KATHOLIEKE UNIVERSITEIT LEUVEN CENTRUM VOOR ECONOMISCHE STUDIEN Keuze van elektriciteitscentrales :...
-
Upload
bryana-hawthorn -
Category
Documents
-
view
216 -
download
1
Transcript of KATHOLIEKE UNIVERSITEIT LEUVEN CENTRUM VOOR ECONOMISCHE STUDIEN Keuze van elektriciteitscentrales :...
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Keuze van elektriciteitscentrales : economie versus milieu
Prof. Stef Proost
Centrum voor Ekonomische Studiën
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
The Royal Ampere Commission
What type of new power plants in the future? Coal, Gas, Nuclear, Renewable…
Take into account Environmental constraints Economic considerations
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Literature
Ampere Group Report I Static Approach
Proost & Van Regemorter Dynamic or multi-period model Approach
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Outline and assumptions
Two methods Static comparison Dynamic comparison with Markal
Common Assumptions Opportunity costs = market prices for fuel, equipment
and labour Gross wage is in long term good indication of productivity so
gross wage is opportunity cost This implies that “employment” is not an objective when we
choose power plants Fuel price scenarios External costs (health damage) per type of pollutant Production in Belgium
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Methodology - Static Comparison - 1
Compare costs in BEF or EURO per kWhe Fuel cost (BEF/GJ) / plant efficiency (kWh/GJ) + Other variable costs
BEF/kWh + Fixed costs
Annuity or rental cost (BEF/kW) divided by expected max. operating hours per year
+ External costs BEF/kWh
Electricity production with Combined Heat and Power (CHP) Cost of electricity generated by CHP=Total cost CHP -
Avoided costs for heat production
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Methodology - Static Comparison - 3
Assumptions Plants operate at maximal production per year Costs and benefits are discounted at 5% Estimated technical lifetime of different plants Technologies : efficiency, costs, emission factors
Long discussions among engineers, see Table I.2 for the outcome
Fuel prices (up to 2030) Oil and gas: steadily increasing prices Coal: stable prices
External costs Taken from Extern-E, see Table I.1
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Methodology - Static Comparison - 4
1,18
0,04
1,24
0,04
1,31
0,33
1,37
0,92
1,38
0,67
1,41
0,74
1,67
0,03
1,67
0,75
1,76
0,62
1,81
0,04
2,35
0,04
2,62
0,04
2,87
0,36
3,14
0,12
3,15
0,64
3,38
1,41
0
0,5
1
1,5
2
2,5
3
3,5
4
4,5
5A
P60
0 nu
clea
r (4
0 ye
ars)
PW
R n
ucle
ar (4
0 ye
ars)
STA
G p
ower
pla
ntP
ulve
rise
d C
oal (
SC
)
Pul
veri
sed
Coa
l (U
SC
,202
0)
Pul
veri
sed
Coa
l (A
SC
)
MH
TGR
nuc
lear
(30
year
s)
IGC
CW
aste
inci
nera
tors
Win
d tu
rbin
e on
shor
e, s
easi
de
Win
d tu
rbin
e of
fsho
re
Win
d tu
rbin
e on
shor
e, p
olde
rs
Woo
d ga
sific
atio
n - S
TAG
Win
d tu
rbin
e on
shor
e, in
land
gas
turb
ines
Ker
osen
e ga
stur
bine
s
Fuel, Non-fuel and External Costs (BEF per kWh - 2010)
Fuel and Non-fuel cost Fuel, Non-fuel and external cost
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Static Comparison - Ranking
Nuclear If accepted and if international tendering for construction
STAG power plant But gas remains transitory fuel for base load
Wind turbine off shore Limited potential Decentralised power supply means extra costs
Pulverised Coal Cheap but dirty fuel
CHP production (table I.6,Fig I.2) Small potential Not really cheaper, despite computation method
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Static Comparison - Caveats
Contribution to guaranteed power is not taken into account Production of CHP, wind and solar is not driven by demand
Real operating time during lifetime is not taken into account Determined by total demand and cost of alternatives
Demand reductions are not an option in this exercise Potential total capacity is very small for some
technologies Comparison only holds for locations with the lowest costs
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Dynamic Comparison - 1
Basic idea Use Markal for the Belgian energy sector
Period 1990-2030 Compute optimal investment strategy for electricity and other
sectors Subject to two types of constraints
Allow nuclear plants or not Kyoto obligation for the Belgian energy sector as a whole
Kyoto Target for Belgium Reduce 2010 GHG emissions by 7,5% relative to 1990 level Our assumptions
Extra efforts are needed and imposed after 2010 -15% in 2030
No emission permits are bought abroad
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Dynamic Comparison - 2
Advantages of this approach Issue is 2020 and later, not 2010 (see static approach) Analyse merits of plants over the whole lifetime Compare efforts in different sectors and in demand
reduction In the static comparison
One CO2 damage value was used in the assessment Demand reduction was missing as an option
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
The MARKAL Model
Demand for energy services 40 types of energy services are identified
Heating of buildings, high temp heat for chemical industry…
Supply of energy services All energy saving and energy production technologies
in operation in Belgium
Major assumption Perfect foresight and no market barriers
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
MARKAL Equations - 1
Example with one energy service (heating) X Produced by two technologies Z and Y
For every technology, we have Running costs c (fuel cost and other operation costs) Investment costs C (annuity formulation) Existing capacities Y°, Z° Emission rates
Simulate market equilibrium with perfect foresight and perfect emission taxes Equal to shadow value of the emission constraint
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
MARKAL Graph
Z°
Y°
Energy service
Cost of energy service
Demand function energy services
c(y)
XmarketXopt
c(z)
Shadow value of emission constraint
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Reference Scenario Assumptions
Increasing oil and gas prices Reduce growth of energy demand Investment in nuclear power stations is possible
Non-GHG external costs of power production are not taken into account
No Kyoto constraint Electricity generation potential in Belgium
Nuclear Maximum of 8000 MW on existing sites is possible
Wind energy 400 + 100 MW onshore and 1000 MW offshore
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Reference+ Scenario - Results
Note: this scenario differs from the reference scenario only because of the internalisation of non-GHG costs in all sectors.
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
No New Nuclear
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
No New Nuclear with Kyoto Constraint
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
With New Nuclear and Kyoto Constraint
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Who Should Make the Efforts
Kyoto implies higher efforts for the energy sector and industry Energy sector: -26% Industry: -33% Residential & Service sector: -6% Transport: -3%
Explanation Existing taxes on fuel in residential and transport
sector Already Induce large energy efficiency efforts in these sectors
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Effect of High Oil Prices
Decrease in energy demand helps to reduce CO2 emissions from oil and gas
Incentive to use coal power plants This increases CO2 emissions
On Balance no major effect on CO2 emissions
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Caveats
No European trade in emission rights Trade in emissions rights would reduce the difference
between scenarios with and without Kyoto
IF European electricity market in the model Requires more transmission capacity Easy to export pollution problem abroad by producing
less But other countries will have to reduce emissions of CO2
further and Imported Electricity will become more expensive When prices are set at
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Conclusions
Static comparison needs to be supplemented by a dynamic approach
A nuclear moratorium is very costly when there is also a CO2 emission constraint Not impossible but multiple policies are needed
Demand reduction by announcing higher electricity prices Use more renewables but using different government policies Replace coal by gas
Stef Proost CES-KULeuvenKATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Methodology - Static Comparison - 2
Comparing capital cost and variable cost Capital cost
Investment costs
Variable cost Fuel cost, non-fuel cost (operation, maintenance…)
Two procedures Aggregation of all costs and benefits over the time
horizon (see dynamic analysis) On an annual basis (annuity = C)
AW C C
C
i i i iC
t nt
n
,..., , ,...n perioden 0
1
1 1
11
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Fuel, Non-fuel and External Costs (BEF per kWh - 2010)1,
18
1,24
1,31
1,37
1,38
1,41 1,67
1,67
1,76
1,81 2,
35 2,62 2,87 3,14
3,15 3,38
1,48 2,
05 2,69
3,63
2,00 2,
76
1,68 2,
15 2,42 2,
82
3,77 4,00 4,
73
5,75
11,9
2
0,04
0,04 0,
33 0,92
0,67
0,74
0,03 0,
75
0,62
0,04
0,04 0,
04 0,36 0,12 0,
64
1,41
0,42
0,47
0,52
0,64
0,12
0,43
0,18 0,
06
2,92
0,49
0,45 0,
66
0,65
-0,3
1
-0,2
9
-1
0
1
2
3
4
5
6
7
8
AP
600
nucl
ear
(40
year
s)
PW
R n
ucle
ar (4
0 ye
ars)
STA
G p
ower
pla
nt
Pul
veri
sed
Coa
l (S
C)
Pul
veri
sed
Coa
l (U
SC
,202
0)
Pul
veri
sed
Coa
l (A
SC
)
MH
TGR
nuc
lear
(30
year
s)
IGC
C
Was
te in
cine
rato
rs
Win
d tu
rbin
e on
shor
e, s
easi
de
Win
d tu
rbin
e of
fsho
re
Win
d tu
rbin
e on
shor
e, p
olde
rs
Woo
d ga
sific
atio
n - S
TAG
Win
d tu
rbin
e on
shor
e, in
land
gas
turb
ines
Ker
osen
e ga
stur
bine
s
STA
G H
TG
as tu
rbin
e H
T
Fuel
cel
ls (n
at g
as) H
T, 2
015
Fuel
cel
ls (h
ydro
gen)
HT,
201
5ga
s en
gine
LT
Bac
k pr
essu
re tu
rbin
e LT
STA
G (n
at. G
as) S
H
Gas
eng
ine
(650
MW
) SH
Die
sel e
ngin
e S
H
Fuel
cel
ls (n
at. g
as),
SH
, 201
5
Fuel
cel
ls (h
ydro
gen)
, SH
, 201
5
Fuel
cel
ls (n
at. g
as),
SH
Fuel
cel
ls (h
ydro
gen)
, SH
Woo
d ga
sific
atio
n
Hay
/Str
aw/M
isc.
Gas
ifica
tion
SH
Fuel and Non-fuel cost Fuel, Non-fuel and external cost
Methodology - Static Comparison - 5
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
MARKAL Equations - 2
0
0
0
Max ( ) ( ) ( ) ( ) ( )
. .
x
x
y z
P x dx c z c y C Z C Y
st x y z
e y e z E
y Y Y
z Z Z
- - - -
£ +
+ £
£ +
£ +
ò
%
The optimisation problem Maximise Consumer Surplus – Costs
Such that Emissions remain lower than what is allowed (Ẽ) Capacity limits are respected
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Models Used in this Exercise
POLES A model for world energy demand and supply
GEM-E3 A general equilibrium model for 15 EU countries
Developed by European consortium
MARKAL A partial equilibrium model for the Belgian energy
system Developed for Belgium by CES - VITO
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Scenario’s 2000 - 2030Energy PriceAssumptions
(POLES)
EU Macro-economicbackground (GEM-E3)
+ 1990-1997 GHGmeasures
Energy efficient choices by agents(MARKAL)
Reference scenario +No nuclear
Kyoto constraint
International energy prices
Overall world economic activity level
Reference case(nuclear No Kyoto)
Belgian economic activity level by sector
Demand for energy services
Reference scenario +Kyoto constraint
Reference scenario +No nuclear
Ranking of measures in function of cost-efficiency
Exogenous input on technological development and
costs of alternatives
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Demand and Supply of Energy Services
Step 1: BStep 2: CStep 3: D
cost of GHGpolicy in 2010
cost in referencein 2010
cost in referencein 1990
Price or Cost of Energy Services
X0
B
D
C
Demand functionin A in 1990
Demand functionin A in 2010
Level ofEnergy ServicesX1X2
GEM-E3
KATHOLIEKE
UNIVERSITEITLEUVEN
CENTRUM VOOR ECONOMISCHE STUDIEN
Cost of Abatement
Cost 1 The net cost for end users in the energy market
No other externalities in energy market No distortions on other markets No income distribution concerns
Cost 2 Cost 1 + secondary benefits on other energy
externalities SO2, NOx...