Global Energy Trade Flows and Constraints on Conventional and Renewable Energies A Computable Modeling Approach

Transcription

1 ISSN X Global Enegy Tade Flows and Constaints on Conventional and Renewable Enegies A Computable Modeling Appoach Ole Gogo Dokumentation N

2 Global Enegy Tade Flows and Constaints on Conventional and Renewable Enegies A Computable Modeling Appoach Ole Gogo Dokumentation N Laden Sie diese ZEW Dokumentation von unseem ftp-seve: Zentum fü Euopäische Witschaftsfoschung GmbH (ZEW), Mannheim

3 The Global Enegy Tade Flows and Constaints on Conventional and Renewable Enegies A Computable Modeling Appoach Ole Gogo Mannheim, Febuay 2012 Zentum fü Euopäische Witschaftsfoschung (ZEW)

4 ISSN X L 7, Mannheim Gemany Tel.: Fax: info@zew.de ZEW 2012

5 Global Enegy Tade Flows and Constaints on Conventional and Renewable Enegies - A Computable Modeling Appoach Ole Gogo Abstact This pape intoduces the computable patial equilibium enegy model Global Resouce Extaction and Enegy Tansfomation (GREET), its stuctue, assumptions and the outcomes of two exemplay scenaios. GREET is chaacteized by a compehensive modelling of constaints on the diffusion of enewable enegy, whee physical constaints on the egional deployment of enewable enegy technologies ae complemented by the need to povide stoage capacities fo enewable poduction of electicity. The consumption of conventional pimay enegy caies, on the othe hand, is constained by egional esouce endowments as well as the need fo capacity investments in pimay enegy caie extaction-, tade- and tansfomation pocesses. In compaison to most contastable global enegy models, thee is an explicit modelling of inteegional tade flows in pimay enegy caies, fo which oiginating and destinating egions of the enegy tades can clealy be specified. Thus, GREET, coveing global pimay enegy tades fo eleven wold model egions, is vey applicable fo looking into futue developments of enegy tade flows. At the same time GREET doesn t miss to cove the point that pedominantly enewable based enegy systems of the futue ae confined by constaints on enewable enegy poduction technologies, such as the need to povide electicity stoage capacities.

6 Table of contents 1. Intoduction 2. Model 2.1 Model Stuctue 2.2 Extaction Secto 2.3 Tade Secto 2.4 Tansfomation Secto 2.5 Renewable Enegy Secto 2.6 Final Demand 3. Model Specification and Data 3.1 Regions 3.2 Enegy Caies 3.3 Initial amounts in base yea Initial amounts of final enegy poduction and demand Initial amounts of pimay enegy caie tade Initial poduction of pimay enegy caies Resouce endowments 3.4 Cost functions and cost data Extaction costs Tade costs Tansfomation costs Costs of enewable enegy poduction Poduction and investment costs Constaints on enewables Renewable potentials Electicity stoage constaints 3.5 Technological leaning 3.6 Final demand specification 3.7 Time steps, depeciation ates and discount facto 4. Results 4.1 Scenaios BAU scenaio Global ETS scenaio Pimay enegy consumption Global pimay enegy consumption Regional pimay enegy consumptions 4.3 Pimay enegy caie tade flows Global pimay enegy caie tade flows Regional pimay enegy caie tade flows Coal tades Cude oil tades Natual gas tades Uanium tades 4.4 Electicity stoage 5. Model compaison and discussion Refeences Appendices

7 1. Intoduction This pape intoduces the computable patial equilibium enegy model Global Resouce Extaction and Enegy Tansfomation (GREET), its stuctue, assumptions and outcomes of two exemplay scenaios. GREET is chaacteized by a compehensive modelling of constaints on the diffusion of enewable enegy, whee physical constaints on the egional deployment of enewable enegy technologies ae complemented by the need to povide stoage capacities fo enewable poduction of electicity. The consumption of conventional pimay enegy caies, on the othe hand, is constained by egional esouce endowments as well as the need fo capacity investments in pimay enegy caie extaction-, tade- and tansfomation pocesses. GREET featues explicit modelling of inteegional tade flows in pimay enegy caies and thus enables to investigate dynamics in futue enegy tades between the eleven wold egions of the model. The pape is oganized as follows: Chapte 2 intoduces the model stuctue, depicting undelying optimization poblems and maket cleaing conditions, while in Chapte 3 constaints and associated data ae specified and assumptions on egions, types of enegy caies, tansfomation technologies, cost functions, ates of technological leaning and discount- and depeciation ates ae illustated. In Chapte 4 esults of a baseline scenaio and a global emission tading scheme scenaio ae shown. Next to geneal global tends, the chapte focuses on the developments within the model egions Euope, China and Noth Ameica and in paticula on the evolving pimay enegy tade pattens between these thee egions and the est of the wold. Chapte 6 compaes the settings of GREET to othe computable enegy models and concludes in highlighting advantages, disadvantages and the pefeable application spectum of the model. Thus, GREET detemines scenaio based evolvements of the global enegy stuctue, exhibiting a significant focus on analyses of pimay enegy tade flows, while at the same time also taking diffeent constaints on enewable and non-enewable enegy poduction into consideation. 1

8 2. Model 2.1 Model Stuctue GREET is a multi-enegy, multi-peiod and multi-egional computable patial equilibium desciption of the enegy secto. The GREET model compises the main elevant activities within the enegy system: Extaction, tade, tansfomation and consumption. As the fist upsteam activity within the enegy famewok, extaction of natual esouces is modelled within each egion of the model. Extaction takes place, facing exogenous esouce endowment constaints and taking endogenous investment decisions on extaction capacity expansions into futue peiods extaction capacities into account. Afte extaction, the pimay enegy caies ae then passed on within each egion to a tading unit that tades these enegy caies to the othe egions consideed in the model. The tading activity is also bound to initial tading capacities that can be enlaged by endogenous investments. Tanspotation costs between the diffeent model egions ae consideed. Within each model egion, thee exists a tansfomation secto that tansfoms these pimay enegy caies into final enegy goods, which ae then demanded by final consumption. Theefoe, the tansfomation secto of each egion is modelled to puchase the diffeent pimay enegy caies fom the vaious pimay enegy tades of the othe egions as well as its home egion. Afte tansfoming the pimay enegy caies into diffeent foms of final enegy poducts, these poducts ae sold within the egion. Concuently, each egion exhibits an initial amount of enewable enegy poduction. The enegy geneated by enewable poduction technologies also seves as final enegy and is sold within each egion. Investments into diffeent enewable technologies allow fo an expansion of the vaious enewable sectos, while being limited by constaints on the ceation of enewable poduction sites. Final consumption demands the oveall amount of final enegy, poduced by enewable technologies and by the tansfomation of pimay enegy caies into final enegy goods within each egion. The following Figue 2.1 illustates the geneal stuctue of GREET, depicted fo a case of two egions A and B. 2

9 egion A egion B Extaction Extaction pimay enegy caies Renewables Tansfomation Tansfomation Renewables final enegy poducts Final enegy demand Final enegy demand Figue 2.1: Geneal stuctue of GREET Fom this gaph one can see that inteegional tade of enegy in GREET only takes place at the pimay enegy caie level, while final enegy poducts ae poduced and consumed only within a egion itself. Fo means of the lage size of the egions, incopoated in the model specifications of GREET, no tade of final enegy goods is taken into account. This is a ealistic simplification, once one compaes the elative size of the tade volumes of pimay enegy caies to those of final enegy goods. 1 Resulting fom the above pictued inteactions between the diffeent decisive units within the oveall enegy famewok, thee ae diffeent makets aising fom this stuctue. The fist set of makets (Makets 1) contains all makets, whee, within each egion, all pimay enegy caies ae sold by extactos to domestic pimay enegy tading units. These makets ae of mino impotance and the tading units could also be egaded as pats of the extaction activities, as often seen in eality, whee pimay enegy esouces ae globally maketed by 1 It can be seen that the bulk of tansfomation of pimay enegy caies into final enegy goods takes place in the egion whee the final enegy is to be consumed. One ationale behind this is that it is e.g. cheape to move cude oil than finished efiney poducts. The same logic applies to coal, natual gas and uanium. (EIA: 3

10 the extactos themselves. Still, hee, fo stuctual puposes and the possibility to look into diffeent effects, the two activities ae conceptually sepaated. The second laye of moe impotant makets within GREET (Makets 2) ae the global makets fo pimay enegy caies, whee all of the pimay enegy caies fom all egions can be bought, to be late on tansfomed into final enegy within the impoting egion. Pices ae detemined by the inteplay of pimay enegy demands fom the impoting egions, the pimay enegy caie supply possibilities of the expoting egions and diffeent tanspotation costs between two egions. Maket cleaing is obtained, once a supply of one pimay enegy caie taded fom an expoting egion to one impoting egion x tade t, pe, equals the amount of this enegy caie, demanded by the tansfomation secto within the impoting egion x tans _ puch t, pe,. This condition has to hold fo all pimay enegy caies pe and all impoting egions at all time-steps t. The makets then clea fo the maket pices p. pe _ down t, pe, The thid laye of makets (Makets 3) then consists of the makets fo final enegy poducts within each egion. Supplies of final enegy poducts ae on the one hand the tansfomation secto, which poduces final enegy poducts fe fom pimay enegy caies, and on the othe hand the enewable secto that poduces final enegy poducts by employing diffeent enewable technologies t. A maket fo a final enegy poduct cleas if the demanded amount of this poduct equals the sum of the amounts supplied fom all tansfomation techniques t tans, pe fe, pe t en fe t t x plus the sum of all foms of enewable enegy poduction x,,,. This condition has to hold fo all final enegy poducts fe in all egions and at all time-steps t. sec The esulting maket pices ae denoted by p,, t fe. Levels of maket pices depend on the egions final enegy demands, the costs of enegy tansfomation and enewable enegy poduction within the egions, as well as on the egions upsteam costs of pimay enegy caie supply. Figue 2.2 illustates the inteplay of the diffeent actos on these makets. 4

11 Extacto Makets 1 supplies ext x t, pe, demands tade _ puch x t, pe, Resulting pices: pe _ up p t, pe, Tade Maket Cleaing: x x t pe ext tade _ puch t, pe, t, pe,,, Makets 2 supplies tade x t, pe, demands tans _ puch x t, pe, Resulting pices: pe _ down p t, pe, Tansfome Maket Cleaing: x x t pe tade tans _ puch t, pe, t, pe,,, Renewable Secto supplies tans x t, pe fe, Makets 3 en x t, fe,, t supplies demands dem x t, fe, Resulting pices: sec p t, fe, Final demand Maket Cleaing: pe tans en dem xt, pe fe, xt, fe,, t xt, fe, t, fe, t Figue 2.2: Makets in GREET In the following subsections the definitions of the optimization poblems of the diffeent decisive activities (extaction, tade, tansfomation, enewable poduction) within the oveall famewok will be pesented. Specifications of the paticula cost functions applied fo the vaious activities and investments will be given in Chapte 4. In the following, the geneal outline of the diffeent sectos objective functions and constaints will be set out fist. 2.2 Extaction Secto The extaction secto maximizes pofits fom the extaction of the finite esouces within the egion. Its maximization poblem is specified as follows: 5

12 T T * t pe _ up ext ext ext ext _ i ext t max,,,,,,,,, (,, ),, (,, ) pe t pe pt pe xt pe ct pe xt pe ct pe it pe ext ext xt, pe,, it, pe, t1 t1 t1 t t ext ext _ ini ext ext ext t, pe, pe, pe t, pe, pe 1 st.. (1) x cap i T (2) x R pe, t1 ext t, pe, ext t, pe, ext t, pe, pe, (3) x 0 t, pe, (4) i 0 t, pe, t, pe, The oveall pofit of the extaction secto is detemined as the sum of pofits ove all timepeiods, wheeby pofits of futue peiods ae discounted by a discount facto. Pofits within each time-peiod consist of the evenues of the sales of the pimay enegy caies ext ext p x minus costs of extaction c,, ( x,, ) and costs of investments into futue pe _ up ext t, pe, t, pe, t pe t pe extaction capacities c ( i ). Poduction costs ae a function of the amounts of pimay ext _ i ext t, pe, t, pe, enegy caies extacted, and investment costs ae a function of the amount of capacity investments within the secto. Both cost functions will be futhe specified in the next chapte. ext The decisions of the extaction secto on the amounts of pimay esouces extacted x,, ext and amounts of investment into extaction capacities i t, pe, ae constained by: (1) a capacity constaint, which detemines that the amount of pimay enegy caie extaction cannot t pe exceed the sum of initial extaction capacities cap and capacity expansion investments ext _ ini pe, i in pevious peiods. Both initial extaction capacities and additional built up capacities ext t, pe, ae theeby subject to depeciation ext pe of the extaction capacity stock fo each type of pimay enegy caie; (2) a esouce endowment constaint, which states that the sum of extaction ove all time peiods cannot exceed the amount of esouce endowment given fo each pimay enegy caie fo each egion R pe, ; (3), (4) non-negativity constaints on extaction and investments. Resulting fom this optimization poblem the following complementaity conditions ae obtained: 6

13 (5) p c ( x ) 0 x 0, t, pe, pe _ up ' ext ext t ext _ cap esdepl ext t, pe, t, pe, t, pe, t, pe, pe, t, pe, T t 1 t ' ext _ i ext ext _ cap ext ext t, pe, t, pe,, pe, pe t, pe, t 1 (6) c ( i ) 0 i 0, t, pe, (7) cap t1 t t ext _ ini ext pod t ext ext ext _ cap pe, pe t, pe, pe t, pe, t, pe, 1 i x 0 0, t, pe, T ext esdepl pe, t, pe, pe, t1 (8) R x 0 0, pe, ext Complementaity condition (5) depicts, that eithe the extaction activity x t, pe, has to amount to zeo o the diffeence of discounted evenues minus the shadow pices on extaction capacity esdepl and on esouce depletion pe, has to amount to zeo. This means that, if ext _ cap t, pe, the sum of costs and shadow pices on extaction exceeds the evenues out of the sale of the pimay enegy caie extacted, no extaction should take place. Vice vesa, if the selling pice fo the pimay enegy caie exceeds the associated costs of extaction, a positive amount of extaction should take place. Complementaity condition (6) depicts the same calculus fo the extaction capacity investments: If discounted extaction costs exceed the sum of depeciated shadow values of capacity investments, no investments in capacity will be made. Complementaity conditions (7) and (8) align the constaints (1) and (2) to thei espective shadow values. 2.3 Tade Secto The esouce tading secto maximizes pofits fom tade, subject to existing initial tade capacities. Investments into these tade capacities between egions ae to be undestood as an incease in physical tanspotation capacity and also as the setting up of tade ageements between patnes fom diffeent egions, each associated with its specific costs. The tading secto maximizes the sum of discounted futue pofits fom esouce tade in fom of evenues fom its tade activities x p diminished by the investment costs associated with tade pe _ down t, pe, t, pe, capacity expansions tade tade c ( i ) and by the costs of the tade activity ct, pe, ( x t, pe, ) tade _ i tade t, pe, t, pe, tade _ puch pe _ up itself and the costs of the pimay esouce bought fom the extaction secto x p. t, pe, t, pe, Thus, the tading secto s optimization poblem is specified as follows: 7

14 max tade _ puch x,,, tade,,, tade t pe xt pe it, pe, * t, pe, T tade pe down tade puch pe up tade tade tade i tade t,,,,,,,,,, (,, ),, (,, ) xt pe pt pe xt pe pt pe ct pe xt pe ct pe it pe t1 t1 _,,,, tade t tade ini tade tade,, tade t t pe pe pe t pe pe, 1 s.. t (9) x cap i, t, pe, (10) x x, t, pe, tade tade _ puch t, pe, t, pe, (11) x 0, t, pe, (12) tade _ puch t, pe, x tade t, pe, tade t, pe, 0, t, pe, (13) i 0, t, pe, Decision vaiable fo a tade is x tade _ puch t, pe,, which denotes the amount of pimay enegy caie tade pe bought fom the extacto, x t, pe, which stands fo the amount of pimay enegy caie sold and expoted fom egion to egion and i, tade t pe,, the amount of investment into a specific tade option. Fo the constaints of a tade, (9) states the tades capacity constaint and (10) descibes, that, fo each tade of a pimay enegy caie in a egion, the sum of all tade tades to all expoting egions x t, pe, is neve allowed to exceed the puchased amounts fom the extacto in its home egion x tade _ puch t, pe,. The constaint has to hold fo all pimay enegy caies pe fom all expoting egions at all time peiods t. (11), (12) and (13) ae the non-negativity constaints on the amounts of pimay enegy caie bought and sold, as well as on the amount of capacity expansions. Capacity investments ae modelled in a putty-clay fashion, such that once made investments in tade capacity ae egaded as sunk costs and cannot be gained back by actively educing capacity at a highe ate than its depeciation. The esulting complementaity conditions, aising fom the tading secto s optimization poblem, incopoated into the oveall model famewok, ae thus specified as: 8

15 _ ' _ (14) p c ( x ) 0 x 0, t, pe, pe down tade tade t tade cap tade _ puch tade t, pe, pe, t, pe, t, pe, t, pe, t, pe, (15) p 0 x 0, t, ec, e tade _ puch up t tade _ puch t, pe, t, pe, t, pe, (16) e x x 0 0, t, ec, e tade tade _ puch tade _ puch t, pe, t, pe, t, pe, t1 t tade _ ini tade tade tade t tade tade _ cap pe, pe, t, pe, pe, t, pe, t, pe, 1 (17) cap i x 0 0, t, pe, T t (18) ' tade capext ( tade tade capext tade t ) 1 tade c i 0 i 0, t, pe, t, pe, t, pe, t, pe, pe, t, pe, t Tansfomation Secto Fo the tansfomation secto pofit maximization is also assumed. The tansfomation secto sec tans maximizes pofits stemming fom evenues of sold final enegy poducts pt, fe, x t, pe fe, less pe _ down tans _ puch the costs fo the puchase of pimay enegy caies fom tades p x less the t, pe, t, pe, tans tans costs of the tansfomation pocess itself ct, pefe, ( x t, pefe, ) less the costs of tansfomation capacity expansion investments c ( i ). Futue pofits ae discounted at discount tans _ i tans t, pefe, t, pefe, ate. Constaints of the tansfomation secto ae: (19) Amounts of final enegy goods poduced x t tans, pe fe, ae not allowed to exceed the depeciated sum of initial tansfomation capacities tans _ ini cap pe fe, and tansfomation capacity expansion investments i t tans, pe fe,, fo all tansfomation pocesses and in all peiods. (20) the sum of all final enegy poducts, geneated fom one type of pimay enegy caie and divided by its specific tansfomation ate fom pimay enegy caie to final enegy good pe fe, is not allowed to exceed the amount of this enegy caie puchased. This condition has to hold fo all types of pimay enegy caies pe in all egions and at all times t, while convesion factos ae assumed to be 0 1, since pats of the enegy content can get lost in the pocess of pe fe tansfomation fom pimay enegy caie to final enegy good. (21), (22) and (23) ae non- tans negativity constaints fo poduction of final enegy goods x t, pe, fe, puchases of pimay 9

16 enegy caies x tans _ puch t, pe, and investments into tansfomation capacity expansion investments i tans t, pe fe,. The oveall optimization poblem can be witten as: max T * t, pe tpe,, tans _ puch x,,, tans tpe xtpe, fe,, itpe, fe, t1 T p x p x c ( x ) c ( i t1 sec _,, tans pe down tans puch,,,,,, tans,, tans tans i tans t fe t pe fe t pe t pe t pe fe t, pe fe, t, pe fe, t, pe fe, t ) t1 _,,,, tans t tans ini tans tans,, tans t t pe fe pe fepe fe t pe fepefe, 1 st.. (19) x cap i, t, pe fe, x t pe tans tpe, fe, tans _ puch (20) x,,,,, tpe fe pe fe (21) x 0, t, pefe, tans tpe, fe, (22) x 0, t, pe, tans _ puch tpe,, (23) i 0, t, pefe, tans tpe, fe, Resulting fom the tansfomation secto s optimization poblem, we obtain the following complementaity conditions: 1 (24) p c ( x ) 0 x 0 ' t sec tans tans tans cap tans conv tans t, fe, t, pefe, t, pefe, t, pefe, t, pe, t, pefe, pe fe, t, pe fe, T ' tans _ i tans tans _ cap tans t 1 tans t, pefe, it, pefe, t, pefe, pefe, it, ecfe, e t 1 t (25) c ( ), t, pe fe, 0 0 (26) p 0 x 0, t, pe, tans _ conv pe _ down t tans _ puch t, pe, t, pe, t, pe, (27) cap t1 tans _ ini tans t tans tans t tans tans _ cap pefe, pefe, it, pefe, pefe, xt, pefe, t, pefe, 1, t, pe fe, 0 0 x t pe tans t, pe fe, tans _ puch tans _ conv (28) x,,,, 0,,, t pe t pe fe pe fe 10

17 2.5 Renewable Enegy Secto Renewable enegy poduces ae also assumed to be pofit maximizes. Thei pofit consist sec en out of the evenues gained fom the sales of enewable enegies pt, fe, x t, fe,, t, while they face en en poduction costs ct, fe,, t( x t, fe,, t) and costs of investments in capacity expansions c ( i ). Cucial fo the modelling of the diffusion of enewable technologies ae en _ en t, fe,, t t, fe,, t assumptions on the constaints on enewables. One obvious constaint is (29), that poduction of enewable enegies cannot exceed installed capacities. (30) and (31) ae the non-negativity constaints on poduction and investment quantities. This is the vey geneal outline of the maximization poblem of the enewable secto. Futhe constaints on the diffusion of enewable enegies will be intoduced and specified in section 3.4.4, depicting physical constaints on enewable enegy diffusion as well as stoage constaints on electicity geneation fom fluctuating enewable souces. T * t max, ec e tt,, en xen t, fe,, t, it, fe,, t t1 T _ sec en en en en i en t,,,,,,,, (,,, ),,, (,,, ) pt fe xt fe t ct fe t xt fe t ct fe t it fe t t1 st.. (29) x cap t1 t en en _ ini en en en t t, fet,, fet,, fe,, t it, fe,, t fe,, t 1 (30) x 0, t, fe,, t en t, fe,, t (31) i 0, t, fe,, t en t, fe,, t, t, fe,, t Fom this optimization poblem, the following complementaity conditions ae obtained: ' t en _ (32) p c ( x ) 0 x 0, t, fe,, t sec en en cap en t, fe, t, fe,, t t, fe,, t t, fe,, t t, fe,, t T ' en _ i en en _ cap en t 1 en t, fe, e, te t, fe,, t t, fe,, t fe,, t t, fe,, t t 1 t (33) c ( i ) 0 i 0, t, fe, t, t1 t en _ ini en en en t en en _ cap fe,, t fe,, t t, fe,, t fe,, t t, fe,, t t, fe,, t 1 (34) cap i x 0 0, t, fe, t, 11

18 2.6 Final Demand dem Fo the egional demand of final enegy poducts x t, fe, we assume that consumption in all final enegies depends on the egional pice of the specific final enegy poducts. Equation (1) depicts the final enegy demand stuctue in GREET. Since GREET is a patial equilibium model, only coveing the enegy secto, while not modelling othe sectos of economic activities, exogenous final enegy demand paths fo all model egions ae assumed. These demand paths ae depicted by the paamete t, fe,, which vaies the gowth of initial demands fo final enegies by egion-specific exogenous demand gowth ates. The demands of the specific final enegy caies and thus also the oveall final demand, howeve, ae sensitive to the development of pices of final enegy caies ove time, which can vay quite significantly fo diffeent scenaios. Final demand fo all foms of final enegy is elastic to pice deviations, compaed to initial pices of the espective fom of final enegy. Thus, assuming an exogenous enegy demand gowth path, the pice-elastic demand on individual final enegies enables a light endogenization of the final enegy demand stuctue, as final enegy demands coespond to pice changes within the enegy system. sec _ ini p dem dem _ ini fe, (35) xt, fe, xfe, t, fe, t, fe, sec pt, fe, 12

19 3. Model Specification and Data In this section, egions and enegy caies ae specified and undelying data is descibed. Also specifications on the functional foms within the diffeent optimization poblems and choices of paametes ae given Regions Figue 3.1: Regions in GREET Figue 3.1 shows the aggegation of egions employed in GREET. Fo a detailed list of counties belonging to each of these egions, see Appendix A.3.1. Each of the egions employed in GREET eithe plays an impotant ole in pimay enegy caie poduction, pimay enegy consumption, o both. Such, the egions Fome Soviet Union (including Mongolia), Middle East, South Ameica and Afica ae impotant poduces and expotes of Natual Gas and Cude Oil. Japan, Euope, China and India ae impotant cuent and futue consumes and impotes of these enegy caies. The egions Othe Asia Pacific and Noth Ameica play an impotant ole in pimay enegy poduction as well as consumption, while the egion Austalasia e.g. has a significant impotance as a poduce and expote of coal and uanium. Altogethe these egions compise moe than 99% of the global poduction and consumption of pimay enegy caies in

20 3.2. Enegy caies Enegy caies in GREET ae classified into pimay enegy caies and final enegy goods. Also, enewable technologies fo the poduction of final enegy goods ae consideed. Pimay enegy caies in GREET ae natual gas, cude oil, coal and uanium. Final enegy goods ae electicity, fuels (a composite liquid fuel categoy), heat and diect demands of natual gas and coal. Next to poduction fom fossil fuels, the final enegy good electicity can in this model also be poduced by the enewable technologies wind, wate, biomass, sola photovoltaics, tide-wave-ocean and geothemal enegy. The final enegy fuels can be geneated using the enewable technology biomass and heat can be poduced by geothemal and solathemal enewable technologies as well as biomass. Within this epesentation of the enegy system, we leave out taditional, non-commecial enegies, such as animal waste o fuel wood, as descibed by Bhattachayya (2010) and only focus on the commecial enegy types as specified above. 3.3 Initial amounts in base yea Initial amounts of final enegy poduction and demand Initial amounts fo the poduction of final enegy goods within the model egions of GREET fo the base yea 2007 ae taken fom OECD enegy balances This way, initial amounts tans fo tansfomation fom pimay enegy caies into final enegy goods x '2007', pe fe, as well en as geneation of final enegy goods fom enewable technologies x '2007',,, fe t ae specified fo all model egions fo the model base yea Accodingly, initial final demand in final enegy goods is set to the amounts given by the OECD enegy balances. Table 3.1 depicts initial values fo All amounts ae given in themal values in million tonnes of oil equivalents, befoe tansfomation into final enegy goods. Auto-poduction (self-geneation) and associated auto consumption is included as a pat of the oveall demand of enegy, e.g. powe plants auto consumption of electicity is temed as a pat of the final enegy demand in electicity. 14

21 Afica Austalasia Euope FSU India Japan MidEast N-Ameica OtheAsia China S-Ameica sum coal 75,44 53,02 287,36 126,58 208,26 67,34 8,54 479,24 179, ,64 12,5 2498,92 Diect demand 13,98 3,26 38,24 14,04 40,52 10,86 0,48 26,66 63,58 260,28 5,4 477,32 electicity 61,48 48,88 208,64 53,2 167,74 56,46 8,06 445,14 110,22 662,34 7, ,26 heat 0 0,88 40,48 59,32 0 0,02 0 7,44 6,18 78, ,34 Natual_gas 63,28 22,1 446,98 502,62 31,04 87,02 217,22 594,02 158,7 48,84 91, ,92 Diect demand 26 13,94 293,12 224,02 16,2 33,34 109,22 389,86 67,84 40,42 62, ,32 electicity 37, ,8 94,2 14,86 53, ,08 88,68 6,74 28,74 728,7 heat 0 1,16 43,06 184,38 0 0,4 0 25,08 2,18 1, ,9 cude_oil 113,44 34,86 706,14 276,84 159,54 194,5 315,46 947,66 374,22 328,32 266, ,08 fuels 113,44 34,86 706,14 276,84 159,54 194,5 315,46 947,66 374,22 328,32 266, ,08 Biofuels (fuels) 0 0,46 14,94 0,06 0,14 0, ,26 0,36 6,22 4,54 52,1 Geothemal (heat) 0,88 2,16 9,6 0,44 0 2, ,48 14,82 0 2,46 49,66 Hydo 8,1 3,26 44,5 21,26 10,64 6,36 1,94 57,04 22,02 41,74 57,54 274,4 Sola_photovoltaics 0 0,02 0, , ,8 Sola_themal (heat) 0,02 0,16 1,46 0 0,14 0,5 0,86 1,74 0,24 4,3 0,14 9,56 Tide_wave_ocean 0 0 0, ,04 uanium 2, ,24 66,48 4,42 68, ,12 48,62 16,2 5,1 702,86 wind 0,1 0,3 10,32 0,02 1 0,22 0,02 4,78 1,04 0,76 0,08 18,68 sum 264,2 116, ,18 994,3 415,2 427,84 544, , ,02 439, ,04 Table 3.1: Enegy tansfomation enegy inputs 2007 (values in mtoe, pimay enegy is accounted fo pio to convesion), souce: OECD enegy balances 15

22 3.3.2 Initial amounts of pimay enegy caie tade Initially taded amounts of pimay enegy caies had to be taken fom diffeent souces: Fo natual gas and cude oil, data fom the BP Statistical Review of Wold Enegy 2007 (BP 2008) was taken, while fo the amount of coal tades in 2007 data fom IEA Coal infomation (2010) (IEA 2010a) was used. Taded amounts of uanium wee specified by data taken fom In cases whee data fo the yea 2007 was missing o temed as unsecue, taded amounts wee appoximated by flows of pevious yeas. Fo the flow of uanium fom Russia to the Euopean Union, the amount of 5406 metic tonnes of uanium in 2007, which by the authos is deemed as a highly uneliable figue, was educed such that uanium impots fom Russia into the Euopean Union do not account fo moe than 25% of all Euopean impots of uanium, as the Euopean Union has a policy of impoting not moe than 25% of its uanium equiements fom Russia. Tables depicting the amounts of inteegional tade fo the base yea 2007 ae given in Appendix A Initial poduction of pimay enegy caies Initial poduction (o extaction) of pimay enegy caies is calculated as the sum of netexpots of pimay enegy caies in a egion and amounts of the pimay enegy caie used within the egion itself. The thus calculated amounts ae checked to not significantly deviate fom poduction amounts specified in OECD enegy balances data fo 2007 and BP statistical eview data fo Since tansfomation data fom OECD enegy balances ae used, while taded amounts ae taken fom BP statistical eview and othe souces specified above, whee aleady BP statistical eview and OECD enegy balances fo the yea 2007 ae not pefectly consistent, small deviations in the pimay esouce extaction data, eithe fom the amounts specified in BP statistical eview o OECD enegy balances ae to be accepted Resouce endowments Pimay enegy caie esouce endowments fo natual gas, cude oil and coal ae set accoding to (BP 2008), while esouce endowments of uanium ae taken fom OECD Uanium 2009 (Nuclea Enegy Agency and OECD 2010), whee data on endowments of identified esouces extactable at less than 130$/kg wee taken as the basis fo endowments 16

23 in Following Nuclea Enegy Agency and OECD (2010), we assumed that one ton of uanium on aveage has an exploitable enegy content of 12 thousand toe, since it is not clea in which egion o type of eacto the uanium will be used late on. Fo model egion Japan some small atificial endowments of cude oil and natual gas had to be constucted fo computational issues, instead of the zeo endowments found in BP (2008). This change, howeve, does not lead to any qualitative change in calculations. Table 3.2 shows the esouce endowments assumed in GREET. coal cude oil natual gas uanium sum Afica Austalasia Euope FomeSovietUnion India Japan MiddleEast NothAmeica Othe Asia China South Ameica sum Table 3.2: 2007 Resouce endowments fo model egions (in mtoe). Souces: BP (2008), Nuclea Enegy Agency and OECD (2010). 3.4 Cost functions and cost data Data on egionally boken down costs of extaction-, tade and tansfomation pocesses is in many cases had to obtain. It becomes even moe difficult, once one looks into costs of capacity expansions, fo example of extaction pocesses. This is because, on the one hand, cost data often ae business elevant infomation, kept confidential fom clients and competitos, and on the othe hand, futue costs on e.g. extaction capacity expansions can be vey unclea, due to e.g. geological conditions. Also, since the eleven egions coveed in this global model ae of huge size and often compehend enomous heteogeneity, epesentative aveages had to be taken, to, in the end, meaningfully depict the situation fo a egion. Whee diect data on a egion was not available, sometimes aveages of by-county-costs within a model egion wee taken, o available cost data fo one o seveal counties within a model egion wee assumed to be epesentative fo that egion. Whee no cost data was available, 17

24 assumptions had to be made. Geneally, two sots of costs apply fo each of the sectos coveed: Costs fo the activity (poduction, tade, tansfomation) itself and costs of investments into capacities fo these activities. Below, costs ae specified fo the diffeent sectos Extaction costs Fo cude oil and natual gas poduction, egional cost estimates by Reutes (2009) as well as cost estimates by the EIA (2009) (T-18. Poduction (Lifting) Costs by Region) wee used. Fo coal extaction, cost estimates fom Haftendon et al. (2010) and Bauya (2007) wee adopted. Fo egional uanium extaction costs, data fom Nuclea Enegy Agency and OECD (2010) was employed. Hade to find ae data o estimates on the costs of pimay enegy caie extaction capacity expansion costs, i.e. costs fo inceasing poduction capacity of a pimay enegy caie in a egion. Since data fo the egional diffeences in costs of capacity investments in extaction pocesses is not available, the egional costs fo capacity expansions in esouce extaction ae configued accoding to the pimay enegy caie specific egional atio of esouce extaction and esouce endowments in the base yea. In addition to these linea costs of capacity expansion, a quadatic cost component, eflecting convex, inceasing costs in apid expansions of capacities, is included. Following Gould (1968), investment cost functions fo capacity expansions in extaction pocesses ae assumed to have the popeties ( ) ( ) ( ) 0, c i c i c i 0, c (0) 0, 0 ext _ i ext 2 ext _ i ext ext _ i ext t, pe, t, pe, ext _ i t, pe, t, pe, t, pe, t, pe, ext t, pe, ext 2 it, pe, it, pe, eflecting the assumption that cost of adjustment will be geate on the aveage the geate the ate of (dis)investment (Gould 1968). Within the specification of GREET, the simplest functional fom of an investment cost function, epesenting these popeties was chosen with c ( i )lc i qc i ext _ i ext ext _ i ext ext _ i ext 2 t, pe, t, pe, t, pe, t, pe, t, pe, t, pe, The extaction investment costs ae thus a function of the amount of investments c ( i ), ext _ ext t, pe, t, pe, with a linea cost component lc and a quadatic cost component ext _ i t, pe, qc ext _ i t, pe,. Fo the 18

25 paametization of the quadatic extaction cost tem we poceeded in a simila way, assigning the height of quadatic extaction capacity expansion costs accoding to the amount of esouce endowment available in a egion Tade costs The tade costs function between egions is specified as a linea cost function of the aveage distances fo epesentative seabone tade outes, using pot wold distance calculato ( Abstacting fom the high volatility of shipment pices and specifics of feight ates due e.g. fequentation of outes, we assumed a epesentative pice of 1US$ pe ton of cago pe day and an aveage daily cago fowading distance of 580 km. The esulting tanspotation costs ae adapted to enegy caie specific feight ates, accoding to the pimay enegy caie specific physical amounts of enegy caie pe enegy content. Distances ae calculated allowing shipments via the Bospous Stait, the Panama Canal and tade the Suez Canal, if easonable. The paamete lc t, pe, depicts the linea costs of pimay enegy caie tade. Additionally, tade costs also espond to fuel pices of impoting egions, following fomula (36): 0,5 sec p tade tade tade t,' fuels', tade (36) ct, pe, ( xt, pe, ) lc,, x t pe t, pe, sec p ' t1',' fuels', Investment costs in tade outes also vay accoding to distance and enegy caie, symbolizing costs of establishing contacts and additional capacity fo a specific tade oute. Costs of tade of pimay enegy caies within a egion, fom thei place of extaction to the place of convesion fo smalle egions ae assumed to be zeo, howeve, fo tade within the geogaphically lage o moe scatteed egions such as Othe Asia Pacific, Fome Soviet Union, Euope, Afica and Noth Ameica, as well as fo neighbouing counties on the same landmass, an aveage tanspotation distance of 1500 km is assumed. Fo an oveview of the assumed tade distances between the egions in GREET see appendix A Tansfomation costs Fo costs of tansfomation pocesses, investment and poduction cost data fo electicity geneating tansfomation pocesses ae taken fom IEA Pojected Costs of Geneating Electicity 2010 (IEA 2010b) and IEA enegy technology pespectives 2010 (IEA 2010c). 19

26 Refiney poduction costs and investments costs in efiney capacity ae taken fom estimations fom Kaise and Gay (2007), Junginge et al. (2008) and by Reutes 2. Junginge et al. (2008) show that specific investment costs fo Gas combined cycle plants stongly depend on plant capacity. With a clusteing of plants aound the sizes of 100 MW and 300 MW, we assumed a typical plant investment cost of 1200$/kw (in 2007 dollas) as epesentative. Costs fo a non-manipulating tansmission of a pimay enegy caie, e.g. fo the pimay enegy caie coal, to become the final enegy good coal that is diectly demanded by final consumption, ae assumed to be zeo. The same accounts fo the tansfomation of the pimay enegy caie natual gas into natual gas as a final enegy good. Analogical to the quadatic cost tem in extaction capacity investments, a quadatic investment cost component is also intoduced fo tansfomation capacity investments, accounting fo ising costs due to scacities in cases of huge capacity investments, which might dastically change the stuctue of the enegy system within a shot time. Quadatic cost components coespond to the amounts of the specific linea investment costs. In contast to othe types of powe plants, fo investments in nuclea powe plants, quadatic investment costs ae inceased by a facto 3, in ode to account fo an inceased scepticism of civil societies to accept dastic inceases in nuclea electicity poduction capacities afte the Fukushima accidents. Convesion ates fo the diffeent tansfomation technologies ae accounted on a egional basis, taken fom input-output atios calculated fom OECD enegy balances Futue cost eductions in convesion pocesses ae taken into account and futhe descibed in section Costs of enewable enegy poduction The modelling of the enewable enegy secto in GREET consides diffeent costs of and constaints on enewable enegy poduction. Next to the diect costs of enegy poduction and costs of investments into additional capacities, constaints on the egional potentials fo enewable enegy poduction ae employed and costs fo electicity stoage fom fluctuating enewable enegy poduction is accounted fo. 2 E.g.:

27 Poduction and investment costs As fo non-enewable final enegy poduction technologies, fo enewable electicity poduction, costs fo capacity investments and poduction of electicity wee taken fom IEA (2010b). Fo fuel poduction fom sugacane and con, poduction costs wee taken fom studies fom van den Wall Bake et al. (2009) and Hettinga et al. (2009). Fo the paametization of quadatic investment cost components, as fo the quadatic costs of non-enewable tansfomation technologies, quadatic cost paametes wee paameticed in elation to the paticula costs of each enewable technology. Howeve, due to the inceasing costs of enewable poduction, once thei employment appoaches absolute physical potentials of a specific fom of enewable enegy poduction fo a egion, quadatic cost components wee aised by a facto 2 compaed to thei non-enewable altenatives. This incease in quadatic costs is to depict the situation that massive investments into enewable technologies have an effect of inceasing the costs, due to scacities in factos such as places of location and othe factos limiting the oveall physical potential of a enewable technology. The opposite tendency of enewable enegies, becoming, due to economies of scale, cheape with moe capacities installed, is also consideed and descibed in section Constaints on enewables Two types of constaints on enewable enegy poduction ae consideed hee. Fistly, fo all foms of enewable enegy poduction, egional potentials ae deived fom the liteatue, to depict the situation that egional poduction of enewable enegy is not boundless. Secondly, as these constaints ae not the most binding elements, when it comes to electicity geneation fom wind and sola technologies, an electicity stoage constaint is intoduced, to account fo the additional costs of electicity geneation fom these fluctuating souces Renewable potentials Data on esouce potentials ae taken fom diffeent souces, with the IPCC Special epot on enewable enegy souces (2011) as a majo souce on egionally diffeentiated potentials on enewable enegy poduction fom diffeent enewable technologies. Thus, fo potentials of geothemal enegy poduction the lowe estimates of the electic technical potential at depths to 10km ae taken fom IPCC (2011). Potentials fo hydoelecticity also stem fom IPCC 21

28 2011. The hydoelectic potential fo China is taken fom NDRC (2007). Fo tide, wave and ocean enegies, egional potential fo wave enegy by Møk et al. (2010) (also in IPCC (2011)) ae employed. Wind enegy potentials ae geneally based on Kewitt et al. (2009). Wind enegy potentials fo the egion of the fome Soviet Union ae specified by esults fo Russia fom Nikolaev et al. (2008) and data fo China is specified by Xiao et al. (2010). Fo annual total technical potentials of sola enegy, minimum estimates fom Rogne et al. (2000) (also in IPCC (2011)) ae employed. Potentials on enewable enegy geneation fom biomass ae calculated using esults fom Fische et al. (2009). Following Fische et al. (2009), as a egional potential fo enewable enegy poduction, only unpotected gassland and woodland (i.e., foests excluded) whee land equiements fo food poduction, including gazing, have been consideed (Fische et al., 2009) ae consideed. On this basis, fo this application in GREET, oveall global biomass poduction potential is assumed to amount up to 222,3 EJ, spatially vey unevenly distibuted, howeve: Afica and Latin Ameica exhibit the lagest potentials fo biomass poduction fo enegy usages, while the othe wold egions have smalle possibilities to enlage thei biomass poduction fo enegy use. Fo an oveview of egional enewable enegy potentials assumed in GREET, see Table 3.3. Tide, wave Region\Technology Biomass Hydo Geothemal Sola Wind and ocean Othe Asia Pacific 155,2 25,0 71,9 918,6 257,2 147,0 China 93,1 115,7 152,4 1837,3 110,2 352,8 Fome Soviet Union+ 341,5 32,5 108,9 3656,2 55,1 734,9 India 62,1 24,9 63,1 716,5 147,0 165,4 South Ameica 1397,2 188,9 36,1 2076,1 404,2 808,4 Middle East 3,1 3,9 35,7 2755,9 18,4 161,7 Euope 186,3 67,5 120,0 532,8 231,5 404,2 Noth Ameica 589,9 109,7 50,0 3325,5 220,5 3395,3 Austalasia 310,5 12,2 33,0 753,3 367,5 183,7 Afica 2142,4 77,7 20, ,7 268,2 147,0 Japan 62,1 10,8 19,2 367,5 73,5 79,9 Table 3.3 Renewable enegy potentials in GREET (in mtoe/yea). Souces: IPCC (2011), NDRC (2007), Møk et al. (2010), Kewitt et al. (2009), Nikolaev et al. (2008), Xiao et al. (2010), Rogne et al. (2000), Fische et al. (2009) 22

29 These potentials, howeve, in many cases do not pedominantly constain the amounts of enewable enegies employed, since physical potentials fo many enewable technologies within the egions ae abundant, especially fo electicity geneation fom sun and wind. In the next section, the complementing constaint of electicity stoage fo fluctuating enewable electicity geneation is intoduced Electicity stoage constaints Fo the geneation of electicity, absolute physical limits on the poduction by enewables, such as land use, ae not the pedominant constaint fo the implementation of enewable enegies. Diffeent studies have shown that it is geneally possible to supply 100% of electicity with enewable enegies, e.g. SRU (2011). Taking this into account, we intoduce the need to povide stoage contingents, vaying on the atio of fluctuating enewable souces of electicity geneation within the electicity system. The need to build up this stoage also makes up an impotant shae of costs of enewables. Hee, we intoduce the necessity to povide stoage only fo electicity geneation fom wind and photovoltaic technologies, while othe enewable technologies ae assumed to be adjustable. Following Töndle et al. (fothcoming), the necessay amount of electicity stoage inceases exponentially with the popotion of enewable electicity poduction. Töndle et al. (fothcoming) depict that, stating fom a enewable penetation ate of about 40%, the need fo stoage inceases exponentially. Figue 3.4 depicts the need fo electicity stoage in the egion Euope, fo diffeent enewable penetation ates. 23

30 Figue 3.4: stoage equiements fo diffeent popotions of enewable electicity poduction. Souce: Töndle et al. (fothcoming) Following the analysis of Töndle et al. (fothcoming), we assume that the necessay amount of electical stoage capacity is an exponential function of the atio of electicity geneated fom sola and wind technologies towads the amount of adjustable electicity poduction technologies. Thus, as an additional constaint fo enewable enegy poduction, an electicity stoage constaint (37) is intoduced, whee the amount of stoage capacity povided in one en egion and one peiod s t, has to amount to an exponential function, with a egion specific paamete specifying the maximum amount of stoage fo a case of an electicity supply fom 100% enewable enegy, and the amount the non-adjustable amount of electicity poduction seving as the agument of the exponential function. If this amount eaches 100% of the electicity geneation, the equied electical stoage capacity comes up to e. xen,,' ' en t wind xt,,' sola ' xtans,, en t pe fe xtt,, en pe t t, (37) s e, t, hee is a egion specific paamete to adjust the exponential function to the diffeent sizes of the egional enegy systems. Taking the analysis of Töndle et al. (fothcoming) as a benchmak fo the amount of electical stoage equied, Table 3.5 depicts the diffeent egional stoage equiements fo the egions in GREET, fo the case of a completely enewable supply of electicity. Region Electical stoage Region Othe Asia Pacific China Fome Soviet Union+ India South Ameica Middle East 38,7 73,9 34,8 32,3 22,1 15,8 Euope Noth Ameica Austalasia Afica Japan Electical 72,2 79,4 15,1 19,9 32,3 stoage Table 3.5 Electical stoage equiements in case of a 100% enewable electicity supply (in mtoe) 24

31 The aising costs of electical stoage and geneation of electical stoage capacity ae shaed popotionately between the fluctuating electicity geneating enewable technologies wind and sun. With the stoage needs intoduced above, a constaint on the constuction of stoage capacity has to be intoduced fo the optimization poblems of the electicity poduction fom wind and sun. Thus, fo these fluctuating enewable technologies the optimization poblem becomes: T * t max, ec e tece,, en en stoe xen t, fe,, t, it, fe,, t, st,, t, it,, t t1 T p x c ( x ) c ( i ) c ( s t1 sec en en en en _ i en en _ stoe en t, fe, t, fe,, t t, fe,, t t, fe,, t t, fe,, t t, fe,, t t,, t t,, t i_ stoe stoe t ) c,, (,, ) t t it t t1 _,,,,,,, en t en ini en en,,, en t t fet fet fet t fetfet,, 1 s.. t (38) x cap i, t, fe,, t (39) x 0, t, fe,, t en t, fe,, t (40) i 0, en t, fe,, t t1 t en stoe _ ini stoe stoe stoe t tt,, t, t, tt,, t, 1 en tt,, t, fe,, t (41) s cap i, t, t, (42) s x x en tt,, x en en t,,' wind ' t,,' sola ' e xen,,' ' en t wind xt,,' sola ' xtans t, pe, en fe xtt,, pe t, tt,, (43) x P, t, fe, t, en t, fe,, t fe,, t Equation (42) depicts the need fo stoage, intoduced above and popotionally shaed between the two technologies, while (41) depicts the electical stoage capacity constaint and (43) stands fo the geneal physical potential constaint, elevant fo all enewable technologies. The esulting complementaity conditions ae depicted in appendix A.3.5. Data fo the cost of povision of electical stoage ae taken fom VDE (2009). With the calculation of stoage equiements of the electicity pat of the enegy system, we implicitly also account fo the feasibility of the electicity supplies in tems of povision of electicity to comply with daily load cuves. Fo the base yea, decisive initial capacities fo electical stoage ae assumed to be nonexistent in the egions. Howeve, enough stoage capacity is povided to account fo the minimal stoage needs in the base yea. 25

32 3.5 Technological leaning Fo the leaning pocesses fo the diffeent technologies within GREET, we decided to not employ endogenous leaning, but to lodge exogenous technological leaning paths. Endogenous leaning can be motivated fom two diffeent pespectives: (1) leaning by seaching effects, whee R&D activities bing down poduction costs and (2) leaning by doing effects, whee bigge amounts of installed capacities bing down pices (compae Junginge et al. 2008). Reasons to not employ eithe fom of endogenous leaning within GREET ae thus twofold: (1) Fo leaning by seaching effects, since GREET only is a patial equilibium model and not a CGE, we cannot account fo ivaly of R&D esouces, such as scientists, between the enegy secto and othe sectos of an economy. Enabling endogenous investments in R&D might lead to an excessive use of R&D capacities within the enegy secto and tade-offs to othe sectos cannot be modelled hee. (2) Fo leaning by doing, the poblem of endogeneity hee is the ational of the investment decisions of the individual agents. In this pefect foesight model, once being able to account fo an endogenous change in costs by poducing highe amounts, costs will be bought down by inceasing the aggegate amount of the technology employed. Howeve, this is not ational fom an individual agent s point of view, since he does not take into account the loweing of pices within his decision to install a cetain device of one technology. Anothe eason fo not applying endogenous leaning ates can be seen in the enomous vaiations in outcomes, whee small changes in the estimation of a leaning ate can poduce dispopotionately dastic changes in outcomes. As Junginge et al. (2008) states, especially fo long tem foecasts, small vaiations in the assumed ates of technological leaning can lead to significantly deviating cost eductions in scenaios o completely diffeent model outcomes in enegy and climate models (Junginge et al.2008). This is (even moe) tue fo endogenously applied leaning ates, as an assumption of a compaatively high leaning ate fo a specific technology might lead to massive endogenous investments and thus change esults dastically. Fo exogenous leaning ates, the magnitude of such potential eos is decisively smalle. Thus, in this model, we chose to implement exogenous leaning ates fo the diffeent enewable and non-enewable technologies, using calculations of pogess atio data summaized in Junginge et al. (2008). Fo leaning ates of fuel poduction fom biomass, Junginge et al. (2008) concludes that it is vey difficult to deive empiical expeience cuves, also due to a lack of data. Still, as an appoximation fo the biofuel secto, esults fom de Wit 26

33 et al. (2010) ae used, which pedict a decease in poduction costs of biomass to liquid Fische-Topsch fuels. Fo the computation of technological leaning of nuclea enegy poduction, we looked into data computed by the Univesity of Chicago (2004). As Junginge et al. (2008) indicates, the technological leaning ates stated in the liteatue and also applied in GREET do not include limitations due to geogaphical potential constaints. Neithe do these estimations of cost developments include the costs of stoage technologies. Thus, as descibed in section 3.4, we modeled these additional cost factos sepaately. Figue 3.6 depicts the cost eduction assumptions fo diffeent technologies. Figue 3.6: Cost eduction assumptions fo diffeent technologies 3.6 Final demand specification As descibed in section 2.6, final enegy demand in GREET gows by an exogenous gowth path, howeve, elastic to final enegy pices: sec _ ini p dem dem _ ini fe, (35) xt, fe, xfe, t, fe, t, fe, sec pt, fe, 27

34 Fo the gowth paamete t, fe,, the magnitude of egional diffeences in final demand gowth ae deduced fom the Hawkswoth (2006). Regional final enegy demand gowth, assuming constant final enegy pices, is depicted in Table 3.7. The paamete, detemining pice elasticity of final demand, was paameteized at 0,03. Region Gowth ate Region Othe Asia Pacific China Fome Soviet Union+ India South Ameica Middle East 1,17 1,95 1,38 2,65 1,95 1,17 Euope Noth Ameica Austalasia Afica Japan Gowth 1,02 1,23 1,39 1,17 0,81 ate Table 3.7 Yealy final enegy demand gowth ates in pecent 3.7 Time steps, depeciation ates and discount facto Fo the time steps within GREET, we chose time steps of 5 yeas, stating fom the base-yea Within the time of one such time step, we allow the model to constuct new capacities in all pats of the enegy system. Although, in some cases, such as the constuction of nuclea powe plants, this time span might be slightly too shot, we believe that, fo most fields, such as themal powe stations o efiney pojects, is quite easonable, as lead times tend to vay between two and fou yeas (Bhattachayya 2011). Yealy depeciation of poduction capacity is chosen to amount to 4% fo all extaction-, tansfomation- and enewable enegy poduction pocesses. No depeciation on tade capacities is assumed. The discount facto in GREET is chosen at 3% pe yea. 28

35 4. Results 4.1 Scenaios The following two basic scenaios seve to depict the geneal esults of GREET model uns. Fo both scenaios the geneal model specifications and assumptions, as depicted in Chapte 3, ae adopted BAU scenaio 1 Fo this Business as usual scenaio (BAU), no global famewok on cabon emission eductions is assumed: globally, cabon emissions ae costless. Howeve, we have implemented the Euopean ETS. In the fom implemented in this scenaio, the EU ETS caps and educes CO 2 emissions fom electicity geneation fo the model egion Euope. Emissions ae capped on the height of emissions in 2007, with the cap tightening by 1,74% evey yea fom 2012 onwads. Within this model un, it is assumed that the cap keeps tightening at this speed until Fo the est of the wold, no estictions on CO 2 emissions ae assumed Global ETS scenaio 2 Fo this scenaio, a binding global estiction on CO 2 emissions is assumed. The estiction is implemented in tems of a global CO 2 emission tading scheme, whee all global cabon emissions esulting fom combustion of fossil fuels within the enegy system have to be coveed by emission allowances. This includes all foms of enegy obtained fom the combustion of the pimay enegy caies coal, cude oil and natual gas. The implementation within GREET takes place at the level of the tansfomation secto. Fo evey amount of pimay enegy caie tansfomed into final enegy goods, emission offset allowances have to be puchased, matching the CO 2 content inheent to the pimay enegy caie tansfomed. Thus, diffeent to e.g. the EU ETS, efiney poducts like gasoline and othe nonenewable liquid fossil fuels ae also coveed by the cabon cap. Fo this scenaio, global cabon emission allowances ae set to the amount of enegy elated cabon emissions of the base-yea 2007, at 25 billion tons of CO 2 pe yea. This effectively means that global CO 2 emissions fom enegy poduction ae not allowed to ise above 2007 levels, with a maket fo CO 2 29

36 offset allowances detemining fo which puposes the emissions ae used, and tansfomation sectos given the necessity to puchase CO 2 offset allowances and incopoating this as pat of thei economic optimization calculus. Thus, the pofit maximization poblem of the tansfomation secto fo scenaio 2 becomes T * t max, pe tpe,, tans _ puch x,,, tans tpe x,,,,, 1 tpefe itpe fe t T p x p x c ( x ) c ( i t1 ) pea sec _,, tans pe down tans puch,,,,,, tans,, tans tans i tans ea tans t fe t pe fe t pe t pe t pe fe t, pe fe, t, pe fe, t, pe fe, t t, pe fe, t t1 _,,,, tans t tans ini tans tans,, tans t t pe fe pe fepe fe t pe fepefe, 1 st.. (44) x cap i, t, pe fe, (45) x tans tpe, fe, fe pefe tans _ puch tpe,, x tans _ puch tpe,, tans tans tans t, pefe, t, pefe, t, pe, tans tpe, fe, tans tpe, fe,, tpe,, (46) ea x em, t, pe, (47) x 0, t, pefe, (48) x 0, t, pe, (49) i 0, t, pefe,, with equation (46) detemining the needs of the tansfomes to puchase emission tans allowances, whee em t, pe, expesses the CO 2 content inheent to the diffeent foms of tans pe fe pimay enegy caies, while eat, pe, fe is set to 25 billion tons of CO 2. Gowth of final enegy demand within the diffeent egions of the wold, as well as all othe assumptions and paametes emain as specified in Chapte Pimay enegy consumption Fo the two scenaios, significant diffeences in the evolvements of pimay enegy consumption can be detected. Even though a global cabon emissions cap at 2007 cabon emission levels is not a vey ambitious estiction, shifts fom the BAU-scenaio, ae emakable. 30

37 4.2.1 Global pimay enegy consumption Results fo global pimay enegy consumption fo the two scenaios ae depicted in Figue 4.1. In scenaio 1, global pimay enegy consumption almost doubles fom 2007 to Coal most significantly inceases its shae in pimay enegy consumption. Natual gas ove time becomes the second impotant pimay enegy caie, also ovetaking cude oil, which is consumed in slightly declining amounts. Renewable enegies ae futhe developed, but thei shae emains low. Nuclea enegy is vey slowly faded out, with new nuclea plants being built, while not completely eplacing the amount of shut down ones. Scenaio 1 Scenaio 2 Figue 4.1: Global pimay enegy consumption in two scenaios (in mtoe) In scenaio 2, oveall pimay enegy consumption keeps gowing, while oveall global pimay enegy consumption fo the yea 2052, e.g., educes by 17% compaed to scenaio 1. Theeby, the global cabon cap most significantly educes coal consumption, while diffusion of enewable enegies poceeds at a faste pace. Nuclea enegy stays at almost constant shaes and natual gas becomes the most widely consumed pimay enegy caie Regional pimay enegy consumptions Evolvements of pimay enegy consumption show diffeent egional chaacteistics. Figue 4.2 depicts the pimay enegy consumptions fo the two scenaios fo the model egions China, Euope and Noth Ameica. In scenaio 1, Chinese pimay enegy consumption moe than doubles until Coal keeps being the dominant pimay enegy souce, with absolute coal consumption also moe than doubling. Natual gas is inceasingly used, while enewable enegies, except fom some electicity geneation fom wate and wind, ae not significantly poduced. The diffusion of 31

38 nuclea technologies is pecluded by cheap coal technologies. Fo scenaio 2, this changes: Coal emains being the most impotant pimay enegy caie, but, until 2052, the amounts of coal used diminish, in elative and also in absolute tems. Nuclea and enewable technologies ae pomoted, while the oveall amount of pimay enegy caie consumption educes significantly, compaed to scenaio 1. Diffeences between the two scenaios fo the model egion Euope ae moe subtle. Since, fo scenaio 1, the continuation of the EU ETS is assumed, aleady a stagnation of the use of coal technologies takes place, while enewable enegies incease thei shaes, especially in electicity poduction. Fo both scenaios, oveall pimay enegy consumption only inceases at low ates. Renewable electicity poduction, e.g. fom wind, inceases to highe levels in the EU ETS case, with cabon leakage taking place to othe non-esticted sectos of the enegy system. Fo scenaio 2, howeve, as CO 2 emissions fom liquid fuel combustion is also esticted by the cabon cap, fuel poduction fom biomass inceases to highe levels. Natual gas and cude oil keep playing impotant oles, with natual gas inceasingly equaling cude oil in impotance. Fo the model egion Noth Ameica, diffeences between the two scenaios ae again moe significant. The cabon cap fist of all educes coal consumption. Howeve, also in scenaio 2, coal consumption fist still inceases, befoe stating to decease fom the 2020s onwads. Compaed to the egions Euope and China, fo Noth Ameica, moe fuel poduction fom biofuels is possible and thus the amount of fuel poduction fom biomass inceases in both scenaios, with highe final inceases fo scenaio 2. 32

39 Scenaio 1 Scenaio 2 China Euope Noth Ameica Figue 4.2 Pimay enegy consumption fo China, Euope and Noth Ameica in two scenaios 4.3 Pimay enegy caie tade flows Oveall pimay enegy caie tade flows show an inceasing tend in both scenaios, howeve, shaply diffeing in types of enegy caie and egional tade pattens Global pimay enegy caie tade flows Fo the base yea 2007, we accounted fo inteegional tade flows -between the egions employed in GREET- summing up to mtoe. In Scenaio 1, the sum of globally taded enegy caies tiples and eaches mtoe in 2052, while in scenaio 2 the intoduction 33

40 of a global ETS makes pimay enegy caie tade flows each a height of mtoe, still moe than doubling compaed to 2007 levels. Figue 4.3: global pimay enegy caie tade popotions (in enegy content) in model yea 2052 Figue 4.3 shows the elative shaes of the diffeent pimay enegy caies in global tade fo the two scenaios fo the yea Fo scenaio 1, with the inceasing pimay enegy consumption in coal, also an inceasing tade in coal becomes ational. Fo the yea 2052, coal tades amount to slightly moe than one thid of the globally taded pimay enegy caies, becoming the most taded esouce. Natual gas comes up to one thid of tades, having ovetaken cude oil tade amounts. Uanium does account fo 4% of global pimay enegy caie tades with egad to enegy contents. Fo scenaio 2, the dastic eduction in coal tades, compaed to scenaio 1, essentially also accounts fo the eduction of oveall tade volumes. Coal tades educe shaply, while gas, oil and uanium all incease thei popotions. Compaed to scenaio 1, gas tades emain on stable absolute levels, while oil tade educes in absolute tems and uanium tade inceases in absolute tems. In both scenaios, natual gas tades show a shap incease compaed to 2007 levels Regional pimay enegy caie tade flows Coal tades As the most significant oveall diffeences between the two scenaios appea fo the tades of coal, also the most obvious diffeences in egional tade flows ae to be seen hee. Figues 4.4 and 4.5 depict majo coal tade volumes fo the model yea 2052 fo the two scenaios, with 34

41 changes fom scenaio 1 to scenaio 2 indicated in backets. Fo scenaio 1, the by fa lagest inteegional tade flow of coal takes place between the model egions Fome Soviet Union (including Mongolia) and China. Additionally, China is povided with coal fom Austalasia and, to a smalle extent, fom India. Austalasia, the Fome Soviet Union, Afica and also India evolve as main supplies of coal. Next to China, as the biggest impote of coal, also Noth Ameica, Euope, Othe Asia Pacific and Japan impot significant amounts of coal. Figue 4.4 Majo coal tades 2052 in mtoe Scenaio 1 In scenaio 2, the sum of coal tades in 2052 educes shaply. Tades fom the Fome Soviet Union to China still epesent the lagest inteegional tade volume, while deceasing by 72% compaed to scenaio 1. Due to the ise in tanspot pices, some mino distance small tade flows incease, e.g. coal tades fom South Ameica to Noth Ameica, while the sum of all coal impots deceases fo all egions. Figue 4.5 Majo coal tades 2052 in mtoe Scenaio 2 (changes to scenaio 1) 35

42 Cude Oil tades Tables 4.6 and 4.7 depict majo cude oil tade flows in the two scenaios. By 2052, the Middle East emains the majo supplie fo conventional cude oil. Noth Ameica is additionally supplied with cude oil fom South Ameica, while Afica delives smalle amounts of cude oil to Noth Ameica, Euope and China. In Euope, as well as in the egions of the Fome Soviet Union, all majo amounts of conventional cude oil ae by that time aleady depleted. Figue 4.6 Majo Cude Oil tades 2052 in mtoe Scenaio 1 This pictue does not decisively change fo scenaio 2. Fo, with the global cap on cabon emissions, as depicted in scenaio 2, global exploitation of cude oil still takes place in a compaable fashion, with the Middle East emaining as the main supplie of conventional cude oil esouces. Still, oveall taded amounts of cude oil educe, with eductions in most individual amounts taded between egions compising that tend. 36

43 Figue 4.7 Majo cude oil tades 2052 in mtoe Scenaio 2 (changes to scenaio 1) Natual Gas tades In both scenaios, by 2052, natual gas becomes a globally taded pimay enegy caie, taded in lage volumes compaable to amounts of cude oil tades. Figues 4.8 and 4.9 depict that, by 2052, most of the expots of natual gas stem fom the Fome Soviet Union, the Middle East and Afica, while most of the othe egions ae impoting fom these two egions, elatively to the size of thei enegy systems and in most cases emphasizing geogaphic poximities. Figue 4.8 Majo natual gas tades 2052 in mtoe Scenaio 1 Unde the global cabon cap assumptions of scenaio 2, natual gas has a high attactiveness, as its combustion is associated with compaably low cabon emissions. Still, changes fom scenaio 1 to scenaio 2 ae almost negligible, with a tendency that egions with big biomass 37

44 poduction potentials poduce moe biomass in scenaio 2, eplacing natual gas impots with gas fom biomass. Figue 4.9 Majo natual gas tades 2052 in mtoe Scenaio 2 (changes to scenaio 1) Uanium tades Figues 4.10 and 4.11 show uanium tade flows fo the yea In scenaio 1, main impoting egions ae Euope, China, Japan and also Noth Ameica, which also poduces significant amounts of uanium within the egion itself. Supplies of uanium ae Afica, South Ameica, Austalasia and the Fome Soviet Union. Euope has to impot all of its uanium used, patially also impoting uanium fom Noth Ameica. Figue 4.10 Majo uanium tades 2052 in mtoe Scenaio 1 38

45 In scenaio 2 the volume of uanium tades inceases, as it is the only pimay enegy caie not causing CO 2 emissions. All of the impoting egions impot moe uanium than in scenaio 1, with especially China moe heavily elying on uanium impots fom the Fome Soviet Union and Austalasia. Impots fom the Fome Soviet Union moe than double. Effects on impots in Euope ae athe insignificant, as the EU ETS was aleady in place in scenaio 1. Still, as Noth Ameica needs moe uanium fo own consumption and Austalasia inceases supplies to China, Euopean impots fom these two egions ae educed and compensated by impots fom Afica. Figue 4.11 Majo uanium tades 2052 in mtoe Scenaio 2 (changes to scenaio 1) Additional esults on the evolvements of pimay enegy caie tade flows ae shown in appendix A Electicity stoage Electical stoage needed to complement the fluctuations of non-adjustable enewable souces of electicity poduction is exponentially intelinked with the shae of these non-adjustable enewables of the oveall electicity geneation. With ising shaes of non-adjustable enewable enegies, the need fo electical stoage capacities becomes lage. Figue 4.12 depicts the global electical stoage equiements fo the two scenaios. Fo scenaio 1, the inceasing shae of non-adjustable enewables leads to global electicity stoage equiements of about 10 mtoe in 2052, which is about 116 TWh electicity stoage capacity. Fo scenaio 2, this amount only slightly inceases fo the nea futue, but moe than doubles in late peiods. As fo the scenaio 2, only a medioce diffusion of enewable 39

46 technologies occued, this is aleady a emakable diffeence. The eason fo this compaably slow diffusion in wind and sola technologies, howeve, can also be seen in the cost associated with the electicity stoage needs. Additionally, one also has to conside, that a big shae of the global stoage needs in scenaio 1 ae installed in Euope and have to be cedited to the assumption of the continuation of the EU ETS thee. Figue 4.12 global electicity stoage capacity (in mtoe) Figue 4.13 shows egional electicity stoage capacity equiements fo Euope, China and Noth Ameica. Stoage equiements ae shaed accoding to electicity amounts esulting fom wind electicity and sola photovoltaic technology. 40

47 Scenaio 1 Scenaio 2 Euope Noth Ameica China Figue 4.13 Electicity stoage capacities (in mtoe) Due to the specifics of the scenaios, the electicity stoage demands fo Euope shaply ise in both scenaios. The EU-ETS in scenaio 1 leads to a moe ealy diffusion in wind and sola technologies, such that electical stoage is aleady needed in ealie peiods, while eaching about the same heights fo the yea In Noth Ameica and China, compaably little electical stoage capacity is equied in scenaio 1, summing up to about 500 toe and 350 toe in 2052 in scenaio 1. In scenaio 2, electicity stoage needs ise shaply. The stoage needs fo China in scenaio 2 show the lagest diffeence compaed to scenaio 1, as in scenaio 1 only few enewable enegy is installed in the vey much coal based Chinese electicity 41