Managing Demand and Supply Dynamics - Increasing Flexibility in the North European Energy System

Transcription

1 Managing Demand and Supply Dynamics - Increasing Flexibility in the North European Energy System Peter Markussen, DONG Energy Thermal Power EPG 2012, 3-5 December 2012

2 DONG Energy is an integrated utility and present throughout the value chain E&P Thermal Power Wind Power Energy Markets S&D Primary positions Geographical focus Central plants Waste-fired plants Gas-fired plants Offshore wind Onshore wind Hydro Wind farms under construction/planned Electricity and natural gas customers Gas storage capacity Electricity and gas sales Gas distribution Electricity distribution Gas storage Total revenue 2011: 7.6 bneur Total EBITDA 2011: 1.9 bneur Number of employees 2011: 6,098 FTE Current market position Strong ownership in a growing gas portfolio Leading thermal producer in Nord Pool and market leader in Danish district heating Growing wind portfolio with market leading position in offshore wind Power / gas infrastructure. Power / gas trading. Retail positions in several countries Leading in sales of electricity and natural gas in Denmark and present in several other countries Source: DONG Energy 2

3 kwh MWh GWh TWh Flexibility comes in many forms and shapes - flexibility is relevant on both local and national level Mature technology & market Ancillary services Demand response (customer flex.) Wind & PV firming* Virtual Power Plants of Electric Vehicles and Hydro Pumps Interconnectors CHP peakers Thermal storage CCGT Large Hydro Pumps Batteries Interconnectors Pumped hydro Waste to energy CHP on biogas Green gas Hydrogen by Electrolysis Fuel cells Promising solution awaiting maturation (technology and/or market) Smart Energy (local and national level) Securing power quality Shifting night and day Storing for the weather Leveling the seasons Minute Hour Day Week Month Year * Approach to handle fluctuations and uncertainty of wind and PV, often 3 through use of batteries Source: DONG Energy

4 Power Market towards 2020: Flexibility, efficiency and interconnectors drives revenue with encreased wind in the system Increased share of electricity from wind influence power prices More wind changes demand for thermal capacity.and the price setting in the power market Power demand (illustrative) extracted wind production Duration Curve for DK Power Price Stable strategic energy reserve Decreased need for compensation capacity Increased need for balancing Hours 50 % wind 30 % wind 1 year DKK/MWh 0 30% wind 50% wind Increased price volatility Reduced thermal production Decreased average power price Production cost (CHP) Time/year Source: Strategy 4

5 Thermal power plants may provide the required flexibility Wind leads to further demand for flexibility Power consumption and wind production January 5-7, 2012 MW GW Max flex demand in 2012 was +2GW Power consumption Wind production Hours Thermal power plants close the gap DK intra-hour supply of flexibility 2020, MW Difference minmax load thermal capacity EV/heat pump* Vattenfall DONG Energy Heat pumps Electrical vehicles (EV) Power Hub 100 Power Hub * expected average availability of 150,000 EV and 200,000 individual heat pumps Source: MPC May 2012, Power Hub, McKinsey flexibility study spring 2012, Energinet.dk market data 5

6 Increased Wind and Solar creates an Increased Need for Backup Capacity GW peak demand wind/pv UK NP GER, NL Source: IHS CERA

7 /MWh Current market conditions do not sustain CCGT build-out Significant intermittent renewable capacity build out Retirements and capacity additions from , GW GSS low but expected to improve outside NP Yearly average prices (Real 2011 prices) capacity addition RE- RENnew Nuclear - new Gas - new Coal - new Oil - new UK Germany Nord Pool -40 capacity retirement GER NL NP UK As a rule of thumb, GSS needs to be ~15 EUR/MWh to justify investment* 7 * Timera Energy - With current Engineering, Procurement and Construction prices Source: Green Spark Spread outlook = IHS CERA European Power Outlook, August 2011

8 New construction of interconnectors may increase flexibility but not on short run Existing Potential new interconnections Under construction NO4 SE1 NO3 SE2 FIN NO5 NO2 NO1 SE3 SE4 Source: Energinet.dk, Ofgem, Statnett, Svenska Kraftnät. and Tennet 8

9 Framework conditions decisive for future flexibility Regulatory issues Energy Market issues Market integrated support for renewables (e.g. equal conditions for all power producers) Create confidence in European CO2 prices towards and beyond 2020 Uncertainty and effects from capacity Payments Capacity Mechanism vs. strategic Reserve What is the future for nuclear? Market coupling between electricity markets Transparent balancing and ancillary markets Secure efficient use of interconnectors Market signals to create incentives for new investments Create incentives for flexible demand 9

10 Green conversion of DONG Energy's capacity income stream to secure future capacity Development in DONG Energy portfolio in DK More biomass and reduced use of coal Fossil fuel (coal, gas, oil) Waste Multi fuel (biomass, gas/coal) Planned conversion to biomass multi fuel PJ Coal Biomass 100 Måbjerg Herning Studstrup Horsens Esbjerg Skærbæk Ensted Asnæs Stigsnæs Kyndby Avedøre Svanemøllen H.C. Ørsted 80 ~6 mt 60 ~3,3mt ~1,4mt ~1mt * Total DONG Energy Total DONG Energy CO 2 emissions in DK CO 2 emission in DK ~2mt ~2,5mt 18 mt CO 2 10 mt CO 2 4 mt CO 2 * Dependent on final investment decision and market price development Source: DONG Energy. 10

11 Conclusions future flexibility Increased wind and solar capacity Increased demand for flexibility from existing assets Biomass co-firing or conversion New CCGT Interconnector development Increased interconnector development Increased flexible demand Nuclear? New Technologies Towards After