February 3, 2017
ENERGY WATCH #1 by Karel Beckman
The State of the European Power Sector (I)
February 3, 2017
While Commissioners Maroš Šefčovič and Miguel Arias Cañete presented their State of the European Energy Union – announcing that “the European energy transition is on track” – an excellent overview was published of the State of the European Power Sector by NGO’s Sandbag and Agora Energiewende.
UK- and Brussels-based not-for-profit climate think tank Sandbag, founded in 2008 by Baroness Bryony Worthington, has made it a tradition to be the first to come out with figures on how the European power market developed in the previous year. This year they teamed up with another climate policy think tank, Berlin-based Agora Energiewende, a joint initiative of Stiftung Mercator (a private charity) and the European Climate Foundation, to publish an extensive up-to-date report on the “Energy Transition in the Power Sector in Europe: State of Affairs in 2016”.
The report is packed with interesting insights which anybody following the European power sector should be aware of. So what are the key findings?
The biggest change in the European electricity system last year, notes the report, was “a large shift from coal generation to gas generation, reducing coal generation by 94 TWh (12%) and increasing gas generation 101 TWh (20%). This, alone, led to European power sector CO2 emissions falling by 4.5%, to 1018 Mt CO2.”
This is certainly a fact that gas advocates can take home with them. Although the contribution of renewables to the power mix was stagnant last year, Europe nevertheless managed to decrease CO2 emissions from electricity generation significantly, solely thanks to coal-to-gas-switching. It’s an argument for gas that American shale gas enthusiasts have of course been putting forward for some time now.
It is instructive to find out what made this switch possible:
- Half of it took place in the UK, and was due to coal plant closures and the increase in carbon price support (i.e. the UK carbon price floor).
- Spanish coal fell early in 2016 as hydro levels returned to normal.
- French gas generation increased aggressively in late 2016 because of widespread nuclear outages.
- Germany and the Netherlands had a temporary coal-gas switch because gas became cheaper than coal in August, September and October 2016.
- Greek gas generation took market share from lignite because of a lower gas price and the removal of a tax on gas in June.
The changes can be seen in this graph:
So there are four main reasons why the coal-to-gas switch took place, according to the report:
- a quarter is from closures of 8 Gigawatt of old coal plants, mostly in the UK
- a quarter is from permanent coal-gas switching from the UK’s carbon price support
- a quarter is from temporary coal-gas switching outside the UK because of low gas prices
- a quarter is from factors related to one-off changes in nuclear and hydro generation 2016
For policymakers there are some lessons to be drawn, then.
The success of the UK’s carbon price floor is one of them. “In April 2015’, notes the report, “the UK’s carbon price support doubled to 18 pound/tonne of CO2, on top of the EU-ETS price, which means the power price must pay around 30 €/tonne, compared to the EU-ETS price of around 5 €/tonne. This 30 €/tonne is sufficient to cause near-permanent switching of the merit order; in the UK, gas price needs to be at a high level before coal can compete with gas.”
Another is the crucial importance of coal and gas prices even on a short-term basis. Both these lessons show that higher CO2 prices will have an immediate effect on CO2 emissions. Of course it follows that if the EU wants to go this way, it should also have a policy in place for gas, which is currently arguably lacking.
In the renewables sector there are also some lessons to be learned from last year’s figures. According to the report, “Renewables generation pauses for breath after a bumper 2015, rising from 29.2% to 29.6% of all electricity generated.”
That’s trying to put a positive spin on disappointing figures. Interestingly, an important reason for the stagnation in renewables generation was adverse solar and wind conditions in 2016 compared to very favourable weather patterns in 2015.
But the installation rate of new renewables was also “behind trend”. Wind installations were “in line with the average” of 2010-2015 (i.e. no growth) and solar installations were lower than in 2015. Biomass growth also slowed to a trickle.
The chart below shows the renewables share of gross power production over the last 7 years:
This chart shows renewables power production in absolute numbers:
Although the share of renewables grew strongly over the last seven years, growth is very unevenly spread across the EU, with some western European countries – Netherlands, France, Belgium – scoring well below average:
To add it all up, the following picture emerges of electricity production shares in Europe from 2010 on:
What this shows is that gas is making a comeback, but is still not at the level of 2010. Nuclear is slowly going down, as a result of German closures. Renewables are moving up, but growth is flattening. Coal has been going down after a short-lived spike in 2012.
ENERGY WATCH #2 by Karel Beckman
The State of the European Power Sector (II)
February 3, 2017
So what can we say about the overall “energy transition” in the power market in Europe, based on the report by Sandbag and Agora Energiewende?
For one thing, electricity demand in Europe turns out to be remarkably stable. Consumption increased 0.5% last year, with declines only in Germany and Italy. Over the last seven years, while GDP rose 7% (1.2% a year), the countries with the highest growth – Poland and Bulgaria – saw their power consumption increase by 1% a year. All other countries had lower growth. The biggest falls were seen in Italy, Sweden and the UK, but also only averaging 1% per year:
The good news, then, is that “there is sufficient energy efficiency happening to keep overall European electricity consumption from rising significantly”. The bad news is that “it does not look like electricity consumption is structurally falling.”
Affordability of electricity, another important priority for policymakers, took a hit last year as prices went up in many countries: France (nuclear closures), UK (coal phaseout) but also in Italy, Spain, Belgium, Portugal and Switzerland. What is more, despite strong cross-border trade, wholesale prices also diverged, with Germany, Poland and the Nordic region seeing much lower prices:
So what do Sandbag and Agora Energiewende expect to happen in the coming years? Here are the highlights:
- The outlook on consumption is for continued stagnation.
- The outlook on renewables is mixed – in 2017, we would expect the level of installations to be at least as high as in 2016 as EU Member States seek to achieve their respective 2020 renewable energy targets…. However, post 2020, no reliable EU renewables framework exists nor is proposed to ensure that the EU 2030 renewables target is met, which could drive new investments in clean power throughout Europe. The more we approach 2020, the more the future of renewables in Europe becomes uncertain.
- The outlook for fossil generation is bleak. Fossil generation should fall by at least 70 TWh in 2017, due to a return to normalised French nuclear generation, a return to normalised wind and solar conditions and new renewables. Then it will continue to fall to 2020, with the continued addition of more renewable capacity.
The less predictable factor, notes the report, is whether the fall in fossil generation will be coal or gas. “Global LNG oversupply could lead to gas prices to crash again”, but such a crash may be short-lived. In addition, a lot will depend on what EU policymakers will do about the carbon price – or, if Brussels does not exist – what actions national policymakers will take.
ENERGY WATCH #3 by Karel Beckman
The end of the Energiewende (revisited)?
February 3, 2017
Three weeks ago, we published an article by German economist Heiner Flassbeck, entitled End of the Energiewende?, which apparently hit a nerve among our readers, as it was read many thousands of times, shared 1400 times on LinkedIn and Facebook, and has drawn 222 comments (to date).
So I presume our readers will also be interested in a recent speech given by Fritz Vahrenholt at the House of Commons in London, called Germany’s Energiewende: A disaster in the making. No question mark here.
The text of the speech was published online by the UK-based Global Warming Policy Foundation (GWPF), a group that is very critical of the prevailing theory of global warming (you could call them “climate deniers” if you want to use this somewhat dubious term). Vahrenholt is on their advisory board.
Vahrenholt is an interesting figure with a very mixed background: he is one of the founders of the environmental movement in Germany, he holds a PhD in chemistry and is Honorary Professor in the Department of Chemistry at the University of Hamburg, is a long-time member of the Social Democratic Party, served in several public positions with environmental agencies such as the Federal Environment Agency, the Hessian Ministry of Environment and as Deputy Environment Minister and Senator of the City of Hamburg, was a board member of Deutsche Shell, responsible for renewables, founded, in 2001, wind energy company REpower and was CEO of RWE’s renewable energy division, Innogy.
He is also a relentless critic of the Energiewende. He is convinced that Germany’s goal of supplying the country’s power, heat and transport needs with 80-95% renewables by 2050 cannot be achieved and will not be followed by any other country in the world.
He identifies several “looming problems” which will precipitate a crisis:
- Intermittency – a problem that won’t go away no matter how many wind turbines and solar panels are built.
- Grid and stability of distribution – periods of oversupply lead to negative prices, power exports that are not welcomed by neighbouring countries, and even huge payments to renewables producers for NOT producing anything (costs of these are €1 billion a year and rising, according to Vahrenholt).
- The rate at which grid expansion takes place is far below what is needed, as a result of public opposition.
- Market distortions.
- The need for a “dramatic expansion” of storage.
- The amount of land needed by wind turbines and biomass is large, and biomass growth is reducing biodiversity
None of these criticisms are new, and none of them are without justification. It is a pity that the critics and supporters of the Energiewende do not seem to be talking to each other. Time for a debate?
It remains to be seen of course how German policymakers will cope with the “challenges” of the Energiewende.
Vahrenholt sees four reasons why the German public has so far supported the Energiewende, despite the enormous cost:
- lack of political opposition
- oversupply means low power prices for some
- there have been no blackouts so far thanks to Germany’s “overengineered” grid
- Germany’s is frequently saved by its neighbours
This picture could change, however. As one our authors, Hamburg-based Jeffrey Michel, has pointed out to us, the AfD (Alternative für Deutschland) – the Trumpian opposition party that has been making headway in Germany – regards climate protection as “Irrweg” (a mistake) and considers “the effect of CO2 emissions on the climate as propaganda” – as they state in their party program. So political opposition may grow stronger.
And Vahrenholt makes another point that is worth thinking about and debating. He argues that the problems caused by the Energiewende will inevitably lead to more and more interventions from policymakers, as a result of which there will “be more state and less market in the energy business… The times of competitive and market-oriented energy management are probably over.”
One of the most controversial aspects of the Energiewende has always been the nuclear phaseout, which has made it much more difficult for Germany to reduce its CO2-emissions, despite the huge growth of its solar and wind power installations.
According to the pro-nuclear environmental NGO Environmental Progress, based in Berkeley, California, Germany’s CO2 emissions went up in 2016, as a result of the closure of another nuclear power station.
Environmental Progress (EP) published this finding on their website recently. It is based on their own calculations, on the basis of publicly available, respectable sources: The Fraunhofer Institute, Agora Energiewende and AG Energiebilanzen (official statistics). Although we at Energy Post cannot check their figures, they are aligned with the figures from Sandbag and Agora Energiewende, which we discussed above.
According to EP, German power production developed as follows in 2016:
EP concludes: “German emissions increased in 2016 for a second year in a row as a result of the country closing one of its nuclear plants and replacing it with coal and natural gas. German emissions would have declined had it not closed a nuclear plant and replaced it with coal and natural gas. Not only did new solar and wind not make up for the lost nuclear, the percentage of time during 2016 that solar and wind produced electricity declined dramatically.”
They add that “Germany added a whopping 10 percent more wind turbine capacity and 2.5 percent more solar panel capacity between 2015 and 2016, but generated less than one percent more electricity from wind and generated one percent less electricity from solar. The reason is because Germany had significantly less sunshine and wind in 2016 than 2015. As such, 2016 is a dramatic illustration of the limits of energy sources that depend on the weather. Their output varies dramatically not just hour-to-hour but also year-to-year.”
ENERGY WATCH #4 by Karel Beckman
Brexit and Euratom
February 3, 2017
Last week on Energy Post Weekly we reported on how a British exit from Euratom could harm UK nuclear industry. “A rapid exit from Euratom could … do serious harm to the UK nuclear industry”, wrote Jonathan Leech and Rupert Cowen, senior nuclear and energy lawyers at energy and infrastructure firm Prospect Law on the website of World Nuclear News.
Almost on the same day it became clear that the UK government is indeed planning to leave Euratom, as can be seen in this European Union (notification of withdrawal) Bill published by the government on 27 January.
The decision has been met with dismay by the UK nuclear industry. World Nuclear News quoted Tom Greatrex, chief executive of the Nuclear Industry Association as saying that “the UK nuclear sector ‘has made it crystal clear’ to the government that its preferred position is to maintain membership of Euratom. Greatrex said: “The nuclear industry is global, so the ease of movement of nuclear goods, people and services enables new build, decommissioning, R&D and other programs of work to continue without interruption. However, if the UK ceases to be part of Euratom, then it is vital that the government agrees transitional arrangements, to give the UK time to negotiate and complete new agreements with EU member states and third countries including the US, Japan and Canada who have Nuclear Cooperation Agreements within the Euratom framework. The UK should remain a member of Euratom until these arrangements are put in place.”
WNN also notes that none of the many new-build projects underway or planned in the UK are of British design and that “most are reliant on foreign technology that is accessible only via existing bilateral treaties through Euratom”.
A Brexit from Euratom could also have serious consequences for the Joint European Torus (JET) project taking place at the Culham Centre for Fusion Energy in Oxfordshire. This project is associated with the ITER fusion reactor project in Cadarache, France. Some 350 scientists are working at the Culham Centre backed by funding from almost 40 countries.
Interestingly, WNN further notes that there are also private fusion energy ventures going on in the UK, specifically one that goes under the name of Tokamak Energy. The CEO of Tokamak, David Kingham, told WNN: “As an agile, privately funded venture, Tokamak Energy is well placed to build on this heritage, bringing the UK closer to achieving nuclear fusion.” Tokamak Energy is building a new tokamak, ST40, at its facility at Milton Park in Oxfordshire. Tokamak is a Russian acronym that stands for toroidal chamber magnetic coils.
“Recent advances show there is a faster route to fusion energy based on more compact devices; I believe the rapid development of new technologies by a variety of private ventures will help the UK put fusion energy into the grid by 2030,” Kingham said. “The UK’s 50-year history in fusion research places us at the centre of a race towards a clean baseload energy source. It’s essential to build on our successes to date and firmly establish an industry of real economic importance. Too often in the past the UK has failed with commercial deployment of our world-class science base; we must build on our leading position in fusion and not give up just at the point where major private investment is being attracted,” he added.
In view of the possible damage to the UK nuclear industry, many people have said the UK should not withdraw from Euratom, even if it leaves the EU. But according to Professor Steve Peers, writing on the website EU Law Analysis, the UK has no choice about it. He argues that the way the EU Treaty and the Euratom Treaty have been set up, they are intrinsically linked. The only way the UK could stay in Euratom but not in the EU, would be if the other members of Euratom agreed to change the setup and become independent of the EU, says Peers, but they are hardly likely to do so.
ENERGY WATCH #5 by Karel Beckman
Myron Ebell and Michael Liebreich come to Brussels
February 3, 2017
Two outspoken but very different critics visited Brussels this week and pounded the EU’s climate and energy policies, according to reports on ScienceBusiness.net.
One was Myron Ebell, the arch-conservative climate adviser to Donald Trump’s transition team, who works for the Competitive Enterprise Institute. Ebell, who met with a hostile reception in Brussels, including some 100 demonstrators, did not mince words. “Whenever you hear environmental expert, think urban eco imperialist,” he said.
Ebell made it clear that “Trump believes the Environmental Protection Agency (EPA) is standing in the way of economic growth, is likely to withdraw from the landmark Paris agreement signed by 190 countries, axe funding for UN climate programmes and roll back environment policies put in place by President Obama.”
Since we know by now that Trump tends to do what he said he would do, we should assume the Paris Agreement is in trouble.
Ebell spoke at a meeting organized by the Alliance of Conservatives and Reformists in Europe, hosted by British MEP Daniel Hannan, “seen by many as one of the key influencing figures behind the UK’s Brexit vote”, as ScienceBusiness.net reports.
A very different visitor to that same conference was Michael Liebreich, who may in some ways be described as the polar opposite of Ebell. He is the founder of the very successful renewable energy consultancy Bloomberg New Energy Finance and has been in the vanguard of climate policy advice. Nevertheless, he was a supporter of Brexit and believes in free-market solutions rather than government-led climate policies.
Liebreich also had some blistering criticism for the EU, directed at the €79 billion Horizon 2020 programme. “Three years in, and Horizon 2020 has not achieved anything that can be recognised as a scientific breakthrough, nor is it set up to achieve innovation”, he said. “It is social policy – it’s about integration and not about science.”
He went on: “I look at the spending in Horizon 2020 [and] I’m trying to see what the benefits are. But I just can’t see its outputs. When I look through the things it funds, I see a lot of [scoping] studies, calls that would interest management consultancies and coordinating functions.”
ScienceBusiness.net notes that Liebreich, in a comment piece published in The Guardian last May, in which he argued that environmentalists should vote for Brexit, wrote, “The rules to apply for Horizon 2020 money state that ‘most of the EU funded projects are collaborative projects with at least three organisations from different EU member states or associated countries.’ Why is this necessary? Is it because scientists are too stupid to find the best collaborators themselves?”
Speaking on Wednesday, Liebreich said, “Innovation funds and policies managed by civil servants fill me with dread. Remember the EU’s Lisbon agenda? Where we were supposed to become the most digitally advanced continent in the world by 2010? Well, that turned out to be a complete pile of whatever you want to call it.”
Europe is much slower on innovation than the rest of the rest of the world, Liebreich said. “The EU studies supercomputers, while China goes and builds them.”
Liebreich said US entrepreneur Elon Musk has made a greater contribution to greening the planet than any policymaker. “Who in transportation has done more to innovate on transport? Is it policymakers or Elon Musk? He made the weather in the car industry and everyone is catching up with him,” said Liebreich.
However, according to ScienceBusiness.net, “he failed to acknowledge the tax breaks Musk’s company, and Tesla customers currently enjoy. But when challenged by Greg Barker, a former UK minister for energy and climate change, Liebreich did concede some ground, recognising the role government standards for cars have played in making vehicles more fuel efficient and cheaper to run.”
ENERGY WATCH #6 by Karel Beckman
Help! We need CCS
February 3, 2017
Ah, I know, you have heard this one before. The eternal “we need CCS but are not investing enough in it” story.
According to the study, written by researchers from the US, Europe and Australia, “our energy systems appear to be changing in ways that are broadly on track with limiting global temperature rise to 2C, but will soon lose ground without rapid deployment of new technologies.”
However, the “continued lack of investment in carbon carbon and storage (CCS) technologies puts the 2C limit in doubt, the researchers say. Without CCS, we will either have to cut back on fossil fuels even more quickly to meet 2C, or “accept that 2C is not possible”, the lead author told Carbon Brief.
Overall, the paper says there “appears to be an emerging trend of declining carbon intensity” of energy, which is consistent with scenarios that keep temperature rise to 2C. This means that, on average, the amount of CO2 released per unit of energy we generate is falling – albeit slowly.”
According to Carbon Brief, “the scenarios show that the route to significant cuts in global emissions is through ‘deep and sustained’ reductions in the carbon intensity of energy, the paper says.”
“Wind and solar, biomass and hydro are currently matching well with the 2C scenarios, the paper finds. Wind and solar in particular has shown ‘extraordinary growth’ in recent years, it says, but ‘greatly accelerated expansion’ will be needed in the coming decades to keep up with the scenarios.”
“Meanwhile, nuclear power is lagging behind, says Peters, and may well stay that way: ‘Nuclear is perhaps unlikely to follow the trends in many 2C scenarios, and this is partly influenced by the recent public resistance to nuclear.’”
“The findings show how crucial the next decade is for halting emissions growth, says Dr Joeri Rogelj, a research scholar at the International Institute for Applied Systems Analysis (IIASA) in Austria, who wasn’t involved in the study. He told Carbon Brief: “It remains clear that the coming 5 to 10 years will be critical to indicate whether we actually and durably made the turn towards a low-carbon transition or not.”
“Despite the positive findings”, notes Carbon Brief, “there is one area in particular that isn’t close to keeping pace with the 2C scenarios: CCS. The lack of development and deployment of CCS schemes remains the biggest challenge for meeting the 2C limit, [lead author] Peters says: ‘There is a clear divergence from current trends and the scenarios. Most scenarios require thousands of CCS facilities by 2030, but there are only tens currently proposed.’
“Without CCS, we either ‘need to look at alternative pathways to 2C’ or ‘we have to accept that 2C is not possible.” To address this lack of focus on CCS, the paper says “a globally-coordinated effort is needed to accelerate progress, better understand the technological risks, and address social acceptability.”
I know it’s not a new message – but it is worth repeating.