November 18, 2016
ENERGY WATCH by Karel Beckman
November 18, 2016
World Energy Outlook – a closer look at the Renewables Revolution
US energy department aims to slash costs of solar to just 2 ct/kWh
Did Trump get “the largest oil and gas discovery ever in the US” as President elect
GE starts world’s first wind+hydro+storage project in Germany
The grave implications of France’s nuclear emergency
World Energy Outlook: a closer look at the Renewables Revolution
The publication of the IEA’s World Energy Outlook, in November, is always an important moment for the global energy industry. The new 2016 edition, however, published on 16 November, takes on extra importance against the backdrop of the COP22 meeting in Marrakesh and the election of Donald Trump as next US president. Indeed, it is the perfect instrument to understand what the Paris accord on the one hand and the Trump presidency on the other may mean for our energy future.
What is important to understand is that the WEO (pronounced to rhyme with “Leo”) presents policy-driven scenarios. The report is usually treated in the media as a prediction of the future, but that is not correct. It offers three different views of our energy future (out to 2040) based on three sets of policies. And this year these policy sets correlate very well what is going on in the real world.
The first scenario is what the IEA calls its Current Policies Scenario: this shows what the global energy market is likely to look like in 2040 on the basis of business-as-usual trends unhindered by new climate policies, such as agreed in Paris. In other words, this is what could be called the Trump scenario: it is what is likely to happen if Trump delivers on his campaign promises and the world follows his example.
The second scenario is called the New Policies Scenario. This shows what is likely to happen if all countries implement the climate policies that they have announced. This year for the first time the New Policies Scenario incorporates all the national climate plans that the nations of the world have submitted as part of the Paris Climate Agreement. In other words, this is the Paris scenario.
As you probably know, according to most analysts the Paris commitments are insufficient to keep global warming limited to 2 degrees. That is why the Agreement contains a review process intended to ramp up the national climate plans in future. Here is where the third scenario comes in: the WEO’s 450 scenario shows what our energy future will look like if governments take the measures needed to limit CO2-concentration to 450 ppm (and thereby global warming to 2 degrees C).
So what are the outcomes of the three scenarios? They are perhaps best be summed up in this table:
This needs little explanation. As I wrote in an article on Energy Post, the Trump scenario leads to a substantial rise in coal, oil and gas use, although even in this scenario the share of fossil fuels declines slightly from 81% to 79%.
In the 450-scenario, coal and oil use are substantially lower, gas demand rises slightly and all renewables become much bigger, even though fossil fuels will still deliver 58% of global energy demand in 2040.
The Paris scenario comes out in between those two extremes, though it is closer actually to the Trump scenario than to the 450 scenario. This underlines the fact that “Paris” is not enough to get us where we need to be.
It is instructive, incidentally, to note how small the share of variable renewables (solar and wind) still is: 181 Mtoe (Million tonnes of oil equivalent) is equal to 1.3% of global energy demand. In 2000, their share was still 0.6%, so this does represent more than a doubling. Also instructive is to see how big solar and wind will be in 2040 in the three scenarios: 11.8% in the 450 scenario, 5.8% in Paris, 4.1% in Trump. Again, this underlines the still limited ambition represented by Paris.
Total energy use is also hugely different under the three scenarios. The 450 scenario comes out at a 24% lower energy use than the Trump scenario, and 17% lower than the Paris one.
In my article on Energy Post, I also cover some other elements in the WEO, such as the trends in energy subsidies (for renewables and fossil fuels) and the interesting implications of the various scenarios for energy security.
Here in my weekly Energy Watch I will dive further into another part of the WEO: the one on renewable energy.
This year’s WEO has a special section on renewable energy. The IEA is a bit late in this game but it now wants to take upon itself a role as the global “clean energy hub”, as Executive Director Fatih Birol puts in the foreword to the WEO. Organisations like IRENA (the International Renewable Energy Agency), set up to be exactly that, will not appreciate this incursion into their territory.
In any case, what the WEO describes is a true renewable energy revolution that is taking place. This may not be apparent if you purely think in terms of climate effects. The perspective you get in that case is that the effects of renewables may still be too limited. However, if you look at it from a business angle, the changes that are occurring are far-reaching indeed.
This is particularly true in the power sector. As you know, energy use can be divided among power, heating and transport, with heating being in fact the largest – and most underpublicized – segment. Renewables (and I am talking about all renewables here, including biofuels and hydropower) are still struggling in heating and transport, but in the power sector even today they are the largest source of power generation capacity and the second-largest (after coal) source of power supply.
Last year, renewables accounted for fully 70% of all electricity generation investment and for the first time, renewables-based power capacity additions exceeded those of all other fuel sources:
In the Paris scenario, renewables will become the largest source of electricity supply before 2030. In the 450 Scenario, renewables are the leading source of supply by the early-2020s and nearly 60% of all supply in 2040.
The share of renewable heating – to repeat: heat is the largest of all energy services – is more modest. In the Paris scenario it will grow from 9% today to 15% in 2040. In the 450 Scenario, “renewable supply obligations (as part of stricter building codes) help ensure that 40% of households rely on renewables for water heating in 2040. In industry, efficiency efforts cut heat demand while better awareness/information, targeted financial incentives and carbon pricing help overcome barriers to adopting renewables for heat. By 2040, around 20% of industrial heat use is from renewables, led by biomass and electricity.”
In transport, renewables have an even longer way to go. In the Paris scenario, the share of renewable energy grows from 3% today to just 7% in 2040 – and that includes both biofuels and EVs. In 2040 only one-in-ten passenger vehicles sold globally is an electric vehicle (EV) in this scenario, with just 40% of the energy used by EVs being renewable.
However, things look quite different for transport in the 450 scenario, as “actions on efficiency, emissions standards and fuel switching all help cut the role of oil in transport (to 65% in 2040), and boost the combined share of biofuels and electricity to nearly one-quarter”. By 2040, around half of all passenger vehicles sold are EVs in this scenario. That, of course, would certainly be an incredible revolution. I am curious if I will live to see it!
The overall picture that emerges is as follows:
This picture gives a good overview of the differences in renewable energy penetration in the electricity, heat and transport sectors:
All of this, it should be stressed, are projections based on current and future policies. They don’t take account of any technological breakthroughs that may happen.
Another key point about the renewables revolution that the WEO rightly emphasizes is that renewables also bring environmental, economic and energy security benefits – less air pollution, lower import dependency, more local jobs.
Crucial for the renewable energy revolution to not only succeed, but to benefit the world, is the competitiveness of renewables. The WEO has very useful definitions of important terms that are often used too loosely in this context. “Renewables that are competitive are those projects that are profitable for an investor without government support. Those that are financially attractive also include those projects that are profitable to investors with government support. Renewables that are cost-effective are those that are the most economically desirable option for achieving society’s goals.”
Interestingly, the WEO notes that “total power system costs and household electricity bills” are no higher in the 450 Scenario than those in the Paris scenario, partly thanks to increased energy efficiency. As far as that is concerned, we may as well go for 450 then!
According to the WEO, hydropower and geothermal (!) “are largely competitive today, while solar PV and onshore wind power are increasingly so to 2040, with projected cost reductions of 40-70% and 10-25% respectively. By 2040, over 60% of total renewables-based generation does not require subsidy in the New Policies Scenario.”
Renewables used to produce heat are competitive in several instances today, notes the WEO. “Solar water heaters are often competitive today on a levelised cost basis, but the upfront costs can be a major hurdle to wider adoption. Bioenergy is the most used renewable energy in industry and space heating, and it can be competitive with fossil fuels where cheap feedstocks are readily available, though this limits its market potential.” The report notes that “renewable heat received about 1% of the total support for all renewables in 2015, while accounting for about one-third of the total renewable energy supplied.”
In transport, conventional biofuels are generally not competitive with fossil fuels today nor are they likely to become so in the future: “Apart from sugarcane-based ethanol in Brazil, they will struggle to become so in the future given the very high share of feedstock costs in overall production costs, which are not expected to decline. Advanced biofuels, produced from cellulosic materials, hold more promise but will still find it difficult to compete with fossil fuels in the absence of carbon pricing and technology breakthroughs. Biofuel use triples in the New Policies Scenario by 2040, while subsidies stay around $25 billion per year.”
Given the environmental issues around biofuels (see this article by John DeCicco which we published on Energy Post this week), we may perhaps conclude that biofuels don’t look like the favoured renewable solution for the future.
If we look at the benefits renewables might bring in broader terms, then the picture becomes even more upbeat. As the WEO notes: “Renewable energy provides a means to achieve many societal goals. In addition to fighting climate change, renewables help redefine energy security in many cases by raising the share of domestically sourced supply. They also reduce energy-related air pollution and the resulting health impacts (although bioenergy requires special attention). These benefits come at little cost to consumers…”
The progress that the IEA expects renewables to make in terms of cost can be illustrated with the following figures, which compare levelised costs of electricity of renewables with fossil fuels in the electricity sector:
And this is what the picture may look like in 2040:
As a result, the amount of subsidy required to promote renewables will go down considerably over the next few decades, notes the WEO:
US energy department aims to slash costs of solar to just 2 ct/kWh
Authoritative though the IEA is, it can’t harm to keep looking at the real world and see if perhaps the IEA is not actually underestimating the cost reduction potential of renewables.
If we look at utility-scale solar PV, for example, the WEO-2016 reports that “in terms of the LCOE (levelised costs of electricity), utility-scale solar PV achieved a global weighted average of about $135/MWh for projects completed in 2015, with the vast majority of projects around the world falling between $100-300/MWh (IRENA, 2016b). Very low reported prices from recent auctions, several well below $50/MWh, suggest that solar PV costs are about to take a major step down the cost curve; but these reported prices may not fully reflect the underlying costs.”
However, the US Department of Energy has a programme, called the SunShot initiative. Just this week it announced that it had reached 90% of its 2020 cost target of $0.06 per kilowatt-hour (i.e. $60/MWh) for utility-scale photovoltaic (PV) solar power. LCOE costs of utility-scale solar PV dropped from about $0.23 in 2011 to $0.07/kWh last year, said the DoE.
SunShot’s goal for 2030 is “to cut the levelized cost of electricity (LCOE) from utility-scale solar by an additional 50% between 2020 and 2030 to $0.03 per kilowatt hour, while also addressing grid integration challenges and addressing key market barriers in order to enable greater solar adoption.”
It seems strange, then, that the IEA is using much higher figures, as can be seen in figure 11.8 above. On the basis of SunShot’s achievement, it is already quite obvious utility-scale solar PV will not need any subsidies at all in 2040.
Did Trump get “the largest oil and gas discovery ever in the US” as election present?
Just a week after Donald Trump’s election, the internet exploded with the news that the “U.S. Geological Survey Discovers Largest Oil & Gas Deposit Ever In America”. The climate-sceptic blogosphere was euphoric.
The news is just a little bit inaccurate, however, although you can’t blame the reporters too much. The US Geological Survey gave out a press release, announcing “USGS Estimates 20 Billion Barrels of Oil in Texas’ Wolfcamp Shale Formation” – with a subheading saying ‘This is the largest estimate of continuous oil that USGS has ever assessed in the United States”.
But note that “continuous oil” refers to “unconventional” oil (shale oil). Moreover, the 20 billion barrels, hailed by some websites as an “incredible amount”, is not so incredible. It refers to “undiscovered, technically recoverable” resources. How much of this amount can be economically produced ( “proved reserves”) is another matter. It will only be a fraction of this.
In fact, the entire US has just 55 billion barrels of proved reserves. The US consumes about 7.3 billion barrels a year or over 19 million barrels per day. The biggest conventional oil field in the US discovered so far is Prudhoe Bay in Alaska, which contained 25 billion barrels of “technically recoverable oil” when it was discovered in 1968, so Wolfcamp is not the largest. At the peak of production, Prudhoe Bay produced 1.5 million barrels per day. It is now down to 280,000.
Another way of looking at Wolfcamp is to compare it to the global technically recoverable shale oil resources. The US Energy Information Administration (EIA) estimates these at 345 billion barrels. Total US undiscovered technically recoverable oil resources are around 200 billion barrels, so Wolfcamp adds “just” 10% to those.
None of this means that Wolfcamp is not a big hit. It is. It means that the US shale oil and gas revolution will continue for many more years.
GE starts world’s first wind+hydro+storage project in Germany
Energy writer Tina Casey (who is an interesting author to follow) reports on the website CleanTechnica that American company GE together with Max Bögl Wind AG has embarked on a huge project at the Gaildorf wind farm near Münster in Germany.
As Casey reports, “It includes four wind turbines with a combined capacity of 13.6 megawatts. The base of each turbine will double as a water storage reservoir, for a total of 1.6 million gallons. These storage units will interact with a nearby lake with a 9 million gallon capacity, and a 16 megawatt hydropower plant. In effect, the turbines will act as giant batteries and provide an opportunity for the hydroplant to operate economically: During times of peak demand and high electricity prices, the hydro plant will be in production mode. During times of low electricity demand and lower prices, the hydro plant will be in pump mode, pumping and storing water–and hence energy–in the upper reservoir for later use.”
Here’s a schematic representing how the storage will help ensure the reliable delivery of electricity from the system:
“To ice the renewable energy cake”, writes Casey, “the added storage raises the height of each turbine tower by 40 meters. The end result is a “record-breaking” height of 246.5 meters, making these turbines the tallest in the world. GE will contribute its new 3.4-137 (3.4 megawatts, 137 meter rotor diameter) wind turbines to the project…. For those of you new to the wind energy topic, stronger, more consistent winds are located at higher altitudes. So, the taller the wind turbine, the better.”
The grave implications of France’s nuclear emergency
With French regulator RTE last week warning of possible electricity shortages and power blackouts the coming winter and 18 of France’s 58 nuclear reactors currently closed for safety checks as well as maintenance, the French nuclear crisis is taking on alarming proportions. With grave implications for the French nuclear industry and the French power sector.
Hard facts are difficult to come by in this evolving disaster. Reuters report that at this moment 30% of France’s nuclear capacity – which delivers 75% of France’s electricity supply – is offline. France’s nuclear watchdog ASN said this week that EDF will not be able to restart 7 reactors for at least another 45 days.
France’s grid operator RTE said last week that France’s nuclear power availability was at a record low for this time of year, reports Reuters. “During some periods of the day in winter, and during some days, we may need to use exceptional measures to guarantee the balance of electricity demand and supply on the network,” RTE President Francois Brottes told reporters at a news conference. RTE would start by boosting power imports and could also pay some industrial customers to switch off their machinery or curb usage, but Brottes said the gird operator might also have to impose short, rolling power blackouts in parts of the country. Power supplies are likely to be most stretched in the first three weeks of December, RTE said. With about a third of French homes heated by electricity, the country is highly sensitive to cold snaps.
The problems are caused by the fact that nuclear regulator ASN has ordered additional safety inspections following upon the discovery last year of weak spots in the steel of Areva’s EPR reactor which EDF is building in Flamanville in northwest France. In May, the ASN said the anomalies found in Flamanville had also been discovered in other reactors already being operated by EDF and ordered safety tests on 18 out of EDF’s 58 reactors.
As Reuters notes, “unlike other nuclear countries such as the United States and China, which have used different reactor models and suppliers, all French reactors are pressurised water reactors made by the same manufacturer, a forerunner of Areva. This standardisation allowed France to build reactors relatively quickly and cheaply, but also created the risk that a generic design flaw or manufacturing problem would affect many reactors and incapacitate a large part of the fleet. Green activists have warned of this possible scenario for years.”
The short-term effects of this situation are worrying enough, but the long-term issues may be even more so. As Giles Parkinson points out this week on Reneweconomy.com, EDF has been “strapped for cashand has to borrow to pay dividends. But it faces huge bills in coming years – with estimates ranging from €50-€80 billion – to upgrade its ageing fleet to meet standards. It faces an even bigger bill should it choose to replace the ageing nuclear reactors once they get to the end of their life, or need further upgrades.”
The situation also spells trouble for the EPR reactors being built in Flamanville and in Finland, which are already running years late and are way over budget. As Parkinson notes, “the faults discovered in Flamanville mean that the reactor may never be completed.”
And what does this mean for Hinkley Point C, the plant that EDF will be building in the UK, after it was awarded a highly controversial contract by the UK government in September? Hinkley Point C will consist of two EPR reactors of 1600 MW each. Estimated construction costs are now £8 billion, but the UK National Audit Office has calculated that the additional cost to consumers could be as high £29.7 billion, given the “strike price” of £92.50/MWh (inflation-proof) that the government will pay EDF. That is – for MWh actually produced of course.
And then we are not even talking about the risk of a really serious accident.
Ironically, just this week EDF and Areva announced that they have reached formal agreement of the takeover of the latter by the former, following the Memorandum of Understanding that they signed in July.
Also ironically, just last week China and the UK announced that they will be building a Joint Research and Innovation Centre on nuclear power in Manchester. The lead organisations of the centre are the UK’s National Nuclear Laboratory (NNL) and China National Nuclear Corporation (CNNC). The Chinese General Nuclear Corporation (GNC) has a 30% share in Hinkley Point C.