Future role of renewable energy in Germany against the background of climate change mitigation and liberalisation

Dipl.-Ing. Uwe Remme

Institute of Energy Economics and the Rational Use of Energy (IER) University Stuttgart

www.ier.uni-stuttgart.de

International Energy Workshop

24 June, Paris

Overview

• Renewables in Germany

• Methodology

• Scenario analysis and variations focussing on the electricity sector

• Conclusions

Conditions and challenges in the energy sector

Liberalisation

Security of supply Climate Change

Renewable energy ?

Renewables in Germany: Potential and Usage

Fuel Area

Renewable energy carrier [PJ] [Mio. ha] Electricity [TWh] Heat [PJ] Electricity [TWh] Heat [PJ]

Hydro Power (without pump storage) 24.7 23.7 19.9

Wind Onshore 2.61 247.3 16.5 Offshore 0.285 129 0Solarthermal Roof 0.08 864 Free areas 0.4 4 340Photovoltaics Roofs, Facade 0.1 131 35-218 Free areas 0.4 543Heat pumps Ground 1 880 3 052 Ambient Air unlimited 1 800Geothermal Hydrothermal 5 140 1 175 Deep sonde 3 010 2 061 Power plants 321 8.7-321Biomasse solid 837-956 70-80 419-478 67-76 398-454 1.3 168-182 liquid 34 4 16 3 15 0.04 0.06 gaseous 342-402 29-34 188-221 27-32 179-210 1 3

39.0 193-207

2

6

15-17

0.21

0.6

35-199

Technical Potential Usage in 2002

Electricity [TWh] Heat [PJ]Supply Demand

Fossil fuels

Import

Domesticressources

Conversion sector

Foss

il en

ergy

carr

iers

Fossil power, CHP and

heat plants

Refineries

Coal processing

Gas distribution

End usesectors

Residential

Foss

il en

d us

e

ener

gy c

arrie

rsEl

ectr

icity

Dis

tric

t hea

t

Commercial

Transport

Industry

Use

ful e

nerg

y

dem

and

Hydro

Ambient heat

Wind

Biomass

PV

Solar-thermal

Renewables

Geothermal

Ren

ewab

les

Renewable power, CHP and

heat plants

System analysis viewpoint

GH

G

GH

G

Are

a b

ased

p

ote

nti

al

MethodologyOptimising energy system model MARKAL/TIMES

• Bottom-up model, partial-equilibrium

• Perfect competition, perfect foresight

• Minimise total system cost subject to technical and energy political constraints

• Results: energy flows, investments, emission flows, costs, prices

Analysis tools/steps:

• Balance model based on optimisation results:

- To calculate average emissions and costs related to an energy flow or the overall generation of an energy carrier

• Price-formation equations (dual problem, representation by digraphs):

- To evaluate the competitiveness of a technology taking into account GHG constraints, renewable quotas, etc.

• Sensitivity analysis (determination of stability intervals based on optimal matrix partition):

- To analyse the effect of marginal changes in input parameter on the solution and also identify the price-setting activities

• Parametric programming:

- To vary input data on a larger parameter interval

MARKAL/TIMES energy system model for Germany

• Time horizon 1995-2050

• Ca. 120 conversion and 380 end-use technologies

• End use sectors:

- Domestic

- Industry

- Commercial

- Transport

• Conversion sector:

- Electricity and district heat generation

- Petroleum sector

- Coal sector

- Gas sector

- Non-energetic use

- Renewable energy sources

- Hydrogen sector

Scenario characterisation

• Reference scenario (REF):

- Phase-out of nuclear energy

- No green electricity quota and no GHG mitigation policy

- Net import of conventional electricity zero after 2005

- Option to import green electricity (up to 20% of net electricity consumption in 2050)

- EU directive on the promotion of biofuels in the transport sector (2% of fuel consumption in 2010, 5.75% in 2010)

• Green electricity scenario (GE):

- Quota for the production of electricity by renewables

2010 2020 2030 2040 2050

Green electricity quota

12.5% 20% 30% 40% 50%

• GHG mitigation scenario (GHG)

- GHG reduction target

2010 2020 2030 2040 2050

GHG reduction relative to 1990

21% 35% 50% 65% 80%

Socio-economic assumptions

Unit 2000 2010 2020 2030 2050Population Mio. 82.2 82.1 80.8 77.9 67.8

GDPAbsolute Billion € 2023 2438 2882 3286 3989

- 2000-2010 2010-2020 2020-2030 2030-2050Growth rate % - 1.9% 1.7% 1.3% 1.0%

Residential sector

Single family houses Mio. m2 1880 2155 2425 2493 2356

Multi family houses Mio. m2 1428 1578 1717 1738 1616

Residential area per capita m2 40.2 45.5 51.3 54.3 58.6

Transport sectorPassenger Billion Pkm 968.1 1090.7 1138.2 1139.1 1026.9Goods Billion Tkm 483.1 607.4 732.4 839.2 964.4

Energy prices (Import)Crude oil €/GJ 2.81 3.56 4.31 5.06 6.57Natural gas €/GJ 2.15 2.84 3.52 4.2 5.57Hard coal €/GJ 1.36 1.43 1.59 1.76 2.09

Net electricity supply

0

50

100

150

200

250

300

350

400

450

500

550

6001

99

0

19

95

20

00

RE

F

GE

GH

G

RE

F

GE

GH

G

RE

F

GE

GH

G

RE

F

GE

GH

G

RE

F

GE

GH

G

2010 2020 2030 2040 2050

Net

ele

ctri

city

su

pp

ly [

TW

h]

Hardcoal Lignite Nuclear Oil

Gas Hydro Wind PV

Geothermal Hydrogen Biomass, Waste Import

50

%

62

%

GHG Emissions

0

100

200

300

400

500

600

700

800

900

1000

19

90

19

95

20

00

RE

F

GE

GH

G

RE

F

GE

GH

G

RE

F

GE

GH

G

RE

F

GE

GH

G

RE

F

GE

GH

G

2010 2020 2030 2040 2050

En

erg

y re

late

d G

HG

-Em

issi

on

s [M

t C

O2*

]

Energy supply and conversion Industry Residential, Commercial Transport

-80%-36%

-52 %

Decomposition of change in CO2 emissions from electricity relative to the reference scenario

-300

-250

-200

-150

-100

-50

0

50

2010 2020 2030 2040 2050

[Mio

. t

CO

2]

Energy efficiency fossil plants

Carbon intensity of fossil fuelsElectricity demand

Renewables

-300

-250

-200

-150

-100

-50

0

50

2010 2020 2030 2040 2050

[Mio

. t

CO

2]

Energy efficiency fossil plants

Carbon intensity of fossil fuelsElectricity demand

Renewables

Scenario „Green electricity“ Scenario „GHG mitigation“

Electricity price

0

5

10

15

20

25

30

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Av

era

ge

ele

ctr

icit

y p

ric

e [

Ce

nt/

kW

h]

Reference scenario Green electricity scenario GHG reduction scenario

Emission permit price decomposition

-300

-200

-100

0

100

200

300

400

500

600

700

800

900

2015 2020 2025 2030 2035 2040 2045 2050

Co

mp

on

ents

of

the

mar

gin

al

GH

G a

bat

men

t co

sts

[€/t

CO

2*]

Coal supply sector Petroleum sectorGas supply sector Biomass supply sectorHydrogen supply sector Electricity and DH sectorResidential, commercial sector IndustryTransport sector Marginal abatement costs

Decomposition of green electricity certificate price

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

2015 2020 2025 2030 2035 2040 2045 2050

Co

mp

on

en

ts o

f th

e G

E-c

ert

ific

ate

pri

ce

[C

en

t/k

Wh

]

Biomass supply sector Electricity and DH sector Coal supply sector Domestic, Residential

Gas supply sector Hydrogen supply sector Petroleum sector GE-zertificate price

Decomposition of electricity price for a coal power plant

- 3 5

- 2 5

- 1 5

- 5

5

1 5

2 5

3 5

4 5

5 5

2020

2025

2030

2035

2040

2045

2050

2020

2025

2030

2035

2040

2045

2050

2020

2025

2030

2035

2040

2045

2050

2020

2025

2030

2035

2040

2045

2050

G r e e n c e r t i f i c a t e c o s t s O p p o r t u n i t y c o s t s c a p a c i t y G H G p e r m i t c o s t s C r e d i t s y s t e m s t a b i l i t y

M i s s i n g c o s t c o v e r a g e V a r i a b l e o p e r a r t i n g c o s t s E l e c t r i c i t y p r i c e

- 4

- 2

0

2

4

6

8

1 0

2020

2025

2030

2035

2040

2045

2050

2020

2025

2030

2035

2040

2045

2050

2020

2025

2030

2035

2040

2045

2050

2020

2025

2030

2035

2040

2045

2050

0

1

2

3

4

5

6

2020

2025

2030

2035

2040

2045

2050

2020

2025

2030

2035

2040

2045

2050

2020

2025

2030

2035

2040

2045

2050

2020

2025

2030

2035

2040

2045

Reference scenario

GE scenario

GHG scenario

Winterday Winternight Summerday Summernight

Cen

t/kW

hC

ent/

kWh

Cen

t/kW

h

Supply curve for green electricity in 2050

Green electricity certificate price [Cent/kWh]

0 10 20 30 40 50 60 70 80 90100110

Ren

ewab

le electricity production [TWh]

0

100

200

300

400

500

600

Photovoltaics Wind onshore Biogas Energy crops Straw

Wood Geothemal Energy

Wind offshore

530

2040

5060

70

80 85 87

Renewable Quota[%]

0

100

200

300

400

500

600

700

5 15 25 35 45 55 65 75 85

Renewable Quota [%]

GHG emissions [M

io. t CO2 *]

0

50

100

150

200

250

300

Price

[Cent/kW

h]

GHG emissions El. Price

GHG permit price

Renewable electricity vs. emission permit price in 2050

GHG emission permit price [€/t CO2*]

0 500 1000 1500 2000

Ren

ewab

le e

lect

rici

ty p

rod

uct

ion

[T

Wh

]

0

100

200

300

400

500

Photovoltaics Wind offshore Wind onshore

Biogas Energy crops Straw

Wood Geothermal energy

GHG emission permit price [€/t CO2*]

0 200 400 600 800 1000 1200 1400 1600

GH

G e

mis

sio

ns

[Mio

. t C

O2*

]

0

100

200

300

400

500

600

700

GH

G r

edu

ctio

n r

el. t

o 1

990

[%]

40

50

60

70

80

90

100

TransportDomestic, CommercialIndustryConversion

60 70 75 80 85

GHG reduction [%]

GHG emission permit price [€/t CO2*]

0 500 1000 1500 2000

Ren

ewab

le e

lect

rici

ty p

rod

uct

ion

[T

Wh

]

0

100

200

300

400

500

Photovoltaics Wind offshore Wind onshore

Biogas Energy crops Straw

Wood Geothermal energy

GHG emission permit price [€/t CO2*]

0 200 400 600 800 1000 1200 1400 1600

GH

G e

mis

sio

ns

[Mio

. t C

O2*

]

0

100

200

300

400

500

600

700

GH

G r

edu

ctio

n r

el. t

o 1

990

[%]

40

50

60

70

80

90

100

TransportDomestic, CommercialIndustryConversion

60 70 75 80 85

GHG reduction [%]

Variation of GHG reduction target and renewable quota (2050)48 % Reduction 59 % Reduction 80 % Reduction

GE-Quota [%] GE-Quota [%] GE-Quota [%]

Net

tost

rom

erze

ug

un

g [

TW

h]

Lignite Hard coal Natural gas Biomass Wind

Hydro PV Hydrogen Geothermal Net generation

Net

ele

ctri

city

gen

erat

ion

[T

Wh

]

Variation of GHG reduction target and renewable quota (2050)

0

10

20

30

40

50

60

70

80

90

100

110

20 25 30 35 40 45 50

GE-Quote [%]

GH

G E

mis

sio

n p

erm

it p

rice

[€/

t]

Reduction 67 %

51 %48 %

55 %

59 %

61 %

45 %42 %

39 %

Variation of gas/oil price and renewable quota (2050)

50 % Reduction 63 % Reduction 80 % Reduction

Price change [%] Price change [%] Price change [%]

Lignite Hard coal Natural gas Biomass WindHydro Hyrogen Geothermal PV

Net

ele

ctri

city

gen

erat

ion

[T

Wh

]

Discounted system costs in the variations

Variation of GHG target and GE quota Variation of GHG target and gas/oil price

140140140120 120 120 120100 100 100 100

80808080

60 6060

6040 40

40

40

40

20

20

20

0

GE-Quota [%]

20 25 30 35 40 45 50

GH

G r

educ

tion

[%]

20

30

40

50

60

70

80500

400

400

300

300

300

300

200

200

200

200

100

100

100

1000

0

0

0

-100

Gas/Oil price change [%]

-20 0 20 40 60 80

GH

G r

educ

tion

[%]

20

30

40

50

60

70

80

[Billion €00 discounted to 1998]

Conclusions• Without policy instruments (i.e. subsidies) or without a climate change abatement

policy an increase in renewable electricity generation is not competitive under current framework conditions

• Climate change abatement policy:

- Up to a reduction target of 50 % gas becomes the major fuel

- Hydro, geothermal energy, biomass and wind are cost-effective mitigation options (among others) when the reduction target becomes higher than ca. 50 %

- Critical issue: assumption on conventional electricity net import of zero

• Green electricity quota:

- Renewable electricity generation displaces mainly fossil generation by gas and hard coal

- Part of the GHG reduction is due to electricity saving measures in the end-use sectors because of the higher electricity prices

• Variation of GHG target, green electricity quota and gas price:

- The green electricity quota reduces the GHG permit price at the cost of the electricity consumers

- For high reduction targets renewable electricity generation is independent from a quota

- Increase in gas price does not favour renewable electricity generation but hard coal and lignite with a compensation for the increased emissions in other sectors