EUROPEAN ENERGY AND TRANSPORT TRENDS TO 2030 UPDATE 2009 Reference scenario with PRIMES Dr. Leonidas MANTZOS E3MLab National Technical University of Athens April 2010
PRIMES ENERGY SYSTEM MODEL
Main Features of PRIMES Full coverage of the energy system, both in demand and supply Mixed representations: Bottom-up (engineering, explicit technology choices) and Top-down (microeconomic behaviors, consistent economic decisions by agent) Modular, with separate modules for each demand and supply sector and separate decision making Decentralized decisions form demand and supply of each energy commodity Market-oriented: market equilibrium prices drive energy balancing of demand and supply per energy commodity Electricity and/or Gas trade within the EU Internal Market and beyond is simulated Extensive set of policies represented Taxes, subsidies, Tradable Permits or certificates Technology supporting policies Environmental policy instruments 3
System Coverage Geographical coverage Each EU-27 member-state taken individually Also, candidate MS and neighbors, such as Norway, Switzerland, Turkey, South East Europe Network coverage Electricity and gas interconnections over Eurasian area For electricity and gas markets, the European countries can be simulated as an interlinked system Core of the model: market linked sub-models for demand sectors, power/steam generation, fuel supply Satellite models: Biomass supply, refineries, detailed transport sector model, gas supply (Eurasian), H2 supply Time frame : 2000 to 2030 (is currently being extended to 2050) by five-years periods Model results fully calibrated to EUROSTAT data for the period 1990 to 2005 (simulated). Projections start from 2010 4
Sectoral and Technology Details 9 industrial sectors, subdivided into 23 sub-sectors using energy in 12 generic processes (e.g. air compression, furnaces) 4 tertiary sectors, using energy in 6 processes (e.g. air conditioning, office equipment) 4 dwelling types using energy in 5 processes and 12 types of electrical durable goods (e.g. refrigerator, washing machine, television) 4 transport modes, 12 transport means and 10 vehicle technologies 14 fossil fuel types, new fuel carriers (hydrogen, biofuels) 10 renewable energy types Main Supply System: power and steam generation with over 150 power and steam technologies and grid interconnections Other sub-systems: refineries, gas supply, biomass supply, hydrogen supply, primary energy production 7 types of emissions from energy processes 5
Modular Structure of the PRIMES model Primary Energy Oil Supply Coal/Lignite Supply Gas Supply (Eurasian area) Gas Production Pipeline Transportation Gas Storage LNG system Gas trade Gas pricing Biomass-Waste Supply Primary resources (18 types) Conversion technologies (17 types) Final bio-energy products (7 types) Cost-supply curves for Renewable sources (20 types) Market Clearing and Price Formation Final Energy Industry 9 main sectors 23 sub-sectors 90 energy using processes Residential sectors 5 types of dwellings 4 energy uses 10 electric appliances Services sectors 3 sub-sectors 6 energy uses Agricultural sector 6 energy uses Transport Passengers and freight 4 transport modes 12 transport means Energy Carriers Oil Refinery 5 generic conversion types blending Hydrogen production and distribution 18 H2 production processes 8 H2 transportation and distribution means Several H2 using equipments Electricity and Steam/Heat Supply More than 150 power generation technologies (and CCS) Cogeneration of Heat and Power (12 technologies) District Heating Industrial Boilers Interconnections among countries 6
PRIMES: Links to other models A new transport module with much higher detail has been developed and will replace the existing transport module of PRIMES in forthcoming modelling exercises Macroeconomic/sectoral activity GEM-E3 model Energy demand-supply prices and market equilibrium for the EU area PRIMES model Environmental impacts GAINS Transport projections TREMOVE/COPERT Agriculture projections CAPRI Transport activity and flows SCENES model (to be replaced by TRANSTOOLS in forthcoming modelling exercises) World energy oil, gas, coal prices POLES and PROMETHEUS models 7
PRIMES 2009 BASELINE SCENARIO ASSUMPTIONS
Macroeconomic Scenario for the EU Three periods: recession (2008-2012), recovery (2013-2022), low but stable growth period (beyond 2022) GDP annual growth rate is 2% for 2010-2030, 1.7% 2005-2030 Demographic projections are based on DG ECFIN s Ageing report 2009, which takes into account dynamic immigration Sectoral Activity Scenario Industrial activity displays a sustained growth pace after downturn during the recession period Energy intensive industrial activity is assumed to remain in the EU Higher growth of non energy intensive sectors Services are the main driver of economic growth in the EU 9
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 % Macroeconomic Scenario for the EU 5.0% 4.0% 3.0% % annual change of real GDP (EU27) 2000, 3.9% 2014, 3.4% 2015, 3.3% 2004, 2.5% Base'2009 Base'2007 2.0% 1.0% 2005, 2.0% 2020, 2.1% 0.0% -1.0% -2.0% -3.0% 2010, -0.1% 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 '95-00 Avg. real GDP growth pa '00-05 '05-10 '10-15 '15-20 '20-25 '25-30 -4.0% 2009, -4.1% Base'2007 2.89 1.80 2.53 2.46 2.19 1.91 1.57 Base'2009 2.89 1.80 0.58 2.29 2.13 1.82 1.65-5.0% 10
100.00 90.00 80.00 Fossil Fuel Prices in Baseline (Constant Euro of 2008 per boe) 90.83 World Energy Prices as in Prometheus Reference Case 70.00 60.00 50.00 40.00 50.19 72.93 51.24 65.71 Oil Gas (NCV) Coal Probability of peak oil (conventional) around 2020 is low (20%) but gets close to 50% after 2030. The share of non conventional oil is 25% by 2030 30.00 20.00 10.00-30.85 12.03 21.29 25.18 Gas prices follow a trajectory similar to oil, coal prices increase during economic recovery period but then stabilize; 5.00 4.50 4.00 Ratios of Fossil Fuel Prices in Baseline (Constant Euro of 2008 per boe) 4.70 gas (NCV)/ coal Hence, gas to coal price ratio increase (this ratio is important for power investment choices) 3.50 gas (NCV)/ oil 3.00 2.50 2.77 2.00 1.88 2.30 1.50 1.00 0.50 0.77-11
1990 2000 2010 2020 2030 1990 2000 2010 2020 2030 Evolution of Transport activity by mode Passenger transport is characterised by a strong increase of aviation activity with respect to other transport modes The share of aviation reaches 12.6% in 2030 from 6.5% in 2005 Following a strong decline in the short term the share of rail transport stabilises beyond 2015 close to 8% Freight transport activity grows in a uniform manner for all transport modes 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 Passenger transport activity in Gpkm 1990 2000 2010 2020 2030 Aviation Rail Cars and Motor cycles Buses 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 4000 3500 3000 2500 2000 1500 1000 500 0 Freight transport activity in Gpkm 1990 2000 2010 2020 2030 Inland navig. Rail Road 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 12
Policy assumptions in Baseline 2009 Policies as in Spring 2009 incorporated Efficiency Directives and regulations, such as on energy services, buildings, labelling, lighting, boilers Regulation on new cars (penalty if above average 135 gco2/km in 2015, 115 in 2020, 95 in 2025 in test cycle) Strong RES supporting national policies, but 20% RES non mandatory Cogeneration directive Large Combustion Plant directive, IPPC directive, national emission ceilings CCS demonstration plants Nuclear revival in some countries, like Italy, (despite continuation of banning by others, Germany, Belgium) ETS Directive included: a) emission allowances up to 2030 decrease, banking allowed, b) full auctioning, after transition phase for some MS, c) extension for aviation, d) benchmarking for most industrial sectors Internal electricity and gas market 13
PRIMES REFERENCE SCENARIO
Additional policy assumptions for the Reference scenario Achievement of the targets set by the Energy and Climate policy package adopted by the European Parliament in December 2008 Full implementation of the Renewables Directives with limited use of cooperation mechanisms 20% RES in gross final energy demand 10% RES in transport Full implementation of the Effort Sharing Decision Leading, in combination to the ETS Directive, to a 20% reduction for total GHGs emissions in 2020 from 1990 levels Implementation of recently adopted EU legislation Recast of the Energy Performance of Building directive agreed between the European Council and the Parliament in November 2009; expected to become an EU legislation within 2010 Eco-design implementing measures four eco-design and labelling implementing measures came into force after the cut-off point of the Baseline: electric motors, TVs, refrigerators and circulators 15
The Energy and Climate policy package The projection of the Reference scenario ensures that simultaneously ETS emissions (plus permissible use of CDM credits) meet the ETS cap cumulatively over 2008-2030 Non-ETS emissions reduction target is met for the EU as a whole (-9.4% from 2005 levels), i.e. through a common carbon price for the non-ets sectors in all EU Member States implying the existence of a trade mechanism similar to that of the ETS sectors The targets set in the Renewables directive are met (assuming limited trade among Member States) 16
Drivers related to the achievement of the Energy and Climate policy package Carbon prices clearing the ETS market and shadow values of the constraints related to the satisfaction of the non-ets and the RES targets are calculated by the model Carbon prices clearing the ETS market reach 16.5 08/t CO2 in 2020 and 18.7 /t in 2030 The shadow value of the non-ets constraint at the EU level is calculated at 5.3 08/t CO2 both in 2020 and in 2030 The average shadow value at the EU level of satisfying the Member States RES constraint reaches 49.5 /MWh in 2020 and 34.8 /MWh in 2030 The inclusion of the RES directive in the Reference scenario (involving a strong shift towards the use of renewable energy forms in the EU energy system) limits the scope for strong action towards emissions reduction in the ETS sectors Carbon prices clearing the ETS market are projected to be well below those of the 2009 Baseline scenario in which only the ETS Directive is included 17
% change per year 0.00-0.50 GDP, Energy and CO2 emissions in the Reference scenario Noticeable effects of the economic crisis on primary energy requirements -1.00-1.50-2.00-2.50 Carbon intensity (t of CO2/toe of GIC) Gross Inl. Cons./GDP (toe/meuro'05) '90-'00 '00-'10 '10-'20 '20-'30-0.93-0.44-1.04-0.46-1.77-0.94-2.08-1.86 In the Reference scenario, energy efficiency progress offsets GDP growth effects on energy demand and so primary energy requirements remain below 2005 levels (with a declining trend in the long run) over the projection period. Carbon intensity of GDP decreases continuously, as a result of efficiency improvements and the full implementation of the Energy and Climate policy package. 18
2000 2005 2010 2015 2020 2025 2030 2000 2005 2010 2015 2020 2025 2030 Final energy demand in EU27 Final energy demand in the EU27 stabilizes over the projection period Electrification and higher penetration of renewable energy forms is a key trend in the demand side Distributed heat also gains some additional market share Strong decline in the use of liquid fuels and to a less extend natural gas 1400 1200 Mtoe Transport 1400 1200 Mtoe Electricity Shares in % 19 20 22 25 1000 800 600 400 200 0 Services - Agriculture Residential Rest of Industry Energy Intensive industry 1000 800 600 400 200 0 RES 5 5 9 9 24 24 Gas 21 20 4 4 6 7 Steam 43 42 Liquids 38 36 Solids 6 5 4 4 2000 2005 2020 2030 19
% change per year % change per year % change per year % change per year 0.00-0.50 Industry (Energy on Value added) 0.00-0.50 Transport (Energy on GDP) Energy Efficiency Progress in EU27-1.00-1.50-2.00-2.50-1.00-1.50-2.00 The economic crisis induces a slowdown of energy efficiency progress in the short term, because of lower capital turnover. -3.00 '90-'00 '00-'10 '10-'20 '20-'30 Reference -2.61-0.99-1.43-1.36 Residential (Energy on Private Income) 0.00-0.50-1.00-1.50-2.00-2.50 '90-'00 '00-'10 '10-'20 '20-'30 Reference -1.34-0.29-2.02-2.10 20-2.50 '90-'00 '00-'10 '10-'20 '20-'30 Reference -0.25-0.32-1.59-1.96 Tertiary (Energy on Value added) 0.00-0.50-1.00-1.50-2.00-2.50 '90-'00 '00-'10 '10-'20 '20-'30 Reference -2.32-0.48-2.11-2.10 Beyond 2015 policies included in the Reference scenario induce significant energy intensity gains in all demand sectors car regulations imply significant energy efficiency gains in transportation similarly, policies for buildings, appliances and lighting accelerate progress in houses and buildings for industry, smaller effects on energy efficiency trajectory
220.0 200.0 180.0 160.0 140.0 120.0 100.0 Energy and Activity in transportation GDP Passenger transport activity Energy for Passenger transportation Freight transport activity Energy for Freight transportation Transport Outlook for EU27 Policies included in the Reference scenario allow for a fast decoupling of energy demand from transport activity. However, the scenario takes a rather conservative view regarding changes in the fuel mix: 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 291 206 164 2005 2020 2030 350 300 250 200 150 100 50 0 CO2 g/km Electric Plug-in hybrids Hybrid vehicles ICE vehicles CO2 intensity (right axis) Fuel Mix Cars 2020 2030 Petroleum Fuels 90.4% 88.1% Biofuels 8.9% 11.3% Electricity 0.0% 0.0% Natural Gas 0.6% 0.6% Hybrid vehicles make significant inroads, but grid electricity is not penetrating the market Biofuels develop according to the RES directive targets 21
200 175 150 125 100 Passenger transport Outlook Energy requirements for passenger transport exhibit a strong decoupling from economic and transport activity growth Regulation for new cars, further electrification of the rail network and inclusion of aviation in the ETS are the main drivers for the more than pronounced energy efficiency improvements projected in the Reference scenario Passenger Transport Index 1990 = 100 Income per capita Travel per capita Energy demand -14.7 Vehicles efficiency improvement change from 2005, in % -8.0-17.5-18.3-17.1 75 50 25 Energy Intensity -26.3 Passenger transport Public road transport -24.5-30.4-29.9-33.2 Private cars Rail Aviation 0 1990 2000 2010 2020 2030 2020 2030 22
Freight transport Outlook Trends are similar to those for passenger transport, though less pronounced 225 200 Freight Transport Index 1990 = 100 GDP Vehicles efficiency improvement change from 2005, in % 175-4.9-5.4 150 125 100 Energy demand Travel per unit of GDP -13.4-13.0-13.6 75 50 Energy Intensity -36.9 25 Freight transport Trucks Rail 0 1990 2000 2010 2020 2030 2020 2030 23
CO2 emissions in Transport In the reference scenario transport activity related CO2 emissions are projected to peak in 2015 and decline thereafter reaching by 2030 at levels below those observed in 2005 Technology progress, CO 2 and cars Regulation and increasing contribution from RES are the main drivers for this result Mt CO2 1200 2.900 2.912 CO2 emissions in Transport sector 1100 1000 2.837 Inl. Navigation Aviation 900 2.707 Rail 800 700 2.644 Road Carbon intensity (t CO2/toe) 24 600 1990 1995 2000 2005 2010 2015 2020 2025 2030
Gross Power Generation by source in TWh 4500 4000 3500 3000 RES 2500 Oil 2000 Gas 1500 1000 Solids Nuclear 500 0 Shares in % 14.3 19.0 32.6 36.0 21.2 23.2 30.0 27.6 19.5 17.8 22.6 21.1 30.5 28.0 24.1 24.1 2005 2010 2020 2030 25 1400 1200 1000 800 600 400 200 0 Gross Power Generation by RES 2000 2005 2010 2015 2020 2025 2030 Tidal, etc. 0 0 0 1 7 10 14 Geothermal 5 5 7 8 12 17 22 Biomass/waste 45 84 120 171 261 275 286 Solar 0 1 17 32 62 77 94 Wind offshore 0 2 14 81 177 224 287 Wind onshore 22 68 147 243 348 381 407 Hydro 353 307 323 333 341 350 358 Power generation in EU27 Considerable increase in RES generation, obtaining the largest market share already in 2020. solar power and offshore wind become increasingly important in the long run Electricity generation from nuclear energy remains rather stable over the projection period. The same applies for power generation from solid fuels and natural gas.
Mtoe Mtoe Primary Energy, EU27 In the Reference scenario, lower primary energy requirements and restructuring away from fossil fuels limit import dependence growth 56.9% in 2020 and 57.4% in 2030 from 52.5% in 2005 EU27 will require 24% more gas imports by 2030 than today. Oil imports by 2030 will be 4% lower from today s levels Primary Energy Requirements 1200 Net Imports 2000 1000 1500 800 1000 RES Natural gas Oil Solids 600 400 500 Nuclear 200 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 Natural gas 135 145 193 257 288 307 301 315 319 Oil 536 512 533 600 580 610 608 600 578 Solids 82 79 99 127 122 125 120 133 129 26
1990 2000 2005 2010 2015 2020 2025 2030 non-co2 GHGs emissions 1172 954 879 815 749 696 694 689 CO2 emissions (non energy related) CO2 emissions (energy related) 6000 5000 4000 3000 2000 1000 0 GHG Emissions (Mt CO2 -eq) 330 299 304 280 294 310 320 329 4031 3811 3947 3740 3665 3397 3345 3194 Index 1990=100 100 91.5 92.7 87.4 85.1 79.6 78.8 76.1 100 95 90 85 80 75 70 GHGs emissions, EU27 GHGs emissions reduce 20.4% from 1990 levels in 2020 and 23.9% in 2030 The reduction takes place for both energy related CO2 emissions and non- CO2 GHGs whereas process related CO2 emissions exhibit a slight increase. 6000 5000 4000 3000 2000 1000 0 GHG Emissions (Mt CO2 -eq) Index, 2005=100 2020 2030 CO2 emissions (energy related) 86.1 80.9 CO2 emissions (non energy related) 101.9 107.9 non-co2 GHGs emissions 79.2 78.5 Total GHGs emissions 85.8 82.1 ETS emissions 80.6 79.7 non ETS emissions 90.6 84.3 2005 2010 2015 2020 2025 2030 non ETS emissions 2691 2657 2592 2439 2358 2269 ETS emissions 2438 2179 2116 1964 2001 1943 Total GHGs emissions 5130 4836 4708 4404 4359 4212 27
Conclusions The Reference scenario reflects the effects of the economic crisis and includes all new EU policies for energy efficiency, GHGs emissions reduction, RES penetration etc. The scenario delivers simultaneously the ETS targets, the non ETS targets and the targets set in the RES directive. The policies included allow total energy demand to stabilise, RES to deploy considerably and the use of fossil fuels to decrease. Power generation gets into a significant decarbonisation pathway. The energy trends under the Reference scenario imply a decreasing trajectory for GHGs emissions. 28
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