A Green European Energy Market : The Role of Cross-border Trade

Transcription

1 A Green European Energy Market : The Role of Cross-border Trade Richard Green and Iain Staffell Imperial College Business School

2 Research Questions What will the European electricity mix look like in 2050? How important is the ability to move power between regions within Europe? Will current market designs be able to cope? Imperial College Business School 2

3 Scenarios for 2050 Imperial College Business School 3

4 TWh / year TWh / year TWh / year CO 2e / year (% of 1990) DECC s 2050 Calculator 3,000 2,500 2,000 1,500 1, ,000 3,500 3,000 2,500 2,000 1,500 1, Energy supply and demand Primary supply Demand Natural gas Oil and petroleum products Coal Agriculture, waste, and biomatter imports Environmental heat Primary electricity, solar, marine, and net imports Lighting & appliances Heating and cooling Industry Transport International shipping International aviation National navigation Domestic aviation Rail transport Road transport Emissions Energy Security Contextual Data Emissions (% of base year) 100% International Aviation and Shipping 75% In the event of a 5 day peak in heating and drop in wind Waste Land Use, Land-Use Balancing capacity used 32% % 36% 54% 0% 50% Change and Forestry Standby capacity required GWcapacity Probable annual emissions MtCO2e - Agriculture 25% Industrial Processes Please use the Storage, demand shifting and interconnection lever to choose balancing and storage options Fuel Combustion Target Energy balancing and bio-energy 0% Carbon capture Oversupply and Imports needed -25% Bioenergy credit Fuel TWh / year Y.04 Coal oversupply (imports) (360) (243) (13) 7 Y.05 Oil and petroleum products oversuppl 73 (515) (632) (696) Total Y.06 Gas oversupply (imports) (270) (223) (352) (198) -50% Y.01 Biomass oversupply (imports) (4) (45) (77) (119) Y.02 Electricity oversupply (imports) (0) - (0) - Bioenergy contextual data NB: Modelled emissions adjusted to match 2007 actuals. See note below emission table. Source / Use TWh / year Modelled emissions, net of capture, by sector (Mt CO 2e) Consumption of gaseous hydrocarbons V Supplied from biogas Sector % of base IX.a Used in domestic heating 33% yr % IX.c Used in commercial heating 8% I Hydrocarbon fuel power generation V Bioenergy (1) (32) (4%) XI Used in Industry 15% 31% 28% 45% XIV Geosequestration I.a Used in unabated power generation 35% 61% 68% 52% VI Agriculture and waste % I.b Used in CCS power generation IX Heating Detailed paths for UK energy and emissions Users choose between options Electricity output not time-specific Electricity generation Electricity imports Non-thermal renewable generation Nuclear power Carbon Capture Storage (CCS) Unabated thermal generation Domestic demand X Lighting and appliances Consumption of liquid hydrocarbons XI Industry % V Supplied from liquid biofuels (0%) 3% 5% 9% XII Used in transport 81% 86% 86% 88% XII Transport % XI Used in industry 9% 9% 8% 6% XV Fossil fuel production % XV.a Used in refineries 6% 5% 5% 5% XVI Transfers 4 1 0% Total % Consumption of solid hydrocarbons % of actual 99% V Supplied from solid bioenergy 1% 8% 52% 100% I.b Used in CCS power plants NB: Emissions (in blue) are modelled from energy consumption and may not agree precisely I.a Used in unabated power plants 86% 85% 44% 29% with 2007 actuals. However, % of base year figures (in black) have been adjusted by a constant factor so that 2007 modelled emissions match 2007 actual emissions. XI Used in industry 11% 15% 55% 69% IX Used in heating 3%

5 Energy Transfer Reference Case Explore 2050 energy transfer scenarios Simple and transparent methodology Project annual demand for 10 fuels x 8 sectors x 40 countries Synthesise hourly electricity profiles for each country Simulate how and where this electricity will be generated All freely available inside a simple(ish) Excel spreadsheet

6 The big picture Step 1: Annual energy demand for 2010 Coal Industry Gas Commerce Nuclear Renew. Domestic Biomass Oil Transport

7 The big picture Step 2: Service demands for 2010 Coal Ind Service demand 290 bn Gas Nuclear Renew. Biomass Oil Com Dom Trn 1164 bn 27.0m houses 2900 HDD 29 CDD 990 bn p-km 620 bn T-km

8 The big picture Step 3: Project service demands to 2050 Growth levels derived from user-selected scenarios for: Service demand 290 bn Population GDP Energy prices 1164 bn 27.0m houses 2900 HDD 29 CDD 990 bn p-km 620 bn T-km

9 The big picture Step 3: Project service demands to 2050 Growth levels derived from user-selected scenarios for: Service demand 580 bn Population GDP Energy prices 3020 bn 35.4m houses 2400 HDD 64 CDD 1920 bn p-km 1450 bn T-km

10 The big picture Step 4: Scenarios for modal split and efficiency Modal split: Electrification / gasification? Planes, trains or automobiles? Batteries, biofuels, or hybrid vehicles? Efficiency: Process improvements Better buildings Gains from fuel switching Service demand 580 bn 3020 bn 35.4m houses 2400 HDD 64 CDD Use scenarios to explore different outcomes 1920 bn p-km 1450 bn T-km

11 The big picture Step 5: Calculate final energy demand for 2050 Ind Service demand 580 bn Com 3020 bn Dom 35.4m houses 2400 HDD 64 CDD Trn 1920 bn p-km 1450 bn T-km

12 We need to know the demand for power over time if we are to dispatch generators to meet that demand and estimate their fuel requirements Electricity cannot easily be stored at present Water can, of course A day in the life Generating hourly electricity profiles Future storage technologies may be developed, but will not be free

13 A day in the life Generating hourly electricity profiles Know the annual electricity requirement for each sector Allocate typical daily profiles to each sector and end-use (e.g. domestic appliances) 200% 150% 100% 50% 0% Incorporate daily temperatures for heating and cooling Add stochastic variation to all parameters

14 A day in the life Example UK daily profiles Validate the method against measured 2010 data GW Winter fortnight Summer fortnight Historic Simulated Historic Simulated 0 01-Feb 08-Feb 01-Jul 08-Jul

15 A day in the life Example German daily profiles Validate the method against measured 2010 data GW 80 Winter fortnight Summer fortnight Actual Simulated Actual Simulated 0 01-Feb 08-Feb 01-Jul 08-Jul

16 Then apply to the 2050 data: A day in the life Example UK daily profiles GW 140 Winter fortnight Summer fortnight Jan Jan 01-Jul Jul

17 Generation mix in Europe GW capacity in 2050 Wind 19% Solar 25% Hydro 12% Pumped Storage 5% Marine 0% Geothermal 1% Waste 1% Biomass 2% Oil 1% Gas Boiler 1% Gas CCGT 16% Gas OCGT 2% Nuclear 8% Coal 5% Lignite 2% 18

18 Dispatching electricity /MWh Net of Renewables Gross Demand Marginal Cost P GW 19

19 Dispatching electricity /MWh Net of Renewables Gross Demand Marginal Cost P GW 20

20 Dispatching electricity /MWh P Cost of Unserved Energy / Value of Lost Load Marginal Cost Gross Demand Net of Renewables Load Shedding GW 21

21 Transmitting electricity Unconstrained line /MWh Local demand /MWh Local demand + exports - imports MC MC P P GW GW Exports and imports between zones allow the prices to equalise 22

22 Transmitting electricity Constrained line /MWh Local demand /MWh Local demand + exports - imports MC MC P P The charge to use the lines between the zones is equal to the price difference between them GW GW There is no longer enough transmission capacity to equalise the prices 23

23 The regions within ETRC Nordic British Isles Germany Baltic Iberia France & Benelux Alps Italy Balkans NW Africa NE Africa

24 Scenarios All use the middle of the road generation mix shown above (not too much of anything!) Scenarios differ only in the amount of inter-region transmission capacity Transmission constraints within regions / countries ignored Scenario 1 business as usual 36 GW Scenario 2 the transmission links of the ECF 40% renewable scenario 75 GW Scenario 3 the transmission links of the ECF 80% renewable scenario 145 GW 25

25 Modelling hydro GW Most regions Alps & Nordic Jan Demand 08-Jan 26

26 Results 27

27 Generation outputs Scenario 1 36 GW transmission Scenario 2 75 GW transmission Scenario GW transmission Europe N Africa Europe N Africa Europe N Africa Nuclear Coal & Lignite Waste & Biomass Gas Oil Hydro Wind Solar Spilled renewables Total 5,130 1,173 5,196 1,121 5,233 1,088 28

28 Time-weighted average prices /MWh Scenario 1 Scenario 2 Scenario

29 British-Nordic transmission Time-weighted average price ( /MWh) British S1 British S2 British S3 Nordic S1 Nordic S2 Nordic S GW Transmission between British Isles and Nordic Countries

30 British-Nordic transmission Time-weighted average price ( /MWh) British S1 British S2 British S3 Nordic S1 Nordic S2 Nordic S GW Transmission between British Isles and Nordic Countries

31 British-Nordic transmission Time-weighted average price ( /MWh) British S1 British S2 British S3 Nordic S1 Nordic S2 Nordic S GW Transmission between British Isles and Nordic Countries

32 Paying for transmission Scenario 1 Scenario 2 Scenario 3 Amount of transmission Variable cost of generation Cost of transmission assets 36 GW 75 GW 145 GW bn bn bn. 17 bn. 50 bn. 100 bn. Easy to justify investment; merchant interconnectors vulnerable to downward jumps in price differentials 33

33 Price-duration curves: Britain /MWh Transmission between British Isles and Nordic Countries 0 GW 4 GW 8 GW 16 GW Hours per year

34 Price-duration curves: Britain /MWh Transmission between British Isles and Nordic Countries 0 GW 4 GW 8 GW 16 GW Hours per year

35 Price-duration curves: Britain /MWh Transmission between British Isles and Nordic Countries 0 GW 4 GW 8 GW 16 GW Hours per year

36 Price-duration curves: Britain /MWh Transmission between British Isles and Nordic Countries 0 GW 4 GW 8 GW 16 GW Hours per year

37 Price-duration curves: Britain /MWh Transmission between British Isles and Nordic Countries 0 GW 4 GW 8 GW 16 GW Hours per year

38 More risk of missing money for generators Moves to capacity markets advisable? Fewer arbitrage opportunities for storage Storage can also provide reserve and/or relax transmission and/or distribution constraints Less incentive for demand response Transmission reduces extreme prices 39

39 Thank you 40