Versnellen van de energietransitie: kostbaar of kansrijk? Een gedachten-experiment voor Nederland Springtij September 207
Messages to remember 0 It is possible to reach (deep) decarbonization 02 The energy transition will be costly, but also provides economic opportunities 03 Increased electrification drives further rollout of renewables 2
To achieve EU 2050 ambition Netherlands needs to accelerate with factor 3 CO 2 equivalent emission, % change as of 990 0 00 90 80 70 60 50 40 30 20 0 224 0.7%./yr 87-6% 97-20% -40% -60% -80% 79 0 990 2000 200 4 6 2020 2030 2040 2050 34 2%./yr = 3x 87 45 SOURCE: CBS 3
We selected a set of measures Assumptions used Transport Shift to electricity for domestic shipping, buses, light duty vehicles, and motor cycles Shift to hydrogen for trucks Buildings Industry Other demand Improved insulation Shift to electric, district (and geothermal), and biogas space heating Shift to biogas (8%) and electric (82%) water heating and cooking Shift from oil and gas furnaces and steam boilers to electric versions Example shift from coal blast to biogas and electric furnaces Efficiency improvements Energy efficiency improvements of % per year Power Gas, coal, and oil are replaced by wind, solar, biomass and gas as backup Introduction of flexibility measures SOURCE: McKinsey MGI, CE Delft, CPB, CBS 4
The current energy system is largely dependent on fossil fuels Netherlands energy demand in 204; flow between energy sources and sectors, PJ Energy sources Natural gas,4 Sectors Transport 438 Oil 709 Residential 373 Coal 377 Commercial 35 Renewables 36 Other 77 Electricity (net import) 53 Power sector 2 343 (net) Industry 840 Agriculture, fishing & other 60 Includes: hydro, geothermal, solar, wind, and biomass 2 Only includes net use for central power production (320 PJ) and transmission and distribution losses (23 PJ); energy sector own use (e.g., oil consumption in refining is included in industry) SOURCE: Centraal Bureau voor de Statistiek (204), Energiebalans and Energieverbruik databases 5
In 2040, the energy system would look and function very differently Netherlands energy demand in 2040; flow between energy sources and sectors, PJ Energy sources Natural gas Sectors Transport Oil Residential Coal Commercial Renewables Industry Other Agriculture, fishing & other Power sector 2 Includes: hydro, geothermal, solar, wind, biomass, and hydrogen 2 Includes net biomass use (94 PJ), gas use ( PJ) and own use and transmission and distribution losses 6
When striving for 80% reduction by 2040 the role of renewables and power increases further Netherlands energy demand in 2040; flow between energy sources and sectors, PJ Energy sources Natural gas Sectors Transport Oil Residential Coal Commercial Renewables Industry Other Agriculture, fishing & other Power sector 2 Includes: hydro, geothermal, solar, wind, biomass, and hydrogen 2 Includes net biomass use (94 PJ), gas use (37 PJ), and own use and transmission and distribution losses 7
An annual investment of ~EUR 0 billion would be needed to move towards a 60% CO 2 reduction by 2040 Indicative net investment need, EUR billions, 2020 to 2040 45 20 200 ~0 EUR billion/ year or ~3% of annual budget 30 85 20 35 Economic impact! Direct impact of investments and changes in import export balance! Shifts towards sectors with higher multipliers! Attraction of new economic activities Transport Residential and Commercial Industry Estimate investment need to adjust demand RES build out (excluding grid) Network and connection costs Total additional investment Note: Cumulative investment varies strongly with commodity prices (incl. offshore wind, PV) Demand System and Generation 8
CO 2 e emissions from industry have reduced 2x faster than total emissions in the Netherlands CO 2 equivalent emission, % change as of 990 Total emissions Industry emissions 0 00-6% -20% -40% -60% -80% 90 80 224 97 87 70 60-32% 50 40 30 20 0-95% 0 990 2000 200 4 5 2020 2030 2040 2050 SOURCE: CBS, National Inventory Report (990-204) 9
A game of clusters - 67 Mton industrial CO 2 emissions Industrial facility Dedicated power plant 0, Mton CO 2 6 Mton CO 2 Mton 29 58 CO 2 e(ch 4 /N 2 O/F) Total emissions CO 2 e (CO 2 ) Netherlands CCS 22 CCU 45 20+ 38 Energy-related emissions 7 Processemissions End of life emissions mostly outside NL 0.3 5 Top 0% industrial facilities are responsible for >65% of CO 2 emissions Recycling Recycling Reuse SOURCE: PRTR Netherlands, National Inventory Report 206 data for 204 0
Overview of industrial CO 2 emissions, split by functional use Emissions per sector, estimated Mton CO 2 /yr, 204 Total 22 4 6 2 0 High temperature heat production at one steel plant is industry s largest CO2 emissions source 0 5 6 3 6 2 7 67 7 2 9 Process emissions On site transport Electricity (e.g., machine drive) 6 Ammonia and ethylene production result in MT of process and heatrelated emissions 4 4 2 2 3 22 4 High temperature heat Mid temperature heat 0 0 2 4 Low temperature heat Chemicals Iron and steel Petroleum refining Food processing, beverages and tobacco Other industries Nearly every sector produces emissions by generating lowand medium-temperature heat NOTE: Difference in totals due to rounding Emissions from biomass are excluded; 2 On-site transport not allocated to specific sectors SOURCE: Manufacturing Energy Consumption Survey (203); National Inventory Report (206); expert interviews; CE Delft Denktank energiemarkt Industrielewarmtemarkt 203; expert interviews
Six ways to move industrial decarbonization forward reaching 60% by 2040 Options 60% reduction compared to 990 levels progressing all options MtCO 2, 204 2040 Assumed impact on industrial CO 2 emissions by 2040 Assumed impact electricity related emissions (excl. from baseline of 45 Mton) Theoretical maximum and minimum potential by 2050 Energy efficiency 2 3 Electrification of heat demand Change of feedstock 0 Develop routes to reuse and recycle materials Decide on steel production route(s) 3 3 6 Develop CCS/U capabilities 3 Total reduction 9.6 9 423 SOURCE: Centraal Bureau voor de Statistiek (204), Energiebalans and Energieverbruik databases, National Inventory Report (990-204) 2
Following these measures, energy demand is reduced by 5% and CO 2 emissions by 46% (>20 Mton) Industry energy demand, incl. feedstock, PJ Industrial direct CO 2 emissions, Mton CO 2 407-2%,237-7%,66 45-46% Chemicals -74% 24 Petroleum refining Iron and steel Food processing, beverages and tobacco Other industries 2 204 2040 60% CO 2 reduction 2050 80% CO 2 reduction 840 PJ of energy demand and 567 PJ of feedstock. Data used in our previous report is based on a preliminary publication of the energieverbruik and energiebalans numbers of CBS, which is shown here and adds up to 840 PJ energy consumption for industry. The final CBS reporting on energieverbruik and energiebalans adds up to 833 PJ 204 2040 60% CO 2 reduction 2050 80% CO 2 reduction SOURCE: CBS-data for 204 3
Industry transition in the Netherlands the missing link OCTOBER 207
Back up 5
Power sector: 80% renewable power supply by 2040 would be needed illustrative scenario, other choices also possible Wind 62% of production ~ thousand turbines 6% of Dutch North Sea Solar 2% of production ~63 million solar panels 2 Third of current roof area Biomass 8% Flexibility measures 8,500 kton dry biomass 3 Conversion of existing coal plants to biomass As illustration, 5 GW of (seasonal) storage Other choices would also be possible, e.g. with larger role for (coal/gas) CCS, imports 45% capacity factor, turbines of 3 GW 2.65 m2 per solar panel, 235 kw 3 7 MJ/kg biomass, 2 ktons/km2 6 6
At our current pace, we will finish the remaining carbon budget within 30 years 2 C Carbon budget emissions to 200, bn tonnes CO 2 e Carbon budget compared to carbon reserves 3,670 3,000-5,400 Gas, unconventional Gas, conventional,060 Oil, unconventional Oil, conventional Coal 939 790 ~900 At current pace budget runs out before 2050 ~900 2 C carbon budget 750-985 985-205 CH4/N2O/F, 205-200 206-200 Carbon reserves 2 C carbon budget Historical emissions Future emissions SOURCE: Team analysis 7
Four major levers are needed to enable the energy transition Final energy consumption,2, 203 and 2050, in EJ 640 43. Increasing energy efficiency limits the rise of energy consumption Fossil fuels 373 2. CCS/U decarbonizes the use of fossil fuels 3 Power sector Fossil fuels Power sector Renewables Biomass and waste 3. Switch to zero emission energy carriers, e.g., electricity or hydrogen 4. Renewables replace fossil fuels 203 2050 Final energy consumption within the 2 o C scenario of the IEA 2 Increase of energy demand is determined via the relative increase of CO2 emissions w/o energy efficiencies 3 The fossil fuels amount processed using CCS/U was determined to be 25% of the total amount of fossil fuels by relating the CO2 emission reduction compared for the 2DS and 6DS scenario 4 The fossil fuel power sector also includes nuclear energy SOURCE: Source: IEA ETP 206 8
Options can create additional value for the Netherlands but do not outweigh their investment in absence of global CO2 price Near positive business case New economic activity Drive change in energy system Roll out with support Efficiency: relatively positive business cases Create optionality in mid temperature heat: Help balance grid and further integrate intermittent renewables CCS/U: Build on well-developed, diverse offshore industry and chemicals industry Scale up Reuse and recycling: Leverage unique transport and logistics capabilities, in combination with chemicals industry Bio-to-Chem routes: Build on both agriculture and food capacilities as wel as chemicals and refining experience Electrolysis R&D: Hydrogen to help balance and buffer the energy system Innovation Further electrification: help drive change in energy system Steel route(s): different routes will either impact economy activity (e.g. CCS/CCU) or help change the energy system, or both (e.g. EAF or H2-based DRI) 9
The challenges International context of majority of industrials Brown field, not green field Opex not capex 20
but also opportunities for the Netherlands Leading position of Dutch industry cherished investment Dense, varied clusters infrastructure and circulariry Innovative food and agri sector high end bio-to-chem Logistics infrastructure ability to recycle at scale Stable and well connected energy system 2