Abstract
We model the evolution of the Central Western Europe power system until 2040 with an increasing carbon price and strong growth of variable renewable energy sources (vRES) for four electricity market designs: the current energy-only market, a reformed energy-only market, both also with the addition of a capacity market. Each design is modelled for two decarbonisation pathways: one targeting net-zero emissions by 2040 for a 2 °C warming limit, and the other targeting −850 Mt CO₂ y‾ for a 1.5 °C warming limit. We compare these scenarios against the high-level objectives of delivering low-carbon electricity reliably to consumers at the lowest possible cost. Our results suggest that both 2 °C and 1.5 °C compliant systems could be achieved and deliver electricity reliably. In terms of cost, we find the 1.5 °C warming scenarios lead to system costs which are twice as high as the 2 °C scenarios due to the high cost of negative emission technologies – in particular direct air carbon capture (DAC). To make a 1.5 °C target more affordable, policymakers should investigate lower cost alternatives in other sectors, and increase research and development in DAC to reduce its cost.
Highlights
In order to achieve the European Union’s (EU) long-term goal of reducing greenhouse gas (GHG) emissions by 80–95% by 2050 compared to 1990 levels, the power sector will need to fully decarbonise by 2050, or even deliver net negative GHG emissions if the objective of the Paris Agreement to limit global warming to well below 2 ◦C is to be met (EC, 2011; UNFCCC, 2017; EC, 2018)
We examine the impact of this assumption in the sensitivity analysis (Appendix K). Further details are provided in Appendix E. This value reflects the historical weighted average cost of capital (WACC) of European power companies in the range of 6%–10% (Donovan, 2015; Eurelectric, 2013)
With a variable renewable energy sources (vRES) penetration of 17% in 2017 and ~70% in the EOM 2C scenario in 2040, a proportional increase in frequency restoration reserves (FRR) requirements would translate to a need of around 30 GW, which is less than the 85 GW of flexible generation capacity available in 2040
Summary
In order to achieve the European Union’s (EU) long-term goal of reducing greenhouse gas (GHG) emissions by 80–95% by 2050 compared to 1990 levels, the power sector will need to fully decarbonise by 2050, or even deliver net negative GHG emissions if the objective of the Paris Agreement to limit global warming to well below 2 ◦C is to be met (EC, 2011; UNFCCC, 2017; EC, 2018). Policies have been implemented to increase the share of renewable energy sources (RES) in electricity supply. These have been largely successful, with installed wind capacity in the EU tripling from 60 to 180 GW between 2008 and 2018, and solar photovoltaic (PV) capacity increasing tenfold from 10 to 115 GW over the same period (Eurostat, 2017; EurObserv’ER, 2019; EurObserv’ER, 2018; SolarPower Europe, 2019). As wind and PV are variable renewable energy sources (vRES) with nearly zero short-run marginal costs (SRMC), this additional capacity has displaced more costly thermal generators in the merit order, reduced electricity prices, and the operating hours of thermal plants (Hirth, 2018)..
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