Sunday, December 25, 2011

European Commission - Energy Roadmap 2050: a secure, competitive and low-carbon energy sector is possible
To achieve the goal of cutting emissions by over 80% by 2050, Europe's energy production will have to be almost carbon-free. How to achieve this without disrupting energy supplies and competitiveness is the question answered by the Energy Roadmap 2050 the Commission is presenting today. Based on the analysis of a set of scenarios, the document describes the consequences of a carbon free energy system and the policy framework needed. This should allow member states to make the required energy choices and create a stable business climate for private investment, especially until 2030.

Energy Commissioner G√ľnther Oettinger stated: "Only a new energy model will make our system secure, competitive and sustainable in the long-run. We now have a European framework for the necessary policy measures to be taken in order to secure the right investments."

The analysis is based on illustrative scenarios, created by combining in different ways the four main decarbonisation routes (energy efficiency, renewables, nuclear and CCS). None is likely to materialise but all scenarios clearly show a set of "no regrets" options for the coming years.

The Energy Roadmap 2050 identifies a number of elements which have positive impacts in all circumstances, and thus define some key outcomes such as:
  • Decarbonisation of the energy system is technically and economically feasible. All decarbonisation scenarios allow achieving the emission reduction target and can be less costly than current policies in the long-run.
  • Energy Efficiency and renewable energy are critical. Irrespective of the particular energy mix chosen, higher energy efficiency and important rising shares of renewables are necessary to meet the CO2 targets in 2050. The scenarios also show that electricity will play a greater role than now. Gas, oil, coal and nuclear also figure in all scenarios in different proportions, allowing Member States to keep flexible options in their energy mix provided a well connected internal market is achieved quickly.
  • Early Investments cost less. Investment decisions for the necessary infrastructure up to 2030 must be taken now, as infrastructure built 30-40 years ago needs to be replaced. Acting immediately can avoid more costly changes in twenty years. The EU's energy evolution requires anyway modernisation and much more flexible infrastructure such as cross border interconnections, "intelligent" electricity grids and modern low-carbon technologies to produce, transmit and store energy.
  • Contain the increase of prices. The investments made now will pave the way for the best prices in the future. Electricity prices are bound to raise until 2030, but can fall thereafter thanks to lower cost of supply, saving policies and improved technologies. The costs will be outweighed by the high level of sustainable investment brought into the European economy, the related local jobs, and the decreased import dependency. All scenarios get to decarbonisation with no major differences in terms of overall costs or security of supply implications.
  • Economies of scale are needed. A European approach will result in lower costs and secure supply compared to national parallel schemes. This includes a common energy market which should be completed by 2014.
The aim of the roadmap is to achieve the low-carbon 2050 objectives while improving Europe's competitiveness and security of supply. Member States are already planning national energy policies for the future, but it is necessary to join forces in coordinating their efforts within a broader framework. The Roadmap will be followed by further policy initiatives on specific energy policy areas in the coming years, starting with proposals on the internal market, renewable energy and nuclear safety next year.

The EC published in March 2011 the overall decarbonisation roadmap covering the whole economy. All sectors – power generation, transport, residential, industry and agriculture –were analysed. The Commission has also been preparing sectoral roadmaps, among which the Energy Roadmap 2050 is the last one, focusing on the whole energy sector....

The Commission, after extensive discussions with stakeholders, has identified four main decarbonisation routes for the energy sector – energy efficiency impacting mostly on the demand side and on the supply side renewable, nuclear and CCS. The scenarios proposed explore different combinations of this four decarbonisation paths interacting:
  • two current trend scenarios: the reference scenario and an updated version including current policy initiatives. This latter scenario serves as the basis of all decarbonisation scenarios;
  • a high energy efficiency, where there is a commitment to very high energy savings, leading to a 41% decrease in energy demand by 2050 compared to the 2005-2006 peaks;
  • diversified supply technologies, in which all energy sources compete on a market basis with no specific support measures;
  • high renewable energy sources (RES), with strong support measures for RES resulting in a RES share amounting to 75% in gross final energy consumption, and to 97% in electricity consumption;
  • a delayed Carbon Capture and Storage (CCS) with the share of nuclear energy in primary energy consumption amounting to 18%;
  • and a low nuclear with higher shares of CCS, around 32% in power generation.
The share of renewable energy (RES) rises substantially in all decarbonisation scenarios, achieving at least 55% in gross final energy consumption in 2050 up 45 percentage points from today's level at around 10%. The share of Renewables in electricity consumption reaches 64,8 % in a High Energy Efficiency scenario and even 97% in a High Renewables Scenario.

The Energy Roadmap 2050 is also ambitious when it comes to energy efficiency: It shows that we need to reduce energy consumption by 2050 by a minimum of 32 percent to maximum of 41 percent compared to the peak in 2005/2006, according to the different scenarios.

Investments cost a lot of money. Is it not cheaper if we forget about decarbonisation? The analysis shows that costs will rise anyway and will be roughly at the same level as if we were not to do anything. If we continue current policies, the total energy system cost - including fuel, electricity and capital costs, investment in equipment, energy efficient products - could represent 14.6% percent of European GDP in 2050 (compared to 10.5% in 2005). 

If we continue with current policies, we may not have to invest as heavily in infrastructure as in the decarbonisation scenarios (high efficiency, high renewable, delayed CCS, low nuclear and diversified supply technologies), but we the face higher fossil fuel costs as gas and petrol prices are estimated to rise due to an increase in world wide demand. By contrast, in the case of the decarbonisation scenarios higher upfront investment is needed but less fossil fuel.
Access to flexible supplies of all types (e.g. demand management, storage and flexible back-up power plants) can be best delivered in a well-connected and well-functioning internal energy market. It helps to use resources efficiently across Europe. For example, with sufficient interconnection capacity and a smarter grid, managing the variations of wind and solar power in some local areas can be provided also from other sources (e.g. renewables, storage or back-up power plants) elsewhere in Europe.Energy policy developments need to take full account of how each national electricity system is affected by decisions in neighbouring countries. Now more than ever, coordination is required. Working together will keep cost down and ensure security of supply.

If investments are postponed, they will cost more and create greater disruption in the longer term. For every US Dollar of investment not made in the power sector before 2020, an additional US 4,3 would need to be spent after 2020 to compensate for increased emission, the IAE says in is 2011 World Energy Outlook. 
For Europe, the Commission already analysed in its "Roadmap to a competitive low-carbon economy" (March 8, 2011) investment expenditure increases of around Euro 100 bn per annum for the 20 year period from 2030 – 2050, without comparably decreasing the investment before 2030.... Some stakeholders show ... that the cost-efficient deployment of renewables across Europe can reduce cumulative costs by more than a fifth by 2030 compared to a Member State by Member State approach. 
Electricity prices will rise in the next decades in any case, regardless if we continue with our actual energy policy or go for decarbonisation. We will face higher electricity prices due to increases in fossil fuel prices (gas, coal and oil)... because world wide demand is increasing, especially in Asian countries such as China. If we opt instead for any decarbonisation scenarios (high efficiency, high renewable, delayed CCS, low nuclear and diversified supply technologies), electricity prices rise because we have to invest heavily in new infrastructure and technologies. 
... They rise until 2030 because capital, grid and fuel costs rise and auctioning payments will increase. Until that year, the increase of electricity prices is roughly the same in all scenarios, regardless whether we stick to our current energy mix or go for decarbonisation, e.g. high renewable share.  After 2030, electricity prices stabilize or decrease under the decarbonisation scenarios. This is because less operational costs are needed for electricity production which in turn has a positive impact of prices. These operational costs include ETS allowances and fossil fuels.  In the case of renewables, the modelled investment needs beyond 2030 are higher than in the case of the others scenarios. This is due to this scenario being a somewhat extreme "near 100% renewable power" scenario which comprises assumptions about very increased storage needs, extension of the grid and back up facilities such as gas power stations. Most of these investments will come after 2030 due to the sharp increase of renewables in the same period of time. This means also higher electricity prices for this particular scenario, but substantial RES penetration in itself does not necessarily mean high electricity prices. Some of these costs are attributable to conventional power plants built prior to 2030 which are assumed to need to recover their investment costs fully despite not running at close to full capacity due to the subsequent renewables growth. 
As regards environmental impacts, all policy options significantly reduce energy consumption with the largest reduction coming in the High Energy Efficiency scenario. The composition of energy mix would also differ significantly in a decarbonised system with strong increase in RES in all scenarios. Nuclear developments depend on policy assumptions taken and ranges from 2 to 18% share in primary energy consumption. The share of gas is the highest in Low nuclear scenario with significant CCS penetration. Oil and solids decline.
Electricity share in final energy consumption doubles from current levels and electricity become the most important final energy source. All decarbonisation scenarios achieve 80% GHG reduction and 85% energy related CO2 reductions in 2050 compared to 1990 as well as equal cumulative emissions over the projection period. In 2030, energy-related CO2 emissions are between 38-41% lower, and total GHG emissions reductions are lower by 40-41%.

Various analyses of carbon and energy policies on GDP suggest that impact is rather limited. Depending on  the decarbonisation scenario, there are no average annual additional energy system costs due to the pursuit of this major decarbonisation as a part of a global effort compared with the Reference and CPI scenarios, or they are small. As regards electricity prices, some policy options show a small decrease in electricity prices as compared to Reference and CPI scenarios (Energy Efficiency and Diversified supply technologies) while some others show increases (High RES and to a lower extent Low nuclear). ETS carbon prices are significantly higher than in the Reference and CPI scenarios, while fuel prices are lower. All policy options require more and more sophisticated energy infrastructures electricity lines, smart grids and storage) with High RES scenario having the highest requirements.

Social dimension of decarbonisation roadmaps is crucial as transition to low carbon economy will require an in depth change in several sectors affecting companies, employment and working conditions. Education and training need to be addressed at an early stage in order to avoid unemployment in some sectors and labour shortages in others. The impact of decarbonisation policies on employment are not substantial by 2020 as shown by several studies but investments in new technologies might trigger demand for higher skilled jobs.

Security of energy supply measured as import dependency improves in all policy options by 2050, the biggest improvements being in the High RES scenario. As regards affordability of energy costs by households, all policy options show significant fuel savings but also higher capital and energy efficiency investment costs. Total energy expenditures by households are higher in all policy options, the highest increase being in options showing strong energy efficiency policies and RES penetration.

Options were compared based on their effectiveness; efficiency and coherence. As regards effectiveness, the 3 objectives of energy policy – sustainability, security of supply and competitiveness - were taken. All policy options were designed to reach 85% reductions of energy related CO2 emissions in 2050, so all are effective. It should be noted that some options are highly dependent on success of new commercially yet not proven technologies. As regards security of supply, all policy options reduce import dependency. However, in more electrified world, stability of the grid might be of much higher concern. As regards, competitiveness, some  policy options show a small decrease in electricity prices as compared to Reference and CPI scenarios while some others show increases. ETS prices are significantly higher than in the Reference and CPI scenarios,  while fuel prices are lower. The model triggers adequate investment which are driven by specific policies or  carbon prices and investment decisions are based on perfect foresight assumption.

In terms of efficiency, the analysis demonstrates that the costs of decarbonisation of the energy system are similar in all scenarios and that most decarbonisation scenarios even show cost savings compared to the Reference scenario. The least costly scenarios are Delayed CCS and Diversified Supply Technologies scenarios with significant penetration of nuclear.

All policy scenarios are coherent with other EU long term objectives (on climate, transport, etc). There is no clear winner among policy options scoring the best in all criteria and several trade-offs will need to be taken into account.

Further information - and

The European Commission Press Release dated 15 December 2011

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