Supporting the deployment of selected low-carbon technologies in Europe

Similar documents
Renewable energy technologies/sources path within EU 2020 strategy

Medium Term Renewable Energy Market Report Michael Waldron Senior Energy Market Analyst Renewable Energy Division International Energy Agency

SETIS Towards a low-carbon future

TREASURE COAST REGIONAL PLANNING COUNCIL M E M O R A N D U M. To: Council Members AGENDA ITEM 8

Renewable energy in Europe. E-turn 21 workshop Cologne, 10 May 2006

Topics Renewable Energy - Near Zero Emission - Joint Actions - Cross-Cutting - Prizes

WP Future opportunities for geothermal and energy system integrated

Background paper. Electricity production from wind and solar photovoltaic power in the EU

EU Climate Change & Energy Policy and Nuclear Fission Research

The Promises and Challenges Facing Renewable Electric Power Generation

Renewable Energy Economics and Technology Status - Program 84

Long-term Transition Paths towards a Sustainable Energy Supply

The Outlook to 2050 and the Role of Energy Technology

Analyses market and policy trends for electricity, heat and transport Investigates the strategic drivers for RE deployment Benchmarks the impact and c

WIND POWER TARGETS FOR EUROPE: 75,000 MW by 2010

3nd UNI-SET Energy Clustering Event. Research and Innovation for the future European energy system

Photo: Thinkstock. Wind in power 2010 European statistics. February The European Wind energy association

RENEWABLE POWER GENERATION COSTS IN 2014

WIND ENERGY - THE FACTS PART VI SCENARIOS AND TARGETS

CONTENTS TABLE OF PART A GLOBAL ENERGY TRENDS PART B SPECIAL FOCUS ON RENEWABLE ENERGY OECD/IEA, 2016 ANNEXES

Overview of renewable energy

CCS - Commercially Viable but a Political Priority?

Methodology for calculating subsidies to renewables

Competitive energy landscape in Europe

EU wide energy scenarios until 2050 generated with the TIMES model

Proposal of draft summary & conclusions

Report on renewable energy supply in Europe addressing technological and political preconditions

Renewables: The True Costs. Michael Taylor and Eun Young So IRENA, Bonn, Germany 7 May 2015

Generation Technology Options in a Carbon- Constrained World

Medium Term Renewable Energy Market Report 2016

Innovation in the Energy Sector: Which technologies do we need after 2030 and which policies do we need now?

Finding an Optimal Path to 2050 Decarbonization Goals

CEOs OF LEADING EUROPEAN ENERGY COMPANIES CONTRIBUTION TO THE EUROPEAN COUNCIL, MARCH 2014

How achievable are the UK s 2020 renewable energy targets?

Capturing the value potential in New Energy. Alexandra Bech Gjørv Head of New Energy

Core projects and scientific studies as background for the NREAPs. 9th Inter-Parliamentary Meeting on Renewable Energy and Energy Efficiency

Advanced Renewable Incentive Schemes. Simon Müller Senior Analyst System Integration of Renewables International Energy Agency

About Energy UK. Introduction

Overview of Calls in the H2020 Work Program Energy

The Decarbonized Electrification Pathway: Taking Stock of Canada s Electricity Mix and Greenhouse Gas Emissions to 2030.

The Role For Nuclear In A UK Low Carbon Economy Large Reactors and Small Modular Reactors

The challenges of a changing energy landscape

Horizont 2020 Secure, clean and efficient energy

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS

energy in figures Energy

Politique et sécurité énergétique dans le contexte des nouvelles énergies

Europe s Coming Challenges in Meeting Decarbonisation Objectives

Impact of Regional Greenhouse Gas Initiative and Renewable Portfolio Standards on Power System Planning

DATA ASSUMPTIONS AND DESCRIPTION OF STUDIES TO BE PERFORMED 2014 EGSL & ELL Integrated Resource Plans

Energy Policy for Communities event. Errol Close Decarbonisation Policy and Co-ordination

Plenary session 2: Sustainable and Inclusive Growth: Energy Access and Affordability. Background Paper

Global Techno-Economic Trends for Solar PV and Relevance for MENA

The German Market Promotion Initiatives for Renewable Energies

Energy-Environment Relationship: How Much Does Environmental Regulation Affect Investment in Energy Infrastructure?

Economic impact of eel trade ban general trends. Study in support to the STECF

Tomorrow s Energy Scenarios 2017 Summary Booklet

SUSTAINABLE USE OF OCEANS IN THE CONTEXT OF THE GREEN ECONOMY AND THE ERADICATION OF POVERTY, PRINCIPALITY OF MONACO, NOVEMBER, 2011

Challenges in achieving energy & climate goals from the EU Energy Roadmap 2050

EU Climate and Energy Policy Framework: EU Renewable Energy Policies

Roadmap for Solar PV. Michael Waldron Renewable Energy Division International Energy Agency

Role of clean energy in the context of Paris Agreement

Regulation as a key driver for renewable energy development: lessons from the Spanish case

Renewable Portfolio Standards

Renewable Energy Sources Act. Progress Report 2007

Renewable Energy Prospects for the European Union

European Offshore Wind Oceans of Opportunity. Christian Kjaer Chief executive European Wind Energy Association

Educational Launch Seminar

Modelling of Australia s National Energy Guarantee

Data, tables, statistics and maps ENERGY STATISTICS

Overview of CO2 Capture Technologies, System Integration, and Costs

Climate Change and Renewable Energy: The Technology Challenges and Opportunities. National Renewable Energy Laboratory What Makes Us Unique?

Small Modular Reactors In A UK Low Carbon Energy System

2015 Economic Planning Study Assumptions

Renewable Energy Prospects for the European Union

Published on Market Research Reports Inc. (

Promoting sustainable mobility: natural gas and biomethane as a fuel for transport

Power to Gas within Uniper. Dr. Peter Klingenberger, Senior Advisor

Strengthening cooperation between EU and MENA: lessons learnt from EU R&D programmes to stimulate industry involvement

AFFORDABLE AND CLEAN ENERGY

Fuels Used in Electricity Generation

Future sustainable EU energy systems and the case of Cyprus

CHINA 2050 HIGH RENEWABLE ENERGY PENETRATION SCENARIO AND ROADMAP STUDY. Energy Research Institute National Development and Reform Commission

E 3 M Lab, Institute of Communication and Computer Systems. The MENA-EDS Model. Middle East and North Africa Energy Demand and Supply Model

Renewable energy technologies

Is there a market for clean technology SMEs? The opportunity for SMEs in cleantech industries in developing countries

The IPCC Special Report on Renewable Energy Sources and Climate Change Mitigation Prof. Dr. Ottmar Edenhofer

L.D. Carter For USCSC

Portugal Energy efficiency report

Challenges and opportunities for Clean Coal Technologies in Europe and Germany

Renewable Resources. David Jacobs Manager, Resource Planning and Procurement

GE OIL & GAS ANNUAL MEETING 2016 Florence, Italy, 1-2 February

MTEP18 Futures. Planning Advisory Committee June 14, 2017

Role of bioenergy and transport biofuels in energy and climate scenarios

RES - Status Quo, Potential and Prospects Vasileios Tsolakidis, CRES

Please note that all IEA data is subject to the following Terms and Conditions found on the IEA s website:

SYSTEMS ANALYSIS FOR ENERGY SYSTEMS USING AN INTEGRATED MODEL OF GIS AND TECHNOLOGY MODELS

Cost-effective share bioenergy How do other options compare to bioenergy?

Integrating variable renewables: Implications for energy resilience

Renewable Energy and other Sustainable Energy Sources. Paul Simons Deputy Executive Director International Energy Agency

Carbon footprint of electricity generation. Stephanie Baldwin POST

Transcription:

Supporting the deployment of selected low-carbon technologies in Europe Implications of technoeconomic assumptions. An energy system perspective with the JRC-EU-TIMES model Wouter Nijs, Savvas Politis, Pablo Ruiz Castello, Alessandra Sgobbi, Christian Thiel, Francesco Zappon, Andreas Zucker 2015 EUR 27608 EN

This publication is a Science for Policy report by the Joint Research Centre, the European Commission s in-house science service. It aims to provide evidence-based scientific support to the European policy-making process. The scientific output expressed does not imply a policy position of the European Commission. Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of this publication. JRC Science Hub https://ec.europa.eu/jrc PDF ISBN 978-92-79-54021-9 ISSN 1831-9424 doi: 10.2790/245031 LD-NA-27608-EN-N European Union, 2015 Reproduction is authorised provided the source is acknowledged. How to cite: Nijs, W., Politis, S., Ruiz, P., Sgobbi, A., Thiel, C., Zappon, F., and Zucker A. (2015),Supporting the deployment of selected low-carbon technologies in Europe. Implications of techno-economic assumptions. An energy system perspective with the JRC-EU-TIMES model; EUR 27608 EN; doi 10.2790/495685 All images European Union 2015 Abstract This report aims at supporting the identification of technological options that could facilitate an efficient and effective transition to a low-carbon energy technology portfolio in the EU for the medium term (2030). It also aims at improving the reader's understanding on how uncertainty of cost and efficiency parameters impact technologies' competiveness as well as affordability, security and sustainability of the entire energy system. Title How does the techno-economic performance of low-carbon technologies affect their deployment? Technology improvements, on top of the projected learning, could accelerate deployment of established technologies (PV and wind onshore and offshore). In contrast, even with a more pessimistic technology outlook, deployment of additional capacity will continue until 2030. Emerging technologies (e.g. second-generation biofuels, tidal stream and carbon capture and storage) take up a role in 2030 only under optimistic scenario assumptions. The overall impact on security of supply, affordability and environmental sustainability is generally proportional to technology deployment. Technologies that are still marginal, like tidal stream energy, require strong improvements, which might be difficult to achieve in the medium-term without significant additional R&I efforts.

Table of contents Executive summary... 2 1. Introduction... 3 1.1 Scope... 4 2. The baseline energy system trends for 2030... 5 3. The role of cost and efficiency: main highlights... 7 3.1 The role of cost and efficiency on the deployment of specific technologies... 7 4. The role of cost and efficiency on affordability, security and sustainability... 10 5. References... 13 List of abbreviations... 14 List of figures... 15

Executive summary Policy context Technological research and innovation (R&I) for the energy system, one of the five pillars of EU's Energy Union strategy, is essential in determining future low-carbon energy trajectories. Substantial R&I is required to further reduce costs of low-carbon technologies and improve their performance. The main objective of this report is to help decision-makers in identifying technological options that could facilitate an efficient and effective transition to a low-carbon energy technology portfolio in the EU for the medium term (2030). Furthermore, this report aims at improving the reader's understanding on how uncertainty of cost and efficiency parameters impact technologies' competiveness as well as affordability, security and sustainability of the entire energy system. To this end, we use the JRC-EU-TIMES model, representing the energy systems of EU28 member States plus Iceland, Norway and Switzerland (EU28+) from 2005 to 2050. The analysis focuses on seven distinctive technology groups: solar photovoltaic (PV) and concentrated solar power (CSP), onshore and off-shore wind power, tidal and ocean wave power, carbon capture and sequestration (CCS) in the power sector as well as second generation biofuels and hydrogen production. Key conclusions For all technologies already in the market today (PV, wind onshore and offshore) additional improvements in cost and/or efficiency, on top of the already projected learning, would further accelerate their deployment. In contrast, even with a more pessimistic technology outlook for PV as well as onshore and offshore wind, deployment of additional capacity will continue until 2030. Emerging technologies, namely second-generation biofuels, tidal stream and CCS for the power sector, take up a role as low-carbon technologies in 2030 only under optimistic scenario assumptions. The overall impact of different techno-economic assumptions on the energy system in terms of security of supply, affordability and environmental sustainability, is generally proportional to their impact on technology deployment. Cost variation for PV and onshore and off-shore wind demonstrate the largest potential impact on the energy system, despite the fact that these technologies are relatively mature. Consequently, investing in R&I of PV and wind would be cost-effective, if this R&I leads to a reduction in costs. This points to the need for an in-depth analysis of potential bottlenecks in the supply chains, including the impact of critical materials. Technologies that are still marginal, like tidal stream energy, have a less significant impact on the energy system by 2030. However, strong improvements in their technoeconomic performance could positively impact the energy systems. Such improvements are however high, might thus be difficult to achieve in the medium-term without significant R&I efforts. Related and future JRC work The main areas for further development and research include deriving sensitivity ranges from a review of past and ongoing R&D efforts, as well as enlarging the analysis to more than one technology simultaneously for a deeper understanding of cross-sensitivities among technologies. An assessment of how key exogenous drivers could significantly affect the European energy system would also shed additional light on how a costeffective and efficient transition to low-carbon energy could be fostered. Such an analysis could, for instance, include import prices of fossil fuels (coal, oil, gas) and demand for energy services 2

1. Introduction Technological innovation for the energy system, one of the five pillars of EU's Energy Union strategy, is essential in determining future low-carbon energy trajectories. The 2015 Communication on A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy [1] sets out key priorities to make energy more secure, affordable and sustainable. Among the objectives of the European Energy Union are the diversification of energy sources, the reduction of energy imports, and ensuring the EU continues to play a leading role in energy efficiency and low carbon energy technologies development and deployment. Energy Research and Innovation (R&I) is recognised as a critical building, driving economic growth, creating highly qualified jobs, and contributing to all dimensions of the Energy Union. The implementation of the energy transition thus requires substantial R&I to further reduce costs of low-carbon technologies and improve their performance. In this context, the main objective of this report is to help decision-makers in identifying technological options that could facilitate an efficient and effective transition to a low-carbon energy technology portfolio in the EU for the medium term (2030). Furthermore, this report aims at improving the reader's understanding on how uncertainty of cost and efficiency parameters impact technologies' competiveness as well as affordability, security and sustainability of the entire energy system. The work's methodology introduces sensitivity analysis on main techno-economic parameters of key emerging technologies within a consistent energy modelling framework for the 28 EU member states. These include technology-specific costs (investment costs, CAPEX, and fixed operation and maintenance costs, FIXOM) and conversion efficiency. We investigate whether strong technology performance improvements or cost reductions can make a technology sufficiently competitive to capture market share and to what extent. Conversely, we analyse the systemic impact of uncertain trajectories of technology and cost parameters. In this way, our results provide useful insights on prioritising the efforts to foster technological deployment. The report can be in the interest of policy makers, technology developers, power marketers, transmission system operators as well as researchers. 3

EFFICIENCY SPECIFIC COSTS (CAPEX, FIXOM) Levelised cost of energy COST Sensitivity Wind, Tidal, PV Biofuels, Hydrogen, CCS in power* BASELINE -10% -10% The levelised cost for technologies with fuel costs is less sensitive to CAPEX and Fixed O&M. For PV, biofuels and H2 technologies, efficiency improvements often induce a CAPEX reduction. Specific for PV where cost is mostly CAPEX, the COST sensitivities can also represent EFFICIENCY sensitivities if efficiency improvements can be realised without additional costs and thus reducing the CAPEX. EFFICIENCY Sensitivity Wind, Tidal +10% Power -10% Levelised cost only CAPEX and Fixed O&M PV Biofuels, Hydrogen -10% Surface use -10% Fuel use BASELINE BASELINE For PV, both power output and peak capacity increase equally These technologies have variable costs CCS in power* -1% Residual CO 2 BASELINE We assume an increase in CO 2 capture efficiency without impact on fuel consumption *CCS can also deployed in the industrial sector. In this report, the focus in however on the power sector Figure 1: Overview of the sensitivities and impact on levelised cost of energy (the example is given only for improvements of cost and efficiency) 1.1 Scope For studying the role of technology cost and efficiency, our analysis focuses on seven distinctive technology groups: solar photovoltaic (PV) and concentrated solar power (CSP), onshore and off-shore wind power, tidal and ocean wave power, carbon capture and sequestration (CCS) in the power sector as well as second generation biofuels and hydrogen production. For each technology group, we design sensitivity scenarios entailing variations of investment (CAPEX) and fixed operation and maintenance (FIXOM) costs. For technology efficiencies, the range of variations is narrower (as it is constrained by technological and physical limitations. Second generation biofuels and solar PV are assumed to have the highest improvement potential on technical efficiency. Also, when varying technology efficiencies, we assume that costs remain unchanged and vice-versa. We use the JRC-EU-TIMES model, representing EU28 plus Iceland, Norway and Switzerland from 2005 to 2050 [2]. The model ensures the satisfaction of all energy services and materials demands in three sectors namely industry, buildings and transport - while minimising the total supply cost under a climate-constraint, which includes the 2030 Climate and Energy Policy Framework (40% 27% - 27% targets), as well as a long term target of 80% reduction of CO 2 in 2050 compared to 1990 levels. 4

2. The baseline energy system trends for 2030 Achieving ambitious CO 2 emission reduction in the European energy system is technically possible, beyond the currently agreed 20-20-20 climate and energy policy package ([3], [4], [5], and [6]). It does require, however, a significant change in the energy consumption mix and technological deployment. Key findings, on the 2030 trends of the EU energy system, indicate that the (total EU) imports of energy decrease by 3%, mainly because the share of renewables in total primary energy consumption increases to a level of 22% in 2030, relative to just 10% in 2010; while primary energy consumption decreases by 16% over the same time period. Final energy decreases by 3% despite the overall growth in energy services and material demands. In 2030, 27% of final energy is provided by renewable resources consists mainly of biomass for heat and combined heat and power (12%), RES-e (10%), solar and ambient heat (4%) and biofuels (1%). Electricity production grows by 2% between 2010 and 2030, while the total installed capacity almost doubles. This is due the share of variable low-availability wind and solar energy in the total electricity production that also more than doubles in that same period, from 12% to 26%. In the same period, the total RES-e share increases from 21% to 46%. Due to this sharp growth of RES-e, the carbon intensity of electricity production reduces from 0.42 to 0.16 t of CO 2 /MWh. 5

2030 main technology COST 2030 CAPEX [ /kw] Definition EFFICIENCY 2030 Efficiency Max. increase Solar PV Thin film Min 272-371 Conversion efficiency - 11% 544-744 surface use 16% Max 816-1114 Example: multijunction cells 24% + 50% For solar PV, where cost is mostly CAPEX, the COST sensitivities can also represent EFFICIENCY sensitivities (of 32% and 11% compared to the baseline 16%) if efficiency improvements can be realised without additional costs and thus reducing the CAPEX. Wind ON Wind OFF Variable rotor speed, three blades Min 252-660 20% 1050-1320 Power coefficient - electricity Max 1575-1980 26% production for given capacity Example: advanced control Min 900-1650 methods 35% 1800-3300 Max 2700-4950 46% + 30% + 30% Tidal Tidal stream Min 1687 Power coefficient 40% 3375 Example: optimise power Max 5062 take-off 50% + 25% CCS in power CCS on coal power plants Min 100-330 CO 2 capture efficiency - 88% - 90% 200-660 residual CO 2 Max 300-990 Improved absorption 91% - 93% + 3% Biofuels 2nd generation biokerosene Min 869 Conversion efficiency - 24% 1738 biomass use Example: increased acitivity 36% Max 2607 enzymes 72% + 100% 24%, 36% and 72% is equivalent to 0.10, 0.15 and 0.30 w/w efficiency H2 Electrolyser Min 3276 Conversion efficiency - 64% Baselin 6552 fuel use 71% Max 9828 Example: increased pressure 83% + 20% Figure 2: Overview of the inputs for the 7 technology groups and their main technologies in 2030 6

3. The role of cost and efficiency: main highlights An important finding of the sensitivity analysis is that for all technologies already in the market today (photovoltaic, wind and hydrogen production) additional improvements in cost and/or efficiency, on top of the already projected learning, would further accelerate their deployment. In contrast, when technology expectations are lower than foreseen, deployment remains relevant but yet lower than projected. This is an indication of inertia in the energy system, preventing already established technologies from leaving the market even in the face of unforeseen techno-economic barrier as those explored in this report. Furthermore, even with a more pessimistic technology outlook for PV as well as onshore and offshore wind, deployment of additional capacity will continue until 2030. Emerging technologies, namely second-generation biofuels, tidal stream and CCS for the power sector, take up a role as low-carbon technologies in 2030 only under optimistic scenario assumptions. However, CSP and wave power, despite their significant technical potential, are not cost-competitive before 2030 even under the most optimistic assumptions. Figure 3: Energy production (PJ) and the role of cost and efficiency for key lowcarbon technologies in 2030. For comparison, the consumption of primary energy in the EU28 reaches 62,356 PJ (equivalent of 1488 mtoe). 3.1 The role of cost and efficiency on the deployment of specific technologies Photovoltaic (PV) systems' installed capacity quadruples on average from 2014 to 2030, mainly driven by the projected gradual cost reduction of 25% in that same period. With a yearly growth of 10%, the total installed capacity reaches a level above 350 GW. This requires an average installation rate of 18 GW per year that is comparable to the 2012 installation rate. Under baseline assumptions, from the land surface available for PV deployment, as accounted in the model's current version, more than 50% of the totals is used for most of the EU countries. When PV cost assumptions are sensitized, the share of PV generated electricity in 2030 ranges from 9% to 16%. Indeed, every 100 7

EUR/kW reduction in the 2030 PV cost adds 30GW of PV capacity in the EU. As it consists mainly of CAPEX, the specific cost of PV can also be reduced by improving the PV efficiency when assuming this improvement does not involve additional costs. Under this assumption, the cost sensitivities can also represent efficiency sensitivities. Improving the PV efficiency by 2.2 percentage points, as this results in a 100 EUR/kW reduction in the PV cost, will also add 30GW of PV capacity. However, efficiency improvements that involve proportional additional costs, while they significantly reduce land use requirements, only demonstrate a marginal impact on the PV deployment trajectory and energy system cost. Concentrated Solar Power (CSP), despite the very high physical potential in southern Europe, stands below the expectations of the industry in 2030 (the Strategic Research Agenda estimates a global installed capacity of 10 GW by 2015 and 30 GW by 2020, including 7 GW installed in EU countries in 2020). Specifically, cost reductions that bring CAPEX within the range of 1000-2000 EUR/kW make CSP competitive for Cyprus, Spain, Greece and Portugal. Onshore wind power installed capacity totals at 337GW by 2030. Total installed capacity for offshore wind at the same time reaches 117 GW. The deployment of both onshore and off-shore wind in the EU accelerates significantly between 2020 and 2030. Onshore wind generation almost treble in 2030 relative to 2010 under the baseline scenario of this analysis, and more than doubles even under the most pessimistic cost assumptions (+50% increase in CAPEX and FIXOM). Under the most optimistic cost assumptions, off-shore wind technologies could increase by a factor 8 in 2030 with respect to 2010. For both onshore and offshore wind, the impacts on electricity generation of increasing capacity factors with 30% are comparable to reductions in costs by 50%. Reducing the costs with 50% has a larger impact on the levelised cost of electricity than increasing the capacity factors with 30%. However, in several countries the wind installed capacity reaches the limit of the resource potential and so the cumulative EU28 capacity is less sensitive. For this reason, increasing the capacity factor allows to harvest more electricity in all countries whereas decreasing cost does not impact all countries. Overall, wind energy develops into an essential component of the European energy mix by 2030 and beyond, even under the most pessimistic scenarios. Tidal and wave energy deployment in the medium-term is below the industry's expectations (projections for 2020 are in the range of 240 MW according to [7]), despite the very high potential. With both cost reductions and/or efficiency improvements, tidal stream and wave energy do not become competitive in 2030. Wave energy doesn't become cost-competitive in Europe even in the longer term, due to the competition with the also variable but cheaper solar and wind power. For tidal stream however, cost reductions of more than 40% (below 2500 EUR/kW) bring market penetration forward from 2040 to 2030, allowing for 16-19 GW. Similarly, efficiency improvements of 25%, inflating the capacity factor to the projected maximum of 50%, accelerate deployment, reaching 0.5GW of installed capacity in the EU in 2030. Off-shore wave energy in contrast requires at least 50% cost reductions to become competitive in Europe by 2040. Carbon Capture and Storage (CCS) in the baseline reaches a level of 8 GW out of 488 GW of thermal capacity by 2030 in the EU 28. Coal power plants first deploy CCS, generating in the medium-term over 90% of the total power output with CCS. Capacity of CCS in the power sector is expected to further increase rapidly, reaching 195 GW in 2050. In the long-run, biomass-fuelled plants with CCS take over from coal based generation. Our results indicate that neither costs, capture rate efficiency nor the availability of storage sites are a significant barrier to the large uptake of CCS in all our sensitivity scenarios. Second generation biofuel production technologies can play a role to help decarbonising the energy system. However under baseline assumptions, and without target for renewable energy in transport after 2020, a negligible amount of 2 nd generation (2G) biofuels is only used in road transport while first generation biofuel 8

production is totally phased out. Only aviation continues consuming biofuels, though 2G generation biodiesel blended with kerosene account for only 2% of the total transport energy use. Biodiesel is used for air transport where, in contrast to road transport, no alternative emission reduction options exist in the JRC-EU-TIMES. Replacing fossil fuels for heat production with solid biomass results in more significant energy savings than replacing oil based fuels with 2G biofuel; competition for biomass thus shifts biomass use in the sector that yields the highest benefits under the climate and energy policies in 2030 and beyond. Process efficiency has a much stronger influence in the competitiveness of 2G biofuels than their cost. However, even under the most optimistic efficiency assumptions, electrification of road transport will only be slightly reduced by the increase in bioethanol production. On the other hand, biodiesel could have a much more significant role in the air transport. The analysis highlights that woody biomass availabilitye and its price as well as the CO 2 emission accounting approach for biomass with CCS, all play a very significant role in influencing in the deployment of 2G biofuel. Hydrogen production represents 0.8% of total final energy consumption for the baseline scenario in 2030. Electrolysis represents 64% of total production, while 25% comes from gasifiers and the remaining 11% is a by-product of the industrial sector. This trend is driven by the substantial penetration of intermittent renewables, namely solar PV and wind, in the generation portfolio. The deployment of gasifiers is not particularly sensitive to changes of techno-economic assumptions. Steam reformers, while relatively important in the short term, do not have an important role to play in hydrogen production under a stringent CO 2 cap, while: only with very high efficiency improvements or significant cost and efficiency deterioration for gasification technologies could biomass steam reforming remain competitive in 2030. However, the relative contribution to total hydrogen production would remain very small. 9

4. The role of cost and efficiency on affordability, security and sustainability An Energy System Index (ESI) is derived (based on the methodology presented in [8]) in order to assess the role of technologies cost and efficiency on affordability, security and sustainability of the European Energy System. The ESI is built on proxy indicators for each of the dimensions identified in the European Commission's Communication on the Energy Union [1], as shown in Figure 4. It is a summary measure of the potential role of each technology group and of improvements or deterioration in their prospective development, on the three key objectives of the Energy Union overall, and separately. In this regard, the ESI provides an easy entry point for more detailed analyses, as well as useful insights to target R&I policies on the basis of the most important objective. Figure 4: Theoretical framework for the development of the Composite Indicator The ESI points out that cost variation for solar photovoltaics and onshore and off-shore wind demonstrate the largest potential impact on the energy system, despite the fact that these technologies are relatively mature. At the same time, efficiency variation of 2G biofuels, onshore and offshore wind, and hydrogen production significantly influence the energy system as well. The cost of PV and wind technologies has the highest impact on the affordability of the energy system in 2030, as both technologies are particularly capital intensive. Specifically, reducing technology costs by 50% results in a reduction in the total energy system cost of up to 12 billion Euros per annum. Consequently, investing in R&I of PV and wind would be cost-effective for the system as a whole, if this R&I is effective in reducing technology costs. This points to the need for an in-depth analysis of potential bottlenecks in the supply chain for PV and wind onshore, including the impact of critical materials, in determining the overall specific investment costs of the technologies. Technologies that are still marginal, like tidal stream energy, have a less significant impact on the energy system by 2030. However, strong improvements in their technoeconomic performance could positively impact the energy systems. Such improvements are in the range of more than 40% compared to the expectations of the industry, and might thus be very difficult to achieve in the medium-term without significant R&I efforts and breakthroughs in technological options. In general terms, focusing on improving the investment and fixed costs of low-carbon technologies seems to be more effective in improving the energy system than enhancing technological efficiency in the medium term. There are some exceptions however. 10

Improving the capacity factor of wind (both onshore and offshore) would have very strong positive impact on ESI, in particular by reducing the system costs. This is mostly driven by a decoupling of installed capacity and electricity generation: a 3% increase in installed capacity in wind onshore leads to an increase in electricity generated of over 25%. This effect is even stronger for wind offshore: while installed capacity increases by over 20% with higher efficiency, the electricity generated increases by almost 60% compared to the baseline. Finally, changes in the evolution of specific investment costs of 2 nd generation (2G) biofuels have a negligible impact on the energy system in 2030. Biomass availability and cost seems to be much more important in determining the overall impact of 2G technologies: indeed, when the input:outpt ratio of 2G biofuel generation processes deteriorates, there is a strong negative impact on the overall performance of the energy system. The impact is not symmetrical for similar improvements. The result is driven by the impact that higher biomass requirements for biofuel production would have on both energy security and on environmental sustainability. Figure 5: Spread of the values of the energy security, security of supply, affordability and environmental sustainability dimension 11

For more detailed information about the study, please contact the JRC-EU-TIMES team at: JRC-EU-TIMES@ec.europa.eu 12

5. References 1. European Commission, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions, and the European Investment Bank. A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy, 2015, European Commission: Brussels. 2. Simoes, S., et al., The JRC-EU-TIMES model. Assessing the long-term role of the SET Plan Energy technologies., in JRC Scientific and Policy Reports2013, Institute for Energy and Transport of the Joint Research Centre - European Commission. p. 376. 3. European Commission, Decision 406/2009/EC of the European Parliament and of the Council on the effort of Member States to reduce their greenhouse gas emissions to meet the Community s greenhouse gas emission reduction commitments up to 2020, 2009: Brussels. 4. European Union, Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community, 2009, European Commission: Brussels. 5. European Union, Directive 2009/28/EC of the European Parliament and of the Council on the promotion of the use of energy from renewable sources, 2009: Brussels. 6. European Union, Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC, 2012, European Union: Brussels. 7. Bloomberg New Energy Finance, A drop in the ocean - wave and tidal deployment to 2020, in Marine Research Note 2013. 8. OECD and JRC, Handbook on Constructing Composite Indicators. Methodology and user guide2008: Organisation for Economic Co-operation and Development, European Commission, Joint Research Centre. 13

List of abbreviations 2G CAPEX CCS CSP EU28 FIXOM PV R&I Second generation biofuel production technologies Overnight investment cost, usually expressed in Eur/Kw Carbon capture and storage Concentrated Solar Power EU 28 member States Fixed operation and maintenance costs, usually expressed in Eur/Kw Photovoltaics Research and Innovation 14

List of figures Figure 1: Overview of the sensitivities and impact on levelised cost of energy (the example is given only for improvements of cost and efficiency)... 4 Figure 2: Overview of the inputs for the 7 technology groups and their main technologies in 2030... 6 Figure 3: Energy production (PJ) and the role of cost and efficiency for key low-carbon technologies in 2030. For comparison, the consumption of primary energy in the EU28 reaches 62,356 PJ (equivalent of 1488 mtoe).... 7 Figure 4: Theoretical framework for the development of the Composite Indicator... 10 Figure 5: Spread of the values of the energy security, security of supply, affordability and environmental sustainability dimension... 11 15

Europe Direct is a service to help you find answers to your questions about the European Union Free phone number (*): 00 800 6 7 8 9 10 11 (*) Certain mobile telephone operators do not allow access to 00 800 numbers or these calls may be billed. A great deal of additional information on the European Union is available on the Internet. It can be accessed through the Europa server http://europa.eu How to obtain EU publications Our publications are available from EU Bookshop (http://bookshop.europa.eu), where you can place an order with the sales agent of your choice. The Publications Office has a worldwide network of sales agents. You can obtain their contact details by sending a fax to (352) 29 29-42758.

LD-NA-27608-EN-N JRC Mission As the Commission s in-house science service, the Joint Research Centre s mission is to provide EU policies with independent, evidence-based scientific and technical support throughout the whole policy cycle. Working in close cooperation with policy Directorates-General, the JRC addresses key societal challenges while stimulating innovation through developing new methods, tools and standards, and sharing its know-how with the Member States, the scientific community and international partners. Serving society Stimulating innovation Supporting legislation doi:10.2790/245031 ISBN 978-92-79-54021-9 2