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Global Futures Report 2013

70 6. Fossil fuel subsidies and taxes. Subsidies and taxes for com- peting fuels affect the competitiveness of those fuels relative to renewables. Models project whether subsidies remain at current levels, or whether they are phased out, and by when. Most scenarios do not account for phasing out subsidies, but there are exceptions. For example, the IEA WEO (2010) “New Policies” scenario shows a phase-out of subsidies in net-oil-importing countries by 2020. (See also “Great Debate 1” on page 12.) 7. Interest rates (discount rates). Renewable energy investments are capital-intensive and thus heavily dependent on the cost of capital. Finance experts underlined that interest rates are “factor one” in the analysis of future projections and possibilities. Small changes in interest rate can have large consequences. Scenarios have to assume interest (discount) rates far into the future in mod- eling economic competitiveness. 8. Finance availability and risk-return profiles. How much finance will be available for infrastructure investments, at what levels of risk and return? This question relates to macroeconomic and financial conditions in general, and the willingness of large institutional inves- tors to fund infrastructure investments given their time, risk, and return profiles. Scenarios generally do not model these parameters. 9. Carbon prices and taxes. To what degree will carbon prices and taxes affect the economics of renewable energy? Many scenarios model future carbon prices and taxes. But experts point out that carbon prices are very uncertain, and depend very much on market rules and in many cases government allocations of credits. 10. Natural gas prices, price volatility, and demand. What hap- pens to future gas prices and gas demand? Experts saw natural gas power generation as the main continuing competitor with renew- able energy, but also noted that the two are complementary. Many scenarios project a large shift from coal to natural gas. Experts pointed to natural gas price volatility, and the need for (and cost of) gas price hedging, as part of the competitiveness equation. 11. Coal prices and demand. Does coal remain a central feature of our energy systems, or is coal “on the way out" as some visionar- ies suggest? Most scenarios show global coal use increasing. For example, US DOE EIA (2011) shows global coal use increasing 50 percent by 2035, but almost all the increase occurs in non-OECD Asia, where China nearly doubles its coal consumption by 2035. 12. Oil prices. What happens to future oil prices? Most scenarios show long-term oil prices in the $100–150 per barrel range con- tinuing for decades. Among many possible effects, oil prices affect the competitiveness of biofuels for transport, and indirectly influ- ence natural gas prices. 13. Nuclear power acceptance and government support. How much will governments continue to support nuclear power? How will political and social acceptance change, as it did in some countries after the 2011 Fukushima accident? Experts noted debates about the true costs of nuclear power, whether nuclear becomes a source of carbon credits, and whether nuclear power investments would be made in the absence of accident insurance provided by govern- ments. Very few scenarios model these factors. 14. Shale gas cost and availability. What production quantities of shale gas are feasible and how will shale gas affect natural gas prices? Some experts in the United States and China considered shale gas prospects as one important determinant of renewable futures in those countries. One U.S. expert said, “Cheap shale gas is here,” and cited an electricity cost of 5–6 cents/kWh from shale gas, cheap enough to undercut renewables, the expert said. However, others said the verdict remains uncertain as to how com- mercial shale gas will become. 15. Carbon capture and storage (CCS) technology cost and viability. Will CCS become commercial? When? Experts expressed a range of views about whether CCS would become commercially viable. Many believed the answer would be important to the future of renewables, as many carbon-constrained scenarios show trade- offs between higher amounts of future renewables and the use of CCS with coal and natural gas. (See also Box 2 on page 16.) 16. Power transmission network expansion, environmental and social issues. Can ways be found to expand and strengthen net- works in ways that are socially acceptable? Many experts believed that stronger networks will be essential to renewables’ future (see Chapter 2), but they were uncertain about the degree to which networks could be expanded given environmental and social issues in developed countries, and the levels of investment required in developing countries. 17. Population and resource geography. The location of popula- tion centers relative to areas of renewable resources affects how much transmission must exist to accommodate renewables. Experts pointed to claims that the “best” renewable resources in specific regions are far from population centers and thus more difficult to harness. One expert, however, brushed aside resource geography as a major constraint, and said, “the notion that we must use ‘the best wind areas’ or ‘the best solar areas’ is a big and pervasive fallacy.” 18. Climate change perception and reality. How will perceptions about climate change evolve over time? How quickly will the climate actually change? These questions will affect political and social willingness and mandate to reduce carbon emissions and employ renewables. RENEWABLES GLOBAL FUTURES REPORT ANNEXes

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