VISION AND INITIAL FEASIBILITY ANALYSIS OF A RECARBONISED FINNISH ENERGY SYSTEM

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2 VISION AND INITIAL FEASIBILITY ANALYSIS OF A RECARBONISED FINNISH ENERGY SYSTEM Results for EnergyPLAN simulations of 2050 Finland Michael Child & Christian Breyer Lappeenranta University of Technology World Conference of Futures Research 2015: Futures Studies Tackling Wicked Problems 11 June 2015, Turku, Finland

3 Agenda Introduction to study Methods Main results Interpretation of results Questions and discussion 3

4 Primary aims: To examine the components of a fully-integrated (power, heating/cooling and mobility) fully-functional, reliable and recarbonized energy system for Finland in 2050 To determine the extent to which differing levels of nuclear power and forest-based biomass affect the cost of such an energy system To explore the roles of energy storage solutions in facilitating high shares of variable renewable energy generation, with a particular focus on Power-to-Gas (PtG), Powerto-Liquid (PtL) and energy storage technologies To develop more accurate future energy scenario modelling methodology in Finland that includes complete transparency of modelling assumptions To encourage discourse on energy-related issues that will contribute to the transformation of the Finnish energy system towards long-term sustainability 4

5 Agenda Introduction to study Methods Main results Interpretation of results Questions and discussion 5

6 EnergyPLAN Developed in 1999 at Aalborg University in Denmark Widely used and respected Energy system analysis carried out in hourly steps for one year Model includes analysis of electricity, heating and transport sectors Results form basis of technical regulation and market optimization strategies Main aim is to assist in the design of national energy planning strategies Model can also be applied on larger and smaller scales Free download from 6

7 Introduction to scenarios 2012 Reference 2020 Reference 2050 Basic (Maximum 145 TWhth biomass) 100 % RE Low (1.6 GWe) Medium (2.8 GWe) New (4 GWe) (Maximum 113 TWhth biomass) 100 % RE Low (1.6 GWe) Medium (2.8 GWe) New (4 GWe) 2050 Reference Business As Usual (BAU) Test scenarios Target of essentially zero carbon emissions from energy sector Target of complete energy independence Finland as an island 7

8 Introduction to scenarios 8 Technology Key insights: Getting the least cost mix of technologies is a manual balancing act using EnergyPLAN EnergyPLAN separates electrolysers for different end products in reality integrated Very high installed capacities of solar PV and wind turbines, but still well below theoretical potentials for Finland 2050 Basic 100% RE 2050 Basic Low 2050 Basic Medium Installed Capacity GWe 2050 Basic New 100% RE 2050 Low Low 2050 Low Medium New Wind onshore Wind offshore Solar PV Hydro - Run of river CHP - DH Condensing PtG - CH₄ PtG - H₂ BAU

9 Agenda Introduction to study Methods Main results Interpretation of results Questions and discussion 9

10 Primary Energy (TWhth) Primary energy Hydrogen Hydro Solar PV Wind offshore Wind onshore Natural Gas Oil Coal and Peat Basic 100% RE 2050 Basic Low 2050 Basic Medium 2050 Basic New 100% RE Low Key insights: Strong roles for renewables in test scenarios Domestic hydrogen becomes major element of TPED Medium New 2050 BAU 10

11 Electricity Production (TWhe/a) Electricity production Condensing CHP-Industry 140 CHP-District Heating 90 Hydro - Run of river Solar PV 40 Wind onshore Basic 100% RE 2050 Basic Low 2050 Basic Medium 2050 Basic New 100% RE Low Medium New Key insights: Electricity has increased role in energy system due to its flexibility Electricity from wind and solar PV become backbone of system 2050 BAU Wind offshore Net import/export or curtailment 11

12 Electricity Consumption (TWhe/a) Electricity consumption 240 V2G losses 190 PtG (H₂) PtG (CH₄) 140 Transport 90 District cooling Individual heating 40 Heat pumps - CHP Basic 100% RE 2050 Basic Low 2050 Basic Medium 2050 Basic New 100% RE Low Medium New 2050 BAU Total consumption (households and industry) Key insights: Flexible demand Closer relation of end user consumption to total production in reference scenarios Large demand for electricity in PtG processes 12

13 Total annual costs (M /a) Total annual costs * WACC 7% 15% BAU: + 3 b New : + 2 b Variable costs - other Variable costs - CO₂ Variable costs - fuel Fixed operation costs Annualized investment costs Basic 100% RE 2050 Basic Low Key insights: Stranded investments in nuclear/ coal power stations not accounted (higher WACC?*) Test scenarios have high level of investment Reference scenarios have high level of fuel and CO₂ costs (risk of high CO 2 price**) 2050 Basic Medium 2050 Basic New 100% RE Low Medium 2050 BAU New ** CO 2 price /t BAU: b rather likely according to Luderer G. et al., Environ.Res.Lett., 8, , 2013

14 14 Levelized cost of electricity For 2050 Basic Medium Scenario Units Wind - onshore * Includes 40% electrical efficiency + 50% thermal efficiency; ** final value is levelized cost of energy (incl. heat) Key insights: Despite higher LCOE, offshore wind distribution favourable to energy system and may lead to overall cost reduction in new simulations Low full load hours in thermal plants lead to high LCOE Wind - offshore Solar PV Solar PV - - ground rooftop mounted Hydropower - Run of the river CHP plants plants PtG Methane Capex /kwe Opex_fixed % of capex 4.51 % 4.55 % 2.00 % 1.00 % 4.00 % 3.66 % 3.50 % 3.30 % Opex-var /MWhe Fuel /MWhe Efficiency % %* 37 % 51 % Lifetime Years Full load hours Hours WACC % 7 % 7 % 7 % 7 % 7 % 7 % 7 % 7 % crf %year ¹ 8.06 % 8.06 % 7.50 % 7.50 % 7.25 % 8.58 % 7.50 % 8.06 % LCOE cents/kwhe ** **

15 Carbon emissions Scenario parameter Basic 100% RE 2050 Basic Low 2050 Basic Medium 2050 Basic New 2050 Low 100% RE Low Low Low Medium New 2050 BAU CO₂ -equivalent emissions Mt Cost of CO₂ - equivalent emissions (MEUR) Renewables share of primary energy (%) Key insight: Future aim should be virtually zero emissions from energy sector Denmark has goal of zero emissions from power sector by 2035 and zero emissions from all energy sectors by 2050 Small amounts shown in table from non-biogenic component of waste

16 Agenda Introduction to study Methods Main results Interpretation of results Questions and discussion 16

17 Interpretation of results A 100% renewable energy system seems possible for Finland, given the assumptions made in this study The 100% RE scenarios are highly cost competitive High level of energy independence seems achievable Prominent roles of renewable energy and energy storage solutions should be considered in all future modelling Opportunities exist for increased domestic investment and RE-based employment Flexibility should be a defining feature of future energy systems 100% RE should be an equal partner in all future discourse regarding the Finnish energy system Further study is needed related to how people will choose to live, how they will perceive risk and the role of energy in their lives (Futures Research) in order to hone the technical requirements of the energy system used in modelling 17

18 Agenda Introduction to study Methods Main results Interpretation of results Questions and discussion 18

19 Questions or comments? 19

20 Thank you NEO-CARBON Energy project is one of the Tekes strategy research openings and the project is carried out in cooperation with Technical Research Centre of Finland VTT Ltd, Lappeenranta University of Technology (LUT) and University of Turku, Finland Futures Research Centre.

21 FURTHER INFORMATION

22 The uniqueness of our work Only research to consider 100% RE scenarios for Finland Only research to seek a virtually carbon-free energy system by 2050 Full integration of power, heating/cooling and mobility sectors Greatly expanded roles for wind and solar energy First study to explore large-scale energy storage solutions and Power-to-Gas (PtG) System modelled on an hourly resolution using historical data for a calendar year Full transparency of technical and economic assumptions Results suggest that a 100% RE scenario is a highly competitive cost solution compared to other test scenarios with increasing shares of nuclear power and a Business As Usual (BAU) scenario 22

23 Inputs + Strategy = Outputs Developed in 1999 at Aalborg University in Denmark Widely used and respected Energy system analysis carried out in hourly steps for one year Model includes analysis of electricity, heating and transport sectors Results form basis of technical regulation and market optimization strategies Main aim is to assist in the design of national energy planning strategies Model can also be applied on larger and smaller scales Free download from 23

24 Flows of energy

25 Flows of energy Basic 100% RE scenario 25

26 Flows of energy Low 100% RE scenario 26

27 Flows of energy BAU scenario 27

28 18000 Breakdown of annualised investment costs Basic 100% 2050 Basic Low RE 2050 Basic 2050 Basic New Medium 100% RE Low Medium New 2050 BAU 28 Large CHP units Large Power Plants Wind Wind offshore Photovoltaic River of hydro BioJPPlant CO2Hydrogenation Chemical Sythesis Electricity grid District heating grid District heating substations EV batteries EV charging station Individual oil boilers Individual NG boilers Individual biomass boilers Inidividual heat pumps Individual electric heat Gas grid Other

29 Introduction to scenarios Category Basic 100% RE 2050 Basic Low 2050 Basic Medium Full load hours 2050 Basic New 100% RE 2050 Low Low Medium New 2050 BAU Wind onshore Wind offshore Solar PV Hydro - Run of river CHP - District Heating Condensing PtG (CH₄) PtG (H₂) Key insight: Low full load hours for thermal plants and PtG are problematic in some scenarios Synthetic gas production may also be needed for non-energy purposes 29

30 Introduction to scenarios Cost of bioenergy is dependent on the form Waste is assumed to be free Agricultural residues have little market value currently and will likely remain half the price of energy wood Estimated biomass price is 22 /MWh in 2050 (plus 5-11 /MWh handling) Stumpage price currently 2 /MWh Price to customer currently 9-23 /MWh* Stricter sustainability criteria could raise this to about 50 /MWh* Energy wood price highly unlikely to exceed 50 /MWh in 2050 Likely to be convergence between the price of energy wood and the price of pulpwood (stumpage price currently about 12 /MWh) *Sikkema et al. Mobilization of biomass for energy from boreal forests in Finland & Russia under present sustainable forest management certification and new sustainability requirements for solid biofuels. and Bioenergy 71 (2014)

31 Introduction to scenarios 1 Mm³ = 2 TWh = 7.2 PJ 2012 (TWhth) 2050 (TWhth) for heat and power for small-scale housing Industrial liquors for energy generation Agricultural residues for energy generation n.a. 21 Total biomass assumptions based on 88 Mm³ annual harvesting i.e., less than current annual increment Low biomass scenarios developed which utilize less than current amount of forest biomass 31

32 Fuel use - Industry (TWhth) Fuel use - Industry 140 Key insights: Some shift from manufacturing to services Increased efficiency in industrial processes Industrial demand may be most rigid Opportunities also for Power-to-Chemicals Natural gas/grid gas Oil Coal/Peat Basic 100% RE 2050 Basic Low 2050 Basic Medium 2050 Basic New 100% RE Low Medium New 2050 BAU 32

33 Fuel use - Transport (TWhth) Fuel use - Transport Key insights: Electrification of transport leads to significant gains in efficiency Domestic biofuel production offers huge business potential Biofuels 40 Electricity 30 Hydrogen Natural gas 20 Petrol 10 Diesel Jet fuel Basic 100% RE 2050 Basic Low 2050 Basic Medium 2050 Basic New 100% RE Low Medium New 2050 BAU 33

34 Gas storage Annual gas balance for the Basic 100% scenario Y-axis values in MWh Each scenario has a unique storage profile 34

35 Main cost assumptions Cost assumptions Cost category Unit Finland 2020 Finland 2030 Finland 2050 Value Value Value Wind - onshore Capex /kwe Lifetime Years Opex fixed % of capex 4.26 % 4.37 % 4.51 % Wind - offshore Capex /kwe Lifetime Years Opex fixed % of capex 4.23 % 4.37 % 4.55 % Solar PV - ground-mounted Capex /kwe Lifetime Years Opex fixed % of capex 2.00 % 2.00 % 2.00 % Solar PV rooftop Capex /kwe Lifetime Years Opex fixed % of capex 1.00 % 1.00 % 1.00 % Hydropower - Run of the river Capex /kwe Lifetime Years Opex fixed % of capex 4.00 % 4.00 % 4.00 % Economic calculations based on 7% Weighted Average Cost of Capital (WACC) 35

36 Main cost assumptions Cost assumptions Cost category Unit Finland 2020 Finland 2030 Finland 2050 Value Value Value Renewable Energy gasification plant Capex /kwth Lifetime Years Opex fixed % of capex 5.30 % 5.30 % 4.00 % Biodiesel plant Capex /kwth Lifetime Years Opex fixed % of capex 3.00 % 3.00 % 3.00 % Biopetrol plant Capex /kwth Lifetime Years Opex fixed % of capex 7.70 % 7.70 % 7.70 % CO₂ Hydrogenation plant (P2G) Capex /kwth Lifetime Years Opex fixed % of capex 4.00 % 3.30 % 3.30 % Biogas plant Capex /kwth input Lifetime Years Opex fixed % of capex 7.00 % 7.00 % 7.00 % Biogas upgrading Capex /kwth Lifetime Years Opex fixed % of capex % % % Gasification gas upgrading Capex /kwth Lifetime Years Opex fixed % of capex % % % 36

37 Main cost assumptions Cost assumptions Cost category Unit Thermal Plants Finland 2020 Finland 2030 Finland 2050 Value Value Value Heat pump for DH and CHP Capex /kw_e Lifetime Years Opex fixed % of capex 2.00 % 2.00 % 2.00 % Average CHP plant Capex /kw_e Lifetime Years Opex fixed % of capex 3.7 % 3.7 % 3.7 % DH/CHP boiler Capex /kwth Lifetime Years Opex fixed % of capex 3.70 % 3.70 % 3.70 % Condensing plant (average) Capex /kw_e Lifetime Years Opex fixed % of capex 3.00 % 2.00 % 2.00 % Waste CHP plant Capex /kwth input Lifetime Years Opex fixed % of capex 7.40 % 7.40 % 7.40 % Capex /kw_e Lifetime Years Opex fixed % of capex 3.50 % 3.50 % 3.50 % 37

38 Main cost assumptions Cost assumptions Cost category Unit Finland 2020 Finland 2030 Finland 2050 Value Value Value Storage systems Heat storage DH Capex /kwth Lifetime Years Opex fixed % of capex 0.70 % 0.70 % 0.70 % Grid gas storage Capex /kwth Lifetime Years Opex fixed % of capex 2.00 % 2.00 % 2.00 % Lithium ion stationary Capex /kwh_e Lifetime Years Opex fixed % of capex 3.30 % 3.30 % 3.30 % Lithium ion BEV Capex /kwh_e Lifetime Years Opex fixed % of capex 5.00 % 5.00 % 5.00 % 38

39 Main cost assumptions Cost assumptions Cost category Unit Finland 2020 Finland 2030 Finland 2050 Value Value Value Infrastructure District heating grid Capex /MWhth Lifetime Years Opex fixed % of capex 1.25 % 1.25 % 1.25 % District heating substation - Residential Capex /connection Lifetime Years Opex fixed % of capex 2.42 % 2.68 % 3.00 % District heating substation- Commercial Capex /connection Lifetime Years Opex fixed % of capex 0.70 % 0.70 % 0.70 % District cooling network Capex /MWth Lifetime Years Opex fixed % of capex 2.00 % 2.00 % 2.00 % Key comment: The importance of transparency of all assumptions is critical Disagreement over assumptions can provide the basis of progressive discussion This must be the new standard in Finland Too many reports and documents lack this transparency 39

40 Further cost assumptions Cost assumptions Unit Finland 2020 Finland 2030 Finland 2050 Value Value Value Fuel Coal/Peat /MWh Oil /MWh Oil USD/bbl Diesel /MWh Petrol /MWh Jet fuel /MWh NG /MWh Liquid biofuels /MWh (weighted average) /MWh Straw /MWh Wood chips /MWh Wood pellets /MWh Energy crops /MWh Uranium (including handling) /MWh

41 Further cost assumptions Cost assumptions Unit Finland 2020 Finland 2030 Finland 2050 Value Value Value Fuel handling (storage, distribution and refining) Fuel oil to central CHP and PPs /MWh Fuel oil to industry and DH /MWh Diesel for transportation /MWh Petrol / Jet fuel for transportation /MWh NG to central CHP and PPs /MWh NG to industry and DH /MWh NG for transportation /MWh to conversion plants /MWh to central CHP and PPs /MWh to industry and DH /MWh to individual households /MWh for transportation (biogas) /MWh

42 Further cost assumptions Carbon content in the fuels Coal / Peat kg CO₂ eq /MWh * Oil kg CO₂ eq /MWh NG kg CO₂ eq /MWh Waste (related to inorganic portion) kg CO₂ eq /MWh Solid biomass kg CO₂ eq /MWh * Emission factor will depend on share of each fuel. 42