Perspectives for the energy system of the future Frank-Detlef Drake Head of Group Research & Development, RWE AG RWE Credit Day London, 9 October 2012
Energy for the future Overview of Perspectives Implications for R&D at RWE for the energy markets and system of the market design future 1 2 3 30 RWE Credit Day I 9 October 2012 30
RWE currently ranked as “most innovative utility in Europe” Innovative R&D has been a tradition at RWE that we want to continue R&D budget: more than €100 million (excl. investments of suppliers and other co-operation partners into demonstration plants and R&D) R&D along the entire value chain with a focus on reducing CO 2 emissions R&D portfolio with more than 250 projects; over 50 patents in 2011 Most R&D projects are developed close to operations in co-operation with suppliers and research institutions Ranked as “most innovative utility in Europe” in Innovation Index of European School for Management and Technology (ESMT Berlin, 2012) RWE Credit Day I 9 October 2012 31
EXAMPLES RWE R&D projects cover the entire value chain Upstream Power generation Transport/storage Application Gas/oil Coal-based Electricity grids Residential households > Reservoir characterisation > CCS/CCU* > Smart grids > Smart metering > Sedimentation and > Lignite drying > High Voltage DC > Smart home maturity history > High temperature materials > Delimitation of steel towers > Gas hydrates > Coal quality Mining Renewable Electricity storage Transport > Automation of large-scale > Wind offshore > Compressed-air storage > E-mobility equipment > Biogas production > Distributed storage via > Comparison H 2 vs.electric > Diagnosis conveyor-belt batteries of electric cars drive > Marine energy systems > Groundwater modelling Nuclear Gas grids/reservoirs Industry/commerce > Safety > Pipeline integrity monitoring > Distributed electricity and heat supplies > Securing of know-how > Gas sensors > Dismantling Overarching technology and systems analysis RWE Credit Day I 9 October 2012 32 * CCS/CCU: Carbon Capture and Storage/Usage;
Energy for the future Overview of Perspectives Implications for R&D at RWE for the energy markets and system of the market design future 1 2 3 RWE Credit Day I 9 October 2012 33 33
Two tons of CO 2 per capita per year are quickly used up with today's energy supply Annual CO 2 emissions Heating of a single- of a medium-sized family home with passenger four people car Auto- mobiles Heat or Return flight Production Air travel Products Frankfurt – of goods worth Los Angeles approx. €4,000 Transformation of entire energy system needed if ambitious CO 2 -reduction shall be achieved RWE Credit Day I 9 October 2012 34
A common view on how CO 2 -targets can be met in a cost-efficient way is emerging Generation Infrastructure Demand 1 High efficiency 2 More electricity 3 Low-CO 2 electricity mix Key guidelines for the design of the energy world of tomorrow RWE Credit Day I 9 October 2012 35
Two theoretical paths towards a low-CO 2 electricity system to be achieved by 2050 Main elements Indicated preference > Quick and massive expansion 1 “Short bridge” of renewables > No construction of conventional or nuclear power plants > Massive development of grid infrastructure and, if necessary, storage facilities 2050 > Continuous expansion of renewables > At least one more round of conventional and nuclear power plant new-build > Use of carbon capture & storage > Gradual adaptation of infrastructure 2 “Long bridge” in line with change in generation Photo source: Wikipedia.org/Sandö Bridge RWE Credit Day I 9 October 2012 36
Germany pursues the short bridge assuming a reduction of domestic power generation by 45% German energy concept for electricity (“short bridge”) 17% Demand reduction 25% -45% Import 20% 58% Renewables 45%* 25% Conventional Generation 10% Nuclear 2010 2020 2010 2020 2050 Source: EWI/Prognos/GWS study * In relation to the reduced power generation, this comprises the often quoted 80% of RES generation RWE Credit Day I 9 October 2012 37
The “short bridge” builds on the expected further cost reduction of RES Levelized costs of electricity for Renewables in Europe [€ 2011 /MWh el ] 240 200 CSP Europe Large PV North Europe 160 120 Biomass (average) Offshore Wind (3,200h) 80 Onshore Wind (2,000h) 40 Large PV South Europe 0 2010 2020 2010 2020 2050 RWE Credit Day I 9 October 2012 38
For both “bridges” we need to cope with increasing shares of volatile Renewables 230 V 50 Hz Power generation Power consumption Potential solutions/measures Flexible power generation Grid expansion 1 2 4 Energy storage 3 “Smart” Technologies 1 2 3 4 Combination of and is most cost-effective, and as additional options. RWE Credit Day I 9 October 2012 39
Combination of flexible generation and grid expansion is the most cost-effective way Times of surplus energy Times w/o sun and wind Demand in GW > 10 GW 5 – 10 GW 1 – 5 GW < 1 GW With Supergrid EU 150 W/o Supergrid 400 Capacity today 400 Doubling of grid capacity until 2030 needed Requirement > Cost-effective: Full European grid < 10% of > Back-up capacity is more cost-effective Advantage generation capex than storage or DSM (demand side > Increased “secure” RES generation management) due to interconnection > Public acceptance > Very low utilisation of back-up plants Challenge > Complex and long permission > Acceptance of old plants (since not a 100% and approval processes CO 2 free option) Source: ECF Scenarios Realization highly challenging RWE Credit Day I 9 October 2012 40
For long-term storage, hydrogen based solutions are an option, but far too expensive “Wind-methane” concept η≈ 65% η≈ 90% η≈ 60% CO 2 + - G el. H 2 CH 4 CH 4 el. Volatile Methane generation Electrolysis production Gas grid CCGT €/MWh: 80 – 200 300 – 500 400 – 700 420 – 750 800 – 1,500 Considering System efficiency 35% electrolysis, methane Costs of electricity ca. 1,000 €/MWh production and reelectrification 1 Methane production costs ca. 500 €/MWh 1 Assumption: CAPEX total value chain (w/o gas infrastructure) ca. 5,500 €/kW RWE Credit Day I 9 October 2012 41
A pan-European approach has significant cost advantages Average Levelized Cost of Electricity per scenario, 2050 [€/MWh, real terms] Storage facilities 235 Distribution grid 38 Ultra high voltage grid 180 Generation 45 22 133 10 39 115 36 10 97 33 12 30 10 +19% +37% +86% +142% 142 8 109 85 72 59 Base “Long bridge” “Short bridge” National 100% RES Local/distributed gen. case 1 (European) (European) (Germany) (Germany) CO 2 reduction in % 2 : 20% CO 2 reduction in each scenario > 85% 1 Today’s generation mix continued with modernization/reinvestment 2 Compared with today (2008); assumption: constant quantity of electricity RWE Credit Day I 9 October 2012 42
RWE is shaping the future of energy (1/2) RWE activity „Lange“ Brücke Clear commitment to achieving carbon-neutral electricity generation by 2050 Continuous expansion of renewables ( ) Founding member of Desertec Industrial Initiative (DII) New-built and operation of modern, highly efficient and flexible gas- and coal-fired power plants Transition to a more flexible conventional power plant fleet Extensive, international development programme for CCS and Carbon Capture and Usage (CCU) Development of technologies and business models around decentral generation, such as PV and micro-CHP (combined heat and power) Photo source: Wikipedia.org / Sandö Bridge RWE Credit Day I 9 October 2012 43
RWE is shaping the future of energy (2/2) RWE activity Leading expertise in grid planning and operation at all voltage levels Development/testing of smart grid concepts Leading role in driving forward electric mobility Foundation of RWE Effizienz GmbH to commercialise efficiency Systematic research and development along the entire value chain Development and open discussion of the prospects of tomorrow's energy supply Photo source: Wikipedia.org / Sandö Bridge RWE Credit Day I 9 October 2012 44
Energy for the future Overview of Perspectives Implications for R&D at RWE for the energy markets and system of the market design future 1 2 3 45 RWE Credit Day I 9 October 2012 45
Forecast is difficult, but RES on the rise and conv. power plants with reduced full load hours Influencing factors % of load today Load Load > Success of energy 100 efficiency > Degree of electrification Residual load (conventional) > Volatile > Shrinking RES share > Persistence of 50 subsidies/incentives RES generation > Availability of capital > Public acceptance > Speed of grid expansion 20 > Security of supply issues 2010 2050 RWE Credit Day I 9 October 2012 46
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