May 8, 2018
ENERGY WATCH #1 by Karel Beckman
New: the “controllable renewable energy plant”–it’s “competitive with nuclear power”
May 8, 2018
Eastern European countries that are considering building new nuclear plants could also opt for building “controllable renewable energy plants”, according to a new study from Berlin-based consultancy Energy Brainpool commissioned by Greenpeace Energy. The two options are comparable in cost, according to the study.
A “controllable renewable energy plant”consists of a combination of wind/solar power with a power-to-gas facility and gas turbine, as shown in this diagram:
The power-to-gas facility and gas turbine act as a backup when there is no power available from wind or sun. This addresses the key shortcoming of intermittent renewable energy. In the concept the gas turbine is fully powered by electrolysis-gas, so the installation is fossil-fuel-free.
Currently, nuclear power projects in Hungary, the Czech Republic and Slovakia are all still in the planning phase.
Hungary is planning two new reactors with a total capacity of 2,400 MW to be finished in 2026.
The Czech Republic is also planning the construction of two new reactors, also 1,200 MW each, at the existing Temelin and Dukovany sites.
Slovakia wants to replace its Bohunice reactor (1,200 MW) in the mid-2020s and is already building two small new reactors, Mochovce 3 and 4 (total 900 MW), which are supposed to come online this year and the next. Slovakia is also planning a new plant at Kecerovce (1,200 MW).
Poland, which does not have any nuclear plants at the moment, also has plans for a new nuclear power plant of 3,000 MW which should go online in 2029, but this is in the pre-development phase, with no location chosen yet.
The study presents detailed estimates of the costs of both options. For the nuclear power plants, it includes budgeted costs of the new Flamanville plant which is being built by EDF in France, and the subsidy awarded to Hinkley Point C, also to be built by EDF.
The estimate for the nuclear plants looks as follows:
The costs of the alternative – the “controllable renewable energy plant”(CRE) – are estimated as follows:
The study notes that the budgeted costs for nuclear power are probably too low. Taking Flamanville and Hinkley Point C as more realistic estimates, the CRE plants are comparable in price, except in Slovakia.
It further adds that financing conditions for renewable energy are quite difficult at the moment. If better conditions could be realized, e.g. through EU intervention, costs would go down significantly:
The study concludes that controllable renewable energy plants are a good alternative for new nuclear plants: “With comparable costs, this kind of system produces electricity with the same consistent security of supply, high energy independence, and minimal effect on the climate.”
These systems are also more flexible and more scalable and imply no dependence on Russian technology or materials.
ENERGY WATCH #2 by Karel Beckman
The return of the ETS – and why it will wipe out coal
May 8, 2018
The reform of the EU ETS (Emission Trading System) – through the Market Stability Reserve (MSR) –will tighten the market “very materially”, according to an important new reportfrom NGO/think tank Carbon Tracker.
However, it will not nearly be enough: “it still only gets us one quarter of the way towards a Paris-compliant cap by 2030 compared with the current EU-ETS cap under the existing EU-wide target of -40% by 2030.”
The MSR will remove 3 gigatonnes (Gt) worth of EUAs (emission allowances) from the market –but, says Carbon Tracker –an extra 1.6 Gt will be needed –and all of this 1.6 Gt will “have to come from lower coal-fired power generation”.
The new regime, when the MSR kicks in, will start in January 2019. This will already have a major impact on the market, “prompting the biggest supply squeeze the EU carbon market has ever seen”. The “surplus” for fixed installations – technically known as the Total Number of Allowances in Circulation (TNAC) – will go down from 1,776m to 496m over 2019-23, a drop of 1,270m.
“The EU-ETS has never before seen such large or sustained annual deficits against the backdrop of such a sharply declining surplus, and the upshot will likely be a need for large-scale fuel switching in the power sector from 2019 onwards to plug the supply gap”, notes the report.
In addition to “fixed installations”, there is also the aviation sector, which will be included in the ETS, and which will add to the supply shortfall. By 2030 the surplus of 334 million becomes a deficit of 226 million allowances. This deficit will have to be plugged by “physical emission reductions”, for example, switching from coal to gas.
Yet all this is not enough to get the ETS on track for “Paris”. Carbon Tracker notes that “the EU Council [i.e. the Member States] have formally requested that the Commission draw up a plan for aligning the EU’s long-term emissions-reduction strategy with the Paris Agreement. This means the Commission now has 12 months to devise a strategy for aligning the EU’s emissions trajectory to 2050 with the Paris Agreement, and hence that the process has been set in train that could ultimately at some point in the next three to five years lead to an EU-ETS cap aligned with the objective of restricting the increase in the average global temperature to well below 2°C.”
The researchers have tried to do this work already. Their conclusions are rather alarming.
They estimate that a reduction in the EUA cap of 2,145 Mt is necessary in the period 2021-2030, whereas under the new MSR regime the impact will be limited to 550 Mt. The “linear reduction factor” in the same period needs to be increased from 2.2% to 4% per year.
What would this mean for the price? It would go up to €45-€50 per ton, a huge increase over the current price (less than €10) and the expected price under the MSR (up to €25).
In practice, this can only mean, the report concludes, that “the abatement required …under our Paris-compliant scenario would have to come from reduced coal-fired output”.
Should anyone doubt the effectiveness of coal-to-gas switching to reduce CO2 emissions, a recent scientific paperby researchers Grant Wilson and Iain Staffell, published in Nature Energy, concludes that the reduction of CO2 emissions in the UK in 2016 (6%) was “notdue to a surge in low-carbon nuclear or renewable sources; instead it was the much-overlooked impact of fuel switching from coal to natural gas generation.”
The two authors discuss “the enabling conditions in Great Britain and the potential for rapid fuel switching in other coal-reliant countries”, particularly in Germany. They note “that spare generation and fuel supply-chain capacity must already exist for fuel switching to deliver rapid carbon savings, and to avoid further high-carbon infrastructure lock-in. More important is the political will to alter the marketplace and incentivize this switch, for example, through a stable and strong carbon price.”
Conclusion: “With the right incentives, fuel switching in the power sector could rapidly achieve on the order of 1 GtCO2 saving per year worldwide (3% of global emissions), buying precious time to slow the growth in cumulative carbon emissions.”
These findings are confirmed by the experience in the U.S., where the CO2 intensity of the power sector has fallen by 28% in the last 12 years. “Of this reduction, 54% has been as a result of coal switching to gas, 40% as a result of the build-out of renewables, and 3% of greater fuel-efficiency in gas power generation.” (Source: here)
ENERGY WATCH #3 by Karel Beckman
Eurelectric: blockchain is risky, a hype, and needs more oversight –but not everyone agrees
May 8, 2018
Although Kristian Ruby, Secretary-General of Eurelectric, the European electricity industry association, says “Blockchain is storming into the electricity sector. Our industry wants to harvest the potential it carries for our industry”, the two reports Eurelectric published on 3 May about blockchain are not bullish on the technology. On the contrary, they stress the limitations and risks of the application of blockchain in the energy sector and reject the idea that energy systems could function without grid operators.
The overview report, Blockchain in Electricity: A review of progress to date, notes that as of now there are some “122 energy sector organisations involved in blockchain technology and 40 publicly announced deployed projects.”Over €240 million has been invested in these projects.
This chart shows the types of projects going on with some examples:
Source: Eurelectric, NERA
But the report stresses that “Despite its potential value, however, blockchain’s future in electricity systems is uncertain. Blockchains represent new technologies with no scaled commercial applications in the electricity industry. The technology class is currently burdened by high costs, slow transaction speeds, and other limitations and risks. Unique characteristics of the electric power sector—such as the presence of economies of scale and scope in network operation — challenge the ability of certain blockchain-based applications to scale. Moreover, blockchain technologies face competitive pressures and public perception challenges. Much more experimentation and innovation are required before the potential value of blockchain to the electricity sector becomes clear.”(These conclusions are repeated in almost the same words no less than four times in the 32-page report!)
The report explains that “high costs and slow speeds stem from energy-intensive consensus mechanisms and the maintenance of large distributed ledgers. While faster blockchain systems like the PoAbased Tobalaba Energy Web Foundation test network promise greater scalability, such scalability requires foregoing some of the desirable properties associated with PoW-based blockchains. Blockchains are encumbered by a “scalability trilemma”in that they only have at most two of the following three properties: decentralisation, scalability, and security. Until further innovation is brought to bear, blockchains are not appropriate for large scale deployment in power systems.”
PoW (proof-of-work) blockchains are systems that work without a central authority (such as an electricity company or grid operator!), as contrasted with Proof of Stake or Proof of Authority blockchains.
According to Eurelectric, PoW blockhains are particularly vulnerable to cyber-attacks: “Code repositories are written by humans and bugs often persist despite quality assurance measures. Blockchains with bugs can last without evidence of attack if they are not valuable enough to entice attacks, and when attacks do occur the consequences can be large…. Without a central authority or insurer, users are fully exposed to the risk of cyberattacks and other unforeseen events.”
Eurelectric also emphasizes that peer-to-peer communities will continue to need the services of grid operators: “While robust P2P communities may emerge, they are unlikely to ever function independently from grid operators, so long as they remain connected to the central grid. DSOs may be able to effectively coordinate the dispatch of DER-provided bulk power system services at lower cost than independent organisations that are less familiar with the network, or than disintermediated blockchain-based platforms. Thus, to the degree that DER-to-wholesale markets emerge, there may be significant advantages to having DSOs coordinate these markets, rather than having these markets function largely on a disintermediated basis.”(DER = distributed energy resources)
The report notes that blockchain technology is not even necessary: “Alternative technological solutions exist for many of the potential applications being explored by blockchain projects. For example, with respect to enabling customer and DER participation in wholesale markets, telemetry-based communication systems have emerged as a potential solution. It is not clear that proposed blockchain-based solutions for enhanced customer and DER market participation would outperform telemetry-based and other technologies.”
Blockchain, says Eurelectric, “has ‘hype’ characteristics that are typical of promising emerging technologies. In a recent report by the research and advisory firm Gartner, blockchain technologies are described as moving past a Peak of Inflated Expectations into a Trough of Disillusionment, in which interest for the technology will wane as experiments and implementations fail to deliver.”
The second report, Blockchain in Electricity: A Call for Policy and Regulatory Foresight, again stresses all the downsides of blockchain: “blockchain technology poses significant risks to the electricity sector. In particular, blockchains are burdened by high costs, unproven security, the lack of responsible parties, a lack of flexibility, and unresolved user-friendliness challenges.”
It notes that “continued and additional policy and regulatory foresight is required to enable blockchain technology to realize its potential without putting electricity customers at risk.”It also asks for “continued innovation funding” through the EU’s Horizon 2020 fund –so that the technology can “continue to mature”–under the supervision of the electricity sector.
Is Eurelectric right to be so skeptical and critical of blockchain in energy? Marius Buchmann, blogger and researcher at Jakobs University in Bremen, has written a report on Event Horizon 2018, a Global Summit on Blockchain Technology in the Energy Sector, held 17-19 April in Berlin, which paints a somewhat different picture.
Interestingly, Buchmann notes that while in 2016 the USwas leading in the number of startups in blockchain in energy, in 2017, Europe took the lead.
Investments in Europe are now more than five times as highas those in the US. In Europe, the number of blockchain startups focusing on the energy sector has increased from 15 in 2016 to 70 by the end of 2017. In the US, however, only 16 new companies have entered the field of energy blockchain in 2017. China is now the second largest market for energy-focused blockchain initiatives after Europe.
Most of the investment comes from ICOs (initial coin offerings), a type of crowdfunding, suggesting that parties from outside the energy sector are particularly active.
Buchmann discusses two concrete “dApps”, i.e. “decentralized applications”. (For more on what dApps are, see here. A“world running on decentralized applications (Dapps)”is described as a “paradigm shift”. These“distributed, resilient, transparent and incentivized applications will prove themselves to the world by remapping the technological landscape.”)
The D3A dApp developed by the Energy Web Foundation (EWF) together with Grid Singularity “has the capability to simulate in what ways remote mini-grids could be operated based on the Energy Web Chain. It provides the framework to define different energy-only markets that optimize the exchange of electricity between producers and consumers on a decentralized level.”
The Origin dApp, also developed by EWF, “provides a method based on the Energy Web Chain to certify and track renewable energy generation on the kWh level, including marginal grid CO2 emissions. Thereby, the Origin dApp provides the basis to trade renewable energy certificatesvia the Energy Web blockchain. Importantly, the Origin dApp was developed to be compatible with existing certification systems and regulations to allow a smooth transformation from existing systems towards a blockchain-based solution.”
Buchmann does note that “throughput [i.e. speed] and scalability are challenges”, but he adds that “the solutions are already there”.
He concludes that “Although there are no solutions market-ready yet, the different initiatives have taken first crucial steps to come closer to real applications. Especially the pitches from more than 40 startups provided some nice examples of what could become possible with the Energy Web Chain.”
McKinsey has also recently issued a report, What every utility CEO should know about blockchain, that gives a useful overview of the impact blockchain could have on the power sector and what the most important applications seem to be.
McKinsey does stress that “the future is uncertain”, and blockchain is “still in its infancy”, but –more than Eurelectric –also emphasizes the “clear potential for blockchain technology to catalyze current disruptions transforming the power industry”.
The consultancy notes that there will be “winners and lowers”. For utilities, it says, “blockchain is a double-edged sword. New challengers can use blockchain to displace incumbents, but incumbents that use blockchain wisely stand to realize substantial benefits.”
According to McKinsey, “by applying blockchain to their vast stores of data, utilities can unlock new revenue streams from better-coordinated markets,“smarter”hardware, and wider electrification. And all of this activity will depend on solving some of the problems that could prevent blockchain technology from being used at scale.”
McKinsey describes six main application areas:
- Issue and trade renewable energy certificates
- Enable peer-to-peer power generation and distribution through microgrids
- Electrify undeveloped markets
- Enable real-time transactions to balance supply and demand
- Manage infrastructure in real time
- Connect electric vehicle charging stations
The report observes that “Many utilities have started to assess the potential of blockchain technology to create both internal and industry-wide efficiencies. Some have gone a step further and launched pilots in such areas as trading, distribution, and data management. Europe has emerged as the leading region for blockchain innovation, with companies launching a range of initiatives. RWE is piloting an electric- vehicle charging-station network based on smart contracts, while Vattenfall has launched a pilot peer-to-peer energy-trading network. In Asia, energy manager and power-marketing company Eneres is partnering with Aizu Laboratory to launch a peer-to-peer network. Development in the United States has tended to be led by players outside the power industry, including the Department of Energy.”
ENERGY WATCH #4 by Karel Beckman
Technologies, markets, states, the public - who and what is driving the energy transition?
May 8, 2018
“Market forces are driving a clean energy revolution in the US”, Bill Ritter, Director of the Center for New Energy Economy at Colorado State University, recently wrote on the website The Conversation.
Ritter notes that “Transforming U.S. energy systems away from coal and toward clean renewable energy was once a vision touted mainly by environmentalists. Now it is shared by market purists.”
After “years of federal and state support for clean energy research, development and deployment”, renewables have become so affordable that the market is taking over –and driving coal power out of business. Despite Donald Trump.
According to Ritter, a recent survey by the trade publication Utility Dive “found that electric power industry leaders expect significant growth in solar, wind, natural gas and energy storage. They also project significant decreases in coal- and oil-fired generation.”
Ritter gives a number of reasons why energy companies are embracing the energy transition:
- Markets favor low-cost energy. Currently natural gas, wind and solar are the lowest-cost resources available to produce electricity and are pushing out coal as a source of power.
- Markets emphasize the long view. As utilities look at aging coal plants that are providing decreasing value to their systems, they are making multi-decade and multi-billion-dollar decisions oninvestments in power plants and infrastructure to replace coal.
- Markets loathe uncertainty. The Trump administration’s policy reversals and tweets are an unstable foundation upon which to build a corporate strategy.
- Wall Street is helping utilities finance billions of dollars of investment. To ensure access to low-cost capital, they want to cite low-risk investments. Coal represents a high-risk investment from both a pollution and a resource standpoint.
- Utilities earn returns on investments in capital infrastructure. Investments in renewable resources arenearly all capital investment and represent the best return for investors.
Ritter could have added idealistic reasons perhaps why businesses are increasingly purchasing renewable energy.
Bloomberg reported recently that “companies are buying renewable power at a record pace”.
“T&T and Walmart are among 36 businesses, government agencies and universities that have agreed to buy 3.3 gigawatts of wind and solar power so far this year. That’s on track to shatter the previous high of 4.8 gigawatts of disclosed deals last year”, notes Bloomberg.
It notes that telecoms and technology companies are leading in clean power purchasing:
Some other highlights from the report:
- Of the 3.3 gigawatts of clean-power deals signed this year, 76 percent involve U.S. power projects
- The 15 clean-power deals signed globally in April will add almost 1.1 gigawatts of new wind and solar power
- Industrias Penoles SAB signed the largest agreement in April, a 245-megawatt wind-power contract that’s also the biggest such deal in Mexicosince a landmark energy-market reform
- Mumbai Metro signed India’s second-biggest corporate power-purchase agreement
If in the U.S. and elsewhere the market is leading the energy transition, in China it is of course the state that is driving it.
Bloomberg recently published an interesting interview with Jin Liqun, the president and chairman of the Asian Infrastructure Investment Bank (AIIB), the Chinese answer to the World Bank. China is the biggest shareholder in the AIIB.
It turns out that the AIIB is very much focused on energy and climate investment. Liqun said that “much of our loan portfolio is focused on power, energy, and transportation.”
“India is the biggest borrower at this stage. This is a country with strong capabilities and big needs. In India, Pakistan, Bangladesh, there is an acute shortage of power. In Myanmar, where we are involved in the development of gas-firing power plants, two-thirds of the people have no access to electricity.
So this is an area of focus, as is transportation. I would highlight our work supporting, say, a mass transit system like a Mumbai or Bangalore subway. It’s so important. You don’t want to encourage everyone to drive to work in congested urban centers. You encourage them to take mass transit. This is another approach to dealing with climate change.”
In Egypt, the AIIB is providing up to $210 million for a renewable-energy project involving 11 greenfield solar power plants. The bank is also helping Oman “to move away from excessive dependence on fossil fuels. They want to develop a port and alternative sources of energy. We helped Oman to develop broadband so they would have better access to modern telecommunication service. I think it’s so important to help middle-income countries in the Gulf area to be prepared for a low-carbon global economy.”
“To be green”, says Liqun, “is of critical importance to our mandate. Promoting sustained economic development through infrastructure investment without leaving an environmental footprint is our sacred mission.”
“Conserving natural resources is crucial”, he adds. “but being green does not conflict with growth. For instance, there is an ever-increasing demand for electric power. Power outages, blackouts, or brownouts, are very common, and a large segment of the population in low-income countries has no access to power at all. Wherever possible, instead of building greenfield dams or power plants, we will make a big push for upgrading the existing power grid and thus helping to reduce systemic loss in transmission and distribution. This is equivalent to building numerous new power plants.”
The BBC reports that China is also actively pursuing fusion energy. In fact, rather surprisingly, according to the BBC, not ITER in France or any of the private sector initiatives in the U.S. and Europe, but China is furthest ahead in fusion research.
The BBC’s Stephen McDonell “was given rare access”to Science Island in Eastern China’s Anhui Province, where he visited the China’s Experimental Advanced Superconducting Tokamak (or EAST).
He writes: “Inside, hydrogen atoms fuse and become helium which can generate heat at several times the temperature of the sun’s core. Powerful magnets then control the reaction, which could one day produce vast amounts of electricity if maintained. Around the globe, they are trying to master nuclear fusion – in the United States, Japan, Korea, Brazil and European Union – but none can hold it steady for as long as the team in Anhui. Right now that’s 100 seconds and it gets longer every year. Here they’re already talking about goals which are 10 times as long, at temperatures of 100 million degrees Celsius.”
Although Song Yuntao, deputy director at EAST, admits that fusion will still require “huge breakthroughs”as well as a “lot of financial backing from the government”, he adds that “The demand for energy is huge in every country and China has a roadmap for fusion-generated power. We want to complete the design for a test fusion reactor within five years. If we succeed it will be the world’s first fusion reactor.”
China is hedging its bets, because it also participates in ITER. But if it can get its own reactor to work first, writes the BBC, “China could end up having the edge over all others when it comes to the power generation of the future”.
At the Bloomberg New Energy Finance “Future of Energy Summit” in New York in April, which saw 1,000 energy executives, financiers and policymakers (including U.S. Energy Secretary Rick Perry) attending, the main theme, according to a detailed account from BNEF senior editor Angus McCrone, was: energy storage.
Which goes to show, McCrone adds, how quickly the energy transition is taking hold across the world. Ten years ago, he writes, storage would not even have been mentioned at an energy summit.
Nevertheless, there was not a very clear answer at the Summit “what the changes to come will look like”.
Some certainties: “photovoltaics and wind are taking over as the least-cost generation options in more and more locations; electric vehicles are on track to win their own cost race, with conventional vehicles, before 2030; and corporations and investors, instead of governments, are increasingly leading the push for clean energy.”
But storage“remains a big question –or many questions. How quickly will battery prices fall? What role in balancing variable renewable electricity will storage be able to play, and not play? To what extent will EV batteries be able to help balance the grid? What will provide long-term storage for when the wind does not blow and the sun does not shine? Will a rapid roll-out of energy storage capacity decimate the economics of generators such as gas ‘peaker’plants that earn the most at hours of highest demand? Finally, and perhaps most importantly, how will regulators respond to the enormously beneficial and disruptive aspects of storage?”
There are some facts to go by. BNEF’s “latest estimates for levelized costs of electricity (LCOE) show an 18% reduction globally for both solar PV and onshore wind in the last year and –even more worrying for incumbents –evidence that falling lithium-ion battery costs were threatening to enable renewables-plus-storage to compete in ‘dispatchable’generation, and batteries alone to compete for ‘flexibility’revenues.”
One speaker said that the “U.K.’s first merchant-only solar-plus-storage project, now commissioned with 10MW of PV and 6MW/6MWh of batteries, could make a 12% internal rate of return if it secured both price arbitrage and frequency response revenues. Meanwhile, U.S. utilities from Hawaii to Arizona were signing an increasing number of power purchase agreements, or PPAs, with PV-plus-storage projects.”
Whether renewables-plus-storage can compete with gas already, is questionable, at least according to David Nason, president and chief executive officer of GE Energy Financial Services. Nason said he did not think storage was yet a “complete competitor for gas”. But he added: “If storage could potentially displace the gas assets we are investing in, that is potentially going to mean that we pull back and don’t finance them.”
Grzegorz Gorski, managing director of central generation for Engie, said “we are not there yet”on the price-competitiveness of renewables-plus-storage for 24/7 generation.
Nevertheless, Engie is investing in batteries, seeing “much greater potential in behind-the-meter storage with aggregation.”
How soon EVs will be feeding energy back is also a question mark, said Pedro Pizarro, president and CEO of Edison International: “Vehicle-to-grid is still an open question.”He suggested a key issue was whether battery warranties could evolve so that they covered those cycles that go back into the grid as well as those used to charge the vehicle.
In the meantime, the U.S. government –unlike most of U.S. business –continues to favour coal power. Energy Secretary Rick Perry “will shortly decide whether essentially to declare a power-grid emergency under Section 202(c) of the Federal Power Act to trigger payments to keep some coal and nuclear plants online”, notes McCrone.
Asked how he would define an emergency, Perry told the Summit: “When you flip a light switch and nothing happens. The grid must not only be reliable, but resilient. We support fuels that can supply baseload electricity, and that includes nuclear and coal.”
The Summit also “hosted the man who has reportedly been instrumental in the Trump administration’s energy policy-making, Robert Murray, founder, chairman, CEO and president of U.S. coal mining firm Murray Energy.”
In “a dramatic appearance”, writes McCone, “Murray told the clean energy dominated audience that coal-fired power was ‘reliable, resilient, affordable’. He predicted that if coal goes any lower than 20-25% of the generating mix in many regions of the country, “people are going to die in the dark.”