Status and Perspectives of Liquid Energy Sources in the Energy Transition

Transcription

1 Corrected Summary Phase 1 as of 26 October 2017 Status Quo and Technology Pathways Status and Perspectives of Liquid Energy Sources in the Energy Transition for Mineralölwirtschaftsverband e.v. (MWV) Institut für Wärme und Oeltechnik e.v. (IWO) MEW Mittelständische Energiewirtschaft Deutschland e.v. UNITI Bundesverband mittelständischer Mineralölunternehmen e. V. Project Management Jens Hobohm (Prognos AG) Hans Dambeck Hanno Falkenberg Andreas Weidler (PhD) Sylvie Koziel Paul Wendring Inka Ziegenhagen Benedikt Meyer (FhG UMSICHT) Martin Dotzauer (DBFZ) Translation: Dörte Müller Berlin, 26 October

2 About Prognos Executive Director Christian Böllhoff President of the Supervisory Board Jan Giller (PhD) Commercial Register Number Berlin HRB B Legal Form AG (Aktiengesellschaft) under Swiss Law Founded in 1959 Field of Business Activity Anyone who wants to make the right decisions tomorrow needs secure foundations. That is what Prognos delivers - independently, and based on scientific research rooted in practice. We have been doing research since 1959 for companies, associations, nonprofit organisations and public sector clients. In close cooperation with our clients we make sure their setup has the necessary leeway and durability. We do that by way of research, consulting and support. Our economic models are unique; our forecasts meet the highest standards. We have one goal: to give you a head start, when it comes to insight, competition and time. Working Languages German, English, French Headquarters Other Locations Prognos AG Prognos AG St. Alban-Vorstadt 24 Goethestrasse Basel Switzerland Berlin Germany Phone Phone Fax Fax Domshof 21 Résidence Palace, Block C Bremen Germany Rue de la Loi 155 Phone Brüssel Belgium Fax Phone Schwanenmarkt 21 Heinrich-von-Stephan-Strasse Düsseldorf Germany Freiburg Germany Phone Phone Fax Fax Nymphenburger Strasse 14 Eberhardstrasse München Germany Stuttgart Germany Phone Phone Fax Fax Web info@prognos.com twitter.com/prognos_ag

3 Table of Contents 1 Abstract 1 2 Task 2 3 Analysis of the status quo 3 4 Analysis of technologies and potentials Biomass Power generation from renewable energies Power-to-Liquid 8 5 Outlook 11 I

4 1 Abstract Liquid energy sources and resources are a significant part of the energy mix and form the basis of important industrial value-added chains in Germany (e.g. in the chemical industry). Above all, in parts of the transport sector and the chemical industry, liquid energy sources and resources are difficult to replace or cannot be replaced at all. In other areas that are still, to a large extent, supplied by liquid energy sources - such as passenger cars and the heating sector -, GHG-neutral energy carriers and systems (including Power-to-Liquid, PtL) will compete against each other. As liquid energy sources will be also needed in the future, the development of the energy pathway Power-to-Liquid will be a no-regret measure, from a climate-protection perspective. Renewably-produced liquid energy sources and resources based on PtL (efuels and feedstock) have significant advantages for the energy transition: they can be used in all consumer sectors, stored easily, and make use of existing infrastructure and appliances. Depending on site conditions production costs of 0.5 to 0.9 /l crude oil equivalent in 2050, assuming an interest rate of 2 percent can be expected. With an assumed interest rate of 7 percent, the costs are expected to amount to between 0.7 and 1.3 /l. Liquid energy sources and resources based on biomass are versatile and could play an important complementary role regarding the reduction of GHG emissions. Costs vary according to technology. Therefore, biomass should be used where it has the largest effect. Power generation from renewable energies will play an increasingly important role for the reduction of GHG emissions. However, currently the power-generation potential that is socially acceptable and therefore feasible remains unclear. In this context, alternatives to reduced GHG emissions as well as energy imports (e.g. in the form of PtL) are necessary in order to ensure Germany s supply of energy and resources. Even more so as many countries have (substantially) larger potentials and more favourable conditions for generating power from renewable energies than Germany. Remark: This interim report had to be corrected against the version from 30 September 2017 due to a miscalculation. The fault concerned the cost of PtL production being subject of the abstract, of chapter 4 and, especially, of Figure 4. PtL cost is now slightly higher as in the version of 30 September 2017, the range of results has also shifted upwards. 1

5 2 Task For a successful energy transition, it is an important prerequisite to balance the criteria of the target triangle of energy policy. When trying to reach greenhouse-gas neutrality in the second half of this century, we have to take into account three equally important targets: security of supply, an efficient climate and environmental protection as well as an economically feasible energy supply. At the same time, Germany is supposed to remain a competitive industrial location - as the German government already stated in its 2010 energy concept. In addition, public acceptance and the international context are important for implementing the energy transition. In principal, a successful energy transition requires application technologies, energy sources and resources that are ideally emission-free or GHG-neutral. Here, the largely GHG-neutral power generation from renewable energies is of utmost importance; regarding the energy end-use, this power can be used directly or be stored as e-fuels or be used as a chemical feedstock substance. Even though electrical power is very important, none of the numerous current studies on the energy transition assumes a complete transition of all energy uses to electrical power. This is, among other things, not only due to the limited domestic power generation potential, but also to a large extent to the high storage and transport costs of electrical power. The term All Electrical Society - that is sometimes used in this context - may be misleading as it does not address issues such as the energy supply of airplanes and the question of liquid resources that are used as substances in the production of a large variety of every-day products. Renewable biomass and energy sources - such as e-fuels and feedstock - that are produced using electrical power generated from renewable energies could become alternative, largely GHG-neutral energy sources and resources. Simply put, this means that hydrogen from renewable generation is combined with carbon dioxide - e.g. from the air - to GHG-neutral hydrocarbons. Associations of mineral oil industry have commissioned Prognos AG to analyse the status quo and perspectives of liquid energy sources and resources within the framework of the energy transition and to study the following issues: What importance does mineral oil have as an energy source, resource and economic factor in Germany today, and what is the long-term relevance of liquid energy sources and resources for the individual consumer sectors? Where is it impossible or difficult to replace them? What contributions can biomass-based, liquid energy sources and resources make to reduced GHG emissions? Is the potential of renewable energies for power generation in Germany sufficient to make all consumer sectors GHG-neutral? What technological progress can be reached, and what would be the costs for largely GHG-neutral, liquid energy sources and resources? What are the perspectives of liquid energy sources and resources resulting from that? 2

6 3 Analysis of the status quo Liquid energy sources and resources are a significant part of the energy mix and form the basis of important industrial value-added chains in Germany (e.g. in the chemical industry). Today, liquid energy sources (based on crude and vegetable oils) contribute to more than one third of the German primary energy consumption and, thus, are proportionally the most important energy sources in Germany. Liquid energy sources supply more than 99 percent of the energy in road traffic, aviation and shipping as well as about one fourth of domestic heating systems. The importance of liquid energy sources in the market is due to both their physicaltechnical characteristics (e.g. high energy density, high technical reliability), mature applications, a reliable supply infrastructure, their competitiveness as well as the storability along the supply chain to the location of its end-use. In addition, liquid hydrocarbons provide with about 74 percent the largest resource basis for the organic chemicals production. Tightly knit networks as well as the energy and product exchange between important, domestic industrial sectors such as refineries, petrochemical, chemical and plastics processing industries result in valuable synergies and contribute substantially to the country s international competitiveness. National and international climate-protection requirements will largely influence the future use of liquid energy sources. In principal, GHG-emissions originating from the production and use of mineral-oil based, liquid hydrocarbons can be gradually reduced and, in the long term, completely phased out (then without mineral oil). There are different options for that, such as to directly use electrical power from renewable energies as well as hydrogen produced with electrical power generated from renewable energies, in the production process of refineries, to increase the proportion of biomass in the resource basis (e.g. vegetable oils, pyrolysis oils), to use Power-to-Liquid (PtL) and Biomass-to-Liquid (BtL, PtBtL) technologies as a long-term perspective, as they have the potential to close the CO 2 cycle and thus would allow for the use of GHG-neutral liquid hydrocarbons in the context of an ambitious climate-protection policy. According to current knowledge, there will be several areas where - due to requirements regarding energy density, storability and transportability as well as the demand of carbon sources for substance-related processes - liquid energy sources and resources will continue to be necessary in the long run. In the transport sector, these are shipping and aviation and probably part of road transport, particularly heavy goods transport and longdistance goods traffic. In addition, in the chemical industry, liquid hydrocarbons are an important resource that can be hardly replaced. This means: As liquid energy sources will also be necessary in the future, the development of the energy pathway Power-to-Liquid will be a no-regret measure, from a climate-protection perspective. 3

7 In other areas that are still, to a large extent, supplied by liquid energy sources - such as passenger cars and heating sector -, various GHG-neutral energy carriers and systems (including PtL) will compete. In general, this is favourable for the consumer. A competition between GHG-neutral energy sources that is open to different technologies is an essential prerequisite for a cost-efficient implementation of the energy transition and an increased efficiency of the energy use. Figure 1: Perspectives of liquid energy sources Power-to-Liquid as an option besides other alternatives. Competition in innovation is decisive. Power-to-Liquid necessary due to very limited potential for biomass and electrification. Segments shares of total sales of liquid energy sources amounting to approx. 110 mio. tonnes in Source: Own presentation based on the Mineral Oil Statistics. Proportion of the areas using liquid energy sources and resources of total sales of approximately 110 million t in

8 4 Analysis of technologies and potentials There are various options for a largely GHG-neutral supply of the sectors that currently use liquid energy sources and resources. Sufficient generation potentials are decisive for the politically desirable reduction of GHG emissions by using renewable resources and/or electrical power generated from renewable energies. How much sustainable biomass and how much renewable electrical power can be sustainably produced in Germany? What is the potential of alternative options for reducing GHG such as PtL and what are their production costs? 4.1 Biomass Liquid energy sources and resources based on biomass are versatile and could have an important complementary function for reducing GHG emissions. However, the domestic potential is limited. The cost of biofuel varies largely according to production methods. The global biomass potential is substantial close to one fourth of the global primary energy consumption could be supplied by biomass. However, the biomass potential is unevenly distributed throughout different regions; and in Germany the biomass potential is limited due to dense population and alternative land use. We assume that in Germany the sustainably usable biomass potential amounts to about 1,000 to 1,600 PJ depending on whether energy crops are included (in the present analysis limited to 2.5 million ha or 25,000 km²). 1,600 PJ is equivalent to about 12 percent of the current primary energy demand in Germany. There is a large number of technical conversion methods for the energy- and substancerelated use of biomass. Biomass offers a high flexibility between heat, electrical power, liquid energy sources and substance-related carbon use. Today, biomass is converted, among other things, to vegetable oils, FAME (fatty acid methyl esters) or ethanol (1st generation biofuels). Biomass can be used to produce synthetic liquid energy sources and resources (Biomass-to-Liquids, BtL); the necessary synthesis methods can be combined with electrolytic hydrogen from renewable electrical power (Power-and-BtL); the use of electrolytic hydrogen, however, is limited due to the domestic supply of electrical power generated from renewable energies. By combining BtL with renewable electrolytic hydrogen, the domestic biomass can be utilized more efficiently - specific costs of provision of PtBtL are lower than those of BtL. Even though there is only a limited supply of domestic biomass, biofuels could be an important compliment for supplying the demand of liquid energy and substance-related applications, at least during a transitional phase towards a comprehensive supply of synthetic fuels (PtL). A model calculation arrived at a potential of up to approximately 1,300 PJ of BtL for supplying the demand of liquid energy and substance-related applications. This means, for instance, that 28 percent of today s primary energy demand of mineral oil could be replaced. We have not explicitly analysed the potential and possible allocations of biomass imports. 5

9 In Germany, the cost of producing liquid intermediate products (BtL) lies probably between 20 and 26 ct/kwh (interest rate of 2 percent) or 24 and 30 ct/kwh (interest rate of 7 percent). This means that BtL is a comparatively expensive alternative, among others, due to the fact that the units are smaller and will probably not be able to reach the same economies of scale as PtL. The allocation of biomass should be determined by raw-material efficiency, on the one hand, and alternative uses in other sectors and the respective costs, on the other hand. In phase II of this examination, we will look at these issues in more detail. Figure 2: Biomass potential in Germany in relation to primary energy consumption primary energy potential biomass primary energy consumption 2016 residual and waste materials potential of liquid products based on biomass energy crops primary energy consumption mineral oils 2016 Source: DBFZ(potentials), * AG Energiebilanzen (preliminary data) 4.2 Power generation from renewable energies Power generation from renewable energies will play an increasingly important role for the reduction of GHG emissions. Even though Germany has sufficient land to install windpower and solar plants, missing public acceptance and other issues may limit the further expansion of power generation from renewables. This means that Germany has a vital interest in establishing GHG-neutral import options to ensure Germany s supply of energy and resources. Renewable energies allow for a largely GHG-neutral electrical power generation. The domestic potential of renewable energies, however, depends on the public acceptance of the land use. Even the development according to current land-use plans requires political and social consensus. Taking full advantage of current land-use plans 1 would result in a 1 Land-use plans for onshore windpower. Offshore and PV according to remarks in grey box under Figure 3. 6

10 installed capacity [GW] power generation of 442 TWh. If 2 percent of the country s land is used for onshore windpower and 0.5 percent for photovoltaics (PV) (together close to 9,000 km²), this results together with other options (offshore windpower, PV on roofs, biomass, hydropower) in 865 TWh electrical power generation potential. It is hard to predict whether a further expansion in this order would be possible, regarding both sustainability and public acceptance. Independent of this, there is a number of requirements for the further expansion of renewable power generation capacities: including public acceptance of a further expansion of transmission networks, technical feasibility of electric power applications in the consumer sectors, investments by end users as well as a comprehensive, uninterrupted supply of electrical power by an increasingly volatile power generation. There has to be a secure supply of peak load demand, even if there is no wind or sun available, which requires the corresponding reserve capacities. Figure 3: Possible installable capacity and power generation potential of renewable energies in Germany according to energy sources ~ 97 GW 182 TWh ~ 210 GW 442 TWh A (land-use plans) B (ambitious) Approx. 1% of national territory for wind power deployment. EEG 2017 projection leads to approx. 15 GW utility-scale PV. Offshore land-use planning (July 2017) includes approx. 31 GW capacity until ~ 430 GW 865 TWh* Approx. 2% of national territory for wind power deployment. 0,5% for utility-scale PV. Approx km² for offshore wind in land-use planning in cluster biomass hydro wind offshore wind onshore utility-scale PV rooftop PV * Prospective, further offshore capacity by offshore cluster 14; an offshore cluster that has not been developed yet, at a large distance off the coast, with an area of 2715 km² and an additional ~ 50 GW of installable capacity and ~ 200 TWh of generating potential. (Cf. Bundesfachplan Offshore für Nordsee/Ostsee des BSH, as of 2017) Compare: In 2016, gross electrical power consumption in Germany amounted to 595 TWh. The future development of electrical power consumption depends on a large number of factors; the increasing electrification of both today s and future energy-consuming activities alone results in a growing electrical power demand, despite demand-side 7

11 efficiency improvements. Thus, most of the over 20 scenarios of different authors that have been analysed assume a growing demand of electrical power in Germany. In the analysed studies, the expected electrical power consumption for the year 2050 will amount to between 440 and 1,100 TWh. Due to the security of supply, it is unlikely that net electrical power imports (i.e. after the deduction of exports) will be massively expanded. There may be also economic reasons opposing electrical power imports, if generation and transport costs (network expansion to the German border) exceed domestic generation costs. We can therefore assume a preference for domestic power generation. In addition, we assume within the framework of this analysis that all other European countries prefer to supply their electrical power demand from domestic windpower and PV plants in order to reach their own ambitious climate goals. However, the cross-border exchange of electrical power will become increasingly important as it constitutes an important flexibility option for the electric power system of the future. In general, most current studies assume that the domestic renewable energy potential is sufficient to supply the overall annual electrical power demand. However, this depends largely on the degree of electrification and the assumptions regarding the efficiency development. In addition, it requires a significant increase of the available land in relation to current land-use plans. We have already mentioned further prerequisites for this. Probably, it will not be sufficient for a large-scale industrial production of liquid (or gaseous) GHG-neutral energy sources and resources in Germany. This means: Alternative GHG-reducing options and energy imports (similar to today s situation) will be necessary. 4.3 Power-to-Liquid Renewably-produced liquid energy sources and resources (PtL) have significant advantages for the energy transition and may depending on site conditions - be produced at a cost of 0.5 to 0.9 /l crude oil equivalent by 2050 (assuming an interest rate of 2 percent). With an assumed interest rate of 7 percent, the costs are expected to amount to between 0.7 and 1.3 /l. Currently, Power-to-Liquid (PtL) is considered the most promising technology for a largescale industrial production of GHG-neutral, liquid energy sources and resources. It means that hydrogen from renewable generation is combined with carbon dioxide to GHG-neutral hydrocarbon. Carbon dioxide can be extracted from the air, for instance. Regarding the production costs of PtL, low electricity cost and high full-load hours are particularly important as they have a decisive influence on the total price of the end product. This means that large-scale PtL should be produced at places that have the necessary conditions. This is the case of certain regions in Europe. However, production outside Europe would be particularly reasonable, as it has economic advantages. Due to meteorological conditions, production costs would be lower and full-load hours higher; in addition, potentials in other countries are partially substantially larger than those in Europe. It appears to be reasonable though to build PtL demonstration plants in Germany to prepare the market implementation. 8

12 The most important technologies for producing PtL are the Fischer-Tropsch process (FT) and the methanol synthesis. Both processes offer the advantage that a large number of GHG-neutral products can be produced using the existing infrastructures, e.g. refineries; Via the methanol route methanol can be produced as an intermediate for chemical production in the first hand. Secondly, by using other chemical processes (olefin synthesis, oligomerisation and hydro treatment), fuel, diesel and jet fuel can be produced. The FT-process has the lowest cost. In the long term (2050), GHG-neutral e-fuels and feedstock could be produced at a cost of approximately 5.2 to 9.6 ct/kwh (0.5 to 0.9 /l) assuming an interest rate of 2 percent, and at a cost of 7.3 to 13.9 ct/kwh (ca. 0.7 to 1.3 /l) assuming an interest rate of 7 percent (without refinement). 2 However, an individual country alone will not be able to reach these values as the learning curve will not be steep enough. Assuming favourable conditions, e-fuels (FT method) will approximate current conventional fuels by Compare: A price of 50 (or 100) $/barrel for fossil crude oil corresponds to about 0.26 (0.52) /l. Figure 4: Range of PtL production costs in 2030 and 2050 (Fischer-Tropsch method) 1 Source: Fraunhofer UMSICHT (electricity cost: Prognos) We have analysed how different factors affect costs (sensitivity analysis). The results show that the following parameters are particularly important: 2 Here, the lower value of the given range assumes optimum conditions regarding site conditions and efficiency of electrolysis, and the upper value less favourable site conditions and efficiency. One litre PtL has a calorific value of 9.56 kwh. 9

13 The efficiency of the electrolysis has the largest effect on costs as it directly affects the plants output. Investment costs: The plants are capital-intensive. As opposed to this, operating costs are less significant. Total rate of return (here: rate always refers to real interest rates): Due to the high capital intensity, the assumed rate of return is an important impact factor. For this reason, we have presented results for two different interest rates (2 percent and 7 percent). Electricity costs: Due to the electricity required for producing hydrogen, electricity costs have a large impact. Also here, costs include the required rate of return. GHG-neutral, liquid energy sources and resources (e-fuels and feedstock) have significant advantages over alternative GHG-reducing methods: 1. Technically, liquid energy sources and resource can be used in all consumer sectors; no complex and costly conversions will be required. 2. It is partially possible to use existing transport structures and infrastructures for transporting them from production sites to consumers. The supply is independent of networks. 3. They can be stored over the entire supply chain and be traded worldwide and thus ensure a high security of supply for the industrial location Germany. 4. Liquid energy sources based on PtL, BtL or PtBtL are able to reduce GHG emissions decisively in all current consumer areas. 5. Liquid energy sources and resources based on PtL, BtL or PtBtL provide an opportunity to supply the large substance-related carbon demand in a GHG-neutral way. Assuming a GHG-neutral scenario, they are indispensable for the chemical industry in Germany. 6. As GHG-neutral liquid fuels can be added without any problems to current liquid fossil energy sources, they can contribute to a gradual CO 2 reduction all the way to complete GHG emission neutrality (drop-in possibility of 0 to 100 percent). 10

14 5 Outlook It will require considerable efforts to realise these benefits for the German energy transition. It is a complex and capital-intensive endeavour to build large windpower and solar farms as well as integrated production plants for seawater desalination, electrolysis and synthesis. This requires stable framework and investment conditions. The next part of the study will analyse two realistic energy-supply scenarios for Germany as well as recommendations of how to initiate the development of the corresponding infrastructure. 11