                                                                                                                 11
                                                                                                                                                                                                                                                                                                                      12
                          k0
                                    k1

                                                                                                                                     k0
                                         k2

                                                                                                                                            k1

                                                                                                                                                                                                                         k0
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                                                k3

                                                                                                                                                    k2
                                                        k4

                                                                                                                                                         k3

                                                                                                                                                                                                                                        k2
                                                                 k5

                                                                                                                                                               k4

                                                                                                                                                                                                                                               k3
                                                                          k6

                                                                                                                                                                    k5

                                                                                                                                                                                                                                                      k4
                                                                                k7

                                                                                                                                                                         k6

                                                                                                                                                                                                                                                               k5
                                                                                        k8

                                                                                                                                                                               k7

                                                                                                                                                                                                                                                                        k6
                                                                                              k9

                                                                                                                                                                                    k8

                                                                                                                                                                                                                                                                              k7
                                                                                                                                                                                         k9

                                                                                                                                                                                                                                                                                       k8
                                                                                                                                                                                                                                                                                              k9
reliable globally. Nonetheless, nuclear generators swiftly                                                                                                                                                                                                 of 2020, the US EIA’s Short-Term Energy Outlook saw
adapted to the changed market conditions. Faced with                                                                                                                                                                                                       the share of nuclear generation increasing by more than
significant decreases in demand, nuclear generators                                                                                                                                                                                                        one percentage point compared to 2019, despite the
curtailed output to maintain the grid stability. Along                                                                                                                                                                                                     general disruptions from the crisis. The performance
with other measures, this has enabled grid operators                                                                                                                                                                                                       of nuclear power demonstrates how it can support
to maintain a reliable system and largely avoid supply                                                                                                                                                                                                     the transition to a resilient, clean energy system well
disruptions Weekly  despite
                          changethe     challenging
                                 in electricity            conditions,
                                                demand relative to 2019                                                                                                                                                                                    beyond  thechange
                                                                                                                                                                                                                                                                Weekly  COVID-19     recovery
                                                                                                                                                                                                                                                                             in electricity      phase.
                                                                                                                                                                                                                                                                                            demand relative to week
                                   (March 16-June 7)                                                                                                                                                                                                                                                       prior lockdown (March 16-June 7)
while also accommodating increased shares of low-
                                                                                                                                                                                                                                                           Despite the demonstrated performance of a

                                                                                                                                                                                          Week 10
                                                                                                                                                                                                              Week 11

                                                                                                                                                                                                                                                                                                                                                                                                                                  Week 10
                                                                                                                                                                                                                            Week 12

                                                                                                                                                                                                                                                                                                                                                                                                                                               Week 11
                                                                                                                                                                                                                                                                                                                                                                                                                                                          Week 12
cost, variable       renewable generation. In France, EDF
                                                                          Week 1
                                                                                        Week 2

                                                                                                                                                                                                                                                                                                                 Week 1
                                                                                                     Week 3

                                                                                                                                                                                                                                                                                                                              Week 2
                                                                                                                 Week 4

                                                                                                                                                                                                                                                                                                                                          Week 3
                                                                                                                            Week 5

                                                                                                                                                                                                                                                                                                                                                      Week 4
                                                                                                                                         Week 6

                                                                                                                                                                                                                                                                                                                                                                    Week 5
                                                                                                                                                       Week 7

                                                                                                                                                                                                                                                                                                                                                                                 Week 6
                                                                                                                                                                   Week 8

                                                                                                                                                                                                                                                                                                                                                                                            Week 7
                                                                                                                                                                             Week 9

                                                                                                                                                                                                                                                                                                                                                                                                       Week 8
                                                                                                                                                                                                                                                                                                                                                                                                                    Week 9
        Average                                                                                                                                                                                                                                            cleaner energy system through the crisis to provide
                                                                                                                                                                                                                                                         Average
increased
        change
              the periodicity of its load following operations                                                                                                                                                                                           change
                                                                                                                                                                                                                                                           competitive, reliable, low carbon electricity when
to accommodate   Ukraine variable renewable generation (EDF,                                                                                                                                                                                                       USA
     1                                                                                                                                                                                                                                     1               needed, challenges remain in both mid and long
2020).
     2   In  the    UK, nuclear played a big part in almost
                 Sweden                                                                                                                                                                                                                    2                       India
                                                                                                                                                                                                                                                           terms. Combined with the broader financial fallout
eliminating
     3          coal generation for over two months (Fig. 9,
                   Korea                                                                                                                                                                                                                   3                      Korea
                                                                                                                                                                                                                                                           of the crisis on national and corporate budgets, as
mid 4panel) (Cockburn,
                  Ontario      2020). EDF Energy was able to                                                                                                                                                                               4                      Ontario
                                                                                                                                                                                                                                                           well as latent risks associated with supply chain
respond
     5      to the USAneed of the grid operator by curtailing                                                                                                                                                                              5                     Germany
                                                                                                                                                                                                                                                           reorganizations,     current conditions could impede the
sporadically
     6
                  the generation of its Sizewell B reactor to
                 Germany                                                                                                                                                                                                                   6                      Brazil
     7                                                                                                                                                                                                                                     7
                                                                                                                                                                                                                                                           required      investments in the clean energy transition,
ensure stability      of the electricity grid. In the Republic of
                   Brazil                                                                                                                                                                                                                                        Sweden
     8              UK                                                                                                                                                                                                                     8               with longer
                                                                                                                                                                                                                                                                    UK     term consequences on the achievement of
Korea, the share of nuclear generation rose by almost 9
     9            France                                                                                                                                                                                                                   9               climate    goals.
                                                                                                                                                                                                                                                                 Ukraine
percentage points during the pandemic. For the whole
     10                                                       India                                                                                                                                                                        10                                  France

Figure 9 – Weekly change in low carbon electricity generation (March 15–June 6) relative to 2019 in selected jurisdictions (Top panel);
Change in nuclear, solar-28%
                           and wind generation market shares since
                                                             12%
                                                                   start of lockdowns -31%
                                                                                       (mid panel); Average impact on 2020 15%
                                                                                                                            electricity
prices vs 2019 before and after lockdown starts10
                                                                                                                Weekly change in low carbon electricity generation (March 16–June 7) relative to 2019

                                                                                            Nuclear electricity generation                                                                                                  Solar and wind electricity generation                                                                                       Other renewable electricity generation
                                                                                                                                                                            Week 10
                                                                                                                                                                                      Week 11

                                                                                                                                                                                                                                                                                                                    Week 10
                                                                                                                                                                                                    Week 12

                                                                                                                                                                                                                                                                                                                               Week 11

                                                                                                                                                                                                                                                                                                                                                                                                                                                         Week 10
                                                                                                                                                                                                                                                                                                                                         Week 12

                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Week 11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                              Week 12
                                                                       Week 0
                                                                                   Week 1

                                                                                                                                                                                                                   Week 0

                                                                                                                                                                                                                                                                                                                                                   Week 0
                                                                                            Week 2

                                                                                                                                                                                                                              Week 1
                                                                                                       Week 3

                                                                                                                                                                                                                                       Week 2

                                                                                                                                                                                                                                                                                                                                                               Week 1
                                                                                                                 Week 4

                                                                                                                                                                                                                                                Week 3

                                                                                                                                                                                                                                                                                                                                                                        Week 2
                                                                                                                          Week 5

                                                                                                                                                                                                                                                         Week 4

                                                                                                                                                                                                                                                                                                                                                                                   Week 3
                                                                                                                                     Week 6

                                                                                                                                                                                                                                                                  Week 5

                                                                                                                                                                                                                                                                                                                                                                                            Week 4
                                                                                                                                              Week 7

                                                                                                                                                                                                                                                                           Week 6

                                                                                                                                                                                                                                                                                                                                                                                                     Week 5
                                                                                                                                                          Week 8

                                                                                                                                                                                                                                                                                     Week 7

                                                                                                                                                                                                                                                                                                                                                                                                                Week 6
                                                                                                                                                                   Week 9

                                                                                                                                                                                                                                                                                               Week 8

                                                                                                                                                                                                                                                                                                                                                                                                                         Week 7
                                                                                                                                                                                                                                                                                                        Week 9

                                                                                                                                                                                                                                                                                                                                                                                                                                      Week 8
                                                                                                                                                                                                                                                                                                                                                                                                                                                Week 9
                                                 Average
                                                 change

     1                                                      Ukraine
     2                                                       Brazil
     3                                                       Korea
     4                                                     Sweden
     5                                                        UK
     6                                                      France
     7                                                       India
     8                                                      Ontario
     9                                                     Germany
     10                                                      USA

                                                                                                                                                                                                                                                                                                                                                        -50%                                                                                                              211%

                                                    5%
                                                             Lower nuclear and                                                                                                                                                                                                                                                                                                                                                           Higher nuclear
     Change share of wind & solar

                                                                                                                                                                            Ukraine
      generation (% -age points)

                                                             higher wind & solar                                                                                                                                                                                                                                                                                                                                                       and wind & solar
                                                                                                                                                                                                                                                                                              Brazil
                                                    3%                                                                                                                                                                                                            USA
                                                                                                                                                                                                                                                                                    Indi
                                                                                                                                                                                                                                                                                    India
                                                                                                                                                                                                                                                                                                        France                                                                                                                                 Korea, Rep. of
                                                    0%
                                                                                                                                                                                                                                                                                      Germany

                                                                                                                                                                                                                                                                                                                                                   UK
                                                                                                                                                                                                                                                                                                            Ontario
                                                   -3%
                                                             Lower nuclear                                                                                                                      Sweden                                                                                                                                                                                                                        Higher nuclear and
                                                             and wind & solar                                                                                                                                                                                                                                                                                                                                                 lower wind & solar
                                                   -5%
                                                                -10%                                  -8%                                              -5%                             -3%               0%               3%                                                                                                                                5%                                            8%                                               10%
                                                                                                                                                                                  Change share of nuclear generation (% -age points)
     Average electricity price in 2020 vs 2019

                                                    0%

                                                                After lockdown
                                                                start
                                                 -20%

                                                 -40%

                                                                Before lockdown
                                                                start
                                                 -60%

                                                 -80%
                                                           S. California Mid-Atlantic                              UK (GB)                              Ontario                         Germany                                        France                         Sweden
                                                             (SP-15)       (PJM)                                                                                                                                                                                       (SE1)

                                                                                                                                                                                                                                            13
MORE FLEXIBLE SYSTEMS TO ENABLE THE TRANSITION

Tomorrow’s electricity systems, the backbone                                                                                                                                                                                                                                                                 In France, flexible operations of the extensive
of broader energy networks, will require flexible                                                                                                                                                                                                                                                            nuclear fleet accommodate the variability of other
oversight to maintain reliable and clean power                                                                                                                                                                                                                                                               electricity sources, a growing trend among nuclear
services. Electricty systems will be inherently more                                                                                                                                                                                                                                                         nations (Patel, 2019). Between 9-12 May 2020, nuclear
distributed, embedding both large and smaller                                                                                                                                                                                                                                                                production varied by 10 GW, mobilizing 44% to 60%
production units tapping the full potential of local and                                                                                                                                                                                                                                                     of its installed capacity, far from nominal power (Fig.
clean energy sources – By 2070, 3 600 GW of rooftop                                                                                                                                                                                                                                                          10, ). Similar patterns albeit with smaller amplitude
solar PV coud be integrated into buildings envelopes                                                                                                                                                                                                                                                         emerge from nuclear plants in e.g. Germany, Slovakia,
(IEA, 2020e) – and using long distance transmission                                                                                                                                                                                                                                                          Czech Republic, Belgium, Finland, Switzerland,
networks to monitor system imbalances (Oudalov,                                                                                                                                                                                                                                                              Hungary and the United States. Exports are minimized
2020). Digital technologies will be increasingly                                                                                                                                                                                                                                                             when electricity spot prices are the lowest (Fig. 10, ).
important to monitor the system complexity, incl. real-                                                                                                                                                                                                                                                      Gas peaking units are sporadically mobilized when
time consumer behavior and flexible storage.                                                                                                                                                                                                                                                                 higher levels of demand kick in (Fig. 10, ).
A closer look at electricity mixes in France and                                                                                                                                                                                                                                                             Portugal’s system flexibility and its security of
Portugal shines a light on two polar approaches to                                                                                                                                                                                                                                                           supply hinge on large pumped storage capacities
system flexibility. Mix compositions differ, but both                                                                                                                                                                                                                                                        and its integration with the Spanish grid. On 9 May
countries already feature large shares of dispatchable                                                                                                                                                                                                                                                       2020, a surge of wind and solar generation and cheap
low carbon electricity sources. Both countries also aim                                                                                                                                                                                                                                                      imports supplied large electricity needs (Fig. 10, ).
for further integration of variable sources of electricity.                                                                                                                                                                                                                                                  As wind died down, solar power plummeted, and trade
France’s carbon intensity of electricity is under 50 gCO2                                                                                                                                                                                                                                                    cut off by high import prices, hydropower took over at
per kWh, i.e. ten times less than the G20 average while                                                                                                                                                                                                                                                      full capacity (Fig. 10, ). On May 12, a new peak in
Portugal’s lies at around 250 gCO2 per kWh, close to                                                                                                                                                                                                                                                         demand was met with hydropower and fossil fuel units
the European Union’s average (ICTP, 2018; EDP, 2018).                                                                                                                                                                                                                                                        operating at full capacity (Fig. 10, ).

Figure 10 – Power generation mixes and spot prices of electricity France (left panel) and Portugal (right panel), 9-12 May 202011

               30                                                                                                                                                                                                                                                                                                30

               20                                                                                                                                                                                                                                                                                                20
EURO per MWh

                                                                                                                                                                                                                                                                                            EURO per MWh

               10                                                                                                                                                                                                                                                                                                10

                0                                                                                                                                                                                                                                                                                                 0

               -10                                                                                                                                                                                                                                                                                               -10

                                                                                                                                          France                                                                                                                                                                                                                                                                                Portugal
               60                                                                                                                                                                                                                                                                                                 8
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

                                                                                                                                                                                                                                                                                                                                                                                            Net Imports
                                                                                                                                                                                                                                                                                                                                                                  
Gigawatts

                                                                                                                                                                                                                                                                                                     Gigawatts

               30                                                                                                                                                                                                                                 Maximum                                                          4
                                                                                                                                      Minimum                                                                                                      nuclear
                                                                                                                                       nuclear                                                                                                   generation
                                                                                                                                     generation                                                                                                     37GW
                                                                                                                                        27GW

                0                                                                                                                                                                                                                                                                                                  0
                                                                                                                                                                                Net Exports
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Net Exports
                                                                                                                                                                                                                                                  Max                                                                                                                                    Energy stored
                                                                                                             Min
                                                                                                                                                                                                                                           nuclear gen
                                                                                                             nuclear gen
                                                                                                                                                                                                                                                37GW
                                                                                                             27GW
                                     9 May 20                                                          10 May 20                                                          11 May 20                                                        12 May 20                                                                           9 May 20                                                        10 May 20                                                           11 May 20                                                           12 May 20
                     00:00 - 01:00

                                       06:00 - 07:00

                                                       12:00 - 13:00

                                                                       18:00 - 19:00

                                                                                       00:00 - 01:00

                                                                                                         06:00 - 07:00

                                                                                                                          12:00 - 13:00

                                                                                                                                          18:00 - 19:00

                                                                                                                                                          00:00 - 01:00

                                                                                                                                                                           06:00 - 07:00

                                                                                                                                                                                           12:00 - 13:00

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                                                                                                                                                                                                                           00:00 - 01:00

                                                                                                                                                                                                                                           06:00 - 07:00

                                                                                                                                                                                                                                                           12:00 - 13:00

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                                                                                                                                                                                                                                                                                                                       00:00 - 01:00

                                                                                                                                                                                                                                                                                                                                       06:00 - 07:00

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                                                                                                                                                                                                                                                                                                                                                                                                                                       18:00 - 19:00

                                                                                                                                                                                                                                                                                                                                                                                                                                                       00:00 - 01:00

                                                                                                                                                                                                                                                                                                                                                                                                                                                                       06:00 - 07:00

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       12:00 - 13:00

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       18:00 - 19:00

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       00:00 - 01:00

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         06:00 - 07:00

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         12:00 - 13:00

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         18:00 - 19:00

                           Thermal (fossil and                                                                                                                                                                                                                                                                                                                                                                          Energy storage (Pumped
                                                                                                                         Hydropower                                                                         Nuclear                                                                           Solar                                                                    Wind                                                                                                                            Regional electricity trade
                               biomass)                                                                                                                                                                                                                                                                                                                                                                                          hydro)

                                                                                                                                                                                                                                                                                           14
The Iberian Peninsula grid operates in relative                                                                               also operated in continental Europe. The International
isolation due to a lack of interconnectors with the                                                                           Hydropower Association sees potential for a 50%
rest of continental Europe. The proposed Biscay                                                                               increase in pumped storage capacity within ten
Gulf interconnector is expected to fill this gap, at an                                                                       years. Such projects developments and their uneven
estimated cost of EUR1.9 billion and annual benefits                                                                          geographical distribution remain insufficient to
in the order of EUR250-290 million (EC, 2016). The                                                                            absorb future demand shocks, avoid curtailment, and
innovative Frades II pumped storage station also                                                                              accommodate the system integration of fast-growing
plays a key role in the system stability: Variable speed                                                                      non-dispatchable capacities.
turbines allow for frequency regulation (Larson, 2018).
                                                                                                                              The ongoing physical and digital transformations
A large pumped-hydro project under construction on
                                                                                                                              require the development of additional flexibility
the Tâmega river will alleviate the reliance on coal by
                                                                                                                              options. Solution developers are now turning
2023 and will help achieve the swift decarbonization of
                                                                                                                              to innovative energy storage solutions. The US
the Portuguese electricity sector.
                                                                                                                              Department of Energy recorded almost 1,300 projects
As shown by the previous examples, historically,                                                                              worldwide covering a wide array of technological
network operators have ensured market clearance                                                                               options, 80% of which are operational (Fig. 11, right
thanks to regional interconnectors, dispatchable                                                                              panel). With more than 40% of the counts, lithium-
power generation units, including natural gas                                                                                 ion battery designs have become the most common
assets, but also pumped storage hydropower                                                                                    source of storage capacity. They now offer a full range
plants. Hydropower plants equipped with pumped                                                                                of services across various timescales. Their flexibility
storage have long been instrumental to match                                                                                  and their ability for quick smoothing and firming of
available sources of electricity supply with customers’                                                                       electricity production have raised interest among
needs. Almost 170GW of pumped storage capacity                                                                                operators of variable renewables sources. Lithium-ion
is operated worldwide, storing up to 9,000 gigawatt                                                                           batteries are also becoming increasingly capable of
hours of electricity each year, equivalent to a third of                                                                      performing scheduled time shifting of renewables over
global generation (Fig. 11, left panel). Almost half of                                                                       longer durations, depending on economic conditions
these power plants are located in China, the United                                                                           and local regulations.
States and Japan. Smaller yet significant capacities are

Figure 11 – Global mapping of energy storage capacities (left panel); Project developments of emerging storage technologies (right
panel)12
                                                                                          Other countries

                                                                                                              Other storage
                         United States

                                                                    Korea, South

                                                                                                                                                Total number of projects: 1,269
                                                                    Switzerland
                                                                    Germany

                                                                                                                                                                                     Electro-Chemical
                                                                    France
                                                   Japan
           China

                                                                                                                                                                    Compressed Air
                                                            Spain

                                                                    India
                                                                    Italy

                                                                                                                                                     Other Ba�ery

                                                                                                                                                                    Molten Salt

100%
                                                                                                                                       Lithium-Ion

                                                                                                                                                                                     Flywheel
                                                                                                                                       Ba�ery

                                                                                                                                                                                                        Other
                                                                                                                                                     (22%)

                                                                                                                                                                                     (13%)

                                                                                                                                                                                                        (15%)
                                                                                                                                       (42%)

                                                                                                                                                                    (1%)

                                                                                                                                                                                     (4%)
                                                                                                                                                                    (3%)

                                                                                                                                                                                                                Technology breakdown

 75%

 50%
                                                                                                                                        Operational Under Contracted Announced
                                                                                                                                          (1030) construction (76)     (152)
                                                                                                                                  Avg.                (11)
                                                                                                                                 project 6 MW       56 MW 9 MW 13 MW
 25%
                                                                                                                                  size
                                                                                                                                                                                                                Project destination

  0%
    0%             16%                     31%             45%                 67%                          94% 100%
                                                                                                                                             High           Upper              Lower             Low
                      Pumped storage global capacity 190GW                                                   9GW                           Income          Middle             Middle           Income
                                                                                                                                            (89%)          Income             Income             (2%)
       ■ Contracted                      ■ Under                    ■   Announced    ■   Operational
                                                                                                                                                             (7%)               (2%)
                                         Construction

                                                                                                             15
The fast-evolving energy storage landscape                                               hundred gigawatts of hydropower capacity built since
suggests significant potential for scalability. The                                      2010 and fifty nuclear reactors under construction
average project size of lithium-ion battery projects                                     corresponding to fifty-three gigawatts of new capacity)
(6MW) remains small compared with other types                                            will strengthen the security of supply.
of storage technologies. But utility-scale lithium-
                                                                                         The innovation path and the falling cost of battery
ion systems with capacities greater than 10 MW and
                                                                                         systems give room for exponential growth in the
increasing storage durations have been commissioned
                                                                                         coming years. In a decade, the cost of a lithium-ion
worldwide in recent years. Some plants in California
                                                                                         1 kWh battery pack — enough capacity to propel an
can run up to four hours (Research Interfaces, 2018).
                                                                                         electric vehicle for six kilometers — saw more than a
Compressed air solutions and molten salt thermal
                                                                                         7-fold decrease, down to $156. The storage capacity
storage, a highly efficient process for 10-hour storage
                                                                                         installed globaly ramped up from 1 GW to over 10 GW in
or more, and best combined with large solar farms, are
                                                                                         less than three years. Bloomberg New Energy Finance
fewer but much larger in scale, in the order of 60-70
                                                                                         sees the $100 per kWh threshold reached within the
MW (Dieterich, 2018). Overall, the average capacity
                                                                                         next three years (BNEF, 2019). However, standalone
of the storage projects announced is more than 50%
                                                                                         applications remain costly to run outside peak hours.
larger the operational projects.
                                                                                         Once combined with solar PV systems, the levelized
Energy storage is vital for the cost-effective                                           cost of electricity — a suitable metric to assess the
transition      towards     decarbonized        electricity                              competitiveness of baseload generation sources —
systems. Battery storage installations are expected                                      falls under $100 per MWh (Fig. 12, right panel). Against
to become standard components of energy                                                  this backdrop, the International Energy Agency projects
infrastructures. As illustrated in previous sections,                                    around 220 GW of capacity installed globally by 2030
clean and non-dispatchable electricity has gained a lot of                               to accompany the aggressive deployment of solar and
ground globally in ten years, driven by strong innovation                                wind and meet the Paris Agreement objective. This is
and various schemes to guarantee operators’ revenues.                                    half of the 2030 requirements in pumped-hydro capacity
One thousand gigawatts of new capacity have been                                         alone (IRENA, 2020b). Some projects recently stalled
connected to the grid since 2010, with strides also made                                 due to the pandemic but market interest remains strong.
off the grid in South Asia and Africa (Fig. 12, left panel).                             Wood Mckenzie, among other observers, predicts that
Variable renewables, now on par with conventional                                        wind and solar, backed with storage solutions, are
sources of power, have established themselves as low-                                    poised to dominate Europe’s power grid by 2030 thanks
risk options for governments and investors to realize                                    to attractive risk/return profiles and despite increasing
their decarbonization objectives. They will live up to                                   exposure to power market conditions (Wood Mckenzie,
their promise only with competitively priced storage                                     2020). The electrification of mobility services will also
solutions that can maintain overall system reliability.                                  boost the emergence of the storage industry, beyond
The progression in dispatchable electricity (incl. three                                 stationary applications in the power sector.

Figure 12 – Market dynamics for batteries and other low carbon options, 2010-201913

                             Dispatchable       Non-dispatchable
             Nuclear          renewables          renewables                                           Unsubsidized levelized cost of storage
2019

                                                                                          1200   Commercial &
                                                                                                 Industrial
                                                                                                 (Standalone)

             392GW               1,325GW             1,209GW
                                                                                           900
                                                                     US Dollar per MWh

                                                                                                                Residential
                                                                                                                (PV+Storage)
2010

                                                                                           600
                                                                                                                                 Commercial &
                                                                                                                                 Industrial
                                                                                                                                 (PV+Storage)
                 375GW           1011GW                223GW                                       LCOE Hydro                                   Wholesale
                                                                                           300            LCOE Gas
       Nuclear           Hydro                 Onshore wind                                                                                                 Wholesale
                                                                                                                   LCOE Nuclear (LTO)                       (PV+Storage)
                         Biomass               Offshore wind

                         Other                 Solar photovoltaic                           0
                                               Concentrating
                                                                                                 2019 2020       2019 2020       2019 2020      2019 2020     2019 2020
                                               solar power

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