Energiezekerheid in onzekere tijden /Gaat het licht uit ?

Johan AlbrechtFaculteit Economie & Bedrijfskunde (Ugent)

Wetenschapcafé Turnhout, Warande 15/10/2014

Tessenderlo;ultra-efficiënt (57%) maar draait niet…

Inhoud

• Werking elektriciteitsmarkten; technologische imperatief van het evenwicht

• Tekort aan capaciteit in BE• Waarom kan de markt dit probleem niet

oplossen?

Defining electricity markets/systems• Market: meeting place for buyers and sellers• Electricity; instantaneous but also intertemporal equilibrium

between demand (load) and supply (generation)• Electricity system is designed to follow a variable load –

technologies selected based on their load following ability• Efficiency: market designs should support ‘optimal’

combination of generation and balancing technologies

Production by generators,sold on future and intra-day markets

Total demand / final consumption

Balancing coordinated by TSO/DSO

Questions

• Do we face a security of supply risk (or do we like to exaggerate)?

• In case we indeed face a supply risk, what is the source of the problem?

• Will the problem persist or disappear?• What can be done?

p.7

The Belgian Context

• Firm capacity of 15 700 MW (< 13 000 MW today)• Nuclear phase-out: 5 900 MW firm capacity

What if no restart of D3 & T2?

What happened on March 26?

Source; Elia.be

Week of March 26; flat prices despite closures?

Source; Belpex.be

Peak load; decreasing?

Reserve Margin (RM) 2012/2013

IHS CERA: CWE reserve margin outlook

Likelihood of new investments?• CCGT gas-powered plant; marginal cost € 50/MWh / LCOE €

75/MWh (LF 65%) / LCOE € 95 /MWh (LF 30%)• Belpex prices March/Sept 2014; € 15 to € 45 per MWh• Why low prices? • declining electricity demand in CWE (-7% since 2008);• increasing (subsidized) renewable capacity with very low

marginal cost in shrinking markets replaces capacity with higher marginal cost;

• failure of emissions trading; too low CO2 price (€ 5/ton CO2)• BE interconnected with countries with overcapacity; BE prices

do not reflect BE scarcity ;• Without recovery of prices; no strong market response to

nuclear phase-out – increasing risk for black-out - government interventions needed

Merit order effect (supply = Σ marginal cost)

p.17

When radical projects meet…• BE: nuclear phase-out as voluntaristic project…• during market liberalisation and integration…• with a very challenging low-carbon project

emerging, without a perspective on realistic and efficient climate policies

• without a full economic recovery after 2008 • compression effect & low spot prices, cash-

flow uncertainty, mothballing, wait & see

Europe: alone in G8/G20• “Yes, we can!” : 20/20/20, Low-carbon Economy,

2050 Roadmap, Energiewende,…• Without a price on CO2 (failure of ETS)• Without supporting energy R&D• Without post-2020 targets• With energy cost disadvantageof + $ 130 bill to US industry(WEO 2013)

• Dieter Helm (author of ‘The Carbon Crunch’, Oxford): ‘Europe took every measure it could to make energy more expensive’ – Europe: EC (targets) + MS (subsidies)

Investment needs for the Belgian system by 2030?

RM = (RAC-PD)/PD [%]

Note: Availability factor of RAC = 88%

2014-2030: minimal (upfront) investment need of € 12 billion

Electricity system in 2030, 2050?

• Expected market outcomes from high RES scenarios? -> German case (NEA/OECD)

Residual load with 80% RESMaximal load remains high with 80% RES!

Excess output (78 GW or 43 TWh/yr or 12% wind & PV output) > max load

Load oscillations of 100 GW in a few hours (mainly because of PV) / today < 12 GW

Generation portfolios for 12 scenarios

DE wholesale prices (NEA/OECD)

80% RES

• (Very) Low prices persist (for electricity as commodity) and can never finance required investments needed in low-carbon scenarios

• Final consumers will have to pay high upfront investment cost, irrespective of their (low) electricity consumption

• Policymakers : “Yes, you consume less and mainly low-carbon electricity and that’s why your invoice can double/triple ”

• European market model of ‘Energy-only’ is not consistent with energy transition / should be complemented with capacity renumeration mechanisms

Some conclusions

• The risk for a blackout is real• Investment need; up to 30 medium-sized

power plants (300 MW)• Large institutional challenge; “liberalised”

market will not trigger investment• New market mechanisms need to be installed

Bedankt voor uw aandacht

• Johan.albrecht@ugent.be• www.itinerainstitute.org ; publicaties

energiebeleid• Second Summer School ‘Economics of

Electricity Markets’ @ Ghent University, August 25-29, 2014

• http://www.ceem.ugent.be/SummerSchools/2014/index.htm

Back-up

NL: Energieakkoord 2013“Als onderdeel van de transitie naar een duurzame energievoorziening komen partijen in deze zesde pijler, in samenhang met de afspraken over hernieuwbare energie in pijler 2 en 3, overeen dat de capaciteit van de jaren tachtig kolencentrales in Nederland wordt afgebouwd. Dit betekent concreet dat drie kolencentrales per 1 januari 2016 zijn gesloten. De sluiting van de twee resterende centrales (Maasvlakte I en II) volgt per 1 juli 2017.”

(note; 1. Maasvlakte 1100 MW, 1973, EON2. Energieakkoord contested by market authorities)

UK: ‘RWE decision signals death knell for UK’s coal-fired power’

• Last month UK utility SSE said it wouldn’t retrofit old coal-fired power plants either, meaning both plants are also likely to close ten years from now.

• Around 15 gigawatts (GW) of the UK’s coal-fired capacity will have to decide how to comply with the EU directive, and can choose between converting to biomass, opt to close in 2023 or upgrade.

• The UK’s energy regular Ofgem warned of potential blackouts because coal-fired power plants will close, while some MPs in the ruling Conservative Party have urged the government to flout EU laws and keep capacity open

• See more at: http://www.rtcc.org/2014/01/09/rwe-decision-signals-death-knell-for-uks-coal-fired-power

Climate policy goals require coal phase-out allover Europe

• National phase-out plans should be coordinated to avoid black-outs, increase credibility and create ‘optimal scarcity’

• Higher CO2 gains than with high RES shares• Capacity payments for new gas assets; essential

to facilitate the phase-out of coal, old gas & old nuclear

• Does Europe want a modern energy infrastructure or not?