RTD/J1/MRV NEEDS – 1st Policy Workshop 7/4/2006 Modelling work at EC DG RTD and TREN as a basis for policy making: an overview Maria R. Virdis DG RTD – J1 NEEDS – 1st Policy Workshop Rome, 7 April 2006

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Content  PRIMES modelling approach and scenarios  POLES modelling approach and scenarios  WETO H2 scenarios

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 PRIMES Modelling and scenario approach (1)  Baseline and renewables scenarios draw on PRIMES model and other more specialised models operated by a consortium led by NTUA;  Baseline is a starting point for scenarios on alternative framework conditions and policy approaches, such as: -higher energy import prices; -alternative policies (energy efficiency, renewables penetration, on nuclear or transport policies).  2005 Baseline to 2030 is an update of the “Trends to 2030” of 2003;  Baseline reflects current trends and policies of the EU and the MS;  Model produces a complete representation of the energy economy of the EU and its 25 Member States up to 2030; plus other European countries, with a deep disaggregation by sector and fuel for energy consumption, transformation and production and for CO2 emissions;

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 PRIMES Modelling and scenario approach (2)  Approach includes macro-economic analyses, world energy modelling (import prices from the POLES model) and in depth analyses on specific areas (e.g. renewables, transport);  Consultation with Member states, EC services and stakeholders;  Scenarios are under preparation addressing: - better energy efficiency; - 20% renewables share target for 2020 under discussion; - revisiting 12% renewables share in 2010 scenario; - combination of renewables with high efficiency scenario; - high energy import prices (sub-case with more oil and gas price decoupling.  Scenarios on e.g. nuclear and effects of transport policies will follow;  Baseline and scenarios to be updated in 2006 given the rapidly changing energy environment; new publication planned for early 2007.

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Assumption for the 2005 baseline  Population increase is small with a stagnation from 2020 onwards;  Aging and lifestyle changes lead to smaller households; their number increases by almost 25% over 30 years to 2030;  GDP in EU-25 increases by 2.0% pa in : - rather low growth in this decade; -low growth also in due to stagnant and aging population.  Economic growth reflects overall economic/social policies;  Sectoral growth rates (industries and services) consistent with GDP;  Growth of passenger and freight transport activity in line with the results of the ASSESS study for the Transport White Paper;  Future weather conditions as of 2000 (warmer than long-term average);  High energy import prices – reaching 58 $/bbl for oil in 2030 (in money of 2005 – in nominal terms, price in 2030 could come close to 100$)

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Policy Assumption for the baseline  2005 Baseline includes policies implemented in the M S by end 2004;  Tax rates in place are constant in real terms (grow with inflation);  Continuation of the economic reform process (e.g. Lisbon strategy) and completion of the internal electricity and gas markets by 2010;  Continuation of active policies to promote better technologies;  Continued policies on energy efficiency including implementation of the fuel efficiency agreement with the car industry;  Nuclear phase-out in certain old Member states and agreed closure of plants with safety concerns in new MS;  Continued promotion of renewables;  No further strengthening of climate change policies - CO2 emissions are modelling results.

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 EU-25: Baseline: Final energy demand by fuel mtoe

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 EU-25: Baseline: Electricity generation by fuel (in TWh)

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 EU-25: Baseline: Renewables share in power generation

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 EU-25: Baseline: Energy consumption by fuel and carbon and energy intensity Carbon and Energy intensity 1990=100 mtoe

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Work plan for 2006: overview  Reporting on 2005 baseline (sharing results among experts and stakeholders through a report to be finalised – no new “red book”);  Completion of scenarios under construction and reporting: -high oil/gas prices; -scenarios on renewables (some 20% in 2020 and 12% in 2010), energy efficiency and combination with renewables cases;  Fresh scenario work on nuclear, transport and policies combined;  New baseline in 2006 for 30 countries reflecting latest developments and stakeholder comments;  Extension of baseline modelling to all countries of S-E Europe;  New energy and transport scenarios starting from the 2006 baseline;  New 2006 scenarios designed to include also feedbacks on GDP, sectoral production and employment; i.e. include second round effects through changes in GDP following RES and efficiency policies.

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 POLES modelling approach and scenarios

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Scope To provide policy-makers at EU level with a 50-year ahead vision on the future structure of world energy markets, GHG emission trends and resource exploitation patterns Several scenarios are systematically generated as variants of the baseline projection, assuming alternative policy options and different hypotheses on Economic growth Resource availability Technology development

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Methodology: POLES model  Reference scenario developed and quantified with POLES.  Model jointly developed by LEPII-EPE (F), IPTS (EC) and Enerdata (F)  Together with PRIMES and GEM-E3, a reference EC policy analysis tool, extensively used to address the long-term evolution of energy markets at global level (GHG emissions, security of energy supply and energy technology) Time horizon extended to 2050 Calculation of energy balances for 32 countries and 18 world regions Disaggregation into 15 energy demand sectors, 12 new/renewable technologies and 12 power generation technologies Simulation of oil and gas: discoveries and reserves for main producers International energy prices and markets are endogenous

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Drivers and constraints to world energy development (1)  Population World population is expected to grow to 8.9 Billion in 2050, with a slowdown that anticipates stabilisation in the second half of the century  Economic growth (source: CEPII (F)) Economic growth slows down, from 3.5 %/yr in , to 2.9%/yr in and 2.2 %/yr in In 2050 total world GDP represents four times the current GDP Industrialised regions converge towards a less than 2%yr growth in the very long run, Asian economic growth significantly slows down, while growth accelerates in Africa and the Middle-East

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Drivers and constraints to world energy development (2)  World oil production Identified reserves amount to 1000 Gbl; (~ oil cumulative prod. today) Progress in recovery rate: URR: from 2600 Gbl today to 3500 Gbl in 2050 Conventional production peaks to about 100 Mbl/d by 2025) Non-conventional oil resources deploy mainly in the western hemisphere

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Reference case - Definition  Accounts for “minimum” climate policies, differentiated by world regions (exogenous carbon value), according to the presently in-force climate policies  Simulates a relatively constrained access to the oil resources in the Middle-East  Higher endogenous oil prices

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Reference case – Primary energy consumption World 2050: 22 Gtoe (10 Gtoe in 2001) Oil & Gas: 6 & 4 Gtoe resp. RES + Nuclear: 6 Gtoe Coal: 6 Gtoe (> ¼) Europe 2050: 2.6 Gtoe (1.9 Gtoe in 2001) Oil & Gas: 0.6 & 0.5 Gtoe each RES + Nuclear: 1 Gtoe Coal: 0.5 Gtoe (1/5)

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Reference case: Electricity production World  Increase: 2.8%/year on average  Share of non-fossil electricity: decrease up to 2020 followed by a significant increase (50% in 2050) Europe  Increase: 1.8%/year on average  Share of non-fossil electricity would reach 60% in 2050

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Reference case: Renewable electricity World  Increase: 5%/year on average 9n , accelerates to 5.7%/year in  Wind potential expanding, and significant emergence of solar power Europe  Increase: 4%/year on average in , accelerating to 5.3% year in  Wind potential exhausted after 2040

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Reference case: CO 2 emissions World 2050: non-Annex 1 = 2/3 world emissions 2050: 2.5 times the 1990 level Europe 2050: 5% above 1990 level

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Reference case: World oil markets

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Reference case: World gas markets

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Key messages from the Reference  By 2050 the volumes traded within the world energy system and corresponding CO 2 emissions would be roughly double today’s  Because of the “peak oil” and “peak gas” and in spite of the marked progresses of RES and nuclear energy after 2030 … Coal comes to be a strategy primary source in the world energy balance Which aggravates the CO 2 emissions problem However, contrasted situation in EU (more carbon-free primary electricity)  Constraints in oil and gas markets (specially after 2030) will involve many structural changes. These are mostly related to: The necessity of “closing” the world energy balance in the long run Solve the bottleneck of the oil-based transport sector of modern societies  The European vulnerability to supply is a crucial issue, for which renewables and nuclear may prove very cost/effective and curb GHG emissions

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 WETO H2 scenarios

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Objectives The WETO-H2 scenario analysis aims at: u Identifying and quantifying technological breakthroughs that may lead to a significant market penetration of hydrogen as an energy carrier at European and global level by u Providing a harmonised and coherent view of the possible emergence pathway of a hydrogen-based energy system, including contrasted hypothesis on resource availability and technology deployment. u Assessing the implications of GHG emission reduction policies on the development of hydrogen as energy carrier, and viceversa.

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 The hydrogen scenario(s)  The main Hydrogen-scenario assumes an accelerated penetration of Hydrogen in energy markets according to the specifities of each country and includes the same ambitious carbon abatement policies as in the WETO carbon constrained scenario (Carbon value rising to Euro/tCO2 by 2050). It is referred to as CCH2.  As a variant for comparative purposes mainly to analyze the structure of the hydrogen production mix, a second hydrogen scenario was also run (H2), with the same technological assumptions that CCH2 but with the mild carbon emission restrictions imposed in the reference projection.  It assumes an accelerated competitiveness of hydrogen-related technologies, with a specialised view on:  The fossil-fuel-based hydrogen. (gasification, new thermodynamic cycles)  The electricity-based hydrogen production routes (nuclear, renewable electricity)

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Transport technologies A dedicated module representing the behaviour of the road passenger transport demand has been developed. Three categories of users: u Urban use (< kms/year) u Normal use ( ~ kms/year) u Intensive use (> kms/year) 11 generic car technologies are represented: u Light Gasoline u Large Gasoline u Light Diesel u Large Diesel u Electric vehicle u Fuel cell H2-fuelled u Hybrid-gasoline fuelled u Hybrid-diesel fuelled u Hybrid-Fuel cell H2 fuelled u Internal Combustion Engine H2 fuelled u Internal Combustion Engine Natural Gas-fuelled

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 World primary energy demand

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Europe primary energy demand

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 Carbon emission projections

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 World hydrogen production (Reference + H2 cases)

DG-RTD/J1/MRVNEEDS – 1st Policy Workshop 7/4/2006 THANK YOU