Transcript 80% below 1990 by 2050 - Energy + Environmental Economics

Getting to 2050
Pathways to Deep Reductions in
GHG Emissions
CFA Society Presentation
October 25, 2011
San Francisco, CA
Ren Orans, Managing Partner
Energy and Environmental Economics, Inc.
Agenda
Climate Change-Why Should I Care?
No Question we have a Monumental Task Ahead
Achievable through Wedges?
Electrification is Key!
Duke Power Example
2
Energy and Environmental Economics, Inc.
San Francisco-based consulting firm since 1989
Deep expertise in electricity sector
Experienced in linking technical-economic analysis to
policy decision-making and public process
Skilled at placing near term energy choices in longterm, transformational perspective
3
The Climate Challenge
Climate stabilization (at 450 ppm CO2e) requires
global emissions to stop growing by 2015, and to fall
50 – 80% below 2000 levels by 2050
Reducing GHGs will mitigate climate change impacts,
but temps will increase no matter what we do today
Source: Intergovernmental Panel on Climate Change, Climate Change 2007: Synthesis Report
Climate ChangeWhy Should I Care?
Economic Costs- Costs between 1 and 4 percent of
GDP in 2050
Investment in Mitigation-Requires huge investment
in new Infrastructure.
• Upfront investments are about 3 times economic costs which
amounts to about $10 trillion over next 20 years.
Adaptation-What is left over after mitigation, might
be something on the order of $100 Billion per year.
• This also introduces a tremendous financing opportunity to
mitigate, account for and insure against residual adaptation
costs.
National GHG targets developing in
the absence of an int’l framework
Governing
Body
Source/Declaration
Legally
Greenhouse Gas Emissions
binding? Reduction Target
G8
G8 Hokkaido Toyako
Summit
No
50% below current levels by
2050
Australia
Carbon Pollution
Reduction Scheme
No
60% below 2000 levels by
2050
European
Union
European Parliament
Legislative
Resolution, 17
December 2008
Yes
20% reduction from 1990
levels by 2020 (goal of 60%
to 80% below 1990 levels by
2050 in developed countries)
United
Kingdom
Climate Change Act of Yes
2008
80% below 1990 levels by
2050
United
States
Obama administration
policy goal, various
legislative proposals
80% reduction by 2050
Proposal
only
U.S. Federal Proposals Call for Deep
Cuts in GHG Emissions by 2050
Source: Pew Center on Global Climate Change, www.pewclimate.org
U.S. States with GHG Targets
Example states – not full list
Arizona
2000 levels by 2020
50% below 2000 by 2040
California
1990 levels by 2020
80% below 1990 by 2050
Colorado
20% below 2005 by 2020
80% below 2005 by 2050
RGGI
states
10% below 1990 by 2020
Florida
2000 levels by 2017, 1990
levels by 2025, and 80%
below 1990 levels by 2050
Hawaii
1990 levels by 2020
Minnesota
15% below 2005 by 2015
30% below 2005 by 2025
80% below 2005 by 2050
Oregon
10% below 1990 by 2020
75% below 1990 by 2050
Source: Pew Center on Global Climate Change, www.pewclimate.org
California’s GHG Strategy
AB 32: 1990 levels by 2020
• 80% of reductions to come
from regulations
• 33% RPS by 2020
• Energy efficiency
• Combined heat and power
• Light-duty vehicle emissions
performance standards
• Low-carbon fuel standard for
vehicles
• 20% of reductions to come
from regional cap and trade
• Western Climate Initiative
Executive Order S-3-05:
80% below 1990 by 2050
California 2050 Study
Key question
• What does California need to do to
meet the 2050 GHG reduction
goal?
Infrastructure modeling
approach
• Multi-sector, stock roll-over model
• Integrated electricity grid dispatch
algorithms
• Use standard projections of CA
population, economic growth
• Consistent w/ AB32 Scoping Plan
Independent study sponsored
by Hydrogen Energy
International (HEI)
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California’s Big Step Forward
Assembly Bill 32
700
Business as usual projection
600
Million metric tonnes CO2e
Today
500
2020 Goal under AB32
400
Electricity
300
Transportation
200
100
Industry
2050 Goal
Executive order
0
1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050
Greenhouse Gas Savings for 2050
Greenhouse Gas Reductions in California
900
Conservation & Behavior Change
800
Energy Efficiency: Transportation
700
Energy Efficiency: Buildings and
Industrial
PV Rooftops
MMt CO2e
600
500
400
Low Carbon Biofuels
300
Electrification: Transportation
200
Low Carbon Generation
100
Mitigation of Non-Fuel/Non-CO2 GHGs
1990
2000
2010
2020
2030
2040
2050
Remaining CO2e
Year
Source: Energy and Environmental Economics, Inc 2009
Emissions Reductions by Source
MMt CO2e
900
800
Non-Fuel/Non CO2 GHGs
700
Diesel & Other transport fuels
600
Gasoline
500
Fuel - Industrial & Agriculture
400
Fuel - Residential & Commercial
300
Electricity - Transportation
200
Electricity - Non-transport
100
0
1990
Baseline
2000
2010
2020
2030
2040
2050
Year
13
Types of Change
Behavioral Change
Technological Change
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Conservation & Energy Efficiency
Unprecedented
levels of energy
efficiency
Transition to
zero net energy
homes by 2020
Extensive
retrofits of
existing
buildings
20
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Residential Homes (Millions)
“Smart Growth”
10% reduction
in vehicle miles
traveled relative
to baseline
16
New Homes
14
12
Retrofit Homes
10
8
Homes with Historic
Energy Demand
6
4
2
1990
2000
2010
2020
2030
2040
2050
Year
15
Low-Carbon Biofuels

Eliminate consumption of gasoline by 2050 replacing it with
some mix of low-carbon electricity and low-carbon fuels

Aggressive biofuel assumptions don’t meet all transportation
energy needs – biofuels likely to become premium fuel
California Biofuel Availability
Billions of gallons
45
Conservation
40
Efficiency
35
Electrification
BioJet Fuel
30
Biodiesel
25
Ethanol
Jet Fuel
20
Diesel
Gasoline
15
10
100% of California's
biomass feedstock for
ethanol plus 7% of US
feedstocks (DOE EIA 2007)
Feedstocks include Ag Residues,
Grasses and Forest Trimmings
7% assumes a distribution
proportional to fuel consumption
across all 48 States
Assumes 1.8 billion
gallons per year of algal
biodiesel and bio-jet fuel
Sufficient to meet 25% of
biodiesel and 10% of bio-jet fuel
demand in 2050 compliant case
5
0
2008
2050 Baseline
2050 Compliant
Case
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Electrification & Electricity
Demand
Electricity demand could nearly double by 2050
Increase in demand driven by electric vehicles
Electric Demand at the Generator (GWh)
Nearly all electricity must be from low-carbon generation
700,000
600,000
Transportation
500,000
Petroleum & Agriculture
400,000
Industrial
Commercial
300,000
Residential
200,000
Baseline
100,000
1990
2000
2010
2020
2030
2040
2050
Year
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Electrification and Loads
High levels of energy efficiency help to decrease demand and flatten
the demand profile
Off-peak electric vehicle “smart charging” & electrification will flatten
load shape, increase overall demand & need for baseload generation
2050 Baseline Case
“Peaky” demand in 2050 Baseline
2050 Compliant Case
“Flat” load profile in 2050 Compliant case
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Low-Carbon Generation
1. High Renewable Case
3. High CCS Case
2. High Nuclear Case
4. Blended Case
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2009 - 2050 Cumulative
Capital Investment (Billion 2008$)
Investments to decarbonize electricity
are significant in all low-carbon cases
$600
$500
$400
$300
$200
$100
$-
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Generation Capacity in 2050
Gas CT
250
200
Geothermal
Solar Thermal
150
Solar PV
Wind
100
Nuclear
Storage - 4 Hour
50
Gas w/ CCS
Coal w/ CCS
C
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Combined Cycle
H
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N
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Coal
Hydro
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Nameplate Capacity (GW)
Biomass
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Technology Wish List
Efficiency
Zero net energy buildings
Extensive building retrofits
Electrification
Batteries for electric vehicles
Smart charging for electric vehicles
Biofuels
Zero carbon ethanol
Zero carbon algal fuels
Zero Carbon Gen
Carbon capture and storage
Large scale energy storage
Nuclear waste storage
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Retail Rates, Risk and Greenhouse
Gas Reductions
Example from
Duke Energy Carolinas
E3 Case Study
Duke Energy Carolinas
Duke Energy Carolinas is focused on coal and nuclear:
1. Energy efficiency and conservation
2. Transition away from coal power
3. Transition from natural gas power  renewables
4. Electrification of fossil fuel uses
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Source: Duke Energy Carolinas, 2010 Integrated Resource Plan
Investment Decision Timeline
Power plant investments made today have 20 – 40
year lifetime at minimum
Only one to two investment cycles before 2050,
when goal is to have a decarbonized energy system
To what degree should utilities tolerate ratepayer
risk of future emissions abatement costs?
Solar
Wind
Nuclear
Carbon capture &
storage
Duke Energy Carolinas Case Study
Scenario
1. Business-asusual, no CO2
price
2. Business-asusual, w/ CO2
price
3. Coal
retirement
4. Low risk
electrification
5. High risk
electrification
Description
Modeled roughly after Duke Carolinas 2010 Integrated Resource
Plan, assumes no carbon abatement costs
Same as #1, but includes moderate carbon abatement costs
Same as #2, including CO2 cost, but coal is replaced with natural
gas fired generation
Same as #3, but assumes a high penetration of electric vehicles.
New loads are served with new natural gas-fired generation.
Scenario also assumes off-peak charging of electric vehicles.
Electrification does not increase RPS compliance costs. Utility
receives 100% of the GHG savings credits achieved in
transportation sector from electric vehicles
Same as #4, but assumes uncontrolled charging of electric
vehicles. Scenario assumes electrification increases the cost of
decarbonizing the utility generation portfolio to meet the RPS, and
provides no utility credit for GHG savings achieved in
transportation sector from electric vehicles
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Duke Energy Carolinas Case Study
E3 developed five scenarios for 2011 – 2030
Scenarios test variations in generation mix &
vehicle electrification assumptions
GWh
160,000
140,000
Purchases
120,000
Natural gas
100,000
Renewables
80,000
60,000
40,000
20,000
Hydro
Coal
Nuclear
0
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Duke Energy Carolinas Case Study
Assume retired coal is replaced with natural gas
Assume new electrification loads are met with
natural gas
2030 Change in Capacity
Relative to 2010 (MW)
25,000
20,000
15,000
10,000
5,000
Natural gas
0
Renewables
-5,000
-10,000
Hydro
Coal
Nuclear
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Scenario Results:
Greenhouse Gas Emissions
Net Utility Emissions (MMT CO2)
60
50
Emissions are
nearly flat in BAU
scenario
40
30
20
Emissions risk or
benefit from
electric vehicles
High-risk Electrification Case
BAU Case
Coal Retirement Case
Low-risk Electrification Case
10
2009
2012
2015
2018
2021
2024
2027
2030
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Scenario Results:
Retail Rate Impacts
High-risk case: If
utilities do not
receive emissions
savings credit
from electric
vehicle, rate
impacts are high
$0.12
High Risk Electrification
BAU
Real 2010 $/kWh
Low Risk Electrification
BAU Without Carbon Price
$0.08
Low risk case:
rate impacts are
lower than BAU
largely because
of CO2 cost
savings credited
from vehicle
electrification
$0.04
$0.00
2009
2012
2015
2018
2021
2024
2027
2030
30
Ratepayer Risk & Electrification
Electrification & natural gas pathway can be:
• Lower cost for customers;
• Lower risk (for ratepayers and/or shareholders); and
• Lower emissions than BAU coal and nukes pathway.
Done wrong, electrification represents an
emissions and cost risk to utilities
Electrification is unlikely to achieve high
penetrations without concerted policy efforts and
support of electric utilities
• Current federal incentives for EVs unlikely encourage the
market transformation and breakthroughs that are needed
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Summary of Challenges and
Opportunities
GHG reductions pose a substantial financing
challenge
• Initially mitigation in both power, buildings and
transportation sectors
Utilities and larger customers should
account for and possibly hedge against
emissions abatement risk and cost
• Similar to sinking fund for disposal of nuclear waste
• Lack of policy does not translate to zero future
costs
Electrification is key to mitigation challenge
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Thank You
Ren Orans
Energy and Environmental Economics, Inc.
101 Montgomery Street, Suite 1600
San Francisco, CA 94104
(415) 391-5100
[email protected]
Presentation Study Available at:
http://ethree.com/documents/CFA_SocietySF/E3_2050_25Oct11.ppt