Energy transition on track or in troubled waters: Insights from recent trends and experiences in Germany and elsewhere

Transcription

1 Energy transition on track or in troubled waters: Insights from recent trends and experiences in Germany and elsewhere Kyoto University Dr. Felix Chr. Matthes Kyoto, 3 th September 216

2 Transforming the energy system Economic background German population 81 million German GDP in 3,26 bn (3,359 bn US$) in Highly industrialized (26% of GDP from industry) Strong manufacturing industry Strong primary industries (215: Crude steel production 43 mln t, Primary aluminum production 531, t) - Strong net exporter (net trade surplus in 215: ~ 248 bn ) Primary energy (215): Oil 34%, natural gas (21%), hard coal (13%), lignite (12%), renewables (12,5%), nuclear (7,5%) Power generation (215): lignite (24%), renewables (31%), hard coal (18%), nuclear (14%), natural gas (9%), others (4%) Strong federal structures (significant impact of states on energy legislation), strong municipalities (~9 municipal utilities) Member of the European Union (internal market, increasing integration of energy and climate policies)

3 Transforming the energy system There are many drivers Primary drivers - contribution to avoid dangerous climate change - minimize overall vulnerability of the country (e.g. nuclear risks, energy security) - modernize the country with cutting-edge technology to strengthen the economic basis of the country There are however other dimensions - major investment needs exist anyway - increasingly volatile global fuel markets - major technological innovation and cost decrease is underway (solar PV, offshore wind, storage, ICT) - major cost increases for conventional technologies - deep crisis of coal industry (high fixed costs and uncertain future) - major uncertainties on the macroeconomic and international policy environment

4 Transforming the energy system Not to forget the broader framework Liberalised energy markets (since 1996) - utilities are increasingly vulnerable to switching customers - unbundled electricity and gas network operations (legal/ownership) - central trading platforms (electricity exchange) provide price transparency - broad market transparency on generation, networks A strong tradition of decentral/cooperative economic activities (since the early 2 th century) - strong decentral/cooperative sector (businesses, financial sector etc.) - robust legal and institutional framework for the decentral/cooperative sector

5 The Double U-turn of German Policy It was not only about nuclear! Highly controversial Energy Concept 21 (September 21) - Lifetime extension of nuclear plants (by 8 to 12 years) - Ambitious climate and energy policy targets - Some additional policies (Energy & Climate Fund!), significant gaps in respective policies Revision of the 21 decisions (Spring/Summer 211) - Reversion of NPP lifetime extension, acceleration of phase-out - Confirmation of targets - Additional policies (efficiency, CHP, renewables, infrastructure, regulation) - Result: continuation of (well-discussed and well-prepared) strategies, now with a clear long-term focus Comparable debates within the EU (apart from nuclear): Low-carbon Economy Roadmap 25, Energy Roadmap 25)

6 The German case study Energiewende as a comprehensive strategy GHG emissions Renewable Energies Energy efficiency Nuclear power Gross final consumption Power generation Primary energy Space heating Final Energy Power consumption % % % 219-6% 22-4% 18% 35% -2% -2% -1% -1% 221-8% 222-1% 23-55% 3% 5% 24-7% 45% 65% 25-8 to -95% 6% 8% -5% -8% -4% -25% Base year BReg

7 The historical context Electricity generation & electricity policy Nuclear Policy Coal Policy Renewables Policy Breakthrough Mandatory use of domestic coal Stagnation Phase-out Shift to imported hard coal & hard coal decline Take-off & breakthrough Decline & phase-out of hard coal and lignite Stabilized growth Main source of electricity Other renewables Biomass Solar Wind 6 Hydro TWh * Other fossil Natural gas Hard coal Lignite Nuclear * : Western Germany only Kohlenstatistik, Matthes (1999, 215)

8 The historical context Long history of CO2 emissions & ambitious goals 1,4 1,2 CO2 from other fuels CO2 from gaseous fuels CO2 from liquid fuels CO2 from solid fuels Post-war recovery German unification mln t CO2 1, Data include the German Democratic Republic (GDR) for Industrialization Great Depression World War I World War II Financial crisis Decarbonization targets CDIAC, UBA, Öko-Institut

9 The EU ETS: Robust long-term commitment Long-term caps and/or other long-term mechanisms mln t CO2e EU ETS cap 22 Goal % compared to 199 Aviation (national & international) Non-ETS sectors EU ETS (proxy data from 199 to 24) 23 Goal % 25 Goal % 25: -75% 1. Linear Reduction Backloading Factor 1.74% 213/22 2.2% (221-) Öko-Institut 214

10 The bigger picture on the future electricity system The market and regulatory environment New quality of (global) fuel market uncertainties! New quality of technology development / cost uncertainties! New quality of regulatory uncertainties? Liberalisation/ Restructuring Deep Decarbonisation Decentralisation Digitalisation Infrastructure dependency Sector integration The competitive environment is there to stay Free customer s choice Unbundling New technologies with new economic characteristics Energy efficiency implications New technologies Strong coordination needs New players New economic appraisals Stronger and partly new roles for transmission and distribution grids Unsettled role of storage New energy demands Flexibility options from sector integration Matthes 216

11 The changing costs of new supply systems Storage costs as (additional) game changer?! 1 Crystalline Si PV Module Li-ion EV Battery Pack USD (214) per MW / MWh 1 1, MW / MWh (cumulative) BNEF, Öko-Institut

12 Energy transition in Germany Expansion of power generation from renewables 7 6 Historical data Legal EU committment National goals 1% Geothermal 5 Landfill gas Waste (biogenic) Expansion corridor for power generation from RES to 8-1% in 25 8% TWh 4 3 Biomass Photovoltaics 6% 2 Wind - offshore Wind - onshore Minimum expansion Energy Concept 21/211 4% 1 Hydro Expansion corridor EEG 214 2% % Germany: Historical & projected roll-out of power generation from RES BMU. BMWi, Öko-Institut 214

13 Structural change in power generation structures Historical patterns (average week, stylized) Average week Peak Medium Base Load 5 GW Mon Tue Wed Thu Fri Sat Sun Matthes 216

14 Structural change in power generation structures Historical data 215 (average week) Average week 215 Solar Wind Residual Load 5 GW Mon Tue Wed Thu Fri Sat Sun Matthes 216

15 Structural change in power generation structures Illustrative projection 225 (average week) Average week 225 Solar Wind Residual Load 5 GW Mon Tue Wed Thu Fri Sat Sun Matthes 216

16 Structural change in power generation structures Illustrative projection 235 (average week) Average week 235 Solar Wind Residual Load 5 GW Mon Tue Wed Thu Fri Sat Sun Matthes 216

17 Structural change in power generation structures Illustrative projection 245 (average week) Average week 245 Solar Wind Residual Load 5 GW Mon Tue Wed Thu Fri Sat Sun Matthes 216

18 Structural change in power generation structures Historical patterns (windy & sunny week, stylized) Week No. 16 Peak Medium Base Load 5 GW Matthes 216

19 Structural change in power generation structures Historical data 215 (windy & sunny week) Week No Solar Wind Residual Load 5 GW Mon Tue Wed Thu Fri Sat Sun Matthes 216

20 Structural change in power generation structures Illustrative projection 225 (windy & sunny week) Week No Solar Wind Residual Load 5 GW Mon Tue Wed Thu Fri Sat Sun Matthes 216

21 Structural change in power generation structures Illustrative projection 235 (windy & sunny week) Week No Solar Wind Residual Load 5 GW Mon Tue Wed Thu Fri Sat Sun Matthes 216

22 Structural change in power generation structures Illustrative projection 245 (windy & sunny week) Week No Solar Wind Residual Load 5 GW Mon Tue Wed Thu Fri Sat Sun Matthes 216

23 Expansion of German RES generation capacities Phases of the transition towards a new market design GW Geothermal The Landfill early gas deployment phase: support Biomass schemes Wind - offshore Wind - onshore Hydro Historical Data minor Waste (biogenic) shares innovation Photovoltaics & lead markets learning Legal EU commitment Maximum effective load coverage of the RES-based generation fleet The new energy system: National targets a renewables-based system The phase beyond the niche: new market design significant shares storage as a significant Expansion corridor feature for of infrastructure transition power from generation support from RES schemes to market to 8-1% design in 25 system & market integration 1% 8% 6% 4% 5 Load range 2% % Germany: Historical & projected roll-out of RES generation capacities BMU. BMWi, Öko-Institut 214

24 What about the costs? Perspective 1: Historical wholesale prices EUR / MWh Different wholesale (base) electricity price trends and levels in Europe Matthes 216

25 What about the costs? Perspective 3: Retail electricity prices (households) 3 Value added tax (VAT) 25 Electricity tax Offshore liability surcharge ct / kwh Renewables surcharge Demand response surcharge Cogeneration surcharge Industrial network access fee privilege ( 19) surcharge Concession fee Sales & profits Network access fees Wholesale market price (previous year future) Öko-Institut 216

26 What about the costs? Perspective 2: Financing actual RES investments RESA surcharge Wholesale electricity price ct/kwh (216) Öko-Institut 216

27 Insights from the EU Energy Roadmap 25 Primary energy supply for different trajectories Mtoe Status Quo Renewable energies Electricity Nuclear Natural gas Oil Solids Business as usual (no ambitious climate policy) Focus: Energy Efficiency Base Reference CPI High Efficiency Focus: Renewables High RES Decarbonisation Focus: Nuclear (sustainable???) High Nuclear Focus: CCS (sustainable???) High CCS Diversified options Diversified Options Status Quo European Commission, E3MLab 211

28 Power generation for different trajectories Renewables dominate for each trajectory Others Renewable energies Nuclear Natural gas Oil Solids CCS 4. TWh Base Reference CPI High Efficiency High RES High Nuclear High CCS Diversified Options European Commission, E3MLab 211

29 Insights from the EU Energy Roadmap 25 The longer-term system cost trends 1. higher system costs 2. (very) comparable system costs 3. capital-intensive 4. medium-term challenge: storage costs 2 18 Network & sales costs Energy taxes and CO2 costs Variable & fuel costs Fixed & capital costs / MWh Reminder: 4 From today s perspective (extremely) optimistic assumptions 2 for nuclear, rather pessimistic for renewables, probably realistic for CCS, future storage costs Base Reference CPI High Efficiency widely unknown High RES High Nuclear High CCS Diversified Options European Commission, E3MLab 211, Matthes 212

30 A long-term thought experiment on Germany Embarking on different tracks GW Other renewables Photovoltaics Offshore wind Onshore wind Batteries Pumped-water Other fossil Natural gas OGT Natural gas CCGT Hard coal w/o battery storage with battery storage Fossil standard mix Naturalgas-based power system 95% Renewable energy sources Conventional new-built system Lignite Hydro PtG capacity Öko-Institut (216)

31 A thought experiment on Germany Going renewables is the more robust way 1 % System costs EUR bn % -5% -75% CO2 emissions vs 199 /36 27/ GW EUR/t CO2 EUR/t CO2 EUR/t CO2 EUR/t CO2 Battery/PtG Fuel prices low Fuel prices high Fuel prices low Fuel prices high Renewables (wind/solar) Fossil mix (mainly coal-based) Natural gas-based Grid infrastrcuture Operational costs Capital costs CO2 emissions ( ) -1% Öko-Institut (216)

32 Beyond the economics of the system New structure of players and assets The traditional German power system - Running a (centralized) system based on 5 large generation units The emerging new power System in Germany (as of summer 215) - approx. 1.5 million PV installations - approx. 3, wind power installations - approx. 1, biomass power plants - approx. 3, small- and medium-scale cogeneration plants - approx. 7 conventional power generation units The need for a new market design - for phase 1 of roll-out of renewables ( 25% market share) investment certainty and broad economic participation are priority #1 - for phase 2 a new balance needs to be found between priorities from phase 1 and the increasing need for coordination and an appropriate sharing of risks

33 Expansion of power generation from renewables New structure of players & the need for coordination Farmers 11% Others 1% Industry 14% Fonds / Banks 13% Total Capacity 72,9 MW (212) Individuals 35% Other utilities 7% Major four utilities 5% Project developers 14%

34 The geographic dimension of Energiewende The old geography Low load / medium conventional region North Low load Medium nuclear capacities Low conventional capacities High load / high coal region West High load High coal capacities High CHP capacities High load / high nuclear region South High load High nuclear capacities Low load / high coal region East Low load High coal capacities High CHP capacities Medium load / storage region Center Medium-/ high-load High pump-storage capacities

35 The geographic dimension of Energiewende The new geography High wind region North Low load High onshore/offshore wind High load /medium RES region West High load Medium RES High CHP Coal phase-out High load / high PV / high storage region South High Load High PV Access to storage capacities abroad Ultranet New DC corridors SuedLink SuedOstLink Low load / high wind Region East Low load High wind High CHP Coal phase-out Medium load / infrastructure & storage Region Center Medium/high load Medium RES High pump storage capacities Large electricity transits

36 The future is unknown and uncertain but we may be able to describe it structurally From an overall perspective on all challenges and (foreseeable) trends some structural features of the future energy system will probably be robust ones - Significantly more energy efficient but not necessarily less consuming - Mid-term low CO2 and longer-term zero CO2 - Much more diverse (technology options, centralized / distributed / decentralized, economic perspectives and appraisals etc.) - Much more (but not exclusively) distributed and decentralized - Much more coordination-intensive - Much more capital-intensive - Much more infrastructure-intensive (and subject to much more regulatory efforts?!) - Much more sensitive to public acceptance - Not significantly more expansive (than the counterfactual) Transition will be step-wise and priorities will differ in different steps / phases. Without reflection on these long-lasting and robust structural features one might end on a dead track

37 Energy transition What do we know and what are the challenges? Energy transition: a policy-driven structural change of the energy system The target system is technically feasible and affordable - manifold options at the supply & flexibility side exist already or are in the pipeline - costs of the target system do not differ significantly from the counterfactual, transition costs and distributional effects are however significant) The real challenges arise from structural changes that needs to be reflected carefully for the design of the transition process a - structurally changing technology patterns - structurally changing economics (a zero marginal costs system) - structurally changing players / market participants - structurally changing spatial patterns

38 Effective, innovative & efficient strategies The Four-Pillars Approach Paving the Way for clean generation and flexibility options (renewables & complementary flexibility) J - innovation, level-playing-field & roll-out - sustainable economic basis (coordination & enabling investments) Designing the Exit-Game for the non-sustainable capital stocks - security of supply, flexibility, emission levels and fixed costs - output management (ETS etc.) vs. capacity management - nuclear power (J) and high-carbon assets (L ) The infrastructural dimension: Triggering adjustments in time L - integration of centralized and distributed and storage and demand flexibility options - reflection of the new geography of the energy system The innovation side: Making innovation work in time J - for energy efficiency, generation, flexibility, storage and integration

39 Thank you very much Dr. Felix Chr. Matthes Energy & Climate Division Berlin Office Schicklerstraße 5-7 D-1179 Berlin twitter.com/felixmatthes