Roadmap 2050: a practical guide to a prosperous, …

1 Roadmap 2050: a practical guide to a prosperous , low-carbon Europe Volume I: technical and economic assessment Full documentation April, 2010 CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of the European Climate Foundation is strictly prohibited 2 Scope of this document SOURCE: Team analysis In scope Forward pathways by decennium from 2010 to 2050 on energy demand, power demand, power supply and emissions for EU-27 A baseline as well as decarbonized pathways, ranging in share of renewable energy versus thermal and nuclear energy Plausible description of how an economy-wide GHG reduction of at least 80% could be realized Detailed assessment of decarbonized power sector, covering the technical design, cost of electricity Implications of decarbonized pathways on economic metrics (under development) End to end implications on capex, import dependency and annual cost by pathway (under development)

2 Commissioning and decommissioning requirements by technology by decade Comprehensive assessment of all possible generation and storage technologies or an optimization of the pathways based on future cost projections Power market dynamics and regulatory implications or recommendations (will be covered in Volume III) Implications on power and primary energy markets, pricing mechanisms, national energy strategies and secondary effects of decarbonization pathways on primary fuel prices Detailed trade-offs in the decarbonization of road transport via electrification, hydrogen, biofuels or systemic measures like modal shift and urban planning) A detailed review of efficiency improvements available in all energy using sectors Out of scope This report is the first of three volumes.

3 It covers the technical and economic assessment of decarbonization pathways. Volume II covers the broader implications for society and Volume III covers regulatory implications 3 3 Highlight of findings 80% reduction target technically feasible but challenging: Implementation would be a major challenge with all emitting sectors required to transform themselves, introducing technology and investment risks, along with major political and regulatory challenges. The power sector, as the corner stone, needs to decarbonize at least 95% with an increase in 40% in demand Different power pathways are developed that are technically feasible: Pathways differ in share of nuclear, thermal and renewable energy (RES), up to 80% of RES. Balancing is technically feasible in all pathways, but will require significant transmission and back-up plants.

4 COE is similar, capex is significantly higher: The cost of electricity is 5-15% higher in the decarbonized pathways. Capex is 50% to 110% higher, with opex correspondingly lower. Significant growth is required: effective transmission capacity needs to be 3x as large as today s (up 20 to 30x for the France-Spain link); balancing requires 200 to 300 GW of back-up capacity (15% to 25% of generation capacity installed); solar output needs to be 3x higher in the next 10 years. Higher RES share implications: more intermittency to manage and more transmission; lower dependence on gas and coal imports; more reliance on technology learning rates but with higher cost reduction upside; lower delivery risk due to greater resource/technology diversification Macro-economic impact is small: GDP growth changes less than early on in the decarbonized pathways compared to the baseline, and it increases after 2020 due to higher competitiveness.

5 4 Contents Objectives of the European 2050 Roadmap project Methodology and approach Energy, power and emissions baseline for EU-27 up to 2050 Abatement requirements by sector to reach the -80% target Power baseline and decarbonization pathways Comprehensive comparison of all pathways Implications for the next 10 years 1 2 3 4 5 6 7 5 5 In July 2009, the leaders of the European Union and the G8 announced an objective to reduce greenhouse gas emissions by at least 80 percent below 1990 levels by 2050. In October 2009 the European Council set the appropriate abatement objective for Europe and other developed economies at 80-95% below 1990 levels by 2050. Political demand for greater EU energy security, realizing the climate goals, as well the political momentum created by the new European Commission combine to create a window of opportunity for infrastructure investments and related policies.

6 The European Commission is actively working on its European Infrastructure Package and a Communication on 2050 Energy Strategy, which need to reflect the long-term GHG reduction targets SOURCE: Team analysis The EU-27 decided on 80 - 95% emission reduction 6 6 6 6 SOURCE: Team analysis Key deliverables A set of plausible and visionary emissions pathways with an 80% reduction across the EU-27 below 1990 levels by 2050 deep dive on the decarbonization of the power sector Implications on strategic options for the EU A related set of policy options highlighting poten-tial decisions for the next 5 years Political agenda Post-Copenhagen political agenda for the new European Commission June 2010 Commission to publish an issues paper on 2050 strategy and launch stakeholder consultation November 2010 Commission to present European Infrastructure Package Early 2011 Commission to present Communication on 2050 Energy Strategy Commission to present Energy Action Plan

7 2011-2014 Overarching objective Develop a fact based report to support the European Commission and Member State policy-makers to chart an energy strategy for 2010-2014 consistent with the EU s 2050 climate and energy security commitments The objective is to develop a fact based report that is supported by key stakeholders and feeds in directly to EU decision making 7 IPCC data form the basis of the political targets The IPCC data are based on the scientific insights to stabilize at a maximum of +2 C, in line with the 450 ppm scenario. For Annex I countries this means reductions compared to 1990 of -25 to -40% for 2020 and -80 to -95% by 2050 SOURCE: IPCC AR4 WG3; team analysis 8 Assessment criteria Security of energy supply and technology risk, , self reliance, risk of technology failure Economic impact, , cost of electricity, GDP, capital requirements Sustainability, , greenhouse gas emissions,, resource depletion System reliability 8 Not assessed: Public acceptance National energy policies The decarbonization pathways should be sustainable, technically feasible and have a positive impact on the economy SOURCE: Team analysis 9 The project links tightly to related EU activities Current work at the EU Link with EU agenda on power No commercial ties The EU is in the process of drafting strategies to prepare the EU s energy future.

8 DG Energy leads the assessment how the EU can transform its energy sector, which is at the cornerstone of any effort to reduce its emissions by 80% by 2050 As the emission target is realized over several sectors, this strategy will impact other DGs, , climate, transport, agriculture, industry, buildings, research, etc. Seen the a) urgency of drafting strategies for the new commission and b) the long lead times of infrastructure changes, the focus of this project is on the power sector. Large scale changes in 2050 require action in the next 5 years Yet, there are no financial ties between the partners of this project and the EU commission. This study is directly funded by the European Climate Foundation (ECF), themselves sponsored by philanthropists like the Hewlett foundation, with no financial ties to the EU ECF will be the author of the final reports.

9 Consultants to ECF, like McKinsey, ECN and KEMA develop content and assist in synthesis 10 Initiative supported by EU and linked to the EU decision calendar Support and buy in from major industry players, which are the future investors Work executed by broad set of specialized consultants Ambitious goal of 80% emission reduction without offsets Most comprehensive scope: EU-27, all sectors, grid solution, bottom up cost assessment, macro economic impact, policies Intense engagement process with broad public communication tools Added value of the project compared to other initiatives The project has broader buy in and is more comprehensive than similar initiatives Approach and key findings Global overview of energy system, BAU and alternative scenario (450ppm).

10 Alternative scenario reached through CCS renewable sources, high fossil fuel prices WEO 2009 (IEA) Reports ADAM (EU funded, coordinated by Tyndall Centre, UK) Low stabilization global scenarios (down to 400ppm CO2e). Compares 3 sophisticated models. Reductions delivered through large scale and low cost CCS and renewable. Solid cost analysis. No macro economics RECIPE (charity funded, coordinated by PIK, Berlin) Off-shoot of ADAM. Focus on Europe and detailed on power sector. Uses offsets. Power sector emission reduction to 57%. Limited cost analysis. No macro economics Extrapolation of today s power mix to 2050, not a back-casting exercise. No grid modeling Eurelectric Typically focus on one country only, lower decarbonization , and consistent in approach (back-casting, fixing the mix) Company internal efforts Focus on grid.