1st RPN Working Meeting
‘Large-scale penetration of low C policies: Opportunities and threats’ 3 October 2014 – Athens, Greece
The effect of RES on the electricity market
Dimitris Lalas FACE3TS, S.A.
Ban-Ki Moon Climate Summit, NYC 23 Sept 2014
“I must be frank with you: it has been very, very hard for us to make money in that [renewable energy] space. Our solar business we tried for 40 years to make solar work, and at the end of the day we just couldn’t make money at it. About a year or two ago, we got out of it. But we still do have a very big biofuels business, particularly in Brazil. We have a very big R&D programme in biofuels. We have 16 wind farms across the country. So we are trying, but I must tell you it’s a challenging environment to make money in.” Geoff Morrell, US spokesman for BP, also speaking at Climate Week in New York
Roland Busch, the chief executive of Siemens infrastructure group, declared that renewables simply hadn’t advanced enough to replace coal and gas and the German multinational would continue to invest in fossils for “the really long term”. speaking at Climate Week in New York
“Climate change is a defining issue of our age, of our present. Our response will define our future. To ride this storm we need all hands on deck. That is why we are here today. We need a clear vision. The human, environmental and financial cost of climate change is fast becoming unbearable. We have never faced such a challenge, nor such an opportunity.”.. Ban-Ki Moon
1. Looks like the 27% total RES target will go ahead but
with difficulty
2. Major reason –losses on large companies EON, RWE,
Iberdrola
3. The 30% for Energy Conservation is moving to 27%
4. The 40% GHG reduction not sure w/o national targets
(some MS want single figures for themselves)
5. Pressure to accept credits outside ETS
6. Poland (with HU?) is rumored to want to postpone
decision for later, maybe in 2015.
7. Pressure for energy unification
EU, Brussels 23 September 2014
Economist, 26 July 2014: Sun, wind and drain
Daily German electricity demand & supply in August 2022
(Energeiwende- RES in electricity >35% & >50% by 2030)
RES production pushes the cost down (Merit Order Effect)
Diurnal variation of load is also involved
Danish electricity market prices with & w/o wind
Wind Energy and Electricity Prices, POYRY – EWEA, April 2010
Net gains of “Merit Order Effect”
The effect on the load duration curve
The (System) Levelized Cost of Electricity (sLCOE)
Ueckerdt et al., 2013
In LCOE analysis all costs should be counted: Wind energy
Ueckerdt et al., 2013
€20/tCO2 Coal PP eff 38% No imp/exp
DE 2011 8%
Ueckerdt et al., 2013
Short term & long term effects
Day Ahead Forecast vs. Actual
April 2014
0
200
400
600
800
1000
1200
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Day
MW
hDaily wind energy production: Variable yes, stochastic?
DNV-GH & Facets
Solar & wind full cost analysis: long term integration costs
Ueckerdt et al., 2013
DE 2011 8% DE 2011 3,2%
LCOE of different generating technologies in Germany
Fraunhofer Study, 2013 Carbon at €20/tCO2
40-45%
LCOE of solar technologies in high irradiation areas
Kost et al., Fraunhofer Study, 2013
Short term surplus wind penetration from 0 to 30%
Incumbent Producers Consumers Welfare
(€/MWh) (€/MWh) (€/MWh)
Nuclear rents -13 Electricity Market +28 Consumers +7
Coal rents -9 Heat Market -2 Producers -22
Gas rents -1 AS Market -0.1
Interconnectors -0.2
CO2 taxes NA
Wind Subsidies -18
Producer
Surplus
-22 Consumer
Surplus
+7 Welfare
Surplus
-15
Hirth and Ueckerdt, FEEM 82/2012
North-Western Europe i.e. DE, FR, NL,BE, PL
Short term surplus carbon price change from 0 to €100/ton CO2
Incumbent Producers Consumers Welfare
(€/MWh) (€/MWh) (€/MWh)
Nuclear rents +21 Electricity
Market
-43 Consumers -29
Coal rents -10 Heat Market -6 Producers +12
Gas rents +0 AS Market -0
Interconnectors -0
CO2 taxes +20
Wind Subsidies NA
Producer
Surplus
+12 Consumer
Surplus
-29 Welfare
Surplus
-17
Hirth and Ueckerdt, FEEM 82/2012
North-Western Europe i.e. DE, FR, NL,BE, PL
Combined use of RES and Carbon price
Consumer
Rent
Producer
Rent
Economic
Welfare
(€/MWh) (€/MWh) (€/MWh)
Existing (0% wind, €0 C price
(51 €/MWh electricity price)
51 25
30% wind penetration
(43 €/MWh electricity price)
+7 -22 -15
€100/Ton CO2 carbon price
(102 €/MWh electricity price)
-29 +12 -17
Both
(89 €/MWh electricity price)
-24 0 -24
Hirth and Ueckerdt, FEEM 82/2012
North-Western Europe i.e. DE, FR, NL,BE, PL
Frank, Brookings 2014
The Cost-Benefit approach
$50/tCO2 Coal PP eff 32,5% SC NG eff 31,5%
Effect of carbon price – gas electricity generation
Frank, Brookings 2014
The Cost-Benefit approach – NG price sensitivity
Nuclear PP Insurance? Decommissioning?
Fraunhofer Study (Kost et al. ) input parameters
Technology Capex-Opex costs EU 2013
RES Technology Installation
cost (€/kW) O & M cost (€/kW/year)
Wind energy (land) 1021-2041 27-84
Small hydro 1350-7300 35-110
Solar thermal w/o storage 2100-6000 30-120
With storage 4850-8000 80-160
Geothermal
2-phase fluid
flush cycle 1600-3200 56-115
Binary cycle 2600-4500 91-158
Biomass
combustion 1000-3900 83-202
gasification 1900-3500 78-231
Fluidized bed
combustion 2000-3500 82-237
Biogas from
waste
MEK 1000-3500 110-275
Latest basis for calculation – Greek RAE
RES Technology Installation
cost (€/kW)
O & M cost
(€/kW/year)
Capacity
factor
IRR
Wind energy (land) 1200 47 25% 11.3%
Small hydro (<15MW) 2000 50 36% 10.2%
Solar thermal
w/o storage 3800 76 20% 6.5%
with storage
(<2 hours) 4800 96 30% 9.9%
Geothermal <90oC 5000 163 70% 14..5%
>90oC 5000 163 80% 9.7%
Biomass
<1MW 3300 1543 90% 17%
1MW< and
<5MW 3000 1403 90% 17.7%
>5MW 2700 1263 90% 18.5%
Biogas from
waste
>2MW 2300 874 75% 22.7%
The price of Carbon – EC, US and Economist Dec 2013
US Social Cost of CO2, 2015-2050 a (in 2011 Dollars)
EC 2014 SWD values €11-R35-53/tCO2
Year 5% Average 3% Average 3% 95th per
2015 $12 $39 $116
2020 $13 $46 $137
2025 $15 $50 $153
2030 $17 $55 $170
2035 $20 $60 $187
2040 $22 $65 $204
2045 $26 $70 $220
2050 $28 $76 $235
Learning curve of RES technologies
Cost of solar modules, Bloomberg 2013
Dimitri Lalas [email protected]
(Wind turbine cost down 29% since 2008)
Ca. $0.45 in 2017
Commercial cost installed small PV ca $1.6/Wp, Feb 2014
Fossil Fuel Subsidies
• Germany €1.9B
hard coal
• US $1B farmers,
$1.5B oil
reserves, $0.5B
fossil fuel R&D
• UK UKP280M tax
break
OECD countries
Total subsidies
$55-90B/yr
i.e. $7/ton CO2eq
12 salient features of Energiewende
Agora Energiewende 2013
Concluding remarks
• Comparison studies need to be examined in detail and be well
understood by policy makers. • Wind and even solar are at or near grid price parity • There are large uncertainties in the estimations that require caution. • The use of RES and the imposition of carbon price has winners and
losers and it is important to know who is who, and why. • National & regional circumstances, RES potential, existing technologies and
external factors (e.g. fossil fuel prices) will dictate the best combination of technologies to aim for.
• The design of a national LCE policy needs to take into consideration all elements (increased use and uncertainty of large scale RES technologies, increase in energy efficiency, electrification of final energy demand, shift from variable to fixed costs, shift from centralized to decentralized investments, infrastructure effectiveness, shift from goods to services) simultaneously
• The solution to the puzzle may not be optimal (in the economic sense).
And the World vision?
“We need to define a new economy of the world,” President François Hollande of France said in his remarks at the climate summit. “There will have to be a new pricing system for carbon.”
On 22 September 2014, the World Bank released a Declaration, signed by 73 nations (including China) and over 1000 major companies including (Shell, Dow Chemical and Coca-Cola), which calls on all nations to enact laws forcing industries to set a price and pay for the carbon emissions that scientists say are the leading cause of global warming.
Thank you for your attention
Dimitri Lalas [email protected]
Energiewende design
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