1. Update energiescenario 2016-2050
Our Energy Future
Update energiescenario
4 November 2016
| PR109983

2. Context and objective of the study
2014
2015
2016
3E carried out a study with respect to future energy scenario’s for Greenpeace, BBL and WWF
Development of a model that takes into account a large amount of technical, financial and economic parameters
A special focus on the Levelized Cost of Energy (LCOE) and electricity prices
The model was extended (including detailed sensitivity analysis) for large biomass
The forecast of installed capacities and the cost and benefit parameters of different technologies have changed compared to the forecasts made in 2014 in the Reference and Greenpeace Scenarios.
The objective of this study is to analyse the impact of these changes in terms of required investments and subsidies as from 2016

3. Index Updated installed capacities in the Reference Scenario
Updated installed capacities in the Our Energy Future scenario
Updated price forecasts in the Reference and Our Energy Future Scenarios
Updated CAPEX, OPEX and WACCs in the Reference and Our Energy Future Scenarios
Resulting required subsidies and investments in the updated Reference and Our Energy Future Scenarios
Resulting energy mixes in the updated Reference and Our Energy Future scenarios
Sensitivity analysis performed on the updated Our Energy Future Scenario

4. 1.Updated installed capacity forecasts in the Reference Scenario
Main drivers:
The forecasted shut down of 1845MW of nuclear installed capacity between 2010 and 2015 did not happen.
Doel 1 and 2 , which were to be closed in the course of 2015, have been extended for 10 years by the Law of June 28, 2015 (CREG)
Source: Elia, 2016
Main drivers:
On 30 March 2016 the last tonnes of the coal were burned in the Langerlo power plant (Greenpeace)
Source: Federal Planning Bureau, 2015

5. 1.Updated installed capacity forecasts in the Reference Scenario
Main drivers:
Unfavorable market conditions (Sia Partners)
Cancelled tenders in 2015 (Enerdata)
Source: Elia, 2015
Main drivers:
The climate for CHP investment strongly deteriorated. Price developments in the gas and electricity markets mean that new investments are often non-beneficial. (IEA)
Source: Elia, 2016

6. 1.Updated installed capacity forecasts in the Reference Scenario
Main drivers:
Acceleration in the future through the fast-lane system (“windplan”)? (ODE, Bart Tommelein)
Source: EWEA, high scenario, 2015
Main drivers:
Six Belgian offshore parcs still have to be built (Nobelwind, Rentel, Norther, Mermaid, Northwester II en Seastar) (CREG)
Source: EWEA, high scenario, 2015 & CREG, 2016

7. 1.Updated installed capacity forecasts in the Reference Scenario
Main drivers:
Declining political support for PV has led to reduced markets in Belgium
However, there are first signs that demand is taking off in recent months because the new Flemish Minister of Energy publicly supports solar PV
Source: Federal Planning Bureau, high scenario, 2015 &

8. 2.Updated installed capacity/import forecasts in the Our Energy Future Scenario
Take into account recent evolutions in Our Energy Future Scenario:
Since the price of offshore wind is significantly decreasing over the last few months/year, we choose to:
Linearly decrease the installed capacity onshore wind in 2030 from 7544MW to 6592MW
Linearly increase the installed capacity offshore wind 2030 from 3800MW to 4000 MW
We assume 9% of electricity import and take into account the impact on gas capacities:
Assumption is an installed capacity of 6000MW (linear increase) gas CCGT in 2030
Sensitivity analysis for different installed capacities CCGT in 2030 is included in the analysis

9. 2.Updated installed capacity forecasts in the Our Energy Future Scenario
Main drivers:
Difficult political landscape and spatial planning issues
Main drivers:
Observed low costs in recent months/year could accelerate offshore wind development in the long run

10. 2.Updated import forecasts in the Our Energy Future Scenario
Assumption that 9% of electricity demand is imported (Greenpeace Grid report 2014)
Electricity demand is expected to be flat at GWh/year over the period (Elia adequacy report 2016)
Yearly import at 7650 GWh/year over period
Gas CCGT will be used to cover remaining electricity demand (GWh)
Full load hours of gas CCGT will vary based on evolution installed capacity gas CCGT and installed capacity other generation technologies

11. 2.Updated import forecasts in the Our Energy Future Scenario
Main drivers:
Gas CCGT steadily grows until 2025 to stay at the same level over the period
Main drivers:
Flat electricity demand and increasing production by other generation technologies result in gas CCGT running less over period
Full load hours will increase in 2025 when nuclear plants close down

12. 3.Updated price forecasts in the Reference and Our Energy Future Scenarios: oil and gas
Main drivers:***
Main drivers:***
Oversupply
The US shale boom
Production increases existing producers
Decreasing global demand and higher temperatures
Hedge fund positioning
Oversupply
The US shale boom !
Shale gas production might stop growing
Conventional gas production is declining and future oil production capacity not clear
*, ** Source: Greenpeace, Energy Revolution scenarios
*** Source: Financial Times, International Energy Agency (IEA), Forbes and J. Leggett, 2014

13. 3.Updated price forecasts in the Reference and Our Energy Future Scenarios: CO2 price
Main drivers:
Very low CO2 prices over previous years
Main driver future CO2 price in Europe is the Market Stability Reserve (MSR):
Start data of operation is 1 January 2019
Reduce the surplus of allowances in the EU ETS
Market participants have greater clarity that oversupply will begin to drop !
Market Stability Reserve will not significantly increase CO2-prices
*** Source: Thomson Reuters

14. 3.Updated price forecasts in the Reference and Our Energy Future Scenarios: elec price
Main drivers:
Result of previously described price evolutions gas and CO2
*** Source: Thomson Reuters

15. 4.Updated CAPEX and OPEX in the Reference and Our Energy Future Scenarios: offshore wind
Technology
Source
Offshore Wind
Confidential information
Technology
Source
Offshore Wind
CREG, 2015 and CREG, 2016
CAPEX:
Cost decreases because of:
Better design
Track records
Turbine cost decreases
Other innovations (logistics)
But limited because of:
Higher average water depth
Bigger turbines (foundations)
OPEX:
Cost increases compared to 2014
Main drivers:
Maintenance contracts including a guaranteed availability of 95%
Insurance
Electric infrastructure

16. 4.Updated CAPEX and OPEX in the Reference and Our Energy Future Scenarios: onshore wind
Technology
Source
Wind P > 1 MW
Vlaamse Energieagentschap, 2016
Technology
Source
Wind P > 1 MW
Vlaams Energieagentschap, 2016
CAPEX:
Costs decreasing compared to 2014
Drivers: turbines and other (project development, soil survey, connection, security, etc…) costs
Turbine costs vary between 60% and 90% of the total investment cost
OPEX:
No significant change compared to 2014

17. 4.Updated CAPEX and OPEX in the Reference and Our Energy Future Scenarios: PV
Technology
Source
PV < 10 kWc
Fraunhofer, 2016
PV > 50 kWc
Agora Energiewende, 2015 and KicInnoEnergy, 2015
Technology
Source
PV < 10 kWc
Assumed to be the same
PV > 50 kWc
Agora Energiewende, 2015 and Kic InnoEnergy, 2015
CAPEX is clearly decreasing compared to 2014 whereas OPEX is only slightly decreasing
Main driver: model and solar inverter (and other cost components) costs are going down

18. 4.Updated CAPEX and OPEX in the Reference and Our Energy Future Scenarios: learning curve PV
*Source: Fraunhofer

19. 4.Updated WACCs in the Reference and Our Energy Future Scenarios
Technology
Source
Offshore Wind
CREG, 2016
Wind P > 1 MW
Diacore, 2016
PV > 50 kWc
Vlaams energieagentschap - Deel 1 & Bloomberg, 2016
PV < 10kVA
WACC decreases are driven by maturing of different technologies but also by the current low required return on debt

20. 5. Resulting LCOEs of the updated Our Energy (OEF) Future Scenario
The updated forecasted LCOEs of both wind and solar energy are clearly going down compared to the previously forecasted LCOEs

21. 5.Resulting updated subsidies and investments
Ref. Scenario
11.5 bn €
19.1 bn €
Updated Ref. Scenario
10.4 bn €
22.4 bn €
Our Energy Future Scenario
9.9 bn €
38.7 bn €
Updated Our Energy Future Scenario
8.6 bn €
36.4 bn €
NB: Calculations done over the period
Main drivers for required subsidies:
Updated reference scenario: more solar PV and onshore/offshore wind capacities installed and no increase in gas installed capacities
Updated Our Energy Future scenario: lower CAPEX RE technologies and lower installed capacities gas CCGT but higher installed capacities offshore wind
Main drivers for required invest:
Updated reference scenario: lower LCOE renewable energy technologies and lower elec/gas prices
Updated Our energy future Scenario scenario: lower LCOE renewable energy technologies, lower load hours gas CCGT and lower elec/gas prices

22. 6.Resulting updated energy mixes in 2020 and 2030
(Total renewable energy production)
(Total electricity demand)
*Gross total electricity demand in the update: GWh/year

23. 6.Resulting updated energy mixes in 2020 in the Reference Scenario
Previous Ref. Scenario
RE = 23%
Updated Ref. Scenario
RE = 27%

24. 6.Resulting updated energy mixes in 2030 in the Reference Scenario
Previous Ref. Scenario
RE = 28%
Updated Ref. Scenario
RE = 45%

25. 6.Resulting updated energy mixes in 2020 in the Our Energy Future Scenario
Previous OEF Scenario
RE = 32%
Updated OEF Scenario
RE = 32%

26. 6.Resulting updated energy mixes in 2020 in the Our Energy Future Scenario
Previous OEF Scenario
RE = 54%
Updated OEF Scenario
RE = 58%

27. Need for sensitivity analysis
7.Need for sensitivity analysis in the updated Our Energy Future Scenario
Market evolutions are highly uncertain
Need for sensitivity analysis
Sensitivity analysis on:
Range of sensitivity:
Ratio PV/onshore wind
Electricity prices
CAPEX PV solar
Installed capacities gas CCGT
Electricity demand
Decreases of the parameter by:
5%, 10% and 25%
Increases of the parameter by:
Gas CCGT capacities 2030 of 5000/7000MW
Examine the impact on the required subsidies/investments, the LCOE and import/export
Results

28. Explanation: LCOEs PV and onshore wind are relatively similar
7.Sensitivity analysis for the ratio PV/onshore wind in the updated Our Energy Future Scenario
Decrease/increase in rate PV solar/onshore wind (the impact on PV solar of changing installed wind capacity) of 25% leads to a change in required subsidies of respectively -/+0.5%
Explanation: LCOEs PV and onshore wind are relatively similar
Results

29. 7.Sensitivity analysis for the gas/electricity price in the updated Our Energy Future Scenario
Decrease/increase in the electricity price of 25% leads to a change in required subsidies of respectively %and -23.3%
Results

30. 7.Sensitivity analysis for the change in PV CAPEX in the updated Our Energy Future Scenario
Decrease/increase in the CAPEX PV of 25% leads to a change in required subsidies of respectively - 0.6% and
+ 10.8%
Results

31. 7.Sensitivity analysis for the CAPEX of PV solar in the updated Our energy future Scenario
Results

32. 7.Sensitivity analysis for installed capacities CCGT in the updated Our Energy Future Scenario
Decrease/increase in the installed capacities gas CCGT in 2030 leads to a change in required subsidies of +/– 8%
Results

33. 7.Sensitivity analysis for electricity demand in the updated Our Energy Future Scenario
Decrease electricity demand of 25% (by 2030) results in export instead of import within a few years
Results

34. Conclusions Conclusions
Varying electricity prices have the highest impact on the required subsidies, going from +42.7% to -23.3%.
Varying CAPEX values of PV solar plants and varying ratios of PV solar/onshore wind lead to similar impacts on subsidies.

35. Annexes

36. Approach for sensitivity analysis on the ratio PV solar/onshore wind
Calculate the impact on solar PV of decreasing/increasing the installed capacities onshore wind by x%:
Step 1: Calculate the installed capacity onshore wind in the case of sensitivity analysis for every year
Step 2: Calculate the ratio of the number of load hours onshore wind and the number of load hours of solar PV
Step 3: Calculate the difference in terms of the installed capacities onshore wind between the updated scenario and the sensitivity analysis
Step 4: Multiply the results of step 2 and 3. This is what needs to be added in terms of installed capacity solar PV
Step 5: Deduct the result in step 4 from the installed capacity solar PV in the updated scenario

37. Example sensitivity analysis on the ratio solar PV/onshore wind for 2020
In the case of a 5% increase, the installed capacity onshore wind in 2020 is 2393 MW (2279 MW*1.05)
The ratio onshore wind/solar PV is 2,4 (2200/930)
The difference in terms of installed capacity between the updated scenario and the sensitivity analysis is 114 MW (2393MW-2279MW)
270 MW is what needs to be deduced in terms of installed capacity solar PV to compensate for the higher installed capacities onshore wind (2.4*114MW)
The newly installed capacity solar PV is 4296 MW (4566MW-270MW)
Control that the total volumes in 2020 are still the same
Updated scenario
Production onshore wind is 2279MW*2200= 5014 GWh, production solar PV is 4566MW*930= 4246 GWh, Total= 9260 GWh
Sensitivity analysis 5%
Production onshore wind is 2393MW*2200= 5265 GWh, Production solar PV is 4296MW*930= 3995 GWh, Total = 9260 GWh

38. Thank you
Antoon Soete Ruben Verhaegen and Aurore Flament Senior Consultant Consultants Grids & Markets
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