I have bad news for everyone who is trying to convince investors investments in coal are getting more risky. The ‘Centraal Plan Bureau’ (Central Planning Agency, the main economic advisory organ of the Dutch government) has recently published a study about the most cost-effective energy-mix in Europe in 2050. According to this study, coal with CCS (carbon storage) can still play a large role for many decades. This report could potentially have a large influence on the thinking of the Dutch government – indirectly also on people working for public institutions like municipalities, the ABP or universities. So I think it is important we know about this report. I wrote this article to summarize the it and also to provide some counter-arguments.
An introductory article on the report can be found here
And here is the report itself
It has already exerted influence on a recent government report on possible strategies for our energy policy until 2050
The report is offering a number of scenarios about the mix of electricity supply that could be the most cost-effective in Europe in 2050. The main division is between scenarios that assume weak climate-policies, and scenarios assuming more intensive policies. The intensive policy scenarios project 80% less CO2 emissions in Europe in 2050. This can only be attained on the basis of an international climate agreement – according to the report.
The analysis is based mainly on assumptions originating from the World Energy Outlook 2012 – the main yearly report of the International Energy Agency (IEA). This renowned international institution has built up a reputation for making too pessimistic projections on the growth of alternative energy for over more then a decade.
Apart from taking these pessimistic projections as a basis, the CPB- report offers a few alternative scenarios that are even more pessimistic (except one). Here follow some of the assumptions underlying the alternative scenarios
- – Limited possibilities for wind on land due to public resistance
- – Offshore wind will not diminish in price
- – Costs of investments in the electricity network will be higher then expected
- – Prices of solar panels will drop a little faster then the IEA projects
- – The maximum amount of biomass which can be produced in a sustainable way is more limited then expected
- – There will be a smaller market for hydrogen then expected
- – Carbon storage will not develop as fast as expected, possibly due to public resistance
On a positive note, the report projects a bright future for wind energy in almost all scenarios. Only one year ago, the CPB still published a report that concluded wind energy is too expensive.
However the report concludes also there is almost no way solar PV could ever become economically viable. Unlike the scenarios presented by the German Fraunhofer Institute
that envision a future supply dominated by wind, solar, electricity storage + smartgrids (and a little bit biomass for cloudy winter days with no wind) the CPB report sees only two combinations as cost-effective
- – in case of a weak climate policy, a combination of wind + coal with CCS
- – in case of an intensive climate policy, a combination of wind + biomass plants with CCS
Remarkably, the report sees little future for gas in both scenarios. In the first scenario, modern coal gasification plants (IGCC) have the advantage they can also be used for producing hydrogen on windy days, when they are not needed to produce electricity. This would make those new coal plants the most cost-effective. Existing coal plants, as well as nuclear plants, will be pushed out of the market if the share of wind energy increases (because they will produce a smaller number of hours). Hydrogen production based on electrolysis (which could be produced with windmills during hours of surplus production) is not expected to become economically profitable.
However, in the event the world could agree on tougher climate policies, this would result in a higher price for carbon emissions, which would make biomass plants with CCS more economic then coal. Since biomass burning is said to be carbon neutral, if you capture carbon from a biomass plant and store it in the ground, you are actually reducing CO2 levels in the atmosphere. So this would enable these biomass plants to earn a nice income on the carbon emission market (allowing other actors to pollute the atmosphere a little more!).
The report projects only limited opportunities for nuclear energy. Since they take a long time to plan and built, they could only start to play a role after 2040. In the meantime, there could be shortages of uranium. Recycling of uranium is not expected to mature before 2050.
Arguments against this report
From a climate point of view, if these scenarios would come true this would not be entirely satisfactory. In combination with coal, CCS would still cause CO2 emissions (10-20%). And there are environmental hazards and dangers of leakages
With regard to biomass, the question is how much could be produced in a really climate-neutral way , without competing with food production and without depleting the soil in the long run. The report assumes the amount of biomass that could be produced sustainably in Europe is good for 1000 Twh electricity a year (almost 2 times the current electricity production of Germany). This is based on the assumption that most of this biomass would be produced locally. Is this not too optimistic? Especially since we might need biomass for other things as well?
Moreover, there are good reasons to be skeptical about the speed with which CCS can be applied. The fossil industries have had decades to develop it, but the first commercial large scale coal plant with CCS has opened only recently
In the Netherlands, the government originally promised 3 new coal-plants would not be allowed to open unless they had CCS. They failed to make this a hard legal condition for granting the license. So finally the energy-companies could get away with opening the plants without storage – too expensive!
Moreover CCS increases the fuel consumption of electricity plants with 25-40%. This raises the question if it could ever become cost effective. However, I have also found an article reporting on a scientific breakthrough in China that could possibly make it a lot cheaper.
Apart from that, as mentioned before, one can question the pessimistic projections on the development of alternative energy by the IEA (which form the basis of this report). An interesting article criticizing the IEA-projections for solar energy can be found here
According to the default scenario of the CPB report (based on the IEA-projections), solar PV prices would go down 20% by 2030 and 50% by 2050. According to one of the alternative scenarios, it could even be 40% in 2030 and 62,5% in 2050. Yet according to some other reports, current price levels for solar PV are much lower already then those mentioned in the IEA and CPB reports. And the price levels projected for 2050 could already be attained in 2020!
A similar story can be told about the offshore wind-price. According to the default scenario of the CPB, prices will go down 12,5% by 2030 and 25% by 2050. The alternative scenario assumes there will be no price decrease at all. Meanwhile, in New York they expect they can cut prices in half by 2020
See also this article
The CPB report concludes that without CCS, a complete energy-transition to alternative energy is still possible. However due to the high investments in energy storage and the electricity network, this would result in tripling electricity prices. In particular solar PV does not match well with European electricity needs, as energy demand is highest in winter.
The report of the Fraunhofer Institute reaches an entirely different conclusion. Wind and solar energy complement each other perfectly in Germany, because in winter there is more wind, and in summer obviously more sun. If one combines wind and solar with a certain percentage, one could harvest approximately the same amount of electricity every month. This raises the question: did the CPB report only calculate the cost effectiveness of wind and solar separately, or did they also make separate calculations for combinations of them?
Of course, this does not take away the problem there could be days or even weeks with very little wind and sun. According to Fraunhofer, this can be corrected through a combination of smartgrid (allowing transportation of large quantities of electricity from one corner of Europe to another) energy storage, as well as a little bit of backup from CHP plants. Creating this infrastructure would make electricity prices go up in the short run, in the long run they would become much lower then in a business as usual scenario. The CPB report agrees this solution is technically possible, but argues it would be prohibitively expensive.
It remains unclear how both reports calculate the future price of energy-storage. The CPB mentions nowhere they take expected price falls of storage technologies into account. Nevertheless progress in this field has been remarkable over the last years. As short ago as 2012, a leading magazine in Solar PV, www.solarbuzz.com, was stating flatly that improvements in battery technology could not be expected in the near future. One never heard the term storage in articles on alternatives. Right now, storage is a big theme everywhere, except perhaps in The Netherlands.
According to the article below, storage prices are expected to decline from $600 per kilowatt capacity now to about $300 in 2020 and $150 in 2030
And here is another projection
According to some studies, a price of $100 per Kilowatt is the magic border. Large-scale electricity storage becomes economically viable if this price-level is reached. So we have a long way to go. On the other hand, most of the investments in storage will have to be made when we are approaching 100% wind + solar electricity. Certainly in Holland we can still expand wind and sun for a long time without needing storage. And in California, storage is already applied on a relatively large scale
The projections mentioned above are based on current technologies. In the United States, several small start-up companies have started to bring completely new types of batteries on the market. One of those companies is called Ambri. They are developing huge batteries that could store large amounts of electricity in a big sea container. Their technology is a revolutionary simplification of current battery technology and makes use of widely available materials only. When applied on a big scale this technology could easily break through the magic border of $100 per kilowatt capacity – IF the information in the articles is too optimistic.
However, it is remarkable that only a few years after the invention, they already have a number of experimental factories under construction in Hawaii, mainland USA and China. In Europe there is plenty of research in the field of alternative energy, but market-introduction is generally much more difficult! What can we do about that? Maybe somebody can phone Ambri tomorrow and ask them if they would build an experimental factory in Holland, if we were able to find a few investors for them? J
Among specialists and policymakers, different ideas on the future price of energy storage are perhaps the main dividing line. The big question that keeps them awake at night might very well be: ‘what will get cheaper the fastest, carbon storage or electricity storage for wind and sun?’ While alternative energies are becoming cheaper by the year, the fossil industry is also promoting carbon storage more strongly as an alternative.
Whether they also want to invest in it or not is a completely different question. As said, carbon storage is very expensive. Their shareholders expect high revenues every year. Their profit margins are already under pressure because of low prices, and because new explorations in second-rate resources are inherently more expensive. Especially the coal industry is hardly making any profit because they are already producing at cost price. There is a big change all talk about carbon storage is merely a smokescreen for fossil industries who want to continue business as usual as long as possible.
Of course, the idea we could reach negative carbon emissions through biomass burning with CCS is very nice. But if solar energy becomes cheap enough to desalinate seawater on a large scale
negative emissions can also be achieved by growing bamboo in deserts bordering on the sea (like the Western Sahara) and putting that under the ground. One of the nice things about this is that many nutrients for growing bamboo can come from seawater as well!
There is also third possibility bypassing both carbon storage and electricity storage, which is building Concentrated Solar Power plants in North Africa and transporting the electricity to Europe through big cables (which have only 3% energy loss over 1000 kilometers). In desert conditions, it is possible to store solar energy in the sand and use this to produce electricity during the night. Plans for mass application are in an advanced state of development
Getting back to the CPB report: one final critical point is they are projecting an increase in electricity use with 50% for 2050. According to the plans of Urgenda, 50% energy-efficiency can be achieved by 2030
for example with a huge effort to make all buildings energy-neutral. If all cars become electrical this would lead to an increase of 15% in electricity use.
The CPB report is showing our government is now at least starting to think about the future of our energy-supply until 2050. Until now they refused to make plans after 2020 or 2023, with the excuse there were too many uncertainties about future technological developments and climate agreements. It is seems to be very important the climate movement gets involved in this discussion at an early stage. It would also be good if a professional institute like Fraunhofer could make a reaction to the CPB-report. Otherwise anything the CPB says could completely dominate the Dutch political discussion.