Near term emissions reductions in the power sector – the case of Wind and SolarSteve SawyerSecretary GeneralGlobal Wind Energy Council

Electricity generation is responsible for ~40% of energy-related CO2 emissions, or about 25% of total greenhouse gas emissions – the largest single contributor by sector. Action in the power sector is a critical focus for short term action to reduce emissions because of the size of the sector, because of the increasing availability of alternatives at low or no additional lifetime cost, and because investment decisions now will have a major impact on future emissions trajectories, as power plants have a lifetime of 30-60 years or more.

In the past decade, enormous technology improvements and cost reductions have spurred major growth in both wind and solar power technologies, to the point where they are economically competitive with new- build conventional power plants in an increasing number of markets and applications around the globe, in most of which there is no carbon price. With a carbon price, that competitiveness would turn into a clear cost advantage in most markets.

Status of Renewable Electricity Generation

REN 21 Chart from GSR 20141 – 22.1% RE generation at the end of 2013, up from ~18% in 2010.

1 http://www.ren21.net/REN21Activities/GlobalStatusReport.aspx

Hydro-power will continue to be the dominant renewable electricity supply technology through the end of this decade, although its growth potential, while substantial, is relatively small in percentage terms. Bio-power will continue to grow, but probably not at huge rates, as the competition for biomass resources for other purposes will continue to intensify. Geothermal is a mature technology with substantial upside potential, but its geographic distribution is limited. CSP and ocean power have tremendous potential, but are still in the early stages of technology development and ‘take-off’ is not expected before the end of this decade; hence the focus on wind and solar.

Scenarios:

The recent IPCC Special Report on Renewable Energy and Climate Change2 (SRREN) showed us that:

- For wind and solar, the available resource does not constitute any meaningful restraint.

- Renewable energy penetration tends to increase significantly in scenarios with strong GHG targets, i.e., low GHG stabilization scenarios lead on average to higher RE deployment.

It is increasingly the case that because of the enormous growth as well as the cost reductions in wind and solar technologies, that renewables dominate future power supply in an increasing number of mainstream scenarios, not only squeezing out conventional fossil fuel power plants, but increasingly nuclear and CCS technologies. This is primarily because of the cost competitiveness of these technologies, but also due to their relative speed of deployment. While not a factor in the scenarios, governments are also interested in the economic development, employment and energy security benefits associated with renewables, and general although not universal popular support.

However, it is useful to note that even the SRREN was using what are now 5 year old scenarios with 6-8 year old (or older) data, and the recent cost reductions and reliability and efficiency improvements in wind and solar technologies has not been incorporated. For instance, the lower end of the four scenarios assessed in detail had RE electricity penetration at lower rates in 2030 than it is in fact today.

The range in the four main scenarios assessed in the SRREN had renewable electricity penetration rates of 20-61% by 2030, and 24-95% by 2050.

2 http://srren.ipcc-wg3.de/report

In each case, the renewable power sector was dominated by hydro, wind and solar, with the vast majority of the growth coming from the latter two technologies.

Even the historically conservative IEA sees a future electricity supply dominated by renewables, with the 2013 edition of the World Energy Outlook3 showing penetration rates of 32% by 2035 in the current policies scenario and 46% in the 450 scenario.

IRENA’S REMAP4 scenario shows renewable electricity penetration rates of up to 44% by 2030.

However, it is useful to bear in mind that none of these scenarios:

a) Take fully into account the cost reductions and technology improvements of wind and solar over the past few years;

b) Assume a major effort at GHG emissions reductions for the balance of this decade, or beyond.

3 http://www.worldenergyoutlook.org/publications/weo-2013/

4 http://irena.org/remap/

Costs

Decreasing wind and solar costs, reducing air pollution, enhanced energy security, local industrial development and employment are the main drivers for renewable installations in many countries today, with wind providing the cheapest option to add new power to the grid in an increasing number of markets. Solar costs are decreasing very rapidly, and when embedded in the distribution system is quite competitive in many places already; and in some locations the same can be said for stand-alone solar installations. And the price is stable, i.e., no hedge against fossil fuel price fluctuations is needed. An effective carbon price could dramatically increase this effect, as the chart from Bloomberg New Energy Finance (below) shows.

5

OECD/non-OECD

For three of the last four years wind installations outside the OECD have outstripped installations in traditional markets in Europe and North America, and during the course of 2014 Asia will eclipse Europe as the region with the largest installed capacity. With China

5 https://www.iea.org/media/workshops/2014/solarelectricity/BNEF2LCOEofPV.pdf

emerging as the largest market for solar PV in the last year, this phenomenon has begun to show in the solar markets as well.

This move outside the OECD is primarily because electricity demand growth has slowed or stalled in the OECD, while outside it is still growing fast, and where both wind and solar’s cost competitiveness and speed of installation are a significant benefit.

Integration/Transformation

Integration of very large penetrations of variable renewables6 (wind and solar), once thought to be difficult and expensive, have been shown to be much more a question of planning and management, alongside forward-looking investment. Beyond relatively low shares of variable renewable penetration however, it becomes more a question of transformation of the power system – away from something resembling a 19th century telephone system into something much more resembling the internet.

The IEA’s “The Power of Transformation: Wind, Sun and The Economics of Flexible Power Systems” gives many insights into the current thinking and practice in areas where high penetration levels of wind and solar have already been achieved, or are being contemplated:

6 NOT ‘intermittent’. Wind and solar power are variable – and predictable, with increasing accuracy. A nuclear plant is ‘intermittent’, i.e., it will go from full power to zero almost instantly when it SCRAMS, and electricity systems must be designed to cope with this where nuclear is deployed, and the same is true (although generally less dramatically) for all large thermal power stations.

“An assessment of case study regions…showed that annual VRE shares of 25% to 40% can be achieved from a technical perspective, assuming current levels of system flexibility. The analysis assumes that sufficient grid capacity is available inside the power system. According to the same analysis, this share can be increased further (reaching levels above 50% in very flexible systems), if a small amount of VRE curtailment is accepted to limit extreme variability events…

In the long term, high shares of VRE may come at zero additional costs. In the modelling analysis,all cost assumptions are kept constant. However, future VRE generation costs are likely to be lowerand the cost of CO2 emissions higher. This means that high shares of VRE may be achieved withoutincreased total system costs compared to a system with 0% VRE. Costs may even be lower than inthe absence of VRE deployment. However, achieving this requires a successful transformation of thesystem as a whole.”

When transforming electricity systems to accommodate large quantities of variable renewables, as is happening in Denmark right now, one major feature of that effort is a shift of the conventional ‘borders’ between the electricity, heating and cooling, and transport sectors – with electricity playing a much larger role in the overall system – thereby greatly decreasing total primary energy demand, among other things.

Energinet.dk

Emissions reductions potential

Calculating the specific emissions reductions from the introduction of any generation technology requires a substantial number of assumptions, as there are complex system effects, and it depends very much on what technology is being replaced. A wind farm in northern China or India will displace fossil fuel generation which would have emitted >1000-1200g/Kwh of CO2, while in Norway the amount would be negligible. However, for the purpose of this exercise, we have used an average rate of 600g/Kwh, which is slightly higher than the OECD average but much lower than China which dominates both solar and wind markets for new installations.

On the basis of current policies, and with moderate growth for the balance of the decade along the lines of the IEA mid-term market report on renewables, wind and solar will account for approximately 1.4 billion tons of emissions reductions annually in 2020, up from about 580 million tonnes in 2013. However, on the basis of the more positive ‘up-side’ industry projections, this number could easily be increased by an additional 1 billion tonnes by 2020, and with a concerted global effort could go substantially higher. In the period beyond 2020 the climate benefits would continue to grow exponentially, as per the scenarios outlined above.

The actual emissions reductions achieved will of course depend greatly on where the installations take place, both in terms of the resource available on site and the existing generation mix in the country in question7.

Co-benefits

As well as reducing CO2 emission, reducing air pollution, enhancing energy security and creating local industrial development and jobs, wind and solar power have other benefits.

Water consumption – unlike thermal technologies, wind and solar do not consume water (or very small quantities of it) during their working life. This is of particular interest in water-stressed regions of the world, which are unfortunately growing in both number and extent due to the early impacts of climate change.

Rural economic development – many countries, both inside and outside the OECD, are facing a demographic crisis in terms of depopulation of rural areas. In China, Brazil, South Africa and the American mid-West, the booming wind industry is helping to keep people on the land, providing good quality jobs where there have been few or none, in some cases for generation. The same is true although to a lesser extent for large ground-mounted solar installations.

7 For a similar analysis see: Kornelis Blok, Niklas Höhne, Kees van der Leun and Nicholas Harrison, ”Bridging the greenhouse gas emissions gap” - Nature Climate Change 2, 471–474

(2012) doi:10.1038/nclimate1602, 17 June 2012.

http://www.nature.com/nclimate/journal/v2/n7/full/nclimate1602.html

Subsidies

Although one reads a good deal about subsidies for wind and solar in the newspapers, current support for these technologies globally is about 10% of the lower bound of estimates for production and consumption subsidies for fossil fuels. According to the IEA, we are currently subsidizing CO2 emissions to the tune of approximately $US 110/tonne. If this situation were changed, and/or there was an effective price on carbon, the economics of the power generation sector would change from one where wind and solar are now able to compete in many markets with conventional generation, to where there would be a near-universal cost advantage for these technologies.