The evolution of the UK electricity

system in a below 2°C world

Habiba Ahut Daggash1,2,3 and Niall Mac Dowell2,3

1Grantham Institute – Climate Change and the Environment2Centre for Environmental Policy3Centre for Process Systems Engineering

UKCCSRC Cardiff Conference

April 17, 2019

Negative emissions: where and how much?

1

• IAMs estimate that the EU would need to remove 20-70 GtCO2 from the atmosphere by 2100.

• This is often exclusively provided by BECCS deployed in the power sector.

Source: Peters & Geden, Nature Climate Change 7, 619–621 (2017)

What is a ‘fair’ burden for the UK?

2

Sources: Eurostat, 2017 (for population, GDP and emissions data); Raupach, M. et al., Nature Climate Change 4, 873-879 (2014); Peters, G. et al., Environmental Research Letters 10, 105004 (2015).

14%

15%

12%

13%

Responsibility

(Historic

emissions)

Capacity

(GDP)

Inertia

(Current

emissions)

Egalitarianism

(Population)

0 20 40 60 80 100

Allocation of EU CDR burden based on sharing principles (%)

Sh

ari

ng

pri

ncip

le

BE BL

CZ DK

DE EE

IE EL

ES FR

HR IT

CY LV

LT LU

HU MT

NL AT

PL PT

RO SI

SK FI

SE UK

Modelling

3

Sources: Heuberger, C.F. et al. Comp Chem Eng 107 (2017) pp. 247-256; Heuberger, C.F. et al.

Appl. Energy 204 (2017) pp. 831–845

Meeting the UK’s Paris commitments

4

2015 2020 2030 2040 2050 2060 2070 2080 2090 2100

0

20

40

60

80

100

120

140

160

180

200

220

240

-10

Capacity Insta

lled

(G

W)

Year

Nuclear

Coal

Biomass

CCGT

OCGT

CCGT-CCS

BECCS

Onshore-Wind

Offshore-Wind

Solar

Interconnector (FR, NL)

Interconnector (IE)

Pumped-Hydro

Battery-Storage

DACS-CE

DACS-CW0

100

200

300

400

500

600

700

800

Zero-carbon system

CDR lower bound

CDR upper bound

Cum

ula

tive

syste

m cost (£

bn)

Low-carbon vs. Negative-carbon

5

1920 1950 1980 2010 2040 2070 21000

100

200

300

400

500

Ele

ctr

icity s

upply

(T

Wh/y

r)

Year

Coal*

Nuclear

Gas

Gas-CCS

Bioenergy

BECCS

Hydro

Wind

Solar

Imports

Historical generation ESO-XEL

CDR - lower bound

ESO-XELHistorical generation

1920 1950 1980 2010 2040 2070 21000

100

200

300

400

500

Year

CDR - upper bound

How can we incentivise BECCS and DACS?

Service

CO2 removalPower generation &

ancillary services Value to other emitters

Potential incentives

Negative emissions creditCarbon price equivalent

Wholesale electricity marketRevenue support e.g. CfDCapacity/ancillary services market

Auction-able credit to emitters (in power or other sectors)

BECCS

DACS

6

Current economics of BECCS and DACS

7

0 50 100 150 200 250 300 350 400

-10%

0%

10%

20%

30%

40%

50%

60%

IRR

of

FO

AK

pla

nt

Negative Emissions Credit (£/tCO2

)

DACS-CW

DACS-CE

BECCS

2040 2050 2060 2070Treasury SCC in:

2030

• A negative emissions credit (NEC) is a payment made to NETs for CO2 removal

• FOAK BECCS would need a NEC of £55/tCO2 (in addition to revenue from power generation) to achieve 4% IRR

• FOAK DACS plant would need 180-340 £/tCO2for a 4% IRR

Incentivising BECCS

8

50

75

100

125

150

175

200

0

25

50

75

100

125

150

Strike Price (£/MWh)

Ne

ga

tive E

mis

sio

ns C

redit (

£/t

CO

2)

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

BE

CC

S I

RR

IRR less

than -20%

4-15%

IRR

Can carbon pricing do it all?

9

2020 2030 2040 2050 2060 2070 2080 2090 21000

25

50

75

100

125

150

175

200

225

Capa

city In

sta

lled (

GW

)

Year

Nuclear

Coal

Biomass

CCGT

OCGT

CCGT-CCS

Onshore Wind

Offshore Wind

Solar

Interconn. (FR, NL)

Interconn. (IE)

Pumped Hydro

Battery Storage

0

100

200

300

400

BEIS CCC Treasury

Carb

on

In

tensity (

kg

CO

2/M

Wh)

Crediting negative emissions

10

2020 2040 2060 2080 21000

50

100

150

200

250

300

350

Ca

rbo

n p

rice

(£

/tC

O2)

Year

BEIS

CCC

Treasury

0

5

10

15

20

25

Cu

mu

lative

CO

2 R

em

ova

l (G

t CO

2)

• Carbon prices needed to deliver Paris target are significantly lower if BECCS and DACS are credited for CO2

removal

• Providing a NEC therefore allows for lower – and hence more politically deliverable –carbon taxation levels.

Crediting negative emissions

11

2020 2040 2060 2080 2100

0

50

100

150

200

250

Capacity Insta

lled

(G

W)

Year

Nuclear

Coal

Biomass

CCGT

OCGT

CCGT-CCS

BECCS

Onshore Wind

Offshore Wind

Solar

Interconn. (FR, NL)

Interconn. (IE)

Pumped Hydro

Battery Storage

DACCS

-500

-400

-300

-200

-100

0

100

200

300 No NEC

NEC

NEC + EPS

Carb

on Inte

nsity (

kg

CO

2/M

Wh)

Crediting negative emissions

12

2020 2040 2060 2080 2100

40

60

80

100

120

140

30

Marg

inal cost of ele

ctr

icity (

£/M

Wh)

Year

BEIS BEIS with NEC

CCC CCC with NEC

Treasury Treasury with NEC

Cumulative

until 2100

(£ bn)

No

NEC

NEC at

BEIS

Carbon

Price

Net

Cost

Total system

cost680 577 -103

Consumer

electricity

costs

497 511 +14

Carbon

taxes44 35 +9

NEC spend - 120 +120

Total cost +40

Conclusions

13

• To achieve a decarbonised electricity system, increased penetration of intermittent renewables, added flexibility and energy storage is largely sufficient.

• Deeper decarbonisation necessitates large-scale CDR deployment. This sees the system return to one dominated by thermal generators, particular BECCS and CCGT-CCS plants.

• Pursuing decentralisation in the short-term may lead to the disintegration or absence of infrastructure that appears critical in the long-term.

• BECCS and DACCS economics are unfavourable therefore they need incentives to encourage initial investment.

• Remunerating CO2 removal at the carbon price reduces the level of carbon taxation needed to deliver the Paris target, and incentivises earlier CDR deployment.

EFL Seminar

January 24, 2019

Additional Slides

Biomass supply chain

MSW Waste Wood Virgin Biomass US Pellets EU Pellets0

50

100

150

200

Raw

mate

rial (£

/tonne)

Biomass Type

Transport

Annualised CAPEX

Conversion losses

Processing and Personnel

Drying

Raw material

0

50

100

150

200

250

300

Availa

bili

ty (

TW

he/y

r)

0

1000

2000

3000

4000

5000

6000

7000

Nuclear Coal CCGT OCGT Coal-

PostCCS

CCGT-

PostCCS

Bio BECCS Wind-

Onshore

Wind-

Offshore

Solar Pumped

Hydro

Battery

Ove

rnig

ht

Cap

ex (

2015

£/k

W)

Source: IEA, 2015; DBEIS, 2016; LeighFisher, 2016; Arup, 2016; EIA, 2016; EASE-EERA, 2017; Bhave et al.,

2017; Tsiropoulos et al., 2018

UK Europe

US Rest of the World

UK (Central Value)

Technology costs

Meeting the UK’s Paris commitments

2020 2030 2040 2050 2060 2070 2080 2090 21002015

0

100

200

300

400

500

-50

Pow

er

to D

em

and (

TW

h/y

r)

Year

Nuclear

Coal

Biomass

CCGT

OCGT

CCGT-CCS

BECCS

Onshore-Wind

Offshore-Wind

Solar

Interconnector (FR, NL)

Interconnector (IE)

Pumped-Hydro

Battery-Storage

DACS-CE

DACS-CW-700

-600

-500

-400

-300

-200

-100

0

100

200

300

400

500

Zero-carbon system

CDR lower bound

CDR upper bound

Carb

on In

tensity (

kg

CO

2/M

Wh)