Scenarios for Decarbonizing the European Electricity Sector With Particular Consideration to Norway

GW Electricity Generation in TWh Oslo Implications of Paris Workshop Tuesday, March 8 217 6 55 5 4 3 3 21 2 12 13 1 6 211-2 221-3 231-4 241-5 Investment in new capacities Retrofitting or replacement of old plants 4.5 4. 3.5 3. 2.5 2. 1.5 1. 5 22 225 23 235 24 245 25 Default scenario Other Sun Wind Hydro Biomass Waste Oil Gas Hard Coal Scenarios for Decarbonizing the European Electricity Sector With Particular Consideration to Norway Clemens Gerbaulet, Christian von Hirschhausen, Claudia Kemfert, Casimir Lorenz, Pao-Yu Oei - -

Agenda 1. Introduction 2. Decarbonization scenarios 3. Focus on Norway (1): generation 4. Focus on Norway (2): infrastructure 5. Conclusion - 1 -

Conclusions 1/ The electricity sector is fairly easy to decarbonize based on a combination of wind, solar & storage + biomass 2/ The generation mix in Norway is not significantly altered, some onshore and offshore wind kicks in, + some storage; Norway remains a large exporter 3/ Infrastructure has an important, but limited role to play: regional cooperation dominates the European-wide cooper plate - 2 -

Agenda 1. Introduction 2. Decarbonization scenarios 3. Focus on Norway (1): generation 4. Focus on Norway (2): infrastructure 5. Conclusion - 3 -

Availabe CO 2 emissions in Mt Objective: large-scale decarbonization of the European electricity sector 14 1274,7 1273,2 12 1 965,3 818,5 8 6 597,7 458,1 4 27,2 2 89,7 18,9 25 21 215 22 225 23 235 24 245 25 255-4 -

Availabe CO 2 emissions in Mt Objective: large-scale decarbonization of the European electricity sector Objective: System Cost minimization Capacity Cost and Generation Cost Investment cost (Cost data based on Schröder et al. (213) and Pape et al. (214), Zerrahn and Schill (215) for storage and DSM, as well as other sources) Cross-border line expansion cost Investment options: Conventional power plants Renewables (PV, Wind Onshore/Offshore, CSP) Seven storage and three DSM technologies (P/E Ratio endogenous) Grid expansion (increase of NTCs) Resolution: 33 European Countries, one node per country Investment: five-year steps 22-25 plant dispatch: hourly resolution over selection of hours (about 2 weeks) capturing: Variation of time-of day Variation of season Scaled renewable feed-in, reservoir inflow, and demand time series Boundary conditions: EC Roadmap scenario Diversified supply technologies Electricity demand development per country CO 2 -budget over time Other Boundary Conditions Decommissioning of existing plants Market coupling method: NTC or Flow-Based At the moment: very limited sector coupling between the electricity and heat sector, no interaction with electric vehicles Implemented as a linear program, solved with GUROBI (Barrier with Crossover) AC line aggregation to PTDF: 14 12 1 8 6 4 2 PTDF l,nn = 1274,71273,2 1 H l,n B n,nn PTDF linezonal PTDF l,n l,z = count n z n z n PTDFzonal linezonal z,zz,zzz = PTDF ll,zzz k 965,3 818,5 ic 597,7 458,1 27,2 89,7 18,9 2 21 22 23 24 25 26 j linezonal PTDF lll,zzz - 5 -

Scenarios: Default, reduced foresight, budget approach Three main scenarios Default scenario perfect foresight over entire horizon (215-25) Yearly CO2 constraint, in 25 only 2% of current level Reduced foresight scenario decisions makers only aware of the CO2 target of the upcoming five-year period, Used to identify stranded investments resulting from such a myopic vision; Budget approach aggregate emission budget for the entire period from 215 to 25 Emission allocation over time endogenous, allows for a higher degree of decision Assumption: abatement takes place earlier - 7 -

Electricity Generation in TWh European electricity generation in the default scenario 22 25 4.5 4. 3.5 3. 2.5 2. 1.5 1. 5 Other Sun Wind Hydro Biomass Waste Oil Gas Hard Coal Lignite Uranium 22 225 23 235 24 245 25 Default scenario - 8 -

Electricity Generation Capacity in GW European electricity generation capacity the default scenario 22 25 25 2 15 1 5 Storage Other Sun Wind Hydro Biomass Waste Oil Gas Hard Coal Lignite Uranium 22 225 23 235 24 245 25 Default scenario - 9 -

CO 2 Price in 215 /Mt CO 2 price increases after 24; is flat at 8% decarb pathway CO 2 price development 215-25 2 18 16 14 12 1 8 6 4 2 215 22 225 23 235 24 245 25 Default scenario 8% decarbonization pathway In the default scenario, CO2 prices remain at a similar level until 24 When the emission constraint tightens, the CO2 price increases to 175 /t In the 8% decarbonization scenario, the price remains stable - 1 -

GW Investment difference in Reduced Foresight scenario vs Default 12 11, 1 8 6 4,2 4 2 3, 2,5 2,1 1,9 1,7 1,4 1,3 1,,8,7,6,5,5,4,3,2 Gas Hard Coal Sum -2-4 -6 DE CH FI PL HR RS UK NL BE BA HU EE MK RO IE CZ LU SI - 13 -

Comparing CO 2 -Emissions over time in the Default and Emissions budget scenario 15 1 Million t CO 2 5 Biomass Waste Oil Gas Hard Coal Lignite -5-1 22 225 23 235 24 245 25-14 -

How about nuclear and CCTS? Investment Cost Assumptions ( /kw) 7 6 5 4 3 2 1 215 22 225 23 235 24 245 25 Nuclear Biomass PV CSP Wind onshore Wind offshore Lignite CCS Coal CCS CCGT CCS Li-Ion DSM12 Biomass CCS Source: DIW Data Documentation 68, own assumptions - 19 -

Overnight cost in /kw Investment cost assumptions for selected technologies 4 35 3 25 2 15 1 5 215 22 225 23 235 24 245 25 Biomass Wind Onshore Wind Offshore Solar PV Battery 4 hours Battery 8 hours Power to Gas - 2 -

Francois Lévêque (212): The nuclear industry is the child of science and warfare - 21 -

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Looking back no-one ever pretended nuclear was economic MIT (23): The Future of Nuclear Power In deregulated markets, nuclear power is not now cost competitive with coal and natural gas. (p. 3) University of Chicago (24): A case can be made that the nuclear industry will start near the bottom of its learning rate when new nuclear construction occurs. (p. 4-1) The nuclear LCOE for the most favorable case, $47 per MWh, is close but still above the highest coal cost of $41 per MWh and gas cost of $45 per MWh. (p. 5-1) Parsons/Joskow (EEEP 212) may be one day D haeseleer (213): Synthesis on the Economics of Nuclear Energy Nuclear new build is highly capital intensive and currently not cheap, it is up to the nuclear sector itself to demonstrate on the ground that cost-effective construction is possible. (p. 3) Davis, L.W. (212): Prospects for Nuclear Power. Journal of Economic Perspectives (26, 49 66)) These external costs are in addition to substantial private costs. In 1942, with a shoestring budget in an abandoned squash court at the University of Chicago, Enrico Fermi demonstrated that electricity could be generated using a self-sustaining nuclear reaction. Seventy years later the industry is still trying to demonstrate how this can be scaled up cheaply enough to compete with coal and natural gas. (p. 63) - 23 -

Davis (212; JEP, p. 11): 7 years later current update for Europe (own calc.) Levelized costs in cents/kwh Nuclear Coal Natural Gas Baseline (216) 12,1 5,1 5, CO 2 -price: 25 /t 12,1 6,3 5,7 CO 2 -price: 1 /t 12,1 1, 7,9-24 -

CCTS in Europe: no successful large-scale demonstration project to date Source: BOLESTA (29) - 31 -

Option: Carbon Capture, Transportation, and Storage (CCTS)? - 32 -

Agenda 1. Introduction 2. Decarbonization scenarios 3. Focus on Norway (1): generation 4. Focus on Norway (2): infrastructure 5. Conclusion - 36 -

Installed Capacity in GW Installed Capacity in Norway (25): Some onshore and offshore wind, storage only late (PtG) 7 6 5 4 3 2 Storage Solar PV Wind Offshore Wind Onshore Hydro Biomass Other Gas 1 22 225 23 235 24 245 25 Default Scenario - 37 -

Electricity Generation in TWh Electricity Generation in Norway (25): Constrained by CO 2, offshore wind comes in 8 7 6 5 4 3 2 Solar PV Wind Offshore Wind Onshore Hydro Biomass Waste Other Gas 1 22 225 23 235 24 245 25 Default scenario - 38 -

821 828 835 842 849 856 863 87 877 884 891 898 95 912 919 926 933 94 947 954 961 968 975 982 989 996 13 11 117 124 131 138 145 152 159 166 173 18 187 194 111 118 1115 1122 1129 1136 1143 115 Electricity generation in GW Norway February dispatch (25): Strong demand from France/Germany/Europe, some storage 35 3 25 2 15 1 5-5 -1-15 -2 Gas Other Biomass Hydro Wind Onshore Wind Offshore Solar PV Storage Trade Demand - 41 -

821 828 835 842 849 856 863 87 877 884 891 898 95 912 919 926 933 94 947 954 961 968 975 982 989 996 13 11 117 124 131 138 145 152 159 166 173 18 187 194 111 118 1115 1122 1129 1136 1143 115 Electricity generation in GW Dispatch 25 Germany in February shows substantial imports Hour-to-hour operation of the German electricity system in 25 (first two weeks of February) 15 1 5-5 -1 Hard Coal Gas Other Biomass Hydro Wind Onshore Wind Offshore Solar PV Storage Trade DSM Demand German electricity imports in February 25 come in decreasing order from Denmark, Switzerland, Netherland, France and Austria. Hour The imports and exports with Sweden and Poland are even in total Germany exports 96MW on average to the Czech Republic. - 42 -

4348 4355 4362 4369 4376 4383 439 4397 444 4411 4418 4425 4432 4439 4446 4453 446 4467 4474 4481 4488 4495 452 459 4516 4523 453 4537 4544 4551 4558 4565 4572 4579 4586 4593 46 467 4614 4621 4628 4635 4642 4649 4656 4663 467 4677 Electricity generation in GW Norway Summer dispatch (25): Solar in Europe dominates, exports remain strong 3 25 2 15 1 5-5 -1-15 -2 Gas Other Biomass Hydro Wind Onshore Wind Offshore Solar PV Storage Trade Demand - 44 -

Agenda 1. Introduction 2. Decarbonization scenarios 3. Focus on Norway (1): generation 4. Focus on Norway (2): infrastructure 5. Conclusion - 45 -

The European Context: Infrastructure European-wide network development: less promising than in the last decade? Reasons for delay: Consideration of real economic difficulties in implementing theoretically ideal network structures Geopolitical changes/modifications in partner regions (e.g. North Africa, Russia, etc.) Public debate about infrastructure Experience : first draft of the Single Electricity Market back in 1988-48 - Quellen: SRU (21), ECF (21, 211), Czisch (25)

The right level of cooperation Competing Levels for the Investment Challenge European coordinating institutions in place not in place Geographic Scope Europe-wide 1) Europe centralized./. Regional 2) Regional + 3) National Source: Beckers, Hoffrichter, and von Hirschhausen (212) - 49 -

ELMOD Application: Expansion Pathways for the European Transmission Network Pan-European Transmission Investment for the EMF28 Scenarios Question: How do the different EMF 28 scenarios in their choice of technology and national allocation effect the demand on infrastructure investments? Bottom up DC Load Flow model based on ELMOD (3,523 nodes and 5,145 lines plus DC overlay grid) Endogenous determination of grid investments needs up to 25 in 1-year steps. The optimization minimizes the cost of the expansion as well as system operation. Model runs for the EMF28-Scenarios 4%DEF (4% GHG reduction until 25), 8%DEF (8% GHG reduction until 25) 8%GREEN (green, 8% GHG reduction till 25) Additional case for each scenario: doubling of costs for cross border lines - 53 -

Long-Term EMF Scenarios for Europe 25: Technology Specific Generation Capacity for Europe Primes results in a European context; main aspects: Renewable generation capacities CCTS as an option?; nuclear/coal vs. gas share with increasing renewable capacities Scenarios: 4%DEF ~ 4% GHG reduction target to 25, default power plants 8%DEF ~ 8% GHG reduction target to 25, default power plants 8%GREEN ~ 8% GHG reduction target to 25, more Renewables 4%DEF 8%DEF 8%GREEN - 54 -

DC Investments by 25 DC Grid infrastructure investments mostly offshore connectors 4%DEF: 4% GHG reduction 8%DEF: 8% GHG reduction 8%GREEN: 8% reduction + green - 57 -

Agenda 1. Introduction 2. Decarbonization scenarios 3. Focus on Norway (1): generation 4. Focus on Norway (2): infrastructure 5. Conclusion - 59 -