1. APEC Energy Demand and Supply Outlook 6th Edition 2-4 Alternative Power Mix Scenario
Roberto LOZANO APERC Workshop – EWG 51st Meeting Canberra, Australia; 11 May 2016

2. 1. Overview

3. Alternative Power Mix Scenario: Fuel Cases
This scenario provides a quantitative assessment between alternative electricity mixes involving:
High-efficient coal technologies Cleaner Coal Case
Higher shares of natural gas High Gas 50% High Gas 100%
Expanded nuclear energy High Nuclear Case
The Alternative Power Mix Scenario provides a quantitative assessment between the use of high-efficiency coal technologies (including CCS), higher shares of natural gas and expanded nuclear energy in the electricity generation of APEC member economies over BAU. These Scenario’s four cases are: Cleaner Coal, High Gas 50%, High Gas 100%, and High Nuclear.
The Scenario’s ultimate goal is to illustrate the potential trade-offs in terms of CO2 emissions, average generation costs, capital investments and fuel trade and demand. Ultimately, the Alternative Power Mix Scenario aims to outline policy implications involved with the different electricity mixes involved.
Each of these Cases is only applicable to a certain number of APEC economies. Cleaner Coal, High Gas 50% and High Gas 100% Cases are only applicable to 13 economies, while High Nuclear is only applicable to 11.
The outline of my presentation is seen just under the title of every slide. I will discuss briefly the Scenario’s fuel cases and main assumptions. Then I will discuss the main findings. At the end I will outline the major policy implications and challenges highlighted by each one of the fuel cases in the Scenario. Finally, I will provide some major recommendations for policy-makers in the region.

4. Main assumptions by Case and member economy
Main assumptions for each Fuel Case:
Cleaner Coal Case:
In 13 APEC economies with significant levels of coal-based electricity generation, all coal-based power plants built after 2020 will be equipped with at least SC technologies. After 2030, all new coal plants will include carbon capture and storage (CCS) equipment.
Mature coal-using economies (Australia, China, Japan, Korea, Chinese Taipei, Russia and the United States):
After 2020: All new coal-based plants are A-USC or IGCC type with an efficiency between 45% and 50%. After 2030, CCS are added to these technologies.
Developing coal-using economies (Chile, Indonesia, Malaysia, the Philippines, Thailand and Viet Nam):
After 2020: All new coal-based plants are SC or USC type with an efficiency between 38% and 46%. After 2030, it’s only USC with CCS.
High Gas Case:
In 13 APEC economies, coal-based power plants additions after 2020 will be replaced with gas-based generation. This replacement could come for half of those coal-based additions (High Gas 50% Case) or for all of them (High Gas 100% Case).
High Nuclear Case:
In 11 APEC economies currently using nuclear energy (China, Japan. Korea, Russia and USA) and expected to install it (Indonesia, Malaysia, Thailand and Viet Nam) nuclear-based generation will expand over BAU. Two of these economies (Mexico and Chinese Taipei) won’t have an expansion, but enough maintenance and planning will keep current reactors operating beyond their lifetime in BAU.
* No nuclear-based capacity expansion, but as a result of lifetime extensions of existing nuclear power plants, generation surpasses BAU levels by 2040

5. 2. Key findings

6. Coal remains dominant across several Cases
Electricity generation
Only under the High Gas Cases coal would become the second largest energy source for electricity generation

7. The largest reduction of CO2 emissions comes from a maximum use of gas
Total CO2 emissions from electricity generation
With the High Gas 100% Case, CO2 emissions would decrease by 14% over BAU levels.
Among the alternative cases, the High Gas 100% Case yields the largest CO2 emissions reduction, which amounts to 14% over BAU levels. Next largest reductions amount to 12% in the Cleaner Coal Case, to 10% in the High Nuclear Case and to 7% the BAU in the High Gas 50% Case.
Not shown in the graph is the Cleaner Coal Case that includes advanced technologies BUT lacks of CCS. Under such case, CO2 emissions would barely decrease 3%. This issue illustrates that the growth of coal-based generation is only environmentally possible with the use of CCS.
An increased use of gas that replaces all coal-additions from 2020 brings the largest reduction in CO2 emissions

8. Only the use of CCS can ensure viable growth of coal-based generation
APEC-wide coal based electricity capacity by technology and Case
The expansion of coal-based generation in APEC is environmentally justifiable only if CCS technologies are implemented to substantially cut associated emissions. The introduction of CCS technologies from 2030 would result in APEC-wide CO2 emissions descending 12% by If CCS is not installed, advanced coal-technologies would barely result in CO2 emissions descending 3% by 2040.
As the largest coal-user economy, China would account for the bulk of additions of coal-based advanced technologies in APEC. By 2040, China would represent 88% of the A-USC/IGCC additional installed capacity and 80% of the A-USC/IGCC with CCC additional installed capacity. The amount of CCS capacity additions expected in China under the Cleaner Coal Case (162 GW) is about the size of the combined total coal-based generation capacity of Australia, Japan, Korea, Russia and Chinese Taipei in 2013.
In developing coal-using economies, approximately 76% of the coal-based capacity additions with CCS (USC with CCS) is expected to happen in Viet Nam (44%) and Indonesia (32%). The rest of economies will account for much smaller one-digit shares.
Introduction of CCS from 2030 would result in CO2 emissions falling 12% by If CCS is not included, this reduction only amounts to 3%

9. Use of CCS technologies varies widely by economy
Coal-based electricity generation capacity by technology and by Case, 2040
Group of coal- using economies
Economy / Region
Cleaner Coal Case (No CCS)
Cleaner Coal Case
SubC
SC/USC
USC with CCS
A- USC/IGCC
A- USC/IGCC with CCS
(GW)
Mature
Australia 2 10 - 8 4
China
703
319
456
294
162
Japan 41 9 3 6
Korea 7 24
Russia 5 33 17 16
Chinese Taipei 13 1
0.4
USA
150 18
Developing
Chile
Indonesia 34 56 27 29
Malaysia 15
The Philippines
Thailand
Viet Nam 62 23 39
Subtotal
943
584
536
495 90
333
203
Rest of APEC* 12
APEC
954
586
496 92
By 2040 the seven mature coal-using economies (Australia, China, Japan, Korea, Chinese Taipei, Russia and the United States) will see a different penetration of CCS into their respective coal-based generation capacity. The lowest is expected in Chinese Taipei, where CCS (Advanced Ultra Super Critical/Integrated Gasification Combined Cycle with CCS) would only represent 2% of its coal-based economy-wide generation capacity, while Russia would see the largest with 35%. In China CCS is expected to amount to 11%.
In the six developing coal-using economies (Chile, Indonesia, Malaysia, the Philippines, Thailand and Viet Nam) CCS in the form of Ultra Super Critical would see a higher penetration rate. It could represent as little as 23% of economy-wide coal-based capacity in Malaysia or as much as 58% in Viet Nam.
Share of CCS in the coal-based economy-wide generation would amount to 35% in Russia and 58% in Viet Nam.

10. Large potential for gas-based generation in Southeast Asia
Share of gas-based electricity generation in total electricity output
On an economy basis gas-based generation has the highest potential of growth in Southeast Asia. In Thailand, it could grow to as much as 70% in the High Gas 100% Case. However, the greatest potential to expand gas-based generation is in Viet Nam, where the share by 2040 could grow from 15% of electricity generation in the BAU to as much as 37% in the High Gas 50% Case and 68% in the High Gas 100% Case. Similar substantial opportunities are estimated for the Philippines, Indonesia and Chile consecutively, followed by other economies mostly in South-East Asia.
Given the dominance of coal in the mix and the magnitude of electricity generated, the contribution of natural gas in some economies is more moderate at best. In China, for instance, even under the most optimistic assumptions in the High Gas 100% Case, natural gas fuels less than 30% of electricity generation by While natural gas does not penetrate the electricity mix as significantly in China as in other economies, the absolute magnitude of China’s electricity output means that even small changes substantially affect the electricity configuration of the APEC region as a whole.
In Russia there is moderate potential for a higher share of natural gas, mainly because under the BAU this fuel is already dominant by 2040, and because a larger nuclear power contribution is projected, which cannot be replaced by gas. In other north-east Asia economies, the outlook for a larger share of gas is also modest, largely because the pace of coal-based capacity additions that gas might replace is progressively slower and because the consumption of natural gas is already high. In the United States, the potential for gas-based generation growth in the two High Gas Cases is marginal as there is already a rapid switch to gas-based generation under the BAU. This recent preference for natural gas generation in the United States is largely underpinned by burgeoning domestic gas production, mostly in the form of shale gas.

11. Increased gas demand for electricity generation would see gas imports grow robustly…
Fuel demand
Gas trade
HG 100% 2040: Mtoe
HG 50% 2040: Mtoe
BAU 2040: Mtoe
For the APEC region as a whole, annual demand for natural gas for electricity generation by 2040 increases by 25% over the BAU in the High Gas 50% Case and by 51% in the High Gas 100% Case. In consequence, flows of imported gas are 2.3 times higher in the High Gas 50% Case and 3.6 times higher in the High Gas 100% Case. By the end of 2040, gas imports could grow from nearly 235 Mtoe in the BAU to 556 Mtoe in the High Gas 50% Case and 883 Mtoe in the High Gas 100% Case.
Fuel demand for gas-based generation grows 25% and 51% APEC-wide gas imports increase 2.4 and 3.6 times by 2040

12. …especially in certain member economies
Gas trade in APEC economies, 2013 and 2040, BAU and High Gas Cases
Note the scale difference between the graphs with China and with the other economies. Please also note neither of the High Gas Cases includes any different assumptions on domestic gas production.
An expanded gas demand as assumed in the High Gas Cases would entail significant growth in gas imports in certain economies. Largest percentual variations in decreasing order are expected in Malaysia, Viet Nam, the Philippines, China, Indonesia and Chile.
In each of these economies, in comparison with BAU, gas imports by 2040 would increase as follows for each High Gas Case:
(% over BAU)
China – 110%/208%
Chile – 7%/51%
Indonesia – 61%/121%
Malaysia – 455%/824%
Philippines -238%/519%
Viet Nam – 245%/588%
Just as a reference, APERC (all 21 economies) average is
Largest percentage variations expected in Malaysia, Viet Nam, the Philippines, China, Indonesia and Chile.

13. Expanded nuclear energy: Zero emissions with cost-competitiveness
Additions of nuclear-based electricity capacity in the High Nuclear Case,
After the accident in Japan, most of this economy’s nuclear-based capacity was shut down and there has since been strong public opposition to developing nuclear energy in Japan and other economies. For this reason, it was assumed that Japan’s nuclear capacity decreases by 10% in comparison with 2013, remaining at 40 GW, although generation increases more than 26 times with the reactivation of its nuclear reactors to reach 243 TWh in 2040.
High Nuclear Case would deliver a large reduction of CO2 emissions and the lowest generation costs

14. Resulting reduction in the share of fossil energy (percentage points)
Nuclear-based generation offers lower CO2 emissions and mix diversification
Share of fossil fuel energy in electricity generation mix in the BAU Scenario and the High Nuclear Case, 2040
Economy
BAU
High Nuclear Case
Resulting reduction in the share of fossil energy (percentage points)
Coal (%)
Gas (%)
Oil (%)
Total fossil share (%)
China 56 9
0.0 65 51 8
<1 59 6
Chinese Taipei* 53 38
0.1 91 50 34 84 7
Indonesia 62 21
1.4 19 76
Japan 33 36
2.2 71 30 25 57 14
Korea 39 NA 64 22 55
Malaysia 46 85 42 80 5
Mexico* 73
0.5 77 2
Russia 12 10 41 52 13
Thailand 24 74
United States 20 43 11
Viet Nam 15 68
Under the High Nuclear Case, the expansion of nuclear-based generation reduces the share of fossil energy—mainly coal and gas, except in Japan and Indonesia where there is a share of oil-based fuels in the power mix. In economies with nuclear energy sectors, Japan registers the largest reduction in fossil energy use (14%), followed by Russia (13%) and the United States (11%). The rankings reflect shares of nuclear energy in the power mixes. The reduction in Korea, Thailand and Viet Nam is also significant (9% in each).
Increased nuclear energy offers the opportunity to shift away from the use of fossil fuels

15. Expanded nuclear generation would bring economic benefits
Average electricity generation costs,
The capital and operating costs of deploying the technologies considered in this scenario entail different competitiveness implications for the electricity generation mix of APEC economies. The calculation of average generation costs encompasses capital costs, fuel costs, operation and maintenance costs, and carbon costs per unit of electricity generated.
Only in the High Nuclear Case are average costs lower, by 4%. The average costs of electricity generation in the APEC region by 2040 are higher by 2% in the Cleaner Coal Case, 5% in the High Gas 50% Case and 8% in the High Gas 100% Case.
Savings in annual total electricity generation costs in the High Nuclear Case is USD 86 billion—dropping from USD billion under the BAU Scenario to USD billion―and encompasses capital costs, fuel costs, operation and maintenance costs, and carbon costs.
Conversely, capital costs are highest in the High Nuclear Case because of accelerated nuclear power plant development, followed by the Cleaner Coal Case because of the introduction of CCS after Capital costs in both High Gas Cases are lower than under the BAU. In addition, expanded gas imports create a higher economic burden. Annual total electricity generation costs in APEC are estimated to be higher by USD 90 billion in the High Gas 50% Case (a 5% rise) and by USD 147 billion in the High Gas 100% Case (a 7% rise), making both High Gas Cases the most expensive in the Alternative Power Mix Scenario. Fuel costs alone represent a higher share of total generation costs in both High Gas Cases (more than 60%) than in the BAU (about 58%).
Only in the High Nuclear Case are average costs lower than BAU by 4%

16. 3. Policy implications and challenges

17. Major policy implications
Economy
Categories assessed
Reduction of CO2 emissions
Diversity of electricity mix
Total generation costs
Cases CC HG HN
Australia NA
Chile
China
Indonesia
Japan
Korea
Malaysia
Mexico
The Philippines
Russia
Chinese Taipei
Thailand
United States
Viet Nam
Mexico and Chinese Taipei won’t have a nuclear-based electricity expansion per se, but only enough maintenance and planning that will keep current reactors operating beyond their lifetime in BAU.
Not shown here are Brunei Darussalam, Canada, Hong Kong, New Zealand, Papua New Guinea, Peru and Singapore. None of the Cases in the Alternative Power Mix Scenario was applicable to these economies.
Each of the four cases in the Alternative Power Mix Scenario has different effects and trade-offs for each of the 15 economies analysed. These can be organised into three categories according to how they reduce CO2 emissions, dilute the concentration of any single energy source in the power mix on the basis of the HHI, and reduce generation costs. The Herfindahl-Hirschman Index (HHI) is a measure of market concentration and diversity. For further information please go to Chapter 9.
Legend
Largest positive effect
Next best positive effect
Positive effect
Negative effect
Not in the Alternative Power Mix Scenario: Brunei Darussalam, Canada, Hong Kong, New Zealand, Papua New Guinea, Peru and Singapore

18. Main challenges in the Alternative Power Mix Scenario
Overcoming infrastructure bottlenecks and price uncertainty to expand gas trade
Increasing the share of coal-based generation with CCS
Reducing the risks of nuclear power plants across their lifecycle
Cleaner Coal
The main challenge remains in increasing the installed capacity with CCS technologies, and to a lesser extent IGCC technologies. These technologies lack of sufficient institutional and financial support to upgrade them and make attractive their massive deployment.
High Gas
the availability and price of the resource, especially relative to coal, pose major hurdles to expanding natural gas-based electricity generation. Ultimately, economies will need to make decisions based on their respective natural gas balance: insufficient domestic natural gas supplies, exporters of natural gas, absence of natural gas trade and those already with a high participation of natural gas in their energy mixes.
High Nuclear
The main challenges remain in building the additional nuclear capacity required by 2040 and in using this energy source with sufficiently high safety standards, to support economic growth and prosperity while mitigating the physical hazards to society.
Reducing CO2 emissions significantly while achieving reliable and cost-effective electricity mixes

19. 4. Key recommendations

20. Paving the road for alternative power mixes
Prioritize the development of CCS projects and strengthen their financing and economic viability
Enhance gas and LNG trade and explore the development of domestic gas resources (conventional and unconventional)
Increase safety standards of nuclear power plants and promote an informed public dialogue to change the social perception of these projects
No single fuel choice is absolutely better than others, and that carrying out any of these cases would likely create the growing dominance of a single energy source in the power mix, which may be undesirable. The objective of the Outlook’s alternative scenarios, and in particular of the Alternative Power Mix Scenario, is to explore what outcomes derive from a variety of options, revealing implications and effects that can inform energy policy decisions.
Cleaner Coal Case
Member economies should work together to expand the use of cleaner coal technologies across APEC. Cooperation in finding technology solutions that can be commercially adopted, as well as in implementing effective legal and regulatory frameworks, is vital to the wider adoption of efficient coal-fired generation capacity. Key to the development of CCS are seven factors:
financial support, especially in the early development of these projects; 2) supportive policies across the lifecycle of CCS; 3) legal instruments and mandates requiring CCS in the electricity mix; 4) new industrial developments with proven commercial success; 5) Public dissemination of the processes and relevance underlying CCS; 6) Mechanisms to reduce the electricity cost from CCS such as the use of high efficiency power generation cycles, and; 7) Efficient promotion of CO2 transport infrastructure.
High Gas Cases
Promote more vigorously the trade of LNG and pipeline gas imports among member economies, and explore development of domestic conventional and unconventional gas resources.
Accelerating gas trade by reducing tariffs and providing economic incentives to private developers across the value chain might result in more pipeline gas and LNG projects. This could significantly benefit economies that lack domestic gas resources, as well as those with potential gas resources that currently lack the commercial signals to stimulate development. APEC is an excellent forum to explore cooperative mechanisms that favor more extensive LNG trade.
High Nuclear
Expanding nuclear power provides a reliable way to increase electricity generation with zero CO2 emissions and competitive prices. Pioneering xdeveloping nuclear power for the first time require long-term planning to set up the infrastructure required, including capacity building for developing regulatory oversight. APEC economies should strengthen the sharing of information and experience among regulators, and help nuclear newcomers to develop local expertise. The availability and technical capabilities of personnel who can build and operate reactors, and manage nuclear waste, will determine the pace and extent of nuclear power expansion. Finally, improving communication and public outreach on the benefits and risks of nuclear power will help to overcome public acceptance barriers.

21. Thank you