Takashi OTSUKI

Researcher, Asia Pacific Energy Research Centre (APERC)

Email: takashi.otsuki[at]aperc.ieej.or.jp The 4th Northeast Asia Energy Security Forum

15 December 2016, Seoul

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Established based on the directive of APEC Economic Leaders

Major activities

“APEC Energy Outlook” project

Policy cooperative projects

Independent research, including Northeast Asia (NEA) power grid study (2015)

This presentation will discuss additional analysis conducted this year. Note that the results are still preliminary. Please do not cite.

Introduction to APERC (APERC: Asia Pacific Energy Research Centre)

Note: APERC’s publications are available at http://aperc.ieej.or.jp/

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• Introduction Background and methodology

• Early insights and discussion

Contents

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Limited grid interconnections exist in NEA partially due to current national policies of energy self-sufficiency and sometimes volatility in diplomatic and political relationships

Recently, however, several regional events, such as air pollution issues in China and the nuclear disaster in Japan, have potentially increased the attractiveness of interconnections as a means of promoting renewables

One of the resources highlighted in several interconnection concepts is the abundancy of renewable power available in Mongolia

Background and objective

To discuss costs and benefits of massive renewable developments in Mongolia for international power exports

Objective

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1 M. Son, 2011. Paradigm Shift in Energy. 2 Energy Charter, et al., 2014. Gobitec and Asian Super Grid for Renewable Energies in Northeast Asia, : Energy Charter Secretariat 3 Elliott, D. et al., 2001. Wind Energy Resource Atlas of Mongolia. Colorado: NREL/TP- 500-28972.

• Estimated solar and wind potential in Mongolia reaches 1100GW and 1400GW, respectively.2,3

Numerous possibilities has been drawn by various organizations

Asia Super Grid (Son, 2011)1 Gobitec (Energy Charter, et al., 2014)2

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City node

Supply node

Japan-East

(JP-E)

Japan-

Hokkaido

(JP-H)

Japan-West

(JP-W)

Russia-Far East

(RU-FE)

Mongolia

(MN)

Korea

(KR)

China-Northeast

(CH-NE)

China-Northwest

(CH-NW)

China-Central

(CH-C)

China-Southern

(CH-S)

China-North

(CH-N)

China-East

(CH-E)

Least cost model

Linear programming

Optimize capacity and operation of power plants, storage and transmission

Hourly dispatch for a single year

Objective function

Methodology: An NEA-wide power system model

Note: The two transmission routes through the DPRK (dotted lines) in the top-right figure are not considered in the cases discussed below.

𝒎𝒊𝒏. 𝑺𝒚𝒔𝒕𝒆𝒎𝑪𝒐𝒔𝒕 = (𝑰𝒏,𝒕 + 𝑭𝒏,𝒕 + 𝑶𝒏,𝒕 + 𝑪𝒏,𝒕)𝒏,𝒕

𝒏 = node index 𝒕 = technology index (power plant, storage facilities and transmission lines) 𝑰𝒏,𝒕 : annualized capital costs of technology type t at node n 𝑭𝒏,𝒕 : annual fuel costs of technology type t at node n 𝑶𝒏,𝒕 : annual operation and maintenance (O&M) costs of technology type t at node n 𝑪𝒏,𝒕 : annual carbon penalties for emissions from technology t at node n

Suppression control

Power grid

• Wind

• Photovoltaics (PV)

• Nuclear

• Coal-fired

• Gas-fired

• Oil-fired

• Hydro

Electricity imports

Electricity load

(exogenous variable)

Electricity exports• Pumped hydro

• Battery

Electricity

Electricity

Electricity Electricity

From other nodes To other nodes

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Hourly dispatch (May, year 2030 as an example)

• Hourly load curve and intermittency of variable renewables are considered in our analysis.

The model allows us to discuss economic viability considering power system characteristics in detail

Note: These figures show the results in the Base case, which will be discussed later in this presentation.

Source: APERC.

Japan-Hokkaido

Korea

- 40

0

40

80

120

HydroNuclearCoalGasOilPVWindSuppressed PVSuppressed windPumpedBatteryTransmission (China)Transmission (Japan)Transmission (Other)Load

GW

Coal Nuclear

Gas

- 2

0

2

4

6

8

HydroNuclearCoalGasOilPVWindSuppressed PVSuppressed windPumpedBatteryDomestic transmissionTransmission (Russia)Load

GW Wind Solar PV

Coal Nuclear

Pumped (charge) Transmission to East Japan

May

1st

May

15

th

May

31

st

8

112

24

0%20%40%60%80%

100%

Jan

.

Feb

.

Mar

.

Ap

r.

May

Jun

.

Jul.

Au

g.

Sep

.

Oct

.

No

v.

Dec

.

0%-20% 20%-40% 40%-60% 60%-80% 80%-100%

Estimated wind and solar PV output profile for a year, Mongolia1

Variable renewables’ output estimated using meteorological data

1 We estimated these profiles using meteorological data published by NREL. For estimating the wind profile, we also used data from the Inner Mongolia province in China.

Source: NREL and APERC.

Solar PV

112

24

0%20%40%60%80%

100%

Jan

.

Feb

.

Mar

.

Ap

r.

May

Jun

.

Jul.

Au

g.

Sep

.

Oct

.

No

v.

Dec

.

0%-20% 20%-40% 40%-60% 60%-80% 80%-100%

Wind power

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This presentation discusses five cases for the NEA power system of 2030

1 APERC, 2016. “APEC Energy Demand and Supply Outlook 6th edition”.

Source: APERC.

Base case:

Four Mongolian renewables cases (new int’l transmissions are decided endogenously)

“100GW”: 50GW wind power and 50GW solar PV in Mongolia (exogenous).

“500GW”: 250GW each

“1,000GW”: 500GW each

“2,000GW”: 1000GW each

These assumptions are also applied to the following four cases

No new int’l transmission No renewables installation in Mongolia for power exports Renewable capacity in other countries is fixed to projected capacity for 20301 Fossil fuel capacities are based on optimization Carbon price of 30$/tCO2

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• Introduction

• Early insights and discussion Generation, Cost, Emissions

Contents

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Generated electricity, NEA, 2030

• Even “100GW” Mongolian renewables have modest effects on the whole NEA

• Accelerated installation would bring significant changes

Large-scale Mongolian renewables are necessary to change the NEA power mix significantly

Source: APERC.

-25%

0%

25%

50%

75%

-5 000

0

5 000

10 000

15 000

10

0G

W

50

0G

W

10

00

GW

20

00

GW

Base Mongolian renewables

HydroNuclearCoalGasOilPV (except for MN)Wind (except for MN)PV (MN)Wind (MN)Suppressed PVSuppressed windPumped (in)Pumped (out)Battery (in)Battery (out)Transmission lossesShare of renewables

TWh

(right axis)

Coal

Hydro Nuclear

Gas

Wind (Mongolia) PV (Mongolia)

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-40%

-30%

-20%

-10%

0%

0

2 000

4 000

6 000

8 000

100GW 500GW 1000GW 2000GW

Base Mongolian renewables

RU-FEKoreaJapanChinaNEA emissions changes from the Base case(right axis)

MtCO2/yr

Annual CO2 emissions, NEA

• Compared to the Base case, annual CO2 emissions in the “2000GW ” case in China and Korea decline by 1800 MtCO2 (-27%) and by 108 MtCO2 (-34%), respectively.

China and Korea, in particular, are environmentally benefited

Source: APERC.

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3

2256

119

44

3

0 (0)

1

333

1

69

19

152

2862

66

TWh/yr

0 - 50

50 - 100

100 - 500

500 - 1000

1000 ~

81

22

1

1

66

19

1111

4

TWh/yr

0 - 50

50 - 100

100 - 500

500 - 1000

1000 ~

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Net electricity flow

Vast amounts of electricity flows from Mongolia in the “2000GW” case

“2000GW” case

• Main consumer of “Mongolian renewable power” would be the China-North area

Source: APERC.

Base case

China-North

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- 100

0

100

200

300

400

HydroNuclearCoalGasOilPVWindSuppressed PVSuppressed windPumpedBatteryDomestic trans.Transmission (Korea)Transmission (Other)Load

GW

-1 000

0

1 000

2 000

HydroNuclearCoalGasOilPVWindSuppressed PVSuppressed windPumpedBatteryTransmission (China)Transmission (Other)Load

GW

Coal is one of the major sources of generation in China-North and Korea in the Base case

Source: APERC.

Mongolia

China-North

Korea

Hourly dispatch in selected nodes, May, Base case

- 40

0

40

80

120

HydroNuclearCoalGasOilPVWindSuppressed PVSuppressed windPumpedBatteryTransmission (China)Transmission (Japan)Transmission (Other)Load

GW

Coal Nuclear

Gas

Coal

No renewables assumed in Mongolia in the Base case

Wind

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Significant amounts of power flow, and quick backup is needed in the “2000GW” case

Source: APERC.

Mongolia

China-North

Korea

- 40

0

40

80

120

HydroNuclearCoalGasOilPVWindSuppressed PVSuppressed windPumpedBatteryTransmission (China)Transmission (Japan)Transmission (Other)Load

GW

- 300

0

300

600

HydroNuclearCoalGasOilPVWindSuppressed PVSuppressed windPumpedBatteryDomestic trans.Transmission (Korea)Transmission (Other)Load

GW

-1 000

0

1 000

2 000

HydroNuclearCoalGasOilPVWindSuppressed PVSuppressed windPumpedBatteryTransmission (China)Transmission (Other)Load

GW

Hourly dispatch in selected nodes, August, “2000GW” case

Nuclear

Wind Solar PV

Suppressed PV Suppressed wind

Exports to China-North

Imports from Mongolia

Transmission to other Chinese nodes Exports to Korea

Imports from China

Exports to Japan

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Annual generation cost, NEA

• Higher capital costs increase average generation costs, e.g., by 40% in the “2000GW” case

The huge investment cost of renewables and transmission lines is likely to pose economic challenges

Note: References to costs and investments are expressed in 2014 USD. Source: APERC.

0

50

100

150

0

500

1 000

1 500

10

0G

W

50

0G

W

10

00

GW

20

00

GW

Base Mongolian renewables

Capital (PV and wind)

Capital (storage)

Capital (transmission)

Capital (other generation)

O&M

Fuel

Carbon

Average cost (right axis)

Billion USD per year USD/MWh

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-20

-10

0

10

20

0$ 100$ 200$ 300$ 500$

Carbon price [per tCO2]

Billion USD per year

Economic benefits of “100GW” cases1

• Improved economic viability with higher carbon prices

• Very high carbon price would be important to make the concept economically attractive

Strong emissions reduction policies would be important for implementation

1 Difference between the total cost of the Base case and that of the “100GW” case.

Source: APERC.

Economically beneficial (cost reduction)

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The Paris Agreement and the “450” scenario Appendix

Source: UNFCCC and IEA.

Article 2 of the Paris Agreement

“This Agreement ... aims to strengthen the global response to the threat of climate change …, including by (a) Holding the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels, … ”

Carbon price assumptions in the IEA’s 450 scenario (WEO2015)

[$/tCO2] 2030 2040

China and Russia 75 125

Japan and Korea 100 140

• IEA’s assumed carbon prices are lower than the level required to make the Mongolian renewables cases economically attractive (see the previous & next slides)

• This implies that massive Mongolian renewables may be an option for “beyond 2°C”

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-300

-200

-100

0

100

0$ 100$ 200$ 300$ 500$

Carbon price [per tCO2]

Billion USD per year

-100

-50

0

50

100

0$ 100$ 200$ 300$ 500$

Carbon price [per tCO2]

Billion USD per year

Economic benefits of selected Mongolian renewables cases1

Economic viability of larger-scale Mongolian renewables cases

1 Difference between the total cost of the Base case and that of respective Mongolian renewables cases.

Source: APERC.

“500GW” case “1000GW” case

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Large-scale deployments of Mongolian renewables brings environmental benefits, in terms of CO2 emissions reductions; China and Korea, in particular, are benefited

However, a smaller-scale “100GW” of renewables has modest effects on the whole NEA power mix; accelerated installation would be necessary to make the environmental benefits significant

Capital costs for Mongolian renewables and transmission lines would push up electricity supply costs in NEA, posing economic challenges

Strong CO2 reduction policies would make the concept more economically attractive

Conclusion

http://aperc.ieej.or.jp/

Thank you for your kind attention!