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By Professor Pantelis Capros, E3MLab
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
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
Scenarios quantified for the winter package using PRIMES
4 Sept. 2017
3
EnergyEfficiency (ImpactAssessment)
REF16Reference
EuCo27 or
EuCo30Targets 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
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
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 0
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 CO2emissionsSupply of energy
Transport
Domestic sector
Industry
0
1000
2000
3000
4000
5000
6000
20
05
20
10
20
15
20
20
20
25
20
30
20
35
20
40
20
45
20
50
Key GHG emissions in Mt CO2-eq
non-ETS
ETS
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 onshore and offshore) is the strongly emerging power generation industry:
• 30% of total in 2030 (50% all RES)• 50% in 2050 (65% all RES)
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
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
only after 2030
• In the long term, electricity produces
clean gas (methane) and H2 through
electrolysis and a chemical process
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
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
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
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 of 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
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
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
0
50
100
150
200
250
300
350
400
2010 2015 2020 2025 2030 2035 2040 2045 2050
bill
ion
to
e
Net Imports of Natural Gas, EU28
REF2016
EUCO27
EUCO30
EUCO30-RES30
0
100
200
300
400
500
600
2010 2015 2020 2025 2030 2035 2040 2045 2050
bill
ion
to
e
Net Imports of Oil, EU28
REF2016
EUCO27
EUCO30
EUCO30-RES30
0
5
10
15
20
25
2010 2015 2020 2025 2030 2035 2040 2045 2050
bill
ion
to
e
Net Imports of Biomass, EU28
REF2016
EUCO27
EUCO30
EUCO30-RES30
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
0
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 EUCO4011.99
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
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
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
Gas Plants Outlook
4 Sept. 2017
18
•The gas plants are essential providers of flexibility and backup for the development of 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 over the entire projection period
CCS Outlook
4 Sept. 2017
19
•The projection takes into account acceptability issues and difficulties for licensing CO2 storage sites, both seriously obstructing 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.
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
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
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
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.
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 of 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.