You are on page 1of 203

INSTITUTE FOR PROSPECTIVE TECHNOLOGICAL STUDIES

SEVILLE W.T.C., Isla de la Cartuja, s/n,

E-41092 Sevilla

Climate Technology Strategy Within Competitive Energy Markets Energy Technology Strategy 1995-2030: Opportunities Arising from the Threat of Climate Change
Edited by Antonio Soria (IPTS)

Contributors N. Akutsu (International Institute for Applied System Analysis) M. Bess (Energy for Sustainable Development, ESD Ltd.) P. Criqui (Institut dEconomie et Politique Energetique CNRS) D. Finon (Institut dEconomie et Politique Energetique CNRS) S. Isoard (IPTS Joint Research Centre) N. Kouvaritakis (ECOSIM Ltd.) Ph. Menanteau (Institut dEconomie et Politique Energetique CNRS) S. Mima (Institut dEconomie et Politique Energetique CNRS) L. Schrattenholzer (International Institute for Applied System Analysis) A. Soria (IPTS Joint Research Centre) M. Whiteley (Energy for Sustainable Development, ESD Ltd.)

EUR 18063 EN

Work performed in partial fulfilment of JOULE contract n. JOS3-CT95-0008

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

TABLE OF CONTENTS
CLIMATE TECHNOLOGY STRATEGY WITHIN COMPETITIVE ENERGY MARKETS ........................ 1 CHAPTER 1: INTRODUCTION ............................................................................................................................ 4 1.1 GLOBAL WARMING: ANALYTICAL APPROACHES AND POLICIES .............................................................................. 5 1.2 TECHNOLOGY CHANGES: A FOCUS IN POWER PRODUCTION SCHEMES .................................................................... 7 CHAPTER 2: ENERGY SYSTEMS: A GLOBAL VIEW..................................................................................... 9 2.1 THE EU CARBON EMISSIONS WITHIN THE OVERALL GREENHOUSE GAME ............................................................... 9 2.1.1 Trends in carbon emissions...........................................................................................................................11 2.1.2 Trends in carbon intensity.............................................................................................................................13 2.1.3 Technology and policy responses..................................................................................................................15 2.2 A PROJECTION FOR WORLD ENERGY PATTERNS .....................................................................................................17 2.2.1 Lessons from world energy outlooks .............................................................................................................17 2.2.2 WE-2030 exogenous hypotheses: population and GDP growth in 11 world regions ....................................19 2.2.3 An outlook on world primary energy consumption .......................................................................................25 2.2.4 A check of final energy demand profiles: the energy service approach ........................................................30 2.3 CHANGES IN THE EU ELECTRICITY MARKETS: THE MOVING TOWARDS LIBERALIZATION......................................35 2.3.1 Possible industry structures ..........................................................................................................................36 2.3.2 Contracts and prices .....................................................................................................................................38 2.3.3 A changing role for the regulator .................................................................................................................40 2.3.4 The new technology mix................................................................................................................................41 2.3.5 Managing the grid.........................................................................................................................................41 2.4 FUTURE ENERGY TECHNOLOGY MARKETS AND EU COMPETITIVENESS .................................................................42 CHAPTER 3: CARBON REMOVAL, FUEL CYCLE SHIFT AND EFFICIENCY MEASURES: A SECTORAL VIEW ..................................................................................................................................................45 3.1 CARBON REMOVAL AND SEQUESTRATION ............................................................................................................46 3.1.1 Separation and Recovery Processes .............................................................................................................47 3.1.2 CO2 Disposal and Storage Processes............................................................................................................50 3.1.3 Costs and Potentials of Carbon Sequestration, Removal, and Storage .........................................................53 3.2 OTHER REDUCTION OPTIONS ................................................................................................................................55 3.2.1 Demand-Side Measures ................................................................................................................................56 3.2.2 Dematerialization and Recycling ..................................................................................................................56 3.2.3 Efficiency Improvements and Technological Change ...................................................................................56 3.2.4 Fuel-Mix Changes.........................................................................................................................................58 3.2.5 Removal and Sequestration...........................................................................................................................60 3.2.6 Energy conversion efficiency ........................................................................................................................62 3.2.7 Fuel-Mix Changes.........................................................................................................................................65 3.3 THE INDUSTRIAL SECTOR ............................................................................................................................... ......67 3.3.1 Dematerialization ........................................................................................................ .................................67 3.3.2 Energy Efficiency Improvement and Process Changes .................................................................................68 3.3.3 Fuel-Mix Changes.........................................................................................................................................75 3.3.4 Combined Measures in the Steel Industry .....................................................................................................75 3.4 THE TRANSPORTATION SECTOR ............................................................................................................................76 3.4.1 Efficiency Improvements.................................................................................................. .............................76 3.4.2 Demand-Side Measures ................................................................................................................................77 3.4.3 Fuel switching........................................................................................................... ....................................78 3.5 THE RESIDENTIAL & COMMERCIAL SECTOR.........................................................................................................81 3.5.1 Efficiency Improvements.................................................................................................. .............................81

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

3.5.2 Fuel-Mix Changes.........................................................................................................................................84 CHAPTER 4: POWER GENERATION TECHNOLOGY CLUSTERS: PRESENT STATUS AND ITS POTENTIAL ............................................................................................................................................................86 4.1 NUCLEAR INDUSTRY: A PARADIGM IN CRISIS ........................................................................................................86 4.2 CLEAN COAL TECHNOLOGIES ...............................................................................................................................91 4.3 FUEL CELLS FOR STATIONARY AND MOBILE APPLICATIONS.................................................................................102 4.4 WIND POWER GENERATION .................................................................................................................................109 4.5 PHOTOVOLTAIC ELECTRICITY .............................................................................................................................11 4 CHAPTER 5: TECHNOLOGY SCENARIOS TO 2030: BASELINE AND ALTERNATIVE TECHNOLOGY STORIES...................................................................................................................................120 5.1 THE NATURE OF TECHNOLOGICAL PROGRESS AND BREAKTHROUGHS .................................................................120 5.1.1 Energy technology trends in the longer time scale......................................................................................120 5.1.2 Market penetration mechanisms and technological lock-in ........................................................................122 5.2 ENERGY TECHNOLOGY BASELINE PROJECTION ....................................................................................................125 5.3 A LOOK INTO THE FUTURE: WORLD ENERGY TECHNOLOGY SCENARIOS ..............................................................130 5.3.1 Centralized Electricity Production: The nuclear renaissance and incremental innovations.......................131 5.3.2 The cleaner fossil-fuel-based baseload electricity production. ...................................................................132 5.3.3 The Gas-Induced Decentralized Power Generation System........................................................................133 5.3.4 The Energy Efficient Decentralised Power Generation System. .................................................................135 5.3.5 A Future of Renewable Energy Technologies. ............................................................................................136 5.4 RUNNING THE SCENARIOS ...................................................................................................................................137 CHAPTER 6: TECHNOLOGY PERFORMANCE: TECHNOLOGICAL SCENARIOS AND MARKET PENETRATION ASSESSMENT..........................................................................................................................141 6.1 INTRODUCTION ...................................................................................................................................................141 6.2 SAFIRE SCENARIO DESCRIPTIONS .....................................................................................................................142 6.3 SAFIRE RESULTS ...............................................................................................................................................142 6.3.1 Scenario Results..........................................................................................................................................142 6.3.2 Summary of Market Penetration of renewable energy Technologies ..........................................................150 6.3.3 Comparative Analysis of Climate Mitigating Technologies ........................................................................151 6.4 CONCLUSIONS .....................................................................................................................................................162 CHAPTER 7: BASELINE AND ALTERNATIVE TECHNOLOGY SCENARIOS TO 2030: THE EFFECT ONTO THE WORLDS ENERGY SYSTEM......................................................................................................163 7.1 THE NUCLEAR SCENARIO ...................................................................................................................................171 7.2 THE CLEAN COAL SCENARIO ..............................................................................................................................173 7.3 THE GAS TECHNOLOGY SCENARIO .....................................................................................................................176 7.4 THE FUEL CELL SCENARIO .................................................................................................................................181 7.5 THE RENEWABLE ENERGY TECHNOLOGY SCENARIO ..........................................................................................183 7.6 CONCLUSION .......................................................................................................................................................186 CHAPTER 8: IMPLICATIONS FOR THE EU ENERGY R&D STRATEGY AND OTHER POLICIES...188 8.1 R&D PORTFOLIO, TECHNOLOGICAL PROGRESS AND MARKET STRUCTURE .......................................................189 8.2 SHORT-TERM ISSUES: IMPROVEMENTS TO A CARBON-DOMINATED PANORAMA ..................................................190 8.3 LONG-TERM OBJECTIVES: MANAGING THE BACKSTOP TECHNOLOGIES ...............................................................192

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

Chapter 1: Introduction
by A. Soria, IPTS The basic issue to be analyzed in this volume concerns the trends that may be identified within the energy technology field. Our scope here is first to determine up to what extend can technology contribute to a possible structural change within energy markets leading to a less carbon-intensive exploitation system, and second to determine what are the possible mechanisms through which these changes may take place, and what are the conditions that may facilitate this transition. Ultimately, the key question to answer is what will be the energy technologies that are likely to become crucial if energy planners consider with growing attention the necessity of limiting (with different degrees of intensity) the carbon emissions to the atmosphere. The identification of these technologies is, however, not the only task to do. Indeed, these technologies may be out of the market today, and could well be faced to enormous difficulties to become operative within a competitive energy market unless some measures aiming at facilitating its implementation are taken. These measures may be viewed as a necessary effort to conduct the status of the world energy system from a non-sustainable situation, in which the free-riding behavior of some agents, the opacity of the market signals and the induced barriers to technology renewal towards a more efficient and reliable system, where costs and benefits are granted to the pertinent agents and the inefficiencies are charged with equity, so as to produce a combination of positive incentives. The passage from the present scheme to this improved situation is not automatic, and a sort of potential barrier has to be overcome. The task is to provide to policy makers an appropriate strategy so as this obstacle is overcome, ensuring a smooth and reliable transition to a environmental (climatic) safe energy exploitation schemes. An outline of the remaining of the volume follows. Section 1.1 recalls the basic analytical approaches and possible policy frameworks that have been used to assess the energy-environmental-economy problems, and, in particular, the global warming issue. Rather than focusing on a similar basis at all of them, it has been perceived that there are sectors (and, associated to them, the corresponding technologies) that are actually acting as catalyzers of the technology innovation process. The power generation sector seems to be the big player within the overall picture. Arguments to support this hypothesis are given in section 1.2. A general view onto the evolution of the energy system at a global scale is included in Chapter 2. Trends on carbon emissions, both in absolute and per capita terms are included to serve as a framing discussion for the baseline world energy projection obtained with POLES. The peculiarities of the EU and other OECD countries are also discussed, with particular emphasis on the changing structure of the power sector (liberalisation and unbundling), underlying the

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

role that technological diversity within the electricity market can play to foster the transition towards new exploitation schemes. Chapter 3 presents a screening on the portfolio of mitigation measures from a sectoral end-use standpoint. These include fuel mix shift, energy appliances improved efficiency as well as carbon removal and sequestration. These technologies are summarized there by sake of completeness, since, as it has been mentioned, focus will be given to power generation technologies. The emerging clusters of electricity generation technologies are described in Chapter 4, including not only the present techno-economic status of the technologies, but also the prospects for each of them to the medium-long term (2000-2030). The possible technological scenarios foreseen, even if concerning the whole system, have been conceived and constructed around different power generation paradigms: they are described in Chapter 5. Based on the above-described energy technology scenarios, Chapter 6 shows the results obtained concerning the forecasts on market penetration on a technology-by-technology basis, as well as the analysis of the environmental costs and benefits associated, as predicted by the technology diffusion model SAFIRE. The expected effects induced onto the global energy system by the technological hypothesis underlying behind these technologically-driven scenarios are described in detail in Chapter 7. The analysis presented have been conducted using the POLES model, which allow to capture with accuracy the regional specificities, as well as the integrated dynamics of the world markets of primary energy carriers. Finally, Chapter 8 summarizes the main conclusions and gives the guidelines for setting a costefficient energy technology R&D strategy.

1.1 Global warming: analytical approaches and policies


The global warming tread has become an important source of concern during the last decade. However, carbon emissions are not the first environmental problem that has worried energy planners. Indeed, the problem of finding compatible solutions to fulfill the energy supply requirements and limiting sulfur and nitrogen oxide emissions was of extreme importance during the seventies and the eighties. The solution of the acid rain problem came basically through technological solutions that were found after an aggressive environmental regulatory framework. The global warming issue, being linked to carbon use in itself (although also depending on the carbon combustion modalities), seems a problem whose solution exceeds the strict technological domain. Two typical views have been adopted when studying the issue of energy systems and the related environmental effects: The bottom-up approach considers first the individual energy conversion techniques. The models based on this approach are therefore often referred to as engineering models, and are frequently tools for optimal resource allocation, either for the long term (capacity planning) as well as for the sort term (dispatching). Obviously, this approach is particularly suited to simulate the behaviour of some centralized decision subsystem, typically the power sector. On the contrary, subsystems involving a multiplicity of agents (. i.e. the transport sector) are more difficult to analyze using this scheme.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

The top-down approach uses macroeconomic models to investigate the mutual interaction between the economic variables of the aggregate under consideration and the carbon emission. Indeed, economic development and energy consumption are intimately intertwined. The causal relationships are far from being clearly understood: from one side, energy is demanded as a productive factor to generate welfare. On the other side, higher income undoubtedly induces more consumption of energy-related services. The degree of detail of these models may vary depending on the scope of the analysis.

Putting forward the premise that the technology is not the unique aspect of the global warming problem, it should be stressed that it has an outstanding importance. It is also important to remark that the term technology has to be understood here on a broad basis. It includes not only supply-side technologies, but also demand-side technologies. Amongst the first, energy transformation (and, particularly, electric power generation) is a very important subset, since it accounts for a remarkable share of the carbon emissions all around the world. From the demand side, energy efficient improvements in domestic and industrial appliances are also a fundamental factor to contribute to the greenhouse gas emissions reduction. Special mention should be made to the transport sector, whose fast growing share of the global carbon emissions lies today around 22% (to be compared with the share of 18% corresponding to 1973). The carbon emissions reduction strategy has to be based along four basic action lines: Changing the fossil share within the total primary energy production. This concerns mainly the enhancement of the production of primary electricity via renewables (especially hydroelectric power) and nuclear. In the long run, syntethic fuels obtained from renewable resources could also play a role. Changing the fossil fuel mix towards a less carbon-intensive energy system. In principle, this applies to all the sectors concerned, although the power sector has shown much more flexibility than the transport sector in modifying the primary input mix according to the price signals provided by the energy resources markets. Improving the energy conversion efficiency system as a whole in order to obtain more useful final energy with the same amount of primary energy. Efficiency improvements concern the electricity transformation system, electric power transmission, the refining industry, and other economic sectors. The universal trend for a more and more electrified world may offset the efficiency gains achieved by technological developments. Improving the GDP energy intensity, i.e. the final energy consumption required to produce a unit of output. The possibility to achieve this greatly depends not only on the degree of development of the economy considered, but also on the structural characteristics of the sectors in which the economy is specialised. The progressive tertiarization of the world economy may contribute to achieve this objective, although there exist several countries whose growth is still based on extremely intensive industrial sectors.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

1.2 Technology changes: a focus in power production schemes


The technology issue is embedded in all these possible improvements to reduce carbon emissions. Concerning the first two points, the change of the fossil fuel mix or the fossil fuel share towards a more carbon-saving situation can be possible only if the appropriate technology is available and makes this shifting economically sensed, using given the primary energy carrier prices (present and expected). Energy conversion efficiency is an almost pure technological issue, although external incentives, such high primary energy prices work also favoring technological development. With respect to the fourth point, the overall GDP energy intensity depends also on the technology, but it should be understood on a broader basis. Technology means there overall productive schemes, income-generation patterns and technological regimes, as clusters of technologies mutually connected. The prospectives on the possible energy technology paths are fundamental in order to depict reliable multisectorial scenarios, which eventually could be used in the negotiating processes about possible carbon emissions reduction. The actual energy technology trajectory is not independent from what is happening in the overall economy. This expected feedback forces the consideration of several possible technological trajectories, to which one could assign a certain probability, depending on the future state of the world. Energy technologies are crucial in incorporating energy to the productive process. Raw energy carriers have to be transformed into a form able to provide productive service. As a consequence of the natural laws, there are clearly increasing marginal costs in the conversion of energy resources. In the same manner, the specific pollution (i.e. pollution per unit of useful or final energy use) and other external effects would also increase more than proportionally as the depletion takes place. Energy resource depletion would increase the overall energy intensity, since productive processes always use the more accessible natural resources and the exploitation costs (in capital, labor and energy terms) increase as depletion proceeds, so the access to new fossil energy resources is also expected to exhibit increasing marginal costs. It is important to underline that this phenomenon takes place independently of the actual size of the resource reserves. Therefore, technology improvements are not unlimited, and they cannot avoid physical exploitation limits or technical potential for each energy technology. It may be concluded that, although it is clear that the global warming problem is a complex issue, and therefore requires an accurate description of the energy-economy-environment interactions, an adequate technology characterization is mandatory to describe and understand the carbon-energy global system. In addition, technology prospects are fundamental since they may provide the clues to the future characteristics of the backstop technological system. The features of this backstop energy structure are by no means predetermined: although we know a priori that only renewable energy technologies are sustainable in the long run, the precise future exploitation schemes are still unknown. The path-dependency of the energy techno-economic system provides incentive for a further analyses in order to foster the dynamic tracking of the best choice, minimizing the possibility of endeavouring suboptimal, non-reversible trajectories.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

Two main trends are detected in the worlds energy system today: increasing electrification of stationary applications and increasing share of primary energy absorbed by the transportation sector. It generally acknowledged that the moving forces of the overall energy system (and, to a large extent, of the global carbon emissions) are to be found within these two sectors. Any serious attempt to assess the carbon mitigation possibilities in terms of costs has to incorporate this statement as a framework consideration. Amongst these two basic issues, major attention will be given in this study to the electric power industry. The reason for this is twofold: first, the technological diversity that is present within the electricity industry is by far much larger than the one corresponding to the transport sector: power generation technologies change faster and react to policy measures with a flexibility which is not present within the transport sector. In addition, and perhaps connected to the preceding remark, it is perceived that the structural changes within the power sector that are currently under way give the possibility to foster a more sustainable electrification pattern. Indeed, within the current exploitation schemes, electrification leaves more room for technology policy measures, whereas the transport sector has reached a deeper technological lock-in around the standard explosion engine that makes it difficult to achieve significant advances vis--vis the carbon emission issue from the technological point of view. Infrastructural changes, command and control measures and deep social and individual behavioral changes would be required to achieve similar results in terms of carbon emissions abatement. This does not mean that technology has nothing to say with respect to transport-originated emissions, but rather that technology changes are not (today) a sufficient condition to achieve a more sustainable transportation system, the bottleneck being placed around lifestyles and large infrastructures. In a word, given the present trends, it is more likely than disruptive technology changes from the power generation system would have an influence onto the transportation system than viceversa. This important question will be revisited in other parts of this volume.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

Chapter 2: Energy systems: a global view


By P. Criqui, IEPE, A. Soria, IPTS and S. Isoard, IPTS Energy is a key issue that is present in all the sectors of modern economies. Moreover, the availability of cheap, abundant and safe energy sources is indeed a requisite for sustained economic development in emerging economies. The ways in which it is consumed and used to produce welfare is the matter of several disciplinary fields. Energy technologies are important because energy crucial in the overall economic system, not only because of the scarcity of the resources (the world energy mix is based on non-renewable energy carriers), but also because of the environmental concerns. Indeed, environmental degradation is due, to a large extent, to the effects of energy production, transformation and use. The environmental aspects of energy consumption are becoming very important, but the vulnerability of the energy system to price shocks should not be forgotten: two out of the three large global economic recessions in the last fifty years were directly originated by a supply shock in the energy sector. Indeed, economic development and energy consumption are intimately intertwined. The causal relationships between them are far from being clearly understood: on one side, energy is demanded as a productive factor to generate welfare. On the other side, higher income undoubtedly induces more consumption of energy-related services. The ultimate reason behind the massive increase of energy demand is not only the world economic development (energy as productive factor) but also the demographic pressure that pushes the demand of energy as a purely disembodied consumption good. In the OECD countries, the average population annual growth rate in the period 1970-2010 is expected to be 0.6%, whereas in developing countries, it will reach a 1.7% annual rate (2.1% on 1970-1992). Energy demand is driven in OECD countries mainly by the energy per capita increase, but in developing countries, both factors (per capita consumption and population growth) are important.

2.1 The EU carbon emissions within the overall greenhouse game


The environmental effects associated to the use of energy are undoubtedly an important driving mechanism of the world energy system, as far as environmental concerns rapidly spread on the public opinion. Among the negative externalities associated to fossil fuels, CO2 emissions are probably the most important one because of their global climate change implications. However, this threat is perceived with different degrees of concern by governments, decision-makers and general public in different world zones. Amongst the developed nations, the European Union

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

10

has taken the leading role in recognizing the problem as an important issue to be solved, and in proposing coordinated efforts to achieve a cost-efficient solution. The global warming menace is also differently regarded from developing countries. Large, rapidly growing countries, such China, India and some other in the Asian continent give priority to economic development, often accompanied by massive increase in energy consumption. On the contrary, OECD countries exhibit energy intensities of the GDP lower than unity, and are expected to contribute relatively less to the global carbon emission increase. Under the IEA business-as-usual assumption, global annual emissions are expected to increase by 40% between 1992 and 2010, concentrating in developing countries, whose emissions will reach the OECD levels by 2010: electricity supply in two major developing countries, China and India, is coal-based (73%), which is the more carbon-intensive energy carrier. In Europe and North-America, the nuclear reduction will be partially compensated by gas use, whereas Japan is expected to enlarge the coal share in its primary energy mix. Within the entire world, however, the energy demand from the transport sector is expanding at a rate higher than the one corresponding to the GDP. Since it is primarily based in oil and oil-derived fuels, it appears to be an important source of emissions, with a good potential for limiting. Since the environmentally relevant variable is the total accumulated CO2 in the atmosphere, an eventual stabilization of emissions would not solve, in the long run, the greenhouse gas emissions problem. Many other factors, such as the speed of diffusion of carbon dioxide onto the ocean, and the rate of carbon fixation in the vegetal cover are controlling the dynamics of the whole carbon cycle, imposing several time constants and determining the actual evolution of the carbon concentration in the atmosphere. Limiting, and, ultimately stabilizing the carbon emissions is not a well-posed objective unless an agreement is made upon the level on which this stabilization should take place. The Intergovernmental Panel for Climate Change often refers to the standard target of 550 parts per million in volume (ppmv), which corresponds to twice as much the concentration in preindustrial times. The carbon concentration stabilization path greatly depends on the dynamics made to limit the carbon emissions, which would be affects by a continuous cost-benefit analysis. The Framework Convention puts forward the premise that the policies and measures to deal with climate change should be cost-effective so as to ensure global benefits at the lowest possible cost. The uncertainties about the spread over time of both cost of carbon mitigation and damages to the global economic system is an issue of utmost importance. Indeed, the reduction pathway is as important as the concentration stabilization level in determining the total cost of the environmental policy. There exists a line of thought (Wigley et al 96, Manne & Richels 92) arguing that delaying massive mitigation actions by 10-25 years would induce practically the same atmospheric and climatic harm, but the costs to stabilize the carbon concentration would be significantly lower (due to the possibility of exhausting recently new installed capacity and the probable reduction of costs for carbon substitutes in the meantime). Other analysts share the opinion that, on the contrary, there is a lot of no-cost (or low-cost) measures that could be taken already now, allowing for a more aggressive carbon mitigation policy without, yielding a faster carbon concentration stabilization and at a lower level without important economic effort (Grubb 97).

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

11

2.1.1 Trends in carbon emissions


While looking at the historical trends of CO2 emissions, it appears that large differences exist amongst the main emitters. Looking first at the absolute value of emissions levels, the USA and the EU appear to be the main polluters. Under starting from much modest levels, it is observed that the increase rate of the carbon emissions by China and India will lead to these countries to emissions levels close to those of the USA and the EU within relatively few decades, since they have the highest annual growth rates (5.3% and 5.9% respectively). By comparing the emissions annual growth rates on the 1973-1993 period on a country by country basis, with the central line worldwide emissions growth rate of around 1.6%, the countries from the ASEAN group exhibit the highest increase rate (6.5%). The OECD exhibits almost constant emissions, with an annual average growth rate around 0.5%. The EU-15 has even reduced slightly its level of emissions about 0.01% each year. More importantly, it shows that the EU has stopped since a long time to increase its flow of CO2 emissions and this pattern may give more credibility to the proposition of the European Commission for the Kyoto negotiation table.

Worlwide CO2 Emissions


10000000

1000000 World OECD EU-15 ASEAN China India 100000

10000 197

197

198 Years

198

199

199

Figure 2-1Worldwide CO2 emissions

According to the more recent evaluations of 1997, the main CO2 emissions in the world are distributed as follows:

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

12

Country/Zone US EU (East Germany included) China Former Soviet Union Japan India United Kingdom South Korea Canada Australia

CO2 Emissions (%) World Population Share(%) 25% 19.6% 13.5% 10.2% 5.6% 3.6% 2.5% 2.2% 2.1% 1.3%
Table 2-1: Per year CO2 Emissions.

4.7% 9.0% 21.5% 2.6% 2.2% 16.3% 1.0% 0.8% 0.5% 0.3%

Amongst the world-wide CO2 emissions from fossil fuel consumption, the 20 largest carbon emitting countries in 1991 contributed over 81% the total carbon emissions. The top three countries, i.e. the U.S., the former USSR and China, were responsible for around 49% of the world emissions. From 1950 to 1990, global per capita emissions of CO2 from fossil fuels increased by a factor of 1.8, while global population increased by a factor of 2.1. Therefore, annual CO2 emissions have increased by a factor of 3.7. These trends may be even reinforced, if one takes into account the emissions growth of the different geographical zones as well as the foreseen population increase in the next three decades. The EU emissions has been growing from the 1970s at a mild rate (from 1985 to 1994, the CO2 emissions annual rate from fossil fuels has been of 1.15%). A global reduction of the emissions from 1991 in electricity and heat production, the domestic and commercial use as well as in the industry took place. On the contrary, emerging economies and developing ones exhibit high growth rates. Therefore, taking into account the foreseen population growth in these respective zones, it appears that the EU will count only for a small share of the total CO2 emissions in the next decades. Indeed, while France, UK, U.S. and Canada decreased respectively their emissions per capita during the 1973-1994 period of 2%, 0.9%, 0.6% and 0.5% on average each year, China, India, Ex-USSR and Japan raised on average their emissions by 3.77%, 3.75%, 1.5% and 0.4%. An important issue is the analysis of the trends of emissions per capita and per GDP in the OECD and developing countries. The analysis of these trends may provide a very interesting insight and contribute to the assessment of the future global emissions of the EU and discuss the instruments to reach the targets

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

13

2.1.2 Trends in carbon intensity


Regarding the trends on emissions per capita, the emerging picture shows similar trends. Even if some developed countries exhibit high emissions rates per capita, the historical trends show a general stabilization in Europe of the emissions per capita and a catching-up of China and India.

CO2 Emissions Per Capita


100

10

France U.S Japan Canada U.K Ex-USSR China India

0.1 1970 1975 1980 Years 1985 1990 1995

Figure 2-2: CO2 Emissions per capita.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

14

Source: Enerdata

Country USA Canada Australia Former Soviet Union Czech Republic Poland United Kingdom Japan Malaysia China Brazil India

Per-capita CO2 Emissions (metric tons) 19.1 17.0 15.2 14.1 13.0 12.7 9.8 8.8 3.7 2.3 1.4 0.8
Table 2-2: Per capita CO2 emissions per country.

Considering these CO2 emissions data in relation with the GDP growth, a strong correlation is found (not surprisingly). The developing countries, which exhibited two-digit growth rates in the passed decade, have increasingly counted for a bigger share of total CO2 emissions, the economic growth having taken place without any concern of environmental protection as happened earlier to the European countries. Indeed, in 1950, North America, Western Europe and Eastern Europe accounted for 89.2% of global CO2 emissions, Africa, Centrally Planned Asia, Developing America, Far East and Oceania contributing for only 10.8%. Nowadays, the latter regions contribute 40.5% of the CO2 emitted. In total, China has passed from the 10th rank in CO2 emissions in 1952 to the 3rd one in 1991, Japan from the 9th to the 4th, India from the 13th to the 6th, South Korea from the 58th to the 14th, North Korea from the 73rd to the 16th and Iran from the 164th to the 17th. They are foreseen to become therefore the main polluters. The economic growth in the developing countries is expected to slow down but to remain much higher than OECD one. Economic and population growth are therefore the two main driving-forces of CO2 emissions dynamics. Facing the global warming threat will therefore require to include, sooner or later, the developing countries as active partners for reaching the emission targets. During the 1973-1994 period, the rate of emissions/GDP has been very high in as well as in ExUSSR and in India. While the developed countries have uniformly reduced their emissions respectively to the GDP (the average annual growth rate are: France: -3.6%, UK: 2.4%, Japan: 2.32%, U.S.: 2% and Canada: 2.1%), India has increased the carbon-intensity of its economic

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

15

system (+1.2%/year) as well as the Ex-USSR (+0.3%/year). Although China exhibits an important decreasing annual average rate of -3%, it remains amongst the most carbon-intensive economies.

(Source: Enerdata)

CO2 Em i s s i ons / GDP


12

10

France U.S Japan Canada U.K Ex-USSR China

India

0 1970 1975 1980 1985 1990 1995

Ye a r s K g C O2 / U S$ 9 0

Figure 2-3: CO2 Emissions/ GDP.

2.1.3 Technology and policy responses


Technological options and political instruments to reach the targets of CO2 emissions have to be discussed. Several possible actions may be recommended, aiming at correcting externalities effects of polluting technologies, at the formation of correct price signals and at enhancing the related technological progress. A screening on the possible technology responses to cope with the problem of global warming will be presented in Chapter 3. The focus given there consists of a broad set of measures, from carbon sequestration and disposal to massive adoption of energy-efficient devices.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

16

Amongst possible policy measures, the internalisation of the external costs (in terms of pollution) of the conventional technologies within the electricity costs per output unit would give non-distorted price basis for the investment decision-making of the utilities. Indeed, the competitiveness of the renewables would be much more effective and would benefit a lot from such an initiative. However, negotiations on its implementation as well as on the definition of a unified tax rate across Europe has been the source of delays in its introduction. Additional instruments may be used to enhance the diffusion of the new energy technologies which are environmental-friendly. R&D policies may contribute to facilitate fuel substitution for moving away from fossil-fuel based technologies as well as for CO2 removal and sequestration. Finally, joint implementation may provide the opportunity to reduce the CO2 emissions in developing countries, possibly the most important emitters in the future. A simple extrapolation from the above-shown data indicates that the EU carbon emission trend would be to remain roughly constant or even experience a mild increase in the years to come. This business as usual scenario has to be contrasted with the policy objectives of the Commission to reduce emissions to -8% in 2005 and to -13% by 2010 with respect to the 1990 values, within the frame of the negotiations auspicated by the IPCC. Preliminary computations based on a bottom-up techno-economic approach have delivered a possible distribution of the disaggregated emission reductions by Member State:

Country B DK D GR E F IR IT L NL AT P FIN SW UK

CO2 emission index in 2010 (1990 = 100) 85 75 70 105 115 95 105 90 60 90 75 125 90 105 80

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Table 2-3: CO2 emission index in 2010.

17

When comparing these emissions reduction targets (which are the outcome of the 2nd Climate Convention Conference held in Berlin), with the BAU projections, a significant gap appears between what is desirable and what is likely to happen. It seems, therefore, that emerging energy technologies have to fill this gap: the success of the achievement of the emission reduction objectives is inevitably linked to the success of the energy research and technological development (RTD). The considered technological fields in which significant advances are expected, and which have been retained to elaborate the above table are: 1. Improvements in energy efficiency in heavy industries. 2. Improvements in energy efficiency of electrical appliances. 3. Extended use of cogeneration. 4. Development of renewable energy technologies. 5. New car technologies. 6. Modal shifts in transport. 7. Regulations on energy efficiency of buildings. 8. Regulation on methane emissions from landfills. 9. Regulation of N2O Chemicals. 10. Regulation of Chlorofluorcarbonates (CFC) emissions. Energy/CO2 taxation. Notice that these measures do not include specifically any changes within the basic power generation system, but are rather focused on incremental innovations that concern its functioning.

2.2 A projection for world energy patterns


2.2.1 Lessons from world energy outlooks
The prospective empirical analysis of the world energy system are nowadays fewer than they used to be during the energy supply shock period. Nevertheless, several organisations have maintained a certain activity within this domain. This is the case of the International Energy Agency (IEA), the US Department of Energy and the Energy Information Administration (DoEEIA) and the World Energy Council (WEC) The two first organisations have conducted studies whose main objective has been to make mid-term, cross-checked projections reflecting, to a large extent, a consensus on the trends within the sector. The scope of the World Energy Council is different and also more ambitious, since their last analysis (conducted jointly with the International Institute of Applied System Analysis, IIASA), aims at showing the possible development within longer timescales (2020 and 2050).

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

18

IEA-OECD - 96 1993 P opulatio GDP P rim Energy Coal Oil Nat Gas Nuclear Hydr + Ren CO2 (MtC) Oil P rice IIASA-CME- 95 1990 P opulatio
GDP (90$ MER)

"Capacity Constraints" 2000 2010 1993-2010 1,4% 3,2% 2,2% 2,0% 2,1% 2,9% 1,0% 2,5% 2,3%

EIA-DOE - 97 1995 P opulatio GDP P rim Energy Coal Oil Nat Gas Nuclear Hydr + Ren CO2 (MtC) Oil P rice P OLES 2010

"Reference" 2015 1995-2015

8,4 27% 39% 20% 7% 7% 5,9

9,7 26% 39% 21% 7% 7% 6,7 17

12,3 26% 38% 23% 6% 7% 8,6 25

9,1 26% 39% 21% 6% 8% 6,2

12,8 24% 38% 25% 5% 8% 8,8 20,4

14,0 24% 38% 26% 4% 8% 9,7 21,0

3,1% 2,2% 1,9% 2,1% 3,2% -0,1% 2,2% 2,2%

2020 7,9 46,9 15,4 24% 31% 23% 6% 16% 10,0

A1 Scenario 2050 1990-2020 10,1 101,5 24,8 15% 32% 19% 12% 22% 15,1 1,3% 2,7% 1,8% 1,7% 1,4% 2,5% 2,0% 1,5% 1,5%

WE-2030 Baseline 07/16/97 1992 2010 2030 1990-2030 5,4 27,9 8,6 25% 38% 20% 5% 13% 6,0 7,0 52,2 12,3 25% 36% 23% 5% 12% 8,6 26,2 8,7 96,1 19,1 27% 34% 24% 4% 11% 13,6 35,7 1,3% 3,3% 2,1% 2,3% 1,8% 2,7% 1,5% 1,8% 2,2%

P rim Energy Coal Oil Nat Gas Nuclear Hydr + Ren CO2 (MtC) Oil P rice

5,3 20,9 9,0 24% 34% 19% 6% 18% 6,0

P opulatio
GDP (90$ PPP)

P rim Energy Coal Oil Nat Gas Nuclear Hydr + Ren CO2 (MtC) Oil P rice

Table 2-4: Key hypotheses and results of world energy studies.

In a recent study (International Energy Outlook 1997), the US DoE Energy Information Administration compares several forecasts conducted by the International Energy Agency (IEA), the EIA and the Petroleum Industry Research Associations, as well as their own projections. The IEA study presents two main scenarios: the one called Capacity Constraints case corresponds basically to what we could depict as business-as-usual scenario: increasing prices of fossil-fuel due to demand pressure and historical extrapolation for what concerns energy efficiency

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

19

improvements. The Energy Savings case assumes an increase in energy efficiency measures, lower values of demand growth rates and essentially constant fossil-fuel prices. On the other hand, the EIA presents three scenarios of low, medium and high economic growth. Comparing different baseline projections or central scenarios is always problematic since accounting conventions are not identical, especially in what refers to harmonising traditional renewable energies. However, results of this comparison reveal a great convergence concerning the world-wide consumption of these energies, in any case until 2020: all these projections are inscribed, indeed, in a 12-13 Gtep trajectory in 2010 and 15-16 Gtep in 2020. A 19 Gtep in 2030 for the POLES projection seems to be perfectly compatible with the continuation of this trend. However, this apparent convergence of global results conceals potential incoherence, to an extent in which price estimations - once they are specified - are far from being the same. Thus, the DOE projection is supported by an almost stable price estimation of oil until 2015, whereas this price is already increasing 40% for 2010, in the IEA projection and the POLES reference scenario. In this last projection, it can be noticed that there is a strong price increase after 2010, due to the production decrease of conventional fuel and the urgent necessity of non-conventional resources. According to power generation, detailed results are equally less convergent. However, in the scope of 2010 - that is, the deadline nowadays fixed by international greenhouse effects negotiations - the world-wide energetic supply should probably have little more than 3 Gtep of coal and natural gas and between 4.5 and 5 Gtep of oil. Considering the coefficients of carbon of each type of energy, the world-wide energy emissions of CO2 would be about 8,7 GtC, against the 6 GtC in 1990. The important difference between the stabilisation aims fixed in the international negotiations and the "business-as-usual" projections that lead to an almost 45% increase of the emissions in 20 years, starting from 1990 can be noted.

2.2.2 WE-2030 exogenous hypotheses: population and GDP growth in 11 world regions
While 26 countries or regions are individualised in the POLES model, most analyses of the Baseline exogenous hypotheses and results will be performed according to a world disaggregation in eleven geographical or geopolitical regions (acronyms from Table 2.5 are used in the rest of the text or tables).

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat North America Western Europe OECD Pacific Eastern Europe Former Soviet Union Central & South America South Asia South-East Asia Continental Asia North Africa & Middle East Sub-Saharan Africa NOAM WEUR PACO EEUR FSUN CSAM SOAS SEAS COAS NAME SSAF

20

Table 2-5: 11 world regions for the baseline analysis. NB : North America doesnt include Mexico, as OECD Pacific doesnt include South Korea

2.2.2.1 Trends in demography The World Energy to 2030 (WE-2030) population growth hypotheses are derived from the UN projections, for each of the 26 countries or regions identified in the model. Due to low birth rates in industrialised countries and to the pursuit and spreading of the demographic transition in developing regions of the world, they show a continuous decline in world population growth rate, from an average + 1.8 %/yr between 1971 and 1995, to an average of + 1.2 %/yr between 1995 and 2030 and only + 1 %/yr in the last decade of the projection. In spite of the slowdown in growth rates, the world population might increase of 3 billion people between 1995 and 2030, almost in the developing regions. The balance of population between regions will thus be altered, although not dramatically. Key features of the demographic projections the share of the current OECD countries will continue to decline, from 16 % today to 12 % in 2030 the weight of Eastern Europe and the Former Soviet Union will also decline, from 5 to 4 % the total share of developing regions will increase from 76 to 83 %, while for most developing region individually, the share in world population is only slightly increasing due to strong demographic control, China (Continental Asia) is a first exception, with a decline, from 22 to 19 % Sub Saharan Africa is the second exception with, conversely, a strong increase, from 10 to 15 % ; the population of this area will increase of about + 800 M people in the period although its share is almost stable, South Asia (almost India) will also have a strong increase in volume (+ 700 M) and will remain the most populated region with almost 2 billion people in 2030.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
1992 M hab World North America Western Europe OECD Pacific Eastern Europe Former Soviet Union Central & South America South Asia South-East Asia Continental Asia North Africa & Middle East Sub-Saharan Africa WRD NOAM WEUR PACO EEUR FSUN CSAM SOAS SEAS COAS NAME SSAF 5424 % of World total 5 8 3 2 5 8 22 10 22 5 10 6150 5 7 3 2 5 9 22 10 21 5 11 7027 5 7 2 2 5 9 22 10 20 6 13 7893 4 6 2 2 4 9 22 10 20 7 14 8713 4 6 2 2 4 9 23 10 19 7 15 2000 2010 2020 2030

21

Table 2-6: World population 1992-2030

2.2.2.2 Economic projections : the GDP dynamics WE-2030 economic projection are derived from Worldscan economic projections, adjusted for the changes from Market Exchange Rate to Purchasing Power Parity GDP growth rates. While most economic forecasts present variations in MER-GDP, the economic variables used in the POLES Database are expressed in the CEPII PPP conversion system. This is done in order to account both for the informal sector, which in most developing areas constitutes to a large proportion of total economic activity and for the corresponding purchasing power of households. It is thus considered that the PPP-GDP is a better indicator for the energy consumption and energy intensity of GDP and is also more suited for international comparisons. MER-GDP and PPP-GDP projections show significantly different pictures of world economic structure and dynamics. Using PPP, the initial GDP level is higher in developing regions, while the corresponding growth rate of the economy is lower. This results both in a very different structure of world GDP and, paradoxically, in a higher aggregated growth - in spite of lower individual rates - as the share of the rapidly growing regions is more important. This phenomenon is illustrated in Table 2.7, showing the differences in structure and growth rates for the WE-2030 Baseline and for the original Worldscan economic projection.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
WE-2030 - Purchasing Power Parity 1990 World WRD G$90 PPP 27,4 % of World GDP 22 23 10 3 9 9 5 6 9 4 2 2020 1990-2020 Worldscan - Market Exchange Rate PPP-MER 1990 2020 1990-2020 1990-2020 yagr 3,1%

22

72,5

yagr G$90 MER 3,3% 21,6 % of World GDP 28 34 15 2 4 5 2 4 2 3 1

54,6

0,2%

North America Western Europe OECD Pacific Eastern Europe Former Soviet Union Central & South America South Asia South-East Asia Continental Asia North Africa & Middle East Sub-Saharan Africa

NOAM WEUR PACO EEUR FSUN CSAM SOAS SEAS COAS NAME SSAF

16 16 7 2 5 11 7 10 20 5 2

2,2% 2,0% 2,2% 2,1% 1,4% 4,1% 4,6% 4,8% 6,2% 4,0% 3,3%

21 24 11 2 4 9 5 9 9 4 2

2,2% 2,0% 2,2% 3,4% 2,4% 5,2% 6,7% 6,0% 8,7% 4,1% 4,0%

-1,3% -1,0% -1,1% -2,1% -1,2% -2,5% -0,1% -0,7%

Table 2-7: PPP and MER world economic structure and dynamics.

In both the PPP and MER projections, the resulting economic picture is one of a sustained economic growth at world level with an average growth superior to 3 %/yr, between 1995 and 2030 at world level. This is not much higher than the secular trend in world output growth of + 3 %/yr between 1900 and 1990, according to Angus Maddison. This is also not much higher than the growth experienced between 1971 and 1995 : + 3.1 %/yr (PPP). It has to be noted that this growth rate has been reached, in the past quarter of a century, in spite of a series of crises which affected successively the different regions of the world : the oil shocks for the industrialised oil importing countries, the debt crisis in the LDCs and the decay of the Centrally Planned Economies. For the future and in a decade by decade perspective, it appears that combining the hypothesis of a recovery in the former CPEs and the one of a declining but still high growth in Asia, the 20002010 period might experience the highest growth rate with about + 3.8 %/yr on average. World growth rates are then declining, to + 3.3 and + 2.9 %/yr in the two following decades. Key features of the economic projections according to the projection, OECD countries might experience a moderate growth in the 2000-2010 period (about + 2.5 %/yr), while the growth rate will still decline in the two following decades, in the range of 1 to 2 %/yr economies in transition might recover during the two first decades of the next century with growth rate around 3.5 %/yr and then experience more moderate growth, above 2 %/yr all developing regions might grow at rates higher than + 3.5 %/yr during the projection period as compared to the 1971-1995 period, growth will accelerate in Latin America, AfricaMiddle East and South Asia, while it will decelerate in South East and Continental Asia

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

23

however Continental Asia will remain the region with the highest growth potential, specially at the beginning of the projection period, while after 2010 it is overwhelmed by other regions, specially South Asia

yagr NOAM WEUR PACO EEUR FSUN CSAM SOAS SEAS COAS NAME SSAF WRD

1971-95 1995-2030 2,5% 2,1% 2,4% 2,1% 3,6% 2,0% 0,3% 2,9% -0,1% 3,3% 3,3% 3,8% 4,4% 4,8% 6,7% 4,2% 7,4% 5,1% 3,3% 4,2% 2,4% 3,7% 3,1% 3,3%

1971-80 2,8% 3,0% 4,3% 3,6% 3,1% 5,5% 3,4% 7,6% 5,6% 5,1% 3,0% 3,7%

1980-90 1990-2000 2,7% 2,0% 2,4% 1,5% 3,9% 2,2% -0,6% -0,4% 1,6% -3,3% 1,2% 3,5% 5,6% 4,3% 6,5% 5,3% 8,5% 8,1% 1,6% 3,6% 2,0% 2,5% 3,0% 2,7%

2000-10 2,5% 2,5% 2,7% 3,4% 3,9% 4,6% 4,7% 5,0% 6,3% 4,1% 3,1% 3,8%

2010-20 2,2% 2,0% 1,6% 3,3% 3,7% 4,1% 4,9% 4,2% 4,3% 4,5% 4,3% 3,3%

2020-30 1,7% 1,7% 1,2% 2,1% 2,7% 3,1% 4,7% 3,3% 3,6% 4,5% 4,3% 2,9%

Table 2-8: World economic growth (PPP).

2.2.2.3 Changes in per capita GDP profiles While combining demographic trends and GDP projections, it is possible to analyse the per capita GDP profiles and to characterise the changes in the dynamics in hierarchy of the different regions considered. In this perspective, the situations in 1970, 1995 and 2030 can be described as follows : in 1970 the North America region presents a clear advance on other industrialised areas with a yearly per capita GDP of 15 000 $ (1990$ PPP) against 10 000 $ in Europe and Pacific OECD ; an intermediate group of 4 000 to 6 000 $ per capita is lead by the Soviet Union, it also incorporates Latin America and North Africa - Middle East ; at the bottom end, with revenues between 750 and 1 400 $ lay the regions of Asia and Sub-Saharan Africa ; in 1995, the situation is already significantly altered ; while Pacific OECD is now in an intermediate position between North America and Europe, the former CPEs has slipped behind Latin America, while South East and Continental Asia have almost caught-up with the group of intermediate income countries ; only two regions lay behind, Sub-Saharan Africa and South Asia ; in 2030, the picture might still look different ; while the convergence among industrialised countries may continue, it may appear quite strong among intermediate income regions with the complete catch up of South East and Continental Asia to the group formed by Latin America and the countries in transition ; meanwhile, South Asias take-off may continue at a steady speed, it may take until 2010 before the increase in per capita income of Sub-Saharan Africa resumes.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
100

24

NOAM WEUR PACO 10 EEUR FSUN CSAM NAME SSAF 1 SOAS SEAS COAS

0,1 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Figure 2-4: : per capita GDP in the 11 world regions (1971-2030, logarithmic scale)

Key features of the per capita income profiles The catch-up in the per capita income relatively to North America ratio in spite of a higher overall growth rate in North America, the differences in population growth lead to a stabilisation of the per capita income ratio at 90 % of the North American level in OECD Pacific and 70 % in Europe from the 1995 point of departure, the ratio should improve in the intermediate income regions, from 10-25 % to 25-35 % partly because of a still high population growth, the situation will hardly improve in North Africa - Middle East (20 %) and Sub-Saharan Africa (5 %), while the situation of South Asia is improving, but from a very low initial level (from 5 to 10 %)

2.2.2.4 A critical perspective on the WE-2030 economic projections As compared to conventional wisdom economic outlooks, the baseline economic projection used in WE-2030 might appear both too high and too low : it is high in the sense that very few studies, particularly dealing with energy issues incorporate hypotheses of a growth rate superior to 3 %/yr on a reasonably long period

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

25

it is low in the sense that the supposed economic growth in OECD countries is quite weak by the end of the period (under 2 %/yr), which is even hardly conceivable today particularly in the current context of unemployment in Europe it is low because it supposes drastic reductions in output growth in South-East and Continental Asia, from current catch-up rates (7-8 %/yr) to much more modest maturity rates (3.5 %/yr) it is also low because the supposed economic recovery in the Countries In Transition allows to reach the 1990 per capita income level only after the year 2010

10%

8%

NOAM WEUR PACO EEUR FSUN CSAM NAME SSAF SOAS SEAS 71-80 80-90 90-00 00-10 10-20 20-30 COAS WRD

6%

4%

2%

0%

-2%

-4%

Figure 2-5: GDP growth rates in perspective

Finally, the key characteristic of the proposed projection is probably that although regional growth rates remain moderate when taken individually, all regions are considered to grow relatively regularly in the considered period. This results in an aggregated growth rate which is above the one of the preceding period. However it has to be reminded here that, in the past twenty five years, most regions of the world have undergone severe crises of different nature. In this perspective, the key hypothesis of the WE-2030 Baseline projection is thus that no structural crisis will affect any one of the main world region during the considered period. While a key hypothesis it might also be a disputable one.

2.2.3 An outlook on world primary energy consumption


Focusing first on the world primary energy (WPE) demand, the records show that from 1971 to 1992, the average global primary energy demand growth has been 2.4% per year, passing from 5

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

26

Billion TOE to around 8 Billion TOE in 1992. Looking at the picture on a longer time scale, it may be noticed that world primary energy consumption has passed from about 0.5 Billion TOE at the beginning of this century to todays levels. This 1600% increase took place simultaneously with the comparatively modest increase of 400% of the world population: per capita energy consumption increase accounted for the remaining 400% of WPE increase. With respect to the fuel mix, it should be remembered that today, around 85% of the global primary energy comes from fossil fuels. Within the IEA Capacity Constraints (CC) case (basically a business as usual projection), the WPE is assumed to reach around 12 Billion TOE by 2010, whereas according to the EIA International Energy Outlook 97 in the reference case (IEO 97-RC), this could reach around 12.7 Billion TOE by the same date. The corresponding expected average annual growth for the period 1990-2010 would be 2.2% and 2.0%, respectively. If this assumption obtains, current WPE demand will double in around 33 years. Under these assumptions, the fossil fuel share of the WPE could reach 90% by 2010, and natural gas would exhibit the fastest-growing rate (an average annual rate of 2.9% in the next 15 years, according to IEA CC and IEO 97-RC). Nevertheless, the largest increase would take place in the coal market: the global coal demand will expand from todays 2400 MToe to 3000 MToe by 2010. This expansion would be concentrated around developing economies: actually, the OECD coal share is expected to shrink from 45% to 30% in the period 1990-2010. Looking at WPE demand by zones, a noticeable fact is that the relative weight of the developed world is expected to decrease from 65% in 1971 up to 47% in 2010. On the contrary, the developing countries will expand their share from 26% in 1990 to 38% in 2010. GDP growth is a key variable to determine energy demand. The standard forecast assumed by the IEA to carry out the analysis whose results have been summarized above consists of a quite uniform annual GDP growth of 3% in the forthcoming decades in OECD, whereas the expected behavior of the non-OECD countries is not homogeneous: East Asia will be the fastest growing zone (6.6%), followed by South Asia (5.4%), South and Central America and Africa (3.6%). By 2010, the GDP of non-OECD countries (not including the Former Soviet Union and new independent states), encompassing 80% of the world population, is expected to reach the aggregate GDP of OECD countries, that would account for 16% of the world population by that time. These assumptions are in good agreement with the ones projected by the WEFA group, that have been taken for the IEO 97, with different aggregation patterns. Although GDP is important, changes in GDP energy intensity can also motivate noticeable fluctuations in the overall energy demand. During the past, a persistent trend of diminishing GDP energy intensity has been observed, and it is expected to continue to decrease on a global scale, but at lower rate. In OECD countries, the main trade-off will take place between a progressive tertiarization of the economy vs. increasing transport intensity, both for freight and passengers. The decline of the secondary sector weight will be particularly relevant in the economy of the former Soviet Union and the Central and Eastern Europe countries. The industrialization of developing countries will probably concern less energy-intensive processes. 2.2.3.1 World consumption by source of energy According to the WE-2030 baseline projection, world primary energy consumption could increase at an average rate of 2.2 %/yr over the next three decades. Quite important changes may

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

27

occur in the world fuel mix as oil could incur a loss in market share - from 38 to 34 % , due to substantial price increases (see below table 2.9). This would benefit mainly to natural gas - from 19 to 24 % - and also to coal. As for non fossil energies, the share of nuclear energy in world supply could decrease from 6 to 5%, while the regular increase in large hydro and the take-off of new renewables would be offset by the decline of traditional biomass : altogether, the share of the renewable sources of energy could slightly decrease from 12.7 to 11.2 % of world energy consumption.

Mtoe

Mtoe 1992 2152 3231 1670 457 477 429 181 8596

2000 2331 3700 2057 577 557 373 227 9822

2010 3026 4378 2771 628 702 315 487 12307

2020 3926 5257 3745 708 865 268 711 15480

2030 5064 6438 4626 805 1037 230 871 19070

% of World total 1992 2000 25% 38% 19% 5% 6% 5% 2% 100% 24% 38% 21% 6% 6% 4% 2% 100%

2010 25% 36% 23% 5% 6% 3% 4% 100%

2020 25% 34% 24% 5% 6% 2% 5% 100%

2030 27% 34% 24% 4% 5% 1% 5% 100%

Oil Natural Nuclear Hydro+Geoth Trad.Biomass Other P rimary

20000

18000

16000

14000 Other Renewables 12000 Trad.Biomass Hydro+ Geoth 10000 Nuclear Natural gas Oil 8000 Solids

6000

4000

0,2%
2000

0 1992 2000 2010 2020 2030

Table 2-9: Energy consumption and supply in WE-2030 Baseline Figure 2-6: Energy consumption and supply in WE-2030 Baseline

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

28

2.2.3.2 International energy prices One of the main features of the POLES model is its ability to produce endogenous changes for international energy prices. The price mechanisms incorporated in the model do take into account the balance of supply and demand for oil, natural gas and coal : in the short run, prices depend on the demand variation and on oil supply capacities in the Gulf swing producer countries ; in the longer run prices depend on the Reserve on Production ratios for oil and natural gas (see below .). Price changes are quite significant in the Baseline projection, as oil price increase to 26 90$/bl in 2010 and to 36 90$/bl in 2030. Natural gas prices, which are simulated for three main regional markets, also show significant increases after 2000. These price increases are of course due to the total demand increases, they also contribute, in the model, to considerably moderate these increases.

OIL World crude oil price World RP ratio

1973 9,8 24,5

1980 41,4 25,9

1990 20,0 40,6

2000 19,7 39,4

2010 26,9 33,3

2020 32,9 28,2

2030 36,9 22,7

NATURAL GAS Import prices ($90/boe) N. American market European market Asian market Import prices ($90/Mbtu) N. American market European market Asian market

1975 20,4 11,3 19,2

1980 30,0 21,4 36,5

1990 10,8 15,2 20,6

2000 14,5 15,9 28,6

2010 19,0 19,0 34,0

2020 24,4 25,1 36,3

2030 28,4 30,6 42,3

3,5 1,9 3,3

5,1 3,6 6,2

1,8 2,6 3,5

2,5 2,7 4,9

3,2 3,2 5,8

4,2 4,3 6,2

4,8 5,2 7,2

Table 2-10: Oil and gas prices in the WE-2030 Baseline.

2.2.3.3 Trends in energy intensities In the POLES model, trends in energy intensities are dependent on the structural evolutions of the economy and on autonomous technology improvements. But they are also strongly influenced by price-effects.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
toe / 1000 90$ (PPP) 1992 2000 North America 369 340 Western Europe 220 217 OECD Pacific 205 196 Eastern Europe 479 335 Former Soviet Union 745 470 Central & South America 188 198 South Asia 258 230 South-East Asia 250 240 Continental Asia 284 233 North Africa & Middle East 318 306 Sub-Saharan Africa 379 369 World 303 265 Annual % change 92-00 00-10 -1,0% -1,7% -0,2% -1,2% -0,5% -1,2% -4,4% -2,1% -5,6% -3,6% 0,7% -0,9% -1,4% -1,1% -0,5% -1,6% -2,5% -0,6% -0,5% -1,7% -0,3% -0,3% -1,7% -1,5%

29

2010 287 192 174 270 324 181 207 204 220 258 357 227

2020 247 173 159 236 282 169 191 187 203 255 339 206

2030 218 159 150 211 261 159 176 173 191 248 321 192

10-20 -1,5% -1,0% -0,9% -1,4% -1,4% -0,7% -0,8% -0,9% -0,8% -0,2% -0,5% -1,0%

20-30 -1,2% -0,8% -0,6% -1,1% -0,8% -0,6% -0,8% -0,8% -0,6% -0,3% -0,5% -0,7%

Table 2-11: Energy intensities.

Up to 2000 and even 2010 world energy intensity decreases significantly, partly because of strong reductions in energy demand in the transition countries ; it has to be noted however that in 2010 the energy intensity of the Former Soviet Union is still 13 % higher than that of the US. The oil price increase of more than fifty percent between 2000 and 2020 puts a further pressure on energy intensities, in industrialised countries, but also in developing countries, with energy intensity declines of commonly - 1 %/yr. Intensity gains are lower by the end of the projection, largely because of more moderate oil price increases (less than ten percent in ten years). 2.2.3.4 World consumption by region Energy demand growth will be low in OECD region, with growth-rate under 2 %/yr at the beginning of the projection period and under 1 %/yr at the end. The economic recovery in the countries in transition also induces a recovery in energy demand ; the corresponding increase in consumption is however moderate, this implies continued improvements in energy efficiency (see below). Conversely, energy demand growth-rates are between 3 and 5 %/yr in all developing regions ; exceptions are growth rates under 3 %/yr in North Africa-Middle East until 2010 and South-East Asia after 2020 ; conversely, growth rates exceed 5 %/yr in China, until 2010 (this rate has been of 4.4 %/yr between 1985 and 1995). Chinas energy consumption might exceed that of Western Europe by 2010 and that of North America by 2020. In 2030 four regions will each represent a total consumption between 1.2 and 1.7 Gtoe, i.e. the current consumption of Western Europe: the Former Soviet Union, Latin America, South Asia and South-East Asia.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Mtoe 1992 North America Western Europe OECD Pacific sub-total Eastern Europe Former Soviet Union sub-total Central & South America South Asia South-East Asia Continental Asia North Africa & Middle East Sub-Saharan Africa sub-total 474 351 486 786 372 260 659 448 684 1204 473 309 938 636 950 2095 595 405 1317 949 1307 2963 906 586 1684 1384 1677 3974 1367 842 279 1227 232 786 262 797 317 1003 349 1206 2233 1404 568 % of World total 1992 2000 26% 17% 7% 50% 3% 15% 18% 6% 4% 6% 9% 4% 3% 32% 26% 17% 7% 49% 2% 8% 11% 7% 5% 7% 13% 5% 3% 40%

30

2000 2469 1580 642

2010 2674 1787 746

2020 2852 1965 796

2030 2979 2138 847

2010 22% 15% 6% 44% 2% 7% 9% 8% 5% 8% 18% 5% 3% 47%

2020 19% 13% 5% 38% 2% 7% 9% 9% 6% 9% 20% 6% 4% 54%

2030 16% 12% 5% 32% 2% 7% 8% 9% 8% 9% 22% 7% 5% 59%

Table 2-12: Primary energy consumption, by region

During the projection period a major shift in world energy consumption will thus take place : while OECD countries still represent half of total world energy consumption, their share will be reduced to less than one third in 2030 ; conversely, developing countries now represent one third of world total, their share might increase up to 60 % in 2030.

This is shift is of course of paramount importance for many key issues, such as energy supply security, financial requirements, new technology development and diffusion, climate change policy ...

2.2.4 A check of final energy demand profiles: the energy service approach
World final energy (WFE) demand has passed from 4 Billion TOE in 1970 to something less than 6 Billion TOE in 1990, and is expected to reach around 8 Billion TOE by 2010. These figures reflect an increased penetration of electricity, at least until 2000, the progressive electrification of the world final demand will being the main reason. Gains in technological energy conversion efficiency are expected to facilitate overall energy efficiency increase from 2000 on. The structure of the WFE demand reflects a progressive electrification and gasification of the system, compatibly with a persistent, non-declining oil share. The reason for this has to be looked for in the transport sector, which absorbed 22% of WFE demand in 1971, 26% in 1992, and is expected to reach 28% in 2010. Transport oil demand increased during the period 197192 at an annual rate of 2.7%, and the expected rate for 1992-2010 is 2.5% (with more intense growth in South and East Asia). The OECD share in world oil transport demand is expected to move from 75% in 1971 to 56% in 2010.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

31

In the household sector, there is a trend of relative increase in the use of gas and electricity. From the solid fuel sector, the coal share for household consumption remains constant, whereas non-commercial biomass, will be of major importance especially in developing countries with large demographic pressure. The relative electrification of industry also contributes to limit the overall energy efficiency, although this process exhibits very different regional patterns, according to different energy intensities of the GDP, and different shares of industrial sector on GDP. The world electricity demand (WED) is expected to progress with a annual growth rate of 2.3% during the next 20 years, although the average annual growth rate will reach even 6% in developing countries. This means that, roughly speaking, global consumption will double in 2020 with respect to 1990. To provide an idea of the vertiginous dynamics of such a development, these growth rates imply that a new 250 MW power plant has to be built in the world each 3 days during this period (without considering that the existing power capacity has to be replaced). These figures put into evidence the crucial role that technology can play in the power sector in the forthcoming decades. Power generation technologies are becoming a huge market in which the technological expertise of developed countries will have to be massively transferred to emerging economies whose demand for electricity is growing a two-digit annual rates. Within the IEA CC scenario, past trends in the world electricity mix are as follows: the coal share remains constant, the hydroelectric generation share slowly decreases, whereas the oil share decreases more abruptly, as well as the nuclear share, whereas the gas fraction expands from 14% to 22% in the period 1970-2010. In OECD countries, a severe contraction of oilbased electricity production is expected. The dramatic expansion of coal-based electricity production in developing countries is reflected by coal share gains of 10 points: from 37 % in 1971 to 46% in 2010, although the use of gas rapidly expands also from 4% in 1971 to 17% in 2010, the hydroelectric generation share decreases from 34% in 1971 to 24% in 2010 in those countries. The IEO 97 forecasts are generally in agreement with these trends, although it predicts a higher degree of gasification of the electric sector. The transport sector accounted for around 22% of the final world energy demand by 1970. This share increased up to 26% by 1992 and tends to keep on growing. Nowadays, the transport sector consumes about half of the worlds oil consumption. As it is well-known, the most striking note to underline about the world transport sector concerns its high dependency on oil: 97% of the energy consumed by this sector is directly dependent on petroleum. Due to this stiffness, the rapid growth in transport fuel consumption has implications for energy security of supply, local and global environment and balance of payments for most countries. From 1992 to 2010, worldwide annual transportation oil demand is projected to increase by 800 Mtoe (namely 16 million barrels per day), passing from around 1460 Mtoe/year to around 2260 Mtoe/year. For the OECD countries, the annual oil consumption as final energy is expected to grow (according to the IEA) from 1600 to 1950 Mtoe/year in the period from 1992 to 2010. Out of them, the transport sector absorbed 940 in 1992 and is expected to account for 1280 by 2010.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

32

During the last 25 years, the worldwide energy use in the transportation sector increased at an average annual growth rate of 2.7%. Although its growth was slower than the overall economy from 1974 to 1986, there has been a smooth but noticeable change in the trend, and now energy use for transportation is expanding at the same rate as GDP, or slightly faster. It goes without saying that changes in transportation efficiency may modify these trends. However, these changes would not be substantial if only incremental improvements on the traditional road-dominated, single-user explosion engine car would happen. Indeed, although technology is likely to continue to improve significantly, consumer preferences for larger and more powerful cars and trucks could completely offset the efficiency improvements. From 1960 to 1991, the number of passenger cars and commercial vehicles almost quintupled even though global population less than doubled. The global car stock is expected to double in the forthcoming 15 years. Currently, there are great differences in car ownership ratios between countries, although these differences are likely to be reduced in the future. The rising rates of industrialization and urbanization will require more transport and increased investment in infrastructure for the distribution of goods. The transportation market can be segmented by purpose (motion of goods and people), by mode (road, rail, air, sea) and by distance (local, national, international). The split between the major modes of transport will be increasingly influenced by developments affecting their relative quality and performance. In terms of energy consumption, the road subsector is by far the most important, about three quarters of total transport energy demand, its predominance being mainly located in the passenger transport rather than in the freight transport. Bearing in mind these remarks, it is worth to have a look to the POLES results on final energy consumption. While energy demand is simulated in the POLES model by using a sectoral approach, consistency checks can be performed while using the Energy Service approach elaborated by IEA Secretariat. This approach consists in analysing the relationship between total GDP and the key Services performed by energy, to which three main categories of fuel can be associated : fossils for stationary fuel use (mostly heat for process and building), liquids for transport and electricity. This approach overcomes some accounting and statistical difficulties which are inherent to the more conventional sectoral approach. When used at a geographically aggregated level, particularly at world level, it also allows to overcome problems associated to the delocalisation of activities, which have profoundly influenced the energy-GDP relationship in the different regions during the past quarter of a century. At world level the energy-GDP relationship thus appears much more straightforward than in a country by country perspective. The statement drawn by IEAs Secretariat from past evolutions is the following :

for stationary fuel uses, there has clearly been changes in the anterior trend, as energy consumption decreased in volume the first oil shock, but still more after the second (particularly in IEA countries, where the stationary fuel use then more or less stabilises), and also after the fall-down of the CPEs ;

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

33

transport fuels consumption shows a much more direct relationship with GDP, as it follows a linear pattern with a slight inflexion at the end of the seventies, when more efficient cars entered the market, particularly in the US ; electricity-GDP relationship is in fact very near to a straight line at world level, with an elasticity very near or slightly superior to unity, in spite of the crises and profound changes in the world economy and energy system since the early seventies.

This analytical framework at least provides a series of benchmarks for the ex-post analysis of sectoral energy demand projections. As the relationships between GDP and Energy Services look robust, it is possible to compare the aggregated results of bottom-up models with the past evolutions (stationary fuel use - SFU ; transport fuels - TRA ; electricity - ELT)
7000

Data (1971-94)
6000

Projection (1992-2030)

5000

4000

SFU TRA ELT SFU

3000

2000

1000

0 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000

Figure 2-7: Three energy sevices as a function of GDP, past and future.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

34

GDPPOP SFUPOP GDPPOP SFUPOP GDPPOP SFUPOP GDPPOP SFUPOP GDPPOP SFUPOP GDPPOP SFUPOP GDPPOP SFUPOP GDPPOP SFUPOP GDPPOP SFUPOP GDPPOP SFUPOP GDPPOP SFUPOP GDPPOP SFUPOP

NOAM NOAM WEUR WEUR PACO PACO EEUR EEUR FSUN FSUN CSAM CSAM SOAS SOAS SEAS SEAS COAS COAS NAME NAME SSAF SSAF WRD WRD

1992 21,4 2,644 14,5 1,309 18,3 1,318 4,8 1,142 5,6 2,151 5,6 0,539 1,2 0,169 3,5 0,437 2,4 0,420 4,5 0,483 1,3 0,276 5,1 3731

2000 23,9 2,814 15,9 1,385 20,7 1,387 5,5 1,032 5,4 1,398 6,3 0,589 1,4 0,196 4,6 0,546 4,0 0,574 4,7 0,511 1,2 0,275 5,8 4282

2010 28,7 2,700 19,7 1,455 26,1 1,454 7,3 1,043 7,4 1,270 8,6 0,677 2,0 0,223 6,6 0,634 6,7 0,793 5,4 0,518 1,3 0,263 7,4 5143

2020 33,7 2,567 23,5 1,450 30,3 1,458 9,8 1,123 10,1 1,414 11,5 0,747 2,8 0,275 8,9 0,707 9,5 0,956 6,8 0,546 1,6 0,276 9,2 6088

2030 38,5 2,453 27,3 1,416 34,1 1,431 11,7 1,116 12,5 1,516 14,3 0,774 4,0 0,335 11,4 0,759 12,6 1,104 8,6 0,594 1,9 0,295 11,0 6996

3,000

2,500 NOAM WEUR 2,000 PACO EEUR FSUN CSAM 1,500 SOAS SEAS COAS 1,000 NAME SSAF

0,500

0,000 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0

Figure 2-8: Energy Services per capita / GDP per cap, Stationary Fuel Use.
1992 21,4 1,990 14,5 0,748 18,3 0,792 4,8 0,236 5,6 0,526 5,6 0,278 1,2 0,031 3,5 0,177 2,4 0,043 4,5 0,341 1,3 0,057 5,1 1621,5 2000 23,9 2,064 15,9 0,793 20,7 0,850 5,5 0,231 5,4 0,399 6,3 0,312 1,4 0,035 4,6 0,214 4,0 0,100 4,7 0,344 1,2 0,053 5,8 1901,3 2010 28,7 2,011 19,7 0,868 26,1 0,933 7,3 0,267 7,4 0,505 8,6 0,413 2,0 0,043 6,6 0,273 6,7 0,230 5,4 0,344 1,3 0,050 7,4 2443,7 2020 33,7 1,966 23,5 0,937 30,3 0,993 9,8 0,311 10,1 0,654 11,5 0,537 2,8 0,057 8,9 0,340 9,5 0,350 6,8 0,383 1,6 0,056 9,2 3096,8 2030 38,5 1,937 27,3 1,004 34,1 1,053 11,7 0,340 12,5 0,783 14,3 0,654 4,0 0,078 11,4 0,416 12,6 0,520 8,6 0,455 1,9 0,066 11,0 3923,3
2,500

GDPPOP TRAPOP GDPPOP TRAPOP GDPPOP TRAPOP GDPPOP TRAPOP GDPPOP TRAPOP GDPPOP TRAPOP GDPPOP TRAPOP GDPPOP TRAPOP GDPPOP TRAPOP GDPPOP TRAPOP GDPPOP TRAPOP GDPPOP TRAPOP

NOAM NOAM WEUR WEUR PACO PACO EEUR EEUR FSUN FSUN CSAM CSAM SOAS SOAS SEAS SEAS COAS COAS NAME NAME SSAF SSAF WRD WRD

2,000 NOAM WEUR PACO 1,500 EEUR FSUN CSAM SOAS SEAS 1,000 COAS NAME SSAF 0,500

0,000 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0

Figure 2-9: Energy Services per capita / GDP per cap, Transport

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

35

GDPPOP ELTPOP GDPPOP ELTPOP GDPPOP ELTPOP GDPPOP ELTPOP GDPPOP ELTPOP GDPPOP ELTPOP GDPPOP ELTPOP GDPPOP ELTPOP GDPPOP ELTPOP GDPPOP ELTPOP GDPPOP ELTPOP GDPPOP ELTPOP

NOAM NOAM WEUR WEUR PACO PACO EEUR EEUR FSUN FSUN CSAM CSAM SOAS SOAS SEAS SEAS COAS COAS NAME NAME SSAF SSAF WRD WRD

1992 21,4 0,961 14,5 0,401 18,3 0,533 4,8 0,222 5,6 0,359 5,6 0,100 1,2 0,020 3,5 0,066 2,4 0,045 4,5 0,097 1,3 0,031 5,1 0,158

2000 23,9 1,053 15,9 0,428 20,7 0,596 5,5 0,208 5,4 0,295 6,3 0,120 1,4 0,028 4,6 0,094 4,0 0,074 4,7 0,112 1,2 0,031 5,8 0,169

2010 28,7 1,225 19,7 0,529 26,1 0,735 7,3 0,251 7,4 0,335 8,6 0,181 2,0 0,041 6,6 0,146 6,7 0,129 5,4 0,154 1,3 0,035 7,4 0,209

2020 33,7 1,386 23,5 0,625 30,3 0,835 9,8 0,322 10,1 0,422 11,5 0,263 2,8 0,065 8,9 0,209 9,5 0,180 6,8 0,221 1,6 0,048 9,2 0,255

2030 38,5 1,506 27,3 0,721 34,1 0,926 11,7 0,366 12,5 0,494 14,3 0,343 4,0 0,100 11,4 0,278 12,6 0,241 8,6 0,312 1,9 0,068 11,0 0,305

1,600

1,400

1,200

NOAM WEUR PACO

1,000

EEUR FSUN CSAM

0,800

SOAS SEAS COAS NAME SSAF

0,600

0,400

0,200

0,000 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0

Figure 2-10: Energy Services per capita / GDP per cap, Electricity

To summarize, the relevant facts within the power sector the technology will be faced to are the progressive gasification of power generation, the coal-expansion in developing countries and the diminishing of hydroelectric resources market share. Growing final energy uses are electricity (increasing at a particularly high growth rate in developing countries) and transport (expanding faster than GDP almost everywhere, both for passenger and freight,)

2.3 Changes in the EU electricity markets: the moving towards liberalization


The European power market liberalisation, as a prerequisite for the construction of the Internal Energy Market is an essential issue to be analyzed due to mutual implications with the current study of the dynamics of power generation technologies and the related European energy technology policy. Several questions may arise when dealing with these issues. In particular, it should be important to determine to which extent will the market be deregulated, in order to guarantee that competition does induce a fall in energy and electricity prices and increase the global economic surplus. Exploring the conditions that are necessary for the liberalisation to lead to a sustainable energy scheme (which may include environmental-friendly new power technologies) is also a necessary analysis to be conducted. Along an institutional line of thought, the new responsibilities and the acting margins of the market regulator and the national governments is still unclear. The decentralisation process, which is supposed to come from the new competitive conditions, could provide some niche markets for renewables in order to enter the electricity grid on a competitive basis. Establishing the appropriate basis for this to happen is one of the main responsibilities of the future regulator at the EU level.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

36

There is a clear distinction between issues related to liberalisation from those concerning privatisation . Essentially of different nature, they appear to be mutual prerequisite along the construction of the internal energy market. Indeed, as happened in the UK, the overall effects of the liberalisation of the market can not be assessed until the utilities are privatised and the market re-regulated accordingly. Passing from a public ownership to a private one does constitute only the first step of the liberalisation process, that could, in some cases, be skipped if the boundary conditions suggest so. Indeed, the question of ownership is only a minor (although important) part in the overall electric power restructuring: the key questions concern the actual market mechanisms, i.e. who are vendors and buyers, what is traded, what are the rules for wholesale and bilateral contracts, and how the transmission channels are priced and managed. While looking at the liberalisation of the power generation industries in Europe and the potential impact on the distribution of the market shares corresponding to the relative technologies, several factors have to be emphasised. The issue concerning the different new industry structures is crucial, that is the degree to which the market may be liberalised, from the generation activities to the distribution ones. Second, the issue of the trading mechanisms and price formation is determined to a large extent by the type of industrial organization (and viceversa). Third, the new role of the regulator along this liberalisation process must be assessed. Finally, the potential effects of this process on the technological mix for power generation should be analysed.

2.3.1 Possible industry structures


Natural monopolies are mainly due to the presence of economies of scale along the entire range of the cost curve. In such a circumstance, it is optimal to allow the production of a good to be met by only one firm while it could, on the other hand, exclude from the marketplace some alternative production technologies. The arguments in favour of the liberalisation and a European competitive energy market are then to be found in the dramatic increase of the demand curve that each national utility is faced to, as a result of the aggregation of the single national demands induced by the creation of the single electric power market. As a result of this, national companies that used to operate under a monopolistic scheme as the cheapest solution can be considered as price-taking companies in the unified market, since the European demand size clearly overtakes the supply capacity of any producer. The growth of independent power generators in some of the markets that have been already liberalized, shows that the disappearance of economies of scale potentials due to the demand increase as well as the diffusion of new technologies allowing for no scale economies loss in decentralised production, no longer justify the view of this activity as a natural monopoly.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

37

ECU/Kwh EU Total Power Demand

Domestic Power Demand National Monopoly Cost Curve

Kwh

Figure 2-11: Electric power demand.

Electric power may be considered as a product from the generators optic, but its transmission through the network is a service provided by grid managers. There are several new models of market organisation in which these activities are separated and propose alternative organisations to the current one. Four generic potential future market structures are distinguished according to how much competition is introduced into the marketplace. The first structure is the current one in most EU countries, that is a legally established monopoly within a fully vertical-integrated industry: regional monopolies operate providing the power supply service to all customers. There is no accounting separation between generation, transmission and retail distribution. The second structure foresees competition in generation. A single purchasing company has the monopoly on transmission networks, and acts as a monopolistic seller to final consumers. However, this firm buys under a monopsonistic scheme from a number of different generators according to an appropriate bidding scheme to encourage competition. The access to the transmission lines is not given to independent power producers. The third possible structure supposes competition in generation and in wholesale supply. Under this scheme, distribution companies buy electricity directly from the generators and supply it to final consumers over a transmission network. Some retail sellers can also buy directly to power producers. Open access to the transmission grid is allowed, although local retail companies still retain the monopoly over final consumers: there is competition in generation and in distribution. The fourth potential structure supposes full retail competition and direct access to the grid. Under this scheme, there is full competition in power generation, distribution and retail sale. The customers can choose their suppliers which have open access to the wires.

The possible industrial organization schemes are summarized in the following figure (Hunt and Shuttleworth (1996)).

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

38

Generator

Generator Generator

Generator

Generator

Generator

Generator

Purchasing Company / Wholesaler

Purchasing Company / Wholesaler

Purchasing Company / Wholesaler

Purchasing Company / Wholesaler

Purchasing Company / Wholesaler

Distributor / Retailer

Distributor / Retailer

Distributor / Retailer

Distributor / Retailer

Distributor / Retailer

Distributor / Retailer

Final Consumer Final Consumer

Final Consumer Final Consumer Final Consumer

Final Consumer

Model 1

Model 2

Model 3

Model 4

Figure 2-12: Possible industrial organization schemes.

When considering successively these models, the choice is moving each time closer to the final consumer. For them to work properly, the structure of the contractual arrangements amongst the market actors has to be of different nature. It must be emphasised that the issue of the economies of scale is fundamental, since the persistence of economies of scale in generation would lead to maintain a monopoly market structure. Moreover, the benefits of standardisation and of centralised programs may constitute scale economies of sufficient significance to outweigh the benefits of competition. It should be noticed also that the structure of the current national electric markets is highly contrasted and it may influence extensively on the negotiation of the power generation industry structure. Since the generation business may no longer be a natural monopoly, attention is highly focused on the transmission business. These activities remain a natural monopoly and are of first-order importance since the system flexibility as well as the degree of competition strength will depend on the grid access tariffs.

2.3.2 Contracts and prices


When looking to the possible future structure of electricity markets, two main contract types may emerge for electricity business: the first one, closer to the former situation, is based on bilateral contracts between generators and consumers. These contracts are scheduled on a longterm basis and will include interruptibility, risk sharing and operating penalties. Needless to say, this is a system where the installed capacities of the generating companies have a fundamental strategic role. The second approach consists of the creation of a true spot market for electricity, where the price is formed according to the instantaneous market conditions on a, say, 15 minutes basis.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

39

These schemes actually just reflect the dual nature of the electricity business: from one side, the capital-intensiveness of the industry is willing to search for long-term stability. On the other hand, the physical characteristics of the commodity delivered urges for a short-term market mechanism able to make demand and supply match instantaneously. The fact that all the product must flow through the same delivery/accounting/balancing system makes electricity basically different from most other commodities. The situation that is likely to happen will indeed share both types of approaches: an efficiency market will have contract and spot trading. An independent company, referred to either as pool company (if it operates under a spot market basis) or as independent system operator (ISO) may take in charge the management of the grid and the overall system. The functions of the ISO, participated by the involved market actors, may include the maintenance of the instantaneous system-wide energy balance, the provision of ancillary services, and, above all, the management of the grid congestion. Note that, in the more general case, the spot price coexists with a number of different prices agreed for the bilateral contracts. Under the pool approach, the pool receives bids from the generating companies, and the spot price formation process takes place when comparing these bids with the hourly-measured load curves. The bilateral contracts scheduled need to be communicated to the ISO, which ultimately may decide on the feasibility of the arrangements on a day-to-day basis: the transmission rights delivered by the ISO need to take into account all other transactions scheduled for the same time. The main role of the ISO under a multi-bilateral contracts approach is to optimize dispatching flows. The single-buyer model (described in the previous paragraph as model 2) requires long-term contracts between the buyer and the competing independent power producers, therefore allowing for capital insurance for the duration of the contract. The risk of cheaper new entrants is minimized and conveyed, via higher prices, towards the customers, who, on the other hand, have to face a relatively stable supply curve. On the contrary, models 3 and 4 are supposed to operate more under a spot-price scheme. The market is more competitive, since risk is mainly assumed by the agents that take the corresponding decisions: in a word, the technology risk is fully assumed by the generators, who autonomously decide upon their own generating park. In this case, the possibility of guidance from the regulator according to an energy technology policy diminishes. Under these circumstances, peak energy prices may be quite high, because it is likely that the availability of reserve capacity will be lower. As a consequence, there will be objective incentives for a flattening of the daily load curve. However, the picture is not complete. To fulfill the demand increase between baseload and peakload, utilities may buy electricity from other power sources, or may use the next available power plant. Under a more competitive scenario, the reserve installed capacity tends inexorably to decrease. Many old power plants are considered stranded costs, because they will be put out of service only with partial investment recovery. During severe peaks, utilities are likely to ask some large consumers to interrupt the consumption (or at least to lower the voltage to reduce power), or to purchase high valued electricity from the neighbouring generators, trying to export the risk (and the cost to operate additional high-cost generation capacity) of brownout or blackout. Nevertheless, under a competitive reserve requirement system, i.e. when the

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

40

regulatory authority specifically asks for some installed reserve to be operative, capacity may have a separate market value.

2.3.3 A changing role for the regulator


Even in a competitive energy market, government policies and regulation stay of first-order importance for reaching the desired reasonable degree of competition and prevent distorted competition. Since the power industry transition is starting in many countries from a monopoly position of the unique power generation utility, much will have to be done to this respect. Besides this, the European governments have committed themselves to prevent environment degradation and, particularly, to reduce CO2 emissions. The measures permitting to achieve these targets (CO2/energy tax, the endogeneisation of the externalities of the conventional technologies in the costs calculation of the electricity produced by kWh, the diffusion of renewables, specific R&D efforts) are expected to be (and remain) mainly policy-driven and have immediate effects onto the choices made within the power sector. This constitutes therefore a room for public power intervention in the future energy competitive market that has to be carefully assessed by the regulatory authority. Based on the past experience of UK and Norway, the functions of the regulator have been reinforced as well as adjusted. Indeed, while the old functions of controlling the natural monopoly in terms of investments, prices and consumers protection, must be redefined, some new functions emerged related to the competition control. While, in principle, the long-term planning and coordination as well as the public service obligation are not any more under regulator responsibilities, the competitive rules stated should give anyway incentives for longterm view and environmental constraints respect. In addition to this role of correcting externalities effects on prices and, therefore, formation of correct price signals, the regulator may have to integrate also strategic, long run views in order to shape the capacity planning which will be decided by producers on the basis of mainly the short run total production costs: indeed, the achievement of a environmentally sustainable and competitive power generation industry may integrate these long term issues related to the depletion of the European and world-wide reserves (oil, coal and gas), to the CO2 targets and to the supply security. For what concerns green electricity, the new power technologies, and especially the renewables, need to gain the economic and technical confidence within the producers and must overcome the current price-distorted competition taking place with the conventional energy technologies. The external costs internalisation appears as a fundamental way to achieve this target. This is why an appropriate assessment of the effects of the competitive energy market on the power generation technologies dynamics appears in fine essential in order to give quantitative estimations of the proposed policy options. The experience in the UK and Norway shows that the patterns of ownership within the industry after a massive restructuring are far from being definitive. This simply reflects the fact that the incentives to form vertically-aggregated power monopolies have not completely disappeared. These strategic movements could prevent market-wide liberalisation as well as the necessary

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

41

technology renewal. Amongst the regulators new tasks, a permanent monitoring of the market status and the capital movements amongst the players will be of crucial importance, in order to avoid the formation of trusts that could have a price-determining power.

2.3.4 The new technology mix


It is widely acknowledged that a deregulated electricity market (at least in generation) will lead the investors to choose lower capital cost technologies, which allow for more flexibility, lower construction time and therefore more efficiency. The natural gas based power technologies are then the best-placed candidate. However, possible uncertainties in gas prices may limit somehow the foreseen huge diffusion of the natural gas for power generation. The technological evolution within the power market must be analysed with particular care in order to explain the current tendency towards competition and decentralisation. It has been already noted above that the demand curve shift gives an opportunity to introduce competition into the market. It should be noticed that the reasons for the establishment of competitive markets is not only to be found in the assumption of a depletion of the economies of scale in generation activities because of an increase of the demand. What also happens is that new technologies, like the latest gas turbines, provide the opportunity to decentralise the power production without any significant losses compared to the centralised system and to invest in less capital-intensive technologies. Therefore, the potential situation of a small-scale power production scheme gives the opportunity to introduce more competition. Nevertheless, the economies of scale associated with traditional large baseload power generation technologies are not exhausted yet, and, considered separately, will continue to operate in the decreasing branch of the cost curve. An additional important issue is the future trends and direction of R&D expenditures which will be induced by the liberalisation of the market. According to recent studies on the power generation sector privatisation in UK in 1991 (J.A. Walker (1996)), it appears that the R&D trends following the liberalisation shows a general increase of the customer-oriented expenditures. Indeed, R&D expenditures concerning the generation and the protection of the environment are decreasing to the benefit of the distribution, utilisation and commercial ones. Short-term planning of R&D may reveal drawbacks since it may leave apart long-term issues like global warming. The resulting technological mix of the power market may also be extensively influenced by the contracts and joint-ventures currently set up by the old utilities with other ones in Europe and in the U.S., in order to prepare and prevent the competitive pressure which will arise in the forthcoming years. The re-monopolization of the industry could preclude the introduction of superior new technologies competing with the conventional ones currently used by the utilities.

2.3.5 Managing the grid


Industry liberalisation, introducing competition and efficiency from one side, has some other undesired effects that should be internalized. The power distribution system will probably be

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

42

much harder to control and manage than it is under the classical, vertically-integrated utility concept. In a competitive energy market, market clearing and reliability would ultimately (and only) be guaranteed by the flexible and rational response from customers to price signals, without the need for administratively determined installed reserve. How reliable may be the rational behaviour of the demand side is therefore an extremely important issue that needs to be addressed. The technologies that may help in the ensuring grid stability are based in computer controlled communications, and are about to be ready. Market forces may ignore them if they are not committed to do it. It seems that the evolution of the grid should not be left to the market forces push without having established clearly who is responsible for the grid reliability (or, to put it in other words, who has the property right for safe use of the grid) and therefore having created the conditions and the incentives for these new technologies to fully develop. The grid ownership and the transmission regulation are likely to become the key factors that could lead to a position in which renewable energy technologies penetrate the market. Specifically, if marginal price rule for transmission services is applied, the less flexible generation technologies may be penalised. This would play not only against large, centralised nuclear or coal power stations, but also possibly against renewables, although usually more divisible. However, the importance of total network costs prevent to apply this rule, which may be adjusted in order to give price-premium to green electricity producing technologies. The overall aim of the regulator should be therefore to achieve the short-term optimality in prices as well as a long-term sustainable energy scheme.

2.4 Future energy technology markets and EU competitiveness


It has been underlined that no massive expansions in the electricity demand nor in primary energy consumption have to be expected in Europe in the forthcoming decades. If carbon emissions have to be reduced, this reduction should take place by improving the energy conversion and use that is already being demanded rather than managing additional increments. Energy technologies could be oriented along the gas line, including not only advanced improvements in traditional equipment (gas turbines, combined cycles), but also innovative exploitation schemes (fuel cells, etc.), as well as around renewables (wind, solar, biomass..), and energy efficiency and energy saving measures. The market for fossil fuel technologies in many parts of the developing world is expanding at a very rapid pace, but priorities are somehow different. Countries with large fossil fuel resources and with rapidly growing electricity demand are likely to decidedly go for fossil-fuel-based electricity in the next decades. The typical cases of such a situation are China and India. These countries, possessing huge coal reserves, are endeavouring a massive construction of coal-based power plants to fulfill the electricity demand accompanying a very rapid economic development. Only in China, more than 200 GW of new coal-fired capacity is projected up to 2010. This

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

43

would imply the installation of 10-20 new 1000 MW power plants per year. The estimated costs of this capacity expansion have been estimated around US$ 200 billion. The electrification pattern is, therefore, moving towards a reduction of the capital/variable cost ratio in the developed world (with the exception of renewables), whereas this ratio is likely to remain constant or even grow for those developing countries having cheap fossil fuels. Having passed already through this stage of development of the electric industry, these trends open a very good opportunity for European capital equipment suppliers, which have exhausted the expansion possibilities of their domestic market. The European energy technologies can offer to the developing countries the additional advantage of having been designed already including many environment-friendly issues: the reliability is high, the conversion efficiency is higher than the average performance, acid emissions are lower. Therefore, possible future bindings concerning environmental restrictions could be easy to fulfill by these countries if they select the advanced technologies offered by the European industry. Two main drawbacks may weaken the EU position on this issue: first, the competition of local manufacturers, and second, the competition of other advanced countries. For what concerns the former, the difference of the capital costs may be very large: Chinese domestic coal-firing technology could cost even 50% less than technology imported from the industrialized countries, and, in order to limit the balance of payments deficit, Chinese authorities may be willing to limit the share of coal-based power generation equipment imports. In addition, less advanced technology would require less skilled staff and lower operation and maintenance costs. The possibility of losing the market for advanced coal technologies because of the US competence should not be disregarded, even considering the leading role of EU manufacturers in such technologies. The main reason is that coal has a brighter future as a power-oriented fuel in the US than in the EU (at least in the short term). This creates a dynamic domestic market in the US that is missing in the EU, motivated not only by the higher environmental consciousness of the EU public opinion, but also because of the cheaper domestic coal price in the US. In order to overcome these difficulties, efforts should be made by the EU manufacturers to maintain an adequate degree of competitiveness. To achieve this, imaginative joint implementation schemes should be set up in order to produce incentives for the developing economies to adopt the advanced technologies. The production of the capital equipment could be transferred to the concerned countries: benefits for the European companies should also arise because of the cheaper labour costs. An adequate approach to technology transfer, via the formation of risk-sharing joint enterprises is therefore mandatory to preserve the future of the European fossil-fuel power equipment industry. For what concerns new technologies, and more precisely, renewables, the European relative position changes depending what type of technological branch is considered. During the late 80s and early 90s, Europe has gained advantage with respect to the USA within the wind power generation field, not only in installed capacity terms, but also regarding equipment manufacturing capacity. Off-shore wind plants have started to be considered in some parts of the EU as an alternative to provide power to remote coastal areas (mainly in Germany, Denmark, UK and the Netherlands). On the contrary, the leading solar-based initiatives have been and remain out of Europe, even if remarkable efforts have been made by governments and industrialists to shift this situation. Photovoltaic power has not yet reached the operativity level of wind turbines, in terms of equipment costs, and the most salient solar thermal initiatives and

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

44

demonstration plants are outside the EU (USA, Israel, Australia). The importance of creating, via legal instruments or other type of public intervention, a domestic market large enough to produce incentives for firms to innovate and compete for the largest share is, for new technologies, even more important than for conventional power generation schemes. Indeed, at the very beginning of a technological outburst, the possible technology paths are still unclear, and the earnings of early adopters motivated by setting references, procedures and standards, as well as by generating skills and exportable know-how may be huge.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

45

Chapter 3: Carbon Removal, Fuel Cycle Shift and Efficiency Measures: a Sectoral View
by L. Schrattenholzer and N. Akutsu, IIASA

The Intergovernmental Panel on Climate Change (IPCCa 1996) distinguishes between technological options and policy measures. The dividing line between the two is fuzzy because technological options stand behind most policy measures. (The only other major source of emission reductions is consumer behavior.) In this report, we focus on technological measures, but we discuss policies and consumer behavior where we think it influences our analysis in an important way. There is a close interplay between technological possibilities, policies, and consumer behavior in situations in which recipients of benefits are different from those who carry the costs. A prominent example of this is the construction of a residential facility with rental units. Here, the costs of effective insulation are borne by the owner, who has an incentive to keep construction costs low. The benefits in the form of reduced expenditures for room heating and cooling accrue to the tenants. Whenever market rates for rents do not properly reflect efficient insulation costs, the incentive for reaching an overall economic optimum by high levels of insulation is low. The policy response to this and similar problems is standard setting. In the U.S., it is estimated that the National Appliance and Energy Conservation Act (NAECA) which establishes residential appliance standards during the period 19952015 will yield an overall net benefit of US$60 billion (IPCC 1996b). Another important distinction can be made between measures that are taken solely in response to the threat of global climate change and those that represent a simple continuation of historical trends in technological progress. The latter is often referred to as dynamics-as-usual (DAU). Distinguishing between these two kinds of measures is conceptually important but beyond the scope of this chapter. To illustrate the difference between the historical trend of carbon intensity and conventional wisdom, we show, in Figure 3-1 the average global carbon intensity since 1850 and ranges CO2 projections under different scenarios.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

46

Figure 3-1: Decarbonization of global primary energy, historical development and ranges of contemporary scenarios. Source: WEC-IIASA 1995.

According to the figure, a break in the historical trend has already occurred. The question is, how temporary is this? The answer is intimately connected to the choice of a reference scenario. Such a choice must be made to assess the costs and benefits of new technological options and is therefore a key to designing successful R&D strategies.

3.1 Carbon Removal and Sequestration


Since combustion of fossil fuels always emits CO2, any measure aiming at a substantial reduction of carbon emissions from fossil fuel use must include the decarbonization of such fuels or of the flue gas. The removal of carbon in the course of technical processes is usually energy-intensive but leads to high rates of carbon emissions reduction. Alternatively, the sequestration of carbon from the atmosphere by biomass growing is independent of energyrelated carbon emissions because it directly reduces atmospheric concentrations of carbon dioxide. The eventual disposal of carbon removed can be thought of as a two-step process. The first step is the separation and recovery of CO2; the second step is CO2 storage. We shall look at the technical descriptions of these two steps separately and then look at total mitigation costs.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

47

3.1.1 Separation and Recovery Processes


Several CO2 separation and recovery processes are considered for the energy conversion sector. Most of them have already been applied in industrial processes of CO2. Figure 3-2 summarizes these options. Absorption process Chemical absorption Physical absorption Pressure swing adsorption Temperature swing adsorption Pressure and teperature swing adsorption High molecular membrane Liquid membrane Membrane+absorbent

Adsorption process CO2 separation/ recovery Membrane separation process Cryogenic separation process Direct recovery process

Combustion in O2/CO2 mixture

Figure 3-2: The main processes of CO2 separation and recovery.

Chemical Absorption Process Absorption of CO2 is used in chemical plants for the commercial production of CO2. Current demand for CO2 is small in comparison with total emissions in the global power sector. As a countermeasure against global warming, chemical absorption would have to be introduced at a much larger scale. Generally, it is thought that a regenerable amine scrubber is the best candidate for CO2 removal schemes. Many absorbents have been proposed for this process, but the mono-ethanol-amine (MEA) process is the most widely used, owing to its high absorption capacity. Recently, researchers have reported the development of new, high performance absorbents. Mimura et al. (1994) developed sterically hindered amines (SHAs) and tested them in a pilot plant. They found that the power reduction due to CO2 absorption is about 8 percent when this process is used to reduce CO2 emissions from 270 to 25 tons per hour at a power of 600 MW. In contrast, conventional absorbents reduce the output by 28 percent. Other absorption processes in operation or in the planning stage include Statoils Sleipner project (IEA, 1996) in which CO2 is separated from natural gas. Here the main purpose is

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

48

purification. In addition, there are a few research plants for CO2 separation by the same process in Japan. Romania has also been conducting pilot plant tests and plans the construction of a demonstration plant. Physical Absorption Process Physical absorption processes are studied mainly in Europe and in the U.S.A. (Perry and Green 1983 and DOE 1993). The process uses either organic (e.g., dimethylether sulfolane) or inorganic (e.g., water) absorbents. Absorbents are regenerated by reducing pressure and heating absorbents in the regenerator. Research on this process is still theoretical and on a laboratory scale. This method is not expected to be superior to the chemical absorption process for todays atmospheric combustion processes. However, for pressurized combustion processes, this method has an advantage because it involves high-pressure gases. Also, physical absorption processes may turn out to be cheaper than the chemical absorption process in coal gasification plants. Direct Carbon Recovery by Combustion in an O2-CO2 Mixture. In the Netherlands, one focus of research is CO2 removal from ICGCC (Integrated Coal Gasification Combined Cycle) power plants. Using a technology that is still to be developed, gaseous fuel can be combusted in a mixture of oxygen and recycled CO2. Such CO2-saving gas turbines could lead to specific CO2 emissions as low as 5g/kWh, but development of the turbines could be costly (Turkenburg 1995). Physical Adsorption Process
The main advantage of physical adsorption over chemical or physical absorption is its simple and energy-efficient operation and regeneration, which can be achieved through a temperature swing or pressure swing cycle. The primary adsorption material under consideration is zeolite. Adsorption can be divided into three principal methods shown in Table 3-1: Classification of Physical Adsorption methods.

Adsorption PSA TSA High pressure Middle pressure

Desorption Low pressure Middle pressure Low pressure

Low temperature Low temperature Low temperature High temperature PTSA High pressure Low temperature High temperature
Table 3-1: Classification of Physical Adsorption methods.

Research and development of adsorption processes has progressed furthest in Japan, where pilot plants have been built. Based on their research on pressure and temperature swing adsorption (PTSA), Ishibashi et al. (1995) reported that energy consumption of CO2 separation was 46

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

49

percent of the electricity output generated. Although this value may seem very large, the authors estimate that it could drop to as low as 20 percent, mainly through increased performance and the process scale. According to the IEA (1994), the thermal efficiency of a pulverized fuel and flue gas desulfurization plant with pressure swing adsorption will be reduced from 40 percent to 28 percent, and the cost of CO2 recovery will be on the order of 300$/tC. However, according to the U.S. Department of Energy (DOE 1993), this technology is at present not likely to compete with other removal technologies, such as the chemical absorption process. It may be a long time before new, CO2-specific adsorbent materials can be developed. According to DOEs assessment, this technology is likely to become economical in small applications first if is to become competitive at all. Cryogenic Separation. Cryogenic separation involves cooling the gases to very low temperature so that frozen CO2 can be separated. The potential advantages of the process include the possibility of direct disposal of CO2 ice (e.g., in the deep ocean) and the high purity of the separated gas which is close to 100 percent. The disadvantages include the high-energy inputs required for reaching cryogenic temperature. This process exists mainly as a theoretical idea. Schssler and Kmmel (1989) have estimated that starting from a coal-to-busbar efficiency of 38 percent, cryogenic CO2 separation would decrease power plant efficiency to 26 percent if the CO2 emissions were reduced from 0.26 to 0.04 kg/kWh with scrubbing. The major energy requirements are incurred during the compression stages so that improvement in this area would greatly reduce the overall power plant efficiency loss. Membrane Separation Process. Under the membrane separation process, an appropriate membrane is used to separate the flue gases into CO2-rich and lean gas streams (Blok et al. 1991). Membrane separation processes have been used in the field of CO2 separation from EOR (enhanced oil recovery) gas with high pressure, but only theoretical and laboratory research has been conducted thus far on CO2 separation from thermal power plants. A number of process variations have been proposed, including liquid membranes (Saha and Chakma 1992), membrane gas absorption (Nishikawa et al. 1995, and Feron and Jansen 1995). Some of the methods exhibit high separation performance, but they lack durability. Existing commercial membranes exhibit low separation performance; high performance membranes are at present only studied in laboratories. For a two-stage cascade, Golomb et al. (1989) have estimated that the overall efficiency of a coal-fired power plant would drop from 35 percent to 9-18 percent, if about 80 percent of the CO2 were separated from the flue gases at a purity of 95 percent. Using the same assumptions, the researchers estimate the mitigation cost at 271$/tC recovered, about half of this sum having lowest cost estimates, but also a lower carbon removal rate and product gas purity. According to the IEA (1994) the thermal efficiency of a pulverized fuel and flue gas desulfurization (PF+FGD) plant would be reduced from 40 percent to 31 percent, and the cost of CO2 recovery would be 172$/tC.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat The Carnol System.

50

Researchers at the Brookhaven U.S. National Laboratory in the United States have developed the so-called Carnol system. (For a detailed description, see Steinberg 1996). This system combines CO2 removal from coal-fired power plants with methanol generation. It thus eliminates the need for CO2 disposal. Part of the CO2 emitted is used for methanol production, and some of the carbon is separated in solid form during the process. As such, it can either be stored or sold. The proposed system also uses the waste heat from the methanol production to decrease the energy needs for CO2 extraction from the stack gases. Natural gas is considered to be the most natural feedstock for methanol synthesis in the Carnol system, but biomass can be used if CO2 emissions are to be reduced further. The general Carnol system consists of several variants, some of which include non-conventional methods. The future system costs after commercialization can only be estimated. Under favorable conditions, the system could be economic even without credits for CO2 reduction. More conservative assumptions by the same author lead to reduction costs of $175 per ton of carbon (Steinberg 1996).

3.1.2 CO2 Disposal and Storage Processes


Carbon Sequestration. The potential of carbon conservation and sequestration over the time period 19952050 is estimated to be somewhere between 60 and 86 billion tons (IPCCb 1996). This corresponds to 10 to 14 times the global energy-related carbon emissions in the year 1990. Sequestering carbon in biomass immediately suggests the possibility of using this biomass as a primary energy source. Commenting this possibility, Hall (1994) concludes that displacing fossil fuel with biomass sustainably grown and converted into useful energy with modern conversion technologies would be more effective in decreasing atmospheric CO2 than sequestering carbon in trees. Independent of this general conclusion, however, there are pilot projects in which forestation projects are launched for the specific purpose of offsetting carbon emissions. One of the best known examples is that of AES (Applied Energy Services) in the U.S. AES contributes two million dollars to a 10-year sustainable forest project in Guatemala to offset 378,000 tons of CO2 emitted annually at a coal-fired power station in Connecticut. This project is an example of Joint Implementation with a specific cost of 0.10 $/tC to the power company. Enhanced Oil Recovery. The most appealing means of disposing of CO2 is to put the gas to productive use. For example, CO2 can be injected into oil fields, thus improving the oil recovery rate. At present oil prices, only inexpensive CO2 from natural sources is used for enhanced oil recovery in the U.S. CO2 is transported over distances of several hundred kilometers at a typical cost of $8/tC (IPCC 1996a). Based on estimates of future enhanced oil recovery of original reserves plus undiscovered conventional oil by Masters et al., (1987, 1991), the global potential of using CO2 for enhanced oil recovery is approximately 80 GtC, assuming a 50 percent probability of discovery. The biggest part of this potential is located in the Middle East, followed by North America and the

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

51

Former Soviet Union. However, this is a theoretical maximum. In the Second Assessment Report of the IPCC (IPCCa 1996), a minimum potential of 20 GtC is estimated for this option. Chemical Feedstock and Basic Materials. CO2 is widely used as a feedstock by the chemical industry and has come under limited use as a basic material. In the chemical industry, most CO2 is used in the synthesis of urea. At present, this process uses little more than 10MtC per year. Other chemical uses include the production of polycarbonates (Kemi 1987) and alcohol. After consumption and use, many of the chemicals degrade and release CO2. Existing processes are therefore not suitable as major carbon disposal options, and in order to dispose of high levels of CO2, it would be necessary to convert the CO2 to other materials. One variant Steinbergs Carnol process (described in the previous subsection) involves as a key design element the production and storage of solid-state carbon. It should therefore also be considered as a possible storage option. Carbon Storage in Underground Reservoirs. Certain kinds of underground structures, such as depleted oil and natural gas reservoirs, aquifers, natural salt domes, and excavated rock caverns can serve as CO2 reservoirs (Blok et al. 1991). Of these, depleted oil and natural gas reservoirs and aquifers are the most important options. The IPCC (1996a) estimates the storage potential of depleted oil and gas fields to be in the range of 130 and 500GtC. Storage potential in saline aquifers could reach more than 90GtC. Most of the studies involve only theoretical research, e.g., the estimation of storage capacities. However, the Norwegian company Statoil oversees a project at the Sleipner West field that involves the separation of CO2 from natural gas containing 7.9 percent CO2. The recovered CO2 is injected into the Utsira Salina Deep Aquifer. The main purpose of the separation is to increase the purity of the natural gas. Statoil plans to inject 1 million tons of CO2 each year. Esso and Pertamina have also agreed to inject 6 billion tons of CO2 into the aquifer in the Natuna Sea in Indonesia. Carbon Injection into the Shallow Ocean. Haugan (1992) proposed a disposal method, which relies on density flow. This means that seawater containing dissolved CO2, because of its greater density, settles down to the bottom of ocean. The seabed around Norway slopes gently downward. As CO2 is injected into the shallow ocean, it is absorbed by the seawater and it will flow downward into the deep ocean, much as a ball rolls down a slope. Herzog and Adams (1995) proposed an idea of the droplet plume. Under this method, injected CO2 will initially rise, owing to its greater buoyancy. After the CO2 is absorbed, however, the CO2-rich seawater with its higher density will move like a plume towards the seabed, enabling deepwater storage of the CO2.

Carbon Injection into the Deep Ocean.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

52

Deep-ocean storage of CO2 was first proposed by Marchetti (1976). His original proposal was to generate a gigamixer by injecting CO2 into sinking thermohaline currents that eventually reach the deep ocean bottom. This proposal combines the advantages of injection into shallow parts of the ocean with the advantage of the huge storage capacity of the deep ocean. The concrete proposal involved the Gibraltar subduction undercurrent, which would provide storage capacity on the order of 10 billion tons of CO2 per year. Other sinking thermohaline currents include the subduction currents of Bab-al-Mandab in the Red Sea, the Wedell Sea, and the North Atlantic. In the absence of sinking currents, injection of CO2 into the deep ocean requires large-scale facilities, such as tankers or floating platforms. This option is therefore more expensive than storage in the shallow ocean, but it offers an enormous increase in storage potential. If injected at depths of about 3000 meters, CO2 exists as a negatively buoyant liquid, which tends to sink to the sea bottom. Therefore, CO2 would form a negatively buoyant plume in the open ocean (Nordhaus 1975). Another disposal method is solidification of CO2. The resulting dry ice has a specific gravity of about 1.5. It is important in this scheme that the solid ice torpedoes are large enough to reach depths of at least 3 km so that the CO2 can continue to sink spontaneously even in liquid form. Based on preliminary field tests, cubes of 3 to 4 meters would sink below a depth of 3 km before 50 percent of the CO2 is dissolved, thus yielding excellent sequestration potential. The natural net flow of carbon from the surface to deep ocean waters is approximately two billion tons per year. Once higher transport rates are available, the amount of CO2 injected directly into the deep ocean can be greatly increased. The total storage potential is estimated to be enormous. IEA (1994) estimates that the potential for CO2 stored as dissolved carbonate ion (CO32-) is 1440 GtC and an even more if the chemical reaction leading to the formation of calcium carbonate (CaCO3) sediment is taken into account. Among the major outstanding uncertainties are the possible ecological effects of higher concentrations of CO2 in the oceans and their effects on local chemistry in the vicinity of storage sites. According to the IEA (1994), the cost of basic disposal will be 4.1 $/t-CO2. A potential problem with CO2 storage in the deep ocean as well as with its storage in the shallow ocean is the formation of solid clathrates. Upon release, they form sinking plumes and eventually settle on the ocean floor (Saji et al. 1992; Nishikawa et al. 1992; and Austivik and Loken 1992). A major uncertainty in this approach concerns the possibility that hydrates will dissolve in seawater as they are transported within a plume or as they rest on the seabed. Experimental research is underway to study this problem and the dissolution of liquefied CO2 in general, simulating CO2 concentrations in the ocean. So far, these are only theoretical studies, and empirical research is still required.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

53

3.1.3 Costs and Potentials of Carbon Sequestration, Removal, and Storage


To give a rough approximation of carbon reduction costs in the power sector, we reproduce, in Figure 3-3 the trend line derived by EC (1995), which is based on the relationship of carbon emissions to electricity generation costs.

Figure 3-3: Electricity costs and carbon emissions. Source: EC 1995.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

54

The trend line in Figure 3-3 corresponds to reduction costs of US $150 per ton of carbon. Note that the trend line just approximates the relation between electricity costs and carbon emissions. The lowest cost in the figure has lower specific emissions than some higher cost options. This means that the trend line is only indicative and that concrete reduction costs depend on the particular situation, including the reference technology that applies in a given case. For the chemical absorption method, Blok et al. (1989, 1991) have estimated the process costs and energy requirements in detail. The authors concluded that the efficiency of coal-fired power plants decreases from 41 percent to 29.7 percent, if CO2 emissions are reduced from 230 gC/kWh in the unabated case to 30 g-C/kWh with separation. The electricity costs would increase by about 80 percent, resulting in CO2 mitigation costs of about $140/t-C removed. According to the IEA (1994), the thermal efficiency will be reduced from 40 percent to 29 percent, and the cost will increase by 80 percent. These assumptions result in CO2 mitigation costs of about $130/t-C removed in the case of 90 percent CO2 removal from flue gas of the pulverized coal-fired plant with flue gas desulfurization (PF+FGD). Both the reduction of the thermal efficiency and the costs of two sources are identical. This means that using a conventional absorbent will significantly increase primary energy demands for coal-fired power. Specific abatement costs US$/t C PF+ IGCC FGD 128 319 n.a. 84 308 751 n.a. 84 172 458 0175 130175 630

Technology Removal & sequestration Chemical absorption Physical absorption Physical adsorption Cryogenic separation Membrane separation Carnol system O2/CO2 combustion Forestation Disposal & storage Enhanced oil recovery Underground reservoirs Aquifers Ocean disposal Transportation Pipeline, 1000km

Potential Gt C

Reference

IEA, 1994a IEA, 1994a IEA, 1994a IEA, 1994a Golomb et al., 1989 Steinberg, 1996 Blok et al., 1995 IPCC, 1996b

0 11 730 4

>20 130500 902500 1200>

IPCC, 1996b IPCC, 1996a IEA, 1994b IEA, 1994b

32

IPCC, 1996a

Table 3-2: Summary of Costs and Potentials of Removal and Storage Options.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

55

3.2 Other Reduction Options


In this section, we summarize other options to reduce carbon emission. After the classification in this and the previous sections, the rest of this chapters sections are devoted to discussing all the reduction options for each economic sector.

3.2.1 Demand-Side Measures


Carbon emission reduction measures on the demand side aim to reduce the specific energy demand of a given energy service. As such, they are not the direct targets of R&D strategies, but they are nevertheless included here for the sake of completeness. In the sequel, they are discussed in less detail than technological options.

3.2.2 Dematerialization and Recycling


The reduction in material intensity, particularly in the industrial sector, is the result of sufficiently high levels of per capita income and is generally observed in post-industrial economies. This dematerialization (Herman et al. 1989) goes along with a decrease in overall energy intensity of the economies. Dematerialization is thus largely an autonomous phenomenon, but it can also serve as a guiding concept for policy making. Recycling is an example because it amounts to the dematerialization of primary inputs. The reuse of scrap metal, paper, glass, and plastics, as well as the composting of organic matter will not only reduce carbon emissions, but will also address the general problem of waste disposal. Okken and Gielen (1994) estimate that 86 percent of energy inputs necessary for the production of primary aluminum can be saved by using recycled aluminum instead of bauxite. At present, recycling rates in the EU are low. However, products with a long lifespan currently comprise a large share of European consumption (Okken and Gielen 1994).

3.2.3 Efficiency Improvements and Technological Change


Decarbonization through efficiency improvements is a fundamental option for achieving environmentally compatible energy development. Efficiency improvements reduce most of the adverse environmental impacts of energy, including greenhouse gas emissions, while also leading to lower primary energy inputs and therefore to lower fuel costs. In the context of climate change, the appropriate measures of efficiency are primary energy and energy services. Energy services, in general, are not measured in energy units, but rather in other units such as, for example, person-kilometers. Moreover, in some cases, useful energy for a given energy service can be borrowed from the environment (as with heat that is transferred by heat pumps for the purpose of room heating),

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

56

and final energy is used only for heat transfer. Useful-energy efficiency can therefore not be expressed meaningfully in percentages. The question therefore arises as to how much energy is needed for a particular energy service. No straightforward answers are possible, but the IPCC (1996a) summarizes studies that use the concept of exergy to estimate primary-to-service (or exergy) efficiencies with the result that, typically, these are on the order of a few percent. Granted, the lower limits of energy needs derived in these studies are theoretical, but the underlying concept is of paramount importance in all long-term studies of the subject. Technological change in past centuries has improved the efficiency of the factor inputs and substituted new or more abundant raw material resources for dwindling supplies, particularly labor and energy. The growing need to protect the global environment should lead to increasing efforts in the field of technological progress over and above historical trends. To illustrate the costs and potential of efficiency improvement measures, we show here, in an example of efficiency improvement measures supply curves for total primary energy, derived by de Beer et al. (1995) for the Netherlands.

Figure 3-4: Supply curves of energy efficiency improvement measures for the periods 19902000 and 19902050. A discount rate of 5 percent is used. Source: de Beer et al. 1995.

According to this figure, 29 percent of the Netherlands primary energy demand between 1990 and 2000 can be saved at zero or negative costs. For the period 19902050, the value is 43 percent. These figures are the result of a bottom-up study (ICARUS) which, by definition, does not include take-back effects as discussed below where the transportation sector is analyzed.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

57

3.2.4 Fuel-Mix Changes


The most straightforward way to reduce carbon emissions is simply to use fuels that either do not emit carbon at all (e.g., nuclear, solar) or that are carbon-neutral (e.g., sustainable use of biomass). As far as the practical aspects of carbon emissions are concerned, switching from fuels with relatively high specific carbon emissions, such as coal, to fuels with lower specific emissions, such as natural gas, is an important option. Hall (1994) quantified alternative ways of using biomass for CO2 mitigation. His findings are summarized here in Figure 3-5

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

58

Figure 3-5: Alternative ways of using biomass for CO2 mitigation: sequestering carbon in forests versus substitution of coal with biomass for electricity. Source: Hall (1994).

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

59

Approximately 40 percent of energy-related CO2 was emitted by the energy conversion sector (IPCC 1996b). Theoretically, if all final energy were carbon-free, the entire carbon emissions problem could be solved in the energy sector alone. It is therefore clear that many measures and policy options exist for this sector to achieve deep reductions of total energy-related carbon emissions.

3.2.5 Removal and Sequestration


Figure 3-6 summarizes findings of the Joule II Programme study on R&D in Clean Coal Technology. The figure displays several interesting features. First, it indicates that CO2 sequestration becomes competitive even for lignite power plants at approximately 7 UK pence (approximately 11 US cents) per kWh. The other noteworthy point is that there are areas in the two parts of Figure 3-6 that show a positive correlation between costs and carbon emissions. One can see that natural gas tends to be an economical and relatively clean source of power production. At electricity prices of 4 UK pence (6.5 US cents) per kWh, it is even profitable to sequester all CO2 produced by a natural gas-fired power plant. However, this is only a static cost comparison; a scenario analysis would be necessary to determine the potential of such a cheap power generation option over time.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

60

Figure 3-6: Break-even electricity selling prices for base-case technologies (upper part) and for technologies involving CO2 sequestration (lower part). Source: EC 1995.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

61

3.2.6 Energy conversion efficiency


Energy efficiency improvements have already been achieved for almost all types of energy conversion facilities. For example, dramatic improvements in fuel conversion efficiencies have been achieved during this century in electricity generation. The efficiency of electricity generation at the turn of the century was about 5 percent, whereas today the average efficiency in OECD countries is about 36 percent. This amounts to approximately a sevenfold efficiency increase in less than one hundred years. Today, the best combined-cycle natural gas-fired power plants can achieve more than 50 percent efficiency (Nakicenovic et al. 1993). Figure 3-7 illustrates the historical improvements in electric conversion efficiency in the U.S the Former Soviet Union, Western and Eastern Europe.

Figure 3-7: Improvements in electric conversion efficiency in the U.S., the former Soviet Union, Western and Eastern Europe. Source: Nakicenovic et al (1.993).

Eastern Europe. Source: Nakicenovi et al. (1993).

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

62

The IPCC (1996b) estimates that more efficient combustion of all fossil fuel could reduce 30 percent of this sectors GHG emissions at zero or negative costs by 2020 and even by 60 percent in the longer run. For example, the average efficiency of a new coal-fired power plant today is about 34 percent but can be expected to reach 50 to 60 percent in the medium- to-long run (IPCCb 1996). Related to energy efficiency is energy intensity, i.e., the ratio of primary energy consumption per unit of gross domestic product (GDP). On the average, the energy intensity of most developed countries has declined by about 1 percent per year, indicating that during the last 70 years energy requirements for producing a unit value added have been halved. The cogeneration of electricity and district heat can substantially increase the overall efficiency of energy conversion. Cogeneration has efficiencies in the range of 60-80 percent. Often, introduction of cogeneration is hindered by the lack of sufficient demand for low-temperature heat. Today, carbon emissions result primarily from the production of power. In the future, the centralized production of hydrogen or methanol could become a major contributor to carbon emissions in the energy sector. This way, some emissions would be transferred from the transportation to the energy sector. In this case, it is therefore important to consider life-cycle GHG emissions of alternative automotive fuels. See Figure 3-8 for a summary of recent estimates.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

63

Fuel

Greenhouse gas emissions in g/km CO2 equivalent average driving cycle; car consuming 7 litres petrol/100 km Vehicle manufact ure Fuel Supply Operatio n Total (not final)

Pre-tax costs. Based on Renault Clio 1.4 litre 13,800 Km per year, 10 year life. 10% d.r.14 Vehicle cost ($) Fuel cost ($/litre petrol equiv.) Total levelised Cost ($/km) Cost relative to petrol (US/km)

Reformulated Petrol Petrol Diesel LPG CNG Methanol from NG Methanol Wood from

25-27 25-27 27-29 26-28 29-31 25-27 25-27 25-27 25-27 26-28

17-48 15-63 7-35 7-20 5-68 76 0-44 50-220 0-41 0-48

180-193 182-207 139-202 147-155 130-154 149 15-16 15-16 15-16 3-12

222-268 222-297 173-266 180-203 164-253 250-253 40-87 90-263 40-84 29-88 15,168.00 15,168-17,443 16,083-15,384 16,083-15,600 16,128-15,168 16,128-15,168 16,128-15,168 16,128-15,168 19,968-18,048 0.26 0.26-0.26 0.19-0.26 0.18-0.24 0.25-0.35 0.68-0.82 0.94-1.03 0.68-0.82 0.38-1.44 0.29 0.29-0.33 0.29-0.30 0.29-0.30 0.28-0.31 0.31-0.34 0.34-0.36 0.32-0.34 0.33-0.43 0.00 -0.35-3.64 -0.55-1.02 -0.28-0.99 -0.72-1.45 2.30-4.79 4.61-6-74 2.79-5.27 4.10-13.97

Ethanol from Sugar Beet Ethanol from Wood Liguid Hydrogen EV using electricity generated from: European average Coal Oil Gas Nuclear Hydro

Emissions based on urban driving cycle 44-48 44-48 44-48 44-48 44-48 44-48 170 300310 253 130140 15 015 0 0 0 0 0 0 114-118 344-358 297-301 174-188 59-63 44-48 24,768-20,928 0.48-0.96 0.36-0.44 6.81-14.74

Table 3-3: Life cycle GHG emissions and costs. Source: IEA 1994.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

64

3.2.7 Fuel-Mix Changes


Renewable use of biomass and non-emitting renewable sources, such as solar and wind energy can reduce carbon emissions of the power sector to a large extent. Today, these technologies are not competitive except in specific economic niches. However, significant cost reductions are expected in the future (technological learning). Biomass(1) Solar
(1) (2)

4.2-9.9 9.5-13.8 2.0-5.0

Wind(3)

The high end of the range corresponds to conventional technology; the low end to future advanced technology. Source: IEA 1994. Annualized capital costs assuming a 5 percent discount rate and 30 years of service life, an availability factor of 25%, fixed O/M costs of $100 per year; range based on a statistical analysis of future capital costs of solar PV in industrialized countries. Source: Strubegger and Reitgruber 1995.
(3) (2)

Future costs, expected for the time 2020-2030. Source: IEA 1994. Table 3-4: Electricity costs of biomass, solar photovoltaic, and wind, US cents/kWh.

Nuclear energy is another source of carbon-free energy. To date, it has been introduced for reasons other than GHG emission reduction. In many parts of the world, particularly in Europe, nuclear energy faces the well-known problem of public acceptance. As a consequence, only a small part of the discussion about carbon mitigation concerns nuclear power, and carbon reduction costs of nuclear energy are hardly a topic. Long-term R&D strategies should therefore directly address the problem of public acceptance by developing schemes such as the Inherently Safe Reactor. Carbon abatement costs of fuel production from biomass are summarized in Table 3-5. The lowest figure in the table is for methanol from wood. Still, the estimated cost ratio between wood-based methanol and gasoline is more than 3, equivalent to carbon abatement costs of almost $700 per ton of carbon. Values on the higher end of the scale lead to abatement costs of more than $1,800/tC.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

Ethanol from Wheat

Ethanol from Beet

Rape Methyl ether 48.9

Methanol from Wood

Electricity from wood

Net energy yield

58.4

200.6

158.1

209.9

Table 3-5: Cost ranges of biofuels for transportation. Source: IEA 1994.

Product energy credit/net input energy

4.74

12.21

4.98

13.33

22.85

% gasoline or diesel life cycle energy use

52%

38%

43%

22%

8%

Gasoline or siesel substitution (l/ha)

1,695

3,961

885

4,908

Net CO2 abatement (kg/ha)

4,072

13,628

3,722

10,661

9,480

% gasoline or diesel life cycle CO2 emissions

40%

28%

31%

18%

9%

Cost of gasoline or diesel replaced (c/l) EU feedstock prices world feedstock prices.

89-103 54-62 5.1-5.9

92-100 64-72 5.3-5.7

98-136 50-59 5.6-7.8

33-39 33-39(USA) 3.4-4.2

6.49.5c/kwh

Cost ratio of gasoline or diesel (EU)

1.3-1.9

Net cost (subsidy) required (annual $/ ha)

1,207-1,444

2,960-3,284

710-1,052

1,068-1,436

142-447

Cost of C02 abated ($/t)

424-507

374-415

304-450

186-250

27-86

65

Net energy yield if 20% of OECD Europe cropland set aside and used in 2050 (EJ)

1.4

4.8

1.2

3.8

5.0

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

66

As for electricity, significant price reductions are expected from technological learning. The Second Assessment Report by the IPCC (1996a) estimates that advanced biofuels, such as ethanol derived from wood via enzymatic hydrolysis, might be competitive with gasoline at oil prices over approximately $25/bbl. This calculation assumes an annual yield of 150 dry tons per hectare, a value thought to be realistic by Hall (IEA 1994) in the year 2050.

3.3 The Industrial Sector


3.3.1 Dematerialization
At present, about 40 percent of steel, aluminum, and lead are produced from scrap worldwide. The scrap input for copper is estimated to be 15 percent or higher, whereas the global recycling rate for paper is around one-third, a figure which is similar to the present recycling rate of glass bottles in OECD countries. In the future, recycling could significantly reduce specific resource requirements and resulting carbon emissions as illustrated in Figure 3-8. The largest carbon reduction potential would be in enhanced recycling of iron and steel products in conjunction with energy-efficient electric arc furnaces. By increasing the recycling rate to some 70 percent, the global steel industry could reduce its annual carbon emissions by about 110 Mt C, or approximately 24 percent. Increasing the recycling rate of aluminum, paper and glass to 70 percent each could reduce carbon emissions by some additional 50 Mt. Globally, an aggressive recycling strategy, e.g., raising the recycling rate for the major energy and carbon-intensive products as high as 70 percent, could reduce emissions by at least about 160 Mt C, or 8 percent of current total industrial emissions.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

67

Figure 3-8: Carbon reduction potential of industry as a function of the recycling rate for selected materials.

3.3.2 Energy Efficiency Improvement and Process Changes


For the OECD region as a whole, continuous casting yields the highest energy savings potential per ton of steel produced, followed by dry quenching of coke, hot direct rolling and sensible heat recovery at basic oxygen furnaces. Part of these measures have already been implemented and have contributed to the energy efficiency improvements in the steel industries of OECD countries over the last two decades. Ranked by their cost effectiveness per ton of carbon reduced, the measures analyzed could reduce carbon emissions in the OECD steel industry by some 24 Mt C or 14 percent, including 12 percent carbon emission reductions at negative or zero cost per ton of carbon reduced. These negative costs are derived from a (hypothetical) comparison of an average OECD steel plant with the individual efficiency measures outlined above. For instance, applying top-gas recovery turbines to blast furnaces throughout the EU would cost about $60 million (1990 dollars) annually, while the resulting energy savings are estimated to correspond to $220 million (Springmann, 1991). This would produce annual carbon emission reductions of 0.6 Mt (hence a negative reduction cost per ton of carbon reduced). Figure 3-9 compares various steel production processes in terms of their specific energy requirements, carbon emissions, and costs. Several new process technologies offer possibilities for carbon emission reductions in steel manufacturing. Among these are (1) direct smelting (e.g., pre-reduction with a coal-derived reduction gas; followed by a second stage in which

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

68

sponge iron is melted down either with coal, the Corex process, or electricity, the Plasmamelt process); (2) the use of electric-arc furnaces in combination with direct reduction of iron ore (using, for example, the HYL III process, which is particularly interesting from a CO2 perspective, since it includes CO2 scrubber for hydrogen and CO recycling from the reduction gas); or (3) the direct reduction with hydrogen followed by an electric arc furnace, which can be a steel production technology with practically no carbon emissions, provided both hydrogen and electricity are produced carbon-free.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

69

Figure 3-9: Steel production chains: energy consumption, carbon emissions, and costs of various production process routes.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

70

Process technologies to reduce carbon emissions also exist in many other industrial sectors. Using the energy efficiency of the best plants as a guide, specific energy consumption for aluminum production in the EU could be reduced to some 47 GJ/ton (that is, by 36 percent) and for ammonia synthesis to some 28 GJ/ton (22 percent), compared to the industry average (Worrell et al. 1992). In the paper industry, a process change from thermal to mechanical dewatering in pulp mills would yield an estimated energy reduction of 0.07 kWyr (15 percent) per ton of paper. In the cement manufacturing industry, replacement of the wet by a dry process, in conjunction with precalcination and computer process control, could reduce energy requirements from 5.5 to less than 3 GJ (from 0.17 to 0.09 kWyr, respectively) per ton of concrete, although this process change is very capital-intensive (see Figure 3-10). As the CO2 concentration in flue gases of cement plants reaches 30 percent, an alternative strategy might involve carbon scrubbing. Assuming a cost of $150 per ton of carbon removed, this would correspond to an additional $50 per ton of cement produced, nearly doubling current average cement production costs.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

71

Figure 3-10: Capital costs (per ton of carbon reduced) for (a) steel and (b) cement process technology improvements for major world regions versus emission reduction potential.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

72

In addition to process technology changes, a number of more generic technology options exist to further improve industrial energy efficiency, including waste heat recovery, cogeneration, optimized control and improvements of combustion, as well as efficiency improvements of electricity use. Giovannini and Pain (1990) estimate savings potentials from waste heat recovery of between 36 and 67 percent for the Netherlands, Germany and Japan, e.g., through heat exchangers or industrial cogeneration, or through heat upgrading with heat pumps. For industries with high demands for both steam and electricity, industrial cogeneration and heat cascading (e.g., via top and bottom-cycle cogeneration) appear promising. The OTA (1991) estimates that industrial cogeneration could reduce industrial energy demand in the U.S. by as much as 140 GWyr by the year 2015. For low-temperature heat applications, improved boiler efficiency (e.g., fluidized-bed boilers) and fuel substitution are possible CO2 reduction options. Improvements in electricity use via improved industrial drives or lighting could offer significant reduction potentials. Fisher (1990) estimates a global potential for industrial electricity reduction of 240 percent through replacement of industrial drives by the most efficient models, as well as the use of variable-speed drives. An additional reduction of 6080 percent might be realized through installation of the most efficient lighting systems. EPRI (1990) has estimated a maximum technical potential for U.S. industrial electricity reduction of close to 40 percent (compared to a base case in the year 2000). The electricity reduction potential in industrialized countries for high-efficiency adjustable speed drives is estimated to be around 30 percent (IEA 1991). The NAS (1991) estimates that electricity saving of 200 TWh from improved electric drives would cost an average of about 2.6 U.S. cents/kWh in the U.S. (costs assume immediate replacement of existing units). Assuming an average carbon intensity of U.S. electricity production of 0.18 kg C/kWh (Nishimura, 1991), this translates to specific carbon reduction costs of $144 per ton of carbon. An example of a full fuel-cycle analysis with IIASAs CO2DB data base is presented in Figure 3-11, comparing the combination of different motor drives with different means of electricity generation. It shows that as far as technology is concerned, the overwhelming emission reduction potential is on the power generation side.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

73

Figure 3-11: Energy requirements, costs, and CO2 emissions for six energy chains ending with industrial motor drives. Source: Messner and Nakicenovic 1992.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

74

3.3.3 Fuel-Mix Changes


The trend toward increased recycling and remelting of metal scrap requires electric arc furnaces leading to the increasing electrification and lower carbon emissions. The cost of this measure and its carbon emission reduction potential is described above.

3.3.4 Combined Measures in the Steel Industry


The recycling of scrap, in combination with measures in the electricity generating sector, (described in the section on carbon emission reductions in the energy sector), currently appears to be the least expensive process change measure by which industry can reduce its carbon emissions (see Figure 3-12). Compared with the production economics of the average steel plant, electric arc furnaces could achieve both carbon emission reductions and improved production economics, which would imply negative carbon reduction costs of $250540 per ton of carbon. Direct smelting (e.g., via the Corex or Plasmamelt processes) could achieve carbon reductions at an additional cost of $1070 per ton of steel, which translates into $140370 per ton of carbon reduced. The process having the highest carbon reduction potential also has the highest costs (in excess of $900 per ton of carbon reduced). This is the zero-carbon steel production via direct reduction with hydrogen in combination with an electric arc furnace. Because of their high capital requirements, process technology changes on the positive side of steel industry's carbon reduction curve generally represent high-cost carbon reduction strategies.

Figure 3-12: Summary of process technologies with carbon reductions in steel manufacture, carbon emissions and costs (line) versus specific carbon reduction costs (bars).

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

75

3.4 The Transportation Sector


3.4.1 Efficiency Improvements
The average fuel consumption of U.S. automobiles fell from 18.1 liters per 100 km in 1973 to 10.8 liters per 100 km in 1988, representing an average annual decrease of 3.4 percent. During the same 15-year period, average fuel consumption of new vehicles dropped from 16.5 to 8.2 liters per 100 km in the U.S. (4.7 percent per year) and from 8.4 to 6.8 liters per 100 km in Italy (1.4 percent per year) (Nakicenovic et al. 1993). In other European countries, such as Germany and France, there was no decrease of average fuel consumption between 1970 and 1990 (Michaelis 1994). In the OECD as a whole, total fuel consumption in the transport sector rose by some 470 GWyr, or at a rate of 2.5 percent per year (Nakicenovic et al. 1993). In general, the development of total demand for final energy in the transportation sector increases faster than the development of specific fuel consumption might suggest. Part of the reason for this divergence is the consumers reaction to price reductions of automobile transportation. Consumers often respond to more economical automobiles by driving greater distances and by sharing a car less frequently. This phenomenon is referred to as take back. Today, the most fuel-efficient car available on the market is about twice as fuel efficient as the current fleet average. Models such as the Daihatsu Charade, Subaru Justy, or GM Chevette (diesel) have an average fuel consumption of less than 5 liters per 100 vehicle kilometer (47 mpg). Experimental vehicles combining all technical and design features can achieve specific fuel consumption of less than 3 liters per 100 vehicle kilometers, as exemplified by the Volkswagen E-80, the Toyota AXV, and the Renault Vesta2. This represents an improvement over current fleet averages of a factor of three to four. The costs of achieving fuel efficiency improvements are difficult to determine. U.S. cost estimates for additional purchase costs to the consumer range from $60130 per car (EPA 1990) to $500750 per car (OTA 1991) for a vehicle about twice as efficient as the current U.S. average (55 versus 27 mpg, or 4.3 and 8.7 liters per 100 kilometers, respectively). The resulting fuel savings, based on an annual average of 10,000 miles driven, are about 180 gallons, or $230 per year at current U.S. fuel prices. Assuming an annuity factor of 20 percent, fuel savings imply a break-even point of additional costs on the order of $900 for an energy-efficient vehicle. From such a perspective, the fuel efficiency improvements in passenger cars constitute an attractive cost-saving option to reduce CO2 emissions. As general experience suggest, however, automobile performance in terms of fuel efficiency and carbon intensity is only one of many criteria influencing consumer behavior. This compounds the take-back effect in the sense that it provides one more reason to explain why price effects can be expected to have only limited influence on energy savings by cars.

3.4.2 Demand-Side Measures


On the demand side, the Mitigation Panel of the American National Academy of Sciences (NAS 1991) estimates that a doubling of gasoline prices would induce consumers to prefer cars that are between 12 and 15 percent more energy efficient. The commercial transportation sector is

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

76

expected to be more sensitive to such price signals. Still, even there, long-run elasticities are far away from unity. Kaya et al. (1991) estimate that the energy consumption of trucks in Japan could be expected to drop by only about 13 percent if fuel prices were to be increased by 50 percent. It thus appears that price signals especially in a politically acceptable range will not lead to dramatic reductions in transportation fuel demands. This points to the need to investigate regulatory approaches, such as mandatory efficiency standards and consumer information programs, to more fully realize the CO2 reduction potential of fuel efficiency improvements. Behavior not only influences what transport modes are chosen, but also how they are used (usage efficiency). Usage efficiency comprises many components, ranging from traffic flow (congestion), driving modes and styles and, most importantly, to load factors. Automobile occupancy rates for U.S. commuters are estimated not to exceed 1.15 persons per car (NAS 1991). The average in the city of Denver is 1.2, and even in densely populated Tokyo, car occupancy is low, at not more than 1.4 persons/car (Newman and Kenworthy 1989). In cities such as London, Copenhagen, or Sydney, car occupancy is about 40 percent higher (above 1.7 persons per car), which means less energy use and emissions per passenger kilometer driven. But public transportation modes, which have to provide sufficient capacity even during rush hours, also illustrate the low usage efficiency of transport systems. Usage efficiency is perhaps the least understood factor having an impact on the carbon efficiency of transportation systems. Improving usage efficiency not only depends on changes in social behavior and trip organization (such as carpooling or car sharing), but also on public policy incentives, such as the provision of special driving lanes or toll reductions for carpools (as practiced in some U.S. cities), or parking fees or city entrance fees (introduced in some European and Asian cities). One way of looking at behavioral aspects in the transportation sector is to analyze modal split changes. The modal split of long-distance passenger transportation systems in the Former Soviet Union and China. Figure 3-13 shows that the modal split in these countries fits well to a model of logistic substitution. Good fits like these suggest significant system inertia. In this case, it reflects the limited substitutability between different transport modes as a consequence of different performance and quality requirements, relative economics, accessibility to infrastructures, and consumer preferences. In short, policies at aiming at influencing modals are likely to encounter strong system opposition.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

77

Figure 3-13: Modal split between long-distance passenger transportation systems in the former Soviet Union and China (shifted time axes), in fractional share of passenger kilometers.

3.4.3 Fuel switching


A summary of fuel switching options for reducing carbon emissions by passenger cars is shown in Figure 3-14. The figure shows that the use of diesel and methanol fuels could reduce carbon emissions by about 20 percent, compressed natural gas (CNG) vehicles up to 30 percent. The specific carbon reduction costs of diesel and methanol are slightly positive, whereas for CNG vehicles owing to fuel efficiency improvements and generally lower fuel costs overall vehicle operating costs are lower, hence implying savings (negative carbon reduction costs). The data on ethanol admixture or ethanol-fueled cars are based on the Brazilian example. Such measures would entail additional costs, but these appear to be modest (5 percent) and are subject to the inevitable uncertainty range of such cost estimates.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

78

Figure 3-14: Carbon emissions (line) versus carbon reduction costs (bars) of various technological changes to passenger cars.

More revolutionary technological change would be represented by the massive introduction of a new generation of electric vehicles which, owing to the high end-use efficiency of electric cars, would yield lower overall carbon emissions even if electricity were to be produced in oil-fired power plants. Another alternative is hydrogen fuel cell-powered cars. However, the hydrogen options have specific carbon reduction costs in excess of $2,000 per ton of carbon, which makes them high-cost carbon reduction strategies indeed. Figure 3-15 summarizes the technological options available in the passenger transportation sector with respect to energy and carbon intensity. Only hydrogen-fueled vehicles would result in zero carbon emissions, provided fossil fuels are not used in the production of hydrogen. Figure 3-15 also indicates the relative scope of efficiency improvements (see the example of a steam locomotive in 1855, 1955, and a modern, coal-based, electric intercity train) and fuel substitution (coal- versus gas-electric intercity train, or gasoline versus CNG car). The relative rankings of transport modes can, however, vary per unit of energy service delivered (e.g., passenger-km) according to differences in load factors. The latter is highest for aircraft (50 to 60 percent) and lowest for private cars and public mass transit systems (as low as 20 to 25 percent). There are, however, large regional variations.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

79

Figure 3-15: Energy and carbon intensity of various passenger transportation technology chains. Source: Schafer, 1992.

Yanagisawa (1995) has compared the carbon emissions of a number of alternative automotive fuels. His results are summarized in Table 3-6. The table shows that CNG cars have the lowest emissions among all near-term options.

Fuel Type

From Energy Station To Driving (Kg-CO2/100km) 17.1 16.3 26.3 14.5 71.9 29.8 15.8

From Mining to the Energy Station (Kg-CO2/100km) 5.33 (5.47kg gasoline) 7.48 (11.97kg MeOH) 1.50 (11.43kg coal) 3.12 (5.25kg NG) 3.65 (27.9kg coal) 6.59 (10.84kg NG) 0.81 (6.18kg coal)

Total Emissions (Kg-CO2/100km) 22.4 23.8 27.8 17.7 75.6 36.4 16.6

Gasoline Methanol (N.Gas) EV (coal) CNG H2 (electrolysis,coal) H2 (N. Gas) Methanol + EV1
1

Table 3-6: Fuel-cycle analysis of automotive fuels. Source: Yanagisawa 1995. Electricity is assumed to be generated by a coal-fired plant. CO2 discharged from the plant is converted into methanol.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

80

3.5 The Residential & Commercial Sector


Recent literature in the field suggests that the relative energy savings potential of the residential and commercial sector is larger than the potential in either the industrial or transportation sectors. Moreover, according to several results, a significant proportion of the energy and emissions savings can be achieved economically, i.e., by saving money at the same time. A typical size of this no-regrets potential to reduce carbon emissions in this sector is 50 percent. However, the resulting dollar savings and emissions reductions usually describe a theoretical potential: it should not be assumed that merely improving the information flow to consumers would result in a quick realization of this emission reduction potential. The market price of goods and services alone is an unreliable indicator of consumer preference in the residential and commercial sector. One way to measure the degree of incompleteness of the market-price criterion is to calculate the discount rates that are implicit in purchasing decisions in the residential sector. Train (1985) found the following ranges: improvements of thermal integrity of buildings: 1032 percent; space heating and fuel type: 4.436 percent; air conditioning: 3.229 percent; refrigerators: 39 100 percent; other home appliances: 1867 percent. In a way, these high discount rates explain why the usual profitability criteria must be applied with caution in this sector. The question remains as to why the discount rates implied by consumer behavior are so much higher than market discount rates. Discussing this question goes beyond the scope of this report. Readers interested in this topic are referred to Manne and Schrattenholzer (1993). In any case, increasing the assumed discount rate in a study of conservation potentials very quickly reduces the size of the calculated savings. As to the practical savings potential, the IPCC (1996b) estimates that energy efficiency measures for appliances, lighting, and office equipment with paybacks to the consumer of five years or less have the technical potential to reduce carbon emissions by approximately 20 percent in 2010, 25 percent in 2020, and 40 percent in 2050, all relative to a baseline that already includes some energy efficiency improvements. According to the same report (IPCC 1996b), improvements in the building envelope have the technical potential to reduce carbon emissions by 10 percent in 2010, 10 percent in 2020, and 15 percent in 2050, again assuming a payback time of up to five years.

3.5.1 Efficiency Improvements


There are numerous examples of improved efficiency of residential appliances. Compared to the 1986 stock, the 1991 stock of refrigerators, freezers, or room air conditioners in the U.S. consumes about 20 percent less, and 1991 models sold consume an average between 30 to 40 percent less than the average 1986 vintages (Levine et al. 1992). With the best available and most advanced technology, further significant improvements in energy efficiency are possible. In the U.S., where refrigerators are the second largest consumer of residential electricity, the average 1991 stock consumed about 1200 kWh/yr, down from 1450 kWh in 1986, and the best available model sold consumed 710 kWh. Further reductions to 200500 kWh are considered within reach during the 1990s (Levine et al. 1992). According to Meier (1991), more than 25

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

81

percent of the current U.S. refrigerator electricity demand could be reduced by cost-efficient measures. Meiers calculations assume an annual discount rate of 10 percent, which looks low in light of the above discussion. Using a rate of 30 percent instead results in positive costs of all saving measures considered in this case. An example analyzing costs and emissions of different refrigerator types, based on data of IIASAs CO2DB database, is shown in Figure 3-16.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

82

Figure 3-16: Energy requirements, costs, and CO2 emissions for six energy chains ending in refrigeration.

Source: Messner and Nakicenovic 1992.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

83

The figure shows that an advanced refrigerator model provides cheaper services than even the best model of today, even if its electricity comes from a source that includes carbon removal. The message of this subsection is that successful R&D in energy-efficient household appliances is only the prerequisite for reducing final energy consumption and carbon emissions. To actually realize existing potentials, policy must help improve consumers access to information and/or involve instruments such as standard setting, taxes, and appliance energy labeling.

3.5.2 Fuel-Mix Changes


Figure 3-17 presents the calculated CO2 emissions and CO2 reduction costs for residential space heating. The data represent a residence with 150 square meters of living space at three levels of building insulation standards. The CO2 reduction costs are calculated as the differences between the reference case (gas heating and 1990 insulation standards) and each alternative considering the levelized annual heating costs. In addition to the emissions related to residential heating systems, the CO2 emissions of the figure account for all emissions along the energy delivery chain.

Figure 3-17: Carbon emissions (line) versus CO2 reduction cost (bars) for residential heating. The abbreviations represent the three insulation categories in ascending order of technological sophistication (0, I, II): natural gas; a hydrogen delivery chain based on hydro-electricity and electrolysis (ElH2); and photovoltaic electricity and electrolytic hydrogen (PVH2).

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

84

Figure 3-17 conveys that improved building insulation is the single most important factor for immediate CO2 emission reductions. This, and high-efficiency heating technology, even for natural gas-fueled systems, could lead to substantial emission reductions. There, the costs of CO2 reduction are negative, i.e., lowering CO2 emissions reduces heating costs at the same time. Likewise, the combination of hydroelectricity and electrolytic hydrogen could generate net savings if used in superinsulated residences (ElH2-II). Photovoltaic hydrogen in conjunction with superinsulation (PVH2-II) achieves zero carbon emissions for $140 per ton. Commercial heating follows the trend of residential heating. Here, the cogeneration of electricity and space/process heat production is an essential prerequisite. Improved insulation and phosphoric-acid fuel cells (PAFC) would result in CO2 reduction costs of approximately $2580 per ton of carbon.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

85

Chapter 4: Power generation technology clusters: present status and its potential
4.1 Nuclear Industry: a paradigm in crisis
by D. Finon, IEPE Nuclear technology has experienced an important diffusion in the 70s and 80s, as a result of an important technology push, originally carried out by governments of the major industrialised countries. However, the importance of nuclear energy for the world-wide production of electricity (17% in 1995) cannot conceal the great crisis that its diffusion has undergone in the whole world. According to the projections made at the end of the 70s, the world-wide electronuclear capacity should have reached 1,300 GW in 1990 and 3,600 in the year 2000. It was 325 GW in 1990 and will reach 366 GW in 2001, at best. What changes in the field of the selection of electric production techniques would encourage a future boost of its diffusion, especially from the technological perspective? Is it an answer to the increase of world-wide energy needs, particularly in those emerging, rapidly-developing countries? Could the necessity to meet the limitations of greenhouse effect gas emissions agreements revive its development? Nuclear technology has developed following a precise "technology push" model. This model, less and less used, presents three main characteristics: it concerns complex technologies - its projects are defined according to technological objectives, regardless of economic and commercial feasibility - nationalist and military aims: only a very small number of big, national, industrial firms can appropriate the technology The introduction of hybridised nuclear technology through steam turbines in the 60s and 70s meant a change in the electricity production paradigm. This change can be situated in the continuation of the traditional technology trajectory. This trajectory, almost saturated before, had a tendency to focus on the exploitation of the scale effects which lead to an increase of capitalistic intensity.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

86

The selection of competitive nuclear technologies was realised quickly, with a characteristic lock-in phenomenon adaptable to American techniques for light water reactors, in spite of their rather poor performance. BWR and PWR techniques have benefited from a prior military impulse (submarine reactors, production of fissile material). They also benefited from the US government support in the geopolitical arena (control over the risk of proliferation permitted by American supply of enriched uranium) and from the market power of the four major American industrial groups of electrical and mechanical construction, which have already licensed the main German and Japanese groups (Bupp and Derian, 1978: Cowan, 1990). This evolution seeks the introduction of a new radical innovation, which is sustained by organisational inertia, allowing to transfer the preparation problem of large public researching centres to non-strictly nuclear tasks (Finon, 1989). However, the industrial groups, soon confronted to their sales reduction, preferred to focus on incremental innovation strategies based on light water reactors that public research had deliberately discarded. Therefore, public research will partially reconsider it again. At the end of the 60s, there was a consensus disruption, related to the appearance of new social demands and values (safety, health, life quality, participation, etc.). Nuclear development has been a major focus of new social conflicts because it embodies different critical aspects of political control in industrialised societies, and also due the specific nature of its risks, from which particular fears can also arise. This crisis of social acceptance has put off its commercial diffusion from the mid-70s in industrialised democratic countries, except for France and, to a less extent, Japan. The significant slackening of the development of electric power (from a 7% to a 1-2%) that has ended in the appearance of strong over-capacities, has but attenuated the effects of this blockage. Many orders have been cancelled too, especially in the United States (119 cancellations from 1975 to 1978). The reason of this demand decrease can be mainly attributed to: technological complexity safety demands institutional weakness great indivisibility of nuclear equipment

Nuclear development between incremental innovation and opportunities trajectory changes. Some advanced developments (HTR) have been abandoned: efforts for super-generators and for a new management of the wastes have been abandoned in most industrialised countries.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

87

A process of incremental innovation, improving the adaptation of 1st generation reactors has substituted the technology push. Its a question of preserving or restoring social confidence by placing in the market reactors that meet stronger safety norms: By reinforcing isolation systems Through a better prevention of serious accidents produced by fusion of the nucleus. By reducing accident probability. By simplifying exploitation

The aim is to reduce costs and investing risks, by simplifying the design of the reactors, reducing the components and the instrumentation costs. This would lead back to a learning process through standardisation. The result is a reduction of the time and the cost of installation and control authorisations, benefiting from mass production effects and arriving at a limitation of local constructions. New developments are based on the growing use of quality steel, simpler materials which are less sensitive to operating errors and information technologies. Looking for a greater divisibility of the equipment more compatible with financing constraints or faster rentability strategies is very important (see the AP 600 Westinghouse and the AB 600 General Electric developments, partly financed by the US Department of Energy). Evolutionary LWR The nine constructors present in the market are nowadays capable of offering, very often in the context of an alliance, better-designed PWR or BWR reactors (see figure 5). Some techniques are already developed. General Electric, in alliance with Toshiba and Hitachi, is the most advanced, since the construction of two 1450 MW ABWR reactors in Japan (first start-up in 1997). The first N4 reactors (PWR) by Framatome, recently established, also belong to this category. Meanwhile, the creation of the European Pressurised Water Reactor (EPR) prototype, studied by Framatome and Siemens since 1990, in the frame of the REP 2000 project, could be built in France from 2000 to 2005. Passive safety LWR reactors (or revolutionary) These reactors are only at a design stage. They are studied especially in countries where their completion has been blocked, in order to commercialise reactors of a completely different design and undermine objections. Passive safety is ensured through a major thermal inertia of the primary circuit and of the weakest and specific fuel potential. The evacuation of the heat in case of an emergency stop is, thus, easier.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

88

Stage of the development of the advanced LWR techniques and passive safety techniques.
Concept in development Agreed concept Project prototype Prototype in construction Advanced development stage

Advanced reactors (evolutionary)

European Pressurized Reactor: EPR

ABB-CE : System 80 + (1300


MW PWR)

Westinghouse -Mitsubishi : APWR (2X1420 MW in Japan) Commande 1998 ? :

General Electric ABWR 2 prototypes of 1350 MW (Japan) Start up 1997-1998 :

Framatome : N4 (4 reactors) 1996-1998

ABB-Atom : BWR 90

Passive safety reactors (revolutionary)

General Electric SBWR

WestinghMitsub SPWR

Westinghouse AP600

Siemens : SWR 1000

European Passive Plant

Renewed technology push?

The heritage of advanced reactor programmes Programmes have been carried out in France and Japan concerning liquid metal fast breeder reactors (LMFBR), as the inertia created by recent efforts to design complex prototypes is to be developed. The importance of accumulated responsibilities and effected investment should

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

89

probably maintain programmes alive for a decade, after which they are likely to disappear because of the lack of demand pull. The technique studied at the CERN (Genva), backed by the European Commission and the Spanish industry, is but at a preliminary stage. The sub-critical character of the nucleus prevents fusion risk, as the fission reaction is interrupted by particle flux suspension. Besides, its particular neutronics allows the reduction of the actinide production and the consideration of long-term waste transmutation. Moreover, the thorium-U233 cycle presents higher resistance to proliferation, but without radical rupture compared to traditional reactors. Implementation and diffusion of this new nuclear reactor, a new paradigm indeed, require the mastering of a vast number of techniques: powerful linear accelerators adapted to continuous long-term functioning, lead cooling technology (metallurgy, pumps, valves), controlling ThU233 combustible elements (manufacture, exposure to irradiation), adapted techniques for the management of wastes, the type of storage of residues. Therefore, new specific skills have to be developed for nuclear R&D agencies, electromechanical enterprises and companies within the nuclear cycle. In industrialised countries, there are demand pull factors that could provoke the diffusion of nuclear technology to be revived. These are the investment necessity in power production as the installations become obsolete and the anticipation to tensions in the gas market (in case there is too much need of gas-combined cycle units by competing technologies). In rapidly developing countries with limited resources, the growing needs of power capacity will be a paramount factor. On the other hand, governmental commitments to prevent the greenhouse effect by limiting gas emissions are also to be taken into account, within the international framework that will be progressively established in the two coming decades. Drawbacks to the solution of the social acceptance crisis The non-fulfilment of the nuclear technology system would have been resolved at the same time as it was established if the key issue in the question of wastes would not have been so controversial. There are no clear principles about the necessary scientific evidence to consider the acceptability of a definitive storage installation, regarding demands on duration and intergeneration issues (Berkhout, 1991). With no other alternative available, temporal surface storage is nowadays considered as a necessary evil, but it is no definitive solution. Therefore, acceptance of definitive storage areas is a decisive issue. The question of wastes could constitute a permanent focus of public interest on nuclear technology. For those opposed to it, it constitutes an effective tactical means to face an eventual revival that could prevent the appearance of a politically credible solution. Furthermore, the present lack of diffusion of nuclear technology limits a research process on the end-of-cycle waste problems. The industrial organisation of the electric sector, which is based on regulated monopoly, has favoured electronuclear technology diffusion mainly due to two reasons:

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

90

allowing the client to postpone the costs and risks and ensuring a stable return level, this model authorises capital investments with a longer pay-back time; likewise, this model allows the socialisation of the risks and the costs associated to eventual accidents, the management of wastes and equipment dismantling; if regular provision mechanisms can finance the anticipated expenses associated to these two problems, unforeseen additional costs can be wholly transferred to the price paid by the consumer, or be financed by the taxpayer.

Competition regulations, in a private-property rights framework, seem to be incompatible with nuclear assets developments. Firstly, competitors tend to privilege divisible investments and look for shorter repayment deadlines of the order of 5 or 6 years, instead of the 11 or 12 years admitted in a framework of regulated monopoly. Secondly, the combination of competitors/private operators forces the disclosure of real costs. Therefore, it is no longer possible to rely on a complete socialisation of unforeseen costs and of those risks associated to nuclear development, even when states can somehow guarantee a financial-risk cap in the event of nuclear accident. Finally, the associated economic risk carried by rival operators not by the client- is no longer perceived by private investors as identifiable and assessable.

4.2 Clean Coal Technologies


by Mark Whiteley, ESD A significant amount of world wide electricity production comes from coal combustion. In Europe, about 35% of electricity comes from solid fuels. The majority of the coal is burnt in pulverised fuel (PF) boilers heating water to drive steam turbines. However, in todays terms, these PF turbines are relatively inefficient with high levels of emissions. These disadvantages have driven research into efficiency improvements (better turbines, higher boiler temperatures), alternative methods of combusting coal (gasification, fluidised bed combustion), co-firing with other fuels, and even the conversion of coal into alternative types of fuel (eg. liquefaction, pyrolysis). This report analyses the technological changes that have occurred within the combustion process itself to improve the economic, efficiency and environmental performance of electricity from coal combustion. Clean coal technologies are not a new concept, as an understanding of the theory behind these applications has been in the public domain for decades. However, the process of transferring the theory into practical commercial applications has proved to be difficult and still proves to be the main stumbling block behind their lack of widespread implementation. There are many reasons behind this problem, the main ones of which are covered in this report. There are many factors forcing change in the European and world-wide markets. These are occurring at a rapid pace, predominantly by technological change, but also from other economic and political factors. The dynamics of the changes are provided in more detail during the rest of this section. There are many factors influencing leaps in technological progress, each of which lead to improvements in various aspects of clean coal combustion. Some of the forces behind technological change within coal-based power generation sector are listed below. Economics

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

91

In Europe, growth in electricity demand has been relatively low over the last two decades. Therefore, the factor determining the construction of a new plant has tended to be as a replacement for retired power stations, unless there are other circumstances causing changes in the market. There are two major factors that affect the economics of clean coal plant. One, fuel costs, is uncontrollable, while the other, investment costs, can be directly affected through research and development. If clean coal is to become the first choice in new plant construction, it has to become economic against the alternative technologies such as traditional coal-fired pulverised coal-fired steam turbines and gas-fired combined cycle power plants. Fuel price Another economic factor against clean coal is the price of the fuel itself. Deep mined coal in Europe is expensive in comparison to other fossil fuels, so the various indigenous coal industries have only survived owing to government support, be it in the form of a direct subsidy or by guaranteeing prices with the utilities. On the other hand, cheap imports are available, so this is not necessarily a factor against clean coal technology. However, despite the world market price for imported coal being relatively stable, this can be greatly affected by shipping costs, which is an added risk. Competition Competition between various generating technologies is intense in Europe. The future for coalfired generation is clean coal. Therefore, as Europe has broad experience in coal burning technologies, intense research is being carried out to make clean coal competitive against alternative technologies, especially with respect to the export market to Asia and the rest of the world. Private ownership of the utilities has significantly changed the culture of these organisations. Over the last few decades, investment policy has become much more financially based. This is currently a factor against clean coal. On the other hand, this gives the component manufacturers the opportunity to invest in clean coal plant themselves, which frees them from the constraint of having a single/few electricity supplier(s) within the region. However, despite no clean coal plant having yet been built in Europe as a result of privatisation, there is scope for this to happen. Bearing in mind the liberalisation of electricity markets, the change towards third party access is more associated with choice to the consumer. However, this allows the concept of product differentiation to be introduced. It is possible that clean coal electricity can be marketed as a premium source of electricity which will encourage the development of this new market. Further research would be necessary in this area to investigate the possibility of clean coal electricity as a niche market and to ascertain the type of niche that this technology can hold. Environment Coal is a relatively dirty fuel compared to other fossil fuels. This is in terms of carbon dioxide emissions (global warming), sulphur dioxide and nitrogen oxide emissions (acid rain) and ash disposal (heavy metals to landfill). Therefore, high levels of research are being carried out to minimise the environmental effects of coal burn, especially in terms of acid rain mitigation. Efficiency improvements will lead to reduced CO2 emissions per unit of electricity produced. Security of energy supply

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

92

Coal is Europes largest indigenous energy source, so its use in the past was encouraged as a means of minimising energy imports. However, owing to changes in the world coal trade and cheap imports from other countries, the majority of the European coal industry has closed down during the last fifty years. This has led to a perceived decrease in the importance of coal as a fuel. A second major impact on the industry has been the termination of the ban on the use of natural gas in electricity generation. As cheap natural gas supplies are plentiful in Europe, there is currently little need for new clean coal plant. However, in the medium to long term, coal is expected to achieve a renaissance as natural gas becomes a scarcer commodity. Technology leadership and exports The main rationale behind maintaining a thriving clean coal technology industry is the export market to developing countries, especially in Asia. For Asia, an increase in the market for clean coal is expected over the next few decades. By being technology leaders, European organisations can benefit from their expertise in these markets. The net result is that these exports can be used to develop and test new processes in preparation for penetrating the European electricity generation market itself. Key players within the industry The players forcing change in clean coal technology are both external and internal to the industry. The main external influence comes from international and national government funds. For example, the European Commission is a major source of funds encouraging research, development and demonstration of clean coal plant. This is making Europe, with the USA and Japan, a world leader in clean coal technologies, which provides an excellent basis for exports to the rest of the world. Alternatively, government can force change through regulations and legislation. However, as the majority of the relevant regulations refer to emissions, coal combustion is penalised owing to its high emissions. On the other hand, laws can be introduced requiring long term security of fuel supply. This would help to secure the majority of the remaining deep-mined coal production in Europe, which is currently under threat from cheap imports and competing fuels. Another key type of player is the utilities. Their aim is to provide the most economic electricity to the consumer within any restrictions set by government. If clean coal developments can make it the best option in certain locations, the long term future for coal combustion in Europe will be assured. Additionally, the faster that technological progress can be made, the better are the prospects for clean coal in the rest of the world. The final key players are the manufacturers and installers of clean coal technology plant and components. They have a vested interest in the rapid integration of the plant into a first choice technology. Their current markets are in the developing world where experience can be obtained into the operating characteristics of this plant. It is vital that this experience can be gained so that continuing improvements in efficiencies and emissions from clean coal combustion can be made.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

93

Amongst the main industrial actors involved in clean coal developments, one could outline Foster-Wheeler Energy, Siemens AG, Babcock Energy International Combustion Ltd, Asea Brown Boveri and many others manufacturers, utilities and technology integrators. Key technology developments There are many different clean coal options based upon a small group of technologies. The main ones are pulverised fuel combustion under critical conditions, fluidised bed combustion and coal gasification. The main technological options arising from these are:

Supercritical and ultra-supercritical coal Most conventional power stations use sub-critical pulverised fuel (PF) combustion, in which coal is ground into fine particles injected, with air, into a combustion chamber. The particles burn in suspension and heat water tubes in the combustion chamber walls, raising high-pressure, high-temperature steam to drive turbine-generator sets. Supercritical PF combustion is an evolutionary advance of sub-critical combustion, in which higher steam pressures and temperatures are used (above 221 bar and 540 C) to raise efficiency levels to 44%. Several supercritical plants are in use in Europe, mainly in the Netherlands. Ultra-supercritical plant is currently under development, employing steam pressures above 248 bar and temperatures over 566 C, and expected to achieve generation efficiencies of up to 47%. New PF plant in Europe will almost certainly be of supercritical or, in time, ultra-supercritical design, with associated emissions reduction technologies, including selective catalytic and noncatalytic reduction (SCR/SNCR), low-NOX burners, fuel staging, flue gas desulphurisation (FGD) and dust collection. Equipment manufacturers tend to prefer this technology to more radical new technologies such as IGCC, because it represents and evolutionary advance of the tried and tested conventional steam cycle. Conventional supercritical coal-fired steam power plant employing elevated live steam parameters have already been built in past decades. Austenitic materials had to be applied for components operating in the high-temperature at that time. Recent developments in the material properties permit the use of ferritic/martensitic steel in present state-of-the-art hard-coal fired power plants and steam parameters of 221 bar and 540C. R&D activities for ultra super critical plant are aiming at higher steam parameters of 248 bar and 566C. For steam generator components, pipes, and turbine components, nickel based materials and methods of manufacturing the named components from these materials have to be developed. However, ultra super critical is still at the development stage, and demonstration plants of this technology can not be expected before 2005-2015. Presurized and Atmospheric Fluidized Bed Combustion (PFBC/AFBC) In fluidised bed combustion, a continuous high-velocity stream of air is injected through a bed of mixed inert material, ash and fuel, creating a fluidised bed in which the fuel particles move about freely in suspension. In bubbling atmospheric FBC, the bed remains at the bottom of the combustion chamber, with a defined surface level. In circulating FBC, which is more efficient, higher gas velocities are used resulting in a turbulent cloud of solids throughout the combustor.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

94

FBC allows rapid and complete combustion of fuel at temperatures around half those of conventional PF plants. In-bed heat exchangers are used to generate steam for industrial or power plant use. Emissions of NOX are limited because the combustion temperatures are low, and SO2 can be removed by adding limestone to the bed. Bubbling AFBC technology is very useful for the efficient combustion of poor quality fuels (e.g. low-grade coal, lignite, peat, wood, biofuels and waste). The technology is well established for industrial and small power applications and for CHP. Circulating AFBC is generally preferred for large-scale power applications (over250MWe). PFBC is based on AFBC but takes place within a large pressure vessel, at pressures around ten times above atmospheric. PFBC can be integrated into a combined-cycle system, where electricity is generated first in a conventional steam turbine-generator set, and then the hot exhaust gases drive a gas turbine to generate additional electricity. More heat is then recovered from the turbine exhaust gas, to give an overall thermal efficiency of about 44%. There are three commercial-scale bubbling PFBC plants in the EU, and several demonstration plants are operating elsewhere in the world. Second-generation PFBC plants are now being designed, which incorporate fluidised bed gasification followed by char combustion (a hybrid cycle). PFBC can therefore be considered as commercially available and applicable for a large variety of coals. The pressurised combustion reduces the space requirements and the fluidised bed can be designed to control emissions of SOX (by admixing limestone) and NOX (by air splitting and temperature control in the furnace) below the environmental standards without cost intensive flue gas cleaning. Using cyclones and candle filters, the flue gas particles can be reduced by 99.9 % before entering the gas turbines, which provides sufficient protection of the turbines and complies with most requirements for emission control. Integrated Gasification with Combined Cycle (IGCC) In IGCC systems, coal is gasified (by reaction with steam, oxygen or air), and the hot gases are cleaned and burnt in a gas turbine. Exhaust heat from the gas turbine (and from the gas cleaning and gasification processes) is used to raise high-pressure steam for additional electricity generation. IGCC plant can achieve net efficiencies of 45% and can be used for low grade fuels (e.g. petroleum coke or refinery residues). IGCC technology is still at the demonstration stage, with demonstration plant in Europe (at Buggenum in the Netherlands and at Puertollano in Spain) and in the USA. It offers the possibility of power generation at very high efficiencies, taking in this manner full advantage of the achievements on gas turbines and combined cycles technology. Decisive characteristics of integrated gasification cycles are the gasification processes (entrained flow, fluidised bed and fixed/moving bed) and oxidant (oxygen- or air-blown). Demonstration plants with an installed capacity of 200-300MW are under construction. The commercial availability of larger units is not expected before 2005. Integrated Gasification with Humid Air Turbine (IGHAT) In IGHAT, gasification of coal is followed by combustion in a Humid Air Turbine (HAT) cycle. HATs are based on gas turbines, without a bottoming steam cycle, with two modifications to

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

95

improve efficiency: multi-stage compression of the turbine air with recuperative water cooling between each stage to reduce the compressor work; and additional flue gas heat recovery in a recuperator for water and its use for compressed air saturation prior to combustion. In conventional gas turbines, more than a third of the power generated in the expander is absorbed to compress the working fluid. This loss of exergy is increased by the requirement for an excess air flow to allow cooling of the turbine components. Humid air turbines (HAT) allow for lowering this inconvenient disadvantage in two ways: first, they use intercoolers on a multistage compressor, therefore reducing the power requirement of compression and producing low temperature heat. Secondly, moisture is added to the compressed air (20-40%) in a saturator. To produce this hot water heat is recovered from the compressor intercooler, aftercooler and turbine exhaust. When HAT is integrated with a coal gasifier (IGHAT), there is a large amount of heat available from the gasifier and other processes (including air separation plant for oxygen blown gasifiers). The hot water is brought into contact with the compressed air in a counter current saturator. Humid air leaving the saturator may have a moisture content of 20% (natural gas HAT) and 40% (IGHAT). This is a key stage of the HAT cycle, since the saturator is a multistage column and the heat exchange approaches reversibility. The humid air is further heated against the hot turbine exhaust in the recuperator. The variable boiling point working fluid of steam and air avoids the large temperature divergence between the water and turbine exhaust in a gas turbine combined cycle. Thus, the moisture addition increases the work output form the turbine, while the intercooling reduces the compressor work requirement. This combines to increase the net power output. The IGHAT cycle can achieve efficiencies higher than those of conventional combined cycles, and is especially adapted for base-load electricity production. An additional feature of this cycle is that, given the high moisture content of the exhaust gas, it is particularly well-suited for district heating. Direct Coal Combined Cycle (DCCC) DCCC combustion in a gas turbine offers the potential to increase the efficiency of electricity generation from coal by eliminating losses during gasification. However, the main technical barrier is damage to the turbine blades from hot ash particles. The research on direct coal firing in gas turbines has been carried out for over forty years. Since 1986, Westinghouse and Textron have run a project at Morgantown Energy Technology Centre of the US DoE, with federal funding. The initial difficulties were related to the severe effects of coal ash on turbine blade path components (corrosion, erosion and deposition). Latter-day effort on direct coal firing (DCF) has concentrated on developing high pressure (12-16 bar) slagging coal combustors which allow removal of ash as a liquid prior to entering the turbine. The hot gas clean up must take place above the ash melting temperature (1400-1600C) and high pressure (at least 18 bar). This high temperature provides additional gains in exergy with respect to other advanced coal cycles, such PFBC or IGCC. The molten ashes accumulate on the edge of the slagging chamber by a centrifugal effect. Nevertheless, there is an efficiency penalty with respect to gas-fuelled natural cycles: the foreseeable efficiency ranks around 44%, and, in general, may be estimated as the efficiency of natural gas

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

96

combined cycle minus a penalty of around 6 percentage points. Its estimated costs would be twice those of gas-fuelled combined cycle. It should be kept in mind that DCFCC is not yet a proven technology, its state of development being still in the laboratory phase. Apart from the slagging combustion system and the liquid ash and contaminants removal, all other components of DCFCC (gas turbine, steam cycle, etc.) are commercially available technologies. A study carried out by Westinghouse/Gilbert-Commonwealth Inc. in 1990 investigated the economics of direct coal fired gas turbines fitted with slagging combustion technology. The study concluded that the cost of electricity from this plant type could be 11-18% cheaper than a comparable 220 MWe pulverised coal boiler fitted with FGD. Other options The Combined Kalina Cycle is an upgrade of the standard Rankine cycle, which, as used in most power generation processes today, uses a single fluid (water) which is expanded in a steam turbine and then condensed and returned to the boiler. The Kalina cycle uses a mixture of two or more fluids, typically ammonia and water, and varies their ratios at different parts of the cycle. This allows optimisation of thermodynamic efficiency, with possible improvements of up to 10%. Conventional steam cycle plant can be adapted to use the Kalina cycle by suitable changes to the condenser. Other possible future technologies at the R&D stage are Magneto-Hydrodynamics (MHD) and Pressurised Pulverised Coal Combustion (PCCC). Techno-economic performance and projected developments The technical performance of each of these options is shown in table 4.2, whereas the economic data of these five technologies are outlined in table 4.3. Table 4.2 Technology Supercritical PFBC IGCC IGHAT DCCC Gross capacity (MW) 650 550 760 400 40 Efficiency (%) 2000 2030 44 49-52 43 44-46 1 46 50-53 40 44-46 1 46 50-52 Lifetime (years) 35 35 35 35 20

Table 4-1: Technical performance of clean coal technologies (2000)

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

97

Capital cost (1ECU/kW) Technology Supercritical PFBC IGCC IGHAT DCCC 2000 1268 1030 2 1370 1300 2 1200 2030 968 900 900 900 950

Operation & maintenance costs Fixed Variable (1ECU/kW/year) (1mECU/kWh) 45 1.8 77-67 2.4-2.2 70-60 1.75-1.5 35-30 1.0 45-30 4.0

Table 4-2: Clean coal technology economic data (2000-2030) Notes: 11990 ECU 2 2005

Environmental impacts There are three main environmental impacts associated with coal combustion. These are: Carbon dioxide (CO2) - global warming Sulphur dioxide (SO2) and nitrogen oxides (NOX) - acid rain Ash disposal issues

CO2 emissions are directly related to the carbon content of coal, and thus to the efficiency of the plant. However, the acid rain effect of each technology is much more variable. Emission figures are shown in table 4.4. Efficiency (%) 2000 44 43 46 40 46 Emissions (kg/TJ) SO2 NOX 2000 2030 2000 2030 55 30 100 79 69 65 85 80 1 1 19 17 38 33 10 6 20 20 1 1 20 20 55 50

Technology Supercritical PFBC IGCC IGHAT DCCC

Table 4-3: Clean coal technologies environmental performance - acid rain 1 Note: 2005

In terms of emissions output, supercritical uses abatement technologies such as Flue Gas Desulphurisation (FGD) plant, Selected Catalytic Reduction, and low nitrogen oxide (NO X) burners. Emissions abatement for the others is integral within the technologies themselves (i.e. hot gas clean-up before combustion, limestone slagging, etc.)

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat Market penetration and prospects for future developments

98

In Europe, the current market penetration of clean coal technologies is extremely small. There are only a few sites, the main ones being in the Netherlands and Spain. However, only supercritical has actually penetrated the market, as the others are demonstration plants. However, on a world wide basis, there are several clean coal generating stations in the developing world where there is rapid growth in electricity demand, particularly in countries such as China. It is these areas where significant growth in market penetration will be achieved. As experience is gained and the technologies become more economic, the potential for significant penetration in Europe will increase during the next decade. There are many factors affecting the almost general lack of clean coal plant installation within the European Union so far. However, there are two factors that have combined to dominate all of the others. The first was the lifting of the EU directive banning natural gas use in power stations, which was predominantly prompted by the realisation that gas was being wasted by flaring off to get to the underlying oil, rather than by the move towards liberalisation. The second factor was the availability of efficient and relatively cheap Combined Cycle Gas Turbine (CCGT) technology. Consequently, even cheap standard coal plant cannot compete in direct terms with the combined cycle gas turbines currently being constructed. The other major barrier to the widespread introduction of clean coal is environmental impact. Even the relatively low emissions from clean coal plant are greater than those from natural gasfired electricity generation. With climate change commitments requiring the reduction of overall carbon dioxide emissions, the clean coal technologies may only become an option where they replace a dirtier technology, which is old coal or oil plant. On a world-wide basis, coal will remain a major primary fuel for at least the next two decades. Countries with a large indigenous coal resource and a rapidly growing demand for electricity, such as China and India, will inevitably build significant new coal-fired electricity generating capacity. In these circumstances, however, competition arises from traditional pulverised fuel plant which is cheap and an established technology. This issue cannot be underestimated. There are two aspects to be considered when exploring the future potential importance of clean coal. The first relates to the fuel. Coal is the most abundant of the fossil fuels and therefore has a long term future after natural gas and oil reserves have been exhausted. Thus, the long term prospects for clean coal are good. However, this assumption is based upon the concept that the reserves are accessible. The European (deep mine) coal industry is shrinking rapidly and is already a tiny proportion of even the industry 20 years ago. If this decline continues until there is almost no remaining European deep mine industry, many of these current reserves will become inaccessible and cease to be a fuel source. The second aspect is the technology. Coal is a major world wide energy source for electricity generation owing to its abundance of supply, and it will continue to be so for many years. However, coal-fired generation will only achieve its full potential if clean efficient plant is developed and installed. Therefore, it is imperative that the best technological options for clean coal are developed as soon as possible in preparation for its resurgence as the technology of choice.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

99

Economic competition, constraints and costs: technology push and demand pull The factors affecting economic competition are related to the fuel itself and the technology. In comparison with a few decades ago, coal is now a cheap plentiful source of fuel, especially from the open-cast mines in South Africa, Australia, Asia and Latin America. Nevertheless, in a European context, coal is relatively expensive, mainly owing to the currently low gas prices. Europe has a large natural gas resource, but this is expected to start depleting within the next couple of decades. Once gas prices increase, as is foreseen, coal will again become an economic option for electricity generation. On the other hand, a major threat to the coal industry is the prospect of the introduction of green taxes, such as a carbon tax. This will penalise coal and make it relatively uneconomic in comparison with most other competing fuels. With respect to the technologies involved, clean coal is still an uneconomic option. Demonstration plant needs to be constructed, so that experience can be gained of the theoretical concepts associated with some parts of the generating process. The consequence over time will be an established range of technologies that are reliable and which can compete against alternatives. Both technology push and demand pull have affected the development of clean coal. They both have positive effects for the development of clean coal technologies. In the present European market, there is very little scope for clean coal in the short term. However, the medium and long term prospects for the technologies involved can only be brought forward if demand is stimulated by government. As the European electricity market becomes more liberalised, clean coal plant will only penetrate to significant levels if it becomes economic against alternative fuels and technologies. This can be achieved by subsidising the capital cost of the plant or by subsidising plant operation. Plant operation can be subsidised by receiving a premium price for electricity generated (similar in principle to the UK Non Fossil Fuel Obligation) or by reducing operating costs (tax credits or fuel subsidies - for example, the former German KohlPfennig, Spanish electricity subsidies, etc) The alternative means of stimulating demand is to force it. This is achieved through regulations requiring the implementation of clean coal plant, or by preventing the market penetration of competing options. Results of R&D Research and development in clean coal has two effects for the technology. Ultimately, it has the effect of making it more economic, with the major issues being: operating efficiencies emissions (sulphur dioxide, nitrogen oxides, particulates) ash management and disposal control of the combustion process

Secondly, R&D is used to build demonstration plant so that the theories can be tested. The lessons learnt from full-scale plant are fundamental as part of the demonstration process.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

100

In terms of R&D management, there is also the question of combining all of these separate issues for the completed plant, as different areas of research can impinge upon the studies being performed in a different section of the electricity generating process. Therefore, in order to achieve the best benefits and value, it is vital that research and development is co-ordinated so that all results can be integrated to provide a valuable product. Conclusions: Prospects for Clean Coal into the 21st Century On a world wide basis, the prospect for clean coal is extremely good, especially in rapidly developing markets such as Asia. This is especially the case in more remote areas where the availability of alternative fuels is poor. However, in these countries, speed of development is often the primary concern and the traditional pulverised fuel combustion plant is often selected, mainly because the technology is established, easy to construct and cheap. Therefore, it is in these situations that the advantages of clean coal, such as higher efficiencies and lower emissions, need to be emphasised through international agreements (climate change - Kyoto), legislation and regulation within these countries. In Europe, there is little perceived short term competitive scope for large investment in clean coal technology plant, mainly owing to the low cost of natural gas and the maturity of the market itself with minimal growth expected. However, in the medium to long term, as natural gas becomes a more scarce fuel and prices increase, and in conjunction with further economic improvements in clean coal technologies, clean coal can expect to receive a renaissance as a feasible option for new large scale electricity generating plant. Another major issue is environmental legislation or taxation related to climate change and acid rain, in particular a carbon tax related to carbon dioxide emissions. This legislation can have both a positive and a negative effect on the feasibility of clean coal. On the positive side, it will encourage the implementation of clean coal plant as opposed to pulverised fuel plant. Conversely, a carbon tax will penalise coal and possibly prevent its widespread market penetration. In terms of research expenditure, coal is a medium to long term fuel option, which will maintain a significant presence in world wide electricity generation. The future of coal combustion is through the introduction of clean coal technologies on a wide basis. R&D and demonstration is necessary to achieve economic competitiveness for these technologies, and to enable clean coal to achieve a significant market share in electricity generation. However, it is vital that clean coal research is carefully co-ordinated so that the optimal benefits can achieved for the minimal cost. Therefore, it may be concluded that clean coal has the potential to become a major technology for electricity generation. However, there are several risks and possible obstacles in Europe in terms of security of fuel supply, which is less the case in countries that still have large amounts of accessible reserves. Other risks include environmental regulations, technological improvements, cost reduction and market confidence that have to be met or overcome, if clean coal is to achieve its potential.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

101

4.3 Fuel cells for stationary and mobile applications


by S. MIMA, IEPE Fuel cells technology, by directly converting fuel chemical energy into electric energy, can attain higher yields than that of thermic machines. Apart from their high global performance in the direct production of electricity, fuel cells present some other advantages: silent functioning, small pollutant emissions, relatively small size, good performance in partial charging, modular construction, short manufacturing time, quick replacement and economic maintenance. For all these reasons, fuel cells promise major implementations in a near future. The trajectory of an efficient and clean technology, but still too expensive Since 1990, fuel cells seem to have experienced a renewed interest and a number of bodies are engaged in strategies of industrial or user development: a growing number of economic agents, energy suppliers, manufacturers of production material, important chemical industries and R&D organisations. More than a technological trajectory, it must be referred to as a family of trajectories corresponding to the type of electrolyte used: Alkaline Fuel Cell (AFC), Phosphoric Acid Fuel Cell (PAFC), Molten Carbonate Fuel Cell (MCFC), Solid Oxide Fuel Cell (SOFC), Polymer Electrolyte Membrane Fuel Cell (PEMFC). The evolution of this family or cluster is characterised by its increasing variety, which is due to the determination of the agents concerned about fuel cell production to adapt to all the possible implementations. Although a hundred demonstration operations are taking place in the world nowadays (Table 1), fuel cells are still at an initial stage of their life cycle: Phosphoric acid fuel cells (PAFC), which constitute the first generation, are the only ones at a pre-commercialising stage. The second generation, molten carbonate fuel cells (MCFC) and polymer electrolyte membrane fuel cells (PEMFC), are at a stage of large-scale demonstration prototypes. PEMFC prototypes with a 10 30 kW capacity have been tested in their application to transport and emergency supplying. Solid oxide fuel cells (SOFC), representing the third generation, are at a researchdevelopment stage. Existing Units PAFC PEMFC MCFC SOFC 160 11 n.a. n.a. Installed Capacities 32 0.4 n.a. n.a. Largest Capacities 11 MW (IFC, Japan) 120 kW (Ballard, Canada) 2 MW (ERC, USA) 25 kW (Westinghouse, Japan)

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

102

Fuel cells present interesting characteristics in the production of electricity : 40% to 65% power yield combined heat and power production (co-generation) that allows rising total yields up to 85% great variety of usable fuels (natural gas, propane, butane, naphtha, methanol, carbonic oxide gas, hydrogen, gasified coal, biomass or land-field gas...) negligible noise and atmospheric pollution moderate power and easily divisible standard size small maintenance cost, due to the reduced number of mobile parts high quality of the steam produced by MCFC and SOFC, which can be used for cogeneration both in buildings and industry. They can become competitive from one hundred kWe to several MWe in three segments : gas-supplied sites of the tertiary sector isolated collective network sites interconnected sites or average power units (some MWe at some MWe tens) could be implemented at the centre of a consumption area.

For some years, the furnishing of electric vehicles with fuel cells has been seriously considered, allowing autonomy of 250-300 km against the 80 km of our best batteries nowadays. Using fuel cells for mobile implementations requires the following: reasonable weight, linked to the problem of hydrogen supply and storage constant/steady power an almost complete insensitivity to atmospheric temperature rapidly replaceable spares and an excellent degree of reliability

Fuel cells can compete with diesel vehicles in road transport, and can substitute electric vehicles in urban policies aimed at limiting local pollution, which is usually based on promoting clean vehicles.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Small decentralised units Capacities 10 kW 100 kW

103

<==>
1000 kW

Substitution of thermoelectric units 10 MW 100 MW

Applications

Transport : Stationary : inter-city bus co-generation fleets of lorries decentralised production individual vehicles centralised production high performance reasonable weight large variety of fuels excellent degree of reliability lifespan of more than 5 years rapid start-up high quality of the steam produced AFC PEMFC PAFC MCFC SOFC

Necessary requirements

locomotive s

Type of Fuel Cell

Drawbacks to diffusion It is obvious that fuel cells cannot easily find their way to substitute other rival paradigms in use. The different power-generation paradigms and internal combustion vehicles have benefited from continuous improvements for a long time and constitute a lock-in for new rival paradigms. Besides, several other obstacles prevent commercialisation of fuel cells: Considering the very small number of fuel cells produced every year and the materials employed, the cost and the purchase price of a fuel cell remains high (table 2), their production being characterised by few economies of scale, even less standardisation and a high intensity of qualified work.

PEMFC Present ($/kW) Objective ($/kW) Cost n.a. 46 (60 kW) mobile 2000 (40 kW stat.) 1000 (250 kW stat.)

PAFC 2500-100000 (system) 250-400 (cell) 1500-2000 (system 200 kW)

MCFC n.a. 1500-200 (system)

SOFC n.a. 215-650 (cell) 1600-3750 (system 50 kW)

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

104

As consumers are not familiarised with the advantages of fuel cells, they are not being taken into consideration for future implementations. The fact that there is no well-established industry in the production of fuel cells contributes to the high risk and cost and to the financing obstacles for their commercialisation. There is great difference between the results divulged by laboratories and those of practical implementations. Considerable efforts are necessary to overcome the process of change from a single cell, functioning in a controlled environment, to a cell module operating in a practical implementation. Certain technical obstacles must be overcome before fuel cells are commercialised, especially for large-scale mobile implementations: development of increasingly thinner proton exchange membranes, optimisation of electrodes, minimisation of platinum... There remain several technical and economic problems, especially in the storage of hydrogen, in these same mobile implementations. In the case of the cells destined to be used in electric vehicles, hydrogen can be supplied either by on-vehicle storage of methanol, associated to a reforming device which transforms fuel into hydrogen whenever necessary, or by pure hydrogen storage. The latter can be stored in five different ways: as compressed gas, in its liquid form through intermediate metallic hydrides, in hollow microspheres and in carbon nanofibres. The first option (methanol) is more convenient and cheaper than the second. In addition, it takes advantage of the already existing petrol stations. On the other hand, as it produces some carbon oxide (CO) and carbon dioxide gas, it pollutes. Competitiveness with other power production systems Fuel cells can become competitive compared to other power production systems such as the GTCC, steam turbines, diesel units for stationary implementations, especially in co-generation ranging from some hundred kW to some MW capacity. This is why their cost of capital must be inferior to 1500/1600$/kW depending on the implementations (specialised decentralised power production, co-generation, centralised power production). For mobile implementations, there are two arguments in their favour: the vehicle releases only the air coming from the steam and its yield is much higher than that of a motor submitted to the physical limitations dictated by the laws of thermodynamics. The fuel cell market covers four segments: city buses, fleet vehicles, individual vehicles and locomotives. Their diffusion by sector will begin with city buses and fleet vehicles before spreading to individual vehicles and, finally, to locomotives. Competitive access is more difficult for mobile implementations than for stationary implementations. In the case of fuel cell buses, if the cost of a PEMFC module is 300$/kW, the bus will be still 30% more expensive than a diesel bus. Mass production economies could make costs fall to less than 150$/kW. Furthermore, for fuel cell individual vehicles to become substitutes of electric vehicles in local anti-pollution policies based on clean vehicles, the PEMFC system can not exceed 55-46 $/kW.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

105

Competitiveness between different fuel cell types Several technical challenges remain unanswered and it is still too soon to foresee which of the fuel cells will reach commercial success. PEMFC and SOFC, which only contain solid components, seem to be the most promising, since they avoid liquid electrolyte defects. Thus, SOFC can have simpler designs, cheap ceramic or metallic materials, which allows reducing costs. Tests carried out in laboratories show that SOFCs can have more than a 10-year life span, that is, the double of liquid electrolyte cells. PEMFCs seem to be more suitable for transport implementations: they work at relatively low temperatures (around 80), providing significant energy from atmospheric temperature, ensuring a short start-up time. They are insensitive to the presence of carbon dioxide gas in the air, unlike "alkaline" fuel cells. Evolution of agents strategies and support policies The lack of information and the complexity of the technologies (AFC, PAFC, MCFC, SOFC, PEMFC), which demands a pooling of different abilities, have made it necessary for the different agents to co-operate in the development of fuel cells. They are, namely, industrial firms that develop and sell fuel cells, gas and electricity companies, big automobile manufacturers and professional associations. The main industrial firms developing and selling fuel cells are: IFC (US), CLC (Europe), Toshiba (Japan), Ballard (Canada), Fuji Electric (J), ERC (US), Melco (J), Sanyo (J), IHI (J), MC-Power (US), BCN (the Netherlands), Hitachi (J), Westinghouse (US), MHI (J), Allied Signal (US), Dornier, Siemens, ECN (the Netherlands), Sulzer (Switzerland) Ztek (US), De Nora, Ansaldo Ricerche (It). Their objectives for the financing of technical progression towards commercialisation are the following: a) in order to reduce costs: the reduction of surface area and volume per power unit the improvement order systems (i.e. intelligent or predicative systems) the manufacturing simplification

- the reduction of the cost of auxiliary elements and increase of their durability: turbocompressors, filters, catalysts, etc. b) in order to facilitate their exploitation: easy use and maintenance, especially for transport implementations normalising and modulating the elements, in order to facilitate technology exchange

- fuel cell integration in other equipment, especially in the event of motor overheating in transport Gas and electricity companies are major fuel cell buyers, namely, General Electric (US), Fuji Electric Company (J), Mitsubishi Electric Company (J), Elfraft, ELSAM (DK), Sydrakft, Vattenfall (S), Iberdorla (ES), ENEL, AEM, Acoser (IT) -the two latter being council services-,

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

106

SEP (NL), Tokyo Gas (J), British Gas (UK), Ruhrgas (A), SNAM (IT), Naturgas Syd (DK), Imatran Voima (FN), Autriche Ferngas (AU), Enagas (ES), ENI (IT). These companies consider fuel cells as an opportunity to approach their clients and to produce electricity according to their clients needs, with more than 60% efficiency, or 80% in co-generation. With more or less enthusiasm, automobile firms devote an increasing amount of their budget to the search of a fuel cell vehicle. Up to now, the rare number of vehicles of this kind, the size of a small lorry, were small factories where almost all the space was occupied by the fuel cell, its compressor and its tank. Progress has been made towards miniaturisation. Daimler-Benz is the first major international vehicle producer to have presented an electric passenger vehicle run on fuel cells. The first prototype model, called "New Electric Car" (NECAR I), was presented in April 1994 by Mercedes-Benz. Daimler-Benz presented, the first "standard" monospace run on PEMFC and still developed by Ballard Power System, in June 1996. This prototype is the first to keep the vehicles capacity. This vehicle can develop 50 kW gross power, with a weight of 6 kilogram per kW system. It reaches a maximum speed of 110 km/h, with a 250-km autonomy. Other producers in this field are: General Motors, Ford, Chrysler, Toyota, Honda, BMW and Renault. Public policies Important efforts have been displayed all over the world to develop this technology, but fuel cells commercialisation is slower than it was thought to be. It has been given a more active support in Japan and the United States, by means of governmental programmes and private companies. These efforts have been less systematic in Europe, where interest timidly arose only in 1985. The present challenge for governments is to provide a market pull in the first years of commercialisation, when costs are still higher than competitive access prices, due to the relatively low production levels. Distribution of fuel cell production units should also benefit from the reinforcement of environmental measures, as opposed to other power production means, and the pressure exerted towards some power production decentralisation in Europe. Cost perspectives On technical grounds, there is a great difference between the results divulged by laboratories and those of practical implementations. Considerable efforts are necessary to overcome the process of change from a single fuel cell, functioning in a controlled environment, to a cell module operating in practical implementations. Currently, fuel cell production is characterised by few economies of scale, even less standardisation and a high intensity of qualified work. The mass production effects associated with large-scale production and increasing standardisation must be sought in order to reach production levels. This standardisation will allow fuel cells to approach a level which can rival present-day power production techniques, in the case of stationary implementations. For mobile implementations, it must be even greater, if we want to rival already-existing vehicles at a

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

107

competitive level. But the perspectives of access to competitiveness are different, according to the hypothesis held back by the mass production effects and start-up costs considered. We may consider as start-up costs, the hypothesis defended by Daimler-Benz researchers, according to which technological improvements will allow a factor-10 cost reduction of current prototypes, up to the year 2003. Therefore, PEMFC cost estimates for 2003 will be 5,500-6,800 $/kW. Basic cumulative production is 2 MW. To estimate possible dates for access to competitiveness, we can refer to the following hypothesis of the cost of competitive techniques: the cost of capital of a combined cycle is 600 $/kW, that of a diesel bus, 150 $/kW, and that of a private vehicle, 55 $/kW. In a pessimistic scenario, built around the analysis of learning curves, fuel cells will be competitive for combined cycles after the first half of the coming century. Following the most optimistic scenarios, PEMFCs will be competitive for combined cycles around 2020, for diesel buses in 2050 and for individual vehicles from the year 2070. An approach to commercialising constraints must take into consideration not only unit technology costs, but also the cost of the associated infrastructures. For mobile implementations, it implies enormous investments to take the hydrogen to the petrol stations and deliver it to the drivers in a safe and secure way. There is no doubt that Americans and Germans prefer the option of an in-the-boot device, enabling the production of hydrogen from methanol. This solution has the advantage of being supported by already-existing petrol stations. Perspectives for market penetration Some experts consider that fuel cells will surpass world-wide sales outlets of 1500-2000 MW/year. Taking into account the capacity of current installations in the world, these objectives, especially for the year 2000, seem to us to be unattainable. In Europe, the four energy scenarios 2000-2020 of the European Commission foresee a fuel cell installed capacity of 4250 MW to 10240 MW -depending on which scenario-, which represents 1-2% of the overall electric capacity estimated for 2020. These estimates also seem somewhat optimistic for the 2001-2005 period, because they imply a rapid increase of fuel cell production during this period. If we do not take into account this constraint and if we work on pessimistic cost estimates, achieving these objectives needs the utilisation of market niches for stationary implementations (which concern decentralised power production, co-generation or centralised production): the relevant investment is about 9 thousand million dollars. Fuel cell diffusion for stationary implementation will probably begin by a specialised decentralised production, then by co-generation prior to extending to centralised production, where competitiveness is more difficult to achieve because costs are rather low. Even if environmental concerns, especially those linked to urban pollution, allow us to believe that mobile implementations will have a priority in fuel cells diffusion, we support the idea that this diffusion will begin by stationary applications, because: -competitiveness can be more easily reached in this sector -mass production effects could allow, in this sector, a procedure to lower the costs It is doubtful whether a relay procedure between these two types of implementation functions the opposite way. In the transport market, fuel cell diffusion will probably start by city buses and

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

108

fleets of lorries, before spreading to individual vehicles and, finally, to locomotives. It will be boosted by environmental regulations.

4.4 Wind power generation


by Ph. MENANTEAU, IEPE At the beginning of the eighties new tax policies in the United States favoured the use of renewable energy, and a market for low and medium power turbines was created. Tax incentives together with the regulation concerning the conditions of repurchasing electricity by electric power companies produced an extremely rapid increase in the number of devices installed, especially in California which became the the worlds biggest wind centre (I. Miles et al, 1994). From 1981 to 1986, wind power installed in California thus passed from 10 MW up to almost 1000 MW, but this rapid growth was suddenly interrupted because incentives were eliminated in the mid-eighties. The elimination or reduction of both federal and Californian State tax incentives in 1985, as well as the petroleum counter-crisis, noticeably slowed down the rate of installations in the United States: 400 MW were installed in 1985, 300 MW in 1986, 150 MW in 1987 and 60 MW in 1988. Keeping in mind that the American market of wind power devices was relatively important at that time, the industrial over-capacity, caused by the collapse of the demand, resulted in extreme competition between producers and some of them disappeared as prices dropped. The limitations of the American market led European producers (and mainly the Danish who had high participation in the United States) to concentrate again on their national markets. In the Netherlands and in Great Britain, wind power production thus became really significant at the beginning of the nineties. A remarkable fact is that wind power generation is not only developed in industrialised countries. India in particular experienced an important growth since the beginning of the nineties, to the point that the Indian market was second, after Germany, concerning new wind power installations (B.T. Madsen, 1995). At the end of 1996, wind power installations in the whole world exceeded 6000 MW and the annual electricity generation went beyond 10 Twh. This is low with respect to the scale of the electricity sector in general, but not to be totally ignored, because the growth rate of the global market has reached 20 to 30% during the last years. Introduction to wind power technology, present performance and perspectives Wind turbines allow the production of electricity for individual implementations (in particular lighthouses and buoys) or for the electrification of houses or villages in regions which are not easily accessible, especially in developing countries.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

109

Nevertheless, since the beginning of the eighties, the development and implementation of wind power generation is mainly centred on electricity generation to feed the power supply system. In order to reduce connection, infrastructure, maintenance and other costs, wind power devices are more and more systematically regrouped to form wind power centres, also called wind farms, which may contain hundreds of turbines (California) and generate power of up to tens of MW. Currently, in the most favoured sites as regards wind resources, the costs to produce wind power kWh are similar to those of traditional coal-fired power stations, but economic competitiveness is still far from being reached in more conventional sites. Furthermore, the rotor diameter, which was of 10 to 12 m in the early eighties, nowadays increasingly reaches 40 m, corresponding to 500 kW nominal power (as opposed to 50 kW with a 10 m rotor), with 40 m high masts. Nowadays, 750 kW windmills are being built and commercialised, and 1 500 kW devices with 60 m rotors are also being tested. These much larger dimensions of windmills are justified by economy-of-scale researches: more favourable distribution of very high windmills, higher productivity with larger rotors because of comparably lower maintenance costs, better exploitation of the available sites, etc. Nowadays, the average productivity of Danish windmills (450 kW model) reaches 900 kWh/m2 whereas the first models (55kW) produced approximately 400 kWh/m2. Similarly, in California the average productivity increased from 500 kWh/m2 in 1985 to 850 kWh/m2 at the end of the eighties, and some wind farms with particularly good wind conditions even reached 1450 kWh/m2 (San Gorgonio Farms - USA) or 1300 - 1400 kWh/m2 with the 10 best Danish devices (P. Gipe, 1995). The costs of wind power generation today are of about 0.05 up to 0.10 ECU/kWh (TERES II, 1996). It is obvious that this is still far from the 0,02 $/kWh stated by the DOE at the beginning of the nineties, and it is doubtful that it may ever be reached (K. Karas, 1992, quoted by P. Gipe). Nevertheless, there is a significant progression with respect to the costs of the first Californian installations in 1981 and 1982 which were near 0,50 $/kWh. Turbine installation cost almost 3-4000 $/kW at the beginning of the eighties. Nowadays, they cost approximately 1200 $/kW (P. Gipe, 1995) or 1100 $/kW (Braun and Smith, 1992) for medium power devices (4-500 kW). This includes the turbine manufacturing costs but those for installation, foundation, road access, connection to the power supply system, the purchase of the site, etc. have to be added, constituting 25 % to 50 % of the turbine cost. According to an AIE analysis in the principal wind power developing countries average manufacturing costs were of 780 - 1200 $/kW in 1995, i.e. an average of 1000 $/kW which means a slight decrease compared to the former year (AIE, 1995). In 1995, the average total installation costs were of about 1300 $/kW in these countries. Operation and maintenance costs have notably decreased during the last 15 years, and, at present, may reach 0.01 $/kW in the most favoured sites. Nevertheless, these costs, like those of installation, are totally variable because they depend on the site, the number and the dimensions of the installed windmills.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat Environmental impacts

110

Atmospheric emissions caused by wind power generation are insignificant compared to those produced by fossil energies. Usually they result from the energy contained by materials or used to construct, to install or to maintain the devices. The noisiness of windmills is often mentioned and not totally to be neglected although the noise level near windmills is rather limited: a modern windmill of 300 kW operating at a wind speed of 8 m/s produces 45 dB at a distance of 200 m, which is noisier than a bedroom at night but quieter than a house during the day (EWEA, 1991). The visual impact of windmills, and even more so that of wind farms, in the environment and often in nature reserves, is probably the main environmental disadvantage of this new type of energy. The first Californian installations, in particular, have significantly contributed to form a pejorative image of wind power. Perspectives and expected progress with respect to performance The energetic performance of modern windmills, which is already relatively high (80% of the theoretically available energy is extracted by the turbine at an optimum velocity M. Grubb, 1996) can be only slightly increased. Furthermore, to improve the performance of the devices, their dimensions have to be increased in order to profit from the much higher wind speeds at more altitude and to enlarge the swept rotor surface. This method, in use since the beginning of the seventies allows the average power of commercialised windmills to become 10 times higher, should still be applied for some years. The 500 kW threshold reached in the mid 90s is being surpassed by new 750 kW devices now on the market. Present pilot studies with offshore wind power generation seem to be quite interesting. By means of offshore production it is possible to profit from the much higher wind speeds and better location, avoiding major visual impact by installing the wind farms at a certain distance from the shore. Nevertheless, the obtained increase in productivity does not compensate for the extra costs of foundations, electric cables and maintenance up to now, so that an offshore produced kWh is 30 to 60 % more expensive than that of the equivalent overland configurations (M. Grubb, 1996). The global wind power generation capacity, almost zero in the early eighties, has reached 6000 MW in 1996, i.e. an annual electricity production of 10 TWh. The distribution of world-wide installed windmills has evolved in a revealing way during the last years because the United States, which still regrouped 55 % of the worlds capacity in 1993, only represented 27 % of it in 1996, whereas Europe passed from 41 % to 57 % at the same time. To be exact, in 1990 wind power devices installed in Europe only produced 500 MW, but 3500 MW were reached in 1996, which means an average growth rate of 40 %/year. The European Wind Energy Association (EWEA), which regroups the industrialists of the sector, aims at covering 10 % of the energy requirements of Europe in 2030 by means of wind power, i.e. installations to produce 100 000 MW (EWEA, 1991). Such a target would require growth rates as high as those observed during the last years in Europe over long periods of time.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

111

Taking into account the enduring economical limitations and the difficulties involved in implanting new sites in some countries, this objective is probably inaccessible although it will certainly mobilise the whole European wind power industry. The importance of the resource and the limitations of its availability A study, carried out in Denmark, evaluates the resource at 780 TWh. It is based on the hypothesis of the systematic and evenly distributed installation of 1 MW windmills evenly distributed over the all areas. The introduction of new limitations, visual impact, noise, impact on the fauna, etc. lowers this potential by some 10 TWh. This potential might be completed by offshore production of a magnitude similar to the national electricity generation of 26 TWh in 1989. The same study carried out on a European scale (12-members-Europe) led to a potential of 620 TWh, i.e. 40 % of the total electricity generation (M. Grubb and N. Meyer, 1993). However, the problem of irregularity is more limiting. As the availability of the resource is uncertain, wind power-stations can not guarantee their maximum installed power at a given moment, and thus, the installed wind power generation capacity is not 100 % to be counted on for annual peaks and could weaken electric systems. Most experts agree that a relative 5 to 10 % wind power contribution would not produce any weakening of the power supply system (AIE, 1993 quoted by M. Kliman). It would only be inadvisable for contribution levels over 25 to 45 % according to the envisaged power supply system (M. Grubb and N. Meyer, 1993). R&D actions After the petrol crisis the renewed interest in wind power resulted in the promotion of vast research programmes in industrialised countries. These programmes are mainly oriented towards the development of three large-sized devices. The economy of scale research seems to be the most appropriate and rapid method to reduce turbine costs. Therefore, first the Americans and then the Europeans established research programmes, implicating aerospace industries (Boeing, British Aerospace, Messerschmidt, etc.) or other agents involved in the sector like NASA, in order to develop wind power turbines capable of producing several MW. Some of these devices have reached 3 MW with rotor diameters of almost 100 m, as for example: WEG LS-1, 3MW (GB), Mod-5B, 3,2 MW (USA), WTS-4 4 MW (USA), Growian 3MW (D). These programmes were doomed to failure. This is made clear by the fact that, at the same time, the Danish were developing their own technological trajectory based on low power windmills (7-30 kW) and on a tried and tested idea. This trajectory has been boosted by incremental improvements to the initial concept and to operation apprenticeships. These have been encouraged by market enlargement policies (market incentives) established by the Danish government to favour small independent producers (especially cooperatives). This is how the present technical standard has been reached. The 500 700 kW commercial devices currently available clearly show their derivation from the first Danish windmills of some ten kW.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

112

The prevailing trajectory has consisted in progressively increasing the power of windmills based on a very classical conception, but without apparent limits so that certain companies are getting ready to commercialise 1 MW devices. The advances on the power (and size) scale have been achieved by the validation of previous steps and the incorporation of accumulated knowledge. This approach, which may not seem very ambitious, allowed a significant progress to take place. This progress was evident both in terms of productivity of the devices (250 300 kWh/m2 in 1980 to 600 kWh/m2 in 1988 and 800 kWh/m2 in the mid-nineties source EWEA and P. Gipe) and of production costs (4000 $/kW at the beginning of the eighties to 1250 $/kW in the mid-nineties source P. Gipe, 1995). At the same time the reliability and availability of turbines was considerably improved. Consequently, technological progress in the wind power sector seems now to confirm a unique standard constituted by a horizontal-axis windmill with two or three blades mounted on a tubular tower about 50 m high, which generates 500 to 750 kW. Present R&D programmes aim to pursue this trajectory incorporating improvements which are basically incremental (variable velocity, compound materials, easily adaptable towers, etc.), but, in general, technological issues are not the only ones to be considered in the definition of research programmes. In this aspect, the orientations given by ETSU in Britain for wind power research programme are very instructive. The stimulation of the demand Most countries resorted to investment aids in order to facilitate the appearance of wind power generation established by the PURPA Law in the United States. Investment subsidies like taxdeductible credits have significantly contributed to the explosion of the Californian market. Similarly, the first Danish support programmes for the wind power market were based on a 30 % subsidy of the investment costs. This subsidy was then progressively reduced, then abolished in 1989. Fixed price systems oblige electricity companies to buy the electricity generated by independent producers. In general, they are calculated on the basis of average domestic sale prices or of the avoided costs, independent of supply guaranties. Finally, these incentive price policies may be completed by the creation of reserved markets corresponding to a fixed proportion of electricity production to be generated by windmills, or renewable energies in general. In Great Britain, for example, 1500 Mw are reserved to be produced by renewable sources till 2000, within the framework of the NFFO (Non Fossil Fuel Obligation). In France, continual invitations to tender for EOLE 2005 should provide the means to reach the 250 to 500 MW objective. The industrial participants The wind power generation industry has advanced considerably during the last fifteen years since the creation of small craft enterprises by militant and enthusiastic businessmen in the seventies.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

113

Europe, without doubt, occupies the first place in the worlds wind power generation sector. Danish constructors are the European leaders and hold a very important place in the international market: in 1994 Danish exports represented 50 % of the global market. German and Dutch constructors have also followed the development of their national markets strongly boosted by public policies, but up to now they have been less present in the international market. Similarly, the American constructors with the exception of Kenetech, handicapped by the fact that wind power technology is mainly increasing in Europe, are relatively insignificant in the global market.

Constructor

Accumulated store in Accumulated store MW number of devices 623 400 265 >250 253 250 >210 > 95 > 55 > 50 4 500 3 900 >2 000 2 000 2 123 nd. 370 nd. nd. nd.

Vestas (DK) Kenetech (USA) Micon (DK) Bonus (DK) Nordtank (DK) Enercon (D) Mitsubishi (J) HMZ Windmaster (B) Nedwind (NL) Wondworld (DK)
Source F. Armand, 1995

4.5 Photovoltaic electricity


by Ph. MENANTEAU, IEPE The photovoltaic cell (PV) is constituted of semi-conducting electronic components. The cell constitutes an elementary power generator. The resulting current is a function of the light intensity and the cells surface and yield. A 10cm x 10cm cell generates energy of the order of 1.5 Wc under a 0.5 V-tension. Several elementary cells are therefore connected to each other in a module, in order to provide a greater amount of energy and tension, i.e. 35 Wc under 12 V. The final product commercialised by the PV industry is the module, which can then be assembled in the shape of panels regrouping several modules.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

114

The major relevance of PV energy stems from its functioning principle: the electricity is hereby produced with the absence of mechanical pieces in movement, without combustion or pressure, from a renewable energy, solar light. PV energy presents, at least in theory, reliable and durable qualities. Its functioning does not produce any gas emissions or noise. Furthermore, the PV can be separated into modules. A PV generator can be limited to a module of some tens of watts or produce several hundreds of kW, or tens of MW. Technological aspects Silicon represents 97% of the worlds PV production: crystalline silicon (mono- and multi-) and amorphous silicon. The development of other technologies is still marginal but they could play a more important role if the PV technology were developed. Crystalline silicon

The basic raw material used is the silicon coming from the wastes of the electronic industry. This material is recast to obtain ingots that are later cut in layers several hundred microns thick to form PV cells. Multicrystalline silicon presents several advantages compared to monocrystalline silicon. It demands lower quality raw materials, the production technique of the ingots is faster and less energy- consuming, in short, cells are directly produced in a squared shape that allows better module refilling rates. These advantages are in part compensated by the lower crystallographic quality of the material, which implies an inferior photoelectric yield to that of monocrystalline silicon. The highest current yield of industrial multicrystalline cells is 13%, which corresponds to the yield of the functioning modules of the order of 10%. The theoretical yield limit for crystalline cells is close to 30%. Nowadays, crystalline silicon presents the best compromise between yield / cost of production. Amorphous silicon

Production processes of crystalline photocells are not very compatible with continuous production processes that would allow an important reduction of production costs. Thin-layer elaboration processes go beyond these constraints by depositing very thin layers of semiconducting material on glass substratum. The main thin-layer technology, and the only one nowadays industrialised, is the amorphous silicon (a-Si). Production costs are relatively low and important basic perspectives subsist thanks to the economies of scale research. The main a-Si shortcomings stem from current yields, which are substantially inferior to those of crystalline cells: this yield is unstable in solar rays and can fall to 4-5%-stabilised yield in real conditions of use. Other components of PV systems A PV system also comprises module assembly structures to ensure mechanical resistance, to orientate them, as well as electric connections and, possibly, a storage system and electronic order system. In the event of very powerful systems, the acquisition of a site, its preparation, the

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

115

impact studies, the network connections, etc., contribute to the overall cost of the installation. Specific batteries were developed for the storage of electricity some years ago for isolated PV systems, allowing for high discharges which automobile batteries could not admit. Concerning metallic structures, one of the main perspectives for development is module integration in ceilings or faades. This latter possibility is being rather seriously considered by the PV industry because the cost of the modules only exceeds slightly 50% of the total cost of a PV installation. With no symmetrical progress of the costs of the systems, the improvement of the cell yields or the decrease of their production cost will only exert a small influence over the cost of the PV kWh. Investment, functioning and maintenance costs The cost of a PV installation can be systematically divided into two parts: the PV element stricto senso (the modules) and the non-PV components. Today, the production cost of the modules is estimated to be 420 ECU/m2 by industrialists (EPIA, 1996), (3.33 ECU/W) for monocrystalline and amorphous silicon (2+/-0.5) ECU/m2. Estimates for the cost of non-PV components are an average of 3500 ECU/kW (but without batteries) (Wrixon, 1993). In general, a percentage ranging from 40 to 60% of the total cost of the system is discounted from the non-PV components total cost. In order to assess the cost of PV equipment, distinctions should be made according to the range of power envisaged and the applications regarded (several W or tens of them, versus some MW, autonomous systems supplied with stock versus network systems). The total cost of PV equipment is rather variable, depending on the power installed, or the nature of the service to be rendered (small-size autonomous system or electric plant connected to the network). In Europe, the cost of a power production plant connected to the network ranges from 6000-8000 ECU/kW (Wrixon, 1993), whereas the cost of a system integrated in a faade or roof is supposed to be lower than that of a power plant (Wrixon, 1993). For smaller-size installations or smaller volume orders, costs can be rather high. So, for example, small units destined to ensure lighting in the villages of non-electrified developing countries (an average 50 Wp) can reach or surpass 20 $/Wp (16000 ECU/kWp), including the costs of the usage equipment. Anyhow, the costs reported in the literature are rather variable even for apparently comparable equipment, of the order of 1 cent/kWh. Present estimations for PV power production costs range from 25 to 300 cents (1990) / kWh, 25 to 250 cents / kWh for isolated systems, but 30 to 40 cents (0.24 to 0.32 ECU/kWh) for PV plants. Environmental impact The environmental impact of PV-cell power production is small. Surface occupation is clearly one of the main environmental limitations of PV energy. The issue of toxic wastes follows the use of potentially dangerous material. Nevertheless, the amounts at stake are small compared to

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

116

other industrial sectors and recuperation and treatment techniques should reduce the scope of the problem. Economic perspectives Concerning crystalline silicon, industrialists estimate that they will be reaching 15% return at the beginning of the 20th century, then 18%, by improving the existing processes. The production of amorphous silicon tandems should reduce instability problems and ensure stable returns around 10% or more towards 2005-2010. At the same time, the production costs of the modules will continue to decrease even though the rhythm may be relatively uncertain. The cost of the production of crystalline PV modules could evolve from 350 to 250 ECU/m2, that is, a maximum cost of 1.8 ECU/Wc by 2010. The cost of production of the a-Si modules could reach 0.8 ECU/Wc (80 ECU/m2). Parallel improvements are envisaged on non-PV components resulting from successive learning stages in this field. The total cost of a PV plant with non-PV components could, therefore, descend to 1000 ECU/kW (from a 3000 ECU/kW minimum today) for an ideal configuration based on modern technologies. World market World-wide sales of PV in 1994 amounted to almost 70 MWc. The total installed capacity all over the world is estimated at 350 MWc, excluding non-energetic implementations. Traditionally, four main categories of PV energy implementations have been distinguished: professional implementations: power supply of isolated or difficult-access equipment interior or leisure implemantations isolated systems for domestic or collective use: isolated systems are used in mountain huts, villages or rooms not connected to the network systems connected to a network: this category covers both powerful power PV plants (beyond 1 MWc) and small individual equipment (several kWc of the solar roof type.

By prolonging the rhythm of growth observed in the period 1984-94 (15%/year), world-wide annual sales in 2010 would rise to 630MWc, i.e. an accumulated installed capacity of about 4000MWc (EPIA, 1996). Experts agree in predicting a great increase in the isolated PV equipment market for the coming years, and particularly, as regards the equipment destined for rural power supply of developing countries. PV cell producers The production of PV modules mainly concerns to OECD countries: Europe (essentially Germany, France, Italy, Netherlands and the United Kingdom), Japan, USA. Two agents, Japan and USA, dominated the market to a great extent in 1987, but Europe has gradually imposed

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

117

itself and, today, it occupies the second position following the United States. Module production exists outside the OECD (India, China, Brazil and Argentina) but still remains minority. About twenty companies represented more than 80% volume of the world market in 1994, but the first five already accounted for more than a 50%. Siemens is the undeniable world leader with a 20% of the market share (assigning this production to Germany) after having recovered the American firm ARCO Solar. Most of these firms belong to important groups, companies from the oil, chemical or electronic sector. The participation of electric companies is much more limited and relatively recent. The rate of use of the production capacities for x-Si are an average of 75% (84% for USA and 60% for Europe). On the other hand, the rate of use of the capacities for a-Si is inferior to 50% (36% for USA). This over-production results in a double research movement of the economies of scale, especially in amorphous silicon production units, and of the over-optimistic anticipations of the expansion of the market, particularly for a-Si. Public policies Public policies in favour of PV energy are divided between programmes aimed at improving the performance of commercial branches, at developing new technologies, at experimenting new implementations, etc., and actions to support PV markets, investment grants, protective tariff policies, etc. R&D policies of the IEA countries in the field of renewable energies are strongly dependent on the political and economic contexts. Stimulated by the oil crisis of the 70s, they later suffered the double influence of the decrease of the oil price and of the constraints of public budgets. Over this period (1984-94), the PV absorbed a third of the R&D public credits and its supremacy strengthened even more in 1993 and 1994, since it was granted more than a half of the total budgets. R&D budget distribution per country reveals extreme concentration; 85% of the R&D credits assigned to PV correspond only to four countries: Japan, the United States, Germany and Italy. In Europe, an important contribution to R&D is provided by the Joule programme (I & II). A total 32-million ecus have been devoted to PV researches (Joule I & II) and, particularly, relating to cells, improving x-Si performances, exploring the potentialities of new materials and developing thin-layered cells. The difference between demonstration and diffusion, in the case of PV installations, is not always obvious since the number of units implied usually remains relatively limited (particularly concerning large production installations). However, programmes carried out by several countries (USA, Germany, France, Japan) are mainly concerned with diffusion, insofar as specific and permanent incentive mechanisms are put into practice to encourage the adoption of PV power production systems. Other parallel mechanisms help its diffusion in export markets and, particularly, in the electrification of rural areas in developing countries.Certain countries have carried out specific aid programmes in this area.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

118

Chapter 5: Technology scenarios to 2030: baseline and alternative technology stories


By A. Soria (IPTS), P. Criqui (IEPE), M. Bess (ESD) and N. Kouvaritakis (ECOSIM)

5.1 The nature of technological progress and breakthroughs


Technological development is a complex phenomenon that has drawn the interest of many scholars. Understanding the nature of the forces behind the process of scientific discovery, technological innovation and know-how dissemination is a challenge for which many theories have been formulated and are still under discussion. It is customary to distinguish between basic research, often supported by public action, and applied research, whose outcome is a technology of rival use, protected by intellectual property rights under some legal scheme. Precluding a priori any attempt to explain in a formal way the specific technology trends within the energy sectors, it has been felt useful to construct several possible technology scenarios the system could be already moving to. However, prior to the description of them, this section aims at providing some insight on the technology dynamics aspects relevant to the energy sector in a general and descriptive way.

5.1.1 Energy technology trends in the longer time scale


Historically, it has been noticed that the trends on energy intensity of the GDP exhibit an increasing-decreasing shape. In stating this, it should be underlined that only commercial flows of energy are considered. As economic development proceeds, the specific energy consumption per unit output progressively grows up to a maximum level, from which it starts a steady decline. The loss of weight of the industrial sector accompanying the massive tertiarization in advanced economies is responsible for this phenomenon. As economic development diffuses across countries, this pattern is often repeated. Nevertheless, the peak in the GDP energy intensity tends to lower as time advances and changes from place to place, according to the industrialization model within each country. Thinking on a long-term basis, several economic science scholars have pointed out the existence of long-wave economic cycles associated to specific massive investment waves. Back to the pioneering work of Kondratieff, who first identified and characterized these long-term cycles, many theorists have regarded these waves as a particular case of the business cycle. Schumpeter was, however, the first in observing the link

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

119

between economic cycles (and, in particular, long-term waves) and innovation clusters. We are interested here in examining energy consumption trends in the light of long-wave cycles in order to derive some clues about energy as an economic good. The United Kingdom reached the above-mentioned energy intensity maximum somewhere around 1890. The United States and immediately after Germany and France reached their maximum energy intensity of GDP around 1920, just at the final phase of the long-wave economic cycle associated with the development of heavy metallurgical industries and massive electrification. From those countries, the USA (the first to reproduce the UK development model) reached the higher maximum, that was, nevertheless, definitively lower than the one experienced 40 years earlier in the UK. The maxima corresponding to countries industrialized after the World War II were even lower, and one can expect that the pattern will be repeated with todays emerging economies. An interesting point to stress is that energy technology paths that the industrialized world have followed up to-date clearly match the well-known Schumpeterian scheme of a series of disruptive innovations followed by a number of incremental improvements onto the basic technology. The massive bulk of industrial innovations that took place in the period 1890-1945 had energy technologies as a triggering event: the massive diffusion of the electric bulb, the electric engine, the alternator and the massive electrification that followed prompted a number of patents and innovations. Simultaneously, the transportation technological regime softly changed from railroad (a common transportation scheme) to individual cars and trucks, thanks (again) to a disruptive innovation: the explosion engine. Since then, however, short and long-wave business cycles have passed, and the energy technological regime has become more or less unchanged: the massive electrification process enhanced the centralized electricity generation and distribution scheme. Moreover, electrification experienced somehow a regression: when hydropower was not able anymore to satisfy electricity generation, the technology shifted to the well-known combustion engineeringbased Rankine cycle, inherited from the first industrialization upraise. Improvements have been of incremental type both in the power generation industry as well as in the transportation modes. Nevertheless, some changes in the power sector have been more noticeable. Indeed, two major novelties have happen during the last 50 years within the power generation system. The first one consisted of the cluster of innovations around the introduction of nuclear power plants. When nuclear power plants entered the power sector, a number of competing technologies were available. After some years, and following a paradigmatic case of technology lock-in, Rankinecycle based light water reactors started to dominate the sector, expelling the gas-graphite reactors and some other technological options. The main reason for this success is probably to be found in the fact that the experience gained in small naval applications with LWR was easy to extrapolate to power generation on-shore plants (as well as other military and strategic constraints). The LWR era started around the 70s but it did not succeed in massively diffuse. Around ten years later, the nuclear programmes of most of the advanced countries were stopped basically because of the negative perception of the technology in the public opinion, as well as because the environmental concerns of the technology were not solved by that time. In addition, due to the possible military applications of the technology, the penetration of the technology in developing countries was restricted in an effort to prevent nuclear weapon proliferation.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

120

The second novelty appeared somewhere in the middle of the 80s, consisting of the use of gas turbines for electricity production. Although at a first glance it was not a disruptive innovation, it may have hosted the seed for a future major perturbation within the electric system. First of all, having flexible (either for baseload and peakload) electricity production without using a steam cycle was a significant technological change (inherited, by the way, from the fast expanding air transport sector). Second, the possibility of installing combined Brayton-Rankine cycles opened the way to combined heat and power schemes achieving dramatic increases in the overall energy conversion efficiency. However, the importance of the emergence of the gas turbine is even greater due to the ability that this technology exhibits in order to downsize the generation units without any loss of economies of scale. This may facilitate the diffusion of less centralized electricity generation schemes. The traditional view according to which the power industry was considered a typical example of natural monopoly is changing, at least in the power generation side. As a consequence of its versatility, gas turbines may pull the penetration of renewable energy technologies, since they are particularly well-suited for hybrid devices. Looking towards a time horizon placed around 2010, it seems clear that at least one generation of capital equipment will be replaced in developed countries with slowly-increasing electricity demand. The situation is different in emerging economies in South and East Asia (typically China and India, but also Latin America and some parts of Africa), where brand new capacity will have to be installed to satisfy electricity demands that will grow almost at two-digit annual rates. This opens a good opportunity for a change in the technological paradigm: the lack of structural inertia in those zones may indeed act as a catalyzer to the diffusion of more environmental-benign energy technologies. There is, however, the possibility that these countries, adopting a follower approach within an standard leader-follower scheme, may tend to replicate the technological regime dominating today in OECD countries.

5.1.2 Market penetration mechanisms and technological lock-in


Increasing returns in production is a well-known innovation-driving mechanism. Many economists have underlined the significant role that is played by the incentives that firms have to benefit from a transitory monopolistic position. These fluctuations or departures from the Marshallian long-term industry equilibrium are intimately linked to the changes in the long-term cost curve of the industry, and therefore, with the technological regime dominating at each stage of the economic development. The relationship between the adoption of an innovation, their further improvements and their further costs makes so that the selected equilibrium is dependent on the actual technological and economic history. The mechanisms providing incentives for innovation are often positive feedback economic effects, i.e. de-stabilizing schemes that induce growing perturbations within the system. As technologies, information, and know how diffuse, the relative advantage of the innovator is exhausted, and the system comes back to a sort of stable equilibrium. The mechanisms are similar to those encountered in the description of other complex systems, either coming from the natural science, such as biological and species dynamics, or from other social sciences, such urban or firm dynamics. The analysis of these phenomena has prompted the emergence of a new approach to economic problems, i.e. the

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

121

evolutionary economics focus. A key issue in the analysis of these subject is the identification of the positive feedback mechanisms. There are several types of these mechanisms. Some of them are linked to the productive process itself, are usually known as increasing returns to scale. They may be due to a number of reasons. Positive spillovers may play also a fundamental role in explaining economies in production: learning effects are to be considered under this chapter. Research and development is another important issue that may have a capital influence onto the techno-economic system in the long term, and deserves a particular attention, either considered as an exogenously-driven variable or as variable endogenously generated.

Returns to scale, to adoption and to scope The first idea to be considered is the pure returns to scale concept, which is simply related to the output rate the firm. The idea is related to the effect on the production level of a simultaneous relative in-crease of all the production factors. From the mathematical standpoint, constant returns of scale are associated to first-degree homogeneous production functions, whereas homogeneous production functions with degree larger than unity yield increasing returns to scale. The existence of increasing returns to scale is, basically, a short and medium-term issue. Increasing returns to scale have been traditionally associated to the existence of large fixed costs that must be incurred by firms independently on the actual output volume. Fixed costs are spread over more units as output increases, leading to a decreasing average cost. According to this, the existence of returns to scale is ultimately due to the use of productive factors with different degrees of flexibility: in the most typical case, in the short run labor costs are variable, whereas capital costs are fixed. R&D costs is an important chapter within the fixed costs budget in the case of emerging energy technologies. Nevertheless, there are also external reasons for economies of scale to appear: good infrastructures, adequate legal and regulatory frame, existence of abundant natural resources, normalization and standardization of procedures and labour skills. Returns to adoption is a positive feedback effect that appears providing more and more incentives to potential adopters to go for a particular technology as this technique is progressively enlarging its market share. Increasing returns to information are at the root of increasing returns to adoption. Coordination effects amongst market actors are conferring relative advantages to those who follow the leading line of thought within the business, creating a incentives for uniformity: a technology that gets ahead, tends not only to stay ahead, but consolidate its position as leader, whereas the competing technologies have progressively greater difficulty in entering or surviving in the market. However, not only past adoptions play a significant role in markets evolving under this scheme: the expectations that the agents form on the possible future choice of the competitors are also an important issue to look at. The decisionmaking therefore consists of a tradeoff between the potential gains of imposing the own technology to the entire market, thus benefiting from the early-dominant position, and the reluctance of risk-averse investors to go for technologies that could be made prematurely obsolete by the returns to adoption mechanism. Labor skills fixation by learning by using contributes also to endogenize technological change and lead to irreversibility and path-

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

122

dependent phenomena. The final uniform technology panorama is, in many cases, unpredictable. Small events may possibly give one of them an initial advantage, favoring its adoption. Then, thanks to these early events that induce more improvements in this technology than in the others, it may attract a broader proportion of potential adopters, and, finally, lock-in the market. These perturbations that initiate the technology path bifurcation may be related to technological choices by individual entrepreneurs, prior experience of technology developers, political circumstances or simply the timing of contracts. Nothing, however, guarantees the overall optimality of the technology path emerging from this competition scheme: since the benefits are due to the uniformity and not to the costs or the efficiency, first hit is privileged no matter its techno-economic characteristics. The possibility of suboptimal selection is an issue often invoked for public intervention via an adequate technology policy. 3) When a company is able to produce at lower costs two or more products that were alternatively produced by specialised firms it is said that the former company has increasing returns to scope. Shared equipment or common facilities may make producing several goods together less expensive than each of them separately. As with increasing returns to scale, it may be possible that some ranges of output of the goods produced exhibit increasing returns to scope while decreasing returns to scope at others. Once again, the cost-effectiveness of one firm producing several goods depends on how the regions of economies and diseconomies of scope relate to the demand for the goods. For two technologically close goods or services, it may exist increasing returns to scope that could avoid redundant expenditures like fixed costs. Increasing returns to scope are potentially important within the energy-environment system. The possibility of implementing hybrid energy plants (i.e. combining, for example, the natural gas and an intermittent energy source like wind energy) open a huge field of possible developments to achieve the objective of designing more sustainable energy exploitation schemes. Increasing returns to scope and to scale can reinforce each other or have opposite effects. It could be cost-effective to produce in the same firm several goods while expanding the production of each raises costs more than proportionally. Whether a natural monopoly exists or not depends on the overall cost situation. Therefore, the hypothesis underlying the current policies of deregulation of the energy markets may also be analyzed within the framework analysis of the increasing returns. Indeed, a competitive market can benefit consumers of electricity as well as environment only if it incorporates some long-term vision. Learning curves and R&D as positive feedback mechanisms It has been argued that the returns to scale are a short-term issue since it deals, given the fixed costs, with the annual productive flow. On the contrary, the learning effects are a long-term issue: the learning curve principle states that there is a (quasi-linear) relationship between the logarithm of the unit production cost and the logarithm of the cumulative production. The justification of this has to be found within the experience and skill gained in the whole production process, changing in the course of the expansion of a firm or an industry the average unit production cost. Originally formulated and conceived for labour-intensive industries, the concept was rapidly extrapolated to a variety of cases. Ultimately, it may be viewed as a sort of long-term reward (or technology fidelity-dividend) taking into account the benefits of staying within a specific technology rather than changing to another one that could be potentially

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

123

cheaper but which exhibits adaptation costs in the short term. Notice that the difference with the returns to adoption rely on the fact that the learning effect reinforces the decision made time ago by the agent, whereas the returns to adoption mechanism reinforces the decision made in the past by other agents (possibly the competitors). Along the market structure and innovation framework, Schumpeter [1942] argued that a market involving large firms having market power is the price society must pay for rapid technological progress. This has been usually called the Schumpeterian hypothesis. The main arguments are to be found in economies of scale in R&D and management, greater capabilities for risk spreading and finance advantages proper to large firms. Concerning the R&D, the absence of duplication and the diversification of the expenditures may be the principal advantages. Appropriability advantages, that is, the level of production, the productive capacity or marketing services, may also favorite the large firms in exploiting more quickly on a large scale the innovations . The big firms, able to block imitation by competitors, increase their appropriability and ensure their revenues by a procedure that blocks the emergence of a superior technological path, and therefore may be catalogued as socially suboptimal. Large firms or monopoly displacement could therefore only be achieved through the development of new technologies requiring quite different technological background, providing to new firms the opportunity to arise and to weak the advantages that large firms derive from their experience and imitative ability. Oligopoly has been however viewed as the most desirable structure, involving neither the R&D incentive problem of perfect competition nor the pricing problem and R&D unique source of monopoly. The profits, reward of innovation, provide motivation and funds for firm growth, supported furthermore by the welfare advantages to have the firm with a better technology supplying a growing share of the market.

5.2 Energy technology baseline projection


In order to conduct the prospective analysis of energy technology trends, two main generalized expected technology deployment trajectories have been explored within this research: the first one basically corresponds to the BAU (Business As Usual) scenario, for whose numbers a consensus has been achieved after having had an in-depth look to the literature survey. In addition, a generalized, cross-technological moderately optimistic scenario has been also made. This scenario, including all the technologies, may be referred to as EI (Enhanced Improvements). In order to enlarge this perspective, several possible and plausible energy technology trajectories constructed around technology clusters have been also considered. The idea behind this approach is to try to capture the differentiated behaviour of each of these technological clusters. Some of the key technologies within each cluster could experience significant progresses, and therefore induce in the related technology families important and differentiated cost diminishings. These alternative technologies scenarios will also be outlined below.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

124

The main reason why it is desirable to have a series of energy technology scenarios relates to the fact that most of the energy models these data are supposed to be supplied to are actually lacking an appropriate representation of endogenous technological progress. It should be kept in mind that the aim is to focus on a time horizon around 2010-2030, and that the multiplicity of these technological scenarios is justified by the above-mentioned lacking feedback effect from the rest of the global socio-economic system. The electricity generating costs for some selected technologies as they are characterized in the technology database, and corresponding to years 1990 and 2030 (both for the BAU and EI assumptions) are reported in the following graphs). The fuel price trend hypothesis made for these cases were that, during the period considered, coal price would increase by 5% in real terms, lignite price would remain stable, whereas oil and natural gas prices would experience substantial increase, by 50% and 80%, respectively.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
C1. Hard Coal 200-500 MW C1(2). Hard Coal >500 MW 700 C3. Lignite + FGD (200-500 MW) C5. GTCC 200-350 MW C6. Oil Boiler (200-500 MW) 600 C8. Gas Turbine > 50 MW, oil fired C10. Nuclear 1000-1500 MW LWR 500 C11. Large Hydro A1(i) Supercritical Coal 400 A3. IGCC>500 MW A4. PFBC 200-500 MW 300 A6. Integrated Oil Gasif. Comb. Cycle 200-500 F5. New Nuclear design F7. Advanced Coal Cycle 200 A7. Small Hydro > 2 MW A8. Wind on shore > 0.5 MW 100 A10. Low Temp.Solar C12. Biomass 0 0.5 F2 ii) Fuel Cell Stationary 1 1.5 2 2.5

125

800

hours (thousands

C1. Hard Coal 200-500 MW


125

C1(2). Hard Coal >500 MW C3. Lignite + FGD (200-500 MW) C5. GTCC 200-350 MW

115

105

C6. Oil Boiler (200-500 MW) C8. Gas Turbine > 50 MW, oil fired

95

C10. Nuclear 1000-1500 MW LWR C11. Large Hydro

85

A1(i) Supercritical Coal A3. IGCC>500 MW

75

A4. PFBC 200-500 MW


65

A6. Integrated Oil Gasif. Comb. Cycle 200-500 F5. New Nuclear design

55

F7. Advanced Coal Cycle A7. Small Hydro > 2 MW

45

C12. Biomass F2 ii) Fuel Cell Stationary

35 3 3.5 4 4.5 5 5.5 6

hours (thousand
80 C1. Hard Coal 200-500 MW C1(2). Hard Coal >500 MW 75 C3. Lignite + FGD (200-500 MW) 70 C5. GTCC 200-350 MW C6. Oil Boiler (200-500 MW) 65 C8. Gas Turbine > 50 MW, oil fired C10. Nuclear 1000-1500 MW LWR 60 C11. Large Hydro A1(i) Supercritical Coal 55 A3. IGCC>500 MW A4. PFBC 200-500 MW A6. Integrated Oil Gasif. Comb. Cycle 200-50 45 F5. New Nuclear design F7. Advanced Coal Cycle 40 C12. Biomass F2 ii) Fuel Cell Stationary 35 6.5 7

50

hours (thousands

Figure 5-1: 1990 Electricity generation costs by load for some selected technologies

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

126

800

C1. Hard Coal 200-500 MW C1(2). Hard Coal >500 MW C3. Lignite + FGD (200-500 MW)

700

C5. GTCC 200-350 MW C6. Oil Boiler (200-500 MW)

600

C8. Gas Turbine > 50 MW, oil fired C10. Nuclear 1000-1500 MW LWR

500

C11. Large Hydro A1(i) Supercritical Coal A3. IGCC>500 MW

400

A4. PFBC > 500 MW A6. Integrated Oil Gasif. Comb. Cycle 200-500

300

F5. New Nuclear design F7. Advanced Coal Cycle

200

A7. Small Hydro > 2 MW A8. Wind on shore > 0.5 MW A10. Low Temp.Solar

100

C12. Biomass F2 ii) Fuel Cell Stationary

0 0.5

A9i. Photov. in Buildings 1 1.5 2 2.5

hours (thousands)

C1. Hard Coal 200-500 MW C1(2). Hard Coal >500 MW 114 C3. Lignite + FGD (200-500 MW) C5. GTCC 200-350 MW 104 C6. Oil Boiler (200-500 MW) C8. Gas Turbine > 50 MW, oil fired 94 C10. Nuclear 1000-1500 MW LWR C11. Large Hydro A1(i) Supercritical Coal 84 A3. IGCC>500 MW A4. PFBC > 500 MW 74 A6. Integrated Oil Gasif. Comb. Cycle 200-50 F5. New Nuclear design 64 F7. Advanced Coal Cycle A7. Small Hydro > 2 MW A8. Wind on shore > 0.5 MW 54 A9i. Photov. in Buildings A9(ii). Photov. Rural 44 A10. Low Temp.Solar C12. Biomass 34 3 3.5 4 4.5 5 5.5 6 F2 ii) Fuel Cell Stationary

hours (thousand
C1. Hard Coal 200-500 MW C1(2). Hard Coal >500 MW 61 C3. Lignite + FGD (200-500 MW) C5. GTCC 200-350 MW C6. Oil Boiler (200-500 MW) 56 C8. Gas Turbine > 50 MW, oil fired C10. Nuclear 1000-1500 MW LWR 51 C11. Large Hydro A1(i) Supercritical Coal A3. IGCC>500 MW 46 A4. PFBC > 500 MW A6. Integrated Oil Gasif. Comb. Cycle 200-500 M F5. New Nuclear design 41 F7. Advanced Coal Cycle C12. Biomass 36 6.5 F2 ii) Fuel Cell Stationary 7

hours (thousands)

Figure 5-2: 2030 (BAU) Electricity generation costs by load for some selected technologies

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
800 C1. Hard Coal 200-500 MW C1(2). Hard Coal >500 MW C3. Lignite + FGD (200-500 MW) 700 C5. GTCC 200-350 MW C6. Oil Boiler (200-500 MW) 600 C8. Gas Turbine > 50 MW, oil fired C10. Nuclear 1000-1500 MW LWR 500 C11. Large Hydro A1(i) Supercritical Coal A3. IGCC>500 MW 400 A4. PFBC > 500 MW A6. Integrated Oil Gasif. Comb. Cycle 200-50 300 F5. New Nuclear design F7. Advanced Coal Cycle 200 A7. Small Hydro > 2 MW A8. Wind on shore > 0.5 MW A10. Low Temp.Solar 100 C12. Biomass F2 ii) Fuel Cell Stationary 0 0.5 A9i. Photov. in Buildings 1 1.5 2 2.5

127

hours (thousands

C1. Hard Coal 200-500 MW C1(2). Hard Coal >500 MW 114 C3. Lignite + FGD (200-500 MW) C5. GTCC 200-350 MW 104 C6. Oil Boiler (200-500 MW) C8. Gas Turbine > 50 MW, oil fired 94 C10. Nuclear 1000-1500 MW LWR C11. Large Hydro A1(i) Supercritical Coal 84 A3. IGCC>500 MW A4. PFBC > 500 MW 74 A6. Integrated Oil Gasif. Comb. Cycle 200-50 F5. New Nuclear design 64 F7. Advanced Coal Cycle A7. Small Hydro > 2 MW A8. Wind on shore > 0.5 MW 54 A9i. Photov. in Buildings A9(ii). Photov. Rural 44 A10. Low Temp.Solar C12. Biomass 34 3 3.5 4 4.5 5 5.5 6 F2 ii) Fuel Cell Stationary

hours (thousand

C1. Hard Coal 200-500 MW C1(2). Hard Coal >500 MW 61 C3. Lignite + FGD (200-500 MW) C5. GTCC 200-350 MW C6. Oil Boiler (200-500 MW) 56 C8. Gas Turbine > 50 MW, oil fired C10. Nuclear 1000-1500 MW LWR 51 C11. Large Hydro A1(i) Supercritical Coal A3. IGCC>500 MW 46 A4. PFBC > 500 MW A6. Integrated Oil Gasif. Comb. Cycle 200-50 F5. New Nuclear design 41 F7. Advanced Coal Cycle C12. Biomass 36 6.5 F2 ii) Fuel Cell Stationary 7

hours (thousands

Figure 5-3: 2030 (EI) Electricity generation costs by load for some selected technologies

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
C1. Hard Coal 200-500 MW
0.6

128

C3. Lignite + FGD (200-500 MW)


0.55

C5. GTCC 200-350 MW C10. Nuclear 1000-1500 MW LWR

0.5

A1(i) Supercritical Coal A3. IGCC>500 MW

0.45

A4. PFBC > 500 MW


0.4

A6. Integrated Oil Gasif. Comb. Cycle 200 MW F5. New Nuclear design F7. Advanced Coal Cycle

0.35

0.3 450

F2 ii) Fuel Cell Stationary


650 850 1050 1250 1450 1650 1850 2050 2250

Specific capital cos

C12. Biomass

Figure 5-4: Capital costs-efficiency map for some selected power generation technologies

5.3 A look into the future: world energy technology scenarios


We present hereafter the possible energy technology paths that could be foreseen, according to the past evolution of the global energy system that has been discussed above, and to the evidence found in the state-of-the-art technological review that has been made within our project. The scenarios presented below have been constructed bearing in mind the state-of-the-art and the technology characterization patterns that were outlined in Chapter 2, and around the trends concerning the long-term fuel cycles presented in Chapter 3. It should be underlined again that, although the scenarios are supposed to capture a complete, coherent and self-consistent hypothesis on the whole energy system, they have been constructed around technologies and market organisation schemes corresponding to the power sector. The reason for this was already suggested in Chapter 1: looking at the most dynamic final energy demand sectors, namely the electric and the transportation ones, it has been remarked that, in terms of technological diversity, the power generation sector is experiencing rapid changes that can hardly be found in other sectors. If the centralized electricity production and distribution scheme is supposed to continue, we may foresee two versions for this possible energy system structure (Scenarios 1 and 2). On the contrary, scenarios 3, 4 and 5 are related to the decentralized power generation schemes.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

129

5.3.1 Centralized Electricity Production: The nuclear renaissance and incremental innovations.
Under this hypothesis, when the time for massive decommissioning of nuclear power plants installed in OECD countries will arrive (around the year 2005), no other reliable and carbon free alternative will be available for baseload electricity production. In this case, one could forecast the substitution of old nuclear power plants by new, safer (possibly smaller) nuclear devices. Nevertheless, the possible downsizing of this technology would never reach a degree in which the power generation could be considered as decentralized: the typical power of these new, advanced reactor could lie around the 600 MW, i. e., close to the typical size of coal-baseload power plants (which ranges around 300-600 MW). The possibility of disruptive innovations in this field (such as the energy amplifier concept) should be considered also within this scenario. The applicability of this scenario is mainly limited to OECD, already-nuclearized countries, the possibility for new economies to shift towards this scheme ex nihilo being lower. Nevertheless, some emerging economies could follow this way (India, Pakistan, China). The implications in terms of global geostrategy that this may have are far beyond the scope of our discussion, but it seems that this would not be viewed with sympathy from the OECD countries. However, in terms of nuclear weapon proliferation, the choice for massive nuclear-based power generation in a limited number of these countries would not dramatically change the composition of the world nuclear club of nations. Operating in the fringes, new and renewable energy technologies may progress with low speed. Basically, the picture that has to be retained within this scenario could be: The power sector would be supposed to rely on the reengineering of nuclear power plants, with progress in safety and waste management and the finding of socially acceptable solutions to decommissioning and retrofitting. In a longer time horizon, passive reactors and/or energy amplifiers, focusing on intrinsic safety, enhanced operation flexibility and smaller size would allow for the massive replacement of nuclear by nuclear, and the partial nuclearization of some emerging economies. At a European scale, this nuclearization (or renuclearization process) may take place first on a reduced cluster of countries (France, Belgium, Germany and Sweden). A second group could then follow, including the UK, Spain, the Netherlands and Italy. The transport sector would be supposed to stay relying on oil-based fuels, allowing for a progressive penetration of hybrid cars first, and then electric battery cars. No structural changes would be supposed for the heat market within this scenario. The process of electrification would be enhanced and a non declining share of domestic heating would be electric. The demand side target technologies would be grouped around electrical appliances, for the reasons invoked in the above paragraph. From the natural resource capital stock point of view, for this scenario to occur, one should assume also high primary fossil fuel prices, or alternatively (for those models with endogenous prices) reduced reserves, especially of natural gas.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

130

The foreseen technology characterization to be supplied to the models under these assumptions would look like this: All the nuclear capacity dismantled will be replaced by new nuclear in OECD countries. To achieve this, one has to be really optimistic for what concerns the projected costs of nuclear, and quite pessimistic on the future fossil fuel prices. Baseload electricity production in the largest emerging electricity demanders (China and India) will have a significant share (say 30%) of nuclear. The rest of the technologies could be assumed to follow a non-constrained but conservative path.

5.3.2 The cleaner fossil-fuel-based baseload electricity production.


Under this scenario, and maintaining the hypothesis that no disruptive innovation has taken place in the dominating power generation schemes, nuclear power will be progressively substituted by cleaner fossil-fuel-based power generation schemes. The degree of innovation within this scenario may depend on the restrictions applying to a given world zone: the developed world is likely to shift toward GTCC schemes, which still have a good potential for efficiency improvement, provided a smooth evolution of the gas prices. New, large consumer nations sitting on huge coal reserves are likely to use these resources. The potential of advanced clean coal technologies is to be found mainly there. The possible technological trajectory along this scenario would include as a first step the adoption of fluidized bed combustion power plants (in all its possible variants), to be progressively replaced by supercritical and ultra-supercritical power plants that may reach thermal conversion efficiencies far beyond 50%. The utilization of ceramic filters and advanced inox steel will allow for noticeable operation improvements and simultaneous specific pollutant emissions reductions. Marginal improvements to the today predominant Rankine thermodynamic cycle may also be obtained by the use of modified thermodynamic fluids. Further on, new coal-based technologies (Integrated Gasification, possibly in combination with Humid Air Turbines, Direct Coal Fired Combined Cycle, Magneto-hydrodynamics Cycle, etc.) have to prove their full potential beyond 2010. Therefore, in international terms, the picture may be catalogued as a possible joint implementation success story, within a basically non-changing power sector structure: the limitations imposed by the baseload coal-dominated sector would preclude (at least at the first stages of this story) a massive decentralization of the grids. The sector-wise picture that could describe this scenario might be as follows: The power sector would be supposed to rely on the technology innovations concerning clean coal technologies and the gasification of solids. The Rankine-cycle technological trajectory would start from traditional coal boilers and fluidized bed combustion plants, that are supposed to be rapidly replaced by supercritical and ultra-supercritical power plants, with significant progress in material science allowing for the development of steels able to withstand the extremely severe enthalpy conditions of the main steam in these plants. Simultaneously, developments in the gasification technologies may take place, propagating

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

131

to biomass-based (either waste or crops) techniques, both based on the gas turbine combined cycle thermodynamic approach. The transport sector would also in this case stay relying on oil-based fuels. Oil should more and more become an specialized fuel for transportation applications. The expected technological progress in this field would be incremental, allowing for a progressive penetration of low-consumption cars (5 l/100km and less), giving less space for the penetration of the electric car into the market, since no cheap baseload electricity would be available, contrary to what could happen in the first scenario. For what concerns the heat market within this scenario, the expected changes with respect to the present situation should be of minor importance. The diffusion of cogeneration, although important, may have a limited potential ceiling due to the limits on natural gas and the difficulties in implementing such schemes for non-utility purposes at lower scale. The demand side target technologies would be grouped around electrical appliances, energy conservation device, and, last but not least, more and more efficient gasoline and diesel engines. From the natural resource capital stock point of view, within this scenario, one should simultaneously assume high natural gas prices (or low reserves) and low coal prices (or high reserves).

The foreseen technology characterization to be supplied to the models under these assumptions would look like this: The nuclear will be replaced by nuclear in OECD countries only in a relatively reduced share (new reactors may be introduced for experimental purposes). Baseload electricity production will be progressively occupied by clean-coal technologies, first in OECD, and immediately also in the emerging economies, who will benefit from joint implementation schemes. Natural gas is expected to enter in the power sector very intensively, but operating exclusively in the peak hours. The remaining technologies could be assumed to follow a non-constrained but conservative path.

5.3.3 The Gas-Induced Decentralized Power Generation System.


This technology path represents a more radical change within the organizational structure of the energy system. Under this hypothesis, it is assumed that todays economies of scale in producing and distributing energy (and more precisely, electricity) will progressively disappear, being substituted by technologies operating in the Marshallian branch of the cost curve, i.e. with diseconomies of scale (in other words, with increasing marginal costs). As a first expected result, the production units would have lower size. Consequently, large, high voltage linear transport lines will loss their importance and will be substituted by local, radial, low-voltage grids, locally operated. The interconnection between different generators, necessary to ensure an adequate grid reliability, would therefore multiply at a very reduced scale. This may facilitate

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

132

the economic competition between independent power producers, as well as a significant degree of technology diversification. However, it is expected that this decentralization in power generation would not be strong enough so as to induce dramatic changes in the distribution system. The most salient technology that may be effectively downsized without significant efficiency loss is the gas turbine (either in single or combined cycle). As this scenario would be almost entirely dominated at the beginning by natural gas, an appropriate network of gas pipes or any other transporting system is mandatory in this case. Long-distance electric lines would be replaced by gas pipes. The generation and distribution of electricity would take place at a local level. This system may be complemented by some traditional centralized baseload electricity generation, decentralized co-generation to satisfy heat demand, as well as some intermittent renewable electricity production operating in their market niches. The sector-wise picture that could describe this scenario might be as follows: The power sector would be supposed to rely on the innovations concerning gas turbinerelated technologies. Solid fuels and some nuclear capacity would also be present for a share in baseload electricity generation. The former would be used under IGCC schemes. To summarize, further advances in small GTCC and coal power plants may be foreseen, as well as on-site conversion of wastes and biomass residues. The presumed abundance of natural gas and the pressure in favor of carbon emissions would induce some changes within the transport sector along this scenario: one may assume that the oil-fired explosion engine vehicle may progressively shift towards compressed natural gas (CNG) vehicles. The potential market share of them would at the end be determined by the price paths of oil and natural gas. The use of bio-methanol from biomass pyrolisis as a transportation fuel may be foreseen also. The heat market within this scenario may develop according to the general decentralization trend, by a significant penetration of co-generation schemes within the industrial sector. The end-use efficiency increase in this sector would therefore be noticeable. The demand side target technologies would have a comparatively minor importance, since the emerging generation technologies would be able to accommodate both to peakload and baseload. Significant improvements are to be assumed for what concerns the development of CNG vehicles. Concerning the natural resource capital stock issue, one should assume very optimistic hypothesis on the global reserves of natural gas within this scenario, since it would occupy a progressively higher role within the worlds primary energy mix.

As a consequence, the pressure on natural gas price would be progressively higher. As natural gas price increases, coal gasification and direct coal combustion may start to be more and more attractive, provided that, in the meantime, the corresponding capital costs had undergone already a significant decrease. To summarize, the fundamental technological notes for this scenario are: Nuclear power is replaced by nuclear only in a very limited share. The availability of natural gas at low price would contribute for massive installation of small scale GTCC power plants.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

133

Coal resources would partially channelled to power production through gas-fuelled Brayton turbines: IGCC, DCCT (direct coal combustion turbine) or similar technologies which allow for more flexible, load-tracking devices: optimistic assumptions are made on the costs of these technologies.

5.3.4 The Energy Efficient Decentralised Power Generation System.


This scenario would represent a more radical change within the organizational structure of the energy system. It may be considered as a technologically-enhanced version of the previous one. Indeed, in the short run, its development would overlap with scenario 3: gas turbines would allow for a first move towards decentralization. As a first expected result, the production units would have lower size. As other alternative technologies will be available, they would enter progressively into the market. In particular, natural-gas fuel cells for decentralized electricity production would be the natural sequel to the initial small-size gas turbine capital equipment. Consequently, large, high voltage linear transport lines will loss their importance and will be substituted by local, radial, low-voltage grids, locally operated. The interconnection between different generators, necessary to ensure an adequate grid reliability, would therefore multiply at a very reduced scale. This may facilitate the economic competition between independent power producers, as well as a significant degree of technology diversification. The existence of an appropriate network of gas pipes or any other transporting system is also a requisite for this scenario to develop. The traditional centralized baseload electricity generation would remain important only during the first transient period, to progressively loose importance afterwards. Decentralized co-generation would also contribute to satisfy heat demand. The technology pull induced by fuel cells would allow for a more intense expansion of intermittent renewable electricity expansion production, possibly using hydrogen as energy carrier. The sector-wise picture that could describe this scenario might be as follows: The natural gas is supposed to dominate the more and more decentralized power sector, first via gas turbine technologies, then with the even more efficient energy conversion fuel cells. As in the previous scenario, solid fuels and some nuclear capacity would also be present for a share in baseload electricity generation. In a second step, fuel cells and new systems for independent power producers will represent a disruptive innovation (although still gasbased). The emergence of fuel cells for static applications is supposed to rapidly spread to electric fuel cell automobile. This would indeed mean a dramatic change in the transport sector. The availability of a cheap primary fuel (natural gas in this case) is a prerequisite for this scheme to emerge. Later on, the issue of alternative fuels (hydrogen from renewables) may depend on the long-term behaviour of the fossil fuel reserves, as well as on the prices of these conversion technologies (biomass distillation, renewable-based water electrolysis, etc.). The generalized decentralization of the energy system would foster the outbreak of energy service companies, as well as local markets for heat and power. As in scenario 3, the demand side target technologies would have a comparatively minor importance, because of the physical approaching between supply and demand thanks to the decentralized generation technologies.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

134

As in scenario 3, one should assume very optimistic hypothesis on the global reserves of natural gas within this scenario, and, therefore, low gas prices at least in the first phase.

As a consequence, the pressure on natural gas price would be progressively higher. As natural gas price increases, coal gasification and direct coal combustion may start to be more and more attractive, provided that, in the meantime, the corresponding capital costs had undergone already a significant decrease. To summarize, the technological characterization would look like this: Nuclear power is replaced by other types of centralized electricity generation. The availability of natural gas at low price would contribute for massive installation of small scale GTCC power plants in the first phase of the period of analysis. In order to properly simulate this scenario, one has to assume really optimistic capital costs decrease for fuel cells beyond 2005-2010. The fuel cell development would facilitate the use of coal and biomass resources through gasification schemes.

5.3.5 A Future of Renewable Energy Technologies.


The picture selected within this hypothesis is probably the less likely in the short and medium term. Its early stages may be coincident with scenarios 2 and 3. Further in advance, one could devise a world status in which, either due to supply-side shocks from the fossil-fuel market, to a dramatic decrease of RET costs, or to both reasons, RET would reach a commercial status. The industrial organization within this scenario may combine aspects from the fully centralized electricity generation and transmission scheme, and those of the decentralized downsizing scheme. Among the first, we may outline the possibility for long-distance, baseload electricity hydro resources that may be put in exploitation if the adequate conditions in transmission technology apply (super conductor lines, etc.). Concerning the second, home-produced electricity or heat (via photovoltaics, or low temperature solar thermal devices, whose market penetration may be induced by using the appropriate building regulation) may be introduced. The fundamental issue that would characterize this scenario is the necessity to find appropriate technological solutions to provide a sufficient degree of flexibility in the system to accommodate to a significant share of intermittent power generation. The key technologies would therefore concern energy storage. This may take place at the power source, by accumulation of energy under several forms: thermal (molten salt reservoirs), mechanical (pump storage), chemical (synthetic fuels) or electrical (batteries), to be delivered to the grid when the original source is not available. The energy storage can also take place at the final consumption level. In addition, demand side management technologies would have a key role in achieving and maintaining the above-mentioned system flexibility. This scenario could be sectorally described as follows: The fossil fuels are supposed to diminish its predominant role within the power sector. This does not mean that they would disappear, but rather that they will be confined to captive

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

135

markets. The standard electric networks will be reinforced by new long distance transmission technologies able to put in exploitation large scale renewable power generation schemes: large hydro, on-shore and off-shore wind power, as well as solar thermal power plants. Large scale electricity storage facilities would allow to cope with the problem of intermittence of renewables. Simultaneously, small scale decentralized production, based on solar heat and building-integrated PV systems, small wind generators and battery storage would allow for massive decentralization. The emergence of renewables will also imply significant changes in the transport sector. The elaboration of synthetic fuels using renewable energy technologies would certainly induce significant changes in the environmental external costs of transport. The changes may or may not be based on technological disruptions: synthetic methanol could, for instance be used within conventional (although more efficient) internal explosion engine cars, or used in electric fuel cell cars. The energy carrier could also be hydrogen. The adoption of a given technological paradigm will certainly depend on the cost and the opportunity factors. As in scenario 4, the decentralization of the energy system would encourage the appearance of energy service companies operating in local markets for heat and power. The demand side technologies would again have a comparatively minor importance within this scenario, for the same reasons invoked above. Contrary to what was said for scenarios 3 and 4, a necessary condition for this scenario to occur is that the energy system would move onto a situation with high primary fossil fuel prices (either due to shortage in reserves or to full internalization of the corresponding external costs).

The notes to be retained in order to characterize this scenario would be: Nuclear power is replaced by decentralized fossil-fuel based electricity generation first, then by baseload, long-distance renewable energy supply. The electric grid evolves towards a more decentralized one, combined with some longdistance, large capacity transport lines. The fraction of baseload power occupied by renewables increases as a consequence of developments in energy storage technologies.

5.4 Running the scenarios


The practical question to be solved now is how to construct a coherent set of input data to simulate the above-described scenarios. The models under consideration (POLES, PRIMES, SAFIRE) are of very varied nature and therefore special care has to be taken in order to combine suitable hypothesis for technology deployment. POLES, for instance, requires particular assumptions in different world zones. This problem is not present when dealing with the European energy markets in PRIMES, although the characterization of different national energy systems within this model makes also necessary to introduce country-specific issues. The degree of technological disaggregation is also different from model to model. The current version of the POLES model includes basically 10 conventional electricity generation technologies, as well as 10 new and renewable energy technologies, whereas the number of energy technologies retained

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

136

in PRIMES is significantly greater. For instance, the conventional electricity generation technologies considered in POLES are: Conventional, large-size hydro Conventional nuclear LWR New Nuclear Design Pressurized Fluidised Bed Combustion Integrated Gasification Combined Cycle Advanced Thermodynamic Cycle (Coal Powered) Lignite-powered conventional Coal-powered conventional Oil-powered conventional Gas-powered conventional Oil-powered gas turbine combined cycle Gas-powered gas turbine combined cycle.

A significant change has been introduced within the POLES electrical submodel in order to assign the share of electricity generation for each technology, via a sharing ratio which is function of a substitution parameter rather than by pure and strict variable cost order of merit. On the contrary, future capacity requirements are planned according to a full future costs, depending on the peak-to-baseload diminishing shares. These full future costs are also affected by the discounting method as well as the capacity factor. The important point to retain here is that both variable (variable operation & maintenance, but not the fuel) and fixed costs (investment and fixed operation & maintenance) are exogenous to the model. We have, therefore, to modify the set of data (eventually including some capacity constraints) in order to set up different scenarios. The technology database that has been developed within our project may assist in finding a coherent set of possible technological paths. Referring to the list of 64 technologies that have been revised up to now by the Technology Working Group, each modelling team has to select the most appropriate technologies to be included within the corresponding analytical tool to capture as much adequately as possible the technological development path. The technology database has been enlarged, including two prospects for the year 2010. The first one, referred to as Business as Usual (BAU), contains the original data elaborated by the working group. A column entitled Enhanced Improvements (EI), containing optimistic prospects on emissions, costs and efficiencies for 2010. These data, that have been cross-checked also by looking at the confidence intervals provided in some of the literature that was used to elaborate the original database, are summarized in the annex. Selection of the data from one or the other column should be made according to the lines given when describing the four proposed electric sector scenarios.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

137

It should be underlined that modifying the technology data is not the only way in which different energy technology scenarios can be simulated and analyzed. Indeed, the modification of some of the structural constants of a given model could be the preferred way to shift from one scenario to another, with the same set of techno-economic data. Increasing the market sharing elasticities (or substitution parameters) may induce that small perturbations in the costs have amplified effects on the market shares as the absolute value of the substitution parameter increases, therefore inducing a faster penetration of slightly cheaper technologies This is why the issue of model calibration and design has to be regarded in close connection to the data provided for the scenario definition. Notice also that the market shares computed in POLES and PRIMES are in most cases fully reversible, and no lock-in mechanism is foreseen: the structural inertia may disappear in the long run as old installed capacity is dismantled. This should be considered especially when interest is put in simulating a possible lock-in of the nuclear market share around todays values in the OECD countries (i.e. the electric scenario n 1). Running scenarios for the renewable energy technologies may imply several tasks, but the most important one in order to achieve satisfactory results is to adjust some of current econometric specifications, according to alternative hypotheses which could lead to the definition and the simulation of possible different potential technological scenarios. For instance, the NREN module of POLES includes a learning curve function for each technology. The evolution of the capital costs are then endogenous, that is, they are driven by the learning curve elasticity for each of these technologies, as well as by an exogenously-given autonomous technological progress, and by the difference between the levelized renewable electricity price and the corresponding NREN electricity price. This difference is used for the calculation of the pay-back time, which is considered an appropriate measure of the costeffectiveness or the competitiveness associated with each technology. Endogenising the technical progress has been of capital importance for the modelling and the simulation of the dynamics of the diffusion of renewables. Therefore, it would now be possible to integrate the institutional R&D expenditures as a explaining factor of the technological change instead of the more ambiguous concept of technological exogenous progress. Under this new approach, the technical progress, specified as a technological policy decision variable and then subjected to structural and short-term fluctuations, may have a great influence on the diffusion of the renewables. It has been suggested to derive also for new and renewable energy technologies two basic baselines (an optimistic one and a pessimistic one). Setting up the scenarios in terms of learning curve elasticities and technical progress ratios is a task that may be done by looking at the technology parameters forecast (basically the costs), both under pessimistic (BAU) or optimistic (EI) assumptions, and therefore try to identify whether the selected learning curve elasticities and exogenous technological progress rates lead or not to these baselines. The BAU and EI data are included in Annex. Some alternative hypotheses, which could lead, each of them or combined, to the definition of potential technological policies for the renewables diffusion are discussed in the following. Basically, we see three relevant issues to be tackled, involving one technical point and two technological policy related decision variables:

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

138

The modelling of emerging energy technologies does not suppose any annual capacity constraint for the diffusion of the renewables. Therefore, these constraints could be added to the models and would allow to simulate different scenarios according to the degree to which the industry and the states are committed, in particular with the CO2 emissions reductions objectives. Moreover, by integrating the R&D variable, it would be possible to do different assumptions on the future support of the authorities towards the diffusion of renewables: specifically, it could involve the possible substitution of the institutional R&D by private R&D expenditures. This institutional behaviour issue should be specifically in concordance with the calibration of the substitution parameter in the above-mentioned the sharing ratio function for the allocation of electricity generation for each technology. Indeed, within the present structure, no real competition is allowed between traditional electricity generation schemes and renewables: whereas the former are installed according to the demand forecast, the capital and other various variable costs, and the sharing function whose exponential parameter measures somehow the stiffness of the decision-making, the latter diffuse according to an almost independent, Fischer-Pry-like scheme.

Nevertheless, and bearing in mind the significant effort that has been made to upgrade the structure of the electrical sector within POLES and PRIMES, the above remarks should be kept in mind only as possible future themes for further development.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

139

Chapter 6: Technology Performance: Technological Scenarios and Market Penetration Assessment


By M. Bess and M. Whiteley (ESD) The five above-described technology scenarios that were agreed as a reasonable way of hypothesizing forthcoming energy technology trends have been introduced to the SAFIRE energy technology assessment module. In addition ESD has run its market penetration model SAFIRE for a sixth scenario, Business as Usual. This is essentially a continuation of present trends with no major changes in the energy supply structure or energy policies. This scenario is similar to the Conventional Wisdom scenario from DGXVIIs European Energy to 2020 - A Scenario Approach. There are no major fuel price shocks, with crude oil prices rising steadily from US$ 17.60 per barrel (in 1993 terms) in 1995 to US$ 31 (1993 dollars) in 2020. Most nuclear plants come to the end of their life early in the next century and are not replaced under this scenario. Gas based power generation continuous to make significant inroads into the generation mix.

6.1 Introduction
This chapter analyses the scope for renewable and new conventional energy technologies up to the year 2030. This has been done using ESDs SAFIRE1 energy model. As agreed at the Climate Technology meeting in Sevilla on 30th April 1997, five technology scenarios have been investigated. These, along with a 6th Business as Usual scenario developed by ESD, are as follows: Centralised electricity production with nuclear renaissance and incremental innovations; Cleaner fossil-fuel-based base load electricity production; Gas-induced decentralised power generation system; Energy efficient decentralised power generation system;
1

SAFIRE was financed by the European Commission - Directorate General XII, Science, Research and Development under the Joule II Programme.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat A future of renewable energy technologies.

140

Section 2 describes the assumptions used in more detail for each scenario. Section 3 describes the results of the SAFIRE runs, while section 4 provides a comparative analysis of each technology based up on these results

6.2 SAFIRE Scenario Descriptions


SAFIRE assesses the impact of energy technologies and associated policies on a variety of economic indicators including: market penetration, pollution emissions, investment cost, employment, import dependency etc. SAFIRE takes base data on technology costs, performance, renewable energy resources, energy demand in 63 sectors of the economy, fuel prices and scenario data describing potential views of the future energy situation. Technology market penetration is then calculated both for decentralised and centralised applications. For centralised electricity generation a least cost dispatching methodology is used to calculate market penetration for each technology. For decentralised heat and electricity markets the payback period of a particular technology is used to determine its market potential which is then correlated with a market penetration curve to give an assessment of each technologys contribution to meeting energy demand in each sector, for each year. The Business as Usual scenario considered here is essentially a continuation of present trends with no major changes in the energy supply structure or energy policies. This scenario is based on the Conventional Wisdom scenario from DGXVIIs European Energy to 2020 - A Scenario Approach. There are no major fuel price shocks, with crude oil prices rising steadily from US$ 17.60 per barrel (in 1993 terms)in 1995 to US$ 31 (1993 dollars) in 2020. Most nuclear plants come to the end of their life early in the next century and are not replaced under this scenario. Gas based power generation continuous to make significant inroads into the generation mix. The remaining technological scenarios have been described in the preceding chapter.

6.3 SAFIRE results


There follows a description of the key features of the technological development seen in each scenario. For each scenario the results for renewable energy technologies are presented separately from the results for new fossil based and nuclear technologies.

6.3.1 Scenario Results


6.3.1.1 Business as Usual Scenario Renewable energy (excluding large hydro) penetration rises from 3.6% of primary energy in 1993 to 8.4% by 2030, as shown in figure 1. This increase is largely accounted for by greater utilisation of industrial solid waste, wood energy crops, agricultural waste, municipal solid waste, landfill gas and geothermal and wind. This can be attributed to the rise in fossil fuel prices increasingly making renewable energy technologies cost competitive. In the case of the biomass technologies 70-100% of their increased penetration comes in decentralised heat

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

141

markets rather than centralised electricity markets. Overall, the split between electricity and heat provided by renewable energy by 2030 is approximately 50/50.

Renewable Technology Penetration to 2030 BAU Scenario


300,000 250,000

GWh per year

200,000 150,000 100,000 50,000 0 Large Hydro Forest residues Indust waste, solid Energy crops, wood Municipal waste Wind Small Hydro Geothermal

Agric waste, solid

Landfill gas

Munic. digestible

Energy crops, ethanol

Tide

Wave

Indust waste, liquid

Energy crops, biodiesel

Solar - active

Agric waste, liquid

PV elec

Cooling & daylighting

Figure 6-1: Renewable technology penetration to 2030 - BAU scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated and, in the case of biofuels, the energy used in the transport sector.

With respect to new fossil fuel technologies, figure 2 shows the market penetration to 2030. In this scenario, CCGT technology makes large inroads into the European electricity generating market, due to its cost competitiveness and the availability of gas. After 2010, IGCC also penetrates rapidly, due to reductions in the capital cost of the equipment. Existing coal, oil, gas and nuclear generating technologies are largely phasing out by 2030.
Renewable Technology Penetration to 2030 Centralised Electricity Scenario
300,000 250,000

GWh per year

200,000 150,000 100,000 50,000 0 Large Hydro Indust waste, solid Forest residues Municipal waste Energy crops, wood Geothermal Small Hydro Agric waste, solid Landfill gas Munic. digestible Energy crops, ethanol 2030 2010 1993 Solar - passive Wind

Indust waste, liquid

Wave

Energy crops, biodiesel

Solar - active

Agric waste, liquid

Tide

PV elec

Cooling & daylighting

Solar - passive 1993

2010

2030

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

142

Figure 6-2 Renewable energy (excluding large hydro) penetration rises from 3.6% of primary energy in Conventional technology market penetration to 2030 - BAU scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated.

6.3.1.2 Centralised Electricity Production Scenario In this scenario, when old nuclear plant is being retired in around 2005, the capacity is replaced with newer, smaller nuclear technologies. 1993 to 8.7% by 2030, as shown in figure 3. This increase is again largely accounted for by greater utilisation of industrial solid waste, wood energy crops, agricultural waste, municipal solid waste, landfill gas and geothermal in the decentralised heat market and also wind. In comparison to the Business as Usual scenario the split between heat and electricity supply from renewables has increased slightly to 55/45.

Renewable Technology Penetration to 2030 Centralised Electricity Scenario


300,000 250,000

GWh per year

200,000 150,000 100,000 50,000 0 Large Hydro Indust waste, solid Forest residues Municipal waste Energy crops, wood Geothermal Small Hydro Agric waste, solid Landfill gas Munic. digestible Energy crops, ethanol 2030 2010 1993 Solar - passive Wind

Indust waste, liquid

Wave

Energy crops, biodiesel

Solar - active

Agric waste, liquid

Tide

PV elec

Figure 6-3: Renewable technology penetration to 2030- Centralised electricity scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated and, in the case of biofuels, the energy used in the transport sector.

Figure 4 shows that CCGT, as in the Business as Usual scenario makes a large leap in penetration by 2030, however, the drop off in nuclear penetration experienced after 2010 is here halted and a small increase in penetration is noted.

Cooling & daylighting

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

143

Conventional Technology Penetration to 2030 Centralised Electricity Scenario


1,200,000 1,000,000

GWh per year

800,000 600,000 400,000 200,000 0 CCGT - Gas PS Nuclear (Current & new PWR) Fossil/Gas Cogen. (decent.) Existing Coal Fired PS

IGCC - Coal PS

PFBC - Coal PS

OCGT - Oil PS

Existing gas PS

HOCC - Oil PS

Heat Pumps (decentralised)

2030 Existing Oil Fired PS Fuel Cells (decentralised) 2010 1993

Figure 6-4Conventional technology market penetration to 2030- Centralised electricity scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated

The change in nuclear penetration is accounted for by the phase out of current nuclear capacity and the introduction of new capacity as shown in the figure below. Increased levels of funding for research, development and demonstration of new safer smaller nuclear technologies has allowed significant cost reductions to be made therefore making the installation of some new capacity cost effective.

6.3.1.3 Cleaner Fossil Fuel Scenario Under this scenario nuclear power is progressively substituted for by cleaner fossil fuel based energy generating technologies. Renewable energy penetration is similar to the previous scenarios, with the largest contributions in 2030 still coming from large hydro, industrial solid waste, forest residues, energy crops, and municipal solid waste. The large increase in penetration of the biomass technologies coming from the decentralised heat market. Once again it is the gradual increase in fossil fuel prices and the gradual evolution of the performance of renewable energy technologies that makes renewable energy technologies increasingly cost competitive.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

144

In this scenario, the existing conventional nuclear, gas, coal and oil based generators are being phased out by 2030. Because of enhanced research, development and demonstration funding, significant technology developments and reductions in capital cost for IGCC have allowed this technology to penetrate massively at the expense of CCGT which is significantly constrained in comparison to the Business as Usual scenario.

Installed Nuclear Capacity Centralised Electricity Scenario


150

MW of installed nuclear capacity

100 Thousands 50 0 1993 1995 2000 2005 2010 2015 2020 2025 2030

Year Old capacity New capacity Total

Figure 6-5: Conventional technology penetration to 2030 - Cleaner fossil fuel scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated.

6.3.1.4 Gas-induced Decentralized Scenario In this scenario the energy system becomes much less centralised with a greater penetration of decentralised independent power producers based on natural gas. Overall, the penetration of renewable energy supply technologies increases from 3.6% to 7.2% of primary energy supply by the year 2030, as shown in figure 8. This is slightly less than in the Business as usual scenario, given the new dominance of gas in the decentralized heat and electricity markets.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

145

Renewable Technology Penetration to 2030 Cleaner Fossil Scenario


300,000 250,000

GWh per year

200,000 150,000 100,000 50,000 0 Large Hydro Indust waste, solid Forest residues Energy crops, wood Municipal waste Wind Small Hydro Geothermal

Agric waste, solid

Landfill gas

Munic. digestible

Energy crops, ethanol

Tide

Wave

Indust waste, liquid

Energy crops, biodiesel

Solar - active

Agric waste, liquid

PV elec

Cooling & daylighting

Figure 6-6: Renewable technology market penetration to 2030- gas decentralised scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated and, in the case of biofuels, the energy used in the transport sector.

Once again the conventional generating capacity is dominated by CCGT by 2030. However, the decentralized nature of the energy supply system is allowing more significant penetration of decentralized gas fired CHP systems.

Conventional Technology Penetration to 2030 Cleaner Fossil Scenario


1,600,000 1,400,000

GWh per year

1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 IGCC - Coal PS Nuclear (Current & new PWR) Fossil/Gas Cogen. (decent.) Existing Coal Fired PS PFBC - Coal PS CCGT - Gas PS OCGT - Oil PS 2030 2010 Existing gas PS Existing Oil Fired PS Heat Pumps (decentralised) Fuel Cells (decentralised) 1993 HOCC - Oil PS

Figure 6-7: Conventional technology market penetration to 2030 - gas decentralised scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated.

Solar - passive 1993

2010

2030

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

146

6.3.1.5 Energy Efficient Decentralized Scenario The decentralisation of the energy system is more marked than in the previous scenario, with smaller scale gas based energy generation units coming into the decentralised heat and electricity markets. As in the previous scenario, the penetration of renewables is slightly hampered by the increased penetration of small scale gas fired cogeneration.

Renewable Technology Penetration to 2030 Gas Decentralised Scenario


300,000 250,000

GWh per year

200,000 150,000 100,000 50,000 0 Large Hydro Forest residues Indust waste, solid Municipal waste Energy crops, wood Wind Small Hydro Agric waste, solid

Geothermal

Munic. digestible

Energy crops, ethanol

Landfill gas

Energy crops, biodiesel

Indust waste, liquid

Tide

Wave

Solar - active

Agric waste, liquid

PV elec

Cooling & daylighting

Figure 6-8 Renewable technology market penetration 2030 - Energy efficiency scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated and, in the case of biofuels, the energy used in the transport sector.

Figure 6-9 shows that increased funding for R,D&D of fossil fuel based technologies, CCGT, decentralized gas CHP and IGCC means that they all make large increases in penetration as their costs come down. However, fuel cells also benefit from increased R,D&D and their lower capital costs mean that for the first time they begin to make penetrations, albeit at a much lower level.

Solar - passive 1993

2010

2030

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

147

Conventional Technology Penetration to 2030 Gas Decentralised Scenario


1,400,000 1,200,000

GWh per year

1,000,000 800,000 600,000 400,000 200,000 0 CCGT - Gas PS Fossil/Gas Cogen. (decent.) IGCC - Coal PS Nuclear (Current & new PWR) Existing Coal Fired PS PFBC - Coal PS OCGT - Oil PS 2030 2010 Existing gas PS HOCC - Oil PS Heat Pumps (decentralised) Existing Oil Fired PS 1993 Fuel Cells (decentralised)

Figure 6-9: Conventional technology market penetration to 2030 - Energy efficiency scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated.

6.3.1.6 Renewable Future Scenario Under this set of optimistic assumptions about the future costs and technical efficiencies of renewable energy technologies, their penetration is significantly enhanced in comparison to the other scenarios, reaching over 12% by 2030. Wastes, energy crops, wind and geothermal technologies benefit in particular. The increase in penetration in this scenario over the Business as Usual scenario is largely (65%) due to increased penetration of the decentralised heat market by biomass technologies. The remaining penetration is in both the centralised and decentralised electricity markets.

R enew able Technology Penetration to 2030 Energy Effic iency S cenario


300,000 250,000

GWh per year

200,000 150,000 100,000 50,000 0 Large Hydro Forest residues Indust waste, solid Energy crops, wood Municipal waste Wind Small Hydro Agric waste, solid Geothermal

Munic. digestible

Energy crops, ethanol

Landfill gas

Energy crops, biodiesel

Indust waste, liquid

Tide

Wave

Solar - active

Agric waste, liquid

PV elec

Cooling & daylighting

Solar - passive 1993

2010

2030

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

148

Figure 6-10: Renewable technology market penetration to 2030 - Renewable future scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated and, in the case of biofuels, the energy used in the transport sector.

figure 11 shows that, large improvements in the cost of IGCC allow huge penetrations of this technology at the expense of the existing technologies nuclear coal, oil and gas which are all phased out by 2030.

Figure 6-11: Conventional technology market penetration to 2030 - Renewable future scenario. The graph shows
Conventional Technology Penetration to 2030 Energy Efficient Scenario
1,400,000 1,200,000

GWh per year

1,000,000 800,000 600,000 400,000 200,000 0 CCGT - Gas PS Fossil/Gas Cogen. (decent.) IGCC - Coal PS Nuclear (Current & new PWR) Existing Coal Fired PS Fuel Cells (decentralised) PFBC - Coal PS OCGT - Oil PS 2030 2010 Existing gas PS Heat Pumps (decentralised) HOCC - Oil PS 1993 Existing Oil Fired PS

the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated.

6.3.2 Summary of Market Penetration of renewable energy Technologies


The table below shows the market penetration of renewable energy technologies (excluding large hydro power) to 2030 under the six different scenario views of the future. The figures are a percentage of total primary energy supply.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Table 6-1 Market penetration of renewable technologies in 2030 (% of primary energy supply)

149

1993 Business as Usual Centralised electricity Cleaner fossil fuels Decentralised gas Energy efficiency Renewables Future 3.6% 3.6% 3.6% 3.6% 3.6% 3.6%

2000 4.6% 4.6% 4.7% 4.8% 4.9% 7.7%

2010 6.3% 6.0% 6.5% 6.2% 6.2% 9.5%

2020 7.5% 7.7% 7.6% 6.3% 6.3% 10.3%

2030 8.4% 8.7% 8.5% 7.2% 7.2% 12.3%

It is noticeable that the only scenario that brings significantly more renewable capacity on line is the Renewables Future scenario. The technologies effected are mostly wastes, energy crops, geothermal and wind; these all respond to increased R,D&D and to efficiencies of scale production to be come more cost competitive.

6.3.3 Comparative Analysis of Climate Mitigating Technologies


This section assesses which technologies within each scenario represent the most effective investment for reducing carbon dioxide emissions. The new fossil fuel and renewable energy technologies have been ranked according to three criteria. 6.3.3.1 Comparison criteria Net Benefit Investment per tonne of carbon dioxide avoided Total annual reduction in carbon dioxide emissions. These criteria are described below. Net Benefit (billion ecu).

This is the cumulative net present value of the investments required to bring about the level of market penetration of each energy technology observed in the scenario (see equation 1). The initial capital cost of new technologies is offset by the avoided capital cost of the equivalent capacity of conventional fossil fuel generating technologies that would otherwise be required. The avoided costs of fossil fuel and also the external benefits to the environment of reduced CO2 emissions also offset the initial capital cost. The value of the environmental benefit of each technology is based on figures produced by the EXTERNE2 project.

Externalities of fuel cycles: Externe project

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Equation 6.1: Calculation used to produce net benefit figure (NB. all costs are discounted at 10%).

150

Net Benefit = Capital cost of technology (ecu/MW)*Installed capacity (MW) - Average capital cost of current technology (ecu/MW)*Installed capacity of new technology (MW) - Energy generated by technology (kWh)*avoided fossil fuel cost (ecu/kWh) - cost of reduced damage to environment (ecu/kWh)*energy generated by technology (kWh) All new technology capital costs and avoided fossil fuel technology capital costs over the accounting period of 1993 to 2030 are included in this analysis. The avoided fossil fuel capital cost is based on the average cost of generating heat and electricity from fossil fuels today. Avoided fuel costs and external benefits are included from throughout the lifetime of the plant, so any benefits that accrue after 2030 are also included in the analysis. All the costs and benefits were then discounted to the base year with a discount rate of ten percent. A positive figure for the net benefit of investing in a particular technology means that the benefits in terms of the savings in capital costs of equivalent conventional technology and the savings in fossil fuel and the savings in damage to the environment outweigh the capital costs of the technology. Conversely, a negative net benefit figure means that capital cost is greater than all the cost savings achieved by using that technology. This criteria gives a measure of the overall benefits in ecu derived from each new technology. It is dependent on the overall level of market penetration of the technology as well as its cost effectiveness at reducing carbon dioxide emissions. Therefore, the same technology in different scenarios may have different values for the net benefit according to the level of penetration of that technology in that scenario. In order to compare just the cost effectiveness of one technology against another in terms of reducing carbon dioxide emissions we need to use the next criteria. Investment per tonne (ecu/tn).

This is the total present capital investment in a technology per tonne of carbon dioxide avoided (see equation 2). The capital cost of new plant installed up to 2030 is divided by the total carbon dioxide savings over the lifetime of the plant. The capital costs incurred up to 2030 are discounted to the present at a rate of 10%. The reduction in carbon dioxide is in comparison with the level of emissions from todays conventional energy generating technologies.
Equation 6.2: Investment per tonne of carbon dioxide avoided (NB. all costs are discounted at 10%).

Investment per tonne CO2 = Capital cost new technology (ecu/MW) * Installed capacity(MW) / total reduction in CO2 emissions over the lifetime of the plant with respect to 1990. Annual reduction in carbon dioxide emissions in 2030.

This is the reduction in carbon dioxide emissions per year achievable with each technology by 2030. Once again this uses as a comparison the level of carbon dioxide emissions from todays

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

151

conventional energy generating technologies. This criteria will be dependent on both the absolute level of market penetration of the technology and also its effectiveness in reducing carbon dioxide emissions.
Equation 6.3: Annual reduction in CO2 emissions in 2030

Annual reduction of CO2 = Energy generated by technology in 2030(kWh) * reduction in CO2 emissions per kWh The results for each scenario are presented next. The analysis tables relate to new installed capacity for each technology. Technologies are only analysed if they increase their installed capacity during the period up to 2030. Therefore, nuclear only appears in the table for the centralised electricity scenario. A technology may produce a high net benefit because a large capacity is installed, whether that is because it has low initial capital costs or because there is a large available fuel resource. However, other technologies may be more cost effective in terms of cost per tonne of carbon dioxide reduced, but have a lower net benefit because they achieve a lower market penetration due to higher capital costs or are constrained by the availability of the fuel resource, as is the case with some renewable energy technologies. 6.3.3.2 Business as Usual Scenario CCGT and IGCC have the highest net benefit for the investment required to produce the observed penetration. These technologies are the most cost effective technologies for reducing emissions of carbon dioxide. They also make the largest overall contribution to reductions in carbon dioxide emissions because of their high levels of penetration. The most cost effective renewable energy technologies for reducing carbon dioxide emissions are biomass based, ie. energy crops and forest residues. However, because of its large penetration (33.8 GW in 2030), wind is the renewable technology that has the greatest potential in absolute terms to reduce the emissions of carbon dioxide. Noticeably, photovoltaics are the least cost effective (investment per tonne of carbon dioxide reduced) because of their high cost and low market penetration. PV also has a negative net benefit figure because the costs are greater than the sum of the benefits. Nuclear makes no savings in carbon dioxide emissions and is not presented here because there is no new installed capacity in this scenario.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Table 6-2: Business as Usual Scenario - Analysis of SAFIRE Results
Net Benefit (Billion ecu) Investment per tonne of carbon dioxide (ecu/tn) Annual reduction in carbon dioxide emissions by 2030 (million tonnes CO2/yr)

152

CCGT - Gas PS IGCC - Coal PS Fossil/Gas (decent.) CHP

272.4 92.4 56.9 19.5 15.6 13.6 12.1 8.8 7.2 4.1 4.1 3.9 3.7

CCGT - Gas PS IGCC - Coal PS Energy biodiesel Forest residues Energy ethanol crops, crops,

0.2 0.4 0.6 0.7 0.8 0.9 1.0 1.0 1.1 1.8 2.2 2.7 2.7 3.2 3.8 4.2 4.4 4.7

CCGT - Gas PS IGCC - Coal PS Wind Energy crops, wood Fuel Cells (decentralised) Small Hydro Municipal waste Large Hydro Agric waste, solid OCGT - Oil PS Forest residues Geothermal Fossil/Gas (decent.) Landfill gas Wave Indust waste, solid Munic. digestible Energy ethanol Solar - active PFBC - Coal PS Energy biodiesel crops, crops, CHP

481.6 227.6 56.3 45.3 38.0 25.9 22.3 21.4 18.9 16.5 15.8 15.3 14.8 14.7 13.6 13.2 13.1 7.0 6.8 6.1 5.4 2.4 1.0 0.2

PFBC - Coal PS Small Hydro Large Hydro Wind Indust waste, solid OCGT - Oil PS Fuel Cells (decentralised) Geothermal Municipal waste Landfill gas Energy wood crops,

Fuel Cells (decentralised) Energy crops, wood OCGT - Oil PS Agric waste, solid Landfill gas Small Hydro Agric waste, liquid Wave PFBC - Coal PS Munic. digestible Wind Large Hydro Solar - active Fossil/Gas (decent.) Geothermal Municipal waste Indust waste, liquid Indust waste, solid PV elec CHP

1.7 1.7 1.3 1.1 0.6 0.5 0.2 0.1 0.0 -0.0 -1.1

Munic. digestible Forest residues Wave Solar - active Indust waste, liquid Agric waste, solid Energy biodiesel crops,

5.4 7.5 9.6 22.6 37.5 231.7

Agric waste, liquid Energy ethanol PV elec crops,

Agric waste, liquid Indust waste, liquid PV elec

6.3.3.3 Centralised Electricity Production Scenario From the table below, CCGT and IGCC are the most cost effective technologies for reducing the emissions of carbon dioxide. Because of innovations leading to reduced costs, nuclear power increases its market penetration in this scenario, though it is not amongst the most cost effective for reducing carbon dioxide emissions.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

153

Again, the biomass based technologies are the most cost effective of the renewable energy technologies and wind provides the greatest potential for absolute carbon dioxide emissions reduction.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Table 6-3: Centralised Electricity Production Scenario - Analysis of SAFIRE Results
Net Benefit (Billion ecu) Present Gross Investment per tonne of carbon dioxide (ecu/tn) Annual reduction in carbon dioxide emissions by 2030 (million tonnes CO2/yr)

154

CCGT - Gas PS Fossil/Gas (decent.) CHP

279.2 59.0 46.6 34 15.2 14.2 14.0 12.3 9.6 7.0 4.8 4.6 4.2 4.1 1.7 1.7 1.4 1.3 0.8 0.6 0.2 0.1 0.02 -0.01 -1.4

CCGT - Gas PS IGCC - Coal PS Forest residues Energy biodiesel Energy ethanol crops, crops,

0.3 0.3 0.6 0.6 0.7 0.7 1.0 1.0 1.1 1.5 1.6 1.7

CCGT - Gas PS IGCC - Coal PS Wind Fuel Cells (decentralised) Energy crops, wood Nuclear Small Hydro Geothermal Large Hydro Agric waste, solid Municipal waste Fossil/Gas (decent.) Landfill gas Forest residues Indust waste, solid OCGT - Oil PS Wave Munic. digestible Solar - active Energy ethanol Energy biodiesel crops, crops, CHP

458.3 130.8 56.2 48.9 42.4 36.3 24.9 23.7 23.5 23.4 22.5 21.8 20.3 19.1 18.2 15.8 13.5 13.5 9.3 6.8 5.5 4.6 2.1 1.1 0.3

IGCC - Coal PS Nuclear Small Hydro PFBC - Coal PS Large Hydro Wind Indust waste, solid OCGT - Oil PS Geothermal Landfill gas Fuel Cells (decentralised) Municipal waste Energy wood crops,

Fuel Cells (decentralised) Energy crops, wood Agric waste, solid OCGT - Oil PS Agric waste, liquid Small Hydro Landfill gas Fossil/Gas (decent.) Wave Munic. digestible Solar - active Wind Large Hydro Geothermal Nuclear PFBC - Coal PS Municipal waste Indust waste, liquid Indust waste, solid PV elec CHP

3.6 3.6 3.7 4.0 4.2 4.5 5.4 5.5 7.3 9.2 20.9 25.8 191.4

Munic. digestible Wave Forest residues Solar - active Indust waste, liquid Agric waste, solid Energy biodiesel crops,

Agric waste, liquid PFBC - Coal PS Indust waste, liquid PV elec

Agric waste, liquid Energy ethanol PV elec crops,

6.3.3.4 The Cleaner Fossil Fuel Based Scenario In this scenario IGCC and CCGT are once again dominant, however, because of the capital cost reductions in cleaner coal technology IGCC becomes the most cost effective technology for reducing carbon dioxide emissions and has by far the largest absolute potential to reduce emissions.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

155

Table

6-4: The Cleaner Fossil Fuel Based Baseload Electricity Production Scenario - Analysis of SAFIRE Results
Net Benefit (Billion ecu) Present Gross Investment per tonne of carbon dioxide (ecu/tn) Annual reduction in carbon dioxide emissions by 2030 (million tonnes CO2/yr)

IGCC - Coal PS CCGT - Gas PS Fossil/Gas (decent.) CHP

255.4 99.6 57.2 28.3 15.6 13.7 12.2 9.8 7.2 4.7 4.0 3.6 3.6 1.7 1.7 1.3 1.1 0.8 0.6 0.2 0.1 0.0 -0.0 -1.1

IGCC - Coal PS CCGT - Gas PS Energy biodiesel Forest residues Energy ethanol crops, crops,

0.4 0.6 0.6 0.7 0.8 1.0 1.0 1.1 1.2 1.4 2.0 2.2 2.7 2.8 3.9 4.2 4.4

IGCC - Coal PS CCGT - Gas PS Wind Energy crops, wood Small Hydro Large Hydro Municipal waste Fuel Cells (decentralised) Agric waste, solid Geothermal OCGT - Oil PS Forest residues Landfill gas Fossil/Gas (decent.) CHP

448.3 102.8 56.3 43.4 25.9 21.8 21.5 20.1 18.6 18.4 16.6 16.0 16.0 15.9 15.0 13.6 13.2 12.7 7.5

PFBC - Coal PS Small Hydro Large Hydro Wind Indust waste, solid OCGT - Oil PS Geothermal Landfill gas Fuel Cells (decentralised) Municipal waste Munic. digestible Energy wood crops,

Energy crops, wood OCGT - Oil PS Agric waste, solid Fuel Cells (decentralised) PFBC - Coal PS Landfill gas Small Hydro Agric waste, liquid Wave Munic. digestible Wind Large Hydro Fossil/Gas (decent.) Solar - active Geothermal Municipal waste Indust waste, liquid Indust waste, solid PV elec CHP

PFBC - Coal PS Wave Munic. digestible Indust waste, solid Solar - active Energy ethanol Energy biodiesel crops, crops,

Forest residues Wave Solar - active Indust waste, liquid Agric waste, solid Energy biodiesel crops,

5.1 6.1 7.1 10.0 21.0 41.5 231.7

7.0 5.4 2.4 1.1 0.2

Agric waste, liquid Energy ethanol PV elec crops,

Agric waste, liquid Indust waste, liquid PV elec

6.3.3.5 The Gas-induced Decentralised Power Generation System In this scenario, the market penetration of decentralised gas CHP systems is much more marked, it is second only to CCGT by 2030. This leads to a leap in the cost effectiveness of this technology for reducing the emissions of carbon dioxide. However, CCGT and IGCC followed

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

156

by the biomass renewable energy technologies are still the highest ranking in terms of investment per tonne of carbon dioxide. Nuclear makes no savings in carbon dioxide emissions and is not presented here because there is no new installed capacity in this scenario.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

157

Table 6-5: The Gas-induced Decentralized Power Generation System Scenario - Analysis of SAFIRE Results
Net Benefit (Billion ecu) Present Gross Investment per tonne Annual reduction in carbon dioxide of carbon dioxide (ecu/tn) emissions by 2030 (million tonnes CO2/yr)

CCGT - Gas PS Fossil/Gas (decent.) CHP

276.2 135.2 89.8 15.4 13.6 11.2 11.0 6.5 6.0 5.8 3.7 3.5 2.9 1.6 1.5 1.0 0.9 0.5 0.4 0.1 0.1 0.0 -0.0 -0.7

CCGT - Gas PS IGCC - Coal PS Energy biodiesel Forest residues Energy ethanol crops, crops,

0.2 0.2 0.6 0.6 0.8 1.0 1.0 1.4 1.8 2.0 2.6

CCGT - Gas PS IGCC - Coal PS Fossil/Gas (decent.) Wind Energy crops, wood Small Hydro Large Hydro Agric waste, solid Municipal waste Fuel Cells (decentralised) OCGT - Oil PS Geothermal Forest residues Landfill gas Wave Munic. digestible Indust waste, solid Energy ethanol Solar - active Energy biodiesel crops, crops, CHP

501.4 248.2 122.0 54.1 39.4 25.8 21.4 18.7 16.8 16.3 14.2 13.2 12.2 11.6 11.4 11.0 8.5 7.0 6.4 5.4 2.4 2.2 0.5 0.1

IGCC - Coal PS Small Hydro Large Hydro Wind PFBC - Coal PS Fuel Cells (decentralised) Indust waste, solid OCGT - Oil PS Municipal waste Geothermal Landfill gas Munic. digestible Energy wood crops,

OCGT - Oil PS Energy crops, wood Agric waste, solid Landfill gas Small Hydro Wave Fossil/Gas (decent.) CHP

2.7 2.7 4.0 4.0 4.3 4.4 5.6 7.4 8.0 19.3 49.7 63.2 230.3

Agric waste, liquid Solar - active Wind Fuel Cells (decentralised) Large Hydro PFBC - Coal PS Munic. digestible Geothermal Municipal waste Indust waste, liquid Indust waste, solid PV elec

Forest residues Wave Solar - active Indust waste, liquid Energy biodiesel crops,

Agric waste, solid Agric waste, liquid Energy ethanol PV elec crops,

Agric waste, liquid PFBC - Coal PS Indust waste, liquid PV elec

6.3.3.6 The Energy Efficient Decentralised Power Generation System As the energy supply system becomes more decentralised even than in the previous scenario, decentralised gas CHP penetrates to an even larger degree. Fuel cells experience significant capital cost reductions and are therefore making a large absolute contribution to carbon dioxide emissions reduction, and are also now one of the most cost effective technologies. Again, nuclear makes no savings in carbon dioxide emissions.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

158

Table 6-6: The Energy Efficient Decentralized Power Generation System Scenario - Analysis of SAFIRE Results
Net Benefit (Billion ecu) Present Gross Investment per tonne Annual reduction in carbon dioxide of carbon dioxide (ecu/tn) emissions by 2030 (million tonnes CO2/yr)

CCGT - Gas PS Fossil/Gas (decent.) CHP

265.9 161.0 87.3 24.2 15.4 13.5 11.0 10.9 6.1 5.5 3.5 3.5 2.9

CCGT - Gas PS IGCC - Coal PS Energy biodiesel Forest residues Fuel Cells (decentralised) Energy ethanol crops, crops,

0.2 0.2 0.6 0.6 0.7 0.8 0.9 0.9 1.2 1.9 2.1 2.6 2.6

CCGT - Gas PS Fuel Cells (decentralised) IGCC - Coal PS Fossil/Gas (decent.) Wind Energy crops, wood Small Hydro Large Hydro Agric waste, solid Municipal waste OCGT - Oil PS Geothermal Forest residues Landfill gas Munic. digestible Wave Indust waste, solid Energy ethanol Solar - active Energy biodiesel crops, crops, CHP

489.1 417.5 239.9 119.5 53.2 41.9 25.8 20.9 18.1 16.6 13.8 13.1 12.2 11.3 11.0 10.6 8.8 7.0 6.4 5.3 2.4 2.1 0.5 0.1

IGCC - Coal PS Fuel Cells (decentralised) Small Hydro Large Hydro Wind PFBC - Coal PS Indust waste, solid OCGT - Oil PS Municipal waste Geothermal Landfill gas Energy wood crops,

OCGT - Oil PS Energy crops, wood Agric waste, solid Landfill gas Small Hydro Agric waste, liquid Wave Fossil/Gas (decent.) Solar - active Wind Large Hydro PFBC - Coal PS Munic. digestible Geothermal Municipal waste Indust waste, liquid Indust waste, solid PV elec CHP

1.7 1.6 1.0 0.8 0.5 0.4 0.1 0.1 0.0 -0.0 -0.7

3.3 4.0 4.1 4.4 5.8 7.6 8.0 21.1 49.7 65.0 230.3

Munic. digestible Forest residues Wave Solar - active Indust waste, liquid Agric waste, solid Energy biodiesel crops,

Agric waste, liquid PFBC - Coal PS Indust waste, liquid PV elec

Agric waste, liquid Energy ethanol PV elec crops,

6.3.3.7 A Future of Renewable Energy Technologies Scenario In this scenario the rate of adoption of renewable technologies is much more rapid as capital costs decrease significantly. Whilst CCGT is still the highest ranking technology, renewables are now making a much larger contribution overall to reductions in carbon dioxide emissions.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Table 6-7: A Future of Renewable Energy Technologies Scenario - Analysis of SAFIRE Results
Net Benefit (Billion ecu) Present Gross Investment per tonne of carbon dioxide (ecu/tn) Annual reduction in carbon dioxide emissions by 2030 (million tonnes CO2/yr)

159

CCGT - Gas PS Fossil/Gas (decent.) CHP

247.4 106.1 89.4 34.0 27.4 17.5 16.6 13.8 12.0 7.7 7.6 6.5 5.5 3.0 2.7 2.5 1.2 1.0 0.3 0.3 0.2 0.0 -3.7 -5.5

CCGT - Gas PS IGCC - Coal PS OCGT - Oil PS Energy biodiesel Energy ethanol Energy wood crops, crops, crops,

0.2 0.4 1.0 1.2 1.4 1.5 1.7 1.9 2.7 2.7 3.2 3.7 3.8

CCGT - Gas PS IGCC - Coal PS Wind Solar - active Geothermal Energy crops, wood Fossil/Gas (decent.) Agric waste, solid Municipal waste Small Hydro Forest residues Indust waste, solid Large Hydro Landfill gas OCGT - Oil PS Fuel Cells (decentralised) Munic. digestible Wave Agric waste, liquid Energy crops, ethanol Energy biodiesel crops, CHP

475.2 215.3 188.6 94.8 51.4 46.1 44.6 33.0 30.2 26.9 26.0 23.4 23.3 18.9 15.4 15.3 14.8 12.2 8.5 8.0 5.7 5.0 3.7 1.3

IGCC - Coal PS Wind Indust waste, solid PFBC - Coal PS Small Hydro Large Hydro Geothermal Landfill gas Municipal waste OCGT - Oil PS Fuel Cells (decentralised) Energy wood crops,

Forest residues Agric waste, solid Fuel Cells (decentralised) Small Hydro Wave PFBC - Coal PS Landfill gas Agric liquid waste,

4.0 4.1 5.3 5.7 7.2 9.4 9.6 15.4 17.8 18.1 83.1

Forest residues Munic. digestible Wave Indust waste, liquid Agric waste, liquid Agric waste, solid Energy biodiesel Energy ethanol Solar - active PV elec crops, crops,

Large Hydro Munic. digestible Fossil/Gas CHP (decent.) Municipal waste Geothermal Wind Solar - active Indust waste, solid Indust liquid PV elec waste,

PFBC - Coal PS PV elec Indust waste, liquid

However, PV is still not a cost effective technology and has a negative net benefit. It is largely the biomass waste and energy crop technologies that offer the best means of reducing carbon dioxide emissions.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

160

6.4 Conclusions
In all of the scenarios, except the Cleaner Fossil Fuel Based scenario, CCGT is the new technology that has the greatest market penetration in 2030 and makes the largest contribution to reducing emissions of CO2 at between 450 and 500 million tonnes of CO2 per year. CCGT also produces the largest net benefit on the investment in its construction and is the cheapest technology for avoiding a tonne of CO2 at between 0.2 and 0.6 ecu per tonne. The reason for the success of CCGT is the availability of relatively cheap gas and the low capital costs of the technology. In most of the scenarios, natural gas-fired CHP makes large inroads into decentralised heat markets. However, it is interesting to note that it is substantially more costly per tonne of CO2 avoided than CCGT. This is because the capital cost of CHP is higher than CCGT, and also because in the sectors where CHP penetrates the heat that it is replacing has lower CO2 emissions coefficients than the centralised electricity that CCGT is replacing. IGCC only challenges CCGT, in terms of cost effectiveness of CO2 emissions mitigation, in the Cleaner Fossil Fuel scenario where the availability of cheap coal, coupled with efficiency improvements and cost reductions arising from stimulated R,D&D, allow IGCC to compete on a capital cost basis. Nuclear power is phased out in all scenarios, except the Centralised Electricity scenario, simply because of its high cost. In the Centralised Electricity scenario, increased funding for R,D&D results in efficiency improvements and cost reductions that allow nuclear to compete to some extent on a cost basis and to maintain its level of installed capacity. All the scenarios, except the Renewable Future scenario, are not particularly helpful to renewable energy technologies which only achieve a market penetration of about 8% of primary energy demand. In the Renewable Future Scenario a more significant penetration of 12% of primary energy is achieved. In this scenario, wind has a large market penetration and is therefore the renewable energy technology which makes the largest contribution to reducing CO2 emissions at 190 million tonnes per year in 2030. However, the most cost effective technologies per tonne of CO2 are the energy crop technologies at 1.2 to 1.5 ecu per tonne of CO2.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

161

Chapter 7: Baseline and alternative technology scenarios to 2030: the effect onto the worlds energy system
By N. Kouvaritakis (ECOSIM) and P. Criqui (IEPE) The POLES baseline projection up to 2030 has been produced using the main BAU technology characterisation dataset discussed in the preceding Chapter (the reader is referred for details to the accompanying Annexes to this volume). With these data, the emerging world balance is summarized in Tables 7.1 to 7.3.
Table 7-1: POLES World Primary Energy Projection
MTOE 1992 2000 2010 2020 2030 1992/2000 2000/2010 2010/2020 2020/2030

Primary Production Solids Oil Natural gas Nuclear Hydro+Geoth Trad.Biomass Other Renewables

8358.17 2151.61 3263.79 1670.03 457.13 190.86 428.51 196.24

9485.38 11926.80 14911.35 18243.26 2380.67 3616.87 2123.46 582.83 222.30 401.19 158.07 3428.54 4346.27 2652.69 648.35 278.48 340.35 232.12 4563.62 5200.87 3429.52 743.66 344.05 291.00 338.63 5897.01 6260.11 4115.73 878.21 412.49 251.09 428.63

1.6% 1.3% 1.3% 3.0% 3.1% 1.9% -0.8% -2.7%

2.3% 3.7% 1.9% 2.3% 1.1% 2.3% -1.6% 3.9%

2.3% 2.9% 1.8% 2.6% 1.4% 2.1% -1.6% 3.8%

2.0% 2.6% 1.9% 1.8% 1.7% 1.8% -1.5% 2.4%

The world primary energy mix trend is captured

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat O th e r R e n e w a b le s T ra d . B io m a s s H y d ro + G e o t h. N u c le a r N a tu r a l G a s O il 2000 2010 2030 S o li d s Figure 7-1 World primary energy mix
Table 7-2 POLES World Electricity Projection 1992-2030
1992
Electricity Generation in TWh Thermal of which: Clean Coal Gas Turbines Biomass Nuclear Hydro+Geoth Solar Wind Small Hydro CHP 108.19 271.02 138.30 2126.19 2219.35 0.95 4.66 125.35 405.95 130.70 1040.97 174.31 2304.21 2584.83 1.75 9.76 168.63 433.27 566.75 3840.86 227.67 2567.06 3238.14 6.30 14.86 183.81 403.41 2007.16 6410.68 283.61 2978.49 4000.52 20.33 29.18 213.48 408.70 3348.32 8931.63 348.68 3607.91 4796.38 35.81 60.37 250.01 363.74 2.4% 18.3% 2.9% 1.0% 1.9% 7.9% 9.7% 3.8% 0.8% 15.8% 13.9% 2.7% 1.1% 2.3% 13.7% 4.3% 0.9% -0.7% 13.5% 5.3% 2.2% 1.5% 2.1% 12.4% 7.0% 1.5% 0.1%

162

20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0

Mtoe

2000

2010

2020

2030 1992/200 2000/201 2010/202 2020/203 0 0 0 0


2.1% 2.5% 4.1% 5.3% 3.2% 3.8% 2.9% 3.2%

12670.21 14998.24 22377.68 30764.30 40769.41 7787.75 9495.79 15964.11 23113.59 31655.19

5.3% 3.4% 2.1% 1.9% 1.8% 5.8% 7.5% 1.6% -1.2%

Generation Capacity in GWe Thermal Nuclear Hydro+Geoth Solar+Wind+Small Hydro

2916.01 1916.63 330.57 641.05 27.75

3365.98 2282.98 289.83 754.26 38.91

4916.29 3631.24 316.70 922.60 45.76

7006.93 5451.39 369.67 1122.82 63.05

9233.53 7374.86 435.01 1334.70 88.96

1.8% 2.2% -1.6% 2.1% 4.3%

3.9% 4.8% 0.9% 2.0% 1.6%

3.6% 4.1% 1.6% 2.0% 3.3%

2.8% 3.1% 1.6% 1.7% 3.5%

Average Load Factor in %

49.60

50.87

51.96

50.12

50.40

0.3%

0.2%

-0.4%

0.1%

Fuel Input for Thermal PG

2081.15

2127.31

3257.10

4479.89

5932.55

0.3%

4.4%

3.2%

2.8%

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Solids Oil Gas 1275.53 329.53 476.09 1358.27 275.68 493.35 2171.47 304.08 781.55 3024.65 370.71 1084.53 3946.01 592.08 1394.45 0.8% -2.2% 0.4% 4.8% 1.0% 4.7% 3.4% 2.0% 3.3%

163
2.7% 4.8% 2.5%

Average Thermal Efficiency in %

32.18

38.39

42.15

44.37

45.89

2.2%

0.9%

0.5%

0.3%

Table 7-3: POLES World Final Energy Projection


1992
Final Energy Consumption Solids Oil Gas Heat Electricity Renewables by Sector: Industry Transport Dom. Tert. Agr. 2331.38 1621.48 2258.56 2843.23 1814.36 2466.19 3448.39 2245.45 3026.43 4061.23 2763.14 3720.50 4664.30 3365.43 4504.90 2.5% 1.4% 1.1% 1.9% 2.2% 2.1% 1.6% 2.1% 2.1% 1.4% 2.0% 1.9% 6211.42 805.97 2706.67 1143.96 206.29 880.59 590.01

2000
7123.79 922.37 3093.75 1380.86 183.12 1099.57 559.26

2010

2020

2030 1992/2000 2000/2010 2010/2020 2020/2030


1.7% 1.7% 1.7% 2.4% -1.5% 2.8% -0.7% 2.0% 1.7% 1.9% 1.3% 0.0% 4.2% 0.2% 1.9% 1.5% 1.8% 1.7% 0.0% 3.1% 1.0% 1.7% 1.6% 1.6% 1.2% 0.0% 2.8% 0.8%

8720.28 10544.87 12534.63 1087.31 3747.99 1571.46 183.76 1662.92 572.47 1264.29 4464.11 1854.46 184.47 2262.97 629.63 1485.76 5255.20 2090.65 185.27 2971.43 679.73

The baseline world electricity mix for 2030 is summarized in figure 7.1. The technologies retained in the figure include those considered in the central electricity production module of POLES, as well as some other included in the new and renewable module. Notice the remarkable success of the gas turbine in combined cycle technology. Amongst the baseload technologies, supercritical coal seems to expands rapidly its market share, although IGCC retains a significant degree of competitiveness due to its flexibility in using fuels of varied qualitiy.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
World Power Reference Production (2030)
8873.48

164

9000.00

8000.00

7000.00

HYD: Large Hydro 6000.00 5940.16 5592.87 NUC: Nuclear 1000-1500 MW NND: New Nuclear design PFC: Supercritical Coal ICG/ IGCC 5000.00 TWH 4795.26 ATC: Advanced Coal Cycle LCT: Lignite+FGD CCT: Hard Coal OCT: Oil Boiler Monovalent 4000.00 GCT: Gas Powered Trad. Turbine OGC: Oil Powered Gas Turbine GGT: GTCC 200-350 MW 3000.00 2538.00 2978.12 2784.25 2760.97 CHP: GTCC & CHP WRD_SHYPRO WND: Wind on Shore SPP: Solar Power Plant 2000.00 1454.72 1042.37 1000.00 414.30 0.00 0.00 1 555.93 364.07 249.30 60.22 31.16 81.01 267.57 100.95 7.40 BF2: Waste Incineration CHP BGT: Biomass Gasification MFC: Proton Exchange Membran Fuel Cell SFC: Solid Oxyde Fuel Cell

Figure 7-2 Baseline World Electricity Mix (TWH) by 2030

The results territorially disaggregated are shown only for the group OCDE and the aggregate Asia, for sake of conciseness. The reference energy balances corresponding to these aggregated zones are given below. Tables 7-4 to 7-6 to summarize the results for OCDE countries, whereas tables 7-7 to 7-9 correspond to Asia. Table 7-4: POLES OCDE Primary Energy Projection
MTOE 1992 2000 2010 2020 2030 1992/2000 2000/2010 2010/2020 2020/2030

Primary Production Solids Oil of which non conventional Natural gas Nuclear Hydro+Geoth Trad.Biomass Other Renewables

3012.86 3394.72 3693.92 4053.11 4792.87 863.59 814.27 32.74 720.87 375.14 97.71 44.89 96.38 863.34 1074.39 1326.23 1635.74 932.23 32.74 820.81 32.74 783.48 1080.50 32.74 518.25

1.5% 0.0% 1.7% 0.0% 2.9% 2.6% 0.7% 1.9% -3.2%

0.8% 2.2% -1.3% 0.0% 1.5% 0.4% 0.7% 0.3% 2.5%

0.9% 2.1% -0.5% 0.0% 0.6% 1.0% 0.5% 0.3% 1.8%

1.7% 2.1% 3.3% 31.8% 0.3% 1.3% 0.3% 0.3% 1.2%

908.48 1057.94 1125.88 1165.14 460.88 103.20 52.37 74.23 481.90 110.21 53.73 94.95 532.91 116.13 55.21 113.28 606.92 120.24 56.82 127.50

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Table 7-5 POLES OCDE Electricity Projection 1992-2030
1992
Electricity Generation in TWh Thermal of which: Clean Coal Gas Turbines Biomass Nuclear Hydro+Geoth Solar Wind Small Hydro CHP 64.52 271.02 84.93 1744.84 1136.15 0.89 4.55 65.06 376.85 74.74 794.85 105.98 1822.08 1199.95 1.69 8.88 89.51 383.23 256.83 1950.78 117.02 1908.13 1281.57 6.20 12.86 92.88 354.69 740.82 2707.85 144.32 2133.26 1350.34 20.17 24.21 93.64 368.26 1036.78 3205.97 173.81 2486.98 1398.16 35.38 43.28 95.06 327.58 1.9% 14.4% 2.8% 0.5% 0.7% 8.3% 8.7% 4.1% 0.2% 13.1% 9.4% 1.0% 0.5% 0.7% 13.9% 3.8% 0.4% -0.8% 11.2% 3.3% 2.1% 1.1% 0.5% 12.5% 6.5% 0.1% 0.4% 7688.12 4359.79

165

2000

2010

2020

2030 1992/200 2000/201 2010/202 2020/203 0 0 0 0


1.4% 1.9% 2.4% 3.6% 1.8% 2.2% 1.4% 1.6%

8583.89 10924.56 13002.77 14976.27 5078.56 7268.24 9012.90 10589.83

3.4% 1.7% 1.9% 1.5% 0.3% 5.8% 6.0% 0.2% -1.2%

Generation Capacity in GWe Thermal Nuclear Hydro+Geoth Solar+Wind+Small Hydro

1746.21 1105.58 267.53 357.56 15.54

1937.30 1303.54 230.61 380.56 22.60

2497.97 1833.39 234.99 403.01 26.57

3046.42 2325.38 261.80 422.40 36.83

3507.72 2727.40 292.99 436.47 50.86

1.3% 2.1% -1.8% 0.8% 4.8%

2.6% 3.5% 0.2% 0.6% 1.6%

2.0% 2.4% 1.1% 0.5% 3.3%

1.4% 1.6% 1.1% 0.3% 3.3%

Average Load Factor in %

50.26

50.58

49.92

48.72

48.74

0.1%

-0.1%

-0.2%

0.0%

Fuel Input for Thermal PG Solids Oil Gas

1028.47 744.74 122.08 161.65

1080.63 787.09 119.96 173.58

1447.80 977.64 131.05 339.11

1718.96 1191.31 107.48 420.18

1956.61 1417.66 64.33 474.63

0.6% 0.7% -0.2% 0.9%

3.0% 2.2% 0.9% 6.9%

1.7% 2.0% -2.0% 2.2%

1.3% 1.8% -5.0% 1.2%

Average Thermal Efficiency in %

36.46

40.42

43.17

45.09

46.55

1.3%

0.7%

0.4%

0.3%

Table 7-6: POLES OCDE Final Energy Projection


1992
Final Energy Consumption Solids Oil Gas Heat Electricity Renewables by Sector: 3061.32 149.56 1620.49 708.73 22.07 537.05 121.23

2000
3380.67 114.92 1778.55 796.68 17.09 639.46 126.60

2010
3738.54 108.48 1886.17 837.60 17.73 819.75 148.67

2020
3984.03 113.34 1946.64 857.35 18.44 965.42 168.49

2030 1992/2000 2000/2010 2010/2020 2020/2030


4176.42 119.53 1988.01 856.47 19.23 1106.52 184.33 1.2% -3.2% 1.2% 1.5% -3.1% 2.2% 0.5% 1.0% -0.6% 0.6% 0.5% 0.4% 2.5% 1.6% 0.6% 0.4% 0.3% 0.2% 0.4% 1.6% 1.3% 0.5% 0.5% 0.2% 0.0% 0.4% 1.4% 0.9%

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Industry Transport Dom. Tert. Agr. 1101.08 1010.99 949.24 1169.80 1135.66 1075.21 1231.51 1240.51 1266.51 1265.42 1322.81 1395.80 1280.01 1388.58 1507.83 0.8% 1.5% 1.6% 0.5% 0.9% 1.7% 0.3% 0.6% 1.0%

166
0.1% 0.5% 0.8%

Table 7-7: POLES Asia Primary Energy Projection


MTOE 1992 2000 2010 2020 2030 1992/2000 2000/2010 2010/2020 2020/2030

Primary Production Solids Oil of which non conventional Natural gas Nuclear Hydro+Geoth Trad.Biomass Other Renewables

1446.36 1890.43 2795.09 3571.38 4306.51 737.91 1104.75 1893.02 2585.50 3269.23 308.79 0.00 116.40 20.97 26.58 197.49 38.22 330.13 0.00 156.21 48.23 40.21 182.17 28.73 370.35 0.00 206.50 74.78 61.15 148.84 40.45 352.17 0.00 267.05 99.72 87.46 121.62 57.87 291.02 0.00 321.62 134.35 112.55 99.37 78.37

3.4% 5.2% 0.8% NA 3.7% 11.0% 5.3% -1.0% -3.5%

4.0% 5.5% 1.2% NA 2.8% 4.5% 4.3% -2.0% 3.5%

2.5% 3.2% -0.5% NA 2.6% 2.9% 3.6% -2.0% 3.6%

1.9% 2.4% -1.9% NA 1.9% 3.0% 2.6% -2.0% 3.1%

Table 7-8 POLES Asia Electricity Projection 1992-2030


1992
Electricity Generation in TWh Thermal of which: Clean Coal Gas Turbines Biomass Nuclear Hydro+Geoth Solar Wind Small Hydro CHP 7.40 0.00 7.41 97.55 309.02 0.02 0.10 48.66 5.22 6.64 146.68 6.65 190.67 467.56 0.03 0.81 58.61 6.26 200.30 905.28 4.83 296.22 711.00 0.07 1.73 55.52 5.19 997.76 1413.78 4.12 401.23 1016.94 0.06 3.73 74.16 5.39 1813.44 2218.15 7.84 560.03 1308.67 0.05 9.63 101.59 3.63 -1.4% NA -1.3% 8.7% 5.3% 1.5% 30.2% 2.4% 2.3% 40.6% 20.0% -3.1% 4.5% 4.3% 10.8% 7.8% -0.5% -1.8% 17.4% 4.6% -1.6% 3.1% 3.6% -1.9% 8.0% 2.9% 0.4% 6.2% 4.6% 6.6% 3.4% 2.6% -2.2% 9.9% 3.2% -3.9%

2000

2010

2020

2030

1992/00
6.9% 7.3%

2000/10
8.4% 9.5%

2010/20
4.6% 4.8%

2020/30
3.7% 3.8%

1712.42 2927.30 6545.40 10253.96 14726.05 1251.85 2203.37 5475.67 8752.46 12742.44

Generation Capacity in GWe Thermal Nuclear Hydro+Geoth Solar+Wind+Small Hydro

382.67 272.04 14.90 85.91 9.82

569.37 1239.50 403.36 23.73 130.16 12.13 993.85 36.93 196.78 11.95

2180.69 1832.35 50.30 281.54 16.49

3093.18 2640.55 66.22 362.05 24.37

5.1% 5.0% 6.0% 5.3% 2.7%

8.1% 9.4% 4.5% 4.2% -0.2%

5.8% 6.3% 3.1% 3.6% 3.3%

3.6% 3.7% 2.8% 2.5% 4.0%

Average Load Factor in %

51.08

58.69

60.28

53.68

54.35

1.8%

0.3%

-1.2%

0.1%

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

167

Fuel Input for Thermal PG Solids Oil Gas

354.81 277.46 52.56 24.78

489.29 1130.40 401.25 45.43 42.61 951.31 26.04 153.05

1702.03 1475.78 6.47 219.78

2316.20 1978.99 4.80 332.41

4.1% 4.7% -1.8% 7.0%

8.7% 9.0% -5.4% 13.6%

4.2% 4.5% -13.0% 3.7%

3.1% 3.0% -2.9% 4.2%

Average Thermal Efficiency in %

30.34

38.73

41.66

44.22

47.31

3.1%

0.7%

0.6%

0.7%

Table 7-9: POLES Asia Final Energy Projection


1992
Final Energy Consumption Solids Oil Gas Heat Electricity Renewables by Sector: Industry Transport Dom. Tert. Agr. 599.56 183.31 439.97 893.38 266.54 556.92 1294.82 436.03 764.13 1651.31 643.81 1005.54 2033.64 923.38 1307.42 5.1% 4.8% 3.0% 3.8% 5.0% 3.2% 2.5% 4.0% 2.8% 2.1% 3.7% 2.7% 1222.84 457.65 364.99 46.03 17.13 114.10 228.46

2000
1716.84 653.35 539.96 100.30 11.66 207.58 210.90

2010
2494.97 845.75 818.77 161.46 11.66 474.26 189.29

2020
3300.66 986.09 1118.75 286.82 11.66 725.80 179.48

2030 1992/2000 2000/2010 2010/2020 2020/2030


4264.44 1154.05 1489.15 404.36 11.66 1038.31 177.74 4.3% 4.6% 5.0% 10.2% -4.7% 7.8% -1.0% 3.8% 2.6% 4.3% 4.9% 0.0% 8.6% -1.1% 2.8% 1.5% 3.2% 5.9% 0.0% 4.3% -0.5% 2.6% 1.6% 2.9% 3.5% 0.0% 3.6% -0.1%

The baseline demographic and economic trends are summarized in the following table:
Table 7-10: POLES Socio-economic trends
1992
Population (Million) OCDE GDP (M$90) OCDE Population (Million) ASIA GDP (M$90) ASIA Population (Million) World GDP (M$90) World 873.60

2000
919.77

2010
961.52

2020
991.50

2030 1992/2000 2000/2010 2010/2020 2020/2030


1012.77 0.6% 2.0% 1.5% 6.0% 1.6% 3.2% 0.4% 2.6% 1.2% 5.6% 1.3% 3.8% 0.3% 2.0% 1.0% 4.4% 1.2% 3.3% 0.2% 1.6% 0.9% 3.8% 1.0% 2.9%

15208.83 17813.38 22917.96 27950.75 32763.31 2892.50 6258.00 5423.80 3265.03 3696.45 4098.94 4461.12

9980.13 17272.94 26545.79 38380.23 6145.45 7023.36 7888.82 8709.81

27946.81 35862.32 52249.09 72476.23 96131.60

To conclude with, the baseline projection on natural resources trends (reserves, prices and distribution) is also outlined in the following tables. For sake of conciseness, the information is limited to oil and gas, since the pressure on coal resources is supposed to be much lower.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Table 7-11: POLES Baseline oil market outlook
OIL PRODUCTION (mbd)
Gulf Conventional OECD Conventional Other Conventional World Non Conventional Total

168

1973 1980 1990 2000 2010 2020 2030

1980/ 1973

1990/ 1980
-1.4% 0.5% 1.1% NA 0.3%

2000/ 1990
2.5% 1.7% -0.2% 7.0% 1.1%

2010/ 2000
5.1% -1.3% 1.0% 0.0% 1.9%

2020/ 2010
2.6% -0.5% 0.5% 25.6% 1.8%

2030/ 2020
2.0% -2.8% -0.3% 13.3% 1.9%

21.0 18.8 16.3 20.9 34.4 13.3 14.5 15.2 18.1 15.8 24.3 30.2 33.7 33.0 36.6 0.0 0.0 0.3 0.7 0.7

44.6 15.1 38.3 6.5

54.5 11.3 37.2 22.8

-1.6% 1.2% 3.1% NA 1.1%

58.6 63.5 65.2 72.6 87.5 104.6 125.7

OIL RESERVES 1973 1980 1990 2000 2010 2020 2030 1980/ 1990/ 2000/ (thousand mb) 1973 1980 1990
Gulf OECD Other World Conventional Non Conventional Total 305 58 173 0 0 524 338 52 216 0 0 601 592 59 315 917 48 966 591 52 443 1086 130 1217 565 39 395 1000 195 1195 494 36 333 863 314 1177

2010/ 2020/ 2000 2010

2030/ 2020

388 1.5% 5.8% 0.0% -0.5% -1.3% -2.4% 38 -1.4% 1.1% -1.2% -2.7% -1.0% 0.6%

262 3.3% 3.8% 3.5% -1.1% -1.7% -2.4% 687 451 NA NA NA 1.7% -0.8% -1.5% -2.2% NA 10.4% 4.1% 4.9% 3.7%

1138 2.0% 4.9% 2.3% -0.2% -0.2% -0.3%

1973 1980 1990 2000 2010 2020 2030

1980/ 1990/ 2000/ 2010/ 2020/ 2030/ 1973 1980 1990 2000
3.0%

2010
2.6%

2020
1.2%

World crude oil price World RP ratio Average Rate (%) Recovery

9.8 24.5 80.0

41.4 25.9 80.0

20.0 40.6 80.0

18.5 45.9 31.1

24.7 37.4 37.1

31.8 30.8 44.2

36.0 22.8% -7.0% -0.8% 24.8 51.3 0.8% 0.0% 4.6%

1.2% -2.0% -1.9% -2.2% 1.8% 1.8% 1.5%

0.0% -9.0%

Table 7-12: POLES Baseline gas market outlook


GAS PRODUCTION (billion m3)
OECD of which America Former Union N.

1973 1980 1990 2000 2010 2020 2030

1980/ 1973

1990/ 1980
NA

2000/ 1990
2.8% 2.9% 0.2% 7.4% 4.2% 2.5%

2010/ 2000
1.5% 0.9% 1.0% 6.0% 2.8% 4.6%

2020/ 2010
0.6% 0.6% 2.3% 6.7% 2.6% 4.3%

2030/ 2020
0.3% 0.5% 1.8% 3.6% 1.9% 2.8%

728 568 269 37 24 0

0 582 404 40 49 0

774 1021 1189 1265 1309 572 742 94 116 187 761 756 193 176 240 828 876 918 0.5% 8.5% 1.5% 15.8% NA

-0.2% 6.3% 8.9% 8.9% NA

Soviet

836 1050 1255 346 232 378 662 300 577 939 361 759

Middle East Asia Other

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
World 1149 1397 1914 2386 2981 3853 4624 4.0% 3.2% 2.2% 2.3% 2.6%

169
1.8%

GAS RESERVES 1975 1980 1990 2000 2010 2020 2030 1980/ 1990/ 2000/ (Trillion m3) 1973 1980 1990
OECD of which N.America Economies transition Latin America Asia Other World in 15 9 23 2 2 24 67 15 9 29 5 5 28 82 18 8 50 8 9 51 135 14 7 75 7 8 64 168 14 6 72 7 7 73 174 15 7 69 7 7 78 175 17 -0.5% 1.9% -2.4%

2010/ 2000
0.2%

2020/ 2010
0.8% 0.9%

2030/ 2020
0.8% 1.3%

7 -0.7% -0.7% -2.5% -0.9% 64 5.2% 5.4%

4.1% -0.4% -0.4% -0.7% 0.7% -1.0% -2.2%

5 15.5% 6 21.0% 76 168 2.5% 4.1%

4.2% -1.0%

5.4% -1.6% -0.5% -1.0% -1.6% 6.4% 5.2% 2.3% 2.2% 1.3% 0.4% 0.6% -0.2% 0.1% -0.4%

1973

1980

1990

2000

2010

2020

2030

1980/ 1990/ 2000/ 2010/ 2020/ 2030/ 1973 1980 1990 2000 2010 2020

RP ratios N.American market European market Asian market World 14.9 68.0 161.7 16.1 58.1 90.6 15.9 56.7 75.1 70.6 9.4 71.3 44.6 70.3 7.5 58.6 37.3 58.5 6.3 45.8 32.2 45.5 5.9 38.0 1.5% -0.1% -5.1% -2.3% -1.6% -0.7% -3.1% -0.3% 2.3% -1.9% -2.4% -1.9%

25.1 -10.9% -1.9% -5.1% -1.8% -1.5% -2.5% 36.4 0.0% -1.8% -2.5% -2.2%

Import prices ($90/boe) N.American market European market Asian market 20.4 11.3 19.2 30.0 21.4 36.5 10.8 15.2 20.6 14.9 14.5 28.7 19.6 18.3 31.8 24.3 25.6 33.4 26.5 32.1 40.5 8.1% -9.7% 3.2% 13.6% -3.4% -0.5% 13.6% -5.6% 3.4% 2.8% 2.2% 2.4% 3.4% 1.0% 0.5% 0.9% 2.3% 2.0%

7.1 The Nuclear Scenario


This scenario has been implemented in POLES by altering the technico-economic characteristics of two types of Nuclear plants: A standard large LWR which in the reference case saw its capital cost slightly increasing over time was assumed to be about 30 % cheaper compared to reference in 2030. Furthermore fixed operation and maintenance costs were assumed to be about 35 % lower.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

170

A new evolutionary nuclear design assumed to be introduced gradually in the reference case and finishing costing about 5 % less to construct and about 25 % less to operate than the LWR by to 2030 gained a substantial share of the nuclear share (over 25 %) thanks primarily to its inherent safety characteristics. For the nuclear scenario this type of plant was assumed to be 30 % cheaper to construct and 50 % to operate than in the reference case.

These changes have had a substantial impact on the competitiveness of these plants in terms of generating costs : whereas in the reference case they were un-competitive in most regions of the world even for the higher annual loads they become generally cost-attractive vis--vis combined cycle gas turbines(*) in the region of 5-6 thousand hours per year and vis--vis supercritical coal technologies(*) in the region of 4-5 thousand hours per year. Such enhanced competitiveness is particularly marked for the new nuclear design. It is worth noting however that the changes were phased in gradually and power plants but especially nuclear ones are characterised by a slow turnover.
6000 5000 4000 3000 TWh 2000 1104 1000 11 0 -31 -1000 -2000
Figure 7-3: The Nuclear Scenario: World power production by technologies with respect to the reference scenario

Large Hydro Nuclear 1000-1500 MW LWR 4770 New Nuclear design Supercritical Coal Integrated Coal Gasification with Combined Cycle Advanced Coal Cycle Lignite+FGD Hard Coal 200-500 MW Oil Boiler Monovalent Gas Powered Trad. Turbine -1 Oil Powered Gas Turbine Gas Turbine in Combined Cycle 200-350 MW Gas Turbine in Combined Cycle & CHP Small Hydro

-13 -41 -90 -54 -14-7-10 -23 -56 -229 -389 -534 -691 -823 -1163

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Mt of C 250

171

Asia
207

Mt of C 400 350 306 300 250 200

OECD

376

200

180

150

100

50 26 2 0 Mt of C 160 140 120 100 80 60 40 20 0 16 27 114

Coal Gas Oil CO2

150 100 57 50 0 13

Coal Gas Oil CO2

Other World

157

Mt of C 800 700 600 600 500 400 Coal Gas Oil CO2 300 200 99 100 0

World
741

Coal Gas Oil CO2 42

Figure 7-4: The Nuclear Scenario by zones: comparison with the baseline

The overall effect of the scenario is a world wide reduction of CO2 emissions of 5.3 % (8.6 % in the OECD). Naturally this effect is produced almost exclusively within the power generating sector. World-wide: the new nuclear design plant passes from about 1000 TWH to 5800 TWH and the more conventional LWR from 2500 TWH to 3600 TWH overall nuclear contribution increases from under 9 % to over 22 % (from 16 % to 37 % in the OECD). Clearly nuclear power which suffers from heavy costs in the reference case erodes into the high to medium annual loads displacing about 3000 TWH; of coal fired and 1200 TWH of gas fired electricity production. The most severely affected technology is large scale brown coal fired plants (-30 %) while IGCC and gas turbine CC are both 13 % lower and the remainder coal technologies (812%) lower. The relatively important reduction in gas turbine CC is a measure of its big contribution in relative high loads in the reference case. Combined Heat and Power (-15%) and Biomass gasification Combined Cycle (-21 %) suffer from the lower baseload electricity prices resulting from the cheaper nuclear power. Wholesale coal prices are 5-10 % lower while gas prices 3-8 % lower. World oil prices stand virtually unaffected (-1 %) since most of the changes implied by the scenario occur within the electricity sector where petroleum plays a relatively small role. (*) These are basically the winning technologies in the reference case

7.2 The Clean Coal Scenario


For the purpose of this scenario three new clean coal technologies have been retained : 1. Supercritical coal which in the reference case achieved 49 % efficiency and average specific capital cost of around 970 ECU/KW with low operating and maintenance costs (by coal fired

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

172

power plant standards) was the winning coal technology gaining about 14 % of world total central generation and 30 % of world coal generation by 2030. For the purpose of the scenario the efficiency was increased to 55 % and the capital cost brought to 750 ECU/KW by 2030 while a 12 % reductions in O&M costs was also introduced. 2. An IGCC type plant reaching about 50 % efficiency and costing 1100 ECU/KW by 2030 with still relatively high O&M costs of about 60 ECU/KW achieved a penetration of about half the importance of supercritical coal in the reference case. For the scenario the techno-economic performance of this type of plant was substantially improved to reach 54 % efficiency by 2030 while achieving 25 % reductions in both capital and fixed O&M costs. 3. An Advanced Thermodynamic cycle (direct coal fixed combined cycle) plant costing 1000 ECU/KW and reaching 50 % thermal efficiency by 2030 with relatively low operating costs achieved a penetration comparable to the IGCC plant in the reference case. A capital cost of 780 ECU/KW and an efficiency of 52 % was retained for the scenario resulting in cost performances similar to those of the IGCC plant. The changes in the aggregated world electricity output by 2030 are summarized in Figure 7-10.
Large Hydro 2111 2000 2254 Nuclear 1000-1500 MW LWR New Nuclear design Supercritical Coal 1000 TWh 82 0 -51 -147 -350 -1000 -1376 -2000 Oil Powered Gas Turbine -2303 -3000 Gas Turbine in Combined Cycle -78 -115 -49 19 -21-38-18 -9 -9 -6 0 Integrated Coal Gasification with Combined Cycle Advanced Coal Cycle Lignite+FGD Hard Coal 200-500 MW Oil Boiler Monovalent Gas Powered Trad. Turbine

3000

1719

Figure 7-5: The Clean Coal Scenario: World power production by technologies with respect to the reference scenario

It is worth noting that for regions with access to reasonably cheap gas only the supercritical coal plant, and for loads higher than 6500 hours per year, had a clear advantage over Combined Cycle gas plants. In the scenario under otherwise similar circumstances supercritical coal and Advanced Thermodynamic cycle plants become attractive for loads higher than around 3000 hours/year while the IGCC for loads higher than 4500 hours/year. Some improvements (though

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

173

clearly on a smaller scale) were assumed especially in terms of capital cost reductions for more conventional coal technologies which were justified as knock on effects arising from the improvements in the new clear coal technologies.

50 40 30 20 Mt of C 10 0

44

Asia
100 50

OECD
54 8 9 11 Mt of C 0 -50 Coal Gas Oil CO2

-10 -20 -30 -40 -50 -41

Coal Gas Oil CO2

-100 -150 -150 -200 -250 -212

Other World
40 30 20 10 Mt of C 0 0 -10 -20 -30 -40 -36 -2 Coal Gas Oil CO2 Mt of C 34 100 50 0 -50 -100 -150 -200 -250 -300 -290

98

World
50

-141

Coal Gas Oil CO2

Figure 7-6 The Clean Coal Scenario by zones: comparison with the baseline

This scenario results in a net increase in world CO2 emissions (+1 %) which conceals some regional differences : a slight decrease in Asia (-0.2 %) an increase (3.5 %) in the OECD and stagnation in the rest of the world. This rather ambiguous result stems from the fact that while the clean coal plants are more efficient and therefore produce considerably less CO2 per KWH generated they also become more cost attractive and are often chosen in preference to nuclear and gas fired plants which produce even less CO2 per KWH : Coal consumption in power stations increases by 7.5 % while gas consumption decreases by 14 %, oil by 10 %, nuclear generation by 13 % and hydro generation by 1 %. Of the new coal technologies the most dramatically affected is the advanced thermodynamic cycle (+81 %) which sees its share of world power generation go up from under 7 % to around 12 % while the increase in IGCC generation is of the order of 58 % (share up from 7.3 % to 11 %). The performance of the supercritical coal plants is less spectacular + 35 % and a share increase from 15 % to 19 % both because of its relatively deep penetration already in the reference case but also due to the more modest additional technico-economic improvements implied by the scenario. The above new coal technologies replace very substantially conventional coal generation (-2300 TWH) and to a lesser extent gas turbine C.C. (-1380 TWH). They act as a break for the development of new nuclear design power plants which reach only 690 TWH down from 1040 TWH in the reference case. The more conventional LWR are less affected (-150 TWH). Also severely affected are the Biomass gasification CC (-18 %) and especially wind power generation

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

174

(-30 %) mainly due to the lower baseload electricity prices (nearly 10 % lower). Coal prices in the world and regional markets are 5-7 % higher which is clearly not sufficient to reduce significantly the competitiveness of the new coal technologies.

7.3 The Gas Technology Scenario


This scenario is composite and its implementation in POLES involved, apart from modifications in the technico-economic characteristics of some key technologies, an expansion of world ultimate resources in gas. This latter was carried out by following the 5 % probability upper estimate for undiscovered resources contained in the World Petroleum Assessment and Analysis of the U.S. Geological Survey National Center (1991). Special care was taken to ensure that correlations and statistical independence for undiscovered gas in different regions was reflected in a manner consistent with the above survey. On the other hand no attempt was made to link the possible higher resource base for gas with eventual higher occurrence of petroleum resources. The latter have hence remained at their reference case values. The geographical distribution of these additional gas resources has been uneven about half of them occurring in the Former Soviet Union with large additions also recorded for Canada, Iran and China. In terms of the technological side of the scenario the following main gas powered technologies have been treated: Gas turbine combined cycle is already the most successful power generating technology in the reference case contributing about 22 % of total generation by the year 2030. This gain in share achieved in the face of substantial increases in natural gas prices is mainly due to the major improvements in technico-economic performance of this already attractive technology incorporated in the reference case : i.e. an 18 % decrease in capital costs mainly due to an increase in efficiency from around 50 % at present to 59 %. For the scenario capital costs were reduced by a further 12 %, specific fixed operations costs reduced by more than half and efficiencies raised to 63 %. These improvements were assumed to occur mainly by a learning curve effect associated with the greater availability of cheaper gas itself a major component in the structure of generating costs for these technologies. Gas Turbine combined Cycle Combined Heat and Power which is another turbine dependent technology saw sluggish performance in the reference case to higher gas prices. For the scenario apart from the lower prices this technology is assisted by a two point increase in both electric and steam conversion efficiency but also by a 20 % reduction in specific capital cost, fixed and variable operating costs.

Apart from these gas technologies, the scenario implies improved technico-economic performance albeit on a smaller scale for two coal technologies : the advanced thermodynamic cycle and especially the IGCC which benefit from gas turbine improvements. The technology shift with respect to the baseline projection in terms of global electric power production is outlined in Figure 7-7.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

175

10000

9242

Large Hydro Nuclear 1000-1500 MW LWR

8000

New Nuclear design Supercritical Coal

6000

Integrated Coal Gasification with Combined Cycle Advanced Coal Cycle Lignite+FGD

4000 TWh Hard Coal 200-500 MW 618 14 0 0 -108 -213 -531 -2000 -2542 -4000 -124 -255 -286 -33 -21 -53 -18 -123 -1093 -1246 -1635 Oil Boiler Monovalent Gas Powered Trad. Turbine Oil Powered Gas Turbine Gas Turbine in Combined Cycle 200-350 MW Gas Turbine in Combined Cycle & CHP Small Hydro

2000

1444

Figure 7-7: The Gas Scenario: World power production by technologies with respect to the reference scenario

This scenario represents a radical alternative in terms of world energy market configurations due to the enhanced natural gas resource base : Gas in place is assumed to be 45 % higher than in the reference case. Introducing this assumption in POLES results in new discoveries (from the present to 2030) twice as large in the scenario than in the reference case and world gas reserves. This implies that in spite of much higher cumulative production world reserves stand are more than one and a half times their reference level in 2030 resulting at much lower bulk gas prices (in North America less than half Europe -27% and Asia -20%). These assumptions have yielded an alternative oil and gas market evolution which is summmarized in the following (to be compared with the baseline provided in Table 7-11 and Table 7-12):
Table 7-13: POLES Baseline oil market outlook
OIL PRODUCTION (mbd)
Gulf Conventional OECD Conventional

1973 1980 1990 2000 2010 2020 2030

1980/ 1973

1990/ 1980
-1.4% 0.5%

2000/ 1990
2.4% 1.7%

2010/ 2000
4.9% -1.6%

2020/ 2010
2.3% -0.7%

2030/ 2020
1.6% -3.0%

21.0 18.8 16.3 20.6 33.3 13.3 14.5 15.2 18.0 15.4

42.0 14.3

49.3 10.6

-1.6% 1.2%

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Other Conventional World Non Conventional Total 24.3 30.2 33.7 32.8 36.0 0.0 0.0 0.3 0.7 0.7 37.3 5.7 35.8 19.7 3.1% NA 1.1% 1.1% NA 0.3% -0.3% 7.0% 1.0% 0.9% 0.0% 1.7% 0.3% 23.9% 1.5%

176
-0.4% 13.3% 1.5%

58.6 63.5 65.2 72.1 85.3

99.2 115.4

OIL RESERVES 1973 1980 1990 2000 2010 2020 2030 1980/ 1990/ 2000/ (thousand mb) 1973 1980 1990
Gulf OECD Other World Conventional Non Conventional Total 305 58 173 0 0 524 338 52 216 0 0 601 592 59 315 917 48 966 592 52 443 1086 130 1216 567 39 395 1000 187 1187 498 34 333 865 291 1157

2010/ 2020/ 2000 2010

2030/ 2020

401 1.5% 5.8% 0.0% -0.4% -1.3% -2.1% 35 -1.4% 1.1% -1.2% -2.9% -1.2% 0.4%

262 3.3% 3.8% 3.5% -1.1% -1.7% -2.4% 699 399 NA NA NA 1.7% -0.8% -1.4% -2.1% NA 10.4% 3.7% 4.5% 3.2%

1097 2.0% 4.9% 2.3% -0.2% -0.3% -0.5%

1973 1980 1990 2000 2010 2020 2030

1980/ 1990/ 2000/ 2010/ 2020/ 2030/ 1973 1980 1990 2000
2.8%

2010
2.3%

2020
0.8%

World crude oil price World RP ratio Average Rate (%) Recovery

9.8 24.5 80.0

41.4 25.9 80.0

20.0 40.6 80.0

18.1 46.2 31.0

23.9 38.1 36.8

30.1 31.9 43.3

32.7 22.8% -7.0% -1.0% 26.1 49.8 0.8% 0.0% 4.6%

1.3% -1.9% -1.8% -2.0% 1.7% 1.7% 1.4%

0.0% -9.0%

Table 7-14: POLES Baseline gas market outlook


GAS PRODUCTION (billion m3)
OECD of which America Former Union N.

1973 1980 1990 2000 2010 2020 2030

1980/ 1973

1990/ 1980
NA -0.2% 6.3% 8.9% 8.9% NA 3.2%

2000/ 1990
3.7% 3.1% -1.1% 7.0% 7.5% 4.6% 2.7%

2010/ 2000
2.8% 2.6% 0.7% 8.3% 4.8% 5.1% 3.3%

2020/ 2010
2.2% 2.7% 3.2% 8.6% 2.9% 5.4% 3.9%

2030/ 2020
2.3% 2.9% 3.2% 4.7% 2.0% 3.5% 3.1%

728 568 269 37 24 0

0 582 404 40 49 0

774 1115 1474 1836 2302 572 742 94 116 187 776 1007 1314 1753 666 186 241 293 716 411 385 482 979 1339 940 1490 515 628

100.0% 0.5% 8.5% 1.5% 15.8% NA 4.0%

Soviet

Middle East Asia Other World

813 1150

1149 1397 1914 2501 3469 5084 6909

GAS RESERVES 1975 1980 1990 2000 2010 2020 2030 1980/ 1990/ 2000/ (Trillion m3) 1973 1980 1990
OECD 15 15 18 18 20 27 40 -0.5% 1.9% 0.0%

2010/ 2000
1.5%

2020/ 2010
2.7%

2030/ 2020
4.0%

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
of which N.America Economies transition Latin America Asia Other World in 9 23 2 2 24 67 9 29 5 5 28 82 8 50 8 9 51 135 7 79 10 12 70 188 10 83 13 13 85 215 16 90 15 13 96 241 28 -0.7% -0.7% -1.7% 97 5.2% 5.4% 4.2% 5.4% 6.4% 5.2% 4.6% 2.4% 3.2% 3.2% 3.4% 3.0% 0.6% 2.8% 5.4% 0.8% 1.7%

177
5.8% 0.7% 0.5%

16 15.5% 12 21.0% 98 263 2.5% 4.1%

0.8% -0.4% -0.8% 1.9% 1.3% 1.3% 1.2% 0.3% 0.9%

1973

1980

1990

2000

2010

2020

2030

1980/ 1990/ 2000/ 2010/ 2020/ 2030/ 1973 1980 1990 2000 2010 2020

RP ratios N.American market European market Asian market World 14.9 68.0 161.7 16.1 58.1 90.6 15.9 56.7 75.1 70.6 9.9 82.6 52.2 75.4 9.3 70.2 46.1 61.9 10.4 55.1 41.7 47.5 12.6 47.1 1.5% -0.1% -4.6% -0.6% 1.1% 1.9%

-3.1% -0.3% 3.8% -1.6% -2.4% -1.5%

32.4 -10.9% -1.9% -3.6% -1.2% -1.0% -2.5% 38.1 0.7% -1.9% -2.6% -2.2%

Import prices ($90/boe) N.American market European market Asian market 20.4 11.3 19.2 30.0 21.4 36.5 10.8 15.2 20.6 14.4 12.5 22.8 15.1 15.0 26.9 13.4 20.0 27.3 10.6 23.6 32.4 8.1% -9.7% 2.9% 13.6% -3.4% -1.9% 13.6% -5.6% 1.0% 0.5% -1.1% -2.4% 1.8% 3.0% 1.6% 0.2% 1.7% 1.7%

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
400 300 200 Mt of C Mt of C 100 0 -8 -100 -200 -300 -280 94 200 21 0 -13 -200 -400 -600 382

178

Asia
600 400 552

OECD

Coal Gas Oil CO2

Coal Gas Oil CO2

-586

Other World
500 404 400 1000 300 200 Mt of C 100 0 -100 -200 -300 -400 -378 -1500 Coal Gas Oil CO2 188 213 500 Mt of C 0 -500 -1000 1500 1122

World

417

294

Coal Gas Oil CO2

-1245

Figure 7-8 The Gas Technology Scenario by zones: comparison with the baseline

At these levels gas becomes competitive not only vis--vis oil (which it was already) but also for a number of substantial market segments vis--vis coal. Consequently oil prices are dragged down (by 9%) and coal prices fall sharply from already low levels (-20% in North America and 10% elsewhere). Accompanying these changes is a substantial increase in international gas trade (for example in China gas imports double despite a 50% increase in domestic production). Yet the impact of the scenario on CO2 emissions is a paltry -2.1% in 2030 (+0.3% in the OECD). The reason for this apparent paradox are numerous and are summarised below : Generally low gas prices and lower energy prices have meant that final consumption of gas has increased (by 27%) but lower prices of other fuels have meant that their consumption has not fallen sufficiently to compensate for gas increases. In the case of electricity the combination of low fuel costs and improved power plant technico-economic characteristics has produced lower generating costs and hence lower electricity prices. This has been particularly striking for low to medium loads (residential/commercial electricity) where due to the suitability of GTCC to meet such demand, electricity prices have fallen on average woldwide by nearly 20%. This naturally led to higher electricity consumption (up by 8.5 %) which the accompanying multiplier effect associated with transformation losses. Within the power generating sector, many striking changes occur woldwide. Generation from gas turbines c.c. increase by 9250 Twh (more than double the reference case) bringing their share to 42% of total generation instead of the 22% of the reference case. This increase is achieved at the expense of super critical coal (-2550 Twh) conventional coal (-1640 Twh) oil (1500 Twh), brown coal (-1100 Twh) but also nuclear (-750 Twh, 70 % of which the new nuclear design which finds little room to develop). Furthermore, one clean coal technology (the IGCC) because of the improvements associated with turbines finds itself reinforced in the scenario (+1450 Twh worldwide). Three quarters of this latter increase takes place in Asia where the benefits of the enlarged gas supplies are less obvious as most of the increment has to

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

179

come from distant sources involving costly transport thus leaving coal competitive over a large part of the load curve. Combined Heat and power c.c. sees its contribution increasing by 170% to nearly 1000 Twh and in many parts of the world it comes close to saturation imposed by the industrial constraints to its potential. On the other hand, many renewable sources of electricity see their prospects slashed by half (notably biomass gasification combined cycle, Wind power plants and Solar thermal). Even small hydro plants and waste incineration see their contribution reduced by around 20%.

7.4 The Fuel Cell Scenario


This is not strictly speaking an autonomous exercise but an extension of the Gas technology scenario presented above. It retains the enhanced gas resources with all their ramifications and incorporates the same improvements relating to gas turbine combined cycles, CHP as well as the turbine related clean coal technologies. In addition, three fuel cell technologies are given much improved technico-economic characteristics : The proton exchange membrane fuel cell for fixed applications which in the reference case saw fuel efficiency rising from 55% in 2000 to 60% in 2030 has it rising further to 63% for that latter year. Likewise, specific capital costs which fell from 3450 Ecu/Kw in 2000 to 864 Ecu/Kw in 2030 in the reference case are allowed to reach one third of that value and the fixed operating costs for the scenario are also 1/3 of their reference value while specific variable operating costs are allowed to halve. The Solid Oxyde fuel cell with cogeneration which is also a stationary application had efficiencies rising from 60% to 70% between 2000 and 2030 this latter efficiency was deemed to represent an upper limit and was therefore kept unchanged in the scenario. Specific capital costs which reached 800 Ecu/Kw in the reference case were further reduced to 600 Ecu/Kw for the scenario while fixed and variable operating costs by 2030 represent in the scenario one third of their respective values in the reference case. Variable costs reductions are mostly due to large stack cost reductions. A hydrogen fuel cell car was included on the rationale that stationary fuel cell technology improvements as outlined above would also have an impact on smaller mobile forms required for vehicles. Although important improvements have been assumed relating to cost per Kw, stack costs and car Km/Kwh performance and technical lifetime they have proved insufficient for producing a significant impact: in the best of cases i.e. in the scenario by the year 2030 the propulsion system alone costs an additional 20000 ($90) for a relatively small 40 Kw car.

As the fuel cell scenario is additional to the gas technology scenario and therefore embodies most of the features of the latter, a comparison with the reference case would entail to a large extent a repetition. A more interesting comparison can be made between the fuel cell and gas technology scenarios. The proton exchange membrane fuel cell technology which in the gas technology case had reached the relatively small contribution of 115 Twh worldwide by 2030 makes significant inroads reaching 1030 Twh. On the other hand the Solid Oxyde fuel cell though trebling in

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

180

importance still does not account for more than 24 Twh worldwide. Fuel cell vehicles for the reasons mentioned above do not go beyond a demonstration curiosity.
Large Hydro

10000 9242

Nuclear 1000-1500 MW LWR New Nuclear design

8000

Supercritical Coal Integrated Coal Gasification w ith Com bined Cycle Advanced Coal Cycle

6000
Lignite+FGD Hard Coal 200-500 MW

4000 TWh

Oil Boiler Monovalent Gas Pow ered Trad. Turbine Oil Pow ered Gas Turbine

2000

1444 618 -53 -33 -18 -21 14 0

Gas Turbine in Com bined Cycle 200350 MW Gas Turbine in Com bined Cycle & CHP Sm all Hydro Wind on Shore Solar Pow er Plant

0 -108 -213 -531 -2000 -2542 -4000 -124 -1093 -1635 -255 -286 -1246
Waste Incineration CHP Biom ass Gasification Proton Exchange Mem bran Fuel Cell Solid Oxyde Fuel Cell

-123

Figure 7-9: The Fuel Cell Scenario: World power production by technologies with respect to the reference scenario

As the improvements in stationary fuel cells are spread over time and the power generating sector is characterised by slow turnover, one suspects that the 1050 Twh of fuel cell contribution would not be the end of the story had the horizon been extended beyond 2030. This caveat notwithstanding, it is interesting to remark that the fuel cell penetration is accompanied by a massive reduction of 790 Twh in gas turbine combined cycle generation which is hardly surprising given the overwhelming pre-eminence of this technology in new power plant markets which characterised the gas technology scenario. Other significant losers are the IGCC (-75 Twh) for very much the same reasons affecting the GCC and the new nuclear design losing a further 95 Twh as the market for new power plants gets even more saturated with new power technologies.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

181

500 416 400

Asia
600 400

584

OECD

300 Mt 200 of C 100 0 -8 -100 -200 -300 -291 117 Coal Gas Oil CO2 Mt of C 200 23 0 -200 -400 -600 Coal Gas Oil CO2 21

-586

500 400

Other World
404

1500 1193 1000

World

300 200 Mt of 100 C 0 -100 -200 -300 -400 -379 193

218 500 Mt of C Coal Gas Oil CO2

419

356

0 Coal Gas Oil CO2

-500

-1000 -1256

-1500

Figure 7-10 The Fuel Cell Scenario by zones: comparison with the baseline

Under these circumstances it is not surprising that world CO2 emissions decrease only by a further 0.4-0.5% making a 2.5% difference from reference. It seems that there are strict limits as to what can be achieved by adding attractive technologies to one another when essentially they are competing for the same patch.

7.5 The Renewable Energy Technology Scenario


This Scenario is different from the ones previously examined in that it is not organised around a single technological breakthrough or a generically linked cluster of technological developments. It is rather representative of a situation where a major R&D effort would be directed on decentralised renewable technologies producing drastic improvements in the techno-economic characteristics of a number of them which are otherwise technologically heterogeneous. The main technologies affected in this scenario are the following: Biomass gasification for electricity production in small scale (less than 25 MW) combined cycle plants. In the reference case this technology saw no improvement in specific capital costs but a 40 % reduction in fixed operating costs and an increase in efficiency from about 35 % at present to 43 %. Under these circumstances the contribution of this technology slightly more than doubled by 2030 (registering a very low average growth of under 2.5 % p.a.)

For the technology scenario specific capital costs were assumed to halve by 2030 with some further improvements in efficiency and operating costs. The impact of these changes was a near seven fold increase in contribution between the present, and 2030, albeit with an inflexion of

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

182

growth towards the end of the period due to increasing costs of the biomass itself as the cheaper sources are gradually exhausted. Photovoltaics in buildings, involving mostly cells incorporated in window panels saw their capital cost plunge from about 12,000 ECU/ kW to 5,000 ECU/kW by 2010 and 4,000 ECU/kW by 2030 in the reference case. Specific fixed O& M costs were halved between the present and 2030. Impressive as these reductions are they left the cost of electricity produced at a generally uncompetitive level and the technology contributed a relatively symbolic, 4,6 Twh world-wide by 2030. The technology scenario implies a halving of 2030 reference costs this implies a reduction of the cost of the Kwh delivered to around 0.17 ECU which though still not generally competitive with network electricity allows at least the development of niche markets and leads to a contribution of around 32 Twh world-wide by 2030. Of these only about 6 Thw are produced in developing countries despite the fact that on average they enjoy better insolation conditions. This discrepancy underlines the luxury nature of this technology even with the additional improvements. Molten Salt Tower Solar plant with storage was the main solar thermal power technology retained with a capital cost reduced to 1600 ECU/ kW fixed O & M costs of 34 ECU/kW p.a. and a capacity factor of 36 % by 2030. In the reference case it achieved a contribution of 31 Twh word-wide. In the technology scenario with these figures reaching 1130 ECU/kW 25 ECU/kW. p.a. and 38 % respectively its contribution reaches 114 Twh world-wide. It is worth noting that though this latter figure is relatively modest it does not represent the full potential impact of the scenario as by 2030 this technology is still in the stage of vertical take off in industrialised countries and has not even entered that stage in the developing countries where most of the physical potential exists. Small hydro which in the reference case was assumed to be a mature technology registering insignificant gains over the projection period sees its capital cost halved for the scenario and hence its contribution double from 250 Twh to 505 Twh word-wide by 2030. However by the end of the period the technology displays clear signs of saturation as the best available sites are gradually exhausted. On shore wind turbine (over 500 kW capacity) offers the highest contrast between reference and scenario. In the reference case no significant reduction in capital costs was assumed all improvements being concentrated in a relatively modest increase in capacity factors to a range of 12-30 % depending on site. The technology scenario by contrast implies a reduction of capital costs to one third of their present level and further significant increases (+ 33 %) in capacity factors.

These developments render wind power highly competitive, its intermittent character notwithstanding and lead to massive development world-wide (nearly 1600 Twh by 2030). This development is furthermore fairly evenly distributed about half occurring in industrialised countries.
Figure 7-11 shows the projected differences in terms of world power output by 2030 with respect to the baseline scenario.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat
Large Hydro

183

2000

Nuclear 1000-1500 MW LWR New Nuclear design 1500 1500 Supercritical Coal Integrated Coal Gasification with Combined Cycle Advanced Coal Cycle 1000 Lignite+FGD Hard Coal 200-500 MW 510 500 TWh 256 54 0 -14 -58 -112 -500 -157 -224 -30 -43 -149 83 1 4 0 Gas Turbine in Combined Cycle 200-350 MW Gas Turbine in Combined Cycle & CHP Small Hydro Wind on Shore Solar Power Plant -1000 -907 Waste Incineration CHP Biomass Gasification Proton Exchange Membran Fuel -1500 Oil Boiler Monovalent Gas Powered Trad. Turbine Oil Powered Gas Turbine

-412

-387 -410

Figure 7-11: The Renewables Scenario: World power production by technologies with respect to the reference scenario

In addition to the above, the renewable scenario included three more technologies where the improvements implied were insufficient to produce a significant impact. These were: (a) low temperature passive solar which due to insufficient cost reductions remained a niche option, (b) rural photovaltaic which becomes uncompetitive with network connection and therefore faces a shrinking market potential as electrification proceeds, and (c) methanol from biomass for use in vehicles which even with the improvements assumed in the technology scenario remained more costly than conventional oil and failed to penetrate significantly in the absence of preferential fiscal treatment. The net result of the scenario is a 3.3 % reduction in world-wide emissions (2 % in Asia and 5 % in OECD). This is primarily achieved by an across the board reduction in centrally produced

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

184

electricity (-1600 Twh of coal fired -950 Twh of gas fired and -180 Twh of nuclear generated electricity world-wide). World oil prices are little affected (-1.3 %) but wholesale gas and coal prices are more substantially reduced (around - 5 %) allowing for some increase of the consumption of these fuels outside the power generation (especially in industry) which, partially offsets the substantial reductions in power generation. Generally the scenario has major implications for the field of new and renewable technologies but fails to produce a major impact on the CO2 problem. Indeed, these technologies are mostly applicable to the power generating sector, often (being mostly intermittent) even a limited section of this sector displaying also marked geographical niches. Another reason for the relatively subdued overall impact of this scenario is that the most important technologies become truly competitive only towards the end of the period thus having little time to penetrate to their full potential

7.6 Conclusion
The main findings of the previous comparison exercise between the 5 considered energy technology scenarios are briefly summarized in Table 7-15.
Table 7-15 SUMMARY TABLE OF THE IMPACT OF TECHNOLOGY SCENARIOS (World 2030) Comparison with Reference Case

Scenario Nuclear Clean Coal Gas Technology Gas and Fuel Cells Renewables

Coal -94% 4.5% -17.5% -18.6% -5.4%

Oil -0.8% -1.0% -8.1% -8.2% 0.1%

Gas -4.0% -3.9% 49.7% 50.1% -2.3%

Nuclear 142% -13.1% -19.6% -22.5% -4.5%

Hydro -0.7% -1.1% -2.2% -2.6% -0.3%

CO2 Emissions -5.3% 1.0% -2.1% -2.5% -3.3%

A cursory glance at the table above is sufficient to realise that the technology scenarios as defined in the current work do not offer panaceas for the global CO2 emission problem. The reasons for this are inherent in the way the scenarios were constructed as well as energy market structures and the way their functioning is represented in the POLES model. In lieu of conclusions some brief points are proposed here for discussion: The technology scenarios have been defined in terms of clusters of technological breakthroughs affecting only a part of the energy market and hence global CO2 emissions. They have almost exclusively concentrated on power generation and often essentially on mere segments of the load curve. Important though the power generating sector may be, it still accounts for about a one third of world CO2 emissions projected to increase to 40% by

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

185

2030. By simple arithmetic technologies addressing only this sector risk at the best of times to have an impact which seems 2.5 to 3 times too small. Scenarios involving major technico-economic improvements in fossil fuel technologies produce weakened impacts on CO2 emissions because at the same time as they reduce specific emissions they make these technologies economically attractive, not only vis--vis more polluting technologies but also more polluting ones. Choices are therefore influenced in a far from unambiguous manner as far as CO2 emissions are concerned. In this context it is worth noting that all supply side technological improvements result one way or another in a reduction in the cost of consuming energy and hence potentially cause consumption to increase. In any case, it is hardly surprising that the scenarios involving non-fossil energy (the nuclear and renewable scenarios) have produced markedly better outcomes as far as CO2 emissions are concerned. The two scenarios involving increased gas availability have, in view of the major restructuring they imply in world energy markets, produced surprisingly weak results as far as CO2 emissions is concerned. This is due partly to the uneven geographical distribution of the enhanced resources resulting in the gas not being available at sufficiently cheap prices where it could have made the biggest impact (the big Asian coal users: China and India) but also due to a series of secondary market effects which brought fuel prices down and caused demand firmness especially in electricity and gas. All this, notwithstanding the indisputable fact that these scenarios represent a more comfortable energy market situation with all its concomitant virtues of security and a propitious environment for economic development. There is a clear need for energy saving technology breakthroughs as these are likely to suffer less from the ambiguities and secondary effects associated with supply technologies. It is, however, very difficult to identify a cluster of technologies which would be homogeneous enough to be convincing as an identifiable alternative while at the same time addressing a wide spectrum of energy demand. A possible area where such a cluster could be convincingly found is in the transport sector where perhaps the fuel cell vehicle could be revisited with more drastic improvements in its characteristics. It is hard to see how clusters of energy technologies could by themselves make a major impact on the global CO2 problem unaccompanied by major policy initiatives albeit market related ones. Combining technology breakthroughs with internalisation of external costs through taxation or tradable permits would magnify the impact and tend to neutralise some of the more ambiguous side effects quite apart from the fact that these policy instruments can by definition act on a much wider front.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

186

Chapter 8: Implications for the EU Energy R&D Strategy and other policies
By A.Soria (IPTS)

Having explored the main sources of uncertainty within the energy issue, the practical question that public manager have to face is how to assign appropriately R&D funds in order to foster the transition towards a more sustainable energy system, compatibly with other main policy objectives such as ensuring energy supply, improving the competitiveness and efficiency of the European industry and guaranteeing the technological leadership of EU countries within this field. Besides these general objectives, there exist a number of additional boundary conditions that have to be considered when designing a R&D portfolio for the European Union: the creation of a single energy market is an important issue within the Unions political agenda. Merging domestic markets to achieve a larger, unified one will have positive effects on the transparency of prices, on the competitivity of energy services and therefore on the efficiency achieved in processes related to energy transformation and use. Nevertheless, although these benefits will appear in fine, the transition towards a single energy market can be an extremely painful process, if the adequate measures are not taken. the transition towards a single market is being accompanied in the EU by a massive change in the structures of the markets: rather than experiencing transboundary movements to merge national monopolies to produce a situation with a larger market with similar degree of monopolistic control, national companies are being privatised and disaggregated. In many cases, national markets are being simultaneously open to domestic and foreign competition. Some of the energy companies are being unbundled prior their privatisation, whereas some other are likely to maintain their size. The creation of transnational energy companies is, however, a less likely scenario. Therefore, the downsizing of the average energy company (operating more and more as a price-accepter, with lower control on the market and closer to the zero-profit borders) is a fact that has to be taken into account when considering the R&D priorities in the EU. the EU technology policy has to be designed within the framework of the subsidiarity principle that holds for the European-wide coordinated programmes: actions should be taken

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

187

at a European level only when the instrumentation of such a coordinated policy is more efficient than separately implementing national plans (even if aiming at the same general scope). There are many reasons indicating that energy R&D is a field wher significant gains may be obtained as a result of a coordinated, EU-wide R&D action plan. Amongst these reasons one may remark the presence of importants economies of scale in executing R&D actions at a EU scale, because of the complementarities and savings induced by conducting many research in trans-European pools of R&D corporations: larger, coordinated groups avoid the possibility of doubling the efforts and allow for a more exhaustive exploration of the concerned lines of research. In addition, subcritical research teams that are maintained by inertial reasons may regain efficiency if stimulated by the exchange of ideas within a broader research consortium. Besides this, there are research fields whose costs are simply too high to be endeavoured by a single Member State, are feasible only concerted research pools animated by the European Commission. Economies of scope are also found in extending the overall R&D framework to include energy technology programmes: the possibililty of application of innovations originated within the energy technology cluster may diffuse towards other industrial sectors more efficiently if the R&D programmes are coordinated at the same European level.

8.1 R&D Portfolio, Technological Progress and Market Structure


Technological innovations often requiere the public support at the early stages of their development. Although this was not the case for many many technologies whose emergence has had great importance, nowadays most of the relevant innovation clusters are supported, in a way or another, by public policies. A question of capital importance is to determine the basic lines for energy research and technological development to be supported by the means of public policies at the EU level. Answering this question implies first a clear understanding on the situation the system is moving towards and second to figure out how should look like the situation that may be classified as optimal. It is usual to distinguish between product innovation and process innovation, supply side being mostly concerned by the former, whereas demand side is more affected by the latter. This dichotomy is even stronger in the case of the energy markets. Being supply and demand separated quite apart by the physical presence of the energy carrier (electricity, distributed gas, etc.), whose price did not depend on the conditions of delivery, the two innovation subsystems were connected (at least in the short to medium term) only by the weak line of a single price signal. From the demand side, the incentives to adopt energy-saving consumption devices depend basically on the price of the energy carrier that the final has to pay consumer. Similarly, the main incentive that supply-siders have to develop new processes to deliver consumable energy concentrate around the product price thay are allowed to charge. Besides this, compulsory administrative rules may play a role in the adoption of innovations. They have been focused around the supply-side and process innovation, especially for what

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

188

concerns the elctric sector, which exhibits a remarkable degree of technological diversity. Focusing the regulatory issue in the supply side was customary since energy industries were for a long time typical examples of natural monopolies. Corrective measures to hinder the absorption of the consumer surplus by the supply side had to be adopted. In addition, environmental constraints emerged later as an important aspect to be considered in the energy sector regulation, as well as security of supply issues. These regulatory measures were often applied to generators, since the control from the authorities is easier to be addressed to a reduced number of firms. These reasons explain why the innovation process scheme (i.e. supply side) have been predominant with respect to the product innovation process (in the sense of more energy-efficent final consumption devices). To a certain extent, the demand dynamics is even regressive in this sense. This is so due not only to larger domestic appliances demand more power supply, but also to new domestic devices (personal computers, faxes, and many other stand-by machines), and to the generalisation of advanced space heating and air conditioning. Without misregarding the improvements to the efficiency of the global energy system that may be obtained from the demand side, it is perceived, however, that these should be considered as incremental efficiency gains that would not solve, in the long run, the problem of the environmental compatibility of the energy sector. The trend of the industrial organization towards a more dissagregated, decentralized and competitive scheme seems to convey the same message: the demand being determined by the general economic development and the emergence of new needs, the industry remains essentially a supply-controlled one, and is via supply forces that the main bottlencks identified so far have to be solved.

8.2 Short-term issues: improvements to a carbondominated panorama


Recalling the results illustrated in Chapter 2, and looking basically to the primary energy mix, the main conclusion that may be extracted is that a fossil fuel-dominated panorama will continue to prevail. The difference with the present situation is, however, that the mix, dominated by oil in the past, is moving towards a more balanced situation combining oil, coal and gas in similar shares by the end of the analysed period. The interpretation of these trends opens a debate. Indeed, in terms of carbon emissions, the fossil-fuel system is experiencing a sort of bifurcation: on one side, low-carbon natural gas is entering in the mix for power generation and industrial and domestic use, because of it is versatile, clean, available and relatively cheap. On the other hand, coal is becoming more and more an specialised fuel for baseload electricity generation. The interpretation given to the massive use of gas is often referred to the trend of energy de-carbonisation. On the contrary, the penetration and consolidation of coal in the power generation sector may be viewed as the emergence of the backstop technology already fixing. Indeed, as it has been already commented above, there has been a change of paradigm concerning the electric sector: during the sixties and the seventies, many people thought that nuclear power (a carbon-free technology) was reinforcing its position as backstop technology within the sector. The reality, however, has gone

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

189

against this hypothesis, and today it may be agreed that the power generation backstop technology is coal, due to both the size, distribution and availability of the reserves as well as the readiness of the technologies. For what concerns the transport sector , it seems to be solidly locked-in around the use of oil-derived fossil fuels, which is, today, the corresponding backstop technology according to the analyses presented within this report.

Clean Fossil Fuels

Bearing this in mind, it seems that a significant effort should be put into the development of technologies for the clean use of fossil fuels, with particular emphasis on coal and liquid-fuels for combustion engines, as well as for its rational use. The importance of developing and putting into the market such technologies should pace the increasing awareness of the potential risks associated to the global warming. The urgency of going to clean coal also depends on the importance of short-term emissions vis-vis the hypothetical level of steady-state carbon concentration in the atmosphere. The careful assessment of the environmental scenarios including the economic links will continue to be therefore a useful requisite in order to determine the degree pressure that should be put in conducting the technology shifting towards a more carbon-free system. The analysis of energy/economy/energy interactions should therefore be pursued and improved, as well as the analysis coming from the climatology and geology that aim at refining the damage functions (including dynamic effects) of carbon emission and its effects onto the atmosphere.

Energy Efficiency Measures

It has been already said that, even if the industry as a whole may be considered as supply-driven (since the demand is more or less exogenous and quite rigid to prices), energy efficiency measures can contribute to mitigate the pressure on natural resources (as far as they are available). Subsidies to incorporate energy savings devices and mandatory rules imposing an adequete degree of energy eficiency in new (and old) constructions are appropriate tools for what concerns the domestic and buildings sector. The transport sector remains the most rigid to control and the less responsive to market-based tools. In addition, transportation involves issues such as international competitiveness, environmental protection, as well as local congestion of infrastuctures that are extremely difficult to harmonise. The coordination of these programs should involve all the related administrative bodies, as well as local and national administrations. Simultaneously, the industry shall receive the clear and credible message that there exists a resolution from the public authorities to reconduct the transport system (understanding it as a whole, including infraestructures, propulsive technology and organisational issues, such the access to the grid) towards a more environmentally sustainable one. This may turn out on a race to rapidly adopt the best available technologies and therefore induce (or at least facilitate) an endogenous structural change.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat Joint Implementation Schemes

190

Last, but not least, it should be remembered that, for these measures concerning clean coal (and, on a broader basis, clean fossil fuel) technologies to be fully operative, they have to be implemented world-wide. In particular, they could be more effective in those parts of the globe experiencing the fastest transition from primitive and poor energy use towards advanced energy systems. A formidable challenge for the advanced countries is to find imaginative and effective schemes for technology transfer that simultaneously preserve the interests of technology-owners and produce incentives in technology demanders to go for the best available technologies. The means to achieve this scope may be addressed along many policy lines, implemented via separated, but (hopefully) coordinated programmes. These lines may involve from the setup of efficient know-how difussion mechanisms to the implementation of adequate channels of technology transfer. The flow of know-how, bringing to the emerging economies exactly what they are looking for, should be combined with increasing awareness on the necessity to satisfy the fast growing demand with the environmental-friendly technologies.

8.3 Long-term objectives: managing the backstop technologies


Coming back to the future world energy mix sketched in Chapter 2, there is a wide agreement on the unsustainability of such a coal-dominated panorama. Bearing this in mind, and assuming for granted (with different probabilities depending on the scenario considered) that a sort of coal-era is about to start, a basic objective of the EU energy technology policy should be the minimization of the lenght of this coal age, fostering the emergence of a really sustainable backstop cluster of technologies. The efforts in R&D should be directed, under this point of view, towards renewable energy sources and its integration within the energy system. Renewable Energy Technologies and their integration

It is evident that, in the long term, only renewable energy sources are sustainable. It is therefore a priority for policy making to foster technological advancements that could put these technologies in a position closer to the commercialisation phase. The support given in the past to solar technologies, wind power and other RE technological schemes should therefore be continued, taking into account the relative successes and failures that have been encountered in the past. The technologies that are not yet close to enter the market should be the target of basic research efforts: this is the case of solar technologies (low temperature solar for domestic use, photovoltaics, high temperature solar thermal for power production). Other RE schemes, exhibiting less technological difficulties, are finding obstacles due logistic problems, lack of financial support, structural inertiae and/or information opacity. This may be the case for wind power and several biomass exploitation schemes. These technologies require a comparatively higher effort on dissemination under appropriate finance planning. One of the main difficulties hindering the penetration of renewables relates to its intrinsic intermittency. Overcoming this difficulty would certainly represent a significat step towards their entering in the market as real competitors of the already-established technologies. One of the factors that make fossil-fuel valuable as energy carriers is precisely its time-flexibility for

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

191

use. Due to this, the idea of devices possessing only active regulation (and no passive reserve capacity) was predominant. In this way, at the micro-level, no reserve is required due to the use of flexible energy carriers (natural gas, LPG, electricity), whereas at the macro-level (the electrical grid), the peak-to-base management is simplified due to the inter-grid connection and the flexibility of the peak-covering technologies (gas and hydro). New renewable energy candidates have to prove to be at least as flexible as standard peaking schemes (gas turbines and hydro). Particular emphasis should be given to RE-hybrid schemes, since they could represent the natural transition towards a fully decarbonized energy system. The experimental implementation of such hybrid schemes (wind-gas, solar thermal-gas) could start to be applied to isolated systems to be progressively imcorporated to the main market via decentralised schemes. Technological R&D in RE is therefore a critical issue for those RE schemes that, being technology-intensive, did not achieve yet competitive unit costs or have an intrisic lack of operativeness due to intermittency. Energy storage devices

It is clear from the above considerations that an efficient R&D program on long-term energy options should not underestimate the research line devoted to energy storage and batteries. The availability of cheap, efficient and enviromental friendly electric batteries may indeed contribute not only to the development of decentralised, renewable-based electric systems, but also (and possibly with more importance) would contribute to the emergence of the electric car and under technological formats similar to the ones available today, increasing the degree of technological diversity of the transport sector and preparing the way for more advanced and sustainable transportation schemes. High efficency devices, such as fuel cells, are the natural candidate to integrate RE-obtained energy carriers onto the electrical system. Although the fuel cell technology has reached a significant degree of development, with remarkable cost decline in the past years, they are still well abovce the competitive threshold. This is also due to the fact that the technology directly competing with fuel cells within the natural gas fuel line has (i.e. the gat turbine in combined cycle) has become extremely competitive. The topic of energy-storage goes even beyond these issues. Indeed, the development of efficient, safe and versatile energy carriers would make it possible to overcome the intrinsic limitations of use of many specialised energy technologies, able to operate using particular fuels of energy forms. The most appealing case, that puts again into evidence the stiffness of the energy system, is the technological impermeability between the electric and transport sectors. These sectors are leading the bulk of the expansion of the world primary energy demand, and jointly contributing for more than 50% of the global carbon emissions. The possible candidates to play a significant role as inter-technology energy carrier are well known: hydrogen, methanol, and, of course, battery-stored electricity. Developing these technologies is a challenge in which the R&D effort will have a significant role, and for which public R&D programmes have a room to complement and reinforce the private efforts, that would be concentrated on research domains closer to the market place.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat Nuclear energy: the fission and fusion programmes

192

It is extremely difficult to ascertain now wheter nuclear energy has to be considered as a definitive backstop technology or just as a valuable tool that could contribute (temporarily) to make shorter the carbon era. In a way, this debate is irrelevant. The reality is that nuclear energy supplies today a non-negligible share of the world primary energy, which is considerably higher in some countries of the OECD. Many developing countries whose demand for electricity increases rapidly are considering a progressive nuclearization of their electrical sectors. This is the case even for countries such China and India, with significant coal reserves. On the contrary, there are advanced countries that decidedly endeavoured a dismantling policy (Canada, Sweden) or at least a nuclear moratoria (USA, Germany, and many others). The outcome of the process is not yet clear. In any case, nuclear power is a carbon-free option that may or not expand according first to the social willingness to accept the associated disadvantages and second to the degree with which the global warming threat will emerge in the forthcoming decades. Besides this, there is a number of nuclear-based advanced technology initiatives that offer a huge potential, and could indeed become the ultimate backstop technology, but whose degree of advancement is still far from the commercialization phase, namely nuclear fusion. Basic research is still required to determine the feasibility todays design. The private sector still feels this alternative so remote, that only public support could contribute to the exploration of these new technology lines.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

193

References

Armand, F. and Ayache, G.1995. Le dveloppment de lolien en France et dans le monde: quelles perspectives pour lolin en France?. Brochure ADEMA, Nov. 1995 Beer, J., Worrell, E. and Blok, K., 1995. Long term energy efficiency improvement, in: S. Zwerver, R.S.A.R. van Rompaey, M.T.J. Kok and M.M. Berk (eds.), Climate Change Research: Evaluation and Policy Implications, Elsevier Science, The Netherlands (pp. 10811086). Berkhout, F., 1991,Radioactive wastes and the nuclear revival, Energy Policy, vol 19, n7, pp615-620Elsevier Science, The Netherlands (pp. 10811086). Blok, K., Farla, J., Hendriks, C., and Turkenburg, W., 1991, Carbon Dioxide Removal: A Review, Paper presented at the International Symposium on Environmentally Sound Energy Technologies and their Transfer to Developing Countries and European Economics in Transition (ESETT '91). Bupp, I. and Derian, J.C. 1978. Light water: how the nuclear dream dissolved. New York, Basic Blackwell. Committee on Science, Engineering and Public Policy (COSEPUP), 1991, Policy Implications of Greenhouse Warming: Report of the Mitigation Panel, U.S. National Academy of Sciences, U.S. National Academy of Engineering and Institute of Medicine, U.S. National Academy Press, Washington, DC, USA. Cowan, R. 1990. Nuclear Power Reactors: a study in technological lock-in. The Journal of Economic History, Vol. 4, n 3 DOE (US Department of Energy), 1993, A Research Needs Assessment for The Capture, Utilization and Disposal of Carbon Dioxide from Fossil Fuel-Fired Plants, DOE, Washington, DC, USA. DOE/EIA, 1996, The Changing Structure of the Electric Power Industry: An Update, Department of Energy/Energy Information Administration, December. DOE/EIA, 1997, Electricity Prices in a Competitive Environment: Marginal Cost Pricing of Generation Services and Financial Status of Electric Utilities, A Preliminary Analysis Through 2015, Department of Energy/Energy Information Administration, August. Douglas, J. 1991, Fuel Cells for Urban Power EPRI Journal September, pp 5-11. EC (European Commission) 1995. Techno-economic assessment studies of fossil fuel and fuel wood power generation technologies, Joule II-Programme R&D in Clean Coal Technology, Directorate-General for Science, Research and Development, Brussels, Belgium (pp. 125).

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

194

Environmental Protection Agency (EPA), 1990, Policy Options for Stabilizing Global Climate, EPA, Washington, DC, USA. Electric Power Research Institute (EPRI), 1990, New push for energy efficiency, EPRI Journal 15(3): 417; and Barakat and Chamberlin Inc., 1990, Efficient Electricity Use: Estimates of Maximum Energy Savings, EPRI Report CU-6746, EPRI, Palo Alto, CA, USA. EWEA 1991, Time for action: Wind energy in Europe. European Wind Energy Association. Feron, P.H.M., and Jansen, A., E., 1995, Capture of Carbon Dioxide Using Membrane Gas Absorption and Reuse in the Horticultural Industry, Paper presented at the 2nd International Conference of Carbon Dioxide Removal, 2527 October 1994, Kyoto, Japan. Finon D., 1995, La Diversification des Modles dOrganisation des Industries Electriques dans le Monde: une Mise en Perspective, Revue de lEnergie, 465, Janvier-Fvrier. Finon D., et Menanteau, Ph,. 1989, Lchec des surgnerateurs: autpie dun grand programme Grenoble PUG.. Fisher, D., ed., 1990, Options for Reducing Greenhouse Gas Emissions, Stockholm Environment Institute, Stockholm, Sweden. Giovannini, B. and Pain, D., 1990, Scientific and Technical Arguments for the Optimal Use of Energy, Universit de Genve, Geneva, Switzerland. Gipe, P. 1995, Wind Energy Comes of Age, John Wiley & sons, Inc. Gipe, P. 1996, 1996 Overview of Wind Generation, WWW, P. Gipe Inc.. Golomb, D., Herzog, H., Tester, J., White, D., and Zemba, S., 1989, Feasibility, Modeling and Economics of Sequestering Power Plant CO2 Emissions in the Deep Ocean, MIT-EL 89003, Massachusetts Institute of Technology, Cambridge, MA, USA. Grubb, D., and Meyer, N.I., 1993, Wind energy: Resources, systems and regional strategies, in Renewable Energy: Sources for fuel and electricity, Ed. T.B. Johansson, H. Kelly, A.K.N. reddy and R.H. Williams. Grubb, M., Chapuis, T. and Duong M. H., 1995: The economics of changing course. Implications of adaptability and inertia for optimal climate policy. Energy Policy, 23, 417432. Hall, D.O., 1994. Biomass energy options, Proceedings of the Energy Technologies to Reduce CO2 Emissions in Europe: Prospects, Competition, Synergy, April 11-12, 1994. Petten, The Netherlands, OECD/IEA, Paris, France (pp. 159194). Haugan, P.M., and Drange, H., 1992, Sequestration of CO2 in the Deep Ocean by Shallow Injection, Nature, 357: 318320. Herman, R., Ardekani, S.A., and Ausubel, J.H., 1989, Dematerialization, in J.H. Ausubel and H.S. Sladovich, eds., Technology and Environment, U.S. National Academy Press, Washington, DC, USA.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

195

Herzog, H.J., and Adams, E.E., 1995, Environmental Impacts of Ocean Disposal of CO2, Paper presented at the International Energy Agency Greenhouse Gases: Mitigation Options Conference, 2225 August 1995, London, UK. Hirschenhofer, J.H., 1997, Fuel cell statuts: 1996, IEEE AES Systems Magazine, March 1997 p 23-28. Hunt S. and Shuttleworth, G. 1996, Competition and Choice in Electricity, John Wiley&Sons. International Energy Agency (IEA), 1991, Energy Efficiency and the Environment, OECD/IEA, Paris, France. IEA (International Energy Agency Greenhouse Gas R&D Programme), 1994, Carbon Dioxide Capture from Power Stations, Report Number SR2P, IEA, Gloucestershire, UK. International Energy Outlook 1997. Energy Information Administration. Office of Integrated Analysis and Focasting. US Department of Energy, Washington, DC. International Energy Agency 1995: World Energy Outlook. IEA Paris. International Energy Agency 1997: World Energy Outlook. IEA Paris. IPCC (Intergovernmental Panel on Climate Change), 1996a, Climate Change 1995, A Review of Mitigation Cost Studies, Cambridge University Press, Cambridge, UK. IPCC (Intergovernmental Panel on Climate Change), 1996b, Policies and Measures for Mitigating Climate Change 1996, Cambridge University Press, Cambridge, UK. Ishibashi, M., Ota, H., Akutsu, N., Umeda, S., Tajika, M., Izumi, J., Yasutake, A., and Kageyama, Y., 1995, Technology for Removing Carbon Dioxide from Power Plant Flue Gas by the Physical Adsorption Method, Paper presented at the International Energy Agency Greenhouse Gases: Mitigation Options Conference, 2225 August 1995, London, UK. Karras, K. 1992, Wind Energy: what does it really cost? , Paper presented at the Windpower 92 Annual Conference of the American Wind Energy Association, Seattle, USA. Kaya, Y., Fujii, Y., Matsuhashi, R., Yamaji, K., Shindo, Y., Saiki, H., Furugaki, I., and Kobayashi, O., 1991, Assessment of Technological Options for Mitigating Global Warming, Paper presented at the IPCC EIS Group Meeting, 67 August 1991, Geneva, Switzerland. Kemi, W., 1987, Industrial uses of carbon dioxide, in M. Aresta and G. Forti, eds, Carbon Dioxide as a Source of Carbon, NATO ASI Series C, Vol. 206, Reidel, Dordrecht, The Netherlands. Kliman, M., 1997, Enhancing the Market Deployment of Energy technology, Edited by the International Energy Agency.. Levine, M.D., Geller, H., Koomey, J., Nadel, S., and Price, L., 1992, Electricity End-Use Efficiency: Experience with Technologies, Markets, and Policies Throughout the World, Lawrence Berkeley Laboratory, Berkeley, Ca, USA. Madsen, B.T. 1995: Market Update. Wind Stats Newsletter, Vol 8, n 2

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

196

Manne, A.S. & Richels, R.G. 1992: Buying greenhouse insurance. pp 182 The MIT Press, Cambridge, Massachusetts. Marchetti, C., 1976, On Geoengineering and the CO2 Problem, RM-76-17, International Institute for Applied Systems Analysis, Laxenburg, Austria. Masters, C.D. et al., 1987, World Resources of Crude Oil, Natural Gas, Natural Bitumen and Shale Oil, Proceedings of the 12th World Petroleum Congress, 5:327, John Wiley, Chichester, UK. Masters, C.D., Root, D.H., and Attanasi, E.D., 1991, World resources of crude oil and natural gas, Preprints of the 13th World Petroleum Congress 25: 114, John Wiley, Chichester, UK. Mc Mullan, J. T. Williams, B.C., Campbell, P. McIlveen-Wright, D. and Bemtgen, J.M., 1995 Techno-economic assessment studies of fossil fuel and fuel wood power generation technologies, EC, DG XII Brussels Meier, A., 1991, Supply Curves of Conserved Energy, in Proceedings of the IEA International Conference on Technology Responses to Global Environmental Challenges: Energy Collaboration for the 21st Century, 68 November 1991, Vol. 1, Inter Group Corporation, Kyoto, Japan. Michaelis, L., 1994. The transport sector, Proceedings of the Energy Technologies to Reduce CO2 Emissions in Europe: Prospects, Competition, Synergy, April 1112, 1994. Petten, The Netherlands, OECD/IEA, Paris, France (pp. 73114). Mimura, T., Shimojo, S., Suda, T., Iijima, M., and Mitsuoka, S., 1994, Research and Development on Energy Saving Technology for Flue Gas Carbon Dioxide Recovery and Steam System in Power Plant, Paper presented at the 2nd International Conference of Carbon Dioxide Removal, 2527 October 1994, Kyoto, Japan. Nakicenovic, N., Grbler, A., Inaba, A., Messner, A., Nilsson, S., Nishimura, Y., Rogner, H.-H., Schfer, A., Schrattenholzer, L., Strubegger, M., Swisher, J., Victor, D. and Wilson, D., 1993. Long-term strategies for mitigating global warming, Special Issue of EnergyThe International Journal 18(5):401609. Nakicenovic, N., 1995. Carbon dioxide reduction strategies, PIK/WI Workshop on Cost-Benefit Analyses of Climate Change, 10-11 November 1995, Potsdam, Germany. Newman, P. and Kenworthy, J., 1989, Cities and Automobile Dependence: A Sourcebook, Gower Technical, Aldershot, UK. Nishikawa, N., Morishita, M., Uchiyama, M., Yamaguchi, F., Otsubo, K., Kimuro, H., and Hiraoka, R., 1992, Carbon Dioxide Clathrate Formation and its Properties in the Simulated Deep Ocean, Paper presented at the 1st International Conference of Carbon Dioxide Removal, 46 March 1992, Amsterdam, The Netherlands. Nishikawa, N., Ishibashi, M., Ohta, H., Akutsu, N., Matsumoto, H., Kamata, T., and Kitamura, H., 1995, CO2 Removal by Hollow-Fiber Gas-Liquid Contactor, Paper presented at the 2nd International Conference of Carbon Dioxide Removal, 2527 October 1994, Kyoto, Japan.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

197

Nishimura, F., 1991, Technology Assessment for the Reduction of Carbon Emissions in the Electricity Sector, International Institute for Applied Systems Analysis, Laxenburg, Austria (draft). Office of Technology Assessment (OTA), 1991, Energy Technology Choices Shaping our Future, OTA, Washington, DC, USA. Okken, P.A. and Ybema, J.R., 1994. CO2 Reduction through Materials Chain Management, Proceedings of the Energy Technologies to Reduce CO2 Emissions in Europe: Prospects, Competition, Synergy, April 1112, 1994. Petten, The Netherlands, OECD/IEA, Paris, France (pp. 303324). Perry, R.H., and Green, D., 1983, Perrys Chemical Engineers Handbook, 6th edition, McGraw Hill, New York, NY, USA. Saha, S., and Chakma, A., 1992, Separation of CO2 for Gas Mixtures with Liquid Membranes, Paper presented at the 1st International Conference of Carbon Dioxide Removal, 46 March 1992, Amsterdam, The Netherlands. Saji, A., Yoshida, H., Sakai, M., Kitamura, H., and Kamata, T., 1992, Fixation of Carbon Dioxide by Clathrate Hydrate, Paper presented at the 1st International Conference of Carbon Dioxide Removal, 46 March 1992, Amsterdam, The Netherlands. Schssler, U., and Kmmel, R., 1989, Carbon Dioxide Removal from Fossil Fuel Power Plants by Refrigeration Under Pressure, in W.D. Jackson and D.A. Hull, eds., Proceedings of the 24th Intersociety Energy Conversion Engineering Conference, Washington, DC, USA. Springmann, F., 1991, Analysis of the Ecological Impact of Demonstration Projects in the Field of Rational Use of Energy: Development of Evaluation Criteria, Study on behalf of the Commission of the European Communities, Directorate General for Energy (DG XVII), RegioTec GmbH, Starnberg, Germany. Steinberg, M., 1996. The carnol system for methanol production and CO2 mitigation from coal fired power plants and the transportation sector, Brookhaven National Laboratory, Upton, NY. Strubegger, M. and Reitgruber, I., 1995. Statistical analysis of investment costs for power generation technologies, WP-95-109, International Institute for Applied Systems Analysis (IIASA), Laxenburg, Austria (pp. 21). TERES II 1996, The European Renewable Energy Study Energy for Sustainable Development, ESD Ltd. Corsham, UK. Train, K.E., 1985, Discount rates in consumers' energy-related decisions: a review of the literature, Energy 16(12): 12431253. Train K.E., 1991, Optimal Regulation: the Economic Theory of Natural Monopoly, The MIT Press, Cambridge, Massachusetts Turkenburg, W.C., 1995. Energy demand and supply options to mitigate greenhouse gas emissions, in S. Zwerver, R.S.A.R. van Rompaey, M.T.J. Kok and M.M. Berk (eds.), Climate Change Research: Evaluation and Policy Implications, Elsevier Science, The Netherlands (pp. 10131054).

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

198

World Energy Council and International Institute for Applied Systems Analysis, (WEC-IIASA), 1995, Global Energy Perspectives to 2050 and Beyond, World Energy Council, London, UK. Worrell, E., Cuelenaere, R.F.A., and Blok, K., 1992, Energy Consumption of Industrial Processes in the EC, University of Utrecht, The Netherlands. Walker J.A.,1996, The Influence of Privatization on the Direction and Scale of R&D: Recent UK Experience in Competition and New Technology in the Electric Power Sector, International Energy Agency/OECD. Wigley, T. M. L., Richels, R. & Edmonds, J.A. (1996): Economic and environmental choices in the stabilisation of atmospheric CO2 concentrations. Nature, 379, 240-243. World Energy Council and International Institute for Applied System Analysis., 1995. Global Energy Perspectives to 2050 and Beyond. London, WEC Report. Wrixon, G.T., Rooney, A.M, and Paltz, W., 1993, Renewable Energy Ed. Springer Verlag. Yanagisawa, Y., 1995. Separation, conversion and disposal of carbon dioxide as mitigation measures to global climate change, in Proceedings of the Role of Energy Technologies Towards Sustainable Development, 1620 October 1995, Kansai, Japan.

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat TABLE OF FIGURES.

199

Figure 2-1Worldwide CO2 emissions ......................................................................................... 11 Figure 2-2: CO2 Emissions per capita. ........................................................................................ 13 Figure 2-3: CO2 Emissions/ GDP. .............................................................................................. 15 Figure 2-4: : per capita GDP in the 11 world regions (1971-2030, logarithmic scale)................ 24 Figure 2-5: GDP growth rates in perspective............................................................................... 25 Figure 2-6: Energy consumption and supply in WE-2030 Baseline............................................ 27 Figure 2-7: Three energy sevices as a function of GDP, past and future.................................... 33 Figure 2-8: Energy Services per capita / GDP per cap, Stationary Fuel Use............................... 34 Figure 2-9: Energy Services per capita / GDP per cap, Transport............................................... 34 Figure 2-10: Energy Services per capita / GDP per cap, Electricity............................................ 35 Figure 2-11: Electric power demand............................................................................................ 37 Figure 2-12: Possible industrial organization schemes................................................................ 38 Figure 3-1: Decarbonization of global primary energy, historical development and ranges of contemporary scenarios. Source: WEC-IIASA 1995......................................................... 46 Figure 3-2: The main processes of CO2 separation and recovery................................................ 47 Figure 3-3: Electricity costs and carbon emissions. Source: EC 1995. ...................................... 54 Figure 3-4: Supply curves of energy efficiency improvement measures for the periods 1990 2000 and 19902050. A discount rate of 5 percent is used. Source: de Beer et al. 1995. 57 Figure 3-5: Alternative ways of using biomass for CO2 mitigation: sequestering carbon in forests versus substitution of coal with biomass for electricity. Source: Hall (1994). .................. 59 Figure 3-6: Break-even electricity selling prices for base-case technologies (upper part) and for technologies involving CO2 sequestration (lower part). Source: EC 1995........................ 61 Figure 3-7: Improvements in electric conversion efficiency in the U.S., the former Soviet Union, Western and Eastern Europe. Source: Nakicenovic et al (1.993). ....................................... 62 Figure 3-8: Carbon reduction potential of industry as a function of the recycling rate for selected materials............................................................................................................................... 68 Figure 3-9: Steel production chains: energy consumption, carbon emissions, and costs of various production process routes. ................................................................................................... 70 Figure 3-10: Capital costs (per ton of carbon reduced) for (a) steel and (b) cement process technology improvements for major world regions versus emission reduction potential. .. 72 Figure 3-11: Energy requirements, costs, and CO2 emissions for six energy chains ending with industrial motor drives. Source: Messner and Nakicenovic 1992. .................................... 74 Figure 3-12: Summary of process technologies with carbon reductions in steel manufacture, carbon emissions and costs (line) versus specific carbon reduction costs (bars)................. 75

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

200

Figure 3-13: Modal split between long-distance passenger transportation systems in the former Soviet Union and China (shifted time axes), in fractional share of passenger kilometers. . 78 Figure 3-14: Carbon emissions (line) versus carbon reduction costs (bars) of various technological changes to passenger cars.............................................................................. 79 Figure 3-15: Energy and carbon intensity of various passenger transportation technology chains. Source: Schafer, 1992. ........................................................................................................ 80 Figure 3-16: Energy requirements, costs, and CO2 emissions for six energy chains ending in refrigeration.......................................................................................................................... 83 Figure 3-17: Carbon emissions (line) versus CO2 reduction cost (bars) for residential heating. The abbreviations represent the three insulation categories in ascending order of technological sophistication (0, I, II): natural gas; a hydrogen delivery chain based on hydro-electricity and electrolysis (ElH2); and photovoltaic electricity and electrolytic hydrogen (PVH2)................................................................................................................. 84 Figure 5-1: 1990 Electricity generation costs by load for some selected technologies ............. 127 Figure 5-2: 2030 (BAU) Electricity generation costs by load for some selected technologies . 128 Figure 5-3: 2030 (EI) Electricity generation costs by load for some selected technologies ...... 129 Figure 5-4: Capital costs-efficiency map for some selected power generation technologies .... 130 Figure 6-1: Renewable technology penetration to 2030 - BAU scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated and, in the case of biofuels, the energy used in the transport sector.................. 143 Figure 6-2 Renewable energy (excluding large hydro) penetration rises from 3.6% of primary energy in Conventional technology market penetration to 2030 - BAU scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated. .......................................................................................................... 144 Figure 6-3: Renewable technology penetration to 2030- Centralised electricity scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated and, in the case of biofuels, the energy used in the transport sector.................................................................................................................................. 144 Figure 6-4Conventional technology market penetration to 2030- Centralised electricity scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated ........................................................................................ 145 Figure 6-5: Conventional technology penetration to 2030 - Cleaner fossil fuel scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated............................................................................................. 146 Figure 6-6: Renewable technology market penetration to 2030- gas decentralised scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated and, in the case of biofuels, the energy used in the transport sector.................................................................................................................................. 147

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

201

Figure 6-7: Conventional technology market penetration to 2030 - gas decentralised scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated. ....................................................................................... 147 Figure 6-8 Renewable technology market penetration 2030 - Energy efficiency scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated and, in the case of biofuels, the energy used in the transport sector.................................................................................................................................. 148 Figure 6-9: Conventional technology market penetration to 2030 - Energy efficiency scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated. ....................................................................................... 149 Figure 6-10: Renewable technology market penetration to 2030 - Renewable future scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated and, in the case of biofuels, the energy used in the transport sector................................................................................................................... 150 Figure 6-11: Conventional technology market penetration to 2030 - Renewable future scenario. The graph shows the total delivered energy (in GWh/year) by each technology; ie. the sum of heat and electricity generated. ....................................................................................... 150 Figure 7-1 World primary energy mix ....................................................................................... 164 Figure 7-2 Baseline World Electricity Mix (TWH) by 2030..................................................... 166 Figure 7-3: The Nuclear Scenario: World power production by technologies with respect to the reference scenario .............................................................................................................. 172 Figure 7-4: The Nuclear Scenario by zones: comparison with the baseline .............................. 173 Figure 7-5: The Clean Coal Scenario: World power production by technologies with respect to the reference scenario ........................................................................................................ 174 Figure 7-6 The Clean Coal Scenario by zones: comparison with the baseline.......................... 175 Figure 7-7: The Gas Scenario: World power production by technologies with respect to the reference scenario .............................................................................................................. 177 Figure 7-8 The Gas Technology Scenario by zones: comparison with the baseline.................. 180 Figure 7-9: The Fuel Cell Scenario: World power production by technologies with respect to the reference scenario .............................................................................................................. 182 Figure 7-5 The Fuel Cell Scenario by zones: comparison with the baseline ............................. 183 Figure 7-11: The Renewables Scenario: World power production by technologies with respect to the reference scenario ........................................................................................................ 185

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat INDEX OF TABLES.

202

Table 2-1: Per year CO2 Emissions............................................................................................. 12 Table 2-2: Per capita CO2 emissions per country........................................................................ 14 Table 2-3: CO2 emission index in 2010....................................................................................... 17 Table 2-4: Key hypotheses and results of world energy studies. ................................................. 18 Table 2-5: 11 world regions for the baseline analysis. ................................................................ 20 Table 2-6: World population 1992-2030 ..................................................................................... 21 Table 2-7: PPP and MER world economic structure and dynamics. ........................................... 22 Table 2-8: World economic growth (PPP). ................................................................................. 23 Table 2-9: Energy consumption and supply in WE-2030 Baseline ............................................. 27 Table 2-10: Oil and gas prices in the WE-2030 Baseline............................................................ 28 Table 2-11: Energy intensities. .................................................................................................... 29 Table 2-12: Primary energy consumption, by region................................................................... 30 Table 3-1: Classification of Physical Adsorption methods.......................................................... 49 Table 3-2: Summary of Costs and Potentials of Removal and Storage Options. ........................ 55 Table 3-3: Life cycle GHG emissions and costs. Source: IEA 1994. ........................................ 64 Table 3-4: Electricity costs of biomass, solar photovoltaic, and wind, US cents/kWh. .............. 65 Table 3-5: Cost ranges of biofuels for transportation. Source: IEA 1994. ................................ 66 Table 3-6: Fuel-cycle analysis of automotive fuels. Source: Yanagisawa 1995......................... 81 Table 4-1: Technical performance of clean coal technologies (2000)......................................... 97 Table 4-2: Clean coal technology economic data (2000-2030) ................................................... 98 Table 4-3: Clean coal technologies environmental performance - acid rain ............................... 98 Table 6-1 Market penetration of renewable technologies in 2030 (% of primary energy supply) ........................................................................................................................................... 151 Table 6-2: Business as Usual Scenario - Analysis of SAFIRE Results ..................................... 154 Table 6-3: Centralised Electricity Production Scenario - Analysis of SAFIRE Results............ 156 Table 6-4: The Cleaner Fossil Fuel Based Baseload Electricity Production Scenario - Analysis of SAFIRE Results............................................................................................................. 157 Table 6-5: The Gas-induced Decentralized Power Generation System Scenario - Analysis of SAFIRE Results ................................................................................................................. 159 Table 6-6: The Energy Efficient Decentralized Power Generation System Scenario - Analysis of SAFIRE Results ................................................................................................................. 160

Energy Technology Strategy 1995-2030: Opportunities from the Global Warming Threat

203

Table 6-7: A Future of Renewable Energy Technologies Scenario - Analysis of SAFIRE Results ........................................................................................................................................... 161 Table 7-1: POLES World Primary Energy Projection............................................................... 163 Table 7-2 POLES World Electricity Projection 1992-2030 ...................................................... 164 Table 7-3: POLES World Final Energy Projection ................................................................... 165 Table 7-4: POLES OCDE Primary Energy Projection .............................................................. 166 Table 7-5 POLES OCDE Electricity Projection 1992-2030...................................................... 167 Table 7-6: POLES OCDE Final Energy Projection................................................................... 167 Table 7-7: POLES Asia Primary Energy Projection.................................................................. 168 Table 7-8 POLES Asia Electricity Projection 1992-2030 ......................................................... 168 Table 7-9: POLES Asia Final Energy Projection ...................................................................... 169 Table 7-10: POLES Socio-economic trends .............................................................................. 169 Table 7-11: POLES Baseline oil market outlook ...................................................................... 170 Table 7-12: POLES Baseline gas market outlook ..................................................................... 170 Table 7-13: POLES Baseline oil market outlook ...................................................................... 177 Table 7-12: POLES Baseline gas market outlook ..................................................................... 178 Table 7-15 SUMMARY TABLE OF THE IMPACT OF TECHNOLOGY SCENARIOS ...... 186