The impacts of nuclear energy and renewables on network costs. Ron Cameron OECD Nuclear Energy Agency

Transcription

1 The impacts of nuclear energy and renewables on network costs Ron Cameron OECD Nuclear Energy Agency

2 Energy Mix A country s energy mix depends on both resources and policies The need for energy depends on past actions to provide capacity and expectations of growth for the future The supply of energy depends on availability of resources, both internally and externally and distribution networks Hence national situations will lead to different outcomes

3 National Energy Production Mixes Total 62.6 TWh 188gCO2/KWh 781gCO2/KWh Total 541 TWh 79gCO2/KWh 461gCO2/KWh Total 582 TWh CO2 figures from IEA

4 WHAT DRIVES ENERGY POLICIES? Security of supply Energy triangle Low carbon Affordability 4

5 Dimensions of Energy Supply Security and Potential Contributions of Nuclear Energy Security of supply External Dimension Geopolitics, Access to Primary Fuels Safety and Adequacy of Internatl. Infrastructures Unanticipated Resource Exhaustion Resilience to Changes in Climate Policy Internal Dimension Adequacy of Generation Capacity Adequacy of Domestic Transport Infrastructure Adequacy of Market Design and Regulation Price Stability Operational Reliability 5

6 LOW CARBON ELECTRICITY? Security of supply Energy triangle Low carbon Affordability Current liberalised markets send only short term signals which threatens longer term security of supply We need to think in terms of the system effects and costs in a longer term perspective Nuclear power is the only low carbon dispatchable technology, with high availability other than hydro (which is in short supply) 6

7 Nuclear remains important and countries will need to start seriously investing by 2020 GW % 1100GWe % 30% % % % 10% 200 5% 0 0% DS scenario shows an increasing role for nuclear energy share of global electricity generation Other OECD European Union United States Other non-oecd India China 2DS 2DS-hiNuc

8 Competitiveness and affordability Security of supply Energy triangle Low carbon Industry OECD Europe, Japan, Affordability 100 USA, Q

9 Is Nuclear Competitive? (1) Levelised Cost of Electricity Generation by Region (5% Discount Rate) gives part of the picture Nuclear is already a very cost competitive technology Source: Projected Costs of Generating Electricity, IEA/NEA

10 Levelised Cost of Electricity Generation by Region (10% Discount Rate) But nuclear costs depend strongly on the discount rate Source: Projected Costs of Generating Electricity, IEA/NEA

11 OECD NEA System Effects Study: Key Issues System costs are the total costs above plant-level costs to supply electricity at a given load and given level of security of supply. 1. Quantitative estimation of system effects of different generating technologies in particular VaREN: o Costs on the electricity system above plant-level costs (Grid level costs: connection, extension and reinforcement, short-term balancing costs, long-term costs for adequate back-up capacity) o Total system-costs in the long-run (including production) o Pecuniary impacts on nuclear and other dispatchable sources 2. Analysis of institutional frameworks, regulation and policy conclusions to enhance the flexibility and security of supply of power generation and enable coexistence of renewables and nuclear power in decarbonising electricity systems 11

12 The System Effects of Nuclear Power While system effects of intermittent sources are by far the largest, all technologies have some system effects, including nuclear power: Specific and stringent requirements for siting NPPs o Vicinity to adequate cooling source, Location in remote, less populated areas Large size impacts minimum grid size and system operations o No plant s output >10% of lowest demand; high spinning reserves according to N-1 criterion; Importance of grid stability and power quality for the safety of nuclear installations o Stringent requirements in term of grid availability, frequency and voltage stability In some countries (France, Germany, Belgium) significant flexibility is required of NPPs: o o o Frequency control, daily and weekly load-following; Good load-following characteristics; No proven impacts on fuel failures and major components; Start-up Time Maximal change in 30 sec Maximum ramp rate (%/min) Open cycle gas turbine (OGT) min % 20 %/min Combined cycle gas turbine (CCGT) min % 5-10 %/min Coal plant 1-10 hours 5-10 % 1-5 %/min Nuclear power plant 2 hours - 2 days up to 5% 1-5 %/min /07/ /08/ /10/ /12/ /01/ /03/ /05/ /06/ /08/

13 The Short-run and the Long-run Crucial importance of the time horizon, when analyzing adequacy/back-up costs and impacts on dispatchable generators (no issue for grid costs or balancing costs): Adequacy/back-up costs : o In the short-run(ex post),in a system where existing capacity reliably covers peak demand, there are no back-up costs for new variable renewable capacity. o In the long-run (ex ante), variable renewable capacity due to its low «capacity credit» demands dedicated back-up, which is not commercially sustainable on its own. Impacts on dispatchable generators o In the short-run,the pecuniary externalities of subsidized, variable renewables (reduced electricity prices and load factors) will over-proportionally affect technologies with high variable costs such as CCGTs. o In the long-run, the structural re-composition of residual dispatchable capacity will over-proportionally affect technologies with high fixed costs such as nuclear. Issue for investors and researchers: when does the short-run become the long-run? 13

14 Short-Run Impacts In the short-run, renewables with zero marginal costs replace technologies with higher marginal costs, including nuclear as well as gas and coal plants. This means: Reductions in electricity produced by dispatchable power plants (lower load factors, compression effect). Reduction in the average electricity price on wholesale power markets, merit order effect (by 13-14% and 23-33%). Load losses Profitability losses Wind Solar Wind Solar Gas Turbine (OCGT) -54% -40% -87% -51% Gas Turbine (CCGT) -34% -26% -71% -43% Coal -27% -28% -62% -44% Nuclear -4% -5% -20% -23% Gas Turbine (OCGT) -54% -40% -87% -51% Gas Turbine (CCGT) -42% -31% -79% -46% Coal -35% -30% -69% -46% Nuclear -24% -23% -55% -39% Electricity price variation 10% Penetration level 30% Penetration level -14% -13% -33% -23% Power (GW) Gas (OCGT): Lost load Gas (CCGT): Lost load Coal: Lost load Nuclear: Lost load Yearly Load Residual load Utilisation time (hours/year) Declining profitability for baseload (gas, coal and then nuclear). Insufficient incentives for new investment; Security of supply risks as gas plants close (HIS CERA estimate 110 GW no longer cover AC and 23 GW will close until end 2014). 14

15 Long-Run Impacts 100 Gas (OCGT) Gas (CCGT) Coal Nuclear Renewables Capacity Credit Yearly load Residual load: wind at 30% penetration Capacity (GW) Dispatchable Dispatchable Renewables Without VaRen With VaRen Utilisation time (hours/year) Renewable production will change generation structure - also for back-up. Without countervailing measures (carbon taxes), nuclear power will be displaced by a more carbon-intensive mix of renewables and gas. Cost for residual dispatchable load will rise as more expensive technologies are used. No change in wholesale electricity prices for penetration levels < 25%. 15

16 System Effects of Different Technologies: Estimating Grid-level Costs Technology System Costs at the Grid Level (average of 6 countries - USD/MWh) Six countries, Finland, France, Germany, Korea, United Kingdom and USA analyzed Grid-level costs for variable renewables at least one level of magnitude higher than for dispatchable technologies o Grid-level costs depend strongly on country, context and penetration level o Grid-level costs are in the range of USD/MWh for renewables (wind-on shore lowest, solar highest) o Average grid-level costs in Europe about 50% of plant-level costs of base-load technology (33% in USA) o Nuclear grid-level costs 1-3 USD/MWh o Coal and gas USD/MWh. Nuclear Coal Gas On-shore wind Off-shore wind Solar Penetration level 10% 30% 10% 30% 10% 30% 10% 30% 10% 30% 10% 30% Back-up Costs (Adequacy) Balancing Costs Grid Connection Grid Reinforcement and Extension Total Grid-Level System Costs Total cost [USD/MWh] Grid-level system costs Plant-level costs 10% 30% 10% 30% 10% 30% 10% 30% 10% 30% 10% 30% Nuclear Coal Gas On-shore wind Off-shore wind Solar 16

17 Total Costs of Electricity Supply for Different Renewables Scenarios Comparing total annual supply costs of a reference scenario with only dispatchable technologies with six renewable scenarios (wind on, wind off, solar at 10% and 30%) o Takes into account also fixed and variable cost savings of displaced conventional PPs Germany UK USA Total cost of electricity supply [USD/MWh] Ref. Conv. Mix 10% penetration level 30% penetration level Wind onshore Wind offshore Solar Wind onshore Wind offshore Total cost of electricity supply Increase in plant-level cost Grid-level system costs Cost increase Total cost of electricity supply Increase in plant-level cost Grid-level system costs Cost increase Total cost of electricity supply Increase in plant-level cost Grid-level system costs Cost increase Solar 30% Total costs of renewables scenarios are large, especially at 30% penetration levels: o o Plant-level cost of renewables still significantly higher than that of dispatchable technologies. Grid-level system costs alone are large, representing about ⅓of the increase in unit electricity costs. 17

18 Impacts on CO 2 emissions and electricity price In the short-run, renewables replace technologies with higher marginal cost, i.e. fossil-fuelled plants emitting CO 2. Electricity market prices are significantly reduced (by 13-14% and 23-33%) Carbon emissions are reduced (by 30% to 50% per MWh) if mix stays the same. In the long-run, low-marginal cost renewables replace base-load technology. Similar electricity market prices at penetration levels < 25%. The long-term effect on CO 2 emissions depends on the base-load technology displaced o o (nuclear or coal): If there was no nuclear on the generating mix, renewables will reduce CO 2 emissions. If nuclear was part of the generating mix, CO 2 emissions increase. Short- and long-term CO 2 emissions Reference [Mio tonnes of CO 2 ] 10% Penetration level 30% Penetration level Wind Solar Wind Solar [%] [%] [%] [%] Short-term -31% -29% -66% -44% 59.3 Long-Term 2% 4% 26% 125% 18

19 New Markets for New Challenges The integration of large amounts of variable generation and the dislocation it creates in electricity markets requires institutional and regulatory responses in at least three areas: A. Markets for short-term flexibility provision For greater flexibility to guarantee continuous matching of demand and supply exist in principle four options that should compete on cost: 1. Dispatchable back-up capacity and load-following 2. Electricity storage 3. Interconnections and market integration 4. Demand side management So far dispatchable back-up remains cheapest. B. Mechanisms for the long-term provision of capacity There will always be moments when the wind does not blow or the sun does not shine. Capacity mechanisms (payments to dispatchable producers or markets with supply obligations for all providers) can assure profitability even with reduced load factors and lower prices. C. A Review of Support Mechanisms for Renewable Energies Subsidising output through feed-in tariffs (FITs) in Europe or production tax credits (PTCs) in the United States incentivises production when electricity is not needed (including negative prices). Feed-in premiums, capacity support or besta substantial carbon tax 19 would be preferable.

20 Lessons Learnt and Policy Conclusions Lessons Learnt The integration of large shares of intermittent renewable electricity is a major challenge for the electricity systems of OECD countries and for dispatchable generators such as nuclear. o Grid-level system costs for variable renewables are large (15-80 USD/MWh) but depend on country, context and technology (Wind ON < Wind OFF < Solar PV). Nuclear is 1-3 USD/MWh. o Grid-level and total system cost increase over-proportionallywith the share of variable renewables. With current technologies, 35-40% seems to be the limit of affordability and technical feasibility o Lower load factors and lower prices affect the economics of dispatchable generators: difficulties in financing capacity to provide short-term flexibility and long-term adequacy need to be addressed. Policy Conclusions 1. Account for system costs and ensure transparency of power generation costs. 2. New regulatory frameworks are needed to internalize system effects. (1) Capacity payments or markets with capacity obligations, (2) Oblige operators to feed stable hourly bands of capacity into the grid, (3) Allocate costs of grid connection and extension to generators, (4) Offer long-term capacity payments to dispatchable base-load capacity. 3. Explicitly recognize the value nuclear brings to long term stability and security of supply as the major dispatchable low carbon fuel. 20

21 Conclusions 1. The energy mix is determined by national circumstances and by policy decisions. Policy decisions need to take account of sometimes competing interests. 2. Nuclear power has advantages in an energy mix. For developed countries, it contributes to security of supply, reduction of GHG and provides stability of electricity prices over long periods. For many developing countries, it also meets the increasing demand for energy. 3. However, financing of nuclear power in a liberalised market is challenging because the market sends only short term signals and does not favour actions that require long term commitment. 4. This is compounded by grid operations that permit electricity tobe produced when not required and leads to weak wholesale power prices but increasing total costs. 5. In terms of costs, LCOE calculations confirm the overall lifetime competitiveness of nuclear but the industry needs to reduce costs and construction times for new designs. However LCOE is more applicable for social and not private optimality and thus agovernment role in favouring diverse low carbon sources seems necessary. 6. In particular for nuclear, if system costs were internalised, this would create a more level playing field and nuclear power would be increasingly competitive in comparison to intermittent renewables. Such a process requires more transparency on costs, a move away from subsidisation and greater recognition of the stabilising role ofbaseload technologies for grid operation. 21