New Energy Externalities Development for Sustainability Final Conference "External costs of energy t

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New Energy Externalities Development for
Sustainability Final Conference "External costs
of energy technologies"
Energy scenarios for the future and policy
implications
Vincenzo Cuomo, CNR-IMAA, Italy S. Kypreos,
PSI, Switzerland RS2a Modelling Pan European
Policy scenarios Brussels, February 16-th, 2009
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Main objectives

• Developing a new modelling framework for the EU
  as a whole, especially its multi-country aspect
  with trade exchanges among countries
• Contributing to policy evaluation through
• Integration of different objectives in one global
  modelling environment, allowing to evaluate their
  mutual interactions
• Evaluation of the optimal mix of options to reach
  severe energy-environmental targets
• Assessment of the role of external costs in the
  definition of policy strategies
• Assessment of the structural changes in the
  energy system and the role of technologies in
  different boundary conditions
• Scenario analysis for the evaluation of key EU
  targets

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The TIMES models generator

• Partial Equilibrium model
• Maximisation of the consumer/producer surplus
• Supply and demand quantities equilibrate through
  prices changes
• Perfect foresight
• Long term time horizon, to support the definition
  of long term strategies, taking into account
  different standards of energy devices, technology
  development and policy targets
• High technological detail in energy supply and
  end-use sectors (both existing and future
  technologies), potential of fossil and renewable
  resources by country, resulting in a data
  intensive model
• Approach based on full energy costs along the
  life-time of technologies and within the time
  horizon, i.e. including LCA components and
  external costs
• Normative perspective, focused on the development
  needed under a policy scenario

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A common integrated structure
NEEDS Project

• The NEEDS modelling platform

LCA of the most relevant power supply options

• Based on the TIMES multi-period linear
  optimization models generator
• Common structure of country models (RES-Reference
  Energy System)
• Common sources for the main data (energy
  balances, material flows, air emissions)

Energy system models of 30 EU countries (EU27,
CH, IS, NO)
Technology Database (inv cost, oper cost,
efficiency, ...)
Pan European Model

• Externalities of technologies for the production,
  transport, transformation and consumption of
  energy

The NEEDS TIMES PEM represents the reference
modelling platform for several outreach
projects/proposals supported by the EC
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Modelling Pan European Energy Scenarios
Key aspects Main EU Directives Stakeholder
preferences Country level detail
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The country models

• Country models based on a common structure (RES)
• Residential and Commercial
• All end use demand
• Industry
• Energy intensive industry
• Other industries
• Transport
• Different transport modes
• Supply
• Reserves, resources, exploration and conversion
• Country specific renewable potential and
  availability
• Electricity and Heat production
• Public electricity plants
• CHP plants and heating plants

• Geographical coverage
• 30 European countries (EU 27 Iceland, Norway
  and Switzerland)
• Time horizon
• 2000-2050
• Energy carriers included
• (Eurostat, 2005) energy balances, with some
  aggregations
• Materials explicitly modelled
• Only those flows whose production requires much
  more energy or which are important for the
  production processes (e.g. scrap steel).
• Pollutants included
• GHG (CO2,CH4,N2O,SF6)
• LAP (SO2,NOx,CO,NMVOC,PM2.5,PM10)

The Iron and Steel industry RES
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The Pan European TIMES model

• It is more than the sum of the 30 national
  models
• A multi-region approach at Pan EU level
  integrates the single EU countries energy models
• representation of the main energy exchanges
  between EU countries and also with non EU
  countries,
• Electricity trades are modeled via trade
  technologies
• it allows to reflect links and to impose
  constraints at the European level, reflecting the
  coordination of policies across borders and,
  consequently, the harmonisation of the underlying
  country models features and assumptions.

The NEEDS-TIMES modelling platform allows to
performing a more effective policy analyses both
on country level and in a EU wide perspective
enabling the definition of cross country
constraints.
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Objective of the scenario analysis

• The policy scenarios analysed in the NEEDS
  project were designed to address key policy
  issues at EU level
• Environmental issues linked to energy climate
  policy and local pollution linked to energy
• A Post Kyoto climate policy with a 2050 target
  for the EU compatible with the long term EU
  target of 2temperature
• A local pollution policy The objective is to
  evaluate the impact of the internalisation of the
  external cost linked to local pollutant (SO2,
  NOx, PM, NMVOC).
• Energy issues
• Improving the energy security by limiting the
  import dependency with a general constraint on
  imports of crude oil and petroleum products
  (-30) and natural gas gas (-30).
• Oil price the oil price is increased to
  1002000/barrel from 2010 onward and the gas
  price is following this increase,
• Enhancement of the domestic resources by imposing
  the renewable target of 20 for 2020 on final
  energy consumption, as defined in the EC climate
  and energy package (2008), this policy is also
  meant to contribute to energy security.

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The NEEDS Policy Scenarios
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New frontiers opened by the NEEDS modelling
platform

• The NEEDS modelling platform constitutes an
  integrated tool for the analysis of the EU as
  well as national energy systems, evaluating the
  effectiveness of different policy instruments and
  their long term impact in terms of energy and
  technology mix, emissions and costs.
• A tool for supporting stakeholders decisions, in
  order to evaluating
• The impact of targeted air quality EU policies
  (emissions standards) on emissions, costs and
  climate change
• The full costs and benefits of EU Directives that
  have an impact on the energy system
• The impact of different Post Kyoto strategies on
  the future of energy technologies
• The impact of alternative internalisation
  policies and their contribution to sustainability
• The technologies and policies that exhibit the
  most robust behaviour in an overall
  sustainability perspective

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New frontiers opened by the NEEDS modelling
platform

• The set up of the NEEDS TIMES models pave the way
  for the development of a wide range of possible
  applications and have fostered a number of
  outreach initiatives among which
• Contribution to EU and national policy analysis
  (e.g. IEA/ETO ETP2008 report, Ministry of
  Environment of in Estonia GHG reporting
  Template)
• New research projects (IEE, VII FP)
• RES2020 2007-2009 Focus on renewable energy for
  EU at horizon 2020 and beyond
• PLANETS 2008-2010 Focus on advances on how to
  deal with uncertainty in global and EU Climate
  Policies
• REACCESS 2008-2010 Focus on Security of Energy
  Supply for EU at horizon 2050
• REALISEGRID 2008-2010 Focus on Intra-EU (
  Balkans) Electricity Exchanges and Infrastructure

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Highlights from scenario analysisare presented
by
Socrates Kypreos (Paul Scherrer Institut)
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The Modeling Objectives are met

• The TIMES NEEDS Pan EU model allows to study
  policies across the EU borders and to exploit
  synergies and trade-offs for climate, local
  environments and energy systems
• The model gives already now good policy insights
• I will first explain why, continuing with policy
  conclusions about Climate Change and Security of
  Energy Supplies to finish with the
  Internalization of Externalities

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Post-Kyoto climate policy (450ppm)

• An overall EU reduction target of -71 emissions
  by 2050 compared to 1990, is imposed
• A scenario variant (450ppm_oil100) is analysed
  with oil prices going above USA 100/bb

• Security of energy supply (OLGA and OLGA_NUC)
• Imports of fossil fuels are constrained to foster
  the use of renewables, efficiency standards and
  new nuclear (-30 Oil, -40 Gas below baseline
  imports in 2010)
• A scenario variance is analyzed (OLGA_NUC) where
  nuclear reactors are free options to mitigate
  climate change

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Carbon Emissions in Mt CO2/yr
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GHGs Burden Sharing for a 20 reduction EC 2020
proposal Versus TIMES-PEM results
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CO2 Prices and Avoidance Costs
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Scenario Comparison, EU27 Net Electricity
Production
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Scenario Comparison, EU27 Net Electricity
Production
In BAU technology shares are based on fossil
fuels and moderate levels of NUC and RES In
450ppm electricity substitutes for fuels in final
energy markets and Is dominated by GAS-CCS,
(NUC and RES) In OLGA the system switches to
more Coal-CCS but also RES and NUC While only
with OLGA-NUC production is again more balanced
with less COAL and more RES Thus Technology
penetration is strongly influenced by policies
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Electricity prices
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Attributes of CO2 emissions reductions in the
EU27 in Mt CO2/yr Scenario 450 ppm in the year
2050
Power plants (33.2)
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Final Energy in Transport sector
Advanced Technologies in 450 ppm cases gt
10 Biodiesel Plug-in Hybrids H2 Fuel-Cell 1. -
10 Hybrid Electric battery, Gas, Ethanol, etc.
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The RES-COM sectors

• Technologies in 450ppm
• More than 10 Market shares
• Savings in space heating
• Savings space cooling
• Gas heat-pump
• Compression chiller
• Solar Collectors
• Advanced electric appliances
• Between 1 to 10
• Oil/gas condensing boilers
• Air /ground water heat pumps
• Absorption chiller
• Biomass boilers

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The Discounted Energy System Cost
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Conclusions - IER

• Technology penetration and structural changes in
  the energy system of the EU27 are influenced by
  policies and less by their cost (i.e., policy
  that enforces internalization of externalities)
• A strong reduction of the import-dependence on
  oil and gas is only possible if the technology
  development will be successful in all parts of
  the energy system
• In the 450ppm case with a Nuclear Phase-out,
• systems like renewables, CCS , fossil fuel
  switch and use of devices based on electricity in
  the final energy sectors are key options
• Efficiency improvement is in competition with
  renewables and CSS till 2030. Only in case of
  security of supply efficiency improvement takes
  up an additional part
• The cases with an oil price scenario approaching
  values above 100/barrel, are similar to the
  cases with enhanced endogenous production (OLGA)

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Internalisation of external cost of local
pollution in TIMES i.e., with or w/o climate
scenario and with or w/o renewable target

• The external cost associated with local pollution
  (damage per emission from RS1b) computed in TIMES
  are explicitly included in the system cost and
  internalized in the optimisation process
• With internalisation, synergies between policy
  targets (climate and air quality) are fully
  exploited in the choices of reduction measures
• Caveat Neither the climate benefits due to
  reduction of CO2 emissions nor all end-of-pipe
  abatement options are fully modeled in TIMES-PEM
  such that the benefits of policy scenarios are
  underestimated

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• CO2 secondary benefits are not significant in the
  first decades
• Thus, we need explicit LAP internalization
  policies is the first decades to control pollution

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Costs of Policies

• The reduction of damages due to internalization
  of LAP externalities compensates for both the
  Carbon and LAP emission control and are
  sustainable from the environment and the social
  point of view.
•  Overall control cost remains limited given
  assumptions of the model (optimisation, perfect
  foresight, no adjustment cost)

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Conclusions KU Leuven

• A Mix of options helps to reach stringent
  energy/climate targets like
• Decrease in demand of energy services (price
  effect)
• Better efficiency and shift to low carbon energy
  systems at start
• Renewables, CCS, and end-use technologies (i.e.,
  Heat pumps, HFC) at higher target
• Climate policies brings also ancillary benefits
  by reducing local pollutant damages (SO2, NOx,
  PM,VOC) but
• Climate policy alone is not sufficient to improve
  air quality as it starts at moderate control
  levels
• Policy aiming directly at better air quality is
  more effective in the first decades
• Climate policy alone is almost sufficient for the
  renewable-20 target
• But Renewable policy or LAP internalisation are
  insufficient for the climate target

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Overall Conclusions

• Climate policy, security of supply, renewable
  support policy and policies concerning local
  pollution measures needs integrated assessment
  models like the TIMES-PEM
• The model gives already now policy insights but
  if applied in new studies for policy analyses it
  needs
• continues database improvements,
• peer review by country modellers and EU
  authorities
• explicit specification of policies in question.
• Explicit policies could be the assessment of
  burden sharing, extensions of ETS to other
  sectors, green and white certificates, RD and
  learning subsidies for advanced technology and
  infra-structures, energy savings, distributed
  networks and storage systems, etc.