Application of the UNFC to Renewable Energy Resources. David MacDonald, BP

Transcription

1 Application of the UNFC to Renewable Energy Resources David MacDonald, BP

2 Why this project now? Renewable energy is on a significant growth trend The same issues impacting mineral and petroleum projects are relevant for renewable energy There is a real need for a consistent framework for comparing renewable projects with conventional energy forms UNFC could meet these needs with minimal modification, providing a tool for communication around issues of sustainable energy No methodology exists 1. to assess resources (in boe or other metric) of a renewable asset 2. to contrast renewable investment against hydrocarbon (economics per barrel, reserves, etc) 1

3 What could be the outcome of this work? Biofuels Solar Wind Intro What it is First version of a practical handbook to assess renewable resources, with a: commercial guideline for resource progression, as well as a technical guideline by technology An assessment of a renewable portfolio, including resources and production in BOE by 2020 Equivalent financial metrics (lifting cost, finding cost, margin per barrel, etc.) Other What it is not A methodology used for external reporting (SEC, financial reports, etc) A demonstration that renewable barrel is cheaper or more attractive than an hydrocarbon barrel (this is not a case for renewable) 2

4 We are not the only ones thinking about renewable resources Advocacy material for biofuels Country assessment of all energy resources Geothermal: closest link between oil and gas and renewables 3

5 Estimates of global renewable resources are very material on a global scale % Resources Exploited by Hydropower 44 43,06 Biomass 9,27 Wind 2,31 Geothermal 0,15 Solar 0,01 Marine 8 3.8x1 All Solar technologies, including MultiCrystaline Silicon, ThinFilm, Concentrated Solar Power and Solar Thermal 1.0x Conventional, deep hydrothermal and engineered Geothermal 0.5x Onshore and offshore Wind 0, x Hydropower 0.4x Biomass to power 1 Read: Solar resources could provide close to 4 times as much energy as the world needs today 0.05x Marine, including tidal and wave Source: BP Statistical Review, EU Renewable Association, BP AE Strategy & Fundamentals 4

6 Renewable energy is on a substantial growth trajectory serving customer needs - governments and individuals - for local, sustainable energy Source: BP Energy Outlook 2030, January

7 Renewable energy is growing fast in the global energy mix Shares of World Primary Energy % World Power Generation Thousand TWh Key Energy Trends Diversification of energy mix Gas is the only fossil fuel growing [relative to others] to 2030 Renewables represents one fifth of all additional BOE to 2030 and is the fastest growing form of energy (similar to nuclear industry in 70s and 80s) Key Power Trends Higher global income implies increased electrification, especially from non OECD Renewables attain 10% global power market share by 2030, driven by policy and increased cost competitiveness Renewable energy is fast growing and will be material 6

8 Sugarcane and cellulosic ethanol have the potential to form material and cost competitive sources of supply Sugarcane and energy grass ethanol can be major elements of primary energy production Transportation Fuels Supply Curve Source: adapted from Booz Allen Hamilton analysis based on information from IEA, DOE and interviews with super majors; IBGE, UNICA, Conab, CGEE, Unicamp, CTC,, BP Biofuels Team 7

9 Biofuels - resource renewal 200 Stylised Conventional Crude Production Profile Production (kbpd) 0 Brazil SC ETOH Strategy US LC ETOH Strategy Time (years) Min 30 year production life Brazilian SCE & US LCE production models deliver over the lifetime of the assets. Barrel reserves are equivalent to access to feedstocks. 8

10 We have identified a few challenges to develop a methodology for RE resources comparable to the fossil fuels methodology Time horizon Production uncertainty Energy system equivalence Energy price Biofuels We have non-depletable crops but different contract lengths for feedstock and crushing mill lifetime of 30 years. Feedstock availability is uncertain but manageable Biofuels have upstream and downstream activities, similar to fossil fuels Biofuels prices are volatile but mostly global Wind and solar power We have a nondepletable resource but a land lease of 25 years and a technology lifetime of 20 years. Wind and solar power production is fairly certain over the project lifetime Wind and solar power are downstream energy carriers Wind and solar power prices are less volatile but local Do we use a conservative or aggressive time horizon to calculate the reserves? What P90, P50 or P10 do we use to estimate future production? At what point in the energy system do we account for RE reserves and with what methodology? What price do we use to value RE reserves? 9

11 RE resources are infinite but reserves calculation accounting needs to adopt a time horizon Resource availability Biofuels years Wind and solar power years Land lease 20 e.g. US LC e.g. 50 years = 1 lease extension Equipment lifetime 30 e.g. Brasil sugar cane (crushing mill) 20 e.g. wind turbines Contract for feedstock 5 e.g. Brasil sugar cane Not applicable for solar and wind power because energy source is free PPA or spot market Not applicable for biofuels, but applicable for biomass to power 0-20 e.g. 0 for power sold on spot market; 20 for power sold with PPA

12 Uncertainty over the expected production is an issue for biofuels but less for wind and solar power Biofuels Wind power Solar power Uncertainty nature Biomass yield Output arbitrage Feedstock quality Wind speed patterns Sun irradiation Cloud cover Uncertainty range (P90, P50, P10) Yield, e.g. sugarcane 35 (P90) 55 (P10) T/ha Net capacity factor 25% (P90) 40% (P10) Net capacity factor 10% (P90) 20% (P10) Uncertainty mitigation LT contracts with farmers Share the risk Upfront on-site wind speed measurements Upfront on-site solar irradiation measurements Feedstock market Uncertainty but manageable Limited uncertainty and fairly predictable 11

13 Analagous components of wind generation KINETIC MECHANICAL ELECTRICAL Wind Power Density (WPD) Turbine 3 Stage Gearbox Generator Transformer Electricity To Grid Transmission and Distribution TECHNICALLY RESOURCE RECOVERABLE RECOVERABLE/ FEEDSTOCK LOSSES 60% 1 CONVERSION PRODUCT TRANSPORTATION 6% 4% 1% 8% POWER (MW) Gap between Recoverable and Feedstock narrows with: - Improved blade efficiency - Larger diameter turbines 1 Modern turbine efficiency 35-45%. Absolute technical limit of 59.7% efficiency Betz Law 1.84

14 To value RE reserves you can use a global price for biofuels but it is less straightforward for power Biofuels Wind and solar power Price options Global market price Local power price (PPA or spot market) + subsidies (e.g. FIT or PTC) Levelised cost of electricity by technology Pros Straightforward 1 global price for all No fluctuation (PPA and FIT) Small fluctuation (spot and RPS) Less subject to local variations Commonly used methodology Cons Highly fluctuating (similar to fossil fuels) Prices local and regulated Not 1 price for all Underestimate compared to power price Changes over time with learning Accounting solutions Past average price Price on 31 Dec (SPE) Past average local power price Current or future levelised cost Note: In oil and gas, price has direct impact on reserves because it dictates the COP (Cessation of Production); the higher the oil price, the bigger the reserve 13

15 Next Steps Developing a draft general specifications for renewable energies Develop a bridging document for one renewable energy (biofuel) Stakeholder participation All four groups Discuss work with EGRC (2013) 14