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By Professor Pantelis Capros, E3MLab [email protected] 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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Page 1: How to Meet the EU's Greenhouse Gas Emission Targets ... · How to Meet the EU's Greenhouse Gas Emission Targets PRIMES modelling for the Winter Package 4 Sept. 2017 1 ... Final energy

By Professor Pantelis Capros, E3MLab

[email protected]

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

Page 2: How to Meet the EU's Greenhouse Gas Emission Targets ... · How to Meet the EU's Greenhouse Gas Emission Targets PRIMES modelling for the Winter Package 4 Sept. 2017 1 ... Final energy

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

Page 3: How to Meet the EU's Greenhouse Gas Emission Targets ... · How to Meet the EU's Greenhouse Gas Emission Targets PRIMES modelling for the Winter Package 4 Sept. 2017 1 ... Final energy

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

Page 4: How to Meet the EU's Greenhouse Gas Emission Targets ... · How to Meet the EU's Greenhouse Gas Emission Targets PRIMES modelling for the Winter Package 4 Sept. 2017 1 ... Final energy

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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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

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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)

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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

Page 8: How to Meet the EU's Greenhouse Gas Emission Targets ... · How to Meet the EU's Greenhouse Gas Emission Targets PRIMES modelling for the Winter Package 4 Sept. 2017 1 ... Final energy

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

Page 9: How to Meet the EU's Greenhouse Gas Emission Targets ... · How to Meet the EU's Greenhouse Gas Emission Targets PRIMES modelling for the Winter Package 4 Sept. 2017 1 ... Final energy

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

Page 10: How to Meet the EU's Greenhouse Gas Emission Targets ... · How to Meet the EU's Greenhouse Gas Emission Targets PRIMES modelling for the Winter Package 4 Sept. 2017 1 ... Final energy

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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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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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

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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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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

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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

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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

Page 17: How to Meet the EU's Greenhouse Gas Emission Targets ... · How to Meet the EU's Greenhouse Gas Emission Targets PRIMES modelling for the Winter Package 4 Sept. 2017 1 ... Final energy

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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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

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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.

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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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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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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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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.

Page 24: How to Meet the EU's Greenhouse Gas Emission Targets ... · How to Meet the EU's Greenhouse Gas Emission Targets PRIMES modelling for the Winter Package 4 Sept. 2017 1 ... Final energy

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.