Status-quo of coal in India • Installed coal capacity grew from 71 GW in 2007 to 212 GW in January 2017 (11% of global capacity). • Rapid expansion resulted in falling capacity factors. • Leading coal power producers (e.g. Adani) suspended investments and further development. • Draft Electricity Plan: No new coal capacity needed between 2022-27 , apart from the 48 GW already under construction. • India implemented a tax on coal of US$ 3.2/t coal; revenues go to the National Clean Environment Fund. Indian coal consumption has grown much slower than expected. India needs alternative energy sources to provide all people with cheap electricity. Coal capacities in 2017 [GW] Installed Put on hold in Previously under Cancelled Pre- Active capacity total (end 2016) construction put on hold during 2016 construction construction 212 82 13 115 129 48 - 16 - Sources: Climate Action Tracker (2017b); CoalSwarm (2017); Shearer et al. (2017)
Agenda 1. Motivation 2. Colombia`s role in the international steam coal market 3. Trends in current import partners, mainly Europe and US 4. Perspectives for possible new export partners in South-East Asia 5. Implications of the upcoming global coal phase-out - 17 -
The upcoming coal phase out effects countries differently and therefore needs a combination of various political instruments Need to differentiate between countries: that only mine coal (e.g. Colombia) that only mine coal (e.g. Colombia) • employment • employment • income from exports • income from exports those burning coal (e.g. UK and many countries in Europe) those burning coal (e.g. UK and many countries in Europe) • energy security • energy security • (employment) • (employment) those doing both (e.g. US, China, India, South-Africa, Germany) those doing both (e.g. US, China, India, South-Africa, Germany) • energy security • energy security • employment • employment • (income from exports) • (income from exports) - 18 -
Coal phase-out concepts need to incorporate different regional aspects e.g. e.g. e.g. e.g. e.g. e.g. Europe or Europe or China or China or Colombia Colombia US India US India Financial payments Financial payments Moratorium on new Moratorium on new as compensation for Moratorium on new as compensation for Moratorium on new mines; maybe linked mines; maybe linked a moratorium on a moratorium on mines mines with compensations with compensations new mines new mines Existing coal power Moratorium for new Existing coal power Moratorium for new plant fleets need to plants to prevent -------------------- -------------------- plant fleets need to plants to prevent be closed (stranded) assets be closed (stranded) assets Support for RES to Support for RES to Support for RES to Support for RES to Support for RES to Support for RES to meet rising energy meet rising energy meet rising energy meet rising energy replace fossil replace fossil demand, enable demand, enable demand, enable demand, enable capacities & create capacities & create energy access & energy access & energy access & energy access & jobs jobs create jobs create jobs create jobs create jobs Active & passive Active & passive Active & passive Active & passive labour market Active labour market labour market Active labour market labour market labour market instruments to instruments to instruments to instruments to instruments to enable instruments to enable enable a just create new jobs enable a just create new jobs a just transition a just transition transition transition - 19 -
Direct effects of the upcoming coal phase-out for Colombia The speed of the coal phase-out will not be driven by the remaining coal reserves. The main driver for the coal phase-out will be shrinking global demand due to climate and environmental policies as well as direct competition from cheaper and cleaner energy sources. This trend can be seen in the Atlantic as well as Pacific steam coal market. Coal exporting countries, such as Colombia , are at risk not only to lose high shares of their state income but also to be left alone with mono-industrialized regions with low chances for a transition towards alternative and more sustainable industry sectors . Not needed mining investments can be categorized as stranded and should be redirected to prevent unnecessary use of financial means and resources. Divestment strategies or bankruptcy of coal firms might lead to insufficient provisions for mining recultivation and result in additional costs for the Colombian state and its people. The Colombian case is at risk of becoming another example of the “resource curse”. A consistent global and national policy mix and strategies are needed for the closure of older coal plants, the ban on new coal mines and plants, the diversification of the technology mix, and investments into lucrative renewables to manage this transition. - 20 -
The future of Colombian coal exports – International steam coal market in the era of climate policies IAEE European Conference; Vienna, 6 th September, 2017 Dr. Pao-Yu Oei, Dr. Roman Mendelevitch Workgroup for Infrastructure Policy (WIP; TU Berlin); German Economic Research Institute (DIW Berlin) - 21 -
Colombia´s electricity system is mostly based on hydropower Steam coal is therefore mostly exported Installed Capacities and future capacity expansions: Source: UPME (2014). - 22 -
Port - 23 -
Port Electricity from Hydro Gas Coal
Different policy instruments exist to enable a coal phase-out (demand and supply side, technology support, labour) PROPOSED MEASURE EXPECTED EFFECT Forbidding new mines Terminating current plans for new minings sites Closing existing mines Reducing mining volumes of active mines Increasing the CO 2 price / EU-ETS reform Price signal through the introduction of market stability reserve (MSR); CO 2 floor price CO 2 certificates would become more expensive Minimum efficiency Closure of inefficient power plants Flexibility requirements Closure or singling out of inflexible power plants Coal phase-out law Maximum production [TWh] or emissions allowances [tCO 2 ] for plants Emissions performance standard (per Restrictions for new plants and retrofits (without CO 2 capture) [< x g/MWh] unit; for new plants and retrofits) Emissions performance standard Reduce load factor for depreciated coal-fired power plants (e.g., >30y) [< x (emissions cap for existing plants) g/MW] Capacity mechanisms or reserve plants Incentive for construction of less CO 2 -intensive power plants Climate contribution fee Additional levy for old CO2-intensive power plants Support of RES & technology transfer Enabling suffcient clean energy sources to replace coal plants Active & Passive labour policies Creation of new job opportunities; ease potential job losses - 25 - Source: Updated from Oei et al. (2014).
Coal phase-out concepts need to incorporate different regional aspects e.g. e.g. Europe China Moratorium for new Existing coal power or US or India plants/ mines to plant fleets need to be prevent (stranded) closed assets Support for RES to Support for RES to meet rising energy replace conventional demand and enable capacities energy access Active & passive labour market instruments to enable a just transition - 26 -
Main Findings on the upcoming global coal phase-out 1. The climate targets of Paris imply a global phase-out of coal. The majority of resources has to stay in the ground. 2. There is a global trend to phase-out coal power plants in several countries , which is economically efficient. 3. A global energy system based on 100% renewable energy sources until 2050 is technically possible and can be achieved at low costs. 4. A consistent global and national strategies and policy mix is needed for the closure of older plants, the ban on new coal mines, the diversification of the technology mix, and investments into lucrative renewables. 5. The access of all citizens to avordable renewable electricity is a major challenge for some emerging countries. A just energy transition, however, also creates new jobs and opportunities for various regions and sectors. - 27 -
Coal mining in Colombia The coal mine “ Cerrejon Zona Norte”, run by Cerrejon and located in La Guajira, is the largest open pit mine in South America. Its annual production reached 34 Mt in 2014. The second largest steam coal producer with around 20 Mt/year is US-based Drummond Ltd, which operates two major mines near La Loma in the department of Cesar. The third biggest operator Prodeco, a subsidiary of Glencore, is operating its mine Calenturitas located between the municipalities El Paso, La Jagua de Ibirico and Becerril; in the department of Cesar. Its production reached 11 Mt in 2015. Production from smaller coal mining companies operating in Colombia sum up to 7.6 Mt/a. - 28 -
Coal mining - 29 -
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The importance of coal for Colombia - 33 -
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Publications by DIW Berlin on coal and lignite (Selection) Articles (selection) • Oei et al. (2016): „Kohlereserve“ vs. CO 2 -Grenzwerte in der Stromwirtschaft – Ein modellbasierter Vergleich“, Energiewirtschaftliche Tagesfragen, 1-2/2016 • Collins, and Mendelevitch (2015): Leaving Coal Unburned: Options for Demand-Side and Supply-Side Policies, DIW Berlin, DIW Roundup 87, Berlin, Germany. • Richter, Mendelevitch and Jotzo (2015): Market Power Rents and Climate Change Mitigation: A Rationale for Coal Taxes?, DIW Berlin, DIW Discussion Paper 1471, Berlin, Germany. Holz, Haftendorn, Mendelevitch, and Hirschhausen (2015): The • COALMOD-World Model: Coal Markets until 2030, in R. K. Morse and M.C. Thurber (Eds.) “The Global Coal Market - Supplying the Major Fuel for Emerging Economies”. Cambridge University Press . • Oei et al. (2014): Modeling a Carbon Capture, Transport, and Storage Infrastructure for Europe“. Journal of Environmental Modeling and Assessment 05/2014 Politikberatung kompakt and DIW Wochberichte (selection): • Oei et al. (2015): 104: Auswirkungen von CO 2 -Grenzwerten für fossile Kraftwerke auf Strommarkt und Klimaschutz in Deutschland. Politikberatung 104. • Oei et al. (2014): 84: Braunkohleausstieg – Gestaltungsoptionen im Rahmen der Energiewende. Politikberatung 84. Oei et al. (2014): Kohle und Klimaschutz. DIW Wochbericht 14-26 • - 35 -
Electricity Generation in the EU: Coal vs. Gas Phase-out Source: Agora Energiewende 2016 - 36 -
Reserves of lignite and hard coal in Europe (2012): The majority has to remain in the ground to meet climate targets Source: Euracoal (2013) - 37 -
Most coal power plants in China are located at the east-coast Note: The numbers tell the number of generating units at each location. Sources: Climate Action Tracker (2017a); Government of China (2015); Coal Swarm (2017). - 38 -
The coal phase-out will have different structural effects shown by an analysis of current dependencies on coal & renewables Share of installed capacity in 2015 Coal RES (without hydro) Northern Region 58% 2% Western Region 64% 17% Southern Region 47% 28% Eastern Region 83% 3% North Eastern Region 15% 7% Islands 0% 24% India Total 59% 17% Especially the Northern and Eastern Region are vulnerable to the upcoming structural changes of the energy transition, as they have a high dependence on coal and very small amounts of renewable energy capacities. Source: Own calculation based on Central Electricity Authority (2017): Installed capacity. http://www.cea.nic.in/reports/monthly/installedcapacity/2017/installed_capacity-05.pdf - 39 -
Modeling a 100% Renewable Energy Scenario for China with the Energy System Model ReMSYS based on wind and PV 14000 12000 10000 Electricity generation [TWh] 8000 6000 4000 2000 0 2015 2020 2025 2030 2035 2040 2045 2050 Source: Own modeling results with ReMSYS.. - 40 -
Modeling a 100% RES Scenario for India with the Energy System Model ReMSYS: Rising electricity demand met by PV 12000 10000 Electricity generation [TWh] 8000 6000 4000 2000 0 2015 2020 2025 2030 2035 2040 2045 2050 Source: Own modeling results with ReMSYS.. - 41 -
Hypotheses about India‘s future energy transformation Hypothesis 1 : Cheaper than expected renewables can satisfy India’s growing electricity demand without any more added coal capacity than the power plants already under construction. Hypothesis 2: To create a successful Indian sustainability energy transition, the access of all citizens to electricity and a drastic reduction of poverty are indispensable. Hypothesis 3 : A change in leadership (Prime Minister Narendra Modi) brought about a new vision of a solar future, threatening the old fossil fuel based power structures in industries and politics. Hypothesis 4: The current complex energy sector governance hinders policy developments. The transition will be led by state governments, and has to be fostered across classes and castes. - 42 -
Dramatic changes to China’s coal pathway with a big uncertainty about future developments • Electricity generated by coal peaked most likely in 2013, capacity factor of power plants was below 50% in 2015 and 2016, coal accounted for 66% of total energy consumption in 2014 • China’s 13 th Five-Year-Plan: maximum 58% share of coal in national energy consumption by 2020 • Increasingly low utilisation rate of coal plants, reaction by China’s National Energy Administration and National Development and Reform Commission: Suspension of new plant approvals in 13 provinces and regions Ban on new coal mines from 2016-2018 A halt on construction in 15 provinces and regions Exception for projects in poor areas and old revolutionary base areas Plans to retire older coal power plants • Coal power capacity cap of 1,100GW ( 921 GW installed as of January 2017; representing 47% of global installed power capacity) • Cancellation of 100 specific plant projects from September 2016 to January 2017 (Allowed projects in 2015:142 GW, in 2016: 22 GW. Total pre-construction capacity in the pipeline: 134 GW • Total amount of cancelled projects between 2010 and 2016: 203 GW. • Additional 35 GW are under construction since 2016, 55 GW were put on hold since 2016. Sources: Climate Action Tracker (2017a); Endcoal (2017a, 2017b); Isoaho (2016); Shearer et al. (2017). - 43 -
China’s Nationally Determined Contribution (NDC) • Commitment to peak CO 2 emissions around 2030, “making the best effort to peak early” • Lower carbon intensity of GDP by 60% – 65% below 2005 levels by 2030 • Increase share of non-fossil energy carriers in total primary energy supply to ~20% by 2030 • Increase forest stock volume by 4.5 billion cubic metres compared to 2005 levels • Total GHG emissions likely to continue increasing until 2030: no sufficient policies addressing non- CO 2 GHG emissions (CH4, N2O, HFCs etc.) • => China’s Paris Agreement NDC is less ambitious than China’s current policies and its national targets. The NDC is not in line with a fair share of the 2°C (or the 1.5°C) target Note: The numbers tell the number of generating units at each location. Sources: Climate Action Tracker (2017a); Government of China (2015); Coal Swarm (2017). - 44 -
Additional Info China (1/2) • Most populated country globally, second largest economy in the world, second largest concentration of poverty in the world, large-scale urbanization still ongoing • Autocracy; main parties: Chinese Communist Party (CCP) and 8 other small parties controlled by the CCP • National Program on Climate Change, the12 th and 13 th Five-Year Plan for Energy Conservation and Emission Reduction, the Action Plan for Energy Conservation, Emission Reduction and Low- Carbon Development, and the National Plan on Climate Change (2014-2020). • Mix of regulatory approaches, financial support and market-based mechanisms to promote renewables; long-term feed-in tariffs for solar, wind and biomass • Less than 1% of China‘s 500 largest cities meet WHO air quality standards • Rising societal pressures on ruling elite due to air pollution and environmental degradation => Clear shift in energy policies since 2005: implementation of renewable energy law • State Council (i.e. the central government) sets broad directions for renewable energy policy development; ministries and departments draft specific policies • Advisory and coordination role in energy issues established in 2007: National Leading Group on Climate Change Energy Conservation and Emissions Reduction (NLGACCERCER); members are leaders of the State Council and 20 key ministries Sources: Government of India (2015); Isoaho (2016); Shearer et al. (2017). - 45 -
Additional Info China (2/2) • National Development and Reform Commission (NDRC): central role in climate policy and energy; National Energy Administration (NEA) agency under NDRC responsible for renewable energy policy formulation and implementation at the national level • National Energy Commission (NEC): ‘super ministry’ in charge of drafting the national energy development strategy • => energy and climate change are located within the most influential agencies; implementation remains nevertheless a challenge • Regionally differing societal pressures: shut-down of plants in Inner Mongolia, pledges to build power plants in inland provinces • State council puts efforts on ‘clean coal’ and other fossil fuels: gasification, CCS, natural gas and nuclear • Lack in grid infrastructure • China’s National Emissions Trading System to start in 2017 - 46 -
India and China in global Context Source: Shearer et al. (2017). - 47 -
Recent developments coal in China and India Put on hold in On hold in total Put on hold, which was Active 2016 (end 2016) already under construction construction China 300 442 56 146 India no data 82 13 48 Coal capacities as of January 2017, in GW. Source: Shearer et al. (2017). - 48 -
Governance and regional differences • Solar capacity especially strong in Gujarat, Rajasthan, Tamil Nadu and Madhya Pradesh (together >60% of total capacity); dependent on solar radiation, coal availability and political feasibility • Main barriers to renewable expansion: difficult finance environment (makes renewable projects more costly than in other countries, political elites vested interests in fossil fuels, a corruption-prone system requires bribes for new projects, difficult process of land acquisition for private companies • The “ discoms ”, the state -government owned electricity companies, are highly indebted (electricity theft, badly implemented subsidies and technical losses) and do not fulfill their renewable purchase obligations, do not make necessary investments to integrate renewables and thereby scare away investors of renewables • Gujarat can be seen as a leading example for the transition away from coal => lessons to be learned for other states on governance • Split of electricity for agriculture from the rest, controls of necessity for subsidies, stable political coalition • The Indian population of very polluted regions do not protest against coal but instead against higher environmental standards => because they are economically dependent coal and other polluting industries • : - 49 -
Recent developments coal in China and India Put on hold in On hold in total Put on hold, which was Active 2016 (end 2016) already under construction construction India no data 82 13 48 Coal capacities as of January 2017, in GW. Source: Shearer et al. (2017). - 50 -
India’s Nationally Determined Contribution (NDC) • 40% non-fossil fuel capacity of installed power capacity by 2030 (~26-30% of generation; conditional on the provision of resources by industrialised countries) • Lower GDP emissions intensity by 33-35% by 2030 below 2005 levels (-20-25% by 2020) • Additional cumulative carbon sink of 2.5-3 GtCO 2 e through additional forests by 2030 • Current policy developments: 175 GW installed renewable energy by 2022 (NDC pledge 100 GW). Despite rapid • expansion not enough to satisfy growing electricity demand • 100 GW solar capacity by 2022 • Draft Electricity Plan: After 2022 no new coal capacity apart from the one already under construction (48GW) needed India’s NDC is less ambitious than current policies, both pathways are not in line with the 2 ° C (or the 1.5 ° C) target Sources: Climate Action Tracker (2017b); Central Electricity Authority (2016); Government of India (2015). - 51 -
Additional Info India • Solar power revolution: government proposal to install 215 GW renewables by 2027 • Estimated total CO2 emissions for 2021-22 and 2026-27 are 983 million t and 1,165 million t respectively • Around 17.5% of the world population (second most populated country), around 363 million people (30% of the population) live in poverty (largest concentration of poverty globally), around 24% of the global population without access to electricity (304 million), about 30% of the global population relying on solid biomass for cooking and 92 million without access to safe drinking water, wide disparities amongst its people and regions. • Democracy; 6 national, 49 state and >1700 unrecognized parties, strong autonomy of states in India • Policy framework on environment and climate change: National Environment Policy (NEP) 2006: promotes sustainable development along with respect for ecological constraints and the imperatives of social justice. • National Action Plan on Climate Change (NAPCC): sharper focus on required intervention • implemented through eight National Missions , outlining priorities for mitigation and adaptation to combat climate change • supplemented by actions of the State Governments, Non-governmental Organizations (NGOs), initiatives of the private sector and other stakeholders. 32 States and Union Territories have State Action Plan on Climate Change (SAPCC) including climate change concerns in their planning process. • Energy Conservation Act encourages efficient use of energy and its conservation • The National Electricity Policy (NEP) focuses on universalizing access to electricity and promoting renewable sources of energy, as does the Integrated Energy Policy (IEP) . Sources: Government of India (2015); Shearer et al. (2017). - 52 -
Additional Info Energy Market India • Other policies include fiscal instruments like a coal tax, cuts in subsidies, increase in taxes on petrol and diesel, market mechanisms including Perform Achieve and Trade (PAT), Renewable Energy Certificates (REC) and a regulatory regime of Renewable Purchase Obligation (RPO). • No great societal pressures regarding air pollution, although 13 of the 20 most polluted cities worldwide are in India; poor population dependent on polluting industries for economic growth and job creation • Federal level only partly responsible for energy policy- making, more the state governments‘ responsibility, nodal state agencies responsible for implementation • Various mechanisms to promote renewables: grants, tax incentives and generation-based incentives • Fifth largest wind energy producer worldwide At COP21 Prime minister Modi launched the International Solar Alliance (120 states commit to install >1 TW of • solar power by 2030) • Difficult finance environment in India, which makes renewable energy projects more costly than in other countries • Corruption-prone political elite with vested interests in the fossil fuel industry • Other major problems: electricity thievery, and long problematic process land acquisition - 53 -
Agenda 1) The Indian Energy Sector 2) Modeling approach & Input Data 3) Results - 54 -
Modeling approach & Input Data Key Data • A total of 10 regions is being considered. • The years 2020 - 2050 are modeled in 5-year steps, with 2015 as a baseline. • Existing capacities in 2015 are included as residual capacities in our model. • Demands are fixed and based on IEA 450ppm (World Energy Outlook 2015) datasets. Source: Own Illustration, based on Gulagi, et al. (2017) - 55 -
India - Demands 40 6000 Exajoule Gpkm 35 5000 30 4000 25 20 3000 15 2000 10 1000 5 0 0 2015 2020 2025 2030 2035 2040 2045 2050 2015 2020 2025 2030 2035 2040 2045 2050 Power Low-temp. Heat High-temp. Heat Passenger Transport Freight Transport Power & process heat demands more than triple between 2015 and 2050. Overall heavy increase of energy demands over the years. - 56 -
Model Formulation – Objective Function • Sets: y Year f Fuel t Technology m Mode of Operation r Region l Time Slice • Objective Function min 𝑑𝑝𝑡𝑢𝑡 = 𝑈𝑝𝑢𝑏𝑚𝐸𝑗𝑡𝑑𝑝𝑣𝑜𝑢𝑓𝑒𝐷𝑝𝑡𝑢 𝑧,𝑢,𝑠 + 𝑈𝑝𝑢𝑏𝑚𝐸𝑗𝑡𝑑𝑝𝑣𝑜𝑢𝑓𝑒𝑈𝑠𝑏𝑒𝑓𝐷𝑝𝑡𝑢𝑡 𝑧,𝑠 𝑧 𝑢 𝑠 𝑧 𝑠 𝑈𝑝𝑢𝑏𝑚𝐸𝑗𝑡𝑑𝑝𝑣𝑜𝑢𝑓𝑒𝐷𝑝𝑡𝑢 𝑧,𝑢,𝑠 = 𝐸𝑗𝑡𝑑𝑝𝑣𝑜𝑢𝑓𝑒𝑃𝑞𝑓𝑠𝑏𝑢𝑗𝑜𝐷𝑝𝑡𝑢 𝑧,𝑢,𝑠 + 𝐸𝑗𝑡𝑑𝑝𝑣𝑜𝑢𝑓𝑒𝐷𝑏𝑞𝑗𝑢𝑏𝑚𝐽𝑜𝑤𝑓𝑡𝑢𝑛𝑓𝑜𝑢 𝑧,𝑢,𝑠 + 𝐸𝑗𝑡𝑑𝑝𝑣𝑜𝑢𝑓𝑒𝑈𝑓𝑑ℎ𝑜𝑝𝑚𝑝𝑧𝐹𝑛𝑗𝑡𝑡𝑗𝑝𝑜𝑡𝑄𝑓𝑜𝑏𝑚𝑢𝑧 𝑧,𝑢,𝑠 − 𝐸𝑗𝑡𝑑𝑝𝑣𝑜𝑢𝑓𝑒𝑇𝑏𝑚𝑤𝑏𝑓𝑊𝑏𝑚𝑣𝑓 𝑧,𝑢,𝑠 ∀ 𝑧 ∈ 𝑍, 𝑢 ∈ 𝑈, 𝑠 ∈ 𝑆 - 57 -
Agenda 1) The Indian Energy Sector 2) Modeling approach & Input Data 3) Results - 58 -
100% Renewables Scenario - 59 -
Development of Power Generation in PJ 12000 10000 8000 TWh 6000 4000 2000 0 2015 2020 2025 2030 2035 2040 2045 2050 Source: Own Illustration - 60 -
100% Renewables – Heat low 9000 8000 7000 6000 Biomass Petajoule 5000 Solar Thermal Heatpump 4000 Oil Coal 3000 2000 1000 0 2015 2020 2025 2030 2035 2040 2045 2050 - 61 -
100% Renewables – Heat high 25000 20000 Biomass 15000 H2 Petajoule Electric Furnace Gas 10000 Oil Coal 5000 0 2015 2020 2025 2030 2035 2040 2045 2050 - 62 -
Development of Freight Transportation 3500 3000 2500 Rail Petro million freight km Rail ELC 2000 Road Conv Road Bio 1500 Road H2 Ship Conv 1000 Ship Bio 500 0 2015 2020 2025 2030 2035 2040 2045 2050 Source: Own Illustration - 63 -
India – Regional Power Production Source: Own Illustration - 64 -
India – Power Production per Timeslice w/ Storages 5000 4000 3000 TWh 2000 1000 0 2050 ID 2050 IN 2050 SD 2050 SN 2050 WD 2050 WN -1000 Source: Own Illustration - 65 -
Installed Capacity in 2050 - 66 -
Wind & PV Production Profiles, 2050 - 67 -
Trade Between Regions in 2050 - 68 -
450ppm Scenario - 69 -
450 ppm - Power 9000 8000 7000 6000 5000 TWh 4000 3000 2000 1000 0 2015 2020 2025 2030 2035 2040 2045 2050 - 70 -
450ppm – Heat low 9000 8000 7000 6000 Biomass Petajoule 5000 Solar Thermal Heatpump 4000 Oil Coal 3000 2000 1000 0 2015 2020 2025 2030 2035 2040 2045 2050 - 71 -
450ppm – Heat high 25000 20000 15000 Biomass Petajoule Electric Furnace Gas Oil 10000 Coal 5000 0 2015 2020 2025 2030 2035 2040 2045 2050 - 72 -
Global CO2 Emissions per Energy Carrier in billion tons – 0% fossil fuels in 2050 3000 2500 2000 Coal 1500 Gas Oil 1000 500 0 2015 2020 2025 2030 2035 2040 2045 2050 2015 2020 2025 2030 2035 2040 2045 2050 2015 2020 2025 2030 2035 2040 2045 2050 100percent 450ppm newpolicies Source: Own Illustration - 73 -
Germany‘s national GHG reduction target implies further measures … 1.400 Non-ETS-Sector GHG Emissions in Megatons CO 2 equiv. EU-ETS 1.200 Trend of the last years: Coal_Non_ETS emissions going up! 1.000 Coal_ETS 2020 Ziel*: - 40% Lignite_Non_ETS 800 2030 target*: Lignite_ETS - 55% 600 2050 target*: - 80-95% 400 200 0 *) Base line: 1990 Source: Oei, et al.(2014). - 74 -
Lignite in Germany Power plant Mining site The electricity sector is responsible for ~40% of GHG emissions in Germany • ~50% lignite power plants; of which >50% built before 1990 (esp. in NRW). ~33% hard coal power plants; of • Helmstedt basin which 50% built after 2000 Rhine basin Effect of electricity prices below 30 Lusatia €/MWh: Central Germany • Old hard coal power plants are shut down for economic reasons • Political measures could regulate which power plants are closed down: Lignite power plant before 1981- after capacities built 1980 2000 2001 Lignite power plants • [GW] Newly built hard coal power plants • Rhine basin 7 0.3 3 Gas fired power plants Helmstedt basin – 0.3 – • Central Germany – 3 – Lusatia 1 6 0.6 - 75 -
No need for new lignite mining pits in Germany; constitutional conformity of new fields are being contested Projected fields and Displacements : Welzow Süd II (~210 Mio. t CO 2 / 800 inhabitants) Nochten II (~300 Mio. t CO 2 / 1,700 inhabitants) Jänschwalde Nord (~270 Mio. t CO 2 / 900 inhabitants) (Vision: Bagenz-Ost and Spremberg-Ost) Exproprietation (relocalisation of inhabitants): Public interest needed for legality of new fields o Energiewende: neither public interest nor necessity o Possibility to sell electricity from lignite is not a reason o to justify expropritations - 76 -
Different instruments to reduce CO 2 emissions are discussed; among them emissions performance standard (EPS) 1. Standard to be respected at any moment (plant-specific limit per kWh) • Prevents construction of new coal power plants (without CO 2 capture) • Discussed in USA for new-built, in force in Canada as of mid-2015 2. Limit of annual emissions • Can incentivize emission reductions of existing power plants • In force in the UK since 2013 ELMOD: Introduction of a German EPS that uses a gas power plant (450 gCO 2 /kWh) as benchmark to achieve Germany´s climate targets: • limit annual emissions of all plants (EPS) • only those older than 35 years (EPS 35) - 77 -
Climate and energy policy has various proven instruments at hand to account for external effects of electricity generation from fossil fuels. Research Question • Examining current trends of the German energy market with respect to their compatibility with climate targets. Identifying additional instruments besides a reform of the EU-ETS. Main Findings • Coal-based power generation puts climate targets at risk. • A market-driven transition from coal to gas is unlikely to occur in the near future. Additional instruments could be a CO 2 floor price, minimum efficiency levels and flexibility requirements, a coal phase-out law, emissions performance standard, capacity mechanisms or a strategic reserve for coal plants, a climate contribution fee or reduced transmission grid expansion Publications • Chapter in the book Energiewende (forthcoming) • DIW Economic Bulletin, Wochenbericht, Politikberatung kompakt (2012-2015) • Newspaper articles (2014-2015) - 78 -
Share of rising renewables lead to new job opportunities 30% 9 5 1 0 0 8 6 25% 1 0 0 6 1 1 0 0 5 0 0 0 0 8 6 20% 3 32 0 0 16 3 2 1 0 4 0 12 2 0 8 4 15% 0 0 17 17 11 4 10% 1 6 5 5 1 0 4 5 2 0 0 7 6 5 1 0 5% 5 5 2 0 1 0% 1 1 0 0 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 26 12 13 14 9 10 5 2 5 4 Quelle: BMWI (2013) & BDEW (2014), Daten für 2014 sind auf Basis des ersten Halbjahres geschätzt: German Ministry of Economy and Energy (BMWI). [1] - 79 -
Comparing number of jobs in the coal and renewables sector Die Lignite sector used to employ more than 150000 people in 1980. The hardcoal industry in the 1950s-60s employed 500000 people. 2013 2010 2008 BK - Tagebau BK - Kraftwerke SK - Bergbau 2004 Erneuerbare 2002 1998 0 50 100 150 200 250 300 350 400 450 Beschäftigte in Tausende Source: Own depiction based on Ulrich und Lehr (2014) and Statistik der Kohlewirtschaft (2015). - 80 -
Average age in the lignite sector: 75 % are aged over 40 30% 25% 20% 15% 10% 5% 0% Source: Own depiction based on Statistik der Kohlewirtschaft (2015). - 81 -
Lignite and hard coal production and imports in Europe (2015) Source: Euracoal (2016) - 82 -
Structure of Power Generation in selected EU-Countries (2013) Source: Euracoal (2015) - 83 -
Upcoming “ Coal Reserve“ in Germany Notification 11 days ahead; overall payments of 1.6 billion € Owner Unit Power Age in Start of reserve Particularities [MW] 2020 (shut down after 4 years) Mibrag / Buschhaus 352 35 10 / 2016 Plant was moved into reserve already in EPH September as the mining site was fully exploited RWE Frimmersdorf P 284 54 10 / 2017 Last 2 (out of 8) units; facing economic problems for several years. Frimmersdorf Q 278 50 10 / 2017 Niederaußem E 295 50 10 / 2018 Were already listed in the official list of expected closures „Kraftwerksliste Bundesnetzagentur Niederaußem F 299 49 10 / 2018 zum erwarteten Zu- und Rückbau 2015 bis 2019“ with the closing date 2019 Neurath C 292 47 10 / 2019 Similar efficiency factors as other 300 MW units Vattenfall Jänschwalde E 465 33 10 / 2018 Most recent units at the site Jänschwalde (start / EPH of operation of the 6 units 1981-1989); it is Jänschwalde F 465 31 10 / 2019 sometimes easier to start shutting down the last units first. Quelle: Eigene Recherchen basierend auf Daten der Bundesregierung, der BNetzA und Webseiten der Unternehmen - 84 -
Longterm trends of CO 2 emissions in Germany until 2035 The results show that the long-term decline of German CO 2 emissions (301 Mt in 2014). The green scenario resembles a faster coal phase-out by additionally restricting the full load hours of coal power plants (e.g. due to limited coal reserves or an additional climate levy), while the black scenario is a moderate business-as-usual (BAU) scenario. The results are also influenced by developments in neighboring states. It is therefore in the interest of Germany that other neighboring countries also take action and complement the EU-ETS with national instruments to enable a generation portfolio in line with the European climate targets (Visions 3 & 4). 140 CO2-Emissions in Mt 135 130 125 black 120 136 green 115 127 127 110 120 119 115 105 110 107 100 Vision 1 Vision 2 Vision 3 Vision 4 - 85 -
The Role of Coal for Power Generation in Europe 2013 Source: Euracoal (2014) - 86 -
The Phasing-Out of Coal is Politically Unanymous: Different additional instruments are under discussion PROPOSED MEASURE EXPECTED EFFECT POSSIBLE ADVANTAGES POSSIBLE SHORTCOMINGS Forbidding new lignite Terminating current plans for new minings No displacements of villagers; no retrofits for No effect for regions with sufficient already mines sites in Eastern Germany lignite power plants; investment security for granted mining rights all affected people Closing existing lignite Reducing mining volumes of active mines Concentration on one mine (instead of three) Does not necessarily hit the oldest inefficient mines in North-Rhine Westfalia (NRW) reduces fixed costs and less displacements; power plants first overall volumes insufficient for entire lignite fleet leading to some clusures EU-ETS reform Price signal through the introduction of EU-wide instrument; thus, no cross-border Structural reforms uncertain from today's market stability reserve (MSR); additional leakage effects perspective; the extent of the impact is measures: 900 mn EUA from backloading targets several sectors besides electricity unpredictable due to high surplus of certificates directly in MSR, start of MSR in 2017 instead of 2021 CO 2 floor price CO 2 certificates would become more Investment security for operators Feasible prices probably too low to result in a expensive switch from lignite to natural gas in the short term Minimum efficiency Closure of inefficient power plants More efficient utilization of raw materials Open cycle gas turbines (OCGT) could also be affected; complex and time-consuming test and measurement processes Flexibility requirements Closure or singling out of inflexible power Better integration of fluctuating renewable Combined cycle gas turbines (CCGT) could also plants energy sources be affected; complex and time-consuming test and measurement processes Coal phase-out law Maximum production [TWh] or emissions Fixed coal phase-out plan & schedule Outcome of auctioning of allowances would be allowances [tCO 2 ] for plants investment security difficult to predict Emissions performance Restrictions for new plants and retrofits Prevention of CO 2 -intensive (future Minor short-term reduction in emissions - 87 - standard (per unit; for (without CO 2 capture) [< x g/MWh] stranded) investments
„Energy Transformation“ in Germany ( Energiewende) Reduction Share of Renewable Reduction Reduction of Energy Demand of nuclear Energy GHG- energy Emissions Gross final Electricity Primary Domestic Final Electricity energy Productio Energy Heat Energy Demand n Transport 2015 -47% 2017 -56% 2019 -60% 2020 18% 35% -40% -20% -20% -10% -10% 2021 -80% 2022 -100% 2025 40-45% 30% 50% -55% 2030 55-60% 2035 2040 45% 65% -70% -80% bis 2050 60% 80% -50% -80% -40% -25% 95% Basis 2010 - - 1990 2008 2008 2005 2008 - 88 - Source: Own Depiction based on BReg (2010, 2011, 2013)
Lignite power plants are not flexible enough for an electricity system with a high share of renewable sources *) Read data as follows : „ current power plants / state of the art / optimization potential“ Source: VDE (2012)* Lignite CCGT** OCGT** [%P max 2 / 4 / 8 8 / 12 / 15 1 / 2,5 / 4 Change of load p. minute] Hot start-up 1,5 / 1 / 0,5 < 0,1 6 / 4 / 2 [h] (<8h) Cold start-up 10 / 8 / 6 4 / 3 / 2 < 0,1 [h] (>48h) **) CCGT: Combined Cycle Gas Turbine Source: Agora Energiewende (2014). OCGT: Open Cycle Gas Turbine - 89 -
… including a coal phase-out probably until 2040 Germany risks missing the -40% GHG reduction target until 2020 (base: 1990). This is why additional national instruments, employed alongside the EU ETS, come into play and are currently discussed by all relevant actors. Official projections by the Federal Network Agency / Bundesnetzagentur (BNetzA) include a reduction of lignite capacities from 21,2 GW in 2013 to 12,6 GW in 2025. Resulting emission targets for the electricity sector are 187 Mt CO 2 (2025) and 134 Mt CO 2 (2035) compared to 317 Mt CO 2 in 2014. This implies a decarbonization of the electricity sector and a coal phase-out. Barbara Hendricks (Federal Minister for the Environment) and the German Advisory Council on the Environment (SRU) target the year 2040. - 90 -
Planned reserve of lignite capacites The current proposal includes moving 2,7 GW of lignite capacity into a “lignite reserve” • three times 0,9 GW in 2017, 2018 and 2019 • each block is shut down completely after four years in the reserve The reserve of 2,7 GW include • 1 GW of lignite capacity in Lusatia (2 blocks of Jänschwalde) by Vattenfall and the • power plant Buschhaus (350 MW) in Central Germany which was recently bought by Mibrag (owned by EPH) • 1,5 GW of lignite capacity run by RWE in North Rhine-Westphalia (NRW) - 91 -
Economic Risks for utilities: Significantly reduced profitability for old and newer plants Development of Phelix Future (Phelix: physical electricity German wholesale power price) Current Phelix Futures: 2017: EUR 24,05 2018: EUR 23,90 2019: EUR 24,00 2020: EUR 25,20 Source: EEX, May 2016 - 92 -
Technical and Environmental Risks: Iron Ocre: Threat for aquatic life and tourism in the Spreewald Source: www.reiseland-brandenburg.de Source: dapd Source: RBB - 93 -
Comparing jobs in lignite (BK) & renewables (EE) in affected regions in Eastern Germany 30000 25000 20000 15000 10000 Indirekte Jobs 5000 Jobs 0 Climate measures lead to additional annual investments of 15 – 30 billion € in Germany. Meeting the 2020 climate targets would result in additional: 50.000 – 200.000 new jobs • economic increase of 20 – 40 billion €. • Source: Own depiction based on Ulrich und Lehr (2013) and Statistik der Kohlewirtschaft (2013). - 94 -
Kohlelieferungen aus Mitteldeutschland nach Tschechien 2012 sind 160.000 t als Probelieferung aus dem Mitteldeutschen Revier nach Tschechien geliefert worden. „Das tschechische Kraftwerk hat mit der mitteldeutschen Kohle funktioniert.“ Das tschechische Kraftwerk Opatovice befindet sich 100 Kilometer östlich von Prag und ist ungefähr 300 km vom Mitteldeutschen Revier entfernt Bei einem Interesse aus Tschechien kündigte Mibrag-Chef Joachim Geisler an, werde man auch weitere Kohle zukünftig dorthin liefern. Dies wären dann deutlich größere Lieferungen. In 2015 bestätigte die Mibrag, dass keine weitere Transporte nach Tschechien geplant sind. - 95 -
Es gibt keinen Bedarf für neue Tagebaue in der Lausitz Jänschwalde 120 Cottbus-Nord 80 20 15 40 10 0 5 2013 2030 2042 0 Nochten I 2013 2030 2042 400 300 200 Welzow-Süd I 100 0 400 2013 2030 2042 300 Reichwalde 200 400 100 300 0 2013 2030 2042 200 100 Darstellungen basierend auf eigenen Berechnungen 0 2013 2030 2042 - 96 -
Das Braunkohlegebiet in NRW besitzt die größten Reserven Quelle: Eigene Darstellung - 97 -
Die Braunkohle aus dem mitteldeutschen Revier wird bis zu 150 km transportiert Belieferung KW Schkopau [mio. t/a] 6 4 2 Profen 0 Belieferung KW Lippendorf [mio. t/a] 12 10 8 6 4 Ver. Schleenhain 2 0 Belieferung KW Buschhaus [mio. t/a] 4 3 2 Profen 1 Schöningen 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Restmenge Profen [mio. t] Vereinigtes Schleenhain 300 300 200 200 100 100 KW Mumsdorf wurde 2013 nach 45 Jahren abgeschaltet 0 0 2013 2030 2040 2013 2030 2040 - 98 -
E.ON verkauft das Helmstedter Braunkohlerevier an MIBRAG Im September 2013 hat E.ON den Verkauf des Helmstedter Braunkohlereviers bei Braunschweig an die Mibrag angekündigt. Der Verkauf umfasst den Tagebau Schöningen mit allen bestehenden Rückbau- und Rekultivierungsverpflichtungen sowie das Kraftwerk Buschhaus. Die Veräußerung ist Teil einer Umstrukturierung. E.ON trennt sich auch von Anteilen des Gazprom-Konzerns, von Regionaltöchtern und vom Gasnetzbetreiber Open Grid Europe, um zusätzliche Erlöse zu erzielen. Das Kraftwerk Buschhaus wurde 1985 in Betrieb genommen und hat eine Brutto-Leistung von 390 MW. Ursprünglich war die Stilllegung des Kraftwerkes zum Jahr 2017, gemeinsam mit dem Auslaufen des Tagebaus, geplant. Die Mibrag will Buschhaus ab 2014 bis 2030 hauptsächlich mit Kohle aus dem 150 km entfernten mitteldeutschen Revier aus bereits genehmigten Braunkohlefeldern weiterbetreiben. Durch den Aufkauf des Kraftwerks bleiben ca.120 Arbeitsplätze am Standort Buschhaus in Niedersachsen erhalten. Es gibt jedoch auch Kritik an einer verstärkten Auskohlung der Tagebaufelder zu Gunsten niedersächsischer Arbeitsplätze. - 99 -
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