Integrated Assessment ofAdvanced Energy Technology

OptionsGCEP Research Symposium 2005Frances C. Arrillaga Alumni Center

Stanford University June 16, 2005

John P. WeyantGraduate Research Assistants: Oscar Mascarenhas

& Geoff BlanfordDepartment of Management Science & Engineering

Stanford University

Outline

• Philosophy of Assessment Framework• Structure of Assessment Framework• A Couple of Key Design Issues• Initial Applications of Assessment Framework• Initial Insights From Assessment Framework• Future Directions

Recommendations On GlobalEnergy-Economic Modeling in General

• Don’t Take It Too Seriously

• Don’t Ignore It Either

Revolutionary Energy Technologies and “Other” Climate Policies

ClimatePolicies

RevolutionaryNew Energy Technologies

Difficulties In Using Existing General Purpose E-E Models Directly to Assess Long-Run Energy R&D

• Models With Enough Technical Detail Are Too Cumbersome For Uncertainty Analyses

• Models Set Up for Uncertainty Analyses Don’t Have Enough Technical Detail

Design Criteriafor Assessment Framework

• Reflect Uncertainties in:– Future Energy Demands– Future Energy-Environment Policies– Future Energy Prices\Resource Availabilities– Target Technology Performance– Competing Technology Performance

• Focus on Critical Features of GCEP Portfolio:– Value New Technologies Contingent on Availability

of Other New Technologies– Value New Technology Contingent on a Broad

Range of Possible Market Futures

Structure of Assessment Framework• 4 Sectors

(1)Electricity (2)Transportation(3) Industrial Heat (4) Resid. & Comm. Heat

• 8 Regions– US(4)/West Europe/Japan/Other OECD– China(2)/India/Other Developing– Eastern Europe & Former Soviet Union

• 4 Time Periods– 2000-2025– 2026-2050– 2051-2075– 2076-2100

Structure of Assessment Framework(continued)

• Technology Areas – Approx. 250 Technologies– Solar/Wind/Biomass/Sequestration– Advanced Combustion/Hydrogen/Nuclear– Advanced Electric/ Advanced Coal

• Output Metrics– Carbon Emission Reductions/Fuel Use– Total Benefits– Public & Private Benefits– By Technology and Portfolio (Inc. Option Values)– Water/Land/Platinum Use/Price Feedbacks

Technology Cost & Performance. Probability Distributions Models/

Results Technology/Portfolio Evaluation

Scenario/ Scenario Variable

Probability Distributions

Valuation Model

Desirable Technologies/Portfolios

Expert Assessments

Scenarios

Schematic Diagramof Technology Evaluation Process

SAGE/TIMES/IEO•Tech Detail •Public•Annual Updates

GCEP•Thermo•Step Out•Integrated

Levelized Cost Comparison for Electric Power GenerationWith $100 per Ton Tax on Carbon (2004-5 Fuel Prices)

0

0.05

0.1

0.15

0.2

0.25

Nuclear Coal Gas CC Gas CT Solar PV SolarThermal

Wind

Generation Technology

Carbon TaxFuel-2004/5Variable O&MFixed O&M ChargesCapital Charges

$/KWHr(2003$s)

Levelized Cost Comparison Concept

Price Of Energy

Quantity of Energy

Demand

Supply

Supply WithCarbon Constraints

Supply With Carbon Constraints

and GCEP

GCEP Technology Assessment: Conceptual Overview

NetBenefits

Alternative GlobalCarbon Emission Projections

0

10

20

30

40

50

60

1990 2000 2025 2050 2075 2100

Year

Bill

ion

Met

ric T

ons

2005 TechnologiesHigh BaselineReference Baseline Low Baseline550 ppmv Stabilizaion

Key UncertaintiesConsidered in Integrated Technology

Assessment Framework• Specific to Advanced Technologies

– Cost– Performance– Public Acceptability

• Market Uncertainties– Energy Demand Levels– Oil & Gas Prices– Government Policies

(Esp. Related to Climate Change)

Price Of Energy

Quantity of Energy

Demand

Supply

Supply WithCarbon Constraints

Supply With Carbon Constraints

and GCEP

GCEP Technology Assessment: Conceptual Overview

LargeUncertainties

NetBenefits

Information, Foresight & Uncertainty:Three Alternative Sets of Assumptions

Invest StartOperation

StopOperation

State of Energy System

Time

Plan & Build Operate

t1 t2t0

(1) Static, Myopic, or Recursive Dynamic(2) Perfect Foresight (Rationale Expectations)(3) Decision Making Under Uncertainty

Information, Foresight & Uncertainty:Three Alternative Sets of Assumptions

Invest StartOperation

StopOperation

State of Energy System

Time

Plan & Build Operate

t1 t2t0

(1) Static, Myopic, or Recursive Dynamic(2) Perfect Foresight (Rationale Expectations)(3) Decision Making Under Uncertainty

Interplay BetweenR&D and Investment Decisions

R&DDecision

C0

InvestmentDecision

C1C1 C2

∞Cost Cost

Time

Projected Range of Impacts of GCEP Programon Global Carbon Emissions

0

5

10

15

20

25

30

35

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Car

bon

Emis

sion

s (G

T)

High

Reference

Low

High-wGCEP

Ref-wGCEP

Low-wGCEP

Carbon Emission Reductions Resulting From GCEP Renewables R&D

0

0.05

0.1

0.15

0.2

0.25

0.3

25 50 75 100 125 150 175 200 225 250 275 300 325 350 375 400 425 450 475 500 525 550

Cumulative Carbon Emission Reductions Through 2100 (GT)

Freq

uenc

y

Integrated Assessment ofCarbon Capture, Separation and Sequestration

• Inputs Required (Oscar Mascarenhas Project)– Energy Penalty for Separation– Capital, O&M Costs for Separation– CO2 Transport Costs– Sequestration Costs/Capacities by Region & Category – PRA of Leakage Potentials– Public Acceptability Assessment

Initiating Event

CO2 plume contacts

well

Age

CO2 degrades cement

Cement Seal

Integrity

Cement type/

quality

Leakage through

well

• Outputs Produced– Market Share/Carbon Emission Reductions– Impact on Energy System Costs/Energy Markets– Under Broad Range of Energy Market/Technology

Futures

Carbon Emission Reductions Resulting From GCEP Sequestration R&D

0

0.05

0.1

0.15

0.2

0.25

0.3

25 50 75 100 125 150 175 200 225 250 275 300 325 350 375 400 425 450 475 500 525 550

Cumulative Carbon Emission Reductions Through 2100 (GT)

Freq

uenc

y

Carbon Emission Reductions Resulting From GCEP R&D Portfolio

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

50 100

150

200

250

300

350

400

450

500

550

600

650

700

750

800

850

900

950

1000

1050

1100

Cumulative Carbon Emission Reductions Through 2100 (GT)

Freq

uenc

y

Contributions of GCEP Technologiesto Carbon Emission Reductions

0

2

4

6

8

10

12

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Year

Bill

ion

Tonn

es C

arbo

n

Hydrogen

Renewables

Sequestration

Advanced Combustion

Incremental Value of Renewables Program

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

50 100

150

200

250

300

350

400

450

500

550

600

650

700

750

800

850

900

950

1000

1050

1100

All ProgramsAll Less Renewables

Cumulative Carbon Emission Reductions Through 2100 (GT)

Freq

uenc

y

Preliminary Insights From Assessment Framework• All Areas Have High Option Values

– Can Identify Plausible Cases Leading to 5-10 Times Expected Values– Nuclear & End-Use Efficiency Wildcards– Choice of Policy Instruments Can Affect Substitutability and

Complementarity of Technologies• Advanced Combustion

– Large Benefits Robust Over Many Uncertainties• Carbon Capture and Sequestration

– Potentially Large Benefits– Public Acceptability & Economic Incentive Issues

• Renewables– Large Potential Benefits Possible, But Timing Uncertain– Economic Incentives And/Or Failures Elsewhere Can Accelerate– Key Potential Roles for Niche Markets

• Hydrogen– Large Benefits Possible, But They Depend on Success in A Number

Complementary Areas – Need Careful Internal Co-ordination and External Monitoring

Initial Results

Optimal First Period Investment

RNW FOS SEQ RNW FOS SEQ

$ m

illio

n/yr

$ m

illio

n/yr

U.S. Electric Generation Sector No Budget Constraint

0

50

100

150

200

250

0

50

100

150

200

250

Cost-Benefit CriterionCost-Effectiveness Criterion

5 % Increase

15 % Increase

Blanford Dynamic Programming Model

Thank You!

The End

Many Technologies Can Contribute

??

But What is the Optimal R&D Investment Portfolio?

R&D Investment R&D Outcomes Market Outcomes

Nuclear Carbon SequestrationHydrogen

Renewables Combustion Efficiency

GCEP Approach for Assessment Activities

Initial Technical Area

Assessment

Rigorous Energy System Efficiency

Analysis

Integrated Cost and Environmental

Analysis

Selection of Technical Area for Study

Review of current state of energy systems and research directions

• Literature Studies• Workshops

Thermodynamic Framework

Report on issues, barriers and clear opportunities

framed around thermodynamic principles

applied to the area

Second Law Analysis of Selected

Components

System Integration of Components

Exergy Analysis of Systems

Report on potential for significant improvement

over current energy systems based on fundamental

thermodynamics of systems

System Components and Structure

Performance Limits and Expectations

Report on potential market penetration and projected overall impact on global

greenhouse gas emissions

Scenario Probabilities Cost Modeling

Global Impact on GHGs