Rio+20 SD-Learning: Energy Planning

A Simple Example of Modeling an Energy Supply System

H-Holger Rogner# & Mark Howells*
# Head, Planning & Economic Studies Section (PESS), Department of Nuclear Energy * Prof and Director, Division of Energy Systems Analysis, Royal Institute of Technology (KTH), Sweden

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International Atomic Energy Agency

Mathematical background
Linear and mixed integer programming (LP and MIP) Linear variables for continuous processes Integer or binary variables for decisions and unit commitment Equations reflecting restrictions - technical, legal, environmental, social Optimization target (objective) - minimum cost, maximum profit, minimum emissions, maximum energy security, etc.
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Linear Programming A simple example

Oil

Objective function: System cost minimization

Maximum oil import

Solution space

Oil use for transport

Natural gas

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Linear Programming A simple example

CO2
Primary energy Secondary energy Final energy

< max

refinery oil < max oil ppl gas gas ppl > min mfl trp petrol for transp. > min el trm electricity

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Objectives
Demonstrate modelling of an energy supply system Explore impact of different policies on energy system evolution

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A simple energy system

Energy service demands
Lighting, mobility, room conditioning, refrigeration and other devices

Final energy
Electricity, liquid fuels (oil), gas and biomass

Primary energy supplies

Domestic coal Imported gas and oil

Existing power plants coal, oil and gas Expansion options

Coal, oil and gas power plants Wind strong and weak wind-regime locations Concentrated solar power (CSP) Nuclear beyond 2030

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Step-by-step
1. Mapping the energy system in MESSAGE
i. Data collection (demand, technologies/infrastructure including performance characteristics ii. Model calibration and verification

2. Forward looking / Scenario development

i. ii. iii. iv. Demand developments Resource availability and costs/prices Technology menu Constraints (technical, finance, policy, risks, etc)

3. Analysis & results interpretation

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Energy system network (mapping)

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Modelling framework
MESSAGE Planning horizon 2012-2050 Scenarios:
Reference all options without policy constraints
Expansion constraints for new build

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Max_CO2 - Maximum technically feasible CO2 emission reductions (supply side) CO2 - Cumulative 40% reduction from Reference between 2012 and 2050 CO2 and efficiency at end-use

Essential simplifying assumptions:

Constant fuel import and domestic resource prices Constant technology performance parameters (no technology learning) Discount rate 6% (real) Hydro power potential already exhausted Efficiency parameter at end-use level include more than the energy component of the energy service provided No energy exports Constant shape of electricity demand load curve
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Energy service demand

Different units
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Energy Services Technologies

Mobility Technology
High consum ption car Low consum ption car

Fuel Consumption litre/100km

9 5

Investment $/car
17,000 22,500

Air Conditioning Technology

AC Low COP AC High COP

Coefficient of Performance 2.5 3.5

Installation cost $/unit

500 2,100

Improving Insulation
Standard insulation Im proved insulation

Energy consumption kW h/m2

150 75

Installation cost $/m2

current state 250

Lighting Technology Energy efficiency %

Classical bulb LED lights 5 25

Installation cost $/piece

0.3 15

Other electricity
Standard Efficient

Energy efficiency %
40 50

Installation cost $/piece

500 700

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Final energy demand development

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Shape of electricity load curve

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Generating technology characteristics

Overnight construction cost $/kW
Coal PP Oil PP Gas PP Wind Strong Wind Weak CSP Nuclear Electricity transm ission/distribution 2200 1300 1000 1800 1800 6000 6000 1000

Technology

Variable Fixed O&M cost O&M cost Availability Efficiency $/MW h $/kW /year % %
9.7 8 4.6 1 1.1 10 40 25 20 25 25 80 10 86 77 86 36* 25* 55* 86 100 40 36 53 33 90

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Levelized costs of electricity generation

Real interest rate Life tim e Annuity factor Load factor Overnight capital costs Inveatm schedule ent Nuclear %/yr 6 years 50 % 0.0634 % 85 $/kW 6,000 -6 0.10 -5 0.20 -4 0.25 -3 0.25 -2 0.15 -1 0.05 $/kW 1,466 $/kW 7,466 M ills/kWh 63.62 $/kW 80.00 $/M Wh 10.00 $/GJ 0.7 % 35.0 $/kWh 0.0072 $/MWh 91.56 Coal 6 40 0.0665 85 2,200 Gas 6 30 0.0726 85 1,000 Oil 6 30 0.0726 77 1,300 CSP 6 25 0.0782 55 5,000 Wind-S 6 25 0.0782 36 1,800 Wind-W 6 25 0.0782 22 1,800

IDC Total investment Investm costs ent Fix O&M Var O&M Fuel price Ffficiency Fuel costs Total generation LCOE

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0.15 0.30 0.35 0.20 334 2,534 22.62 40.00 9.80 1.32 40.0 0.0119 49.67

0.10 0.55 0.35 108 1,108 10.81 20.00 4.60 8.00 53.0 0.05434 72.44

0.2 0.5 0.3 153 1,453 15.65 25.00 7.99 14.03 36.0 0.1403 167.69

0.20 0.40 0.40 558 5,558 90.25 60.00 4.60

0.05 0.95 114 1,914 47.47 25.00 1.00

0.05 0.95 114 1,914 77.68 20.00 1.00

107.30

56.40

89.06

Levelised electricity generation costs

180 160 140 120

$/MWh

100 80 60 40 20 0

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Coal

Gas

Oil

CSP

Wind-S Wind-W

Screening: Load factor

Max wind

Max CSP

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Screening: Load factor

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Screening: LCOE & Interest rates

200 180 160 140

$/MWh

120 100 80 60 40 20 0
3 4 5 6 7 8 9 10 11 12

Nuckear Coal CCGT CSP Wind

Interest rate

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Generating capacities Reference case

26,000 24,000 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2012 2015 2020 2025 2030 2035 2040 2045 2050 IAEA

Nuclear Hydro CSP Wind_L Wind_H Oil Gas Coal

MW

Electricity generation Reference Case

110

90 70

Nuclear Hydro CSP Wind_L Wind_H Oil Gas Coal

TWh

50 30 10 2012 -10 IAEA 2015 2020 2025 2030 2035 2040 2045 2050

Scenario results - Reference

Essentially business-as-usual Oil phased out from electricity generation (diverted to serve mobility purposes Wind from good locations expands to maximum Cumulative CO2 emissions: 2,349 Mt Total discounted system costs: US$ 119.35 billion Growing import dependence gas for electricity Traditional biomass use declines at the household level Water for biomass and food production rather constant over the planning horizon
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Question 1: What are the minimum cumulative CO2 emissions that can be technically accomplished with the given portfolio of fuels and technologies while still meeting all energy service demands Approach: Apply a US$ 1,000,000 tax per tonne of CO2 emitted
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Contemporary challenges: The environment

Price
Equilibrium with social costs

What is an externality? A cost that is 'external' to the transaction... Any examples?

PS PP

Equilibrium in an unfettered market

OK, so we damage the environment... how much are you willing to pay to: - avoid the damage? - fix the damage? - live with the damage?

QS Qp

Quantity

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Impact of CO2 penalty on competitiveness of low carbon electricity

Comparative Generating Costs Based on Low Discount Rate US cents per kWh
9 8 7
6

Low GHG high cost

5 4 3 2 1 0

Low GHG low cost

CCGT

Coal steam

IGCC

Source: IEA, 2006

No carbon price Carbon price $20/tCO2

Carbon price $10/tCO2 Carbon price $30/tCO2

A relatively modest carbon penalty would significantly improve the IAEA ability of a low carbon technology to compete against gas & coal

Generating capacities Maximum CO2 emission reduction

26,000 24,000 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2012 2015 2020 2025 2030 2035 2040 2045 2050 IAEA

Nuclear Hydro CSP Wind_L Wind_H Oil Gas Coal

MW

Electricity generation Maximum CO2 emission reduction

110

90 70

Nuclear Hydro CSP Wind_L Wind_H Oil Gas Coal

TWh

50 30 10 2012 -10 IAEA 2015 2020 2025 2030 2035 2040 2045 2050

Difference in generating capacities Maximum CO2 reduction Reference case

15,000

10,000

Nuclear Hydro

MW

5,000

CSP Wind_L

Wind_H Oil Gas

-5,000

Coal

-10,000 2012 2015 2020 2025 2030 2035 2040 2045 2050 IAEA

Difference in electricity generation Maximum CO2 reduction Reference case

80 70 60 50 40 30 20 10 0 -10 -20 -30 -40 -50 -60 -70 -80 2012 IAEA 2015 2020 2025 2030 2035 2040 2045 2050

Nuclear Hydro CSP Wind_L Wind_H Oil Gas Coal

TWh

CO2 emissions
140 120 100 80 60 40 20 0 2012 2015 2020 2025 2030 2035 2040 2045 2050 Reference Max reduction

Million tonnes of CO2

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Impact on final energy supply

8 6 4 2 Bio_mod Bio_trad Gas Oil_f Oil_tr -4 -6 -8 Elec

Mtoe

0 -2

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2012 2015 2020 2025 2030 2035 2040 2045 2050

Scenario results - Maximum CO2 emission reduction

Coal used phased out as fast as low CO2 emitting fuels and technologies can be introduced No more coal in the system after 2025 Wind from less favorable locations expands to rapidly Nuclear power and CSP enter the market and reach their maximum market shares, i.e., 40% and 25% of total generation, respectively Gas becomes a swing supplier in electricity generation. Cumulative CO2 emissions: 1,116 Mt (52% reduction) Traditional and modern biomass use at the household level expand rapidly displacing gas and oil Water for biomass and food production grows 20-folds over the planning horizon IAEA Economically not a valid scenario

Question 2:

What is the impact of a more realistic 40% reduction of cummulative CO2 emissions? Approach: Apply a cumulative emission budget of 1,300 Mt CO2
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Generating capacities 40% CO2 emission reduction

26,000 24,000 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2012 2015 2020 2025 2030 2035 2040 2045 2050 IAEA

MW

Difference in electricity generation 40% CO2 reduction Reference case

80 70 60 50 40 30 20 10 0 -10 -20 -30 -40 -50 -60 -70 -80 2012 IAEA 2015 2020 2025 2030 2035 2040 2045 2050

Nuclear Hydro CSP Wind_L Wind_H Oil Gas Coal

TWh

Scenario results 40% CO2 emission reduction

The higher emission budget takes pressure off the system All reductions achieved by phasing out coal Wind from less favorable locations expands less rapidly Nuclear power unchanged from the Max CO2 case CSP enters the market 20 years later and expands more slowly Gas becomes expands its role in electricity generation. Total discounted system costs: US$ 125.14 billion

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Question 3: What is the impact of a more realistic 40% reduction of cummulative CO2 emissions but with end-use efficiency and infrastructure improvements? Approach: Same a previous case plus efficiency improvements per demand category (technology/infrastructure)
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Cumulative CO2 emission limitations and end-use efficiency improvements

6 4 2 0 Bio_mod Bio_trad Gas Oil_f Oil_tr -6 -8 -10 2012 2015 2020 2025 2030 2035 2040 2045 2050 IAEA Elec

Final energy demand

Mtoe

-2 -4

Cumulative CO2 emission limitations and end-use efficiency improvements

4,000 2,000 Nuclear 0 -2,000 -4,000 -6,000 -8,000 -10,000 2012 2015 2020 2025 2030 2035 2040 2045 2050 IAEA Hydro CSP Wind_L Wind_H Oil Gas Coal

Difference in generating capacities

MW

CO2 and efficiency improvements Generation

110 90 Nuclear 70 Hydro CSP Wind_L Wind_H Oil 30 10 2012 2015 2020 2025 2030 2035 2040 2045 2050 -10 IAEA Gas Coal

TWh

50

Difference CO2+Eff vs Reference Generation

60 50 40 30 20 10 0 -10 -20 -30 -40 -50 -60 -70 -80 -90 2012 IAEA 2015 2020 2025 2030 2035 2040 2045 2050

Nuclear Hydro CSP Wind_L Wind_H Oil Gas Coal

TWh

Emissions
120 100 80 Ref 60 40 20 0 2012 2015 2020 2025 2030 2035 2040 2045 2050 IAEA CO2max CO2_Eff

Results CO2 and efficiency

Efficiency take pressure of the supply sector Overall electricity demand reduced by 30% Other final demand reductions without compromising energy services while meeting CO2 emission reduction targets Lowest total system costs at US$ 110.83 billion

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Discussion and experimentation

Exploring policy interventions:
What level of support is needed to make weak wind-regime projects economically viable? What about technology learning Suggestions from the audience!!!

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