- 0 -

Scenarios for Decarbonizing the European Electricity Sector –

With Particular Consideration to Norway

Oslo “Implications of Paris” Workshop

Tuesday, March 08 2017

Clemens Gerbaulet, Christian von Hirschhausen, Claudia Kemfert, Casimir Lorenz, Pao-Yu Oei

0 0

21

30

12

55

13

6

0

10

20

30

40

50

60

2011-20 2021-30 2031-40 2041-50

GW

Investment in new capacities

Retrofitting or replacement of old plants

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

2020 2025 2030 2035 2040 2045 2050

Default scenario

Ele

ctr

icit

y G

en

era

tio

n i

n T

Wh

Other

Sun

Wind

Hydro

Biomass

Waste

Oil

Gas

Hard Coal

- 1 -

Agenda

1. Introduction

2. Decarbonization scenarios

3. Focus on Norway (1): generation

4. Focus on Norway (2): infrastructure

5. Conclusion

- 2 -

Conclusions

1/ The electricity sector is fairly easy to decarbonize based on a

combination of wind, solar & storage + biomass

2/ The generation mix in Norway is not significantly altered, some onshore

and offshore wind kicks in, + some storage; Norway remains a large

exporter

3/ Infrastructure has an important, but limited role to play: “regional

cooperation” dominates the European-wide cooper plate

- 3 -

Agenda

1. Introduction

2. Decarbonization scenarios

3. Focus on Norway (1): generation

4. Focus on Norway (2): infrastructure

5. Conclusion

- 4 -

Objective: large-scale decarbonization of the European

electricity sector

1274,7 1273,2

965,3

818,5

597,7

458,1

270,2

89,7

18,9

0

200

400

600

800

1000

1200

1400

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055

Ava

ila

be

CO

2 e

mis

sio

ns

in

Mt

- 5 -

Objective: large-scale decarbonization of the European

electricity sector Objective: System Cost minimization

• Capacity Cost and Generation Cost

• Investment cost (Cost data based on Schröder et al. (2013) and Pape et al. (2014), Zerrahn and Schill (2015) for storage and DSM, as well as other sources)

• Cross-border line expansion cost

Investment options:

• Conventional power plants

• Renewables (PV, Wind Onshore/Offshore, CSP)

• Seven storage and three DSM technologies (P/E Ratio endogenous)

• Grid expansion (increase of NTCs)

Resolution:

• 33 European Countries, one node per country

• Investment: five-year steps 2020 - 2050

• plant dispatch: hourly resolution over selection of hours (about 2 weeks) capturing:

Variation of time-of day

Variation of season

Scaled renewable feed-in, reservoir inflow, and demand time series

Boundary conditions: EC Roadmap scenario “Diversified supply technologies”

• Electricity demand development per country

• CO2-budget over time

Other Boundary Conditions

• Decommissioning of existing plants

• Market coupling method: NTC or Flow-Based

At the moment: very limited sector coupling between the electricity and heat sector, no interaction with electric vehicles

Implemented as a linear program, solved with GUROBI (Barrier with Crossover)

1274,7 1273,2

965,3

818,5

597,7

458,1

270,2

89,7 18,9

0

200

400

600

800

1000

1200

1400

2000 2010 2020 2030 2040 2050 2060

Availab

e C

O2 e

mis

sio

ns

in

Mt

AC line aggregation to PTDF:

𝑃𝑇𝐷𝐹𝑙,𝑛𝑛 = 𝐻𝑙,𝑛 ∗ 𝐵𝑛,𝑛𝑛−1

𝑛

𝑃𝑇𝐷𝐹𝑙,𝑧𝑙𝑖𝑛𝑒𝑧𝑜𝑛𝑎𝑙 =

𝑃𝑇𝐷𝐹𝑙,𝑛𝑐𝑜𝑢𝑛𝑡 𝑛 ∈ 𝑧

𝑛∈𝑧

∀𝑖𝑐

𝑃𝑇𝐷𝐹𝑧,𝑧𝑧,𝑧𝑧𝑧𝑧𝑜𝑛𝑎𝑙 = 𝑃𝑇𝐷𝐹𝑙𝑙,𝑧𝑧𝑧

𝑙𝑖𝑛𝑒𝑧𝑜𝑛𝑎𝑙

𝑘

− 𝑃𝑇𝐷𝐹𝑙𝑙𝑙,𝑧𝑧𝑧𝑙𝑖𝑛𝑒𝑧𝑜𝑛𝑎𝑙

𝑗

- 7 -

Scenarios: Default, “reduced foresight“, “budget approach“

• Default scenario

perfect foresight over entire horizon

(2015-2050)

Yearly CO2 constraint, in 2050 only 2%

of current level

• Reduced foresight scenario

decisions makers only aware of the CO2 target of the upcoming five-year period,

Used to identify stranded investments resulting from such a myopic vision;

• Budget approach

aggregate emission budget for the entire period from 2015 to 2050

Emission allocation over time endogenous, allows for a higher degree of decision

Assumption: abatement takes place earlier

Three main scenarios

- 8 -

European electricity generation in the default scenario 2020–2050

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

2020 2025 2030 2035 2040 2045 2050

Default scenario

Ele

ctr

icit

y G

en

era

tio

n in

TW

h

Other

Sun

Wind

Hydro

Biomass

Waste

Oil

Gas

Hard Coal

Lignite

Uranium

- 9 -

European electricity generation capacity the default scenario 2020–

2050

0

500

1000

1500

2000

2500

2020 2025 2030 2035 2040 2045 2050

Default scenario

Ele

ctr

icit

y G

en

era

tio

n C

ap

acit

y i

n G

W

Storage

Other

Sun

Wind

Hydro

Biomass

Waste

Oil

Gas

Hard Coal

Lignite

Uranium

- 10 -

CO2 price increases after 2040; is flat at 80% decarb pathway

0

20

40

60

80

100

120

140

160

180

200

2015 2020 2025 2030 2035 2040 2045 2050

CO

2 P

rice

in

201

5 €

/Mt

Default scenario 80% decarbonization pathway

• In the default scenario, CO2 prices remain at a similar level until 2040

• When the emission constraint tightens, the CO2 price increases to 175€/t

• In the 80% decarbonization scenario, the price remains stable

CO2 price development 2015 - 2050

- 13 -

Investment difference in Reduced Foresight scenario vs Default

11,0

4,2

3,0 2,5

2,1 1,9 1,7 1,4 1,3

1,0 0,8 0,7 0,6 0,5 0,5 0,4 0,3 0,2

-6

-4

-2

0

2

4

6

8

10

12

DE CH FI PL HR RS UK NL BE BA HU EE MK RO IE CZ LU SI

GW

Gas

Hard Coal

Sum

- 14 -

Comparing CO2-Emissions over time in the Default and Emissions

budget scenario

-100

-50

0

50

100

150

2020 2025 2030 2035 2040 2045 2050

Mil

lio

n t

CO

2 Biomass

Waste

Oil

Gas

Hard Coal

Lignite

- 19 -

How about nuclear and CCTS?

Investment Cost Assumptions (€/kW)

0

1000

2000

3000

4000

5000

6000

7000

2015 2020 2025 2030 2035 2040 2045 2050

Nuclear

Biomass

PV

CSP

Wind onshore

Wind offshore

Lignite CCS

Coal CCS

CCGT CCS

Li-Ion

DSM12

Biomass CCS

Source: DIW Data Documentation 68, own assumptions

- 20 -

Investment cost assumptions for selected technologies

0

500

1000

1500

2000

2500

3000

3500

4000

2015 2020 2025 2030 2035 2040 2045 2050

Ov

ern

igh

t co

st i

n €

/kW

Biomass Wind Onshore Wind Offshore Solar PV Battery 4 hours Battery 8 hours Power to Gas

Cost Assumptions

• DIW Berlin Data Documentations Schröder et

al. (2013) and XXX (2017)

• Nuclear power

• 6000 €/kW

• no economics from “nth-of-a-kind” plants

• Storage and DSM

• based on Pape et al. (2014) and

• Zerrahn and Schill (2015)

• CCTS technologies are implemented as

sensitivity

• Renewables

• Solar PV cost degression to continue.

• Offshore wind less steep learning curves,

higher uncertainty

• Biomass most expensive renewable

source.

- 21 -

Francois Lévêque (2012):

„The nuclear industry is the child of science and warfare“

- 22 -

- 23 -

Looking back …

…no-one ever pretended nuclear was „economic“ …

MIT (2003): The Future of Nuclear Power

“In deregulated markets, nuclear power is not now cost competitive with coal and natural gas.” (p. 3)

University of Chicago (2004):

“A case can be made that the nuclear industry will start near the bottom of its learning rate when new nuclear construction occurs. (p. 4-1) … “The nuclear LCOE for the most favorable case, $47 per MWh, is close but still above the highest coal cost of $41 per MWh and gas cost of $45 per MWh.” (p. 5-1)

Parsons/Joskow (EEEP 2012)

“may be one day …”

D’haeseleer (2013): Synthesis on the Economics of Nuclear Energy

“Nuclear new build is highly capital intensive and currently not cheap, … it is up to the nuclear sector itself to demonstrate on the ground that cost-effective construction is possible.” (p. 3)

Davis, L.W. (2012): Prospects for Nuclear Power. Journal of Economic Perspectives (26, 49–66))

“These external costs are in addition to substantial private costs. In 1942, with a shoestring budget in an abandoned squash court at the University of Chicago, Enrico Fermi demonstrated that electricity could be generated using a self-sustaining nuclear reaction. Seventy years later the industry is still trying to demonstrate how this can be scaled up cheaply enough to compete with coal and natural gas.“ (p. 63)

- 24 -

Davis (2012; JEP, p. 11): „70 years later …“

current update for Europe (own calc.)

Levelized costs in €cents/kWh

Nuclear Coal Natural Gas

Baseline (2016) 12,1 5,1 5,0

CO2-price: 25 €/t 12,1 6,3 5,7

CO2-price: 100 €/t 12,1 10,0 7,9

- 31 -

CCTS in Europe: no successful large-scale

demonstration project to date

Source: BOLESTA (2009)

- 32 -

Option: Carbon Capture, Transportation, and Storage (CCTS)?

- 36 -

Agenda

1. Introduction

2. Decarbonization scenarios

3. Focus on Norway (1): generation

4. Focus on Norway (2): infrastructure

5. Conclusion

- 37 -

Installed Capacity in Norway (2050):

Some onshore and offshore wind, storage only late (PtG)

0

10

20

30

40

50

60

70

2020 2025 2030 2035 2040 2045 2050

Default Scenario

Inst

all

ed C

ap

aci

ty i

n G

W

Storage

Solar PV

Wind Offshore

Wind Onshore

Hydro

Biomass

Other

Gas

- 38 -

Electricity Generation in Norway (2050):

Constrained by CO2, offshore wind comes in

0

10

20

30

40

50

60

70

80

2020 2025 2030 2035 2040 2045 2050

Default scenario

Ele

ctri

city

Gen

erati

on

in

TW

h

Solar PV

Wind Offshore

Wind Onshore

Hydro

Biomass

Waste

Other

Gas

- 41 -

Norway February dispatch (2050):

Strong demand from France/Germany/Europe, some storage

-20

-15

-10

-5

0

5

10

15

20

25

30

35

821

828

835

842

849

856

863

870

877

884

891

898

905

912

919

926

933

940

947

954

961

968

975

982

989

996

1003

1010

1017

1024

1031

1038

1045

1052

1059

1066

1073

1080

1087

1094

1101

1108

1115

1122

1129

1136

1143

1150

Ele

ctri

city

gen

erati

on

in

GW

Gas Other Biomass Hydro Wind Onshore Wind Offshore Solar PV Storage Trade Demand

- 42 -

Dispatch 2050 Germany in February shows substantial imports

-100

-50

0

50

100

150

821

828

835

842

849

856

863

870

877

884

891

898

905

912

919

926

933

940

947

954

961

968

975

982

989

996

1003

1010

1017

1024

1031

1038

1045

1052

1059

1066

1073

1080

1087

1094

1101

1108

1115

1122

1129

1136

1143

1150

Hour

Ele

ctri

city

gen

erati

on

in

GW

Hard Coal Gas Other Biomass Hydro Wind Onshore

Wind Offshore Solar PV Storage Trade DSM Demand

Hour-to-hour operation of the German electricity system in 2050 (first two weeks of February)

• German electricity imports in February 2050 come in decreasing order from Denmark, Switzerland,

Netherland, France and Austria.

• The imports and exports with Sweden and Poland are even in total

• Germany exports 960MW on average to the Czech Republic.

- 44 -

Norway Summer dispatch (2050):

Solar in Europe dominates, exports remain strong

-20

-15

-10

-5

0

5

10

15

20

25

30

4348

4355

4362

4369

4376

4383

4390

4397

4404

4411

4418

4425

4432

4439

4446

4453

4460

4467

4474

4481

4488

4495

4502

4509

4516

4523

4530

4537

4544

4551

4558

4565

4572

4579

4586

4593

4600

4607

4614

4621

4628

4635

4642

4649

4656

4663

4670

4677

Ele

ctri

city

gen

erati

on

in

GW

Gas Other Biomass Hydro Wind Onshore Wind Offshore Solar PV Storage Trade Demand

- 45 -

Agenda

1. Introduction

2. Decarbonization scenarios

3. Focus on Norway (1): generation

4. Focus on Norway (2): infrastructure

5. Conclusion

- 48 -

The European Context: Infrastructure European-wide network development: less promising than in the last decade

Quellen: SRU (2010), ECF (2010, 2011), Czisch (2005)

Reasons for delay:

• Consideration of real economic difficulties in implementing theoretically „ideal“ network structures

• Geopolitical changes/modifications in partner regions (e.g. North Africa, Russia, etc.)

• Public debate about infrastructure

• „Experience“: first draft of the Single Electricity Market back in 1988

?

- 49 -

The right level of cooperation

Competing Levels for the Investment Challenge

European coordinating institutions …

… in place … not in place

Geographic

Scope …

… Europe-wide 1) “Europe centralized” ./.

… Regional 2) “Regional +” 3) “National”

Source: Beckers, Hoffrichter, and von Hirschhausen (2012)

- 53 -

ELMOD Application:

Expansion Pathways for the European Transmission Network

Pan-European Transmission Investment for the

EMF28 Scenarios

• Question: How do the different EMF 28 scenarios in

their choice of technology and national allocation

effect the demand on infrastructure investments?

• Bottom up DC Load Flow model based on ELMOD

(3,523 nodes and 5,145 lines plus DC overlay grid)

• Endogenous determination of grid investments

needs up to 2050 in 10-year steps. The optimization

minimizes the cost of the expansion as well as

system operation.

• Model runs for the EMF28-Scenarios

• 40%DEF (40% GHG reduction until 2050),

• 80%DEF (80% GHG reduction until 2050)

• 80%GREEN (green, 80% GHG reduction till 2050)

• Additional case for each scenario: doubling of

costs for cross border lines

- 54 -

Long-Term EMF Scenarios for Europe 2050:

Technology Specific Generation Capacity for Europe

Primes results in a European context; main aspects:

• Renewable generation capacities

• CCTS as an option?; nuclear/coal vs. gas share with increasing renewable capacities

Scenarios:

• 40%DEF ~ 40% GHG reduction target to 2050, default power plants

• 80%DEF ~ 80% GHG reduction target to 2050, default power plants

• 80%GREEN ~ 80% GHG reduction target to 2050, more Renewables

40%DEF 80%DEF 80%GREEN

- 57 -

DC Investments by 2050

40%DEF: “40% GHG reduction” 80%DEF: “80% GHG reduction” 80%GREEN: 80% reduction + “green”

DC Grid infrastructure investments mostly offshore connectors

- 59 -

Agenda

1. Introduction

2. Decarbonization scenarios

3. Focus on Norway (1): generation

4. Focus on Norway (2): infrastructure

5. Conclusion

- 60 -

Conclusions

1/ The electricity sector is fairly easy to decarbonize based on a

combination of wind, solar & storage + biomass

2/ The generation mix in Norway is not significantly altered, some onshore

and offshore wind kicks in, + some storage; Norway remains a large

exporter

3/ Infrastructure has an important, but limited role to play: “regional

cooperation” dominates the European-wide cooper plate

- 61 -

Scenarios for Decarbonizing the European Electricity Sector –

With Particular Consideration to Norway

Oslo “Implications of Paris” Workshop

Tuesday, March 08 2017

Clemens Gerbaulet, Christian von Hirschhausen, Claudia Kemfert, Casimir Lorenz, Pao-Yu Oei

0 0

21

30

12

55

13

6

0

10

20

30

40

50

60

2011-20 2021-30 2031-40 2041-50

GW

Investment in new capacities

Retrofitting or replacement of old plants

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

2020 2025 2030 2035 2040 2045 2050

Default scenario

Ele

ctr

icit

y G

en

era

tio

n i

n T

Wh

Other

Sun

Wind

Hydro

Biomass

Waste

Oil

Gas

Hard Coal