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The Challenge of the Energy Transition
Eindhoven university of Technology
May 23, 2013
Michiel Boersma, Top team Energie
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Agenda
1. The Energy Transition� Background: Why?� Dutch Situation
Historical Perspective Our Ambitions How do we get there?
2. Challenges
3. Conclusions
3
Energy Source (%) 2007Reference
2030450 Scenario
2030
Coal 26,5 29,1 18,2
Oil 34,1 29,8 29,5
Gas 20,9 21,2 20,4
Nuclear 5,9 5,7 9,9
Hydro 2,2 2,4 3,4
Biomass / Waste 9,8 9,6 13,6
Renewable Energy
(Wind, Solar, Geothermal)0,6 2,2 5,0
Total Demand
(In mln ton OE)12.013 16.790 14.389
% increase in relation to 2007 40% 20%
Primary Energy Demand by Source
Source: World Energy Outlook 2009 (IEA)
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The Energy Transition: Background
� At global level: Energy Supply Fossil Based (about 80%)
� Fossil Fuels: Limited Available (R/P ratio’s: Gas: 64; Oil 54; Coal 112, BP2011)
� Fossil Fuels:
Demand: Developed Regions
Supply: Limited, Politicallyinstable Regions � Geo Political Scarcity
� Demand: Growing due to Economic Growth � Price Increase (Demand +
Production Costs)
� Fossil Fuels: Produce CO2 (Climate Change / Biodiversity)
� So… 1) Less Dependent and 2) Less Use
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Energy Transition in The Netherlands (1/4)
� 2001: Fourth National ‘Milieu Beleids Plan � Energy Transition Project (EZ)
� 2004: Energy Transition Taskforce, 7 Platforms
(Green raw materials, new gas, sustainable electr. generation, mobility,
chain efficiency, buildings/housing, greenhouse as energy source)
� 2008: Energy Transition Council
Vision 2050: Transition Paths
Focus: Technological Innovation
Central Energy Production
Consumer Forgotten
Driven by established Energy companies
Knowledge Institutions Absent
No Cooperation Model
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Energy Transition in The Netherlands (2/4)
� 2011: Energy Transition Council Dissolved
� 2011: Top Sector Energy Established
Green deals between multiple Stakeholders about
variety of subjects
� 2012: Top Sector Energy continued by Rutte II Government
Conclusion:
� No long term, consistent and coherent policy during
different Government terms (Germany good example)
� Rather erratic approach
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Energy Transition in The Netherlands (3/4)
Results so far:
�Facts
Renewable Energy Production: 3,9% vs. 4,1% 2 years ago
% Renewable Energy of Energy Consumption – 2010
NL 3,8%
Italy 10,1%
Germany 11%
France 12,9%
Denmark 13,8%
Reduction CO2 emission per inhabitant lower than average in Europe
�However
Energy Transition high on Political Agenda (Climate Change, Security of Supply
(ME), uncertainty nuclear option)
Local / Regional decentral initiatives, SMART Infrastructure)
Top sector Energy Innovation Initiative
SER ‘Duurzaamheids Akkoord’
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Reduction Greenhouse Gas emission 2001 2011
Source: Eurostat, 2010
CO2emission per inhabitant
tCO2 per inhabitant
20112001
1,0% p.a.
11,09,9
2011
7,9
2001
6,9
1,3% p.a.
4,3
20112001
3,6
1,8% p.a.
The
Netherlands
EU World
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Energy Transition in The Netherlands (4/4)
Ambition Rutte I/II (Adopted by Top sector Energy)
�20% less CO2 in 2020 by energy savings in households and industry
16% renewable energy, with gas as transition fuel
�Long term horizon: EU objective aiming for 8095% CO2 reduction in 2050
�Competitive Energy Prices ST / LT
�Strong position NL in key segments
�Make renewable energy faster more competitive
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The Conventional Energy System:
�Fossil fuel based
�Central production
�Large scale units
�All elements of the chain are part of
the energy company
�One way system: energy flows from
power unit to consumers
�Energy is affordable, reliable and it
also became relatively cleanSource: Essent
How to Reach Our Ambition? (1/5)
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Step 1. Sustainable (Green) Energy
�In mid nineties this was mainly
centrally generated
�Biomass (wood chips/palmoil)
cofiring and large windparks
Source: Essent
How to Reach Our Ambition? (2/5)
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Step 2. Local Energy
�Households and companies
(individuals and cooperatives)
produce their own energy with solar
panels, windmills and biogas units
�Twoway energy system
�Still marginal, but this development
is expected to continue
Source: Essent
How to Reach Our Ambition? (3/5)
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Step 3. Adapt the Energy
System
�Central and local
generation
�System flexibility :
central backup via gas
units, energy storage,
demand steering
�Use local energy close to
the source
Sust. Generation Sust. Generation
Flexible
Backup
StorageStorage
SMART HOME
Energy Efficiency
CENTRAL LOCAL
Source: Essent
How to Reach Our Ambition? (4/5)
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How to Reach Our Ambition? (5/5)
Two main routes:
1. Energy Efficiency (Less Use): Enormous Potential
2. Renewable Energy Sources
Energy Transition Requires a Fundamental Change of the Energy system
Paradigm ShiftCurrent Future
� Central Energy Production
� Mainly Fossil Based
� Decentralized Energy Production
� Renewable Sources (Wind, Solar, Biomass)
Dual Energy
System
Gas as
Transition Fuel
Smart Grids as
Enablers
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Can Our Ambition be Met?
� ECOFYS (2013): “16% renewable production in 2020 is ambitious, but possible via a combination of techniques and methods, provided projects start now and government provide clarity about financial support”
(In Pj)Situation
2010
Current policy
2020
Required &
possible 2020
Additional required
2013 2020
Energy Savings relative to 2011 97 151
Biofuel (liquid) 13 37 37 24
Waste / Wood Incineration 43 73 83 30
Biomass in generation 12 60 48
Geothermal & Heat / Cold storage 5 21 35 30
Wind onshore 14 28 52 38
Wind offshore 3 21 50 48
Solar PV 0,3 5 18 18
Solar Heat 1 1 7,4 6,4
Total Energy Consumption… 2304 2207 2153
.. of which renewable 79 (3,4%) 186 (8,4%) 342 (16%) 187
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Challenges in the Energy Transition
1. Cost Competitiveness of Renewable Energy Options
2. Intermittency of Renewable Energy sources
3. Acceptance of New Energy Options by Consumer
4. Role of Main Actors: Government, Knowledge
Institutions/Universities, Energy Companies,
Network Companies, Financiers: Cooperation
In addition these are two questions requiring an
answer:
1. Recent Fossil Fuel Based Investments in NL
2. Shale Gas Revolution.
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Challenges in the Energy Transition: Cost
Competitiveness of New Energy Options
How to improve cost competitiveness of renewable energy options ?
�Build Innovation Portfolio
�Right Balance 4 D’s (Discovery, Development, Demonstration, Deployment)
�Commitment large Companies and MKB / SME (40% export NL)
�Organize proper financing to avoid being trapped in the valley of death
�Ensure sector has sufficient and proper educated people
Currently: limited attention for entrepreneurship, commercialization, technology in
education
�Reinforce strong energy areas
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Challenges in the Energy Transition: No single bullit
can do the trick: 7 Energy Focus Areas
Topsector
Water
Topsector
HTSM
Topsector
Chemie
Energy saving
in buildingsGas
Wind off shore
Energy saving
in industryBioenergy
Solar Energy
Smart Grids
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Phases of innovation
Resea
rch &
Dev
elopm
ent
Larg
e sc
ale
dem
o’s
Smal
l sca
le d
emo’s
laggards
late majority
early majority
early adopters
innovators
Comm
erci
aliz
atio
n
Nic
he m
arke
ts
Marketshare
Time
Valley’s of death emerges
when actors in a later
development phase feel
there is no added value
for the innovation. The
market collapses
Private Financing
High Risk Public Financing
Actors (scientists, companies, consumers) develop technology together by solving
technical economic problems, executing tests and developing markets
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Challenges in the Energy transition: Intermittency of
Renewable Energy Sources
� Impact of renewable energy on daily energy prices
� Cross border effects of German PV production on neighboring
countries
� Effect of wind power/solar PV on conventional gas power
plants usage
� Integration of renewable energy production in electricity
networks; challenges to security of supply requires need of
sufficient flexible back up
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Increasing photovoltaics feedin strongly impacts the
daily energy price in Germany...
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20:0018:0004:0002:00 24:0022:0008:0006:00 16:0014:0012:0010:00
EPEX 15.05.2008 Energy generation PV 15.05.2012EPEX 16.05.2012
Use of middle and peakload plants
[€/MWh][MW]
Source: EEX
More renewables and decreasing demands put particular pressure on older
coal and gas power plants
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… but also in Central and Western Europe…
Electricity prices for one hour at European stock exchanges (in €/MWh (left axis)) and
German PVelectricityproduction (in GW (right axis)); 8th May 20121)
1) Source: EEX; RWE Supply&Trading.
Germany German PVproductionFranceSwitzerland
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An example of conventional power plants: massive
decrease of working hours
Juni 2009 Juli 2009
MW
Usage of the gas CHP unit in Gersteinwerk F (427 MW) 2009 compared to 2011
Juni 2011 Juli 2011
MW
Production in June and July 2009 Production in June and July 2011
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Integration of renewables and challenges to security of
supply
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max: 22.656 MW
04.02.2011, 19:00
min: 140 MW
20.05.2011, 10:00
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max: 13.096 MW
09.05.2011, 12:00
min: 592 MW
01.01.2011, 12:00
Quelle: RWE Supply&Trading, MLTVW
> In the first halfyear of 2011 alone, there were variations of 23 GW in wind feedin and 13 GW in
photovoltaics feedin.
GW GW
03.02.2011 5.02.2011 19.05.2011 21.05.2011 08.05.2011 10.05.2011 31.12.2010 02.01.2011
Wind Photovoltaics
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Challenges in the Energy Transition: The Consumer
� Improve Acceptance by The Consumer
Innovations introduced via technology push instead of market pull.
Examples: SMART meter, nuclear energy, CCS, biomass cofiring,
fracking (shale oil/gas)
Technology push often fails
Energy Transition: socio technological transition. Can not be enforced
by governments, needs to be accepted by all stakeholders
(governments, NGO’s, consumers, companies, knowledge institutions)
Exceptions: Crises situation (oil crises last century)
Education process requires companies to understand consumers and
consumers to understand the ins and outs of energy
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Challenges in the Energy Transition: Role of Main
Actors
� Governments: Energy Policy, Stimulation, Impediments, Stable Energy
System
� Knowledge Institutions/Universities: New Ideas, Cooperate
� (End) consumer: Part of Process, Awareness, Participate
� Industry: Energy/Network Companies, SME, Clean Tech companies: Have
Knowledge/ Expertise, Backup, Energy Savings Households, Accommodate
Decentral production (SMART Grids), Electric Cars
� Financiers: Crucial in Facilitating Transition
Cooperation/Leadership
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Challenges in the Energy Transition: Company Clusters
Customer shell
NL Company Partners
Suppliers
Customer Customers
Financial
Partners
Co producers
External
Stakeholders
Governments
Knowledge
institutes
Education
Playing field
Support shell
Innovation en
operational shell
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Questions in the Energy Transition: 1. Recent Fossil Fuel Based Investments in NL
� Dutch Energy companies have vested interest in Energy Transition, as they
have invested large amounts of capital in gas/coal units that are at
risk/stand idle and do not make the required return
� Gas units will always be required for flexibility in case sustainable
production does not operate (no wind, no sun)
� Bilateral Agreement with Germany?
� Role in SER Duurzaamheids Agreement for Sustainable growth: turndown
old cash generating coal units, future of coal tax?
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Questions in the Energy Transition: 2. Shale Gas Revolution 1
� Background
• Found in rock formation rich in organic matter (at depth of 15005000 m); known
for over 200 years
• Until recently uneconomic because of low rock permeability, low production rate
• Took off in USA due to introduction horizontal drilling combined with multistage
hydraulic fracturing over about 2000 m horizontal distance using high pressure
water (99%) and sand/chemicals (friction reducer). Fractures extend as much as
few hundred meters in hydrocarbonbearing rock. One well every 5 km
• Shale gas reserves are in China (largest reserves!), USA/Canada, Europe (Poland,
Germany, UK, France, Spain, Ukraine, Bulgaria, Netherlands
(Brabant/Gelderland/NO polder/Randstad)
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Questions in the Energy Transition: 2. Shale Gas Revolution 2
� Impact on market fundamentals/energy security
• USA: Shale gas production increased from 11 bcm in 2000 to 138 bcm in 2010 (i.e.
23% of total US gas production (0,6 tcm). In 2035 projected to grow to 46% of gas
production.
Shale gas resource availability: 2550 tcm, i.e. 4080 years current production
Over 2007/2010 conventional gas imports dropped 19%
Henry hub gas price dropped from $ 8/9 in 2008 to $ 4 /MBTU in 2010
Return of energy intensive industry to US
• Europe: Nearly as much recoverable shale gas as in US.
Gas prices dropped from $11,5 in 2008 to 8 $/MBTU in 2010 and become more
linked to spot gas prices in stead of to oil
Shale gas recognized by EU Commission, but environmental concerns
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Questions in the Energy Transition: 2. Shale Gas Revolution 3
� Impact: economic, environmental and energy transitional
� Impact on US Economics
� Environmental: Carbon dioxide and methane emissions, water usage,
disposal of chemicals and water used in fracking, contamination of
groundwater, competing land use requirements in densely populating
areas (noise/traffic, increased seismic activity in the area of production
� Energy Transitional: Shale Gas could potentially cause a setback of the
energy transition, which requires large sums of government support to
become competitive.
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Conclusions
� The Energy Transition (less use of and less dependant of fossil fuels) is a world
dilemma
� A lot of attention has been given to the transition, but
* The transition has been too slow
* A consistent, coherent and long term energy policy is a prerequisite, but lacking
� So far insufficient support has been created in society in an early stage
� 16% renewables in 2020 is just possible through various means/technologies
� Companies have a key role, together with knowledge institutions, government,
NGO’s and consumers
� The debate between central and decentral generation needs to be resolved
� Shale gas may temporarily adversely impact the transition towards renewables
� Cooperation between all actors is key to the solution