European-wide and Regional Scenarios for CO2 Infrastructure
Berlin Conference on Energy and Electricity Economics (BELEC 2015)
Cross-Border Coordination for Sustainable Energy Security –
Theory and Policy Lessons from Different Sectors, Berlin, 28.05.2015
Dipl.-Ing. Pao-Yu Oei, Dipl.-Ing. Roman Mendelevitch
Workgroup for Infrastructure Policy (WIP), Technische Universität Berlin
Energy, Transport, Environment (EVU), DIW Berlin
-0-
Agenda
1. The Vision for a Pan-European CCTS-Network
2. Modeling a Pan-European CCTS Infrastructure
3. Examining a Regional Roll-out in the North Sea with EOR-Applications
4. Combining CCTS and the Electricity Sector in one Model
5. General Conclusions
-1-
Source: OECD/IEA (2010) & Luderer, Edenhofer et al. (2011)
Introduction: Big hopes…
Installed capacity equipped with Carbon
Capture in GW from different studies:
Year
Study
IEA (2012)
Capros et al. (2011)
2020
4.9
3
2050
77
108
-2-
… and the reality: The failure of CCTS in Germany
„CO2-Speicherung
für Energiewende
Hürth
(De, RWE) nicht relevant“
08.12.2010
"Ob [CCS] in Deutschland zur
Anwendung kommt ist eher
zweifelhaft. [...]“
29.10.2011
19.10.2011
Longannet
(UK, 1 Milliarde £)
05.12.2011
Jänschwalde
(De, Vattenfall)
Mongstad
(Norway)
20.09.2013
14.07.2012
18.12.2012
No EU-funding
through NER-300
9 cancelled
projects in 2
years
22.10.2013
14.10.2013
No CO2-priority
infrastructure
projects
27.01.2014
Schleswig-Holstein
(De) forbids CO2storage
Source: Own illustration based on Tagesspiegel (2010), BBC (2011), Märkische Rundschau (2011), Vattenfall (2011), Bundesregierung
(2012), EC (2012), Bellona (2013), EC (2013), GCI (2013), EUWID (2014).
-3-
Development of the CCTS projects since 2011
cancelled.
?
???
?
?
delayed
?
?
?
?
?
-4-
Source: Own depiction based on GCI (2011, 2013) and MIT (2014).
Agenda
1. The Vision for a Pan-European CCTS-Network
2. Modeling a Pan-European CCTS Infrastructure
3. Examining a Regional Roll-out in the North Sea with EOR-Applications
4. Combining CCTS and the Electricity Sector in one Model
5. General Conclusions
-5-
CCTSMOD: Model structure
• Omniscient planner designs cost-optimal CCTS
infrastructure given costs for infrastructure and CO2
Certificates
• CO2 Certificate price as initiator for CCTS
development
 CO2 prices from PRIMES EMF scenarios
• Time horizon 2010-2050, five-year steps
• Solved as MIP with the CPLEX Solver in GAMS
-6-
Data from the Pan-European model: Emission sources and
potential storage sites in Europe
CO2 source emissions
• 1618 fossil power
• 1847 heavy industry
• ~ 3.2 Gt CO2 /a in 2010
Available storage potential
• 44 Gt Onshore
• 50 Gt Offshore
• 1.2 Gt CO2-EOR
Source: Own illustriation
-7-
Cost structure for CO2 capture costs
Capital costs in
€/tCO2 (captured)
per year
Operation and
maintenance
costs in €/tCO2
(captured)
Energy penalty in
€/tCO2
(captured)
Sector
2010
2020
2030
2040
2050
Coal
175
175
149
127
108
Gas
275
275
220
176
141
Cement
243
243
207
176
150
Steel
91
91
77
65
55
Refinery
170
170
145
123
105
Coal
10
10
9
8
7
Gas
7
7
6
5
4
Cement
21
21
18
15
13
Steel
5
5
4
3
3
Refinery
18
18
15
13
11
Coal
54
54
53
52
51
Gas
47
47
46
45
44
Cement
16
16
16
16
16
Steel
28
28
27
26
25
Refinery
43
43
42
41
40
Source: Own illustration based on various sources (see Mendelevitch (2014) for more details).
-8-
Assumptions for Pan-European scenarios
Input Parameter
Variation
2015
2020
2025
2030
2035
2040
2045
2050
40%
14
17
27
37
45
52
52
52
80%
18
25
39
53
75
97
183
270
Certificate price in €/tCO2
•
Germany, Denmark, UK and Norway de facto only allow offshore storage, which will
eventually be the case in all EU countries.
•
Available storage capacity reduces form 94 GtCO2 to 50 GtCO2
•
France+Belgium do not have domestic storage potential, Germany only very limited (1.2 Gt)
-9-
Scenario results: 40% Scenario
•
No mayor deployment of CCTS
•
CCTS starts being used from the year 2035 onwards when the CO2 certificate price passes
the 40 €/tCO2 threshold.
•
only a very small annual amount of around 1 MtCO2 is being captured and stored in
offshore hydrocarbon fields as well as saline aquifers
•
Four iron and steel factories in Norway and Estonia are the only emitters that invest in
capture technology, benefiting from the lower variable and fixed costs assumed for this
industry. The location of the investing factories is directly at the shore which leads to lower
transport costs than for other industrial facilities.
•
The overall costs sum up to 0.2bn.€ of investment costs and additional 0.4bn.€ of variable
costs until 2050.
- 10 -
Scenario results: 80% Scenario
•
•
•
•
•
- 11 -
Similar to the previous results, CCTS
deployment starts once the CO2 price exceeds
40 €/tCO2 in 2030.
The iron and steel sector is again the first mover
until some cement works start capturing CO2
from 2035 onwards At that point a certificate
price of 75 €/tCO2 is being reached and a total
of 300 MtCO2 are annually stored in offshore
hydrocarbon fields and saline aquifers.
CCTS becomes economical for power plants
and refineries as soon as the price exceeds 100
€/tCO2 in the year 2040.
Still rising prices above 180€/tCO2 in 2045 lead
to additional economic incentives for more
distanced power plants to invest in further
CCTS deployment.
The CO2 is transported via a pipeline network of
44,800 km to different storage locations.
Scenario results: 80% Scenario
2050
•
•
•
•
•
- 12 -
Similar to the previous results, CCTS
deployment starts once the CO2 price exceeds
40 €/tCO2 in 2030
The iron and steel sector is again the first mover
until some cement works start capturing CO2
from 2035 onwards At that point a certificate
price of 75 €/tCO2 is being reached and a total
of 300 MtCO2 are annually stored in offshore
hydrocarbon fields and saline aquifers.
CCTS becomes economical for power plants
and refineries as soon as the price exceeds 100
€/tCO2 in the year 2040.
Still rising prices above 180€/tCO2 in 2045 lead
to additional economic incentives for more
distanced power plants to invest in further
CCTS deployment.
The CO2 is transported via a pipeline network of
44,800 km to different storage locations
Sensitivity on variable and investment costs
Input Parameter
Capital cost
in €/tCO2y
Variable cost
in €/tCO2
[1]
[3]
Variation
Base Case1
Inv&Var_150%
Inv_200%
Base Case2
Inv&Var_150%
Var_200%
2015
175
263
350
64
96
128
2020
175
263
350
64
96
128
2025
162
243
324
63
95
126
2030
149
224
298
62
93
124
2035
138
207
276
61
92
122
Data specification used for coal-fired power plants in (Mendelevitch, 2014).
Costs only include additional variable and fixed costs for a capturing unit compared to a facility without a capturing unit.
- 13 -
2040
127
191
254
60
90
120
2045
118
177
236
59
89
118
2050
108
162
216
58
87
116
Agenda
1. The Vision for a Pan-European CCTS-Network
2. Modeling a Pan-European CCTS Infrastructure
3. Examining a Regional Roll-out in the North Sea with EOR-Applications
4. Combining CCTS and the Electricity Sector in one Model
5. General Conclusions
- 14 -
CCTSMOD: Model structure
• Omniscient planner designs cost-optimal CCTS
infrastructure given costs for infrastructure and CO2
Certificates
• CO2 Certificate price as initiator for CCTS
development
 CO2 prices from PRIMES EMF scenarios
• Time horizon 2010-2050, five-year steps
• Solved as MIP with the CPLEX Solver in GAMS
- 15 -
The role of CO2-EOR: Focus on the North Sea region
2025
2050
- 16 -
The role of CO2-EOR: Focus on countries with a CCTS agenda
2025
2050
- 17 -
Comparison: North Sea regions vs. only DK, NL NO, UK
2025
2030
2035
2040
Avg. Invest. in CO2 Transport per All North Sea Region
MtCO2 per year
DK, NL NO, UK
0.07
0.09
0.11
0.03
0.07
0.07
0.09
0.07
Avg. Invest. in CO2 Storage per MtCO2 All North Sea Region
per year
DK, NL NO, UK
0.10
0.11
0.16
0.10
0.10
0.10
0.16
0.15
Origin.
from
industry
[%]
Storage left
in 2050
CCTS
invest.
costs
CCTS
var.
costs
[€bn]
[€bn]
Regional Scenario
Pipeline
Stored
Network
Emiss. until
[th. km]
[GtCO2]
[GtCO2]
2030
2050
2030
2050
North Sea 80%
10.2
26.8
0.6
8.5
54
34.6
191.9
539.3
DK, NL NO, UK 80%
11.0
13.6
0.6
3.1
57
36.4
61.7
232.4
- 18 -
Some first conclusions for CCTS implementation in Europe
• Industrial CO2 emitters benefit from significantly lower variable capturing costs
• For Carbon Capture variable costs are more important than investment cost
• There are significant economies of scale associated with CO2 transport and storage infrastructure
• CO2-EOR can positively influence the economics of CCTS but the potential is very limited
- 19 -
Agenda
1. The Vision for a Pan-European CCTS-Network
2. Modeling a Pan-European CCTS Infrastructure
3. Examining a Regional Roll-out in the North Sea with EOR-Applications
4. Combining CCTS and the Electricity Sector in one Model
5. General Conclusions
- 20 -
Our research idea is to examine the future electricity market of
the UK
UK´s climate targets for GHG reduction:
34% by 2020 & 80% by 2050 (base year: 1990).
5%
4%
9%
1%
Coal
35%
Oil & other fuels
Gas
Nuclear
Hydro (natural flow)
18%
Wind & Solar
Other renewables
1%
Net imports
27%
Electricity production per fuel type in 2013 for UK
Source: DECC (2014) – UK Energy Brief
- 21 -
Motivation for designing a new model: The ELCO model
Current Representation of CCTS
•
Electricity market models (e.g. Egerer et. al 2013, Kunz et al. 2013, Leuthold et al. 2012)
•
CCTS infrastructure models (e.g. Oei, Herold, and Mendelevitch 2014; Mendelevitch 2014)
They neglect:
•
CO2 transport and storage aspects incl. competition for storage usage with the industry
•
The electricity system
Our model should simulate:
•
regionally disaggregated electricity generation and flows
•
CO2 capture from power generation and CO2-intensive industry, CO2 transport and storage (incl.
CO2-EOR)
Included Features:
diffusion and curtailment constraints, environmental regulation and targets, time-specific CO2 stream,
location-specific technology costs and constraints, endogenous or exogenous feed in tariffs
- 22 -
Generation
Income
Generation
VC & FC
Generation
Investment
ETS Costs
Capture
VC & FC
Capture
Investment
Transport
VC & FC
Transport
Investment
Electricity
TSO Fee
Electricity
CO2 - TSO
CO2
TSO Fee
RE
new
PV, Wind on & off,
Biomass, Hydro
NUC
new
New Nuclear
Industry
ETS Costs
Capture
VC & FC
Capture
investment
Storage
EOR Income
Storage
VC & FC
Storage
investment
CON
Existing Nuclear,
Coal, OCGT, CCGT
Set: t, tt
FOSSIL
new
New Coal, OCGT,
CCGT w/o CCTS
- 23 -
FOSSIL
CCTS
New Coal, CCGT
w/ CCTS
IND
CO2 Market
Transport
Investment
Electricity Market
Transport
VC & FC
ELEC - TSO
STOR
Cement, Steel w/ &
w/o CCTS
Saline, DOGF, EOR
Set: i, ii
Set: s, ss
Assumptions for a tentative scenario
•
Electricity sector
− RE-Diffusion: Exponential growth depending on starting capacity
− CfD: Exogenous strike price projections for 2015 and 2020
− Nuclear: Max 5 GW new capacity
− CO2 target: 90% reduction until 2050 (base 1990)
− CO2 certificate price: from 20€/t in 2015 to 80€/t in 2050
− No specific RE-Target
− EPS: 450 gCO2/kWh for new capacity
− Demand Reduction: 20% until 2050
•
Steel and Cement sector
− CO2 Emissions Reduction: 40% until 2050
•
Storage
− Oil: price 65€/bbl, CO2 efficiency: 3bbl/tCO2
− Available storage types: offshore CO2-EOR, DOGF, Saline Aquifer
•
General 2015-2050 in 5 year steps; 5 weighted time slices; 3 nodes; no line congestion
- 24 -
Results
4 of a tentative scenario: The electricity sector…
• Diversified electricity portfolio in
2050: RES-E (47%), gas (25%),
nuclear (14%), and CCTS (14%)
• Constant growth of renewables
• CfD covers more than 70% of the
market in 2050; its expenses rise to
23 bn. € in 2050 (equivalent to a tax
of 100 €/MWh)
- 25 -
Results
4 of a tentative scenario: …including the CCTS chain
• Diversified electricity portfolio in
2050: RES-E (47%), gas (25%),
nuclear (14%), and CCTS (14%)
• Constant growth of renewables
• CfD covers more than 70% of the
market in 2050; its expenses rise to
23 bn. € in 2050 (equivalent to a tax
of 100 €/MWh)
• Investments only in EOR storage,
regardless of additional incentives
from the energy market
• CO2 flow from industry is more
constant than from electricity sector
- 26 -
Agenda
1. The Vision for a Pan-European CCTS-Network
2. Modeling a Pan-European CCTS Infrastructure
3. Examining a Regional Roll-out in the North Sea with EOR-Applications
4. Combining CCTS and the Electricity Sector in one Model
5. General Conclusions
- 27 -
General Conclusions
•
There has been a „lost decade“ with respect to CCTS implementation
no operating demonstration project with a complete capture, transport and longterm
storage chain;
reasons for the delay are
– Few incentivces to invest in capture infrastructure (e.g. too low CO2-ETS price)
– Underestimated capture costs
– No focus on cheap capture technologies for industrial processes
– Underestimated complexity of implementing CO2 transport and storage
•
There is a big gap between model visions for CCTS roll-out and political reality which has
to be closed
•
CCTS in Europe currently only plays a role in combination with CO2-EOR-applications, in
particular in the UK, Norway and the Netherlands
•
Onshore storage of CO2 is not an option due to public resistance
•
Pilot projects should focus on the industrial application (esp. in the steel sector) of CCTS
due to cheaper abatement costs and fewer alternative abatement technologies
- 28 -
European-wide and Regional Scenarios for CO2 Infrastructure using CCTSMOD
Berlin Conference on Energy and Electricity Economics (BELEC 2015)
Cross-Border Coordination for Sustainable Energy Security –
Theory and Policy Lessons from Different Sectors, Berlin, 28.05.2015
Dipl.-Ing. Pao-Yu Oei, Dipl.-Ing. Roman Mendelevitch
Workgroup for Infrastructure Policy (WIP), Technische Universität Berlin
Energy, Transport, Environment (EVU), DIW Berlin
- 29 -
Next steps for this modeling approach
•
Compare the costs of different incentive schemes and analyze their effects on the
deployment of different low carbon technologies, with a special focus on CCTS with and
without the option for EOR.
•
Further consider the role of industry CCTS
•
Study the feedback effects between the CfD scheme and the electricity price, and
investigate the incentives of the government which acts along the three pillars of energy
policy: cost-efficiency, sustainability and security; in a two-level setting
•
Use our results to draw conclusions and possible policy recommendations for low carbon
support schemes in other counties
- 30 -
…the upcoming decade becomes vital to prevent sunk
investments in carbon intensive power plants.
[MW]
6.000
yearly construction coal
5.000
[MW]
2.000
1.500
4.000
3.000
yearly construction
OCGT
1.000
2.000
500
1.000
0
0
[MW]
8.000
6.000
4.000
2.000
yearly construction CCGT
[MW]
6.000
5.000
yearly construction
nuclear
4.000
3.000
2.000
1.000
0
0
Source: Own illustration based on Platts (2011)
- 31 -
The Electricity Markets Reform (EMR) in UK comprises of
several instruments:
•
Contract for Differences
•
Capacity Markets
•
Emissions Performance Standard (EPS)
•
Carbon Floor Price
Source: DECC (2012)
- 32 -
Motivation and research question
EMR is controversially discussed, e.g. by (Pollitt and Haney 2013)
•
as a whole, it is not a consistent strategy to achieve the three main energy policy priorities
of competitiveness, energy security and decarbonization
•
will increase the wholesale electricity price and the consumers energy bill substantially
•
removes ability to react quickly to new information, and competition in planning for the
future; generation mix will no longer be decided based on price signals but be determined
by the government.
Wrong incentives through the EMR might lead to sunk investments in carbon intensive power
plants. These lead to a risk of induced welfare losses as well as breeched climate targets
(see e.g. Johnson et al. 2014).
 We want to analyze the measures of the UK-EMR, specifically the Carbon Price Floor
(CPF), Emissions Performance Standard (EPS) and Contracts for Differences (CfD), and
how they will influence the construction of new generation capacities, with a special focus
on CCTS.
- 33 -
Current status of CCTS: Not a single pilot project in the EU!
Project
Jänsc
Porto-
ROA
Belch
Comp
Don
C-
Long
Getic
ULCO
Green
White
Peel
Peter
Teess
Eems
Pega
Marits
Mong
hwald
Tolle
D
atow
ostilla
Valley
GEN
annet
a
S
Hydro
Rose
Energ
head
ide
haven
sus
a
stad
gen
(UK
y
e
Proje
ct
Oxy)
Capta
in
(Esto
Clean
n)
Energ
y
Country
Technolo
gy
DE
IT
NL
PL
ES
UK
UK
UK
RO
FR
NL
UK
UK
UK
UK
NL
NL
BG
NO
UK
Oxyfu
Post
Post
Post
Oxyfu
Pre
Pre
Post
Post
Post
Pre
Oxyfu
Post
Post
Pre
Post
Oxyfu
Post
Post
Pre
Öl-/
Aquife
Aquife
Aquife
Gasfel
r
r
r
el
Storage
el
Aquife
Aquife
Öl-/
Aquife
Aquife
r
r
Gasfel
r
r
el
EOR
Aquife
EOR
r
Aquife
Aquife
r
r
EGR
el
Aquife
Öl-/
Öl-/
Aquife
r
Gasfel
Gasfel
r
d
d
d
EOR
d
250
250
250
260
320
650
450
330
250
Stahl
H2
430
400
400
400
250
340
120
630
400
in
2015
2015
2015
2015
2015
2015
2015
2015
2015
2016
2016
2016
2016
2016
2016
2017
2017
2020
2020
-
Status in
2011
2020
2017
2013
2018
2018
2016/
2011
2016
2018
2012
2020
2012
2017
2018
2013
2013
2013
2013
2018
2013
shut
shut
7
shut
shut
shut
shut
shut
shut
shut
down
down
down
down
down
down
down
down
down
Capacity
[MW]
Plan
2011
Source: Own depiction based on GCI (2011, 2013) and MIT (2014).
- 34 -
Option: Carbon Capture, Transportation, and Storage (CCTS)?
- 35 -
Pilot Plant in Jänschwalde is being cancelled on 5.12.2011
- 36 -
Interpretation No. 1: Exaggerated Expectation vis-à-vis CCTS
e.g. Luderer, Edenhofer et al. (2011): The Great Transformation
- 37 -
Interpretation No. 2: Unfocussed technology policy:
“Competition between Technologies” instead focus on Post-Combustion
Source: Gibbins, Chalmers (2007)
- 38 -
Interpretation No. 2: Gibbons/Chalmers (2008):
Rapid Diffusion only Using Post-Combustion
Source: Gibbins, Chalmers (2007)
- 39 -
Interpretation No. 3: Biased Cost Estimates
(EU, 2011A1, p. 19)
- 40 -
Interpretation No. 4: Overestimation of Learning Effects
„Inverse“ Learning Curves are Possible, e.g. Nuclear Power in the USA
Source: Rai, Victor, Thuber (2008, p. 12)
- 41 -
Interpretation No. 5: Neglect of the „T-Component“
(here: scenario Onshore 100)
in 2050
• Pipeline network of 33,000 km
• 413 billion € investment costs
• 1319 billion € variable costs
• 50 of 94 Gt storage left in 2050
 scarcity of storage potential
becomes visible (~ 25 years left)
Source: Herold, Oei, Mendlevitch, et al. (2011)
- 42 -
Interpretation No. 6: Neglect of the S-torage Component
CO2 source emissions
• 1618 fossil power
• 1847 heavy industry
• ~ 3.2 Gt CO2 /a in 2010
Available storage potential
• 44 Gt Onshore
• 50 Gt Offshore
Source: Herold, Oei, Mendlevitch, et al. (2011)
- 43 -