Perspectives for the energy system of the future

Transcription

1 Perspectives for the energy system of the future Frank-Detlef Drake Head of Group Research & Development, RWE AG RWE Credit Day London, 9 October 2012

2 Energy for the future Overview of R&D at RWE Perspectives for the energy system of the future Implications for markets and market design

3 RWE currently ranked as most innovative utility in Europe Innovative R&D has been a tradition at RWE that we want to continue R&D budget: more than 100 million (excl. investments of suppliers and other co-operation partners into demonstration plants and R&D) R&D along the entire value chain with a focus on reducing CO 2 emissions R&D portfolio with more than 250 projects; over 50 patents in 2011 Most R&D projects are developed close to operations in co-operation with suppliers and research institutions Ranked as most innovative utility in Europe in Innovation Index of European School for Management and Technology (ESMT Berlin, 2012) 31

4 RWE R&D projects cover the entire value chain EXAMPLES Upstream Power generation Transport/storage Application Gas/oil Coal-based Electricity grids Residential households > Reservoir characterisation > Sedimentation and maturity history > Gas hydrates > CCS/CCU* > Lignite drying > High temperature materials > Coal quality > Smart grids > High Voltage DC > Delimitation of steel towers > Smart metering > Smart home Mining > Automation of large-scale equipment > Diagnosis conveyor-belt systems > Groundwater modelling Renewable Electricity storage Transport > Wind offshore > Biogas production > Marine energy > Compressed-air storage > Distributed storage via batteries of electric cars > E-mobility > Comparison H 2 vs.electric drive Nuclear Gas grids/reservoirs Industry/commerce > Safety > Securing of know-how > Dismantling > Pipeline integrity monitoring > Distributed electricity and heat supplies > Gas sensors Overarching technology and systems analysis * CCS/CCU: Carbon Capture and Storage/Usage; 32

5 Energy for the future Overview of R&D at RWE Perspectives for the energy system of the future Implications for markets and market design

6 Two tons of CO 2 per capita per year are quickly used up with today's energy supply Annual CO 2 emissions of a medium-sized passenger car Automobiles Heat Heating of a singlefamily home with four people Return flight Frankfurt Los Angeles Air travel or Products Production of goods worth approx. 4,000 Transformation of entire energy system needed if ambitious CO 2 -reduction shall be achieved 34

7 A common view on how CO 2 -targets can be met in a cost-efficient way is emerging Generation Infrastructure Demand 1 High efficiency 2 More electricity 3 Low-CO 2 electricity mix Key guidelines for the design of the energy world of tomorrow 35

8 Two theoretical paths towards a low-co 2 electricity system to be achieved by 2050 Main elements Indicated preference 1 Short bridge > Quick and massive expansion of renewables > No construction of conventional or nuclear power plants > Massive development of grid infrastructure and, if necessary, storage facilities Long bridge Photo source: Wikipedia.org/Sandö Bridge > Continuous expansion of renewables > At least one more round of conventional and nuclear power plant new-build > Use of carbon capture & storage > Gradual adaptation of infrastructure in line with change in generation 36

9 Germany pursues the short bridge assuming a reduction of domestic power generation by 45% German energy concept for electricity ( short bridge ) 17% Demand reduction 25% Import 20% -45% 58% Renewables 45%* 25% Nuclear Conventional Generation 10% Source: EWI/Prognos/GWS study * In relation to the reduced power generation, this comprises the often quoted 80% of RES generation 37

10 The short bridge builds on the expected further cost reduction of RES Levelized costs of electricity for Renewables in Europe [ 2011 /MWh el ] CSP Europe Large PV North Europe 120 Biomass (average) Offshore Wind (3,200h) Onshore Wind (2,000h) Large PV South Europe

11 For both bridges we need to cope with increasing shares of volatile Renewables Power generation 230 V 50 Hz Power consumption Potential solutions/measures 1 Flexible power generation Grid expansion 2 3 Smart Technologies Energy storage Combination of and is most cost-effective, and as additional options. 39

12 Combination of flexible generation and grid expansion is the most cost-effective way Times of surplus energy > 10 GW 5 10 GW 1 5 GW < 1 GW Times w/o sun and wind Demand in GW With Supergrid EU 150 W/o Supergrid 400 Capacity today 400 Requirement Doubling of grid capacity until 2030 needed Advantage Challenge Source: ECF Scenarios > Cost-effective: Full European grid < 10% of generation capex > Increased secure RES generation due to interconnection > Public acceptance > Complex and long permission and approval processes Realization highly challenging > Back-up capacity is more cost-effective than storage or DSM (demand side management) > Very low utilisation of back-up plants > Acceptance of old plants (since not a 100% CO 2 free option) 40

13 For long-term storage, hydrogen based solutions are an option, but far too expensive Wind-methane concept Volatile generation η 65% + - CO 2 η 90% η 60% el. H 2 CH 4 CH 4 el. Electrolysis Methane production Gas grid CCGT G /MWh: ,500 Considering electrolysis, methane production and reelectrification 1 System efficiency Costs of electricity Methane production costs 35% ca. 1,000 /MWh ca. 500 /MWh 1 Assumption: CAPEX total value chain (w/o gas infrastructure) ca. 5,500 /kw 41

14 A pan-european approach has significant cost advantages Average Levelized Cost of Electricity per scenario, 2050 [ /MWh, real terms] Storage facilities Distribution grid Ultra high voltage grid Generation % % +86% +142% Base case 1 Long bridge (European) Short bridge (European) National 100% RES (Germany) Local/distributed gen. (Germany) CO 2 reduction in % 2 : 20% CO 2 reduction in each scenario > 85% 1 Today s generation mix continued with modernization/reinvestment 2 Compared with today (2008); assumption: constant quantity of electricity 42

15 RWE is shaping the future of energy (1/2) RWE activity Lange Brücke Clear commitment to achieving carbon-neutral electricity generation by 2050 Continuous expansion of renewables Founding member of Desertec Industrial Initiative (DII) ( ) New-built and operation of modern, highly efficient and flexible gas- and coal-fired power plants Transition to a more flexible conventional power plant fleet Extensive, international development programme for CCS and Carbon Capture and Usage (CCU) Development of technologies and business models around decentral generation, such as PV and micro-chp (combined heat and power) Photo source: Wikipedia.org / Sandö Bridge 43

16 RWE is shaping the future of energy (2/2) RWE activity Leading expertise in grid planning and operation at all voltage levels Development/testing of smart grid concepts Leading role in driving forward electric mobility Foundation of RWE Effizienz GmbH to commercialise efficiency Systematic research and development along the entire value chain Development and open discussion of the prospects of tomorrow's energy supply Photo source: Wikipedia.org / Sandö Bridge 44

17 Energy for the future Overview of R&D at RWE Perspectives for the energy system of the future Implications for markets and market design

18 Forecast is difficult, but RES on the rise and conv. power plants with reduced full load hours Influencing factors % of load today Load Residual load (conventional) > Volatile > Shrinking RES generation Load > Success of energy efficiency > Degree of electrification RES share > Persistence of subsidies/incentives > Availability of capital > Public acceptance > Speed of grid expansion > Security of supply issues

19 Supply of subsidized RES depresses CO 2 -price and distorts wholesale markets RES impact on EU-ETS CO 2 -price [EUA, /t CO 2 ] Mitigation costs [ /t CO 2 eq] Without subsidised RES Fixed mitigation target Mitigated emissions [t CO 2 eq/a] Thus, CO 2 -price is and remains depressed Mitigation costs [ /t CO 2 eq] 10 With subsidised RES RES Mitigated emissions [t CO 2 eq/a] 0 Historic Forward

20 Regulators all over Europe discuss capacity markets as a cure Capacity payments basically agreed on, but no decision on selection of mothball market or fully fledged capacity market. Mothball market in order to secure supply in years with low hydro availability. Not exhaustive Capacity obligations. Access to EDF production by new entrants through regulated price/ contracts. Ongoing discussion on a capacity market with not defined design. Capacity payments with volume depending on system capacity margin. Fully fledged capacity market envisaged. Extra system for reserves by battery storages discussed. Measures to attract investments in carbon-free technologies or in stable thermal technologies at an efficient cost are needed. 48

21 A new European market design is needed A single European electricity market needs a harmonized single European legislation E.g. a European hybrid quota system with suppliers obligation for RES A restrengthening of the EU- ETS to achieve cost-efficient CO 2 -mitigation An efficient mechanism to ensure system stability (e.g. reserve market) 49

22 And finally: Who will fund the transformation? EU energy invest and sources of finance [ bn/a, real 2010] Institutional Investors Private Investors Public Utilities/EU Funds Listed Utilities ~55% ~70% > Energy world of the future offers manifold investment opportunities > However, ambitious political targets can only be met with additional sources of funding > In order to attract capital, politics needs to establish a market/ regulatory framework that allows for sufficient returns > Partnership models need to be explored ~45% ~30% Today Ø Future ( ) Source of future net investment data: McKinsey study 2010 Transformation of Europe s power system until Own calculation. 50

23 RWE Credit Day London, 9 October 2012