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Low emissions, new renewables, new business models
A changing energy system
Bitbang, March 15, 2017
Petra Lundström
Vice President, Nuclear Service, Fortum Power and Heat Oy
The global energy context today
• Based on International Energy Agency: World Energy Outlook 2016
2
Most of World’s electricity is currently generated by burning coal
IEA outlines a great uncertainty in the future use of coal for electricity generation. The use of renewable and nuclear power
increases in all scenarios
Global electricity generation by fuel & scenario
Global CO2 emissions in the power sector
Gt 20
Current Policies
Scenario
Coal
Gas & oil
2014
16
Additional in 2040 in
New Policies Scenario
12
New Policies
Scenario
Nuclear
End-point of range:
2 °C Scenario
Current Policies Scenario
Hydro
Other
renewables
8
4
2 °C Scenario
2
4
6
8
10
12
14
16
Thousand TWh
3
Source: World Energy Outlook 2016, International Energy Agency
2000
2010
2020
2030
2040
No peak yet in sight, but a
slowdown in growth for oil demand
Change in oil demand by sector in the New Policies Scenario, 2015-2040
mb/d 6
3
0
-3
Power
generation
Buildings
Passenger
cars
Maritime
Freight
Aviation Petrochemicals
The global car fleet doubles, but efficiency gains, biofuels & electric cars reduce oil
demand for passenger cars; growth elsewhere pushes total demand higher
© OECD/IEA 2016
Coal: a rock in a hard place
Coal demand in key regions in the New Policies Scenario
China
2014
United States
Change 2014-2040:
India
Decreasing demand
Increasing demand
European Union
Southeast Asia
500
1 000
1 500
2 000
2 500
3 000
Mtce
The peak in Chinese demand is an inflexion point for coal; held back by concerns over
air pollution & carbon emissions, global coal use is overtaken by gas in the 2030s
© OECD/IEA 2016
The global energy context today


© OECD/IEA 2016
Key points of orientation:

Middle East share in global oil production in 2016 at highest level
for 40 years

Transformation in gas markets deepening with a 30% rise in LNG

Additions of renewable capacity in the power sector higher in 2015
than coal, gas, oil & nuclear combined

Energy sector in the spotlight as the Paris Agreement enters into force

Billions remain without basic energy services
There is no single story about the future of global energy; policies
will determine where we go from here
… but change is visible, and locally very significantly so
• Renewable technologies are becoming increasingly competitive
– Fluctuating electricity generation vs. flexibility and/or predictable capacity
• Smarter and more elastic power demand through rapidly developing enabling technologies
new business models, new competitive landscape
• Alongside a high share of intermittent renewable generation, flexible generation and storage will
be increasingly important and valuable
• There is still a strong ”economy of scale” in energy generation and security of supply benefit in
centralized power grid. Not obvious that the future is totally decentralized. We may have
decentralized and ”super scale” production in parallel.
7
Solar and wind power is becoming increasingly competitive
Solar PV and Wind Onshore LCOEs based on publicly available data
2016
Wind more competitive and
fits to seasonal demand
2016
2030
The required annual average market
price is higher than LCOE as the
market price tends to be lower in hours
with high wind and solar generation
2030
62 €/MWh 46 €/MWh
45 €/MWh 34 €/MWh
80 €/MWh 47 €/MWh
92 €/MWh 52 €/MWh
2016
2030
65 €/MWh 49 €/MWh
80 €/MWh 47 €/MWh
2016
2030
2016
41 €/MWh 32 €/MWh
2030
67 €/MWh 50 €/MWh
44 €/MWh 26 €/MWh
2016
51 €/MWh 30 €/MWh
65 €/MWh 49 €/MWh
51 €/MWh 30 €/MWh
Solar more competitive and
fits to seasonal demand
2016
2030
50 €/MWh 38 €/MWh
38 €/MWh 22 €/MWh
2016
2030
59 €/MWh 44 €/MWh
43 €/MWh 25 €/MWh
NOTE: The figures are indicative and illustrate a possible development in cost of wind and solar globally based on external sources. The figures do not
represent Fortum view. Solar and wind conditions and CAPEX may largely vary by individual projects even within same region.
8
2030
PV LCOE assumptions are based on EU PV Technology Platform report and EU PVSEC 2015 paper. Wind CAPEX and OPEX are from Sweco report
Incitamenten för investeringar i kraftproduktion, capacity factors are from BNEF LCOE low case scenario. Indicative wind capacity factor for Russia from IFC
Advisory: Services Russia’s New Capacity-based Renewable Energy Support Scheme
2016
2030
44 €/MWh 34 €/MWh
45 €/MWh 26 €/MWh
LCOE assumptions:
•
7% real WACC
•
CAPEX, OPEX globally uniform; lifetime solar 30y, wind 25y
•
Assumption that capacity factor will increase for solar 7,5% and wind by 15% from 2016 to 2030
•
20% higher CAPEX for onshore wind for the rest of the world compared to low cost Nordic
•
Uniform 20% corporate tax assumed
Homes and apartments become ecological, smart and flexible
• Consumers evolve from unresponsive demand to active participants, enjoying
new services for smart and sustainable living
• Enabled by fast ICT/digitalization development
Smart demand
• Load timing & curtailment – largest devices
• Smart heating – heating not intermittent due to
structural heat storages (building, water
masses, etc)
Rooftop solar
• Micro production, peaks up to
5..10kW/house
Electric Vehicle
• Smart charging, up to x0 kW/charger
• Sharing economy of parking, charging
Local storage
Customer interface digitalisation
• Ecosystem
• New business models
• Batteries, 2..10 kWh-scale
• Enabling shaving of peaks and larger utilization
of solar energy (shift to evening)
Electricity replacing fossil fuels
10
Share of wind and solar generation has increased significantly in
German power mix in the past 15 years
20% of electricity produced in Germany
originated from wind and solar in 2015
Germany, net power generation in 2000, total
538 TWh
Germany, net power generation in 2015, total
610 TWh
0%
0%
1%
2% 0%
5%
4%
0%
0%
1% 0%
Nuclear
6%
Lignite
30%
Lignite
14%
7%
Hard coal
9%
Nuclear
Natural gas
1%
Hard coal
Natural gas
3%
Oil
Other non-renewables
Wind, onshore
Oil
15 years
Other non-renewables
12%
23%
Wind, offshore
Hydro
24%
Wind, offshore
Hydro
4%
Biomasse
Solar
25%
Waste
Geothermal
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Source: Bundesverband der Energie- and Wasserwirtschaft (bdew)
Wind, onshore
Biomasse
1%
Solar
10%
18%
Waste
Geothermal
German wind, history example
Wind power output is very stochastic, great differences over hour, day and week time frames
• From hour-to-hour and day-to-day big, stochastic changes can occur
• Week-on-week differences smoothen somewhat, remarkable variance remains
12
Source: Markedskraft
Solar production example, Germany
Solar creates steep but expectable ramping and peak varies, but changes smoothen week-on-week
• From day to day, big differences can occur in peak output level, steep rampings
• Week-on-week differences average out
13
Source: Markedskraft
Electricity generation technologies may be classified into 5 categories
depending on their production pattern
Class
Electricity generation
technology
Flexibility
Repeating
pattern
Solar PV, hydro run-off-river (especially in
Nordics), wave
Causes
balancing
need
German Solar
Wind on & offshore
Causes
balancing
need
German Wind
Nuclear, Lignite, CHP industry, waste
Supply
(downreg
only)
predictable
Intermittent
random
Baseload
steady,
downreg
Flexible
production
Dispatchable
Storage
Dispatchable,
both ways
14
Hydro with reservoir (major in Nordic), Thermal
condensing coal, gas, bio, oil (majority on the
continent), CHP district heating
Production pattern real life example
German Nuclear
Supplies
balancing
Nordic hydro
Batteries: industry-size & solar-attached,
pumped hydro
Supplies
balancing
Norwegian pumped hydro (Holen,Bykle)
Demand side is turning to smart and locally optimized
Intermittency of renewables and closures of conventional power plants create need for new balancing solutions
Category, demand management
Centralized, example MWscale
Retail, example
kW-scale
Demand timing optimization,
normal daily operation
-Timing electricity consumption to most attractive time
Optimizing energy-intensive industry site
process for suitable load times, where
possible
-Timing of house / hot water heating
-Timing of EV charging and home battery
usage
Included in above, goal to keep below
certain maximum network load for
smaller grid fee
-Optimization of heating, PV inverters, EV
charging and batteries of a house or
apartment house to stay below certain
threshold
Stopping/curtailing energy-intensive
process on exceptionally expensive hour
-Shut down electric heating for short time
-curtail/shut down electric vehicle loading
frame and capturing arbitrage between energy prices
-Fastest in response can also participate to quick intraday
regulation markets (FCR, FRR)
Peak Shaving,
normal daily operation
-Shaving total load of grid access point for permanently
smaller network load, i.e. fuse size
Demand Cut, exception
-short-term load curtailment or cut in case big price
incentive occurs, day-ahead or intraday
15
Color codes: Current operation in market / Will be in near future
Nuclear technology outlook – two different trends
• Nuclear technology trends: large vs small, active vs passive, etc
 Choice of the path depends on the local market needs, the development of the technology, development of
the supply chain, international harmonization of licensing and regulations and on standardization
Decision to build a new nuclear power plant
Large
reactors
Small
reactors
(<300 MWe)
Short term e.g. VVER/AP1000
Short/mid term e.g. CAP1400
Mid term SMR, e.g. NuScale, ACP100, SMART
Extreme simplification & economy of
serial production
•
•
•
Manageable projects, stepwise investments
Extremely simplified standardized concepts
Internationally harmonized regulatory
approach
VVER – Russia, AP1000 – USA, CAP1400 – Chinese version of Westinghouse’s AP1000
SMR – Small Modular Reactors (several concepts)
Advanced large reactors
•
•
•
Economy of scale, extensive past experience, lessons
learnt from recent projects
Large investments - development of financing models
Gradual evolution towards simplification, harmonization
& standardization, improved constructability
Large reactors, supercentralized nuclear – case Korea
17
Image: KHNP (Hanbit site)
Small reactors – case NuScale
18
Summary: The traditional value chain in energy business is
changing
• A traditional utility business value chain:
• With the emergence of decentralized, smaller scale production for autoconsumption, the
picture changes significantly, especially at the Consumption end:
– Consumption becomes more flexible: demand becomes aggregated and/or adjusted based on
power market condition utilizing sophisticated information technologies
– Consumption and small scale production either for autoconsumption or for sale go hand in
hand
– The customer needs both to buy and sell electricity
– Also storage appears at the customer’s site in a smaller scale
– Many new decentralized production technologies are renewable, i.e. less need for fuel supply
– Well functioning electricity market and distribution grids are of vital importance to ensure a
balanced overall system
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