Economies of Scale vs the Learning Curve Joan MacNaughton, Senior Vice President, Power & Environmental Policies BIEE 8th Academic Conference, 23 September 2010
Agenda The challenge Meeting the challenge in the power sector The policy framework Conclusions BIEE - JM - 30/09/2010 - P 2
World abatement of energy-related CO2 emissions Gt 42 40 Reference Scenario 13.8 Gt Share of abatement % 2020 2030 38 Efficiency 65 57 36 34 32 30 28 26 3.8 Gt 450 Scenario 2007 2010 2015 2020 2025 2030 1. End-use 59 52 2. Power plants 6 5 Renewables 18 20 Biofuels 1 3 Nuclear 13 10 CCS 3 10 Source: International Energy Agency, "World abatement of energy-related CO2 emissions in the 450 Scenario," World Energy Outlook 2009 BIEE - JM - 30/09/2010 - P 3
Investment, investment, investment Baseline $ 270 trn Blue Map = 450ppm scenario $ 46 trn $ 750 bn/yr 2030 $ 1600 bn Source: International Energy Agency, Energy Technology Perspectives 2010 2050 60% of 2030 emissions from existing plants 60% of 2030 plants still to be built BIEE - JM - 30/09/2010 - P 4
Agenda The challenge Meeting the challenge in the power sector The policy framework Conclusions BIEE - JM - 30/09/2010 - P 5
Meeting the challenge in the power sector Technology Mix - Nuclear - Renewables ALSTOM INVOLVEMENT Source: Power Systems analysis Production Efficiency - Fuel Preparation/Retrofit - New generation plants - Energy management Carbon Capture and Storage BIEE - JM - 30/09/2010 - P 6
Meeting the challenge: The full portfolio of technologies is needed Gas Coal Oil Hydro Nuclear (Conv. Island) Wind BIEE - JM - 30/09/2010 - P 7
Meeting the challenge Source: EPRI, Creating our future, 2009 Summer Seminar BIEE - JM - 30/09/2010 - P 8
Meeting the challenge Source: EPRI, Creating our future, 2009 Summer Seminar BIEE - JM - 30/09/2010 - P 9
Meeting the challenge: evolution of cost of CO 2 avoided / tonne CO 2 90 80 70 60 50 Public funding 40 30 20 10 0 Demo phase Early commercial phase Mature commercial phase Source: McKinsey & Company CCS assessing the economics for the cost numbers; policy implications drawn by ZEP BIEE - JM - 30/09/2010 - P 10
Meeting the challenge: learning rates Implied learning rates per doubled capacity; various periods Solar PV* 18 23 Ethanol 15 Assumption for CCS Wind Power 13 Higher learning case 15 LNG 13 Base case 12 Average** 12 SO2 and NOx capture systems 12 Lower learning case 7 PV inverters Solar thermal 3 6 *Sources indicate learning rates between 18 and 23% for solar PV **Unweighted average of the learning curves, with Solar PV taken at 20.5, the midpoint between 18 and 23 Source:Worldwatch Institute; IEA; IPCC; BTM consult; ABS; NREL; IIIEE; ABI; Drewry 2007; UC Berkeley ERG; Navigant consult; McKinsey analysis BIEE - JM - 30/09/2010 - P 11
CCS learning curves compared to other industries Learning curve experience from renewables and LNG as capacity is installed Implied learning curve per doubled capacity Capital cost 2004 USD/W Capacity CAGR 1,000 LNG* 1970 2000 13% 15% CCS differences: more mature component technologies 100 10 Solar Thermal 1985 1991 3% 65% Ethanol 1978 1996 15% Solar PV** 1975 2003 30% 23% 40% Wind Power 1981 2001 1981 2001 13% 52% CCS main opportunity areas Improving energy efficiency Standardization of capture technologies 1 1 10 100 1,000 10,000 100,000 PV inverters Cumulative capacity installed 6% 1995 2002 MW 70% *LNG capital cost measured in USD/t and capacity measured in bcm **Other sources indicate learning rates as low as 18% for solar PV Source: Worldwatch Institute; IEA; BTM consult; ABS; NREL; IIIEE; ABI; Drewry 2007; UC Berkeley ERG; Navigant consulting; McKinsey analysis BIEE - JM - 30/09/2010 - P 12
Performance is already there We Energies Pleasant Prairie USA - Coal - Chilled Ammonia CO2 capture rate 90% CO2 purity >99% Parasitic load [%] on net efficiency AEP Mountaineer USA - Coal - Chilled Ammonia 90% >99.9% 25 20 Dow Chemical Co. Charleston USA - Coal - Advanced Amines 90% >99.5% 15 Realistic limit Vattenfall Schwarze Pumpe Germany - Lignite & Bit. Coal - Oxy 90% >99.7% 10 Thermodynamic theoretical limit: assuming ideal separation and compression processes* Pilot phase Demo phase Commercial phase and will continue to improve *Theoretical limit assumes ideal separation and compression processes (110bar): isentropic, no losses BIEE - JM - 30/09/2010 - P 13
at a competitive cost Typical cost of electricity OECD new low carbon power plant construction /MWh 24 22 PSP RoR Hard Gas with Coal with CCS CCS Nuclear Hydro Geothermal Wind Onshore Wind Offshore Solar Thermal Solar PV BIEE - JM - 30/09/2010 - P 14 CCS is competitive with other decarbonized power sources Source: Alstom Analysis
Agenda The challenge Meeting the challenge in the power sector The policy framework Conclusions BIEE - JM - 30/09/2010 - P 15
Policy framework for CCS Funding for large scale demos Global linked cap & trade systems (EU, US, Australia) Regional strategic plan for transport, storage National - Regulation of CO 2 storage, including liabilities - Regulatory framework foundation for a commercial offering National/Local - Public acceptability BIEE - JM - 30/09/2010 - P 16
Policy framework for CCS Risks: Commercial Policy & regulatory (too little too late; inappropriate approaches to e.g. knowledge sharing/ip; tilted playing field) Political risk Absence of infrastructure BIEE - JM - 30/09/2010 - P 17
Agenda The challenge Meeting the challenge in the power sector The policy framework Conclusions BIEE - JM - 30/09/2010 - P 18
Conclusions Consensus over decarbonising power sector by 2030 Technologically entirely feasible All technology solutions required Policy framework to facilitate: - Level playing field - Targeted support - Tackling co-dependencies - Better risk management - Effective global co-ordination BIEE - JM - 30/09/2010 - P 19
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