Combining Energy Networks: The Impact of Europe's Natural Gas Network

on Electricity Markets till 2050 Jan Abrell, Hannes Weigt, Clemens Gerbaulet, Franziska Holz

19.04.2013, Dresden

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Agenda

1. Coupled Energy Markets

2. Model Setup

3. Results

4. Conclusion

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Electricity and Gas Linkage

• Energy Markets are interlinked (local as well as global)

• Gas is considered the most important fossil fuel for electricity markets (golden age of gas?)… while Germany shouts down some gas plants due to lack of profitability…

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Modeling the interaction of Energy Networks

Problem:

• Linkage of energy markets via electricity fuel input

• Most primary fuel markets have an underlying network topology

• Electricity markets are a pure network market

Interaction of „normal“ price effects and network effects

Integrated assessment necessary, but rarely done

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Agenda

1. Coupled Energy Markets

2. Model Setup

3. Results

4. Conclusion

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Model

Gas wholesale market

Gas final market

Electricity wholesale market

Electricity final market

Final demand

gas

Final demand

electricity

Electricity generation

Pipeline operator

LNG trader Trader

pipeline gas

Gas producer

System operator Pipeline market

Fuel market

Natural gas Transmission service Electricity

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Market Data

• All European network nodes plus outside suppliers (pipe + LNG)

• One node per country, concentrating supply and demand

• Network capacities between nodes are constrained, within countries unlimited

• 44 zones in Continental Europe (ENTSOE synchronized grid)

• In each zone, conventional and renewable generation and electricity demand

• PTDF for zonal grid

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Agenda

1. Coupled Energy Markets

2. Model Setup

3. Results

4. Conclusion

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EMF 28 Scenarios: “The Effects of Technology Choices on EU Climate Policy”

Technology dimensionDefault w

CCSDefault w/o CCS

Pessimistic Optimistic Green

CCS on off off on offNuclear energy ref ref low ref lowEnergy efficiency ref ref ref high highRenewable energies ref ref ref ref optPolicy dimension for the EU Policy dimension for the Rest of the World (ROW)No policy baseline (no policy, also without the 2020 target) no policy EU11Reference: including the 2020 targets and 40% GHG reduction by 2050

"moderate policy" scenario ModPol; no emission trading across macroregions (but trade within macroregions e.g. within EU) EU1 EU2 EU3 EU4 EU5

Mitigation1: 80% GHG reduction by 2050 (with Cap&Trade within the EU)

"moderate policy" scenario ModPol; no emission trading across macroregions (but trade within macroregions e.g. within EU) EU6 EU7 EU8 EU9 EU10

Mitigation2: 80% GHG reduction by 2050 (with Cap&Trade within the EU)

IMAGE2.9 scenario; full emission trading for ROW, but no emission trading between ROW and EU. Regional relative contributions to mitigation based on the Mitigation 1 scenario EU12 EU14

Mitigation3: global 480ppme target with full Cap&Trade

IMAGE2.9 scenario; emission trading is allowed between all regions EU13 EU15

Scenario package for the models that go for the technology dimension (11 Scenario package for the models that go for the policy dimension (7 altogether)included in both scenario packagesAdditional optional scenarios for models that go for the policy dimension

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Going Green, but When?

• RES will provide large share of future EU electricity generation, difference mostly in the specific timing

• Renewable Supply requires large overcapacities due to low utilization levels of wind and solar

• Emitting generation is basically ‘dead’ by 2050

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Doing the Ususal Business, EU 1

If the TYNDP is realized as projected:

Network congestion is similar range as 2010 (in money terms)

Price level mostly defined by global fuel price developments, less by regional aspects

€/MWh <20 20-30 30-40 40-50 50-60 >60

2010 2030 2050

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Going Green, EU 10

A strong increased and fastened RES extension leads to:

Significant price dump (merit-order effect)

Network utilization strongly influences by local RES injection, but price effects small due to low price level

€/MWh <20 20-30 30-40 40-50 50-60 >60

2010 2030 2050

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Peak Load Conditions

• Under BAU conditions (EU 1) high load leads to high prices all over the place (as conventionals set the price everywhere)

• Under Grenn conditions (EU 10) local differences prevail, as some regions have sufficient RES supply

2010

2050 EU 10

2050 EU 1

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Role of Gas in Europe

Europe's gas supply strongly dependents on imports (ca. 64% of EU demand):

1. Russia (34%) 2. Norway (30%) 3. Africa (23%) 4. Others (13%)

Ignoring Norway, 80% of imported natural gas originates in regions that experiences supply

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More RES, Less Dependence?

Decreasing gas demand, projected extension of gas infrastructure and an increased RES share reduce the import dependence and the impact of sudden shortages in the long run

€/MWh <-5 -5 - 0 0-5 5-10 10-15 >15

2010 2030 2050

Russian Gas Cut

African Gas Cut

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Agenda

1. Coupled Energy Markets

2. Model Setup

3. Results

4. Conclusion

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Conclusio

How will Europe's energy future look like?

No one knows for sure…

…but what do we already know now? Electricity supply is largely influenced by political decisions (= policy

defines development path, the rest follows from there on)

Network extensions crucial for reaping locational RES potentials

Gas market is less of a problem, if targeted efficiency achievements and extensions take place (maybe even an overcapacity problem)

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Contact:

Hannes Weigt Forschungsstelle Nachhaltige

Energie- und Wasserversorgung Universität Basel

fonew.unibas.ch

hannes.weigt@unibas.ch