Session 1: The role of gas technologies in low carbon energy systems

Transcription

1 Session 1: The role of gas technologies in low carbon energy systems IEF-IGU Gas Ministerial 22 nd November 218

2 Key messages: The role of new gas technologies in resilient low carbon energy systems Key messages In the near term, gas offers significant climate benefits from coal fuel switching Some OECD markets have demonstrate significant climate benefits for coal to gas switching To prompt fuel switching in Asia, localized pollution controls and/or carbon price signals are critical In the medium term, gas is complementary with increasing renewables deployment to manage intermittency Gas is fast to ramp up and is not time-limited like battery storage In the long run, multiple levers are available to decarbonize gas though the value chain Biomethane and hydrogen technologies can decarbonize gas supply Methane leak prevention is critical in gas midstream CCUS and efficiency measures are available to reduce emissions from end use of gas Session objectives Identify how governments and industry can accelerate fuel switching to gas Discuss the role that gas can play in supporting renewables deployment Discuss what will be required to accelerate the development and deployment of new, low carbon gas technologies such as biomethane, hydrogen, and CCUS Identify what measures should be taken to reduce methane leaks and to improve efficiency of gas consumption 1

3 Agenda Near term: Coal to gas switching Medium term: Complementary with renewables Long term: Decarbonization of gas Questions for discussion 2

4 Natural gas emits half the CO 2 and a fraction of other pollutants vs. coal CO 2 PM 2.5 NOx SOx lb/mwh gross lb/mwh gross lb/mwh gross lb/mwh gross 2,5 2, 1, , , Coal Natural gas. Coal. Natural gas. Coal.+ Natural gas. Coal. Natural gas Note: Coal emissions based on supercritical boiler technology; Gas based on CCGT Data: NETL, BCG analysis 3

5 In power generation, gas is advantaged on land and capital intensity Capital intensity ($/MWh) Solar PV - Utility Scale 3 Coal Wind - Onshore 2 1 Gas CCGT Land intensity (Acres/MW produced) 1. Based on 217 Lazard LCOE estimates Source: Lazard, Strata, American Gas Association, BCG analysis 4

6 Coal to gas switching responsible for greatest share of CO 2 reduction in US US share of gas in power generation mix US Energy sector emissions Annual share of US power generation (%) MT CO2 1 6, Other Nuclear Renewables Natural gas 5,98 5,96 5,94-3.2% -3.3% -.6% Coal -3.6% 27 Primary Increased Increased Coal to 213 energy demand reduction renewables nuclear gas switching Data: EIA, Mohlin et al 218, BCG analysis 5

7 Substantial coal to gas switching opportunity in the Asian power sector... Power sector Industry sector Buildings sector 216 coal consumption (Mtoe) 4, 216 coal consumption (Mtoe) 4, 216 coal consumption (Mtoe) 4, 3, 3,61 3, 3, 2, 2, 1,384 2, 1, 1, 1, Asia Europe & CIS North Africa America Latin America Middle East Asia North America Europe Africa & CIS Latin America Middle East 196 Asia 23 Europe & CIS 5 Africa 1 North America Latin America Middle East Asia Pacific China India Southeast Asia Japan Eurasia Europe Source: IEA, BCG analysis 6

8 ... But requires >$4 carbon pricing given current gas prices Cost equivalence of coal and gas power generation $/t 12 1 Gas Cheaper Carbon price ($/t CO 2 ) $ $2 $4 Coal price 8 US EU Japan China 6 EU 15 4 Coal Cheaper $/mmbtu Gas price - landed Note: Short run marginal cost for CCGT (54% efficiency) and coal plant (39% efficiency); transport cost 1 $/mmbtu, 9$/tonne Source: BCG Analysis 7

9 In the UK, a carbon price >$2/t drove significant coal to gas switching UK power generation capacity UK power production by source UK power generation capacity (GW) 15 Announcement of carbon price floor in 211, set at 18/T from 216 UK power production (TWh).4 Gas-fired generation increased by 4% in 216, replacing coal shut downs Complete coal phase out expected around Other Gas Renewable Gas Oil Nuclear Oil Nuclear Coal All renewables Coal Source: IEA, Ofgem, BCG analysis 8

10 Regulation of localized pollution the most effective lever for improving gas competitiveness in Asia Example of China LCOE with no externality costs LCOE with $4/t CO2 price LCOE with local pollution externality costs 216 LCOE ($/MWh) 216 LCOE ($/MWh) 216 LCOE ($/MWh) % % % Solar - Crystalline Silicon Natural Gas CCGT Coal - Subcritical Solar - Crystalline Silicon Natural Gas CCGT Coal - Subcritical Solar - Crystalline Silicon Natural Gas CCGT Coal - Subcritical Note: Based on average base case LCOE for China in 216 per Bloomberg; Local pollution externality costs per University of Texas LCOE study Source: Bloomberg, University of Texas, BCG analysis 9

11 Agenda Near term: Coal to gas switching Medium term: Complementary with renewables Long term: Decarbonization of gas Questions for discussion 1

12 Renewables require additional backup beyond 4-45% of generation mix Developed grids can absorb 4-45% of renewables without additional backup Beyond 4-45%, backup is required Example of generation mix modeling Intermittent renewables can be absorbed through several levers Available reserve capacity Flexing non-re sources (e.g., gas, coal) Demand management Trade with other grids Renewables at 43% of generation GWh BCG project example Examples Hawaii: 4-45% renewables, ~MW of storage GWh California: 41% renewables, repurposed ~4GW of hydro for pumped storage (~5% of total capacity) Denmark: 5-55% renewables (~45% wind), no storage capacity of note, strongly connected to Norway and Sweden Renewables at 7% of generation DG & Central PV Storage 24hours of an avg. day Coal Biofuel Gas CT Wind Daily storage required Must-run baseload Must-run Source: IEA 217 Country Review; BCG project experience 11

13 Significant role for gas peaking capacity going forward A high renewables penetration scenario Will shift gas capacity from baseload to peaking Power Generation Mix (%) 1 Historical world power generation mix NEO 218 power generation mix 1 Gigawatts % solar and wind % renewables 29% fossil fuels by Other Wind Nuclear Gas New Baseload Retired Baseload Solar Hydro Oil Coal New Peaker Retired Peaker Source: Bloomberg NEF, IEA; Bloomberg New energy finance 12

14 Agenda Near term: Coal to gas switching Medium term: Complementary with renewables Long term: Decarbonization of gas Questions for discussion 13

15 Five ways to reduce emissions from the gas system Supply Transmission/ distribution End use Biomethane Hydrogen Leak reduction Efficiency Carbon capture Cost competitive with policy enablers in some contexts Limited supply & feedstock challenges Technology still immature with multiple potential pathways & competing tech. Grid integration will be challenging Critical driver of emissions for natural gas Proven technology available, but there are key barriers to adoption New tech. with significant benefits (CHP, heat exchangers) Challenge is how to deploy and integration up tech. solutions Demonstrated in some contexts, but not yet achieved scale Requires high carbon price or public support 14

16 In Europe, hydrogen and biomethane are nearing cost competitiveness due in part to policy Renewable gas technology cost estimates - Europe Policy drivers of renewable gas cost competitiveness Cost of hydrogen production ( p/kwh) Small scale SMR Hydrogen Distributed wind Distributed hydrogen Liquid hydrogen Biomethane Market price & supply support: Carbon price minimum future price of $4/t planned Renewable gas portfolio standards in place Stream methabe reforming (SMR) Range SMR (CCS) Mean Coal Gasification Coal Gasification (CCS) Approximate EU average wholesale gas price in p/kwh Biomass Biomass Electrolysis Anaerobic BioSNG Gasifi-Gasificatiocation digestion (CSS) Outliers Approximate EU average wholesale electricity price in p/kwh Capital investment: Building capital conversion support CCS infrastructure development direct or subsidized New regulations and standards: Feed-in / injection rules Safety standards established for hydrogen use Feedstock standards for biomethane Source: Imperial College London, BCG analysis 15

17 In the US, biomethane supply limited and uncompetitive vs. Henry Hub Example of California California biomethane supply costs and availability $ / MMBtu Government issued renewable energy credits subsidize the difference between HH price and the production cost of biogas Known available annual supply in California (bcf) Landfill ~5 Dairy ~1 3 2 Waste water treatment plants ~ HH 1 price of natural gas bcf / yr Municipal solid waste ~15 Total ~8 Landfill Dairy MSW WWTP Total CA gas consumption of 2.1TCF/yr Capturing all available biogas in California will be cost prohibitive 1.Henry Hub Source: EIA, UC Davis 16

18 Power-to-gas provides highly flexible, seasonal long-term storage Storage technologies by discharge time and device size Discharge time at rated power Days/weeks/ months Hours Minutes High energy supercapacitors Lead acid battery Flow batteries High power flywheels Lithium ion battery Advanced lead acid battery NaS Power-to-gas Pumped hydro CAES 1 Seconds SMES 2 High power supercapacitors 1kW 1kW 1kW 1MW 1MW 1MW 1GW Energy storage device size Technological maturity Commercialization/Maturity Deployment Demonstration Development 1. Compressed air energy storage 2. Superconducting magnetic energy storage Source: IEA, IRENA, EASE, AECOM, HSBC, BCG 17

19 Proven solutions are available to address key sources of methane emissions Majority of methane leakage driven by upstream production & gathering Existing solutions can largely eliminate upstream fugitive methane Example range of emissions factors for technology or methods US - CH 4 emission per bcm SCM/hour/device SCM/hour/device kscm/completion Top down method Bottom up method %.4 Pneumatic controllers % 1.2 Centrifugal compressors % 6.3. Well completions Production Transmission & storage Gathering Local distribution High emissions tech. Processing Oil refining & transportation Low emissions tech. Source: EDF study in the journal Science; CCAC O&G Methane Partnership 18

20 New technologies and approaches are emerging to reduce methane emissions Detection and measurement Maintenance / repairs New equipment Venting / flaring operations Devices and systems with infra-red cameras or optical path laser spectroscopy technology Satellite technology for measurements of fugitive emissions Drones equipped with technology to scan areas / equipment Continuous detection systems for shale sites Systems for Directed Inspection & Maintenance (DI&M) Big-data software to optimize repair campaigns IoT and blockchain technology applications Sealing robots Platform with real-time view of emissions (e.g. for distribution networks) Innovative business models (ESCO) Innovation in established technologies Electro-centrifugal pumping technology Compressed-air pumps low/intermittentbleed pneumatic controllers Vapor recovery systems Electric circulation pumps for dehydrators Compressors/VRUs to capture casing head gas AI and simulation applications to test applications of new technology New small scale LNG applications Mobile gas to liquids Solutions for efficient well venting for liquids unloading (e.g. foaming agent) Solutions to stabilize hydrocarbon liquid storage tanks Software to support efficient operation with equipment Sources: OGMP Report, OGCI Sep 18 Report, WRI (reducing-methane-us-working-paper) BCG experts 19

21 Industrial efficiency measures can reduce emissions example of CHP and heat exchangers Combined heat and power (CHP) Heat exchangers Top cycle CHP uses waste heat from electricity generation directly for heating Bottom cycle CHP uses excess heat from industrial processes to produce electricity Can achieve up to 5% energy savings vs conventional gas boilers, with <5yr payback period in the US Regenerative burner systems add heat exchangers to gas exhaust systems At >8 C can achieve 3% savings compared to traditional gas heat system, and up to 6% energy savings vs oil fired system Key challenge is how to accelerate adoption Source: BCG 218 Global Gas Report 2

22 CCS for power gen is a relatively expensive technology CAPEX of a 25MW power plant with various capture systems (first-of-a-kind) US million 5 69% 38% 42% 24% Natural gas postcombustion Coal oxyfuel Coal postcombustion Coal precombustion 15 1 Including CCS in a power plant increases LCOE by 2% US/MWh levelized cost of electricity (LCOE) ,2 1,2 29,4 4,2 6,4 Conventional coal +52% 144,4 1,2 36,1 9,8 97,3 Advanced coal with CCS Example Capture systems Base plant Capture system CAPEX (% of base plant) Transmission investment Fuel Plant opex Plant capex 1. Natural gas plant is based on combined cycle technology. Post-combustion and oxy-fuel base plants are supercritical pulverized coal. Precombustion base plant is an IGCC unit. Does not include cost of pipelines, storage etc. 2. Based on expected costs in 22; EIA 215 Source: Schlumberger 212, Global CCS Institute, EIA Energy Outlook

23 CO2 capture is the main cost component for CCS in power systems While storage is the major technical constraint Capture CCS value chain Transportation Storage Technology Capture technology with significant progress Large-scale CCS power projects moving into operation and construction Technology for CO2 pipelines well established Existence of small scale shipment of CO2 Limited to niche sectors (i.e. food industry) Established storage in deep underground rock formations Depleted O&G field (DOGF) Deep saline aquifers (SA) Enhanced Oil Recovery (EOR) Limited availability worldwide Suitable sites 25-5 Mt CO2 Economics 7-9% of the overall cost of a large-scale CCS project Capture (capex) and compression process (opex) Current cost: ~6 $/tco2 Costs roughly proportional to distance for pipeline transport Onshore ~5 $/tco2 Offshore ~9 $/tco2 Shipment more expensive $/tco2 1 Large variation in storage costs SA: 5-25 $/tco2 2 DOGF: 5-15 $/tco2 2 Risk of investing in exploration of unsuitable SA CCS not yet at mature stage: cost reduction and technology development are needed $/tco2 for ~18 km shipments of 2 Mt CO2 p.a., 18 $/tco2 for ~15 km shipments and including liquefation costs 2. Onshore vs. offshore Source: US DOE, Global CCS Institute, European Technology Platform for Zero Emission Fossil Fuel Power Plants 22

24 Agenda Near term: Coal to gas switching Medium term: Complementary with renewables Long term: Decarbonization of gas Questions for discussion 23

25 Questions for discussion Accelerating coal to gas switching What policies are most effective for accelerating coal to gas fuel switching? How can additional investment in Asian coal power generation capacity be avoided? What measures should industry be taking to accelerate fuel switching? Role of gas in supporting renewables deployment What is required to accelerate investment in gas peaking capacity? Will gas peaking be complementary or competitive with battery storage? Requirements to accelerate biomethane, hydrogen, and CCUS What technologies have the greatest potential for reducing emissions from gas supply and consumption? What scale of investment is required to develop these technologies? How can the industry achieve "quick wins" to demonstrate the viability of these technologies? Measures to reduce methane emissions and improve gas end use efficiency What is the role of policy vs. industry action in reducing methane emissions and improving efficiency? Are new technologies required, or is it purely a challenge of scaling up existing technology? What are success stories that industry and government can highlight? 24