New Energy Externalities Development for Sustainability
Final Conference
"External costs of energy technologies"
Energy scenarios for the
future and policy implications
Vincenzo Cuomo, CNR-IMAA, Italy
S. Kypreos, PSI, Switzerland
RS2a “Modelling Pan European Policy scenarios”
Brussels, February 16-th, 2009
Main objectives
 Developing a new modelling framework for the EU as a
whole, especially its multi-country aspect with trade
exchanges among countries
 Contributing to policy evaluation through
 Integration of different objectives in one global modelling
environment, allowing to evaluate their mutual
interactions
 Evaluation of the optimal mix of options to reach severe
energy-environmental targets
 Assessment of the role of external costs in the definition
of policy strategies
 Assessment of the structural changes in the energy
system and the role of technologies in different boundary
conditions
 Scenario analysis for the evaluation of key EU targets
The TIMES models generator
 Partial Equilibrium model
•Maximisation of the consumer/producer surplus
•Supply and demand quantities equilibrate through prices changes
•Perfect foresight
 Long term time horizon, to support the definition of long term
strategies, taking into account different standards of energy devices,
technology development and policy targets
 High technological detail in energy supply and end-use sectors (both
existing and future technologies), potential of fossil and renewable
resources by country, resulting in a data intensive model
 Approach based on full energy costs along the life-time of
technologies and within the time horizon, i.e. including LCA components
and external costs
 Normative perspective, focused on the development needed under a
policy scenario
A common integrated structure
NEEDS Project
The NEEDS modelling platform
LCA of the
most relevant
power supply
options
 Based on the TIMES multi-period linear
optimization models generator
Technology
Database
 Common structure of country models (RESReference Energy System)
(EU27, CH, IS, NO)
(inv cost, oper cost,
efficiency, ...)
Externalities of
technologies
for the
production,
transport,
transformation
and
consumption of
energy
Energy system models of 30
EU countries
Pan
European
Model
 Common sources for the main data (energy
balances, material flows, air emissions)
The NEEDS TIMES PEM represents the reference
modelling platform for several outreach
projects/proposals supported by the EC
Modelling Pan European Energy Scenarios
Policy objectives:
•Stabilization of CO2 concentrations
•Security of energy supply
•Improvement of environmental quality
Modelling platform:
Key aspects:
• A multi-region integrated PanEuropean model including the
full range of information and
data from LCA and ExternE
Main EU Directives
Stakeholder preferences
Country level detail
…
Scenario analysis:
•Long term post-Kyoto strategies
•Enhancements of EU endogenous resources
•Effects of the internalisation of external cost of local air
pollutants
The country models
 Geographical coverage:
Country models based on a common
structure (RES):
• 30 European countries (EU 27 + Iceland, Residential and Commercial:
Norway and Switzerland)
• All end use demand
Industry:
Time horizon:
• 2000-2050
Energy carriers included:
• (Eurostat, 2005) energy balances, with
some aggregations
Materials explicitly modelled:
• Only those flows whose production
requires much more energy or which are
important for the production processes
(e.g. scrap steel).
•
•
Energy intensive industry
Other industries
Transport:
•
Different transport modes
Supply:
•
Reserves, resources, exploration and
conversion
• Country specific renewable potential and
availability
Electricity and Heat production:
• Public electricity plants
• CHP plants and heating plants
• GHG (CO2,CH4,N2O,SF6);
• LAP (SO2,NOx,CO,NMVOC,PM2.5,PM10)
The Iron and Steel industry RES
Pollutants included:
Iron ore
Pellet
production
Sinter
production
Pellets
Sinter
Raw iron
Crude steel
Iron Blast
Furnace
Blast Oxygen
Furnace BOF
COREX
Blast Oxygen
Furnace BOF
- scrap
DRI iron
Sponge
Iron for DRI
Steel production
demand
crude steel eq.
Energy
consumption
finishing
DRI EAF
Cyclone
Convertor
Furnace
CCF
EAF
Cast iron
Cupola
Stream RS2a
Scrap
13
The Pan European TIMES model
It is more than the sum of the 30 national models:
•A multi-region approach at Pan EU level integrates the single EU
countries’ energy models
• representation of the main energy exchanges between EU countries and also with non EU
countries,
• Electricity trades are modeled via trade technologies
•it allows to reflect links and to impose constraints at the
European level, reflecting the coordination of policies across
borders and, consequently, the harmonisation of the underlying
country models features and assumptions.
The NEEDS-TIMES
modelling platform allows
to performing a more
effective policy analyses
both on country level and
in a EU wide perspective
enabling the definition of
cross country constraints.
Cy
pr
us
Objective of the scenario analysis
The policy scenarios analysed in the NEEDS project were designed to
address key policy issues at EU level:
Environmental issues linked to energy: climate policy and
local pollution linked to energy
A Post Kyoto climate policy with a 2050 target for the EU
with the long term EU target of 2°temperature
compatible
A local pollution policy The objective is to evaluate the impact of the
internalisation of the external cost linked to local pollutant (SO2, NOx, PM,
NMVOC).
Energy issues:
 Improving the energy security by limiting the import dependency
with a general constraint on imports of crude oil and petroleum products (30%) and natural gas gas (-30%).
Oil price: the oil price is increased to 100$2000/barrel from 2010 onward
and the gas price is following this increase,
Enhancement of the domestic resources by imposing the renewable
target of 20% for 2020 on final energy consumption, as defined in the EC
climate and energy package (2008), this policy is also meant to contribute to
energy security.
New frontiers opened by the NEEDS modelling platform
The NEEDS modelling platform constitutes an integrated
tool for the analysis of the EU as well as national energy
systems, evaluating the effectiveness of different policy
instruments and their long term impact in terms of energy and
technology mix, emissions and costs.
A tool for supporting stakeholders’ decisions, in order to
evaluating:
 The impact of targeted air quality EU policies (emissions
standards) on emissions, costs and climate change
 The full costs and benefits of EU Directives that have an impact
on the energy system
 The impact of different Post Kyoto strategies on the future of
energy technologies
 The impact of alternative internalisation policies and their
contribution to sustainability
 The technologies and policies that exhibit the most robust
behaviour in an overall sustainability perspective
New frontiers opened by the NEEDS modelling platform
The set up of the NEEDS TIMES models pave the way for the
development of a wide range of possible applications
and have fostered a number of outreach initiatives among
which:
 Contribution to EU and national policy analysis (e.g.
IEA/ETO ETP2008 report, Ministry of Environment of in Estonia
– GHG reporting Template)
 New research projects (IEE, VII FP)
 RES2020: 2007-2009: Focus on renewable energy for EU at
horizon 2020 and beyond
 PLANETS: 2008-2010: Focus on advances on how to deal with
uncertainty in global and EU Climate Policies
 REACCESS: 2008-2010; Focus on Security of Energy Supply for
EU at horizon 2050
 REALISEGRID: 2008-2010: Focus on Intra-EU (+ Balkans)
Electricity Exchanges and Infrastructure
Source: R. Loulou (KANLO)
Highlights from scenario analysis
are presented by
Socrates Kypreos
(Paul Scherrer Institut)
The Modeling Objectives are met
 The TIMES NEEDS Pan EU model allows to study
policies across the EU borders and to exploit
synergies and trade-offs for climate, local
environments and energy systems
 The model gives already now good policy insights
 I will first explain why, continuing with policy
conclusions about Climate Change and Security of
Energy Supplies to finish with the Internalization
of Externalities
Post-Kyoto climate policy (450ppm)
 An overall EU reduction target of -71% emissions by 2050
compared to 1990, is imposed
 A scenario variant (450ppm_oil100) is analysed with oil
prices going above USA$ 100/bb
Security of energy supply (OLGA and OLGA_NUC)
 Imports of fossil fuels are constrained to foster the use of
renewables, efficiency standards and new nuclear (-30 %
Oil, -40% Gas below baseline imports in 2010)
 A scenario variance is analyzed (OLGA_NUC) where
nuclear reactors are free options to mitigate climate
change
Carbon Emissions in Mt CO2/yr
5000
4500
Storage of CO2
4000
Households, co
mmercial, AGR
3000
2500
2000
Households, co
mmercial, AGR
1500
Industry
1000
Conversion, prod
uction
500
2000
2020
2030
2040
2050
OLGA_NUC
OLGA
450ppm
REF
OLGA_NUC
OLGA
450ppm
REF
OLGA_NUC
OLGA
450ppm
REF
OLGA_NUC
OLGA
450ppm
REF
0
Statistic
CO2 emissions in Mio t
3500
CO2 emissions compared to Kyoto (2020-1990)
GHGs Burden Sharing for a 20% reduction
EC 2020 proposal Versus TIMES-PEM results
40%
33%
30%
30%
28%
27%
18%
20%
15%
9%
10%
0%
0%
-2%
-10%
-20%
2%
-2%
-6%
-6%
-3%
-10%
-6%
-13%
-14%
-19%
-23% -22%
-30%
-17%
-21%
-24%
-19%
-24%
-31%
-32% -33%
-36%
-40%
-35%
-35%
-38%
-43%
-50%
-27%
-27%
-45%
-47%
-49%
-47%
-52%
-55%
-60%
AT BE BG CZ DE DK ES
[450ppm]
FI
FR GR HU
IE
EC proposal
IT
NL
PL PT RO SE
SI SK UK
EU-target
CO2 Prices and Avoidance Costs
Average CO2 avoidance costs
140
120
120
100
100
2020
2030
2020
2030
OLGA_NUC
OLGA
0
OLGA_NUC
0
OLGA
20
450ppm
20
OLGA_NUC
40
OLGA
40
450ppm
60
OLGA_NUC
60
80
OLGA
80
450ppm
Euro/ton
140
450ppm
Euro/ton
CO2 price
Scenario Comparison, EU27: Net Electricity Production
7000
In BAU technology shares are based on
fossil fuels and moderate levels of NUC
and RES
5000
In 450ppm electricity substitutes for
fuels in final energy markets and …
4000
Others
Solar
Is dominated by GAS-CCS, (NUC and
RES)
3000
Wind
In OLGA the system switches to more
Coal-CCS but also RES and NUC
2000
Hydro
Nuclear
While only with OLGA-NUC production is
again more balanced with less COAL and
more RES
1000
Natural
gas
Oil
2000
2020
2040
2050
OLGA_NUC
OLGA
450ppm
REF
OLGA
OLGA
2030
OLGA_NUC
450ppm
REF
OLGA_NUC
450ppm
REF
OLGA_NUC
OLGA
Thus: Technology penetration
is strongly influenced by
policies
450ppm
REF
0
Statistic
Net electricity generation (TWh)
6000
Electricity prices
160
Electricity Price in [€/MWh]
140
120
100
80
60
40
20
0
2000
2010
REF
OLGA_NUC
2020
2030
450ppm
450ppm100
2040
OLGA
2050
Attributes of CO2 emissions reductions in the EU27
in Mt CO2/yr Scenario – 450 ppm in the year 2050
CHP (15.2%)
CCS
CON
CCS 4%
7%
Fossil Switch
Renewables
0%
6%
Efficiency
2%
Efficiency increase
Enduse
8%
Fossil Switch
19%
End use
52%
CCS
13%
Power
plants
(33.2%)
Renewable
17%
Renewable
9%
Nuclear
6%
Efficiency
Fossil Switch
0%
2%
Electricity and Heat
7%
Final Energy in Transport sector
Advanced Technologies in
450 ppm cases:
> 10%
Biodiesel
Plug-in Hybrids
H2 Fuel-Cell
1%. - 10%
Hybrid
Electric battery,
Gas, Ethanol, etc.
The RES-COM sectors
Technologies in 450ppm
More than 10% Market shares:
20000
Renewables
•Savings in space heating
•Savings space cooling
•Gas heat-pump
•Compression chiller
•Solar Collectors
•Advanced electric appliances
15000
10000
Heat
Electricity
Gas
Petroleum products
Coal
2000
2020
2030
2040
2050
OLGA_NUC
OLGA
450ppm
OLGA_NUC
OLGA
450ppm
REF
OLGA_NUC
OLGA
450ppm
REF
OLGA_NUC
OLGA
450ppm
•Oil/gas condensing boilers
•Air /ground water heat pumps
•Absorption chiller
•Biomass boilers
REF
0
REF
Between 1% to 10%
5000
Statistic
Final energy consumption - Res+Com (PJ)
25000
The Discounted Energy System Cost
Totoal discounted system cost (Billion of Euro)
65500
65000
64500
64000
63500
63000
62500
62000
61500
REF
450ppm
OLGA_NUC
OLGA
Conclusions - IER
Technology penetration and structural changes in the energy
system of the EU27 are influenced by policies and less by their
cost (i.e., policy that enforces internalization of externalities)
A strong reduction of the import-dependence on oil and gas is
only possible if the technology development will be successful in
all parts of the energy system
In the 450ppm case with a Nuclear Phase-out,
systems like renewables, CCS , fossil fuel switch and use of devices
based on electricity in the final energy sectors are key options
Efficiency improvement is in competition with renewables and CSS
till 2030. Only in case of security of supply efficiency improvement
takes up an additional part
The cases with an oil price scenario approaching values above
100$/barrel, are similar to the cases with enhanced endogenous
production (OLGA)
Internalisation of external cost of local
pollution in TIMES
i.e., with or w/o climate scenario
and with or w/o renewable target
The external cost associated with local pollution
(damage per emission from RS1b) computed in TIMES
are explicitly included in the system cost and
internalized in the optimisation process
With internalisation, synergies between policy targets
(climate and air quality) are fully exploited in the
choices of reduction measures
Caveat: Neither the climate benefits due to reduction
of CO2 emissions nor all end-of-pipe abatement
options are fully modeled in TIMES-PEM such that the
benefits of policy scenarios are underestimated
CO2: LAP Emission Reduction Relative to the REF Case
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2010
2020
2030
NOx
PMX
2040
SO2
NMVOC
2050
CO2
CO2 & Internalization:
Extra Emissions Reduction relative to REF due to Internalization
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2010
2020
2030
NOx
PMX
2040
SO2
2050
NMVOC
CO2 secondary benefits are not significant in the first decades
Thus, we need explicit LAP internalization policies is the first decades
to control pollution
Costs of Policies
Relative Energy System's Welfare Loss
due to Policies (Discounted)
3.50%
2.50%
1.50%
Excluding induced reduction of
LAP Damages
CO270intern
CO270_EU
Ref_Intern
CO270intern
-1.50%
CO270_EU
-0.50%
Ref_Intern
0.50%
Including induced reduction of
LAP Damages
-2.50%
The reduction of damages due to internalization of LAP
externalities compensates for both the Carbon and LAP
emission control and are sustainable from the environment
and the social point of view.
Overall control cost remains limited given assumptions of the
model (optimisation, perfect foresight, no adjustment cost)
Conclusions – KU Leuven
A Mix of options helps to reach stringent energy/climate
targets like:
Decrease in demand of energy services (price effect)
Better efficiency and shift to low carbon energy systems at start
Renewables, CCS, and end-use technologies (i.e., Heat pumps,
HFC) at higher target
Climate policies brings also ancillary benefits by reducing
local pollutant damages (SO2, NOx, PM,VOC) but
Climate policy alone is not sufficient to improve air quality
as it starts at moderate control levels
Policy aiming directly at better air quality is more
effective in the first decades
Climate policy alone is almost sufficient for the
renewable-20 target
But Renewable policy or LAP internalisation are
insufficient for the climate target
Overall Conclusions
Climate policy, security of supply, renewable support
policy and policies concerning local pollution measures
needs integrated assessment models like the TIMES-PEM
The model gives already now policy insights but if applied
in new studies for policy analyses it needs
continues database improvements,
peer review by country modellers and EU authorities
explicit specification of policies in question.
Explicit policies could be the assessment of burden
sharing, extensions of ETS to other sectors, green and
white certificates, R&D and learning subsidies for
advanced technology and infra-structures, energy
savings, distributed networks and storage systems, etc.