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The Coal-Free 2°C Scenario: Within Reach, and Cheaper Than Told by IEA

Terje Osmundsen's picture

Senior Vice President of the Norwegian-based international solar power company Scatec Solar.

  • Member since 2018
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  • Apr 14, 2017
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Photo: Coalswarm

Scrapping of planned coal power and accelerated investment in wind and solar are essential if we are to reach the Paris climate goals. The good news: It can be done significantly cheaper than the International Energy Agency (IEA) estimates, writes Terje Osmundsen, Senior Vice President of the Norwegian-based international solar power company Scatec Solar. Courtesy of EnergiogKlima.

Two new reports shed new light on how to meet the Paris goals:

  • If Turkey, Indonesia, Japan, Bangladesh, Pakistan, Vietnam, Thailand, South Korea and a few other countries follow the path of China and India and start to put coal developments in the freezer, the world could be saved from devastating climate change.
  • Wind and solar can contribute to almost half of the CO2 cuts required to keep global warming below the 2°C target, if we achieve an average yearly growth rate of 12 and 18% respectively until 2030.
  • The cost of reaching these goals is lower than told by the International Energy Agency (IEA) to the G20 Ministers who met in Baden-Baden in Germany mid-March.

The first of the two reports, “Investment needs for a Low-Carbon Energy System”, was published jointly by IEA and the International Renewable Energy Agency (IRENA) on the occasion of the G20 meeting in Germany. The second report, “Boom and Bust 2017: Tracking the Global Coal Pipeline”, was issued by the NGO’s CoalSwarm, Sierra Club and Greenpeace.

IEA still inflates the costs of renewables

The IEA/IRENA report starts with the target to limit – with a 66% probability – global warming to 2°C. This scenario “would require an unparalleled ramp up of all low-carbon technologies in all countries”, it says. By 2050, nearly 95% of world electricity production would be low-carbon, 70% of new cars would be electric and the entire existing building stock would have been retrofitted. Furthermore, the CO2 intensity of the industrial sector would be 80% lower than today.

Following this growth path, wind and solar combined would become the largest source of electricity by 2030. This would require ”a major effort to redesign electricity markets to integrate large shares of variable renewables, alongside rules and technologies to ensure flexibility”.

IEA estimates that $40 trillion must be invested in the electricity sector to support this transformation between 2015 and 2050, compared to an estimated 28 trillion in the IEA’s reference “New Policies” scenario. About half of that, i.e. $20 trillion, would be spent on renewables and the rest on investments in the grid, batteries etc. Wind and solar would each need to attract about $7 trillion, according to IEA.

As a result of this massive green investment boom, the IEA scenario reckons total installed capacity of wind and solar in the world would increase 11-fold, from about 650 GW in 2015 to 7130 GW in 2050. The carbon intensity of the power sector would be reduced from 516 g CO2 per kWh in 2014 to only 117 in 2030, and as low as 30 gram CO2 in 2050.

$2 million per MW is not only higher than it costs to build solar and wind today, it fails to take into account the effect of the industry’s continuous cost reductions

Besides renewables, the main driving force is here an accelerated phasing out of coal as well as an intermediary rise in natural gas as source in power generation.

To put these numbers into perspective, IEA calculates that the 66% 2°C scenario will require 40% higher total investments in the energy sector compared to the New Policies Scenario. On the other hand, the import bill for the net importing countries will be drastically reduced. IEA estimates that the net savings for 20 largest economies will amount to $1.6 trillion, as a consequence of reduced import of coal, gas and oil in the power generation sector.

All in all, IEA estimates that when combining the higher investments with fuel savings, the net cumulative cost of the global power system (including transmission and distribution) to 2050 would be around 15% higher in the 66% 2°C scenario than in the reference scenario.

However, it seems that IEA once again significantly overestimates the costs of large-scale deployment of solar and wind energy (I have previously pointed out how IEA repeatedly has underestimated cost reductions in solar PV).

Let’s do the math: To reach 7130 GW wind and solar in 2050, starting with about 700 GW in 2015 and conservatively adding 5% for replacement of “decommissioned” plants, you need to build on average about 190 GW a year. This is certainly a high number, but note that it’s only 50% higher than the 130 GW built in 2016. To build an average of 190 GW solar and wind a year the next 35 years IEA reckons we’ll need $14 trillion in investments, i.e. $400 billion per year. $400 billion for 190 GW translates into an average assumed investment cost the next 35 years for wind and solar of more than $2 million per MW.

But $2 million per MW is not only higher than it costs to build solar and wind today, it fails to take into account the effect of the industry’s continuous cost reductions, especially the solar PV sector. As an illustration, the table below shows that – according to Bloomberg data – the average global investment cost for wind and solar fell by about 60% the last two years, from $2.7 to 1.7 million per MW.

Both the wind and in particular the solar industry will continue to reduce costs, especially if we assume – as IEA does in its 2°C scenario – a yearly growth of staggering 12 and 18% respectively for wind and solar the next 15 years. With system costs for utility PV projected to drop 5-10% per year at least until 2030, it seems reasonable to assume an average investment cost below $1 million per MW the next 35 years, i.e. less than half of what assumed by IEA.

(It is impossible to find out from the analysis if IEA have included other elements that justify the high investment costs. Part of the explanation for IEA’s higher cost numbers could possibly be that the organisation assumes a higher share of concentrated solar power (CSP) which is more expensive than solar PV, but this is not spelled out. It is also difficult to see why developers should shift from PV to CSP if the latter continues to be several times more expensive than photovoltaic solar power.)

A modest carbon tax would have been sufficient to accelerate the phasing-out of coal, also in the top 10 coal countries

In other words, the ”extra” investments in the power sector required to meet the 2°C scenario with at least 66% probability is not $9-10 trillion as estimated by IEA, but rather probably closer to half this amount – equal to about $150  billion a year instead of the approximate $300 billion bill presented by IEA. By the way, we should note that these numbers are excluding the significant net savings from reduced fossil fuel imports in the same scenario. They are therefore significant, because they illustrate that the sustainable low-carbon scenario required to meet the Paris goals is significantly cheaper than communicated by IEA.

The 600 coal plants pipeline that must be frozen

The IEA/IRENA report highlights the importance of an accelerated phase-out of coal in the electricity sector. The report “Global Coal Plant Tracker 2016”, published in March by CoalSwarm, describes the nature of this challenge. It starts by painting a surprisingly optimistic picture: “After a decade of unprecedented expansion, the amount of coal power capacity under development worldwide saw a dramatic drop in 2016″.

The main reason is China and India, which saw 68 GW of construction now frozen at over 100 project sites, and an equal amount retired. Overall, the pipeline of new coal fired power plants was cut in half from 2015 to 2016, from 1100 to 560 GW, and the number of construction starts reduced by 62%.

Hopefully, the examples set by China and India last year can serve as a model for the remaining countries betting their future on coal

“The slowdown in the coal power pipeline brings the possibility of holding global warming to below 2°C from pre-industrial levels within feasible reach”, concludes the report optimistically.

However, it remains to be seen whether the drop observed in 2016 reflects a trend, or just a one-time adaptation to oversupply of power in India and shifting economic priorities in China.

According to the report, the “top 30 countries” still had more than 550 GW of new coal power plants under development, in addition to 250 GW under construction. That means these 30 countries still had about 550 new coal plants in the pipeline, if we assume that each coal plant on average has a capacity of 1 GW. Other than China and India, the top 10 “pipeline countries” are: Turkey, Indonesia, Vietnam, Japan, Egypt, Bangladesh, Pakistan, South Korea, South Africa and Philippines.

The good news is that none of these countries are dependent on coal power for the security of energy supply at competitive prices.  Almost all the top 10 coal countries have abundant solar resources, and most have also access to good wind resources. In all these countries, possibly with the exception of Japan, solar and wind power can be supplied at a cost per kilowatthour that is competitive with, if not lower than electricity generated from new coal-fired plants.

So why are these countries still betting their energy future on coal?

I think the answer has to do with the perception that only large centralized conventional power plants can provide the “baseload” power required to secure the countries’ economic development. That used to be the case, but it’s no longer so. As the experience from Scandinavia, Germany and California shows, the required security and flexibility of supply can be achieved through a combination of, among others, large-scale deployment of renewables, enlarged cross-border interconnection capacity and various forms of storage, supplemented by gas-fired peaking plants.

Hopefully, the examples set by China and India last year can serve as a model for the remaining countries betting their future on coal. A modest carbon tax would have been sufficient to accelerate the phasing-out of coal, also in the top 10 coal countries. As a substitute, it is now important that the new sources of “climate finance” committed in the Paris treaty, are not dispersed into myriads of initiatives that may keep diplomats and development agencies busy but fail to deliver result-based investments on the ground.

An initiative expected to be launched by the Norwegian government later this year, can serve as an example. The proposal is to set up a facility that will offer partial credit risk guarantee products to renewable energy projects in the developing countries, provided the projects can offer certified CO2-emisson reductions. The initiative is meant to incentivize the market, for example by stimulating private banks and emitters of green bonds to take a more active role in financing renewable energy projects in developing countries.

More innovation is certainly required if we want to stimulate market-based alternatives to the more than 500 coal plants still in the pipeline.

Editor’s Note

Source: Energi og Klima. Reproduced with permission.

See also Greg Muttitt, Why the International Energy Agency still gets it wrong on fossil fuels and Terje Osmundsen, How the IEA exaggerates the costs and underestimates the growth of solar power.

Original Post

Terje Osmundsen's picture
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Schalk Cloete's picture
Schalk Cloete on Apr 14, 2017

Regarding the IEA total investment cost assessment, the report clearly states an average of $330 billion/year investment in wind & solar in Figure 2.16. RE retirements (especially wind) will also be much greater than the 5% figure assumed by the author. See the typical s-curve starting to develop in the wind figure in Figure 2.11 as wind turbine retirements start to match new builds. Also take into account that more expensive offshore wind will have to play a major role in many countries in such an extreme RE buildout scenario. This more objective look at the IEA analysis makes their cost analysis seem quite reasonable.

Please see my recent article (and the interesting discussion thread below it) on why coal is still important in developing nations.

Bob Meinetz's picture
Bob Meinetz on Apr 14, 2017

Terje, re:

As the experience from Scandinavia, Germany and California shows, the required security and flexibility of supply can be achieved through a combination of, among others, large-scale deployment of renewables, enlarged cross-border interconnection capacity and various forms of storage, supplemented by gas-fired peaking plants.

In California renewables are “supplemented” by gas-fired generation? Gas, peaking or CCGT, is responsible for more than 60% of our state’s electricity.

Your article describes not the experience in California, Germany, Scandinavia, nor anywhere else, but a myth promoted by first-world renewables advocates to advance an agenda. Thankfully, impartial sources like EIA are around to illustrate how harmful it is to serious consideration.

Joe Deely's picture
Joe Deely on Apr 14, 2017

Nat Gas Share of Electricity in CA for 2016 – from EIA

Total Gen = 199,038 GWh
NG Gen = 97,531
NG % Share = 49%

Including import numbers lowers NG share substantially.

CA NG generation be much lower in 2017. Below is NG generation data for for first quarter from CAISO

Avg MWh/day 2016 2017 Y-Y
Jan 237,083 201,347 -15.1%
Feb 196,212 156,788 -20.1%
Mar 144,911 112,044 -22.7%

CAISO has recently had multiple days where total Solar generation is greater than NG generation.

As another example look at NG share yesterday from CAISO

Total Gen = 572,786 MWh
Gas Gen = 111,503 MWh

Gas Share = 19.5%
Renewables Share = 31.0%
Nuclear = 9.5%
Large Hydro = 17%
Imports = 23.2%

NG was definitely a supplement.

Thorkil Soee's picture
Thorkil Soee on Apr 14, 2017

At least Germany is heading for deep troubles due to the ambitious Energiewende.
About Dunkelflaute see: http://wp.me/s1RKWc-90
About pollution and costs see: http://wp.me/p1RKWc-11F
Norway is the only country in Europe, having plenty of hydro.
Sweden has a good combination of hydro and nuclear.
Denmark has an expensive dream of being self-sufficient using wind-power.

It does not matter how much you connect the European countries with HVDC cables, it will be nothing but a very expensive drip in the ocean.
On the last page of a very comprehensive paper http://www.reo.dk/CustomerData/Files/Folders/7-debatten-pdf/303_wind-14-... you can look at the unpleasant facts.
In the wintertime and especially at nighttime, we can not rely on PV-solar power.
In Europe, France is the only country having adequate nuclear and corresponding low pollution.

Jarmo Mikkonen's picture
Jarmo Mikkonen on Apr 15, 2017

China is reducing coal use but not by wind and solar alone.

According to China’s 13th 5-Year Plan, nuclear and hydro generation increase 2015-2020 more than wind and solar in real terms, that is, TWhs.

China’s 2020 nuclear generation with 58 GW capacity and current CF of 91 % would amount to 462 TWh. If the Chinese replaced it with solar, they would need to build 450 GW of solar capacity. That’s 150 GW more than the installed cumulative global solar capacity at the end of 2016.

The carbon intensity of the power sector would be reduced from 516 g CO2 per kWh in 2014 to only 117 in 2030, and as low as 30 gram CO2 in 2050.

Carbon intensity in France was 58 g/kWh in 2016. It has been below 100 g/kWh the past 20 years. If climate really is a concern for the world, international community should step up and condemn Hollande’s insane decision to cut nuclear share of power generation from 75% to 50%.

Willem Post's picture
Willem Post on Apr 15, 2017

Terje,

The world’s fossil fuel consumption has been a steady 78% of all Primary Energy for the past 10 years, despite several trillion dollars of investments in renewable electricity systems.

Current coal consumption is about 8000 million metric ton per year. China and India use about half of that IN AN INEFFICIENT (low efficiency plants, high CO2/kWh) AND DIRTY MANNER (low efficiency pollution control systems, high pollution/kWh).

Modern coal plants in Europe and the US have pollution control systems with efficiencies of 0.998 to 0.999 (about one or two lbs per 1000 lbs of fly-ash particulates is released to the atmosphere), whereas in China and India the norm is 0.950 or less (about 50 lbs or more is released to the atmosphere).

The fuel energy fed into power plants, cars, buildings, etc., is primary energy. The energy from mines, wells, forests, etc., is source energy.

http://www.windtaskforce.org/profiles/blogs/world-energy-very-slowly-tra...

Mark Heslep's picture
Mark Heslep on Apr 15, 2017

It’s more than a little outrageous to include Germany as an example to illustrate the curious idea that baseload is no longer necessary, given the 49 GW of German coal plants, about the same capacity it had in 2000 . Yet another 1100 MW German coal plant nears completion at Datteln.

John Miller's picture
John Miller on Apr 15, 2017

California also pays 2x-3x what most other US States pay per KWhr. Re. EIA data. The good news is that Germany pays almost 2x the cost of power as California. Re. example data. Based on this data, Power Revenues seem to support the EIA’s projected costs to a reasonable level.

Joe Deely's picture
Joe Deely on Apr 15, 2017
Darius Bentvels's picture
Darius Bentvels on Apr 16, 2017

You may expect that in ~2025 with the advent of 12MW offshore wind turbines etc, offshore wind in many seas, such as the North Sea, will be cheaper than onshore wind.

With 8MW wind turbines, offshore is now already at ~5cnt/KWh as shown with the recent Danish and Dutch tenders. Developments don’t stop. The first 9MW model is now entering the production phase. EU study expect that 20MW is feasible.

Furthermore those wind turbines will last more than 30years so retirement rate will decrease towards 3%.

All 11 wind turbines of first offshore wind park started in 1991, still operate. Replacement may occur for economic reasons as those are only 450KW, hence replacing them with one 9MW wind turbine will deliver more electricity (9MW = higher = substantial higher capacity factor, usually >50%) and less maintenance costs.

Thorkil Soee's picture
Thorkil Soee on Apr 16, 2017

Germany is a model of pollution and expensive power.
If nothing else look at http://wp.me/s1RKWc-90

Thorkil Soee's picture
Thorkil Soee on Apr 16, 2017

Here, as seen so often, there is a dream of solving the problem using HVDC connections.
At the best it will be a very expensive drip in the ocean.
The European sun is synchronized – for obvious reasons.
But it does not help – the wind-power as well.
On the last page of a very comprehensive site you can check the unpleasant facts for the combination of 14 European countries.
See http://www.reo.dk/CustomerData/Files/Folders/7-debatten-pdf/303_wind-14-...

Willem Post's picture
Willem Post on Apr 16, 2017

Thorkil,

Those graphs are grossly misleading.

One has to sum the simultaneous 5 minute, or one minute, wind energy for a day or a week, etc., to obtain the wind production variability. The variability of demand and of supply determine grid stability conditions. If those conditions are within required ranges all is fine.

The wind and solar outputs of each country would be balanced by all countries, if an HVDC overlay system is in place for the entire area, including offshore.

Any excess would be curtailed or stored (by various means), any shortage would be made up with traditional generators, and from storage.

This can be done, but it would require a lot of money, $trillions, and all would be highly visible and noisy all over Europe.

It would be much less costly to have much greater energy efficiency, and supply the remaining primary energy with 75% from nuclear, and the rest from other sources, as France has been doing for 5 decades.

Russia, China, India, Iran and other nations have major nuclear programs underway.

Only Japan, the US and EU are in a nuclear coma.

Darius Bentvels's picture
Darius Bentvels on Apr 16, 2017

China’s 2020 nuclear target of 58GW won’t be reached (delays partly due to opposition by local population, partly due to delays during construction similar as in USA).
Experts estimate a total of 52GW in 2020.
Chinese 2020 PV-solar target is now 110GW, Wind 210GW (wind produces already more KWh/a than nuclear).
Your CF estimation for Chinese PV-solar doesn’t fit with reality.

France has the luck that it has a friendly climate and significant hydro. Most countries are less lucky, hence more CO2.

Thorkil Soee's picture
Thorkil Soee on Apr 16, 2017

Yes and No
Japan, the US and EU are in a nuclear coma.
Also: much can be gained by more efficient use of the available.
BUT
By nature the energy from sun is synchronized and there is less at winter, when there is more need.
If you do not accept the findings of Søren Kjærsgård, we must have new data.
Storage of energy: We must not forget that the demand is enormous and that the only realistic possibility is Hydro.
Unfortunately new possibilities in Europe are almost not existent.
About HVDC: I still dare to say that it will never be possible to distribute “what is not there”.

Anyhow; the German Energiewende, already now, in the start-up, is a disaster.
If you have time and courage, then have a look at http://wp.me/p1RKWc-11F (Energiewende) and http://wp.me/s1RKWc-90 (Dunkelflaute)

Darius Bentvels's picture
Darius Bentvels on Apr 16, 2017

Though reducing nuclear has priority as that is by far the most dangerous, Germany also reduced coal in past decade:
2005: Coal 288TWh (46%), nuclear 163TWh, Renewable 63TWh
2016: Coal 260TWh (40%), nuclear 85TWh, Renewable 191TWh

Bob Meinetz's picture
Bob Meinetz on Apr 16, 2017

And where is all that non-NG electricity coming from, Joe? From solar panels, or wind turbines? Of course not – it’s from hydropower, due to record rains.

http://www.sandiegouniontribune.com/business/energy-green/sd-fi-hydro-ra...

Maybe you install downspouts for a living, and only need electricity after it rains. Others’ needs are independent of weather, making NG not a supplement, but a requirement.

NG has – temporarily – been displaced by hydro. Now, let’s look at the rotten side of that cherry you picked: where was solar in January before the snowpack from this season’s rains melted? It was 40% lower than last year.

http://www.renewableenergyworld.com/ugc/articles/2017/02/09/california-s...

Nice try. The only consistency about unavailables advocates is their unwavering determination to put lipstick on their energy pig.

Bob Meinetz's picture
Bob Meinetz on Apr 16, 2017

Bas, France’s emissions are either lower than Germany’s because it’s “lucky”, or it had the foresight to build out safe, carbon-free nuclear energy decades ago.

I know, I know – turning your sow’s year into a silk purse is not easy. It won’t get any easier.

John Miller's picture
John Miller on Apr 16, 2017

California also pays 2x-3x what most other US States pay per KWhr. Re. EIA data. ( https://www.eia.gov/electricity/monthly/update/end_use.cfm#tabs_prices-3 ) The good news is that Germany pays almost 2x the cost of power as California. Re. example data. ( https://www.ovoenergy.com/guides/energy-guides/average-electricity-price... ) Based on this data, Power Revenues seem to support the EIA’s projected costs at a reasonable level.

Darius Bentvels's picture
Darius Bentvels on Apr 16, 2017

So the economic and technological most developed nations put nuclear on the sideline or are actively reducing nuclear.

Take France. They decided in 2015 to reduce nuclear from ~75% towards 50% in 2025, a much faster reduction than Germany.
Their scientific govt institute ADEME concluded after simulation studies regarding the situation in 2050, that
80% renewable would be the cheapest solution for a reliable electricity supply in France.

Darius Bentvels's picture
Darius Bentvels on Apr 16, 2017

Check my comment to Willem below.
Apparently France learned from its mistake.
Seems to be more difficult for many states in USA.

Darius Bentvels's picture
Darius Bentvels on Apr 16, 2017

Would be nice if the biggest polluter in the world pp, USA would also take serious action. Would stop stimulating coal, introduce an Emission Trading System. etc.

So USA starts reducing its CO2 emissions substantially below the Kyoto 1990 reference level, following leading nations such as Germany, Denmark, etc.

Joe Deely's picture
Joe Deely on Apr 18, 2017

Bob,
Left you a comment yesterday but it went into the moderator hole and it appears the moderator is on vacation.

Hydropower is definitely doing well this year. Should help displace a lot of NG.

But what about your solar comments? First your link – did you actually read the article? Because here is what it says:

“and initial estimates indicate that installation activity in California declined by approximately 40 percent year over year. “

Installations – not generation – did you really miss this Bob? Take the blinders off.

Solar on CAISO was actually up 40% in Jan Y-Y. So, the exact opposite of what you said. Rainy weather and all.

If you don’t like CAISO data you could have looked at EIA solar data for Jan. Which shows solar up 31% Y-Y.

Really sloppy Bob.

CAISO is showing many days where Solar is generating more on a daily basis than NG. For ex. on Saturday Apr 15th NG generated 82,063 MWh and Solar generated 89,978MWh. This does not even include rooftop.

The only consistency with your comments is how poorly you back up your comments with actual facts and how blind you are to what is actually happening.

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