Annex 1 Scenarios – assumptions and results

Part B: Decarbonisation scenarios. 2

1. Assumptions. 2

1.1 Macroeconomic and demographic assumptions. 2

1.2 Energy import prices. 2

1.3 Policy assumptions. 3

1.4 Assumptions about energy infrastructure development 7

1.5 Technology assumptions. 7

1.6 Drivers. 9

2. Results. 9

2.1 Overview: outcome for the four main strategic directions to decarbonisation. 9

2.2 Energy consumption and supply structure. 13

2.3 Power generation. 20

2.4 Other sectors. 31

2.5 Security of supply. 34

2.6 Policy related indicators. 36

2.7 Overall system costs, competitiveness and other socio-economic impacts. 39

2.8 Conclusions. 53

Attachment 1: Numerical results. 56

Attachment 2: Assumptions about interconnections and modelling of electricity trade. 78

Attachment 3: Short description of the models used. 85

Part B: Decarbonisation scenarios 1. Assumptions

1.1 Macroeconomic and demographic assumptions

On the basis of the European Council's objective for EU decarbonisation of at least 80% below 1990 by 2050 in the context of necessary reductions by developed countries as a group[1] it is assumed that competitiveness effects throughout decarbonisation would be rather limited. Therefore, the decarbonisation scenarios are based on the same demographic and macroeconomic assumptions as the Reference scenario and Current Policy Initiatives scenario. Such an assumption also facilitates comparison of the energy results across scenarios. These macro-economic (sectoral production) assumptions also hold for energy intensive industries. However, under fragmented action, measures against carbon leakage may be necessary. The analysis of this particular case (see below) deals with energy and emission effects of such measures, but does not address potential changes in sectoral production levels under fragmented action. The aim of measures against carbon leakage is indeed to avoid such relocation of energy intensive production.

1.2 Energy import prices

The decarbonisation scenarios are based on "global climate action" price trajectories for oil, gas and coal[2] reflecting that global action on decarbonisation will reduce fossil fuel demand worldwide and will therefore have a downward effect on fossil fuel prices. Oil, gas and coal prices are therefore lower than in the Reference scenario and Current Policy Initiative scenario. Their trajectories are an outcome of the global analysis in the Low carbon Economy Roadmap, which is similar to recent IEA projections that assessed the impacts of ambitious climate policies[3].

Figure 18: Fossil fuel prices in the decarbonisation scenarios

1.3 Policy assumptions

In addition to policy assumptions in the Current Policy Initiatives scenario, the following policies and measures were added to scenarios:

Table 15 Measures included in all decarbonisation scenarios

1 || Climate policies for respecting carbon constraints to reach 85% energy related CO2 reductions by 2050 (40% by 2030), consistent with 80% reduction of total GHG emissions according to the "Roadmap for moving to a competitive low carbon economy in 2050" (including achievement of cumulative carbon cap) in a cost effective way || Supplementary to specific energy policies in the scenario, ETS prices and carbon values for non ETS sectors are determined in such a way as to reach the 2050 reduction goal; ETS and non ETS sectors use equal carbon prices/values (from 2025 onwards); cumulative emissions are similar across scenarios

2 || Stronger RES facilitation policies || Represented by higher RES-values in the model. These facilitating RES policies include for example the availability of more sites for RES, easier licensing of RES installations, greater acceptance and support deriving from the improvement of local economies and industrial development; operational aids remain at the same level as in the REF/CPI scenarios.

3 || Transport measures || Energy efficiency standards, internal market, infrastructure, pricing and transport planning measures leading to more fuel-efficient transport means and some modal shift Encourage the deployment of clean energy carriers by establishing the necessary supporting infrastructures[4]

4 || Guarantee funds for all low carbon generation technologies || The model reflects support to early demonstration and first of a kind commercial plants for all innovative low-carbon technologies in the energy sector (nuclear, RES and their infrastructure needs, CCS, etc.).

5 || Storage and interconnections || Higher penetration of variable generation leading occasionally to excess electricity is dealt with by increased pump storage and more interconnection capacity. Moreover, large parts of such excess electricity generation from variable sources is transformed into hydrogen, which is fed, up to a certain degree, into the natural gas grid, thereby providing a means for (indirect) storage of electricity and reducing the carbon content of gas delivered to final consumers enabling deeper emission cuts. Where for technical or economic reasons, simulated in the model, feeding into the natural gas grid is not feasible, excess electricity (mainly from RES) is stored in form of hydrogen at times of excess supply and transformed back into electricity when demand exceeds supply. (Hydrogen storage is used to a different degree in various decarbonisation scenarios, see also measures under Scenario 4).

Scenario 2: High energy efficiency

This scenario is driven by a political commitment of very high primary energy savings by 2050. It includes a very stringent implementation of the Energy Efficiency Plan and aims at reaching close to 20% energy savings by 2020. Strong energy efficiency policies are also pursued thereafter.

Table 16 Policies/measures included (in addition to measures in table 15):

|| Measure || How it is reflected in the model

1 || Additional strong minimum requirements for appliances || Progressive adaptation of modelling parameters for different product groups. As requirements concern only new products, the effect will be gradual.

2 || High renovation rates for existing buildings due to better/more financing and planned obligations for public buildings (more than 2% refurbishment per year) || Change of drivers (ESCOs, energy utilities obligation, energy audits) influence stock – flow parameters in the model reflecting higher renovation rates (higher than 2% pa), with account being taken of tougher requirements for public sector through specific treatment of the non-market services sector

3 || Passive houses standards after 2020 || All new houses after 2020 comply with passive house standards - around 20-50 KWh/m2 (depending on the country) which might to a large extent be of renewable origin

4 || Marked penetration of ESCOs and higher financing availability || Enabling role of ESCOs is reflected in lower discount rates for household consumers (from 17.5% to 16% in 2015, 14% in 2020, 13% in 2025 and 12% from 2030 onwards) and for industry, agriculture and services (from 12% to 11% by 2015 and to 10% from 2020 onwards)

5 || Obligation of utilities to achieve energy savings in their customers' energy use over 1.5% per year (up to 2020) || Induce more energy efficiency mainly in residential and tertiary sectors by imposing an efficiency value for grid bound energy sources (electricity, gas, heat)

6 || Strong minimum requirements for energy generation, transmission and distribution including obligation that existing energy generation installations are upgraded to the BAT every time their permit needs to be updated || Higher efficiency of power plants through removing less efficient items from the generation portfolio, allowing however for efficiency losses where CCS is deployed Less transmission and distribution losses

7 || Full roll-out of smart grids, smart metering || Enabling more efficiency and decentralised RES; Reflected as costs in the distribution grid costs, electricity prices and overall costs of the energy system

8 || Significant RES highly decentralised generation || More advanced power dispatching and ancillary services to support reliability of power supply Higher penetration of small wind, solar and hydro

Scenario 3: Diversified supply technologies scenario

This option is mainly driven by carbon prices and carbon values (equal for ETS and non ETS sectors). Carbon values are a still undefined proxy for policy measures that bring about emission reduction. They do not represent a cost to economic actors outside EU ETS (where they coincide with the EU ETS price), but are economic drivers that change decision making of the modelled agents. Yet, the changes triggered by carbon values may entail costs (e.g. for investment in energy savings or for fuel switching), which are accounted for in the modelling framework. They are applied to all sectors and greenhouse gas emissions, covering ETS and Non ETS sectors. As economic drivers, they influence technology choices and demand behaviour. Their respective level is not an assumption but a result of the modelling depending among other things on the level of ambition in GHG reduction. The modelling applies equal carbon values across sectors and ensures thereby efficient reductions across sectors.

This option assumes acceptance of nuclear and CCS and development of RES facilitation policies. It reproduces the "Effective and widely accepted technologies" scenario used in the Low Carbon Economy Roadmap and Roadmap on Transport on the basis of scenario 1bis.

Table 17 Policies/measures included (in addition to measures in table 15):

|| Measure || How it is reflected in the model

1 || MS and investors have confidence in CCS as a credible and commercially viable technology; acceptance of storage and CO2 networks is high ||

2 || MS, investors and society at large have confidence in nuclear as safety is considered adequate and waste issues are solved || Applicable for all countries that have not ruled out the use of nuclear, i.e. Germany and Belgium for the longer term and the currently non-nuclear countries except for Poland

Scenario 4: High RES

This scenario aims at achieving very high overall RES share and very high RES penetration in power generation (around 90% share and close to 100% related to final consumption). Recalling security of supply objectives, this would be based on increasing domestic RES supply including off-shore wind from the North Sea; significant CSP and storage development, increased heat pump penetration for heating and significant micro power generation (PV, small scale wind, etc.). Regarding assumptions for the demand sectors, scenario 4 is similar to scenario 3, with the exception that RES are more intensively facilitated.

Table 18 Policies/measures included (in addition to measures in table 15):

|| Measure || How it is reflected in the model

1 || Facilitation and enabling policies (permitting, preferential access to the grid) || Represented by significantly higher RES-values in the model than in other decarbonisation scenarios; these RES facilitating policies include for example lower lead times in construction, and involve greater progress on learning curves (e.g. small scale PV and wind) based on higher production.

2 || Market integration allowing for more RES trade || Use of cooperation mechanisms or convergent support schemes coupled with declining costs/support result in optimal allocation of RES development, depending also on adequate and timely expansion of interconnection capacity (point 4);

3 || Stronger policy measures in the power generation, heating and transport sectors in order to achieve high share of RES in overall energy consumption in particular in household micro power generation and increased power production at the distribution level. || Higher use of heat pumps, significant penetration of passive houses with integrated RES reflected through faster learning rates (cost reductions), higher penetration rates (e.g. due to RES building/refurbishing requirements)

4 || Infrastructure, back-up, storage and demand side management || Substantial increase in interconnectors and higher net transfer capacities including DC lines from North Sea to the centre of Europe. Back-up functions done by biomass and gas fired plants. Sufficient storage capacity is provided (pumped storage, CSP, hydrogen). Smart metering allows time and supply situation dependent electricity use (peak/off-peak) reducing needs for storing variable RES electricity. All these measures allow for exploiting greater potentials for off-shore wind in the North Sea.

Scenario 5: Delayed CCS

The delayed CCS scenario shows consequences of a delay in the development of CCS, reflecting acceptance difficulties for CCS regarding storage sites and transport; large scale development of CCS is therefore assumed feasible only after 2040.

Table 19 Policies/measures included (in addition to measures in table 15):

|| Measure || How it is reflected in the model

1 || Acceptance difficulties for CCS regarding storage sites and transport, which allow large scale development only after 2040. || Shift of cost-potential curves to the left (higher costs reflecting delays and public opposition). The learning curve for CCS is also delayed accordingly, resulting in higher capital costs for CCS than in scenario 3

2 || MS , investors and society at large have confidence in nuclear as safety is considered adequate and waste issues are solved || Low risk premiums for nuclear Applicable for all countries that have not ruled out the use of nuclear, i.e. Germany and Belgium for the longer term and the currently non-nuclear countries except for Poland

Scenario 6: Low nuclear

This scenario shows consequences of a low public acceptance of nuclear power plants leading to cancellation of investment projects that are currently under consideration and no life time extension after 2030. This leads to higher deployment of the substitute technologies CCS from fossil fuels on economic grounds.

Table 20 Policies/measures included (in addition to measures in table 15):

|| Measure || How it is reflected in the model

1 || Political decisions based on perceived risks associated with waste and safety (especially in the aftermath of the Fukushima accident) leading to no new nuclear plants being build besides the ones presently under construction: 1600 MWe in Finland, 2x1600 MWe in France and 2x505 MWe in Slovakia. Moreover, the recourse to deciding instead on nuclear lifetime extension is available only up to 2030. || No extension of nuclear lifetime on economic grounds after 2030 No new nuclear plants are being built besides reactors under construction : 1600 MW in FIN; 2*1600 MW in FR and 2*505 MW in SK

2 || MS and investors have confidence in CCS as a credible and commercially viable technology; acceptance of storage and CO2 networks is high || Low risk premiums for CCS

1.4 Assumptions about energy infrastructure development

Infrastructure modelling for decarbonisation scenarios was done similarly to the approach described in Part A, section 1.4 for the Reference and Current Policy initiatives scenarios.

For decarbonisation scenarios the analysis done showed that except for very high RES penetration, the 2020 interconnection capacity would allow for most intra-EU electricity trade provided that some bottlenecks would be dealt with. The identified bottlenecks concerns interconnections around Germany, in Austria-Italy-Slovenia, Balkans and Denmark-Sweden. Greater investment and capacity for these specific links were assumed.

For very high RES penetration, which involves much more RES based electricity trade, stronger growth of interconnection capacity will be required. Under the assumptions of this scenario, full exploitation of off-shore wind potential at North Sea is foreseen. It is assumed that a dense DC interconnection system will develop mainly offshore but also partly onshore, to facilitate power flows from the North Sea offshore wind parks to consumption centres. In this scenario, the links of Sweden with Poland, Sweden with Lithuania, Austria with Italy, France with Italy and links in the Balkan region appear to be congested and need to be reinforced mainly with DC lines.

For more details on the modelling approach and results see Attachment 2.

1.5 Technology assumptions

Many technology assumptions are the same as in the Reference scenario and Current Policy Initiatives scenario (with revised assumptions about nuclear). In the decarbonisation scenarios, however, there are additional features and mechanisms that produce high decarbonisation and technology penetration.

Whereas all decarbonisation scenarios rely on technologies that exist today, they might become commercially mature only over time supported also by decarbonisation requirements. The uptake of the technologies is endogenous in the scenarios with their large-scale deployment leading to lower cost and higher performance, which correspond to a fully mature commercial stage.

All scenarios simulate merit order dispatching for power generation with contribution of variable generation from renewables. Electricity balancing and reliability is ensured endogenously by various means such as import and export flows (in case of high RES it is facilitated by expanding interconnections), investment in flexible thermal units, pumped storage and if required hydrogen based storage. In this latter case, excess variable generation from RES at times of lower demand may be used to produce hydrogen via electrolysis which is then used to produce electricity in turbine based power plants when electricity demand exceeds production from RES and other available sources (e.g. in situations of high demand).

The modelling approach also considers the possibility to mix hydrogen produced through electrolysis in the low and medium pressure natural gas distribution system (up to 30%) in order to reduce the average emission factor of the supplied blend, thereby contributing to the decarbonisation of final energy consumption.

Photovoltaic in High RES Scenario evolves along more optimistic trajectories than in the Reference scenario, as it is presumed that the higher penetration of the technology leads to stronger learning by doing. The higher uptake of RES technologies is driven mainly by the lower cost potentials for RES power, which are due to policies facilitating access to resources and sites.

A further change is in the Delayed CCS scenario where the development of CCS is delayed, and does not reach the same levels of development as in the other scenarios.

There is also faster progress in energy efficiency related technologies due to bigger scale and carbon prices effects. The energy technologies on the demand side follow a different development from the Reference scenario variants. In any situation there are different choices to consumers regarding the energy performance of appliances, buildings and equipment (evident from e.g. energy labelling where such transparency is provided by legislation). In decarbonisation scenarios, there are stronger shifts towards the more efficient technology vintages, which improve the average energy efficiency of a given energy use (e.g. of the average lighting appliance) compared to the Reference scenario variants. Energy efficiency progress is therefore supported by consumer choice effects similar to increased learning by doing driven by consumers opting for the more efficient available technologies.

The assumptions on the battery costs for the transport sector were developed along the lines of the White Paper on a Roadmap to a Single Transport Area. Efficiency improvements of ICE vehicles also occur in response to carbon values, making the overall vehicle fleet more efficient than in the Reference scenario and its variants. However, the following decarbonisation scenarios do not produce the same energy related transport outcome due to the fact that these scenarios do not handle the same transport details and that the overall framework conditions are different according to the scenario. In particular, the penetration of some alternative propulsion technologies (electric vehicles, hydrogen, etc.) might be somewhat different.

1.6 Drivers

An internal greenhouse gas emission reduction contribution of around 80% in 2050 is taken as the key constraint for exploring different scenarios. To ensure that decarbonisation efforts are comparable across options and scenarios, the equalisation of cumulative emissions across scenarios is used as an additional constraint, underlining the importance of the climate impacts of cumulative emissions over the whole period until 2050 (and beyond). The corresponding decarbonisation effort from energy related CO2 emissions is 85% CO2 reductions compared to 1990, as demonstrated by the modelling underlying the Low Carbon Economy Roadmap of March 2011.

Common carbon values applied to all sectors and greenhouse gas emissions, covering ETS and Non ETS sectors, are used as key driver to reach the emission reductions and to ensure cost efficient reductions across sectors. As economic drivers, they influence technology choices and demand behaviour, in addition to the energy policies mirrored in the various scenarios for the Energy Roadmap. The respective level of carbon values is not an assumption but a result of the modelling.

Another important driver concerns international energy prices. Given that these scenarios assume global action, significantly lower fossil fuel prices are assumed than those in the reference and Current Policy Initiatives scenarios. Their order of magnitude has been set at a similar level as the results of the global analysis done for the Low Carbon economy Roadmap and recent IEA projections which assessed the impacts of ambitious climate policies.

To increase the penetration of renewable energy sources the RES-value was increased compared to the Reference scenario. In 2050, the RES-value in the decarbonisation scenarios is twice as high as in the current trend cases: instead of 35 €/MWh in Reference and CPI it amounts to 71 €/MWh in all decarbonisation scenarios, except for the high RES scenario, in which RES support is much more pronounced (RES-value of 382 €/MWh). The RES-value is a modelling tool used to reflect the marginal value of not explicitly modelled facilitation RES policies. These facilitating RES policies include for example the availability of more sites for RES, easier licensing of RES installations, benefits deriving from the improvement of local economies and industrial development. In High RES scenario the RES-value is the shadow value associated with the additional target of maximisation of the RES share in power generation and in the overall energy mix.

2. Results 2.1 Overview: outcome for the four main strategic directions to decarbonisation

Decarbonisation can be achieved through energy efficiency, renewables, nuclear or CCS. Pursuing each of these main directions can bring the energy system a long way towards the decarbonisation objective of reducing energy related CO2 emissions by 85% below 1990 by 2050. The policy options (scenarios) proposed explore 5 different combinations of the four decarbonisation options. Decarbonisation options are never explored in isolation as interaction of different elements will necessarily be included in any scenario that evaluates the entire energy system. Moreover, the climate change issue is about atmospheric concentrations of GHG, i.e. with the long lifetimes of gases involved it is essentially about cumulative emissions. All scenarios achieve also the same level of cumulative GHG emissions. This makes energy, environmental and economic impacts comparable across the scenarios.

Energy Efficiency

Energy Efficiency is a key ingredient in all the decarbonisation pathways examined. Its contribution is most important in the Energy Efficiency scenario (Scenario 2). Energy savings in 2050 from 2005 (virtually the peak energy consumption year) amount to 41%, while GDP more than doubles over the same period of time (+104%). The lowest contribution from energy efficiency towards decarbonisation comes in the Delayed CCS scenario, having a high nuclear contribution, in which primary energy consumption declines 32% between 2005 and 2050. As GDP does not change between scenarios, these energy savings from 2005 are entirely due to energy efficiency gains in a broad sense (including structural change), but not involving income losses.

In the Energy Efficiency scenario, one unit of GDP in 2050 requires 71% less energy input than in 2005. The average annual improvement in energy intensity (primary energy consumption / GDP) amounts to 2.7% pa, which is almost a doubling from historical trends (1.4% pa in 1990 to 2005 including the major efficiency raising restructuring in former centrally planned economies). All the decarbonisation scenarios have energy intensity improvements around 2.5% pa given e.g. synergies between energy efficiency and RES.

Energy savings in the High RES scenario are almost as high as in the Energy Efficiency case (minus 38% for energy consumption in 2050 compared to 2005 instead of minus 41%), this is however achieved by different means: the energy efficiency scenario focuses on direct impacts on final demand, whereas energy savings in the high RES case come largely through highly efficient RES technologies replacing less efficient nuclear and fossil fuel technologies.

A clear result concerning the strategic energy efficiency direction is that a substantial speeding up of energy efficiency improvements from historical trends is crucial for achieving the decarbonisation objective.

RES

RES, too, are a key ingredient in any decarbonisation strategy. The RES share in gross final energy consumption (i.e. the definition for the existing 20% target) rises to at least 55% in 2050.

In the High RES scenario the RES share in gross final energy consumption reaches 75%, up 65 percentage points from current levels. The RES share in transport increases to 73%. The RES share in power generation reaches 86%. RES in electricity consumption account for even 97% given that electricity consumption calculated in line with the procedure for the calculation of the overall RES share excludes losses related to pump storage and hydrogen storage of electricity, the latter being necessary to accommodate all the available RES electricity in particular at times when electricity demand is lower than RES generation.

The second highest RES contribution (58%) materialises in the Low nuclear scenario. The RES share is also rather high under strong energy efficiency policies (57%).

The High RES scenario is the most challenging scenario regarding the restructuring of the energy system including major investments in power generation with RES capacity in 2050 reaching over 1900 GW, which is more than 8 times the current RES capacity and also more than twice today's total generation capacity (including nuclear, all fossil fuels and RES) (for more details see under power generation)

Nuclear

There is also a rather wide range with regard to the contribution of nuclear towards decarbonisation. The nuclear share is highest in the scenario that models the delayed availability of CCS (Scenario 4), given in particular issues arising with transport and storage of CO2 and has no additional policies on renewables and energy efficiency giving rise to an 18% share for nuclear in primary energy demand in 2050, which is 4 percentage points more than is projected under Current Policy Initiatives.

Least use of the nuclear option is made in the Low Nuclear Scenario (Scenario 6), which mirrors a hypothetical Europe-wide sceptical approach to nuclear deployment and investment. This scenario has still a nuclear share in primary energy of 3% in 2050 for reaching 85% CO2 reduction in 2050 similar to all the other decarbonisation scenarios.

The Diversified supply technology scenario (the other scenario, in which technologies compete on their economic merits alone) for reaching decarbonisation has a nuclear share in 2050 of 16% despite of nuclear phase-out in some Member States, which is still slightly higher than the current share. The High RES scenario would leave only little room for nuclear, bringing its share down to 4% in primary energy supply.

CCS

The energy contribution of CCS towards decarbonisation is contingent upon the level of fossil fuel consumption[5] in sufficiently large units to justify economically the deployment of this technology. Hence the CCS share in e.g. gross electricity generation is limited by the degree of energy efficiency and decentralisation of energy supply as well as by the level of RES and nuclear penetration.

The highest share of CCS materialises in the Low Nuclear scenario (scenario 6). This case gives rise to a 32% share of CCS in gross electricity generation in 2050. CCS can substitute for nuclear in the case that this option was available only to a very limited extent. The CCS share would be particularly small in a scenario, in which almost all power generation stems from RES, i.e. Scenario 3, in which the CCS share drops to a mere 7%. The other scenarios have around 19-24% CCS share in gross electricity generation in 2050, with the lower end of the range stemming from delays in CCS technology introduction (mainly linked to storage issues).

Decarbonisation requires substantial progress on both energy intensity and carbon intensity

The 4 decarbonisation dimensions, explored in 5 decarbonisation scenarios, can also be expressed in terms of energy and carbon intensity. Energy efficiency reduces energy intensity (energy consumption divided by GDP) while the other three options (RES, nuclear and RES) impact overwhelmingly on carbon intensity (CO2 divided by energy consumption). Substantial progress needs to be made on both indicators- energy and carbon intensity – which are to some degree substitutes for each other. The more successful policies to reduce energy consumption are the less needs to be done on fuel switching towards zero/low carbon energy sources, and vice versa[6] (see Figure 19). The five decarbonisation scenarios show substantial improvements in energy intensity which sinks 67%-71% compared with 2005 and 73%-76% compared with the higher 1990 level in terms of energy intensity (1990 had lower energy consumption, but also much lower GDP). Fuel switching continues in the decarbonisation scenarios up to 2050 and carbon intensity would improve substantially falling 76%-78% from 1990 (73%-75% from 2005).

Figure 19: Decarbonisation scenarios: Improvements in carbon and energy intensities (reductions from 1990)

With ongoing economic growth, decarbonisation poses a formidable challenge given that meeting higher demand for energy services (heating and cooling, lighting, cooking, process energy, mobility, communication, etc) is part of increasing welfare. Upward pressure on energy consumption and CO2 emissions from economic growth is substantial given that GDP might increase almost threefold between 1990 and 2050 (see figure 20). The 80% GHG reductions objective by 2050 will however require deep cuts into energy related CO2 emissions, which in turn require energy consumption to decrease substantially as well.

Figure 20: Decarbonisation scenarios: development of GDP, primary energy consumption and energy related CO2 emissions: 1990 = 100

2.2 Energy consumption and supply structure

Primary energy consumption is significantly lower in all decarbonisation scenarios as compared to the Reference scenario. This is also true for the Current Policy Initiatives scenario that shows 6 and 8% lower demand in 2030 and 2050, respectively than in the Reference scenario reflecting effects of energy efficiency measures in the Energy Efficiency Plan. The biggest decline of primary energy consumption comes in Energy Efficiency scenario (-16% in 2030 and -38% in 2050) showing effects of stringent energy efficiency policies and smart grid deployment. Compared with the actual outcome for 2005, primary energy consumption shrinks by 41%. The decrease in energy consumption compared with Reference for the decarbonisation scenarios spans a range from 11% - 16% in 2030 and from 30% to 38% in 2050. Energy efficiency is therefore an essential building block in all decarbonisation scenarios.

Table 21: Total Primary energy consumption, changes compared to the Reference scenario

(Mtoe) 2020 || 2030 || 2050

Reference || 1790 || 1729 || 1763

Current policy Initiatives || 1700 || 1629 || 1615

% difference to Reference || -5.0% || -5.8% || -8.4%

Energy efficiency || 1644 || 1452 || 1084

% difference to Reference || -8.1% || -16.0% || -38.5%

Diversified supply technologies || 1681 || 1534 || 1217

% difference to Reference || -6.1% || -11.3% || -31.0%

High RES || 1679 || 1510 || 1134

% difference to Reference || -6.2% || -12.7% || -35.7%

Delayed CCS || 1682 || 1532 || 1238

% difference to Reference || -6.1% || -11.4% || -29.8%

Low nuclear || 1687 || 1489 || 1137

% difference to Reference || -5.8% || -13.9% || -35.5%

It is important to note that these levels of reduced primary energy demand do not come from reduced activity levels (which remains the same across all scenarios). Instead they are mainly the result of technological changes on the demand and also supply side: from more efficient buildings, appliances, heating systems and vehicles and from electrification in transport and heating, which combines very efficient demand side technologies (plug-in hybrids, electric vehicles and heat pumps) with a largely decarbonised power sector. Some changes related especially to fuel switching also contribute to reducing primary energy demand, such as switching from lignite or nuclear power generation to gas or wind based electricity production, which is associated with higher conversion efficiencies. In addition, behavioural change, triggered by e.g. changes in prices, information, energy saving obligations, etc, contributes to better energy efficiency.

Energy intensity of GDP (primary energy divided by GDP) reduces by 53% between 2005 and 2050 in the Reference scenario; the CPI scenario scores significantly better by improving energy intensity 57%. Energy intensity diminishes further in all decarbonisation scenarios: by at least 67% in the delayed CCS scenario. It improves 70% in the high RES and the low nuclear scenarios and even 71% in the energy efficiency scenario. Under decarbonisation, a unit of GDP in 2050 requires only one third of the energy needed today (or slightly less under e.g. a strong energy efficiency focus). By 2030, energy intensity would improve around 45% from current levels under decarbonisation, while this improvement would amount to some 40% under current policies.

Absolute energy savings, not considering the doubling of GDP between now and 2050, show still impressing numbers. Compared with the recent peak in energy consumption in 2005/6, the energy efficiency scenario depicts 41% less energy consumption, which means a substantial energy saving with respect to the levels reached just before the economic crisis.

Figure 21: Primary energy savings in 2050 compared to 2005

It is important to note that these levels of reduced primary energy demand do not come from reduced GDP or sectoral production levels (which remain the same in all scenarios). Instead they are mainly the result of technological changes on the demand and supply side, coming from more efficient buildings, appliances, heating systems and vehicles and from electrification in transport and heating. All decarbonisation scenarios over-achieve the 20% energy saving objective in the decade 2020-2030.

The scenarios are based on model assumptions, which are consistent with the input for the 2050 Low Carbon Economy Roadmap. Recognising the magnitude of the decarbonisation challenge, which implies a reversal of a secular trend towards ever increasing energy consumption, this Energy Roadmap has adopted a rather conservative approach as regards the effectiveness of policy instruments in terms of behavioural change. However, the Roadmap results should not be read as implying that the 20% energy efficiency target for 2020 cannot be reached effectively. Greater effects of the Energy Efficiency Plan are possible if the Energy Efficiency Directive is adopted swiftly and completely, followed up by vigorous implementation and marked change in the energy consumption decision making of individuals and companies.[7]

Not only the amount, but also the composition of energy mix would differ significantly in a decarbonised energy system. Figure 22 shows total energy consumption as well as its composition in terms of fuels in 2050 for the various scenarios.

Figure 22: Total Primary Energy in 2050, by fuel

Low and zero carbon content energy sources are strongly encouraged by going the various decarbonisation routes, each of them focusing on different aspects. This has different repercussions on the fuel mix. Energy efficiency encourages primary sources that can be used with small losses (e.g. many renewables or gas) and electricity at the level of final demand. CCS strategies affect the fuel mix by largely neutralising the high carbon content of fossil fuels, notably coal and lignite, through removal of the associated emissions. RES and nuclear routes are directly targeting the fuel mix. The modelling leads to rather wide ranges for primary energy sources with these fuel mixes in the decarbonisation cases all satisfying the decarbonisation requirement by 2050. Moreover, the development of all the fuel mixes under decarbonisation give rise to the same cumulative GHG emissions from 2011 to 2050.

Table 22: Share of fuels in primary energy consumption in %

|| || Reference scenario || Current Policy Initiatives || Decarbonisation scenarios

2005 || 2030 || 2050 || 2030 || 2050 || 2030 || 2050

Solids || 17.5 || 12.4 || 11.4 || 12.0 || 9.4 || 7.2-9.1 || 2.1-10.2

Oil || 37.1 || 32.8 || 31.8 || 34.1 || 32.0 || 33.4-34.4 || 14.1-15.5

Gas || 24.4 || 22.2 || 20.4 || 22.7 || 21.9 || 23.4-25.2 || 18.6-25.9

Nuclear || 14.1 || 14.3 || 16.7 || 12.1 || 13.5 || 8.4-13.2 || 2.6-17.5

Renewables || 6.8 || 18.4 || 19.9 || 19.3 || 23.3 || 21.9-25.6 || 40.8-59.6

Renewables increase their share significantly under adopted policies and would substantially rise in all decarbonisation scenarios to reach at least 22% of primary energy consumption by 2030 and 41% by 2050. The RES share is comparably low in those scenarios, in which nuclear plays a rather strong role (scenarios 4 and 5). The RES share is highest in High RES scenario reaching 60% in primary energy by 2050. It is also pretty high (44% and 46% in primary energy in 2050) in the Energy Efficiency and Low nuclear scenarios, respectively.

The RES share is higher when calculated in gross final energy consumption (indicator used for the 20% RES target). It represents at least 28% (2030) and 55% (2050) in all decarbonisation scenarios and rises up to 75% in 2050 in the High RES scenario.

Figure 23: Range of Fuel Shares in Primary Energy in 2050 compared with 2009 outcome

Nuclear developments have been significantly affected by the policy reaction in Member States after the nuclear accident in Fukushima (abandoning substantial nuclear plans in Italy, revision of nuclear policy in Germany). These reactions and the forthcoming nuclear stress tests have been reflected in the modelling assumptions for the Current Policy Initiatives scenario (1bis). The downward effects for nuclear penetration in CPI are also present in the decarbonisation scenarios, since the modelling of these cases also included the recent policy adjustments on nuclear.

The share of nuclear varies depending on assumptions taken. In the scenario without new nuclear investment (except for plants under construction) and extension of lifetime only in this and the next decade, the nuclear share declines gradually to 3% by 2050. In the most ambitious nuclear scenario - Delayed CCS, the share rises to 18%[8].

The share of gas under Current Policy Initiatives is higher than in the Reference scenario reflecting abandon of the nuclear programme in Italy, no new nuclear power plants in Belgium and higher costs for new plants and retrofitting. The gas share increases slightly to 26% in 2050 in the Low nuclear scenario where the CCS share in power generation is around 32%.

The oil share declines only slightly until 2030 (and even 2040) due to high dependency of transport on oil based fuels. However, the decline is significant in the last decade 2040-2050 where oil in transport is replaced by biofuels and electric vehicles. The oil share drops to around 15% in 2050 when following any of the examined main directions towards decarbonisation.

The share of solid fuels continues its long standing downward trend already under Reference and CPI developments. Under substantial decarbonisation the solids share shrinks further to reach levels as low as 2% in the High RES scenario in 2050 and only 4% and 5% under Energy efficiency and Delayed CCS, respectively. The solids share would remain rather high only in the Low nuclear scenario (10% in 2050) with a high CCS contribution which allows a continued use of solids in a decarbonisation context.

Final energy demand declines similarly to primary energy demand. Current Policy Scenario shows around 5% decrease (in 2020-2050) compared to the Reference scenario. In the Energy Efficiency scenario the reduction on Reference in final energy demand is -14% in 2030 and -40% in 2050. The decrease in the decarbonisation scenarios is at least -8% in 2030 and -34% in 2050. Compared with actual 2005 outcome, final energy consumption decreases in 2050 by 37% in the High Energy Efficiency scenario and by around 32% in all the other decarbonisation scenarios.

Sectors showing higher reductions than the average are residential, tertiary and generally also transport.

Table 23: Final energy demand, changes compared to the Reference scenario

|| Reference scenario || Current Policy Initiatives || Energy efficiency || Diversified supply technologies

|| 2020 || 2030 || 2050 || 2020 || 2030 || 2050 || 2020 || 2030 || 2050 || 2020 || 2030 || 2050 ||

Final Energy Demand (Mtoe) || 1227 || 1187 || 1221 || -6% || -4% || -5% || -9% || -14% || -40% || -7% || -9% || -34% ||

Industry || 330 || 333 || 369 || -4% || -5% || -5% || -4% || -5% || -30% || -4% || -5% || -26% ||

Residential || 318 || 299 || 288 || -9% || -6% || -4% || -13% || -20% || -43% || -9% || -12% || -35% ||

Tertiary || 181 || 174 || 181 || -8% || -5% || -7% || -13% || -25% || -53% || -8% || -15% || -42% ||

Transport || 398 || 382 || 383 || -4% || -2% || -6% || -7% || -12% || -40% || -7% || -9% || -38% ||

|| High RES || Delayed CCS || Low nuclear ||

|| 2020 || 2030 || 2050 || 2020 || 2030 || 2050 || 2020 || 2030 || 2050 ||

Final Energy Demand (Mtoe) || -7% || -8% || -34% || -7% || -10% || -35% || -6% || -10% || -35% ||

Industry || -4% || -4% || -25% || -4% || -5% || -26% || -3% || -6% || -26% ||

Residential || -9% || -9% || -34% || -9% || -12% || -35% || -9% || -13% || -36% ||

Tertiary || -8% || -13% || -44% || -8% || -16% || -42% || -7% || -17% || -43% ||

Transport || -7% || -8% || -38% || -7% || -9% || -39% || -7% || -9% || -39% ||

There is a lot of structural change in the fuel composition of final energy demand. Given its high efficiency and emission free nature at use, electricity makes major inroads already under current policies (increase by 9 pp between 2005 and 2050 in CPI).

The electricity share soars further in decarbonisation scenarios reaching 36% - 39% in 2050, reflecting also its important role in decarbonising further final demand sectors such as heating and services and in particular transport. The electricity share would almost double by 2050. The crucial issue for any decarbonisation strategy is therefore the full decarbonisation of power generation (see below).

Table 24: Final energy consumption by fuel in various scenarios

Also RES make major inroads under current policies including the 2009 RES Directive. The direct use of RES in final demand (i.e. not counting here the RES input to power and distributed heat generation) rises strongly to 2030 coming close to a doubling of the share. However, without additional policy push beyond the current RES/climate change measures, this RES share could be stagnant. On the contrary, in decarbonisation scenarios the share of directly used RES (e.g. biomass, solar thermal) would go up to 24% in 2050 in almost all decarbonisation cases, except for the high RES scenario, where this share reaches even 30%.

Oil has been dominating final energy for many years and might continue doing so until 2030 even in the decarbonisation scenarios, when is would still account for one third of energy deliveries to final consumers. The big changes come after 2030 when more and more parts of final energy consumption based on oil, especially in transport, are replaced by electricity (e.g. electric and plug in hybrid vehicles, heat pumps). The oil share in 2050 would drop to around 15%.

The gas share has been declining in recent years and would be lower than today under both current policies and decarbonisation in 2030, when gas would account for not more than a fifth in final demand. The gas share after 2030 would be decreasing further in particular in decarbonisation scenarios, which is due to the greater role of electricity in both heating and for providing energy in productive sectors.

Distributed heat would deliver 7-8% of final energy demand in 2030 under both current policies and decarbonisation, raising its share substantially from current levels. The heat share in 2050 would be highest (10%) in the Low nuclear scenario where high electricity production is ensured by CCS equipped generation from gas and solids, often in a CHP mode.

Solid fuels become rather obsolete in final energy demand under current policies (falling to around 3% in 2030-2050). The decline of the solids share reflects higher use of electricity and gas in heating and industry. Solid fuels become marginal under decarbonisation, especially by 2050, when most solids base processes have been replaced by electricity or other fuels. The solid fuel share in 2050 would shrink to 0.3-0.4%.

Figure 24: Shares of Electricity in Current Trend and Decarbonisation Scenarios

2.3 Power generation

Electricity demand increases in all scenarios compared to 2005 levels, following greater penetration of electricity using appliances, heating and propulsion systems. The increased use of electric devices is partly compensated by the increased energy efficiency of electric appliances as well as increased thermal integrity in the residential and service sectors and more rational use of energy in all sectors, but overall the effect from emerging new electricity uses at large scale for heating and transport is decisive. The development of electricity consumption varies between sectors.

Transport electricity demand increases strongest. The increase of electricity use in transport is due to the electrification of road transport, in particular private cars, which can either be plug-in hybrid or pure electric vehicle; almost 80% of private passenger transport activity is carried out with these kinds of vehicles by 2050. Despite substantial progress regarding energy efficiency of appliances and for efficient heating systems, such as heat pumps, household electricity demand in 2050 under decarbonisation exceeds the current level given the additional deployment of electricity in heating and cooling.

Electricity demand in the other sectors decreases or remains flat under decarbonisation. Electricity demand in services/agriculture diminishes in all decarbonisation scenarios as a result of strong energy efficiency policies, although there is a substitution from other energy carriers to more efficient electric devices e.g. heat pumps. . Industrial electricity demand remains broadly at the current level by 2050 under decarbonisation.

Table 25: Electricity final energy demand

|| 2005 || 2050

|| Reference || Scenario 1bis || Scenario 2

Final energy demand (in TWH) || 2762 || 4130 || 3951 || 3203

Industry || 1134 || 1504 || 1426 || 1109

Households || 795 || 1343 || 1230 || 913

Tertiary || 759 || 1184 || 1041 || 518

Transport || 74 || 100 || 255 || 663

|| 2050

|| Scenario 3 || Scenario 4 || Scenario 5 || Scenario 6

Final energy demand (in TWh) || 3618 || 3377 || 3585 || 3552

Industry || 1211 || 1169 || 1201 || 1191

Households || 1026 || 938 || 1019 || 1013

Tertiary || 707 || 605 || 696 || 677

Transport || 675 || 664 || 669 || 671

Power generation: level and structure by fuel

Given the assumed limited electricity import possibilities from third countries, the increased electricity demand will have to be generated nearly exclusively within the EU. Moreover, electricity production has to cover also power plant own consumption (e.g. for desulphurisation), the consumption of the other energy producing sectors (energy branch) as well as transmission and distribution losses. Furthermore, additional electricity generation is appropriate under strong decarbonisation objectives to produce hydrogen mixed in low and medium pressure gas networks (bringing down emission factors in final demand) and for producing hydrogen, which is used for balancing in the case of high RES scenarios. Therefore, similar to electricity demand there is a strong increase from current levels for power generation in all scenarios. Under decarbonisation, power generation will be lower in 2050 compared with Reference and CPI scenarios. The highest electricity generation level in 2050 among the decarbonisation cases comes about in case of CO2 reduction focussing particularly strongly on RES.

The structure of power generation changes substantially between the scenarios. The Reference scenario and the Current Policy Initiatives scenario show renewable shares in 2050 reaching 40 and 49% respectively and fossil fuels still having a share of 33 and 31% respectively. Among the decarbonisation scenarios, only the Low nuclear scenario has a share of fossil fuels above 30%, as it makes substantial use of CCS. In the other scenarios the fossil fuel share lies below 25% and is particularly low in High RES scenario, where fossil fuels account for under 10% of electricity generation.

Under decarbonisation, power generation in 2050 is based on renewables for at around 60%-65%, except for the high RES case, in which this share is much higher. Wind alone accounts for about one third of power generation in most decarbonisation scenarios. In the high RES case, the wind share reaches even close to 50% in 2050. The nuclear share falls from the present level in all decarbonisation scenarios. This share is highest in 2050 under delayed CCS, in which case it is around 20%. On the contrary, in the low nuclear scenario, nuclear would account for just 2.5% of power generation.

Table 26: Power generation

|| || 2005 || 2050

|| || Reference || Scenario 1bis || Scenario 2

Electricity generation || TWh || 3274 || 4931 || 4620 || 4281

Nuclear energy || Shares (%) || 30.5 || 26.4 || 20.6 || 14.2

Renewables || 14.3 || 40.3 || 48.8 || 64.2

Hydro || 9.4 || 7.6 || 8.5 || 9.2

Wind || 2.2 || 20.1 || 24.7 || 33.2

Solar, tidal etc. || 0.0 || 5.1 || 7.0 || 10.6

Biomass & waste || 2.6 || 7.3 || 8.4 || 10.9

Geothermal heat || 0.2 || 0.2 || 0.2 || 0.3

Fossil fuels || 55.2 || 33.3 || 30.6 || 21.6

Coal and lignite || 30.0 || 15.2 || 11.1 || 4.8

Petroleum products || 4.1 || 2.2 || 2.1 || 0.0

Natural gas || 20.3 || 15.1 || 16.7 || 16.7

Coke & blast-furnace gasses || 0.9 || 0.7 || 0.7 || 0.0

Other fuels (hydrogen, methanol) || 0.0 || 0.0 || 0.0 || 0.0

|| || 2050

|| || Scenario 3 || Scenario 4 || Scenario 5 || Scenario 6

Electricity generation || TWh || 4912 || 5141 || 4872 || 4853

Nuclear energy || Shares (%) || 16.1 || 3.5 || 19.2 || 2.5

Renewables || 59.1 || 83.1 || 60.7 || 64.8

Hydro || 8.0 || 7.7 || 8.1 || 8.1

Wind || 31.6 || 48.7 || 32.4 || 35.6

Solar, tidal etc. || 9.9 || 16.4 || 9.9 || 10.8

Biomass & waste || 9.3 || 9.6 || 9.9 || 9.8

Geothermal heat || 0.3 || 0.6 || 0.4 || 0.4

Fossil fuels || 24.8 || 9.6 || 20.1 || 32.7

Coal and lignite || 8.1 || 2.1 || 5.1 || 13.1

Petroleum products || 0.0 || 0.0 || 0.0 || 0.1

Natural gas || 16.6 || 7.5 || 14.9 || 19.5

Coke & blast-furnace gasses || 0.0 || 0.0 || 0.0 || 0.0

Other fuels (hydrogen, methanol) || 0.0 || 3.9 || 0.0 || 0.0

NB: power generation is presented in the most comprehensive way in this table involving in a sense some "double counting" in the denominator of shares for the high RES scenario: first electricity generation from RES is counted including those parts of RES based generation that, in case supply exceeds demand, are transformed into hydrogen for later use by producing electricity for a second time from these original renewables sources. This specific representation for showing also the magnitude of hydrogen based RES electricity storage (4% in 2050) leads to total electricity generation numbers that are in a sense inflated, which in turn gives rise to lower RES share numbers in this specific representation that counts production from RES once as such and secondly under hydrogen based generation (shown separately) for the part that is not lost in transformations into hydrogen and back from hydrogen to electricity.

Power plant investments by fuel type (e.g. RES, nuclear, fossils with CCS, fossil without CCS)

The installed capacity increases in all scenarios compared to the Reference scenario due to the additional balancing and power reserve capacities needed for the variable RES which increase in all scenarios. The scenario with the least increase is Energy Efficiency scenario which requires the least amount of electricity and therefore also the least amount of installed capacity. All scenarios still have fossil fuel fired power plants as installed capacity, which are used mainly as back-up.

The share of CCS capacity in thermal power plants for the decarbonisation scenarios ranges from 48% in Low nuclear scenario to 12% in High RES scenario. The share in the other scenarios is between 35 and 44%.

Table 27: Installed power capacity

|| || 2005 || 2050

|| || Reference || Scenario 1bis || Scenario 2

Net Installed Power Capacity || GWe || 715 || 1454 || 1502 || 1473

Nuclear energy || 134 || 161 || 117 || 79

Renewables (without biomass/geothermal) || 147 || 681 || 784 || 1012

Hydro (pumping excluded) || 105 || 121 || 122 || 125

Wind power || 41 || 382 || 432 || 548

Wind on-shore || 40 || 262 || 291 || 370

Wind off-shore || 1 || 120 || 140 || 177

Solar || 2 || 171 || 224 || 330

Other renewables (tidal etc.) || 0 || 6 || 7 || 9

Thermal power || 434 || 613 || 601 || 382

Solids fired || 187 || 131 || 104 || 70

Oil fired || 62 || 168 || 38 || 15

Gas fired || 167 || 226 || 366 || 187

Biomass-waste fired || 18 || 87 || 92 || 108

Hydrogen plants || 0 || 0 || 0 || 0

Geothermal heat || 1 || 1 || 1 || 2

|| || 2050

|| || Scenario 3 || Scenario 4 || Scenario 5 || Scenario 6

Net Installed Power Capacity || GWe || 1621 || 2219 || 1639 || 1721

Nuclear energy || 102 || 41 || 127 || 16

Renewable (without biomass/geothermal) || 1081 || 1749 || 1093 || 1193

Hydro (pumping excluded) || 126 || 131 || 126 || 127

Wind power || 595 || 984 || 609 || 674

Wind on-shore || 398 || 612 || 408 || 452

Wind off-shore || 197 || 373 || 200 || 222

Solar || 351 || 603 || 348 || 381

Other renewables (tidal etc.) || 10 || 30 || 10 || 11

Thermal power || 439 || 429 || 419 || 513

Solids fired || 94 || 62 || 73 || 125

Oil fired || 19 || 19 || 18 || 18

Gas fired || 218 || 182 || 210 || 255

Biomass-waste fired || 106 || 163 || 115 || 112

Hydrogen plants * || 0 || 0 || 0 || 0

Geothermal heat || 2 || 4 || 2 || 2

|| || 2005 || 2050

|| || Reference || Scenario 1bis || Scenario 2

Total CCS capacity || GWe || 0 || 101 || 39 || 149

Solids || 0 || 64 || 33 || 28

Oil || 0 || 0 || 0 || 0

Gas || 0 || 37 || 6 || 121

|| || 2050

|| || Scenario 3 || Scenario 4 || Scenario 5 || Scenario 6

Total CCS capacity || GWe || 193 || 53 || 148 || 248

Solids || 50 || 18 || 30 || 79

Oil || 0 || 0 || 0 || 0

Gas || 142 || 34 || 118 || 169

* Hydrogen capacity in the above table refers only to plant technologies dedicated to specific hydrogen use, such as fuel cells. Capacity for generating electricity from hydrogen, serving only the purpose of storing RES based electricity that was previously produced at times when electricity supply exceeded demand, is accounted for under gas fired capacity, given that hydrogen would be burnt is such types of plants, including as a mixture with natural gas.

The high RES scenario is a particularly challenging scenario regarding the restructuring of the energy system involved; RES policy related challenges in this scenario include the following:

Huge investments in RES power capacity need to be ensured with wind capacity alone reaching over 980 GW in 2050, this is 20% more than today's (2010) total power generation capacity (including nuclear, fossil fuels and all RES); similarly, solar capacity would need to soar to 600 GW, which amounts to almost three quarters of our present total generation capacity; all RES power generation capacity (Renewables + biomass/waste + geothermal in table 27) would need to increase to over 1900 GW, which is more than 8 times the current RES capacity and also more than twice today's total generation capacity. It might be a challenge to ensure the raw material needed for RES technologies and there may be upward pressure on e.g. steel prices, which could be a challenge to such a development (not modelled with the energy model); other logistic challenges would relate to ensuring the maritime equipment to install and maintain the off-shore wind capacity that rises from just close to 5 GW today to over 370 GW in 2050; In order to accommodate RES production from remote sites with respect to consumption centres and to take advantage of the cost differences across Member States for cost-effectiveness reasons, the grid needs to be extended substantially and also smartened to deal with variable feed in from many dispersed sources (e.g. solar PV); the scenario analysis identified needs for grid extension beyond 2020 under a decarbonisation agenda and in addition a set of additional DC links (electricity highways) needed to accommodate a very high RES contribution to electricity supply (see attachment 2 to this Annex); Another challenge relates to the skilled workforce required, the lack of which can lead to a stalled development unless a major RES related education and training strategy is pursued taking account of ageing EU population over the next decades, which is even shrinking after 2035. Skilled workforce will also be needed for the construction of expanded, smart grids, which will also be necessary for the penetration of other low carbon technologies. In addition to economic, logistical, resource security and manpower challenges, there is the acceptance issue for new transmission lines and perhaps also regarding the substantial expansion of (on-shore) RES installations;

It will also be challenging in the other decarbonisation scenarios to ensure the required RES capacity in 2050 and to accommodate it by the grid. The Energy Efficiency scenario poses the least challenge given the lowest electricity demand, but nevertheless, RES power generation capacity would need to soar to 5 times the current level, exceeding today's total electricity generation capacity (nuclear, fossil fuel and RES combined) by more than a third. On the other hand, increased energy efficiency and decentralised RES might require more sophisticated solutions for distribution level.

Other scenarios pose also substantial challenges throughout the transition. For example, higher nuclear deployment in the delayed CCS scenario leads to more requirements for nuclear fuel and more nuclear waste that needs to be safely transported and stored. Electrification of passenger transport involves many changes in car production and infrastructure provision. A smooth transition from a petrol/diesel to an electricity based system for mainly urban transport requires a lot of logistical changes.

Widespread penetration of CCS will require dedicated CO2 transport grids that need to be financed, constructed and accepted. Acceptance challenges could be particularly pronounced for nuclear and CO2 storage. As carbon capture, transport and storage require significant quantities of electricity that need to be generated in addition to electricity for final use, there would be higher input demand also for fossil fuels. This effect would be particularly pronounced if global decarbonisation includes an important contribution from CCS for energy consumption and also for abatement of industrial process emissions. This could exert upward pressure on the level of world fossil fuel prices.

All scenarios involve substantial changes in production, transformation, smart transmission/distribution and consumption patters for energy, requiring a skilled workforce against the background of ageing population. Enhancement of the European capacity for innovation, appropriate RTD as well as education and training will be instrumental for a cost-effective transition to a low carbon economy that fosters competitiveness and security of supply.

Decarbonisation requires also considerable capacity for CCS, except for the high RES scenario. The other scenarios involve around 150 GW – 250 GW CCS capacity in 2050, with the upper end materialising in Low nuclear scenario, which is the case with the greatest use of CCS for power generation (32% share

In Table 28 the capacity investment per decade for the scenarios can be seen; as can be observed the highest investments take place in RES in all scenarios. As can be seen no new investment is undertaken in nuclear in Low nuclear scenario after 2030; only Delayed CCS sees higher nuclear investment than in the Reference scenario for the last two decades of the projection period. Investment continues in thermal power plants throughout the projection period in all scenarios; it is lowest in High RES and Energy efficiency scenarios. These investment numbers include lifetime extensions of existing plants, refurbishments and replacement investments on existing sites, which is particularly relevant for nuclear. These investment numbers must not be confused with additional new plants of e.g. nuclear.

Table 28: Net Power Capacity Investment in GWe per decade

|| || 2011-2020 || 2021-2030 || 2031-2040 || 2041-2050

Reference || Nuclear energy || 15 || 64 || 46 || 62

Renewable energy || 192 || 169 || 192 || 259

Thermal power fossil fuels || 100 || 78 || 184 || 183

of which: CCS || 5 || 6 || 48 || 41

Thermal power RES || 37 || 17 || 14 || 24

Scenario 1 bis || Nuclear energy || 12 || 42 || 41 || 49

Renewable energy || 187 || 169 || 245 || 309

Thermal power fossil fuels || 101 || 72 || 169 || 198

of which: CCS || 3 || 0 || 19 || 17

Thermal power RES || 38 || 17 || 13 || 29

Scenario 2 || Nuclear energy || 11 || 24 || 34 || 22

Renewable energy || 204 || 222 || 318 || 436

Thermal power fossil fuels || 86 || 23 || 92 || 92

of which: CCS || 3 || 0 || 56 || 90

Thermal power RES || 38 || 19 || 27 || 29

Scenario 3 || Nuclear energy || 12 || 46 || 36 || 35

Renewable energy || 214 || 250 || 348 || 463

Thermal power fossil fuels || 90 || 37 || 130 || 101

of which: CCS || 3 || 1 || 91 || 98

Thermal power RES || 40 || 20 || 27 || 25

Scenario 4 || Nuclear energy || 12 || 30 || 12 || 0

Renewable energy || 215 || 396 || 588 || 817

Thermal power fossil fuels || 88 || 35 || 66 || 91

of which: CCS || 3 || 0 || 19 || 30

Thermal power RES || 38 || 22 || 55 || 53

Scenario 5 || Nuclear energy || 12 || 47 || 56 || 39

Renewable energy || 214 || 256 || 354 || 464

Thermal power fossil fuels || 89 || 36 || 79 || 115

of which: CCS || 3 || 0 || 35 || 110

Thermal power RES || 39 || 20 || 37 || 23

Scenario 6 || Nuclear energy || 11 || 4 || 0 || 0

Renewable energy || 213 || 281 || 385 || 515

Thermal power fossil fuels || 90 || 50 || 163 || 121

of which: CCS || 3 || 5 || 121 || 118

Thermal power RES || 39 || 25 || 26 || 27

Investment in generation capacity entails substantial cumulative investment expenditure in all scenarios over the period 2011-2050. Cumulative investment expenditure for power generation is most pronounced in the high RES scenario amounting to over 3 trillion € in real terms up to 2050. Among the decarbonisation scenarios cumulative investment expenditure for power generation is lowest in the Energy Efficiency scenario given the marked savings in electricity consumption.

Figure 25: Cumulative investment expenditure in 2011-2050 for power generation (in € of 2008)

These investment expenditure results impact on electricity generation costs in the different scenarios (see below)

Impacts on infrastructure

Infrastructure requirements differ in scenarios. Decarbonisation scenarios require more and more sophisticated infrastructures (mainly electricity lines, smart grids and storage) than Reference and CPI scenarios. High RES scenario necessitates additional DC lines mainly to transport wind electricity from the North Sea to the centre of Europe and more storage. The biggest share of costs relate to the upgrade and improvement of distribution networks including smartening of the grid. Investments needed in transmission lines are much lower and new interconnectors represent only a fraction of these transmission costs.

Table 29: Grid investment costs

(Bn Euro'05) || Grid investment costs

2011-2020 || 2021-2030 || 2031-2050 || 2011-2050

Reference || 292 || 316 || 662 || 1269

CPI || 293 || 291 || 774 || 1357

Energy Efficiency || 305 || 352 || 861 || 1518

Diversified supply technologies || 337 || 416 || 959 || 1712

High RES || 336 || 536 || 1323 || 2195

Delayed CCS || 336 || 420 || 961 || 1717

Low nuclear || 339 || 425 || 1029 || 1793

Euro'05 || Transmission Grid investment (bEUR)

2011-2020 || 2021-2030 || 2031-2040 || 2041-2050 || 2011-2050

Reference || 47.9 || 52.2 || 53.5 || 52.0 || 205.7

CPI || 47.1 || 49.6 || 64.8 || 66.6 || 228.2

Energy Efficiency || 49.0 || 63.1 || 80.3 || 80.1 || 272.5

Diversified supply technologies || 52.8 || 70.2 || 88.0 || 86.8 || 297.8

High RES || 52.8 || 95.5 || 137.8 || 134.4 || 420.4

Delayed CCS || 52.7 || 71.0 || 88.6 || 87.6 || 299.9

Low nuclear || 52.9 || 73.8 || 95.2 || 94.8 || 316.6

Euro'05 || Distribution Grid investment (bEUR)

2011-2020 || 2021-2030 || 2031-2040 || 2041-2050 || 2011-2050

Reference || 243.7 || 263.5 || 280.5 || 276.0 || 1063.7

CPI || 245.0 || 239.3 || 317.6 || 325.9 || 1127.8

Energy Efficiency || 256.3 || 289.1 || 408.4 || 291.8 || 1245.5

Diversified supply technologies || 284.2 || 345.9 || 454.3 || 329.8 || 1414.1

High RES || 283.5 || 440.0 || 619.8 || 431.5 || 1774.8

Delayed CCS || 283.4 || 349.4 || 445.1 || 339.6 || 1417.5

Low nuclear || 286.4 || 350.8 || 472.5 || 366.5 || 1476.3

Euro'08 || Investments in new electricity interconnectors

2006-2020 || 2021-2030 || 2031-2050

Reference || 13.1 || 0.3 || 0.0

CPI || 21.9 || 9.7 || 0.6

High energy efficiency || 21.9 || 9.7 || 0.6

Diversified supply technologies || 21.9 || 9.7 || 0.6

High RES || 21.9 || 21.2 || 50.8

Delayed CCS || 21.9 || 9.7 || 0.6

Low nuclear || 21.9 || 9.7 || 0.6

The model assumes that grid investments, that are prerequisites to the decarbonisation scenarios in this analysis, are undertaken and that costs are fully recovered in electricity prices. The reality might differ from this model situation in a sense that current regulatory regime might be more short to medium term cost minimisation oriented and might not provide sufficient incentives for long-term and innovative investments. There might also be less perfect foresight and lower coordination of investments in generation, transmission and distribution as the model predicts.

Power generation costs

Fixed operational and capital costs for power generation increase over time in all scenarios. The increase in capital costs is more pronounced in decarbonisation scenarios, notably in the High RES case. A substantial RES contribution (high RES scenario) leads to an increase of fixed and capital costs of 155% in 2050 compared with 2005 (81% rise by 2030) due to the additional investment needs in generation, grid, storage and back-up capacities. On the contrary, the increase in variable and fuel costs over time under Reference and CPI developments would be more or less cancelled in the decarbonisation cases. This effect of shifting variable and fuel costs towards capital costs is most pronounced in the High RES scenario. In this decarbonisation case, the substantial RES contribution leads to a decline of variable and fuel costs by 45% below Reference in 2050 and also a decrease by 21% on the 2005 level.

Unit costs of transmission and distribution increase substantially in all decarbonisation scenarios. The High RES case has the greatest increase. Due to the decarbonisation of the power sector in all scenarios in the last two decades of the projection period, the costs related to ETS auction payments decrease substantially.

These effects on cost components allow for a decrease in electricity prices between 2030 and 2050 in all decarbonisation scenarios, except for the High RES scenario. This is in stark contrast to the period up to 2030, in which electricity prices increase due notably to increases in capital cost, grid costs and auctioning payments. The High RES case is an exception from other cases because of the very high investment requirements combined with stronger requirements on the electricity grid extension, which is not fully compensated by savings in fuel and other variable costs.

Therefore the High RES case features the highest electricity prices among the decarbonisation scenarios, as it would not allow for the flattening out of the strong price increase up to 2030 (observed in all scenarios) but continues with major capital intensive changes to the power system.

Table 31: Electricity prices and cost structure [9]

It is important to note that, as explained in the assumptions part, the PRIMES model makes sure that the full costs of electricity production and distribution are recovered through electricity prices. Both marginal costs and the appropriate portion of fixed capital and operation costs are allocated to the various sectors according to the Ramsey Boiteux methodology taking into account price elasticities in the allocation of fixed costs. This procedure is necessary to ensure a sustainable modelling solution because in internally consistent scenarios electricity sector investments need to be financed by the revenues from selling electricity.

However, power exchanges in wholesale markets work on the basis of marginal costs for determining spot prices with suppliers having lower marginal costs that the equilibrium price being able to cover (parts of) fixed costs. In a situation with a very high contribution of capital intensive low carbon technologies with marginal costs close to zero, such as RES, all suppliers succeeding to place bids might be bidders with such RES power plants and competition at power exchanges would drive this electricity price down close to zero. Obviously, close to zero prices over very long time segments every year would not be a sustainable solution in such a scenario, as the necessary capital expenditure and investment under such market structure could not be financed from selling revenues and such a scenario would not materialise. While PRIMES, presenting functioning scenarios, presents economically sustainable electricity prices, this issue appears to be an institutional challenge for the transition to a low carbon electricity system, especially for one that is nearly entirely based on RES.

2.4 Other sectors

Heating and cooling: distributed heat/steam and RES

Demand for distributed heat in the decarbonisation scenarios rises compared to current level but is 2%-10% lower by 2030 as compared to the Reference scenario, with the greatest decline occurring in the high RES scenario. The decrease is more pronounced towards 2050 with 46% decrease as compared to Reference scenario in the High RES scenario; 26% decrease in the Energy Efficiency scenario and at least -20% decrease in other decarbonisation scenarios. The High RES scenario shows lowest distributed heat demand after 2025 due to the highest penetration of RES in power generation which leads to decrease of CHP[10] and due to the shift towards electricity use for heating reducing especially district heating from fossil fuels.

When comparing results for distributed heat between Reference and decarbonisation scenarios, it is important to note that final energy demand in the decarbonisation scenarios is 34% - 40% lower in 2050 than under reference developments (around 10% lower in 2030).

The biggest decrease as compared to the Reference scenario in 2050 occurs in the residential sector (-63% in High RES scenario and -32-42% in all other decarbonisation scenarios) reflecting stringent energy efficiency policies in buildings. Demand stays at current levels of around 240 TWh until 2015 and then gradually declines to 69 TWh in the High RES scenario and 126 TWh in the Low nuclear by 2050, showing the higher distributed heat demand among the decarbonisation cases.

The decrease in the tertiary sector is important as well with -43% in the Energy Efficiency scenario and at least -31% in all other scenarios. The demand peaks in 2015 at 120 TWh and goes down to 52 TWh in Energy Efficiency scenario and around 60 TWh in other decarbonisation scenarios.

Contrarily to residential and tertiary, industrial demand for heat increases massively from 160 TWh in 2005 to reach 503 TWh in High RES scenario and up to 733 TWh in Low nuclear/High CCS scenario by 2050. Industrial demand is still lower as compared to Reference scenario by at least 17% in all decarbonisation scenarios and by -43% in High RES scenario. However, industry needs steam for some processes that can hardly be substituted by other fuels.

Heat consumption is also rising in the energy branch from 54 TWh in 2005 to 71-77 TWh in 2050, with the Energy Efficiency and delayed CCS scenarios at the lower end of the range and the Low Nuclear scenario at the upper one.

Following the diverging trends in different sectors the shares of sectors in total distributed heat changes significantly up to 2050.

Table 32: Heat/steam final consumption

|| 2005 || 2050

Reference scenario || Decarbonisation scenarios

Industry || 161TWh || 31% || 880 TWh || 76% || 503 - 733 TWh || 81- 80%

Households || 240 TWh || 46% || 186 TWh || 16% || 69 - 126 TWh || 11 - 13%

Tertiary || 116 TWh || 22% || 92 TWh || 8% || 52 - 64 TWh || 8 - 7%

Final demand || 517 TWh || 100% || 1.159 TWh || 100% || 627 – 923 TWh || 100%

With lower final energy demand under decarbonisation, the share of distributed heat in total heating in the residential, services and agriculture sectors rises somewhat from current level of slightly over 11% in most scenarios, except for the High RES scenario. This decrease in the share of distributed heat is compensated by the increased direct use of biomass for heating, which soars from approx. 13.5% in 2010 to approx. 33% in 2050 in the High RES scenario.

Table 33: Share of distributed heat in total heating for residential and tertiary

|| 2020 || 2030 || 2050 ||

CPI || 11.6% || 12.0% || 12.0% ||

Energy Efficiency || 12.0% || 12.8% || 13.3% ||

Div. Supply Technology || 11.6% || 12.4% || 13.4% ||

High RES || 11.6% || 11.4% || 8.5% ||

Delayed CCS || 11.6% || 12.4% || 12.4% ||

Low Nuclear || 11.6% || 12.5% || 13.7% ||

Heat and steam generation

Heat from CHP rises from 473 TWh in 2005 to 1030 TWh by 2025 in the High RES scenario and then declines to 682 TWh by 2050. In other scenarios, including Energy Efficiency, the rise continues until 2035 with the highest CHP generation in the Low nuclear scenario at 1113, exhibiting a slight decline thereafter. CHP heat production in 2050 covers a range from 682 TWh in the high RES scenario to 1019 TWh in the low nuclear case. As in the Reference scenario the growth is driven by support policies resulting from the application of the CHP directive and ETS carbon prices.

CHP share in power generation is the highest in the Low nuclear scenario reaching 22% in 2030. This share in 2030 is the lowest in the High RES scenario at 19%. By 2050, CHP share decline in all scenarios to 18% in Low nuclear and to 11% in High RES scenarios reflecting higher penetration of wind and solar in power generation (no combined production of heat possible) and electrification of heating in combination with energy efficiency policies to reduce demand for heat.

District heating is already declining from its 2000 levels of almost 190 TWh and this decline continues in the Reference scenario as well as in decarbonisation scenarios to 109 TWh in the Reference scenario and 29 -52 TWh in decarbonisation scenarios. The development of district heating is due to its benefits in reducing emissions in the short and medium term but in the long run, similarly to CHP plants, if district heating boilers do not use biomass, they emit GHG.

RES in heating and cooling

The modelling of energy demand formation by sector includes heating and cooling requirements as well as a detailed coverage of various ways of satisfying these needs including distributed heating and cooling from co-generation and district heating. As can be seen from table 34, there is very significant progress in all decarbonisation cases regarding the share of RES in heating and cooling. The RES share in heating and cooling doubles between 2005 and 2020 in all scenarios, reaching at least 44% by 2050 under decarbonisation. The highest share of well over 50% in 2050 is achieved in the High RES scenario.

Table 34: Percentage share of RES in gross final consumption of heating and cooling

% share || 2020 || 2030 || 2050

CPI || 20.9 || 22.7 || 23.8

Energy Efficiency || 21.0 || 23.3 || 44.9

Div. Supply Technology || 20.9 || 23.8 || 44.0

High RES || 20.9 || 26.8 || 53.5

Delayed CCS || 20.9 || 24.2 || 44.9

Low Nuclear || 20.8 || 24.3 || 44.6

Transport

In the decarbonisation scenarios, transport energy demand is projected to decline by close to 40% below Reference in 2050 due to active policies for tightening CO2 standards (essentially impacting on fuel efficiency), taxation, internal market and infrastructure measures[11]. The highest energy savings, in order of 155 Mtoe, are achieved in the Energy Efficiency scenario but all decarbonisation scenarios deliver savings in the same order of magnitude (around 150 Mtoe). Over 60% of these energy savings originate from passengers transport.

Energy intensity in passenger transport improves by slightly over 60% between 2005 and 2050 in the decarbonisation scenarios, mainly due to the enforcement of such efficiency standards. For freight transport, the efficiency standards together with measures encouraging a shift in modal choices lead to around 40% decrease in the energy intensity.

The EU transport system would remain extremely dependent on the use of fossil fuels in the Reference scenario. Oil products would still represent 88% of the EU transport sector final demand in 2030 and 2050 in the Reference scenario. Consumption of oil would decrease by 11% by 2050, relative to the Reference scenario, in the Current Policy Initiatives scenario mainly driven by the revision of the Energy Taxation Directive.

In the decarbonisation scenarios, final consumption of oil by transport is expected to decrease by almost 70% in 2050, relative to the Reference scenario; the oil share in final demand would amount to around 45%. This decline is compensated to a certain extent by the rise in the electricity demand by road and rail transport and the increased demand for biofuels, especially in aviation, inland navigation and long distance road freight, where electrification is not or less an option. Biofuels would represent slightly below 40% of energy consumption in aviation and inland navigation and 41% in long distance road freight by 2050. The role of biofuels in energy demand by passenger cars and light duty vehicles would be more limited, ranging between 13% and 15%. Electricity would provide around 65% of energy demand by passenger cars and light duty vehicles in all decarbonisation scenarios. Electro-mobility would need to be supported by the upgrade of Europe’s networks towards a European super grid and decarbonisation of electricity sector.

As a result of the higher demand for electricity and sustainable biofuels, the share of renewables in transport would increase by 2050, ranging between 62% and 73%. This difference between the decarbonisation scenarios can be explained by the different power generation mix, despite similar shares of biofuels and electricity demand in energy consumption by transport mean. Therefore, the highest share of renewables in transport is achieved in the High RES scenario.

2.5 Security of supply

Import dependency in 2030 does not change substantially in decarbonisation scenarios as compared to Reference scenario and Current Policy Initiatives scenario due to decline in both gross inland consumption and imports. There is however a substantial decrease in 2050, driven by increased use of domestic resources, mainly renewables. Import dependency is only 35% in High RES scenario (compared to 58% in the Reference scenario and Current Policy Initiatives scenario) and 39-40% in all other decarbonisation scenarios besides Low nuclear scenario (45%) where it is higher due to significant use of fossil fuels with CCS. Decarbonisation will significantly reduce fossil fuel security risks.

Table 35: Import dependency

% || 2009 || 2030 || 2050

1.Reference || 53.9 || 56.4 || 57.6

1 bis Current Policy Initiatives || 57.5 || 58.0

2. Energy efficiency || 56.1 || 39.7

3. Diversified supply technologies || 55.2 || 39.7

4. High RES || 55.3 || 35.1

5. Delayed CCS || 54.9 || 38.8

6. Low nuclear || 57.5 || 45.1

Large scale electrification combined with more decentralised power generation from variable sources brings other challenges to high quality energy service at any time. An adequate stability of the grid is a precondition for the consistent modelling of all scenarios; that is why differences in indicators such as reserve margin are rather small.

Utilisation rates of electric capacities decrease from 49% in 2005 to 36% in 2050 in the Reference scenario and to a range of 25% (High RES) to 33% (Diversified supply technologies scenario) in decarbonisation scenarios. This reflects higher requirements for reserve power and balancing services in order to keep supply of electricity reliable and secure in all scenarios.

All scenarios see a high increase in the share of variable RES in the electricity supply; this naturally leads to higher balancing requirements in the system. In the long term the balancing is met to the greatest extent by increased pumped storage (to the extent there is still increased potential available), the development of flexible gas-based units, higher import-exports and in the case of very high RES penetration with hydrogen based balancing. Thermal power plants, mainly gas fired ones, remain available as reserve power and provide ancillary services. The reduction in utilisation rates of thermal power plants is driven by economic considerations, not by predetermined exogenous inputs.

Utilisation rates for steam stay stable in the Reference scenario at around 43% but decrease to a range of 26% (High RES) and 36% (Diversified supply technologies scenario) in decarbonisation scenarios. Energy savings and electrification in heating which takes place in the decarbonisation scenarios limits the scope for further expansion of distributed heat/steam and CHP, except in cases of production with carbon free (or very low carbon content) resources (e.g. biomass, gas mixed with hydrogen).

Import-export flows of electricity are also driven by economic considerations in the internal market, for which simulations were carried out separately for every scenario. This allows for trade between countries and therefore for optimal use of the interconnections and generation capacities across countries, taking into consideration the limits of the interconnector capacities, which have been adapted according to the challenges posed by the different scenarios. . The simulation thus allows for a better cost optimisation of the power generation system across the EU Member States in the context of stable grid operations at European level at any time.

It emerges clearly from table 36 that decarbonisation would involve greater electricity trade among Member States, which is most pronounced in the case that decarbonisation focuses overwhelmingly on RES.

Table 36: Grid stability related indicators

Power Reserve Margin (%) || || Volume of electricity trade (TWh)

Ratio of dispatchable nominal capacities with RES contributing with (small) capacity credits divided by total peak demand (EU net imports not included) || || Sum of all export and import flows of electricity as simulated by the model (lower than in reality)

|| 2020 || 2030 || 2050 || || || 2020 || 2030 || 2050

Reference || 24,1 || 16,0 || 17,7 || || Reference || 212,1 || 217,6 || 222,3

Scenario 1bis || 26,8 || 19,1 || 22,0 || || Scenario 1bis || 255,8 || 307,5 || 322,8

Scenario 2 || 29,1 || 24,6 || 27,8 || || Scenario 2 || 303,1 || 450,8 || 618,9

Scenario 3 || 25,7 || 21,2 || 23,8 || || Scenario 3 || 326,6 || 476,1 || 623,6

Scenario 4 || 25,6 || 21,7 || 32,2 || || Scenario 4 || 304,4 || 602,8 || 1040,9

Scenario 5 || 25,7 || 21,7 || 25,9 || || Scenario 5 || 322,8 || 489,0 || 648,6

Scenario 6 || 25,1 || 20,4 || 26,3 || || Scenario 6 || 317,8 || 482,5 || 599,1

|| || || || || || || ||

Contribution of electricity storage (%) || || Volume of electricity trade as % of gross final electricity demand

Extraction of electricity from storage systems as percentage of gross final demand of electricity || || Sum of all export and import flows of electricity as simulated by the model (lower than in reality) as percentage of gross final electricity demand

|| 2020 || 2030 || 2050 || || || 2020 || 2030 || 2050

Reference || 1,2 || 1,1 || 1,3 || || Reference || 6,0 || 5,7 || 4,9

Scenario 1bis || 1,1 || 1,1 || 1,1 || || Scenario 1bis || 7,4 || 8,6 || 7,4

Scenario 2 || 1,1 || 1,3 || 1,0 || || Scenario 2 || 9,0 || 13,7 || 15,4

Scenario 3 || 1,1 || 1,2 || 1,0 || || Scenario 3 || 9,4 || 13,2 || 13,6

Scenario 4 || 1,1 || 1,2 || 6,5 || || Scenario 4 || 8,8 || 17,0 || 24,3

Scenario 5 || 1,1 || 1,2 || 1,0 || || Scenario 5 || 9,3 || 13,6 || 14,3

Scenario 6 || 1,1 || 1,2 || 1,1 || || Scenario 6 || 9,1 || 13,7 || 13,4

|| || || || || || || ||

Share of decentralised power generation (%) || || Investment in electricity grids (bn EUR'08)

Share of generation by small scale power plants which are connected to low voltage and medium voltage grid over total net power generation || || Investment expenditure on electricity networks over the indicated time period

|| 2020 || 2030 || 2050 || || || 2006-2020 || 2021-2030 || 2031-2050

Reference || 6,3 || 9,1 || 10,6 || || Reference || 389,9 || 308,0 || 649,0

Scenario 1bis || 6,5 || 10,0 || 13,9 || || Scenario 1bis || 387,3 || 291,1 || 773,6

Scenario 2 || 7,1 || 13,1 || 21,8 || || Scenario 2 || 405,4 || 352,2 || 860,5

Scenario 3 || 7,2 || 13,0 || 20,9 || || Scenario 3 || 436,8 || 416,1 || 958,9

Scenario 4 || 7,2 || 17,3 || 31,3 || || Scenario 4 || 434,4 || 535,5 || 1323,5

Scenario 5 || 7,2 || 13,1 || 21,4 || || Scenario 5 || 436,2 || 420,4 || 960,9

Scenario 6 || 7,1 || 14,0 || 24,3 || || Scenario 6 || 438,9 || 424,6 || 1029,0

2.6 Policy related indicators

Emissions and ETS prices

All decarbonisation scenarios achieve 80% GHG reduction and close to 85% energy related CO2 reductions (83.4-84.4%) in 2050 compared to 1990 as well as equal cumulative emissions over the projection period. In 2030, energy-related CO2 emissions are between 38-41% lower, and total GHG emissions reductions are lower by 40-42%. In 2040, energy related CO2 emissions are 63-66% below their 1990 level, while total GHG emission fall by 61-63%.

Power generation would be almost completely decarbonised with CO2 emissions in 2050 plummeting 96-99% compared with 1990. CO2 emission reductions by 2050 are particularly high (minus 86-88%) also in the services/agriculture sector as well as in households (minus 85-87%). Energy related CO2 emissions in industry fall 77-79% below their 1990 level. Transport CO2 emission are 60-62% lower in 2050 compared with 1990.

The ETS price rises moderately from current level until 2030 and significantly in the last two decades providing support to all low carbon technologies and energy efficiency. Concrete policy measures such as those pushing energy efficiency and/or those enabling penetration of renewables depress demand for ETS allowances which subsequently lead to lower carbon prices. Carbon prices are the lowest in the Energy Efficiency scenario where energy demand is the lowest followed by High RES scenario (second lowest in 2030 and 2040) and the Diversified supply technology scenario (second lowest in 2050). Delay in penetration of technologies (CCS) or unavailability of one decarbonisation option (nuclear) put an upwards pressure on demand for allowances and ETS prices.

Table 37: ETS prices in €'08/t CO2

|| 2020 || 2030 || 2040 || 2050

Reference scenario || 18 || 40 || 52 || 50

Current Policy Initiatives || 15 || 32 || 49 || 51

Energy Efficiency || 15 || 25 || 87 || 234

Diversifies supply technologies || 25 || 52 || 95 || 265

High RES || 25 || 35 || 92 || 285

Delayed CCS || 25 || 55 || 190 || 270

Low nuclear || 20 || 63 || 100 || 310

The same carbon value as in the ETS applies also to non-ETS sectors after 2020 assuring cost-efficient emissions abatement in the whole economy.

CCS storage needs

Making use of the CCS option will require considerable storage capacities for CO2 over time. The Reference scenario developments, including a more optimistic picture on CCS demonstration and availability of storage sites, would require storage capacity for the cumulative CO2 emissions captured up to 2050 of 8 billion tonnes of CO2.

In the CPI scenario, CCS penetration is more moderate leading to storage requirements of 3 bn t CO2 up to 2050. The lowest storage needs come about under high RES scenario, in which case the additional storage requirements over CPI amount to 0.5 bn t CO2. The highest storage needs comes in the Low nuclear scenario leading to considerable CCS penetration, which requires almost 13 bn t CO2 storage capacity up to 2050. Also the Diversified Supply Technology scenario would require considerable storage capacity.

Table 38: CCS storage needs for power generation and industrial processes up to 2050 (in bn t CO2)

RES targets and biomass

The Reference scenario assumes that the RES target is reached in 2020. The RES share (as % of gross final energy consumption according to the definition of the RES directive) is slightly higher in all decarbonisation scenario in 2020 (21%), rises to at least 28% in 2030 and 55% in 2050. In the High RES scenario this share is at 31% in 2030 and 75% in 2050.

The share of renewables in power generation is even higher and stands at 86% in 2050 in the High RES scenario. The share in consumption is even higher, since with much more variable supply and demand some electricity produced needs to be stored and losses linked to such storage processes lead to lower consumption compared to production, i.e. reducing significantly the denominator of such a share. When calculating the RES-E share in line with the calculation of the overall RES share in gross final energy consumption, i.e. excluding energy losses linked to pump storage and hydrogen storage of electricity, the RES share in electricity consumption amounts to 97% in 2050 in the High RES case.

The share of renewables in transport (target of 10% for 2020 in the RES directive) is 1 percentage point higher in all decarbonisation scenarios in 2020; it rises to 19%-20% in 2030 and to 62%-73% in 2050. The share of renewables in transport in the High RES scenario is 20% in 2030 and even 73% in 2050. The increase between 2030 and 2050 as well as the difference to the Reference scenario and Current Policy Initiatives scenario of almost 50 percentage points in 2050 for the decarbonisation scenarios is remarkable and shows the importance of RES based decarbonisation of transport, either directly via biofuels or indirectly via RES based electricity. Decarbonisation efforts and RES share in transport are rather moderate till 2030 but rise significantly from 2030 to 2050.

The large share of RES in the scenarios is driven by a strong support for RES in the form of an implicit facilitation of RES in the scenarios. These lead to shifts in RES potential curves in the decarbonisation scenarios, allowing for more RES exploitation at a given deployment cost level, compared to the Reference scenario. This includes facilitation policies such as:

- For biomass: agricultural policies stimulating the production of energy crops, increased residue collection, and/or increased yield of crops;

- For wind: regarding on-shore it comprises the availability of more land area and a facilitation of the licensing requirements; for off-shore it also represents a facilitation of licensing and the development of technologies that allow placing off-shore power plants in deeper areas or further offshore; and

- For small scale solar PV and wind: development of smart grids and other facilitation policies.

The total use of biomass in the various scenarios is shown in table 39. Whereas the Reference and CPI scenarios have about 100 Mtoe more biomass use in 2050 compared with today's level, there is around 70-80 Mtoe additional biomass use in most decarbonisation scenarios in 2050, except for the high RES case, in which the additional biomass use amounts to around 120 Mtoe.

Table 39: Use of biomass and biofuels

ktoe || 2005 || Reference scenario || Current policy Initiatives

2030 || 2050 || 2030 || 2050

Total domestic biomass || 86285 || 179649 || 185863 || 175987 || 188914

of which biofuels || 3129 || 35255 || 36957 || 34295 || 38912

Biofuels in bunkers || 0 || 0 || 0 || 133 || 2325

Total use of biomass || 86285 || 179649 || 185863 || 176120 || 191239

|| || Energy efficiency || Diversified supply technologies

|| || 2030 || 2050 || 2030 || 2050

Total domestic biomass || || 162716 || 241476 || 172145 || 253209

of which biofuels || || 25033 || 68393 || 26174 || 71047

Biofuels in bunkers || || 553 || 18062 || 553 || 17995

Total use of biomass || || 163268 || 259538 || 172698 || 271204

|| || High RES || Delayed CCS

|| || 2030 || 2050 || 2030 || 2050

Total domestic biomass || || 188675 || 301805 || 172953 || 252893

of which biofuels || || 26296 || 72453 || 26112 || 69370

Biofuels in bunkers || || 553 || 18060 || 552 || 17523

Total use of biomass || || 189227 || 319865 || 173505 || 270415

|| || Low nuclear || ||

|| || 2030 || 2050 || ||

Total domestic biomass || || 175360 || 257226 || ||

of which biofuels || || 26135 || 70794 || ||

Biofuels in bunkers || || 553 || 17981 || ||

Total use of biomass || || 175913 || 275206 || ||

Biofuel consumption rises by a factor of more than ten between 2005 and 2050 under current policies to reach 37-39 Mtoe in 2050. Decarbonisation of transport requires substantially greater biofuels use, which increases to 68-72 Mtoe in 2050, with the highest levels being reached in the High RES and Diversified Supply Technology scenarios.

2.7 Overall system costs, competitiveness and other socio-economic impacts

This section deals with the costs for providing the energy services to the EU economy and society. One key element of such costs is the external fuel bill, i.e. the amount of money that they EU economy has to pay to the outside world for procuring all the net imports of oil, gas and solid fuels from the rest of the world.

The external fuel bill arising from the net imports of fossil fuels decreases below 2005 levels in all decarbonisation scenarios by 2050. This result stems from the pursuit of this major decarbonisation as a part of a global effort with industrial countries as a group reducing GHG emissions by 80%. In such a global setting, fossil fuel import prices will be much lower (see part on assumptions) and actual imports of fossil fuel will be much lower, too. These both effects reduce the expenditure for each of the fossil fuels and thereby the total external fuel bill of the EU. The decrease of the fuel bill in the decarbonisation scenarios is smallest in the Low Nuclear scenario at 31% and highest in the high RES scenario with 43% with RES replacing most fossil fuels.

Compared with current level, all decarbonisation scenarios increase the external fuel bill in 2030, but to much lower levels than the Reference and Current Policy Initiative scenarios. While the external fuel bill would double between 2005 and 2030 under Reference and Current Policy Initiatives developments, this increase would be limited to around 40% under these decarbonisation policies.

Table 40: External fossil fuel bill (in bn € (08))

|| 2005 || Reference || CPI

|| 2030 || 2050 || 2030 || 2050

Bn. EUR'08 || 269.1 || 549.2 || 752.2 || 531.9 || 704.2

Diff. to 2005 || || 104% || 180% || 98% || 162%

|| || Energy Efficiency || Diversified supply technologies

|| || 2030 || 2050 || 2030 || 2050

Bn. EUR'08 || || 364.5 || 165.7 || 379.0 || 180.1

Diff. to 2005 || || 35% || -38% || 41% || -33%

|| || High RES || Delayed CCS

|| || 2030 || 2050 || 2030 || 2050

Bn. EUR'08 || || 374.8 || 154.2 || 377.0 || 180.4

Diff. to 2005 || || 39% || -43% || 40% || -33%

|| || Low nuclear || ||

|| || 2030 || 2050 || ||

Bn. EUR'08 || || 382.0 || 186.4 || ||

Diff. to 2005 || || 42% || -31% || ||

Savings in the external fuel bill are most striking in 2050. Compared with Current Policy Initiatives, the EU economy could save in 2050 between 518 and 550 bn € (08) by going this strong decarbonisation route under global climate action. The largest energy bill savings come about in the high RES scenario. Such fuel bill savings have strong impacts on overall energy system costs.

Total costs for the entire energy system include capital costs (for energy installations such as power plants and energy infrastructure, energy using equipment, appliances and vehicles), fuel and electricity costs and direct efficiency investment costs (house insulation, control systems, energy management, etc), the latter being also expenditures of capital nature. Capital costs are expressed in annuity payments. Total costs exclude disutility and auction payments.

Auction payments are expenditures for individual actors/sectors that are not costs for the economy as a whole, since the auctioning revenues are recycled back to the economy. Disutility costs are a concept that captures losses in utility from adaptations of individuals to policy impulses or other influences through changing behaviour and energy consumption patterns that might bring them on a lower level in their utility function. Such disutility costs correspond to a monetary estimation (income compensating variation) of lower utility from useful energy services (lighting, heating, mobility, etc.) resulting