Modeling carbon
neutral pathways forthe EU
P R E S E N T E D B Y A . D E V I TA
B a s e d o n w o r k b y : P. C a p r o s , M . K a n n a v o u , T. F o t i o u , P. S i s ko s , A . D e V i t a , G . Z a z i a s , S .
Evangelopoulou
Contact: devita@e3modelling.com

EU Policy context
2016-18: Clean
Energy for All
Europeanspackage for 2030

GHG -40%

RES 32%

2018-19: Clean
Planet For Allpackage

Climate neutrality
in the EU by 2050–> Zero net CO2emissions

National Energy
and Climate Plans(NECPs) end 2019

Current trends

Coal phase-out,large RES projects

Compatible withthe RES targetE-mobility
emerging

Short in Energy
Efficiency
ambition

Green gas andHydrogenprojects launched

Various pathways
EE 32.5%

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2Brussels,
17.9.2020
SWD(2020)
177 final
Stepping up
Europe’s2030 climate
ambition to55%(ClimateTarget Plan)

Key questions for the model-based analysis
Long term questions:• Is climate-neutrality by 2050 in the EU viable and sustainable in the long run?
• Is it possible to reach climate-neutrality solely with conventional fuels andtechnologies?
• If not, what additional elements to promote in addition to conventional
policies and technologies?

• Is climate-neutrality affordable?
Mid-term questions:• Which sectors are affected when increasing the target to 55% in 2030?

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PRIMES
Model structure:• Modular system: one module per sector• Microeconomic foundation with engineering
representations

Aim:• Simulate structural changes and long-termtransitions

Focus:• Market-related mechanisms• Representation of policy instruments for market,
energy and emissions, for policy impact
assessment

Technology database:• Energy technology database has a standard format
and is open access

Temporal resolution: to 2070, in 5-year time steps
Geographic resolution: 28 EU MS + 10 European non-EU countries
Mathematically: concatenation of mixed-complementarity problems withequilibrium conditions and overall constraints (e.g. carbon constraint withassociated shadow carbon value) - EPEC

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PRIMES typical inputs and outputs
Input

OutputProcess

GDP and economic growth per sector (many sectors) –GEM-E3
World energy supply outlook – world prices of fossil fuels –PROMETHEUS (or POLES)•

Detailed energy balances (EUROSTAT format)•

Detailed demand projections by sector including end-use
services, equipment and energy savings•

Detailed balance for electricity and steam/heat, including
generation by power plants, storage and system operation•

Production of fuels (conventional and new, including
biomass feedstock)•

Investment in all sectors, demand and supply, technology
developments, vintages•

Transport activity, modes/means and vehicles•

Association of energy use and activities•

Energy costs, prices and investment expenses per sectorand overall•

CO2 Emissions from energy combustion and industrialprocesses•

Emissions of atmospheric pollutants•

Policy Assessment Indicators (e.g. imports, RES shares, etc.)

Taxes and subsidies
Interest rates, risk premiums, etc.
Environmental policies and constraints
Technical and economic characteristics of future energy technologies
Energy consumption habits, parameters about comfort, rational useof energy and savings, energy efficiency potential
Parameters of supply curves for primary energy, potential of sites for
new plants especially regarding power generation sites, renewablespotential per source type, etc.

PRIMES model(PRice-Induced Market
Equilibrium System)
Performs iterations ofdemand and supply
through explicitly
calculated prices

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Model coverage
PRIMES power and heat

PRIMES-BuiMo

PRIMES Industry

PRIMES-TREMOVE• Capacity expansion, Unit
Commitment, Pricing
module• Power, heat and steam
production• CHP, boilers, industrial
plants, etc• Database includes over
13000 power plants• Detailed representation of
RES including water depth
and closeness to shore foroff-shore wind
• Represents policies indetail including different
types of RES support,
facilitation policies,• Different market designand cross border options
can be studied with themodel• Very detailed segmentationof households and dwellingtypes (270 building types);• RES, fossil and P2X fuels• 28 heating and coolingtechnologies• Dynamic programming
modelling of renovation
strategies• Representation of several
non-market barriers, hidden
costs and idiosyncratic
behaviors• Detailed portrayal of policies
specific comprising economic
policies and measures (i.e.
taxes-subsidies, whitecertificates), regulatoryinstruments (i.e. efficiency
standards, eco-designstandards) as well as researchand development measures• 5 income classes• 10 industrial sectors• further split in 31 subsectors and in total 234
energy uses
• distinct sectors forprimary and secondary(recycling) production• 22 different fuels, including“new” fuel carriers(hydrogen, biofuels)• process emissions included• CCS option is included forall process emissions• Detailed portrayal ofpolicies specific comprising
economic policies andmeasures (i.e. taxessubsidies, whitecertificates), regulatory
instruments (i.e. efficiency
standards, BAT) as well as
research and development
measures• All transport modes:
passenger, freight (alsomaritime and aviation)• All fuel types: fossil,biofuels, P2X• Re-fueling and recharging
infrastructure isrepresented in a stylizedmanner and its influenceon choices• Transport-related choiceswith consideration ofheterogeneity of agents• Large number of policies
portrayed: CO2 standards,
blending rates and/ormandates by mode andfuel• PRIMES biomass: verifies
the sustainability criteria
and computes prices forbiofuels

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6Overview of PRIMES modelling
approach
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What PRIMES can do

What PRIMES cannot do The distinctive feature of PRIMES is the combination of
micro-economic foundations with engineering at a fairly highlevel of detail, compatible with a long-term time scale andsectorial detail of available statistics for Europe Designed to provide long term energy system projections andsystem restructuring up to 2070, both in the demand and thesupply sides. Projections include detailed energy balances,
structure of demand by sector, structure of power systemand other fuel supplies, investment and technology uptake,costs per sector, overall costs, consumer prices andcertificate prices (incl. ETS) where applicable, emissions,overall system costs and investment.
 Impact assessment of specific energy and environment
policies, applied at Member State or EU level, including Cannot produce short-term forecasts as it is not an
econometric model (so projections are not statistically basedon past observations, which in PRIMES are only used forparameter calibration).

➢ Price signals, such as taxation, subsidies, ETS➢ Technology promoting policies➢ Standards➢ Infrastructure➢ RES supporting policies➢ Efficiency promoting policies➢ Environmental policies

 The linked model system PRIMES and CAPRI (EuroCARE),
GAINS (IIASA) and GLOBIOM (IIASA) (for non-CO2 gases, airquality, biomass resources and land use) cover all GHGs.

 It is a partial equilibrium model, not performing closed-loop
energy-economy equilibrium analysis, unless linked with amacroeconomic model such as GEM-E3.

 PRIMES lacks spatial information at a subnational level and solacks details about distribution and transport infrastructureand flows that depend on spatial information (except
electricity and gas flows over a country-to-country based grid
infrastructure, which is represented in PRIMES).
 PRIMES considers infrastructure exogenously in all sectors.
Also PRIMES considers learning by doing exogenously (except
for the Biomass module), but varies assumptions acrossscenarios to represent “enabling conditions”.
 PRIMES is an empirical numerical model with emphasis on
sectoral and country specific detail; it has a very large size andso some compromises were necessary to limit computer timeat reasonable levels. In this sense, although rich in technology
representation, the modules of PRIMES are far moreaggregated than pure engineering models.
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Options for decarbonisation“NO-REGRET” OPTIONSDISRUPTIVE CHANGES

Energy efficiency improvement in buildings,
equipment and vehicles.

Reduce energy demand in all sectors beyond
conventional energy savings, e.g. circular economy,
sharing of vehicles, secondary materials production via
recycling.

Enhanced renewables in power generation◦ Large-scale investment in variable renewables◦ Reliable integration of renewables (grids, marketintegration, storage systems, demand response)

Electrification of transport and heating wherecost-efficient, e.g.:◦ Private transport in urban environments◦ Heat pumps in heating

Produce sustainably and use advanced(second-generation) biofuels.

Extension in Long Term Operation (LTO) of theexisting nuclear fleet where possible andgeological storage of CO2 where acceptable.

Changes in the way users use energy, e.g. highelectrification in industry and transport, direct use of
distributed hydrogen and the way energy is distributed(grid and storage for hydrogen, liquified hydrogen or GHGfree methane) etc.
Changes in the production and nature of energy
commodities, e.g.:◦ mix hydrogen and biogas in gas distribution◦ replace fossil gas by carbon-neutral methane◦ replace fossil liquids by carbon-neutral fuels
Capturing CO2 from air or biomass for re-use (synthetichydrocarbons) or underground storage (carbon sinks).

Capturing CO2 from fossil fuels combustion or industrial
processes and use to produce materials (sequestering
carbon dioxide).
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PRIMES modelling to explore contrasted strategies
Max Efficiency & Circular
EconomyPros• Non expensive• No pressure in the energy
supply potentialCons• Depends on investment byindividuals• Potential uncertain• Unclear appropriate policy
signals• Low demand discourages
investment in the supply
side

Maximum Electrification
Pros• Efficient and convenient• Modest growth ofdemand for electricity
Cons• Cannot fully electrify
industry and transport• Lack of competition
among carriers• High seasonal and daily
variability, highbalancing costs

Hydrogen as an end-use
carrier

GHG-neutral fuels(gaseous, liquids)

Pros• H2 can be a universalcarrier• Chemical storage ofelectricity• Less electricity intensive
than e-fuels
Cons• Infrastructure changes• Uncertain future costs ofH2 and fuel cells• Public acceptancePros• Existing infrastructure
and way of consumingenergy• Chemical storage ofelectricity• Competition amongcarriersCons• Carbon neutral CO2
feedstock (DAC,biogenic)• Uncertain future costs ofe-fuels• Vast increase of total
power generation

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Demand side modelling challenges
Buildings

Circular economy• Representation of non-market barriers, idiosyncratic behaviors: Detailed
segmentation of households and dwelling types• Long payback periods of renovation investments: Nested choice of otherenergy equipment, depending on the choice for heating and insulation• What is the potential for decreasing energy
demand through circularity?
•Recycling and modularity•Primary and secondary production of metals•Literature still under development

Industry• Decarbonize process emissions• Direct use of carbon-free hydrogen in industrial uses; Upper limit to theelectrification of industrial uses
• 1-3 investment cycles till 2050
• High segmentation of industrial sectors, energy uses, technologies, Dynamic
and intertemporal modelling of capital vintages, technology and fuel choice

Energy efficiency• Examine the potential of increasing theTransport

efficiency of the transport system (e.g. carsharing, improved scheduling)•Heat recovery capabilities in industry•Deep renovation strategies in buildings• Decarbonisation of long-distance mobility• Inclusion of novel technologies (electric aircrafts, hydrogen vessels, electrictrucks)• Inclusion of new energy carriers (hydrogen, e-fuels, advanced biofuels)• New trends: sharing

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Supply side challenges
Power and Heat
• Demand for flexibility because of extreme RES (85% )• Differentiated unit commitment from capacity expansion• Integrated simulation over the European interconnected system using flow-based allocation• Synergies with the industrial sector• Simultaneous simulation of electricity, distributed heat and industrial steam (boilers, CHP, district heating)

Production of new fuels and storage• Multiple storage options (batteries, pumping, hydrogen, e-gas)• Co-production of multiple products: location of production and consumption, infrastructure

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POWER GENERATION

INDUSTRY

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Energy system costs and investment• The long-term strategy needs increasing investment (in both energy
demand and supply sectors) but reduces energy purchasing
expenditures• The fastest growing part of investment concerns individuals and firms
as end-users of energy.

• Investment in infrastructure is the fastest growing part of investment inenergy supply sectors• Average costs of electricity are similar in all strategy variants, as thedecreasing capital costs of RES and chemical storage offset
diseconomies of scale.
• The learning-by-doing dynamics of today’s low TRL technologies are of
crucial importance for the costs of the supply focused scenarios.

Growing investment in energy demand and supply
Supplyfocus

Growing Emissions reduction effort• The transition is particularly capital-intensive, both in demand andenergy supply sectors.
• The scenarios focusing on reducing the demand for energy services
require lower total investment expenditures compared to the supplyfocusing scenarios.
• As expected, the 1.5oC variants are more costly than the 2oC ones.

Demandfocus

2oC strategy

1.5oC strategy

Strategy Variants

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Increasing the EU 2030 target(s)The -40% GHG in 2030 is insufficient forclimate neutrality by 2050
A -55% GHG in 2030 is recommended◦ Investors and policy makers need a strong signal
to act strongly in next 10-15 years to develop theinfrastructure to achieve carbon neutrality◦ Avoid lock-in effects driven by lower target◦ System integration perspective: power
generation needs to reduce emissions first inorder to allow for other changes◦ Stronger target allows for revision of keylegislation to provide strong signals:◦ ETS - scope and MSR◦ Renewables◦ Energy Efficiency◦ Transport sector policy

EC2020, SWD(2020) 176 final

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Moving to 55%: Emission pathways by sector
Moving to 55% implies an acceleration ofemission reductions particularly in the energysystem◦ Supply side already progressing rapidly towards
decarbonisation:◦ Coal-phase out◦ Cost reduction of renewable technologies◦ Buildings:◦ Technologies are known◦ Market and non-market barriers are limiting factors◦ Industry:◦ Long lead times and investment cycles◦ Avoiding lock-ins◦ Transport◦ Infrastructure requirements◦ Technological developments required

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Moving to 55%: power generation
Increase in electricity demand◦ Electricity is fundamental – heatpumps and e-mobility electrify
demandIn the long-term e-fuels
decarbonize demand further andensure storage
Generation relies on RES, withwind and solar increasing
impressively
Prices signals and regulatory
infrastructure needs to allow
speeding up of emission reduction
Carbon neutrality would bereached by 2040

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Moving to 55%: buildings
Rates of renovation of old buildings will
have to increase considerably from 1%
to almost 2% renovation per annum
Also to shift from light to deep energyrelated renovation
The renovation strategies submitted bythe MS must be enhanced
Emission reductions are driven by:◦ Renovation◦ Fuel-switching: to electricity and direct
RES

Policies to reduce market and nonmarket barriers need to be put in place

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Concluding remarks• Climate neutrality in the EU by 2050 is feasible without excessive cost burden.
• However, cost estimations are uncertain as depending on the potential of learningand massive industrial production of new technologies.
• There should be no doubt about the no-regret options of the strategy, namely energy
efficiency, renewables, electrification and advanced biofuels where cost-effective.
The 2030 EU climate and energy is consistent with the LTS.
• Disruptive changes are necessary to reach climate neutrality. They may imply
changes in the energy production, distribution and consumption paradigm.
• The choice of a single strategy for disruptive changes is not yet mature. Actions arenecessary to resolve the technology, as investment requires long-term visibility.
• The next decade is of utmost importance for infrastructure, industrial developmentof immature technologies and the power sector restructuring: moving to 55% is agood sign for regulatory certainty• Addressing concerns related to investment by individuals and firms with poor fundraising capabilities constitutes a new policy priority.

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