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1 PRIMES modelling for the Winter Package By Professor Pantelis - - PowerPoint PPT Presentation

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E3MLab www.e3mlab.eu PRIMES Model How to Meet the EU's Greenhouse Gas Emission Targets 1 PRIMES modelling for the Winter Package By Professor Pantelis Capros, E3MLab central@e3mlab.eu 4 Sept. 2017 CLEAN ENERGY FOR ALL EUROPEANS announced

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By Professor Pantelis Capros, E3MLab central@e3mlab.eu

How to Meet the EU's Greenhouse Gas Emission Targets PRIMES modelling for the Winter Package

4 Sept. 2017

1

E3MLab www.e3mlab.eu PRIMES Model

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SLIDE 2

CLEAN ENERGY FOR ALL EUROPEANS announced in Nov. 30, 2016: Commission proposes new rules for consumer centered clean energy transition

4 Sept. 2017

2

  • The Winter Package has been conceived using a set of targets and concrete bottom-up policy measures
  • The proposal mainly uses two policy scenarios, EUCO27 and EUCO30, based on the PRIMES model

Policies ETS

Increase of ETS linear factor to 2.2% for 2021-30 Market Stability Reserve

Policies RES

RES-E policies: new guidelines for auctions Policies for biofuels Support of RES in heating

Policies Efficiency

Energy efficiency of buildings: new EED, enhancement of article 7 More stringent eco-design Support of heat pumps Best available techniques in industry

Policies Transport

CO2 car standards (70-75gCO2/km in 2030, 25 in 2050) and for Vans (120 in 2030, 60 in 2050) Efficiency standards (1.5% increase per year) for trucks Measures improving the efficiency of the transport system

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SLIDE 3

Scenarios quantified for the winter package using PRIMES

4 Sept. 2017

3

Energy Efficiency

(Impact Assessment)

REF16

Reference

EuCo27 or EuCo30

Targets for 2030 and 2050

RES Directive

(Impact Assessment)

Electricity Market Design

(Impact Assessment)

EuCo33

MDI Options 0,1,2,3

CRA variants for RES-E RES in H&C Biofuels EuCo30 and Res30 EuCo 35

Capacity Mechanisms

Effort Sharing Regulation

(Impact Assessment in parallel to the winter package)

Low-emission mobility strategy

(Impact Assessment of a communication in parallel to the winter package)

EuCo 40

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SLIDE 4

Storyline of EUCO scenarios

4 Sept. 2017

4

  • The Targets are defined for 2030 but also for 2050
  • The EUCOs are decarbonisation scenarios, compatible with

a 2oC global scenario and the EU INDC in Paris-2015 COP

  • ETS drives strong emission reduction in the power sector and

mainly pushes development of RES which benefit from learning-by-doing requiring low or no out-of-the-market support

  • The reforms of the EU internal markets of electricity and gas

enhance integration of balancing and competition, supplemented by new interconnections

  • Energy efficiency measures strongly reduce demand,

including for electricity, but later electricity demand increases driven by electrification of transport and heat uses

  • Transport undergoes significant emissions cutting through

electrification of cars and LCVs and increased use of advanced biofuels in non-electrified transport modes 2020 – 2030

  • Energy Efficiency
  • Renewables
  • Power sector

Decarbonisation

  • Infrastructure
  • Completion of Internal

Market

2030 – 2050

  • Deep decarbonisation of

the power sector

  • Transport sector

electrification

  • Heating: electrification and

further efficiency

  • Advanced Biofuels in some

transport sectors

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SLIDE 5

Remaining GHG Emissions (EUCO)

4 Sept. 2017

5

  • The energy related CO2 emissions

decrease primarily in the energy supply sectors, notably in the power sector, but also in the demand sectors

  • The remaining non-abated

emissions by 2050 are the non- CO2 GHG, the residual use of oil in transport and various small scale uses of gas in the domestic sector and in industry

  • The reduction of emissions in ETS

are much higher than in non-ETS sectors

1000 2000 3000 4000 5000 6000 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Key GHG emissions in Mt CO2-eq

Non-CO2 GHGs emissions Non-energy related CO2 emissions Supply of energy Transport Domestic sector Industry 1000 2000 3000 4000 5000 6000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Key GHG emissions in Mt CO2-eq non-ETS ETS

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SLIDE 6

Structure of Power Generation

4 Sept. 2017

6

The ETS prices drive profound transformation of power generation

  • Solid fuels strongly decline
  • Nuclear maintains a rather stable

share

  • Gas has a significant share and plays

an important balancing role in the system

  • Emergence of power-to-X storage

systems in the long term reduces gas importance

  • Hydro power and biomass are stable
  • The variable RES (solar PV, wind
  • nshore and offshore) is the strongly

emerging power generation industry:

  • 30% of total in 2030 (50% all RES)
  • 50% in 2050 (65% all RES)
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SLIDE 7

Structure of Capacity Expansion

4 Sept. 2017

7

  • The investment requirements

in gas-fired plants are significant mainly after 2025 and until 2050, in contrast to the continuous decrease in the rate of use

  • The investment in nuclear

both for extension of lifetime and new plants is also significant

  • The investment outlook is

dominated by the massive development of variable RES, notably wind and solar

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SLIDE 8

Demand for Electricity

4 Sept. 2017

8

  • Electricity consumption hardly

increases until 2030.

  • The energy efficiency improvement

drives electricity savings in the short/medium term, and energy savings overall

  • Transport electrification and

increased use of electricity for heat purposes add significant load, but

  • nly after 2030
  • In the long term, electricity produces

clean gas (methane) and H2 through electrolysis and a chemical process

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SLIDE 9

Indicators

4 Sept. 2017

9

  • Electricity decarbonisation takes place

well before 2050 to enable emissions cuts in other sectors

  • Electricity does not only decrease

emissions in transport and heat sectors, but also by reducing the average emission factor of distributed methane (in the long term), serving storage purposes at the same time (Power-to-X).

  • CHP decline is mainly due to heat

savings

  • The contribution of CCS is rather small
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SLIDE 10

The Energy Efficiency pillar

4 Sept. 2017

10

Enablers:

1. Renovation of houses and buildings 2. Eco-design regulation 3. BAT in industry 4. Transport electrification and energy efficiency standards

Based on cost- effectiveness analysis, EUCO30 is selected

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SLIDE 11

The Energy Efficiency pillar

4 Sept. 2017

11

  • Housing renovation is by

assumption very intense until 2030

  • The eco-design measures

reduce demand for electricity

  • But new uses of electricity in

heating and transport sustain growth of demand for electricity

  • The efficiency policies show

significant results in transport and industry over the entire projection period

200 250 300 350 400 450 500 550 2015 2020 2025 2030 2035 2040 2045 2050

Final energy consumption in the domestic sector of the EU28

REF2016 EUCO27 EUCO30 EUCO33 EUCO35 EUCO40 200 220 240 260 280 300 320 2015 2020 2025 2030 2035 2040 2045 2050

Final energy consumption in industry of the EU28

REF2016 EUCO27 EUCO30 EUCO33 EUCO35 EUCO40 260 280 300 320 340 360 380 2015 2020 2025 2030 2035 2040 2045 2050

Final energy consumption in the transport sector of the EU28

REF2016 EUCO27 EUCO30 EUCO33 EUCO35 EUCO40 20.0 22.0 24.0 26.0 28.0 30.0 32.0 34.0 36.0 38.0 40.0 2015 2020 2025 2030 2035 2040 2045 2050

Share of Electricity in Final Energy Consumption (%, EU28)

REF2016 EUCO27 EUCO30 EUCO33 EUCO35 EUCO40

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SLIDE 12

The RES Pillar

4 Sept. 2017

12

  • Solar and wind deploying in the power

sector are the main drivers of the increase in the renewables

  • Renewables in heating and cooling also

develop, albeit at a slower pace, driven by heat pumps and RES-based production

  • f heat
  • The biofuels in transport constitute the

main growing market for bioenergy, as biofuels are essential for reducing emissions in non-electrified transport segments (the RES-T includes for electricity used in transport the RES used in power sector) Note: The EUCO30-RES30 variant was only a sensitivity analysis

0.0 10.0 20.0 30.0 40.0 50.0 60.0 2010 2015 2020 2025 2030 2035 2040 2045 2050

Overall RES Share (%)

REF2016 EUCO27 EUCO30 EUCO30-RES30 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 2010 2015 2020 2025 2030 2035 2040 2045 2050

RES-E share (%)

REF2016 EUCO27 EUCO30 EUCO30-RES30 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 2010 2015 2020 2025 2030 2035 2040 2045 2050

RES-H&C share (%)

REF2016 EUCO27 EUCO30 EUCO30-RES30 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 2010 2015 2020 2025 2030 2035 2040 2045 2050

RES-T share (%)

REF2016 EUCO27 EUCO30 EUCO30-RES30

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SLIDE 13

Developments in the transport sector

  • Advanced car technologies (mainly

plug-in hybrids and battery electric vehicles) dominate the car market as a result of the CO2 car standards, which continuously decrease

  • The biofuels, mostly advanced

lignocellulose-based fungible biofuels in the long term, get a significant market share in the non-electrified segments of the transport sector (trucks, ships, aircrafts)

4 Sept. 2017

13

0% 10% 20% 30% 40% 50% 60% 70% 80% 2020 2025 2030 2035 2040 2045 2050

Share of advanced (mainly plug-in hybrid and pure electric) car technologies in the EU28 car fleet

REF2016 EUCO27 EUCO30 0% 5% 10% 15% 20% 25% 30% 35% 40% 2020 2025 2030 2035 2040 2045 2050

Share of biofuels in total energy consumption in the transport sector, EU28

REF2016 EUCO27 EUCO30

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SLIDE 14

Impacts on import dependency

4 Sept. 2017

14

  • The EUCO scenarios imply

significant gains regarding import dependency

  • The scenarios succeed curbing

imports of natural gas, which was raising concerns in the context of the Reference scenario

  • Imports of oil considerably

decrease in the EUCOs discontinuing past trends

  • Biomass imports rise, however, as

domestic feedstock resources are limited despite the assumed development of fast growing crops producing lignocellulose biomass

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 2010 2015 2020 2025 2030 2035 2040 2045 2050

Import Dependency %

REF2016 EUCO27 EUCO30 EUCO30-RES30 50 100 150 200 250 300 350 400 2010 2015 2020 2025 2030 2035 2040 2045 2050 billion toe

Net Imports of Natural Gas, EU28

REF2016 EUCO27 EUCO30 EUCO30-RES30 100 200 300 400 500 600 2010 2015 2020 2025 2030 2035 2040 2045 2050 billion toe

Net Imports of Oil, EU28

REF2016 EUCO27 EUCO30 EUCO30-RES30 5 10 15 20 25 2010 2015 2020 2025 2030 2035 2040 2045 2050 billion toe

Net Imports of Biomass, EU28

REF2016 EUCO27 EUCO30 EUCO30-RES30

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SLIDE 15

Total costs and investments

4 Sept. 2017

15

  • Moderate increase in

total costs relative to the Reference in EUCO27 and EUCO30

  • Considerable increase in

investment in the demand sectors when the energy efficiency ambition increases

  • The supply side

investment increase relative to the Reference but not across the EUCOs

500 1000 1500 2000 2500 3000 2016-2020 2021-2030 2031-2050 2016-2050

Total energy system cost (bnEUR per year on average, EU28)

REF2016 EUCO27 EUCO30 EUCO33 EUCO35 EUCO40 11.99 12.47 11.61 10.51 12.01 12.78 13.23 11.61 12.01 12.78 13.10 11.53 12.01 12.99 13.35 11.74 12.01 13.26 13.54 11.93 12.00 13.64 13.79 12.19 2016-2020 2021-2030 2031-2050 2016-2050

Total energy system cost as a % of GDP, on average per year in EU28

REF2016 EUCO27 EUCO30 EUCO33 EUCO35 EUCO40 0.0 200.0 400.0 600.0 800.0 1000.0 2016-2020 2021-2030 2031-2050 2016-2050

Demand side Investment (bnEUR per year on average)

REF2016 EUCO27 EUCO30 EUCO33 EUCO35 EUCO40 0.0 50.0 100.0 150.0 2016-2020 2021-2030 2031-2050 2016-2050

Supply side Investment (bnEUR per year on average, EU28)

REF2016 EUCO27 EUCO30 EUCO33 EUCO35 EUCO40

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Nuclear Outlook

4 Sept. 2017

16

  • Retrofitting old plants to extend lifetime is

economically by far the best choice

  • Limitations of sites for new nuclear and

financial closure of investment are the main obstacles

  • The EUCOs take an optimistic view about

retrofitting and new constructions

  • Despite this, the EUCOs project no

increase of nuclear compared to 2015

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SLIDE 17

Solid fuel Plant Outlook

4 Sept. 2017

17

  • Strong decline of solid fuel plants
  • Retrofitting of old sold fuels plants is

economically attractive if technically possible

  • Very few new coal plants in the EUCO

projection, as the model assumes anticipation of future ETS prices

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SLIDE 18

Gas Plants Outlook

4 Sept. 2017

18

  • The gas plants are essential providers of

flexibility and backup for the development

  • f RES
  • In the long term, storage systems

complements gas plants, explaining the slight decrease in the capacity of the latter

  • CCGT is the dominant technology, peak

devices play a secondary role

  • Avoiding mothballing of CCGT in the

short/medium term is an important policy goal

  • The economics of CCGT are at the limit of

possibilities: in the projection, increasingly they produce less energy and higher capacity-related services for the system

  • At the same time, the economic conditions

must allow for significant new investment

  • ver the entire projection period
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SLIDE 19

CCS Outlook

4 Sept. 2017

19

  • The projection takes into account

acceptability issues and difficulties for licensing CO2 storage sites, both seriously

  • bstructing CCS development.
  • The model reflects scarcity of storage

sites by assuming high costs of storage

  • The projection takes the view that in the

long term, decarbonisation conditions will enable some degree of acceptance of CCS, however not in all countries

  • The large majority of CCS plant use gas,

few use coal or lignite. This is due to the ramping flexibility of gas plants and the possibility of maintaining CHP without CO2 emissions.

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SLIDE 20

Biomass and Waste using Plants Outlook

4 Sept. 2017

20

  • The increase of biomass capacities

after 2020 is small

  • The cost of the feedstock and the slow

progress of technology obstruct further development

  • Economically it is more attractive to use

the biomass feedstock to produce advanced biofuels and maintain their use in heat applications, rather producing electricity

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SLIDE 21

Outlook for Variable RES

4 Sept. 2017

21

  • The projection shows variable RES capacity to

more than double in 2030, from 2015 levels, and quadruple by 2050

  • Approximately, 60% is wind and 40% solar
  • The majority of solar is in the long term small-

scale applications

  • Solar thermal, tidal and geothermal have

small shares

  • Wind offshore develop impressively after

2030, facilitated by cost reduction and the assumed DC super-grid connecting North Sea

  • After 2035, development of small scale

batteries, power-to-X chemical storage and hydro-pumping support the RES in the system

GW 2030 2050 Solar 239 425 Wind onshore 247 402 Wind offshore 38 119

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SLIDE 22

Electricity prices and investment

4 Sept. 2017

22

  • On average, the prices of electricity in

the EUCO scenarios do not increase in 2030 compared to the Reference projection

  • However, the prices increase

significantly after 2030

  • The investment expenditures in the

EUCOs are significantly higher than in the Reference projection, mainly after 2030, but at a lesser degree also in the period before 2030

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SLIDE 23

Decomposition of electricity prices

4 Sept. 2017

23

  • Clearly, the main drivers of the

increase in electricity prices in the EUCOs are the grid tariffs, the costs of system services (e.g. costs of storage and ancillary services) and the recovery of RES support costs. The latter, however, decreases a lot after 2030.

  • The total unit cost of power

generation is quite stable over time, despite the considerable shift in the structure of generation.

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SLIDE 24

Concluding Remarks

4 Sept. 2017

24

  • The legislative package proposed by the Commission defines mandatory targets for 2030 within a decarbonisation

roadmap to 2050. The policy ambition is without precedent

  • The role of electricity is central in the transition, and the main two pillars are energy efficiency and renewables
  • The energy efficiency improvement is ambitious and demands strong policies affecting consumers. The same high level
  • f ambition applies to for the transport sector where challenged by electrification and significant massive

development of biofuels is needed.

  • The energy-related costs for individuals need shifting to CAPEX, away from OPEX, which can be a challenge for low

income classes. However, the overall cost increases are moderate. The investment expenditures are likely to rise considerably in the decade 2020-2030 and beyond.

  • Significant gains regarding import dependency, as gas and oil imports significantly decrease
  • Mainly driven by the ETS, power generation is projected to undergo profound restructuring towards dominance of
  • renewables. Gas-firing capacities have a strategic role for balancing and reserve, a role increasingly performed by

storage technologies in the long term. Nuclear plant retrofitting is essential to maintain total nuclear capacity, as investment in new nuclear plants suffers from limitations (sites, financing, etc.). Coal-firing generation is under strong decline; retrofitting old plants just postpones the decline. CCS is unlikely to become a major option

  • Chemical storage, small scale batteries and smart controls are the long term challenges in the interplay of electricity,

RES and dispersed producers-consumers, depending technology and commercial readiness.

  • The projections do not see significant pressures on electricity prices in the medium term. The projection of rising

electricity prices in the long term, is due to the increasing costs of grids and system services.