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Energy and Environmental Economics 2015-2016 Renewables

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Page 1: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Energy and Environmental Economics 2015-2016

Renewables

Page 2: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Renewable Sources

By renewable sources we mean a group of primary and secondary sources of energy which are (to all practical purposes) non-exhaustible, like wind, solar, geothermal, tidal, hydro energy (the only limit being our capability of capturing them),

or reproducible, at least within given limits, like biomass

(i.e. the biodegradable component of agricultural production and waste, and of industrial and urban waste and dump gases)

Non-exhaustible does not mean costless, not even in environmental terms

Page 3: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Solar: capacity growth and geographical distribution

Source: BP Statistical Review of World Energy 2014

Page 4: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

A spectacular expansion

0

20000

40000

60000

80000

100000

120000

140000

160000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Solar capacity - world(MW)

Solar capacity - world(TW)

Page 5: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Solar: a European leadership

Total North America 4%

Total Europe 14%

Total Others 82%

World distribution of solar capacity 1996

Page 6: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Solar Total North America

4%

Total Europe 36%

Total Others 60%

World distribution of solar capacity 2004

Page 7: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Total North America 10%

Total Europe 57%

Total Others 33%

Wordl distribution of solar capacity 2013

Page 8: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Sweden 4%

Netherlands 8%

Switzerland 21%

Germany 27%

Italy 40%

Solar Capacity First 5 countries Europe 1996 (95%)

Page 9: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Spain 2%

France 2%

Italy 3%

Netherlands 4%

Germany 89%

Solar Capacity First 5 countries Europe 2004 (92%)

Page 10: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Belgium 5%

France 7%

Spain 7%

Italy 27%

Germany 54%

Solar Capacity : First 5 countries Europe (83%) 2013

Page 11: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Wind: capacity growth and geographical distribution

Source: BP Statistical Review of World Energy 2014

Page 12: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Wind: spectacular growth again

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100000

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250000

300000

350000

Wind Capacity-World

Wind Capacity-World

Page 13: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Australia 0%

China 13%

India 84%

Japan 2%

New Zealand

0% South Korea 0%

Taiwan 0%

Other Asia Pacific 1%

Wind power distr. Asia 1997

Wind: an Asian Leadership

Page 14: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Australia 8%

China 14%

India 55%

Japan 18%

New Zealand

3%

South Korea

1% Taiwan 0%

Other Asia Pacific 1%

Wind power distr. Asia 2004

Page 15: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Australia 3%

China 76%

India 17%

Japan 2%

New Zealand

1% South Korea 0%

Taiwan 1%

Other Asia Pacific 0%

Wind power distribution Asia 2013

Page 16: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Geothermal: capacity growth and geographical distribution

Source: BP Statistical Review of World Energy 2014

Page 17: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Geothermal: a comparatively slow growth

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6000

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14000

1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Geothermal power-world

Geothermal power-world

Page 18: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Japan 7%

Italy 11%

Mexico 13%

Philippines 20%

US 49%

Geothermal 1995

Page 19: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Italy 11%

Indonesia 11%

Mexico 13%

Philippines 27%

US 38%

Geothermal 2004

Page 20: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

New Zealand 10%

Italy 11%

Indonesia 16%

Philippines 22%

US 41%

Geothermal 2013

Page 21: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Hydropower: Capacity distribution

World resource Institute

Page 22: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Africa 2%

Europe 18%

US+Canada 16%

China India 29%

Latin & Centr.America 15%

Other Europe 2%

Former USSR 7%

Asia Pacific 6%

Ither Asia 5%

Hydropower Capacity 2011

Page 23: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Electricity production from renewables: shares of hydropower sources (OECD)

(Source: IEA)

0,75

0,8

0,85

0,9

0,95

1

1,05

1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Hydro Share (World)

Hydro Share (NO OECD)

Page 24: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

The changing composition of electricity production from

renewables

Source: International Energy Agency

Page 25: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Electricity production from renewables shares of non-hydro sources (world)

0

0,02

0,04

0,06

0,08

0,1

0,12

0,14

1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Geo Share(World)

Wind share

Photov. Share

Tide

Page 26: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Electricity production from renewables: shares of non-hydro sources (Non-

OECD)

0

0,01

0,02

0,03

0,04

0,05

0,06 1

97

1

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

Geo share (Non-OECD)

Wind share

Photov. Share

Tide share

Page 27: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Electricity production from renewables shares of non-hydro sources (OECD)

0

0,05

0,1

0,15

0,2

0,25

1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

Wind share OECD

Photovolt. Share

Geoth. Share

Tidal share

Page 28: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Electricity production from renewables shares of non-hydro sources (OECD-

Europe)

0

0,05

0,1

0,15

0,2

0,25

0,3

19

60

19

62

19

64

19

66

19

68

19

70

19

72

19

74

19

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19

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19

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00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

Wind share (OECD Europe)

Photov. Share

Geo Share

Tide share

Page 29: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Renewables: advantages

• Non-exhaustible or reproducible

• Limited environmental cost (but not zero: landscape (wind, geothermal, hydropower) soil (biofuels, geothermal, hydropower), overall environmental damage (hydropower))

• Not geographically overconcentrated (Energy dependence)

Page 30: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Renewables’ drawbacks

• Relatively “young” technology (i.e. promising but still costly)

• Discontinuous availability of some sources (wind, solar, hydropower) with problems for balancing and despatching in the electric power sector.

• Opportunity costs: an example are biofuels, whose production subtracts land to food production, with an obvious impact on food prices.

Page 31: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Evaluating alternative energy sources

Define: It Investment expenditure mt maintenance expenditure ft fuel expenditure Et Energy output all evaluated at time t, Then the Levelized cost of Energy (LCOE) is defined as:

Page 32: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Levelized cost of Energy (LCOE)

LCOE

t0

TtI tm tft

t0

TtE t

LCOE can be interpreted as the constant sale price for energy such that all costs are recovered keeping the cost of capital into account (β is the discount factor)

Page 33: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Assuming that investment costs are borne only in the first Z periods (the building period) LCOE can be broken in two components:

LCOE

t0

ZtI t

t0

TtE t

tZ1

Ttm tft

t0

TtE t

Page 34: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Then in comparing alternative sources of energy and alternative technologies for energy conversion, results depedn crucially on:

• Construction period versus operation period costruzione (Z:T-Z),

• Discount factor

• Fuel price

• Production profile (the Et profile)

Page 35: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

The costs considered in LCOE are private costs, but it lends easily itself to be corrected for environmental costs

Page 36: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

A study on LCOEs

US Energy Information Administration “Projected Costs of Generating Electricity 2015”

• 181 plants in 22 countries (3 non-OECD) • I have been able to consult only the free, short edition,

which contains only a partial disclosure of results and methodologies

• In such edition, data are disclosed for three “conventional” technologies (CCGT, Coal and Nuclear) and for two Renewables (Solar PV and Wind)

• LCOEs have been computed for three discount rates (3%,7%, 10%) and are expressed as USD/MWh

Page 37: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Conventional technologies, minimum LCOE values (OECD)

0

10

20

30

40

50

60

70

80

90

3% 7% 10%

CCGT min

Coal plants min

Nuclear min

Page 38: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Renewables, minimum LCOE values (OECD)

0

20

40

60

80

100

120

140

160

180

3% 7% 10%

Solar (residential) min

Solar (commercial)

Solar (large)

Onshore Wind

Offshore wind

Page 39: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Conventional technologies, maximum LCOE values (OECD)

0

20

40

60

80

100

120

140

160

3% 7% 10%

CCGT max

Coal plants max

Nuclear max

Page 40: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Renewables, maximum LCOE values (OECD)

0

50

100

150

200

250

300

350

400

3% 7% 10%

Solar res. max

Solar comm. max

Solar large (max)

Onshore Wind max

Offshore Wind max

Page 41: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Waste and biofuels

Page 42: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Will biofuels replace oil/gas?

0

0,00001

0,00002

0,00003

0,00004

0,00005

0,00006

0,00007

0,00008

0,00009

Biogases production/Natural Gas Production

Biogases production/Natural Gas Production

Page 43: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

0

0,0002

0,0004

0,0006

0,0008

0,001

0,0012

0,0014

0,0016

Biogas production/Oil production TJ/kt

Biogas production/Oil production

Page 44: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

Waste

0

0,01

0,02

0,03

0,04

0,05

0,06 1

97

1

19

74

19

77

19

80

19

83

19

86

19

89

19

92

19

95

19

98

20

01

20

04

20

07

20

10

Waste/Natural gas

Waste/Natural gas

Page 45: Energy and Environmental Economics 2015-2016 2015 Renewables.pdf · “Projected Costs of Generating Electricity 2015” •181 plants in 22 countries (3 non-OECD) •I have been

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1

1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Waste/oil (TJ/kt)

Waste/oil (TJ/kt)