Climate Change: are the 2020 European Union Objectives Realistic

1
Climate Change are the 2020 European Union
Objectives Realistic?

• Colette Lewiner
• Capgemini Global Leader Energy, Utilities and
  Chemicals
• 125th ESPCI Anniversary
• Paris, 22 November 2007

2
European Union Climate Change Objectives

• In March 2007, the European Union Ministers asked
  the Member States to commit to

3 x 20 objective by 2020

• Energy consumption reduction of 20
• Green House Effect gases (mainly CO2) emissions
  reductions of 20
• Portion of 20 of renewable energies in their
  energy production

• While these objectives were articulated in
  response to Climate Change issues, the underlying
  assumption is of course an improved security of
  energy supplies as well as a growing European
  economy.
• 2020 is a short time horizon
• compared to the lead time for construction of
  large plants as nuclear plants,
• for the industrialization of carbon
  sequestration,
• for renovation of the buildings and houses park,
• for the switch of the car fleet to electrical
  cars.
• For example
• More than 80 of the refrigerators bought in 2007
  will still be in operation in 2020
• Less than 1/3 of the industrial and utility
  infrastructure in place today will be renewed by
  2020.
• More than 20 of the cars bought in 2007 will
  still be on the road in 2020.

3
European Union Climate Change Objectives
3 x 20 objective by 2020

• Energy consumption reduction target of 20

Source Eurostat, EU Commission, UNFCC

• However, energy consumption continues to grow. In
  the EU-25, the growth in total electricity
  consumption from 1999 to 2004 amounts to
  (source European Commission / Institute for
  Environment and Sustainability, 2007).
• Residential sector 10.8
• Tertiary sector 15.6
• Industrial sectors 9.5
• Before reverting the trend, we have first to
  stop it.

4
European Union Climate Change Objectives
3 x 20 objective by 2020

• Green House Effect gases (mainly CO2) emissions
  reductions of 20

• To limit the average worldwide temperature
  increase to 2 or 3 degrees, it is necessary
  until 2050 to
• Divide by 2 the CO2 emissions at the worldwide
  level (Factor 2)
• Or two divide by 4 the emissions of
  industrialized countries (as the developing
  countries will not be able to follow) (Factor 4)

Source Eurostat, EU Commission, UNFCC
5
European Union Climate Change Objectives
3 x 20 objective by 2020

• Portion of 20 of renewable energies in their
  energy production

• A steep increase in renewable share is necessary.
  However, existing generation projects are mainly
  fossil fuel.

Source Eurostat, EU Commission, UNFCC
6
AGENDA

• How will Europe achieve these targets?
• How much will it cost?
• How can we attain these goals without
  jeopardizing the competitiveness of the EU?

• Security of Supply
• Energy Savings
• CO2 emission reduction
• Renewable energies
• Simulation for France
• Conclusion

7
700 billion at least need to be invested in new
power plants during the next 25 years
Peak load, generation capacity and electricity
mix (2006)

• Investments in infrastructures started to grow
  again in 2005. and continued in 2006
• Planned projects for generation plants amount to
  a total capacity of 190 GW
• Security of the supply situation is evolving
  positively
• But more investment is needed to
• Meet the consumption increase
• Replace ageing plants (UK nuclear)
• Match the peak load demand
• Increase the carbon free generation capacity
• Several factors slowing down these investments,
• increased cost
• Supply constraints for components
• Scarcity of consented sites
• Scarcity of engineering and construction capacity
• Political risks and lengthy regulatory procedures

According to forecasts, European generation
adequacy is not at risk until 2014-2015
8
The planned investments are not consistent with
the European climate change objectives
Projects of new generation capacities, in MW
(2006)

• Investments are not aligned with the EU climate
  change objectives
• 81 of the planned plants will be fossil fuelled
  
• Only gas fired plants are economically viable to
  meet the demand during peak hours
• But these plants
• have a high and volatile fuel cost
• are CO2 emitters
• are contributing to increasing European
  dependencies on imported gas

With these planned investments, the 20 CO2
emission reduction objective seems far away
9
Nuclear is coming back
Projects of new nuclear reactors worldwide

• Nuclear energy is
• Economically viable,
• Large scale
• Reliable and
• Carbon free generation option
• Worldwide, nuclear plant constructions are
  flourishing. 30 plants are under construction and
  290 are planned.
• Asia is one of the most active areas
  concentrating 15 out of the 30 under construction
• Big investment in EPR
• Finland EPR reactor in construction at Olkiluoto
  (estimated amount more than 3 bn) operating in
  2011
• France EPR reactor in construction at
  Flamanville (EDF - estimated amount of 3.4 bn)
  operating in 2012

Similar situation in Europe Canada
Source U.S. Bureau of Labor Statistics, 2005
Nuclear companies are challenged by ageing
workforces and a shortage of new skills
10
AGENDA

• Security of Supply
• Energy Savings
• CO2 emission reduction
• Renewable energies
• Simulation for France
• Conclusion

11
Energy Savings
Energy conservation is a key factor to improve
security of supply and to reduce CO2 emissions.

• The target of a 20 demand reduction is very
  ambitious given that demand is currently rising.
  It will actually require a reduction of more than
  37 off the current trend for electricity
  consumption.
• To reach this 20 reduction in energy
  consumption, strong action plans need to be
  launched both at the EU and at country levels.

• in August 2007, German ministers agreed on a
  30-point program to combat climate change issues.
  This program should make it possible to reduce
  CO2 emissions by 35 to 36 percent in comparison
  to 1990 levels by 2020. Energy and CO2 reduction
  should come from cars, industry, public buildings
  and private homes.
• In France a large debate took place around the
  Grenelle de lenvironnemment in October 2007
  and different measures should be adopted by the
  French parliament
• Buildings after 2010 new low energy consuming
  constructions, for existing public buildings
  compulsory renovation before 2015, financial
  incentives for better isolation in private
  housing
• Transportations reducing cars CO2 emissions
  (ecopastille), promotion of railroad , tax on
  air transportation in certain cases
• No more incandescent bubbles sold after 2010
• Compulsory information on domestic equipment
  consumption

12
Energy Savings

• The national action plans should include
• Regulatory measures for example
• Compulsory insulation norms for new buildings and
  refurbishment assessed in any sales transaction.
• Expand white certificates mechanisms -already in
  place in UK and France- across all EU countries.
• Rewarding mechanisms for energy conscious
  individuals or institutions for example
• Smart meters allows and enables the end customer
  to have a proactive energy saving attitude.
• Smart meters enable Utilities to give incentives
  for consumption decrease, particularly during
  peak hours and thus contribute both to the energy
  savings and CO2 savings objectives
• Replacement of all meters by smart meters (as in
  Sweden, Ontario and California) should be imposed
  at EU level

13
AGENDA

• Security of Supply
• Energy Savings
• CO2 emission reduction
• Renewable energies
• Simulation for France
• Conclusion

14
CO2 emission reduction
The CO2 emission reduction will benefit from the
energy conservation achievements, however
specific actions are needed to meet the European
objectives
World greenhouse-gas emissions by sector (2000,
in )

• CO2 emission reductions will come from
• Energy conservation results
• Better optimization of the generation fleet
  trough Europe via a more fluid grid
• Modification of the primary energy mix, towards
  carbon free generation
• Improvement of the present CO2 Emission Rights
  Trading System
• Organisation of the end users CO2 market

15
CO2 emission reduction (1)

• Better optimization of the generation fleet
  trough Europe via a more fluid grid
• In France, nuclear generation represents around
  80 of electricity output and the nuclear plants
  have to operate in a load following mode when the
  French demand is not high enough to absorb their
  nominal output.
• A more fluid European electricity market- with
  less congestions- would allow exportation of this
  extra carbon free electricity (around 70 TWh per
  year) to the other European countries.

• Improvement of the present CO2 Emission Rights
  Trading System by
• Incorporating other sectors, such as
  transportation, that are big emitters
• Allowing the certificates to be carried forward
  from one period to another
• Establishing clear and coherent rules for the NAP
  quotas allocations. Above a certain threshold
  these quotas could also be auctioned
• Qualifying better the CDM projects to be sure
  that these projects would not have been done
  anyway
• Extending the Kyoto protocol beyond 2012 to give
  a better visibility for Utilities investing in
  large and long term generation plants
• Finally the question is posed on substituting a
  tax to this market mechanism.
• CDM Clean Development Mechanism

CO2 prices Spot price 1st Period (2005
2007) Futures price Dec 06 2nd Period (2006
2012)
Source Powernext
16
New European National Allocation Plans

• G8 nations declared in June 2007 the aim to at
  least halve global CO2 emissions by 2050
• The forthcoming Bali UN Climate Change Conference
  (12/07), is aimed at achieving a comprehensive
  post-Kyoto agreement
• National Allocation Plans have been re-negotiated
  for the 2008/2012 period
• There is a need to extend the Kyoto protocol
  beyond 2012 to give a better visibility for
  Utilities investing in large and long term
  generation plants

Countries real CO2 emissions, compliance to ETS
and Kyoto (2006)
17
CO2 emission reduction (2)

• Modification of the primary energy mix, towards
  carbon free generation
• Utilities can combine two approaches for modify
  their energy mix
• Reduction of the CO2 content of the primary
  energy mix
• CO2 elimination or storage clean coal plants
  CO2 sequestration equipments
• Nuclear energy is allows carbon free generation
  and is therefore an option that has to be
  considered even if at the 2020 horizon it would
  have little impact
• Renewable energies (hydro, wind, solar) have
  continued to be developed

A large range of CO2 emissions in EU countries

• Organisation of the end users CO2 market
• Companies are increasingly engaging in Corporate
  Social Responsibility (CSR) initiatives that
  include energy conservation and CO2 savings.
• This market has to be regulated in order to
  avoid
• the risk of fraud such as sale of credits from
  carbon reduction mechanisms that do not exist,
• funding carbon reductions that could have
  happened anyway,

18
AGENDA

• Security of Supply
• Energy Savings
• CO2 emission reduction
• Renewable energies
• Simulation for France
• Conclusion

19
Renewable energies
Renewable energies allow carbon free electricity
generation which is a great advantage
Proportion of renewable energy in selected
European countries

• Renewable share in primary energy in the EU
  6,5 in 2006
• European Union objective 20 by
  2020 !
• Reaching this 20 share of renewable energies is
  a big industrial and financial challenge. The
  required investments should amount to 18 billion
  Euros per year but should also boost Research and
  Development and new clean technologies

20
Renewable energies

• Hydropower
• First source of renewable energy in Europe and
  has a furtherl arge increase potential in the EU
• Only significant carbon free peak load generation
  option
• Will become indispensable as an energy reserve
  source to complement wind mill intermittent
  output.
• Its development should not be jeopardized by new
  stringent regulations.

• Wind power
• Wind power is developing fast
• It can benefit from the existing reserve capacity
  as long as its share of the total generation
  stays modest.
• Its development is today boosted by governments
  subsidies and climate change issues.
• Windmills that operate in a wider range of wind
  conditions and other technology improvements are
  expected

21
Utilities are investing in wind capacity
Wind capacity (2006)

• Wind capacity is increasing, however this impacts
  grid management
• Germany and Spain have made spectacular wind
  power breakthrough in 2006
• Reserve capacity is needed for this unpredictable
  electricity generation source
• Wind Companies are acquired today at very high
  prices (La Compagnie du vent 11 M Euros revenue,
  acquired by Suez at 720 M Euros Enterprise value
• Wind generation is subsidized through purchase
  tariffs imposed to the Utilities

A green bubble?
22
Renewable energies

• Solar
• The use of solar thermal panels should be
  strongly encouraged
• Photovoltaic solar energy is still very
  expensive. However technology breakthroughs
  should happen (such as matrixes allowing
  efficiencies improvements from 15 to 40).
• Significant decreases in manufacturing costs are
  needed.
• To make solar a reliable source, batteries have
  to be installed

The worldwide photovoltaic market In volume, in
Megawatt peak

• Biomass/bio-fuels
• Biomass and bio-fuels are already being used
  extensively in countries such as Brazil.
• In Brazil in 2005, flex fuel cars overtook
  petrol-driven models for the first time (53.6 of
  the market for new cars)
• In Europe it is more questionable to use fields
  and water that are used to producing food for
  biomass.

23
Simulation for France (done for UFE Union
Française de lEnergie)






Current Projection
Without Electricity Savings
Carbon Free Generation
Energy Consumption Saving
Mixed Scenario
11,6
-2,5
2,4
-10,0
-8,8
/ 567 MtCO2eq (ts GES 1990)
C02
0
-11,1
0
-15,7
/ En. finale
-15,7
DSM
10,5
14,4
14,1
16,6
16,9
/ En. finale
RENEWABLES
5
10
BIOFUELS
10
2
2
/ Carburants

• The Mixed Scenario combines efforts on
  electricity generation and end consumption
• In this optimum scenario energy savings and
  renewable objectives are nearly met, but not the
  CO2 ones
• The French present low CO2 emissions explain why
  these objectives are not met

24
Capgemini analysis concludes that

• The EU recommendations are aiming at building the
  right road map to avoid disastrous consequences
  of Climate Change issues
• However the detailed objectives seem very
  ambitious and may not be met.
• We estimate that energy conservation is THE key
  factor as it will automatically drive CO2
  reductions.
• A strong political will is needed to reach these
  goals. Practical plans should be articulated
  around
• information campaigns coupled with the right
  incentives,
• New regulations to boost low energy consuming and
  low CO2 emitting devices
• Additional research and development funding,
  especially on photovoltaic solar energy and CO2
  sequestration.
• All carbon free generation sources, including
  nuclear, should be considered at equal foot.

25
Capgemini analysis concludes that

• The cost of this policy should be evaluated as it
  should not jeopardize Europes competitiveness
  compared to other Regions in the world.
• Other regions of the world need to follow
• A recent EIA report shows that by 2030, worldwide
  energy consumption should increase by 57 and CO2
  emissions by 59!
• Discussions are underway to convince other
  countries notably the United Sates, Canada and
  China to take strong CO2 reduction measures and
  tangible progresses were achieved during the
  recent G8 meeting.
• However, if these intentions would not translate
  into facts, the European efforts alone represent
  a drop of water in the ocean while jeopardizing
  Europes development.

CO2 emissions forecast for different regions in
the world (2003-2025) in Billion metric tons
26
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