Areva - Reference Document 2016

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BUSINESS OVERVIEW

6.1 Markets for nuclear power and renewable energies

6.1.

MARKETS FOR NUCLEAR POWER AND RENEWABLE ENERGIES

6.1.1. NUCLEAR POWER AND RENEWABLE ENERGIES IN THE GLOBAL ENERGY LANDSCAPE

THE CHALLENGES OF THE ENERGY SECTOR

6.1.1.1.

are currently considering the possibility of using nuclear power and renewable energies and/or increasing their contributions to bolster their security of energy supply, enhance competitiveness and cost predictability, and reduce CO 2 emissions in order to ensure sustainable economic growth.

Strong growth in demand for electricity Global economic growth is relatively stable; it has risen slightly since 2012 (about 2.4% per year, according to the World Bank), but growth is unevenly distributed regionally. However, world demand for energy has continued to grow, including in industrialized countries. Several macro-economic indicators suggest that economic growth in industrial countries will remain weak in the medium term. Emerging markets, on the other hand, will continue to expand and offer the most promising growth opportunities for the energy sector. On the whole, global demand for energy is set to increase, led by world population growth, more widespread access to energy, and long-term economic growth. According to the New Policies Scenario (1) of the World Energy Outlook (WEO) published by the International Energy Agency (IEA) in November 2016, world primary energy consumption is expected to grow from 13.684 gigatons of oil equivalent (Gtoe) in 2013 to 17.9 Gtoe in 2040, translating into average annual growth of 1%. According to the report, it is China and India along with emerging countries and developing countries that are expected to account for the majority of the added demand. World electricity consumption, which averaged 3.2% from2000 to 2014, has grown a bit more than world primary energy consumption. According to the IEA’s New Policies Scenario, world power generation in 2040 is estimated at 34,250 TWh, compared with 20,557 TWh in 2014, giving average annual growth of 2%. Almost all of this growth originates in non-member countries of the Organization for Economic Cooperation and Development (OECD). In China, however, electricity consumption jumped from 2000 to 2014, with an average annual growth rate of almost 11%; this growth is expected to decelerate sharply in the coming years, with an average annual growth rate of 2.4% from 2014 to 2040. On the supply side, oil, gas and coal continue to be the preferred energy sources. In 2014, oil constituted 31.3% of global primary energy, while coal represented 28.6%and natural gas 21.2%. In the United States, technologies deployed on a large scale by the oil and gas industry are facilitating the development of oil and shale gas production. However, the hydraulic fracturing technique used in non-conventional gas production is a cause for environmental concern. The energy policies being implemented by several countries are looking to reverse this trend. The fight against greenhouse gas emissions (GHG) and the security of fossil fuel supply issue have become major concerns for the public, businesses and governments alike. The latter are devisingmeasures to conserve energy and policies to promote renewable energies and diversify their portfolios of energy technologies. A number of countries

Energy and global warming

United Nations Framework Agreements Since the United Nations Framework Convention on Climate Change was created in Rio in 1990, the world’s governments have become involved in the subject of global warming. The objective is to limit the average temperature increase on Earth to 2°C in relation to the pre-industrial era. The Conference of the Parties (COP), a meeting of all governments, is held at the end of each year in a different country. A first major agreement for a reduction of greenhouse gas emissions over the 2008- 2012 period was reached in 1997 when historically industrialized countries signed the Kyoto Protocol in Japan. The second agreement, known as the Paris Agreement, was signed during the 2015 United Nations Climate Change Conference (COP 21) held in Paris in December. It entered into force on November 4, 2016, having been ratified by more than 100 countries totaling close to 75% of the world’s greenhouse gas emissions. The new agreement concerns both developed and developing countries. It calls for attempts to limit the average temperature increase to 1.5°C to significantly reduce its risks and impacts. At the Convention’s request, the Intergovernmental Panel on Climate Change (IPCC) will publish a report in 2018 specifying the emissions level to reach this ultimate goal. Achieving the objective of the Paris Agreement will occur principally through the mechanism of the Nationally Determined Contributions (NDC) communicated by each party specifying their emissions reduction intentions in the energy sector. To date, 189 countries covering 98.8% of global greenhouse gas emissions have submitted their contributions. The Paris Agreement calls for an update of the NDCs every five years and an increased ability to adapt to climate change. It also calls for the availability of a Green Climate Fund, which was set up in 2009 during the Copenhagen Conference and provisioned at the level of 7.4 billion euros in 2014 through contributions from the United States, Japan, the United Kingdom, Germany and France. A floor of 100 billion dollars per year by 2020 has been set to help the most vulnerable countries adapt to climate change and support low-carbon investment projects. The Agreement also encourages bilateral and multilateral sources of public and private funding, which have already been created in the formof, for example, the Green Climate Fund and the Global Environmental Facility.

(1) In addition to national policies and measures decided in mid-2015, the IEA’s New Policies Scenario includes greenhouse gas reduction statements communicated at the Framework Convention on Climate Change. Other reductions are expected to be necessary in order to limit the impact of climate change to a temperature increase of 2°C. The 450 Scenario in the report confirms that new nuclear and renewable energy facilities would be required to meet this goal.

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2016 AREVA REFERENCE DOCUMENT