Application of the UNFC to Renewable Energy Resources€¦ · • LT contracts with farmers •...
Transcript of Application of the UNFC to Renewable Energy Resources€¦ · • LT contracts with farmers •...
Application of the UNFC to Renewable Energy Resources
David MacDonald, BP
alternativenergy
Why this project now?
• Renewable energy is on a significant growth trend
• The same issues impacting mineral and petroleum projects are relevant for renewable energy
• There is a real need for a consistent framework for comparing renewable projects with conventional energy forms
• UNFC could meet these needs with minimal modification, providing a tool for communication around issues of sustainable energy
No methodology exists
1. to assess resources (in boe or other metric) of a renewable asset
2. to contrast renewable investment against hydrocarbon (economics per barrel, reserves, etc)
1
alternativenergy
What could be the outcome of this work?
2
Intr
oW
ind
Sola
rB
iofu
els
Oth
er
What it is• First version of a practical handbook to assess
renewable resources, with a:• commercial guideline for resource progression, as
well as a• technical guideline by technology
• An assessment of a renewable portfolio, including• resources and production in BOE by 2020• Equivalent financial metrics (lifting cost, finding cost,
margin per barrel, etc.)
What it is not• A methodology used for external reporting (SEC, financial
reports, etc)• A demonstration that renewable barrel is cheaper or more
attractive than an hydrocarbon barrel (this is not a case for renewable)
alternativenergy
We are not the only ones thinking about renewable resources
3
Advocacy material for biofuels Country assessment of all energy resources
Geothermal: closest link between oil and gas and renewables
alternativenergy 4
Estimates of global renewable resources are very material on a global scale
3.8x1All Solar technologies, including MultiCrystaline Silicon, ThinFilm,
Concentrated Solar Power and Solar Thermal
1.0xConventional, deep hydrothermal and
engineered Geothermal
0.5xOnshore and offshore
Wind
0.4xBiomass to
power
0.15xHydropower
0.05xMarine, including tidal
and wave
1 Read: Solar resources could provide close to 4 times as much energy as the world needs today
Source: BP Statistical Review, EU Renewable Association, BP AE Strategy & Fundamentals
8 446420
Marine 0,00
Solar 0,01
Geothermal 0,15
Wind 2,31
Biomass 9,27
Hydropower 43,06
% Resources Exploited by 2011
alternativenergy 5
Renewable energy is on a substantial growth trajectory serving customer needs - governments and individuals - for local, sustainable energy
Source: BP Energy Outlook 2030, January 2012
alternativenergy 6
Renewable energy is growing fast in the global energy mix
Renewable energy is fast growing and will be material
Shares of World Primary Energy%
Key Energy Trends• Diversification of energy mix• Gas is the only fossil fuel growing [relative to others] to 2030• Renewables represents one fifth of all additional BOE to 2030
and is the fastest growing form of energy (similar to nuclear industry in 70s and 80s)
World Power GenerationThousand TWh
Key Power Trends• Higher global income implies increased electrification,
especially from non OECD• Renewables attain 10% global power market share by 2030,
driven by policy and increased cost competitiveness
alternativenergy 7
Sugarcane and energy grass ethanol can be major elements of primary energy production
Sugarcane and cellulosic ethanol have the potential to form material and cost competitive sources of supply
Source: adapted from Booz Allen Hamilton analysis based on information from IEA, DOE and interviews with super majors; IBGE, UNICA, Conab, CGEE, Unicamp, CTC, , BP Biofuels Team
Transportation Fuels Supply Curve - 2020
alternativenergy 8
Biofuels - resource renewal
Stylised Conventional Crude Production Profile
Time (years)
2008 20452025
Pro
duct
ion
(kbp
d)
0
200
Min 30 year production life
Brazil SC ETOH Strategy
US LC ETOH Strategy
Brazilian SCE & US LCE production models deliver over the lifetime of the assets. Barrel reserves are equivalent to access to feedstocks.
alternativenergy
Time horizon Production uncertainty
Energy system equivalence Energy price
Biofuels
We have non-depletablecrops but different contract lengths for
feedstock and crushing mill lifetime of 30 years.
Feedstock availability is uncertain but manageable
Biofuels have upstream and downstream
activities, similar to fossil fuels
Biofuels prices are volatile but mostly global
Wind and solar power
We have a non-depletable resource but a land lease of 25 years
and a technology lifetime of 20 years.
Wind and solar power production is fairly
certain over the project lifetime
Wind and solar power are downstream energy carriers
Wind and solar power prices are less volatile but
local
We have identified a few challenges to develop a methodology for RE resources comparable to the fossil fuels methodology
9
Do we use a conservative or aggressive time
horizon to calculate the reserves?
At what point in the energy system do we account for RE reserves and with
what methodology?
What P90, P50 or P10 do we use to estimate future
production?
What price do we use to value RE
reserves?
alternativenergy
RE resources are infinite but reserves calculation accounting needs to adopt a time horizon
Biofuels Wind and solar power
Resource availability
Land lease
Equipment lifetime
Contract for feedstock
PPA or spot market 0-20
20
25 2520
30
5
years years
e.g. Brasil sugar cane
e.g. Brasil sugar cane
(crushing mill)
e.g. US LC
e.g. 0 for power sold on spot market; 20 for power sold with PPA
e.g. wind turbines
e.g. 50 years = 1 lease extension
Not applicable for biofuels, but applicable for biomass to power
Not applicable for solar and wind power because energy source is free
alternativenergy
Biofuels Wind power Solar power
Uncertainty nature
• Biomass yield
• Output arbitrage
• Feedstock quality
Wind speed patterns• Sun irradiation
• Cloud cover
Uncertainty range
(P90, P50, P10)Yield, e.g. sugarcane
35 (P90)–55 (P10) T/haNet capacity factor
25% (P90)–40% (P10)Net capacity factor
10% (P90) –20% (P10)
Uncertainty mitigation
• LT contracts with farmers
• Share the risk
• Feedstock market
Upfront on-site wind speed measurements
Upfront on-site solar irradiation measurements
Uncertainty over the expected production is an issue for biofuels but less for wind and solar power
11
Limited uncertainty and fairly predictable
Uncertainty but manageable
alternativenergy
Analagous components of wind generation
RESOURCE RECOVERABLETECHNICALLY
RECOVERABLE/
FEEDSTOCKCONVERSION PRODUCT TRANSPORTATION
3 Stage
Gearbox
Turbine
Generator Transformer Electricity
To Grid
Transmission
and
Distribution
LOSSES
POWER (MW) 2
8%
1.84
6% 4% 1%
Wind Power Density (WPD)
60%1
1 Modern turbine efficiency 35-45%. Absolute technical limit of 59.7% efficiency – Betz’ Law
2.245.6
KINETIC MECHANICAL ELECTRICAL
Gap between Recoverable and Feedstock narrows with:
- Improved blade efficiency
- Larger diameter turbines
alternativenergy
Biofuels Wind and solar power
‘Price’ options Global market price
Local power price (PPA or spot market) + subsidies
(e.g. FIT or PTC)
Levelised cost of electricity by technology
Pros Straightforward 1 global price for all
• No fluctuation (PPA and FIT)
• Small fluctuation (spot and RPS)
• Less subject to local variations
• Commonly used methodology
Cons Highly fluctuating (similar to fossil fuels)
• Prices local and regulated
• Not 1 price for all
• Underestimate compared to power price
• Changes over time with learning
Accounting solutions
• Past average price
• Price on 31 Dec (SPE)Past average local power
priceCurrent or future levelised
cost
To value RE reserves you can use a global price for biofuels but it is less straightforward for power
13
Note: In oil and gas, price has direct impact on reserves because it dictates the COP (Cessation of Production); the
higher the oil price, the bigger the reserve
alternativenergy
Next Steps
• Developing a draft general specifications for renewable energies
• Develop a bridging document for one renewable energy (biofuel)
• Stakeholder participation
− All four groups
• Discuss work with EGRC (2013)
14