ALPS INTERNATIONAL SYMPOSIUM Tokyo 2018

Techno-Economic Analysisof the Decarbonisation of Power Mix
in Europe -France in Particular- by 2050
PASCAL DA COSTA,ÉCOLE CENTRALESUPELEC AND UNIVERSITÉ PARIS SACLAY
Patronage by endowment fund
Capitaldon on Sustainable Growth1. Introduction

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本日は、このような素晴らしいシンポジウムにお招き頂き有難うございます。
秋元先生をはじめとして、ＲＩＴＥの皆様に感謝いたします。

Thank you very much for inviting me to this wonderful Symposium.
I would like to express my gratitude to Professor Akimoto and theentire RITE team.

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1. Introduction• My work, team, and collaborations at Paris SaclayI-Tésé1. Introduction• What would I like to share with you in this talk?
• What do electrical investments by 2050 depend on?
• The cases of Europe and France,facing liberalisation and climatic goals.
Shares electricity generations in the European Union (EU) (in %)4

1. Introduction

5• What are the results of liberalisation onelectrical markets in Europe?
• Heterogeneous and wide-ranging from one country to another.
• Less innovations than expected, compared to telecoms
or aerial transport.

• In my presentation:

The parallels and paradoxes between the objectives ofliberalisation and the agenda of climatic policy of Europe.

Plan
1. Introduction
2. The European Context
3. The French case
4. Conclusion

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2. The European Context

7• Is the energy-climate plan a good thing or a bad thingfor growth and employment?

• Back in time: in 2009, Europe was working on its energy-climate
programme, 2012-2020 period.
• Auctioning of carbon quotas for more than 40% of the emittersof GHG.

• The assessment was conducted using the macroeconometricmodel with endogenous growth known as NEMESIS:• 3 scenarios: S1, S2 and S3, are compared to the baseline scenario
called ‘Kyoto Forever’ (the Protocol of 1998).
• Results draw an integrated vision of the energy future of the EU.

2. The European Context

8The main results:• A weak cost in terms of GDP loss… which may be•••

negative depending on how revenues fromcarbon allowances are spent by governments.
Employment could be stimulated if the spendingof auctions revenues reduce the cost of labour.
GDP and innovations in renewables highly stimulated
by R&D subsidies.
An opportunity for the countries whose GDP isbelow the EU average and are carbon intensive.

2. The European Context

9• What was the price of a quota of carbon
on the European market?
• The model calculated the optimal price over 60 €/t.CO2 in 2020…
• This compared to 5€ in today’s European carbon market!
Price on European carbon market from 2005 to 2017

• Why
this pricegap?

source: Climate Economics Chair Université Paris Dauphine10

2. The European Context• Liberalisation causes substantial problems
when combined with the energy-climate package :• a rise in the price for Households due to new taxes,
these necessary to subsidy renewables - wind and solar (FiT).
Overcapacity in the EU• a critical missing money
problem for the Utilities,
due to spot prices negative
trend (near-zero marginal
costs of the renewables),and overcapacity.

Source: J. Percebois

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2. The European Context
Spot prices of electricity in France, since 2005
a decrease in prices
since 2011
volatility due tothe crisis

Average prices of electricity for the Households in the UE, since 2007
a rise in prices
since 2010

Source: J. Percebois

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2. The European Context
The combined effect of renewable support and liberalisation
Impossible to phase outof support scheme‘Missing money’
Impossible torecover fixedcosts
Conventional
power plants are
not profitable

Impossible
to invest inclean
energyLessrevenue forpowercompanies

Supportschemesforrenewables

Massive
renewable
investments

Renewables
bring wholesale
price down*+Less demandforconventional
power plants

Total
overcapacity

Taxes (FiTs andother supportsschemes)

Risingretailprices*in particular peak

prices, usually a sourceof profit for base or
semi-base plants
Less demand:

Minor phenomenon for now but could
potentially become more importantautoconsumption, curtailment

May compromise thedevelopment ofelectric cars (secondphase ofdecarbonization)
Debatable:
currently little
elasticity ofdemand on theshort term, but
potential longterm effects

Source: Shoai Tehrani, Da Costa, Akimoto, Nakagami (2016). Are Deregulated Electricity Market and Climate
Policy compatible? Lessons from overseas, from Europe to Japan, proceedings of the USAEE.

2. The European Context

13• What are the policy recommendations to direct
investments in the right direction?
• Feed-in-Tariffs• recent tools: capacity
mechanisms (France) Feed-in-Premium (UK)• in discussion: public tenders
 floor price forcarbon of
30-40 €/t.CO2
Source: Lazard

2. The European Context

14• Next the problem of intermittence -or variability- of therenewable energies, wind and solar:• The cheapest of back ups, the most flexible
as well are the most carbonated: gas power plants.
• Let’s see the French problem with intermittence.

Plan
1. Introduction
2. The European Context
3. The French case
4. Conclusion

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3. The French Case16

• Highly specific:

1.

2.

3.

82% of local Frenchconsumption and76% of the total
demand (withexports) met by thenuclear fleet.
The nuclear portion
would be reduced to50% of total electricity
production as of 2025 or 2030 (recent discussion), and therenewables portion reaching 40% in 2030.
Half the nuclear fleet will be over 40 years in 2025.

3. The French Case
• Is the flexibility of nuclear power possible as partof the solution of balancing supply and demandin real time?
• The construction of scenarios by 2050:• The levels of penetration of renewables into the mix.
• The future constraints of thenuclear fleet.

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3. The French Case18

• The Levelized costs of energy for nuclear, in 2 scenariosof replacement of Pressurised water reactors (PWR) withnew Evolutionary power reactors (EPR):
1. The ‘40-year’ scenario:

with a decommissioning of PWR
once they’ve clocked 40 years.

2. The ‘progressive’ scenario:
with a continuous
decommissioning of PWR(2 decommissions a year)
towards an full EPR fleet
in 2050.

PWR and EPR capacity evolution scenarios(for 50% nuclear penetration)

Source: Cany, Mansilla, Da Costa, et al (2016). “Nuclear and intermittent renewables:
two compatible supply options? The case of the French power mix“, Energy Policy 95.

3. The French Case19

• The reduction of installations in nuclear capacity could
engender an increase of fossils in the mix, with:• up to 25% more emissions in GHG with a share of wind andsolar energies of 50% in 2050.

• To avoid this and to ensure the penetration of renewables,I show that:• the big size of the French fleet of nuclear reactors can allow
high flexibility thanks to small variations in each nuclear plant.

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3. The French Case
• What is the level of response of nuclear flexibility?

• If nuclear capacity is maintained at 60GW (current Frenchsituation): a mix of 30% of wind and solar already requiresconsiderable flexibility…
• … of the order ofa hundred euros
Costs of nuclear flexibility
Reduction inper MWh (for theNuclear in
Shares of
Costs of theShares ofcharge
factorGW
fossils in
nuclearwind andcompared tocosts of nuclear(shares inFranceflexibility
the base casesolarthe mix)(€/MW)
flexibility).
totoSource: Cany, Mansilla, Da Costa, et al (2016). “Nuclear and intermittent renewables:
two compatible supply options? The case of the French power mix“, Energy Policy 95.

3. The French Case
• I show that:• The greatest influence of solar penetration - compared tothat of wind - on the need of flexibility of the nuclear:• The benefit of integrating both renewable sources bysmoothening out the effects of solar.

• New incentives necessary for nuclear power to play
a competitive role as back-up technology:• A carbon tax or other similar incentives for investment
could smooth the gap.
• When compared with gas CCGT, a value as low as
100 €/t.CO2 in 2030 could change the trends.

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Plan
1. Introduction
2. The European Context
3. The French case
4. Conclusion

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4. Conclusion
My conviction in 3 points:
1. Nevertheless, technology alone will not meet the challenges
of climate change.
• Technological change isn’t happening quickly enough torespond to the dynamics of the climate change.
• A multi-dimensional response is required.
• In richer countries, a necessary reduction in electrical demand?

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4. Conclusion
My conviction in 3 points:
2. And the best techno-economic choices will not necessarilybe those adopted into society.
• The issues of :• the diffusion of innovations,• the acceptability or social feasibility,• political choices…
• Germany:
versusabout the nuclear energy.

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4. Conclusion
My conviction in 3 points:
3. Finally numerous questions remain…
• On the supply side:

What sort of an electrical mix are we heading for?
What are the innovations that we have in stock?
Will there be a Gen IV for nuclear energy?
How do we finance electrical investments when spot prices plunge?
What is the future for the Utilities (EDF in France) and other historicalproducers?
Are we witnessing a convergence of electrical and digital energies?

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4. Conclusion
My conviction in 3 points:
3. Finally numerous questions remain…
• Demand side:

What is the level of electricity demand in the future?
Will the demand response be effective?
What about the electrification of mobility?
About electrical self-generation and self-consumption: what are theconsequences on centralised electrical systems?

• And regulation side:

What is the role of politics in the context of liberalisation?
What industrial policies can there be in the field of energy?
Will we see a rise in carbon prices?
Will there be tender offers determined by the type of technology?
Etc.

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Some of my related publications•The paradoxes of European energy market regulation: an analysis of theelectricity mix, B. Shoai-Tehrani and P. da Costa, in Towards a Sustainable
Economy, da Costa and Attias (eds.), Springer, 2018 Forthcoming.

•“Socioeconomic potential for deploying large district heating networks using heat fromnuclear plants in a French urban area”, M. Leurent et al, Energy Policy, 2018.

•“Cost-benefit analysis of district heating systems using heat from nuclear thermal
plants in Europe“, M. Leurent et al, Energy, 2018.

•“Adapting the French nuclear fleet to integrate variable renewable energies via
the production of hydrogen: towards massive production of low carbonhydrogen?”, C. Cany et al, International J. of Hydrogen Energy 42(19), 2017.

•“Three investments scenarios for future nuclear reactors in Europe”, B. ShoaiTehrani and P. da Costa, Energy Studies Review 23(1), 2016.

•“Nuclear and intermittent renewables: two compatible supply options? The caseof the French power mix”, C. Cany et al, Energy Policy 95, 2016.

•Are reregulated electricity market and climate policy compatible? Lessons fromoverseas, from Europe to Japan, B. Shoai Tehrani et al, Y. Nakagami, proceedingsof the USAEE, 2016.

ALPS INTERNATIONAL SYMPOSIUM Tokyo 2018

Techno-Economic Analysisof the Decarbonisation of Power Mix
in Europe -France in Particular- by 2050
PASCAL DA COSTA,ÉCOLE CENTRALESUPELEC AND UNIVERSITÉ PARIS SACLAY
Patronage by endowment fund
Capitaldon on Sustainable Growth