9.2.4 Non-fossil Energy
This section covers the effects of mitigation on non-fossil-fuel-based energy
production and use (electricity and biomass), and the ancillary benefits and
costs associated with mitigation using non-fossil energy.
220.127.116.11 Electricity Use and Production Fuel Mix
World electricity demand in 1998 was 12.6bn MWh, about 60% of which (7.5bn
MWh) was consumed in the industrialized countries (EIA, 2000a). Fossil fuels
used for electricity generation account for about one third of the CO2
emissions from the energy sector worldwide (EIA, 2000b). Globally, about 60%
of all electricity is produced with fossil fuels. However, the fraction of electricity
generated from fossil fuels varies across countries, from as little as 1% in
Norway to 95% in the Middle East, and 97% in Poland (EIA, 2000a). Nuclear reactors
are producing electricity with a global capacity of around 351GWe (IAEA, 1997),
with each having an average of nearly 800MWe of installed capacity. Half of
this total is concentrated in three countries: the USA with 25%, and France
and Japan with 12.5% each (IAEA, 1997, pp. 10-11).
Recent projections show that electricity use will grow 37% to 16.8bn MWh by
2010, and 76% to 21.6bn MWh by 2020. About two thirds of this growth will occur
outside the developed countries (EIA, 2000b). The IPCC Special Report on Emissions
Scenarios (SRES) projections (Nakicenovic et al., 2000) are similar,
with worldwide electricity demand projected to more than double between 1990
and 2020 in scenarios A1B, A1F1 and B1, and to double between 1990 and 2020
in scenarios A2 and B2. Beyond 2020, the growth in electricity demand projected
in the scenarios diverges. A1B shows the highest growth, more than 20 times
between 1990 and 2100, while B1 shows the lowest growth, slightly less than
6 times between 1990 and 2100.
Much of this new power will be generated with fossil fuels. Globally, use of
gas for electricity generation is projected to more than double by 2020. Global
use of coal for generation is projected to grow by more than 50%, with about
90% of the projected increase occurring in the developing countries. In Asia,
nuclear power is still expected to increase to meet the increasing electric
power demand mainly because of resource constraint issues (Aoyama, 1997; Matsuo,
1997). Table 9.6 shows estimates of nuclear electrical
generating capacity by region to 2010.
|Table 9.6: Projected nuclear energy capacity (MW)
Figure 9.2: Projection of world nuclear capacity to 2050 in TWh (Nakicenovic
et al., 1998).
Uncertainty is reflected in the wide range in the long-term
projections for nuclear energy capacity. The World Energy Council (Nakicenovic
et al., 1998; http://www.iiasa.ac.at/cgi-bin/ecs/bookdyn/bookcnt.py)
projects a range of 2,227 to 11,840 TWh in 2050 under six possible future energy
scenarios as shown in Figure 9.2.
18.104.22.168 Impacts of Mitigation on the Electricity Sector
Given the extensive use of fossil fuel in the production of electricity, it
is not surprising that a variety of proposals have been put forth to mitigate
GHG emissions in this sector. Many countries have proposed renewable technologies
as one solution for GHG mitigation (Comisión Nacional de Energía,
1993; SDPC et al., 1996; Piscitello and Bogach, 1997; European
Commission, 1997). In some European countries such as Sweden and Austria, carbon
taxes have been introduced. In Japan, nuclear power is planned to supply 480TWh
in 2010, or 17.4% of total primary energy supply, to help meet the Kyoto target
(Fujime, 1998). In contrast, in Sweden, a policy under debate to phase out nuclear
power and restrict CO2 emissions to 1990 levels by other means would
result in significantly higher electricity prices (Anderson and Haden, 1997)
In general, mitigation policies work through two routes. First, they either
mandate or directly provide incentives for increased use of zero-emitting technologies
(such as nuclear, hydro, and other renewables) and lower-GHG-emitting generation
technologies (such as combined cycle natural gas). Or, second, indirectly they
drive their increased use by more flexible approaches that place a tax on or
require a permit for emission of GHGs. Either way, the result will be a shift
in the mix of fuels used to generate electricity towards increased use of the
zero- and lower-emitting generation technologies, and away from the higher-emitting
fossil fuels (Criqui et al., 2000).
Quantitative analyses of these impacts are somewhat limited. Table
9.1 presents published results from multisectoral models. Other multi-regional
models used to assess the impacts of GHG reduction policies appear to have the
capability to quantify these impacts on the electricity sector (Bernstein et
al., 1999; Cooper et al., 1999; Kainuma et al.,
1999a, b and c; Kurosawa et al., 1999; MacCracken et al.,
1999; McKibbin et al., 1999; Tulpule et al., 1999).
However, the focus of the studies conducted with these models has generally
been on broader economy-wide impacts, and many do not report results for the
electricity sector. McKibbin et al. (1999) reported the price
and quantity impacts on electric utilities if the USA unilaterally implements
its Kyoto commitments. Under this scenario, electricity prices in the USA increase
7.2% in 2010 and 12.6% in 2020, while demand drops 6.2% and 9.5% in those years,
respectively. The Australian Bureau of Agricultural and Resource Economics (ABARE,
1995) reported shifts in fuel share for Annex B under a policy where this group
of countries stabilizes emissions at 1990 levels by 2000. They show that the
share of coal in the generation of electricity for most Annex B countries would
drop by 10% to 50%, with the combined shares for nuclear and renewables increasing
14 to 46%8.
(See Table 9.7 for detailed results.) They note that such
a policy may require substantial structural changes in the industry and are
likely to involve significant costs, but do not elaborate or quantify.
|Table 9.7: Change in shares (percentage points)
of alternative energy sources in electricity generation under
stabilization relative to the baseline in 2010
There are a number of analyses for the USA only that report detailed impacts
on the electricity sector. Charles River Associates (CRA) and Data Resources
International (DRI) (1994) assessed the potential impact of carbon taxes of
US$50, $100, and $200 per tonne carbon, phased in to these levels over 1995
to 2000. By 2010, imposition of such taxes has increased prices of electricity
by 13%, 27%, and 55% for the US$50, $100, and $200 tax, while sales dropped
8%, 14%, and 74%, respectively.
More recently, a group of studies assessing the impacts of the Kyoto Protocol
on the US have reported electricity sector impacts (EIA, 1998; WEFA, 1998; DRI,
1998). These studies all use a flexible mechanism, such as tradable emissions
permits, as the implementation policy. Taken together, the studies reflect a
range of assumptions about the level of emissions reductions that would need
to come from the domestic energy sector. The range of results for the EIA study
for 2010 is summarized here, however, the results from all three studies are
generally consistent. Key impacts in 2010, all of which increase as emissions
reduction requirements increase, include the following.
- Electricity prices were projected to increase 20% to 86% above baseline
- Electricity demand was projected to decrease 4% to 17% below baseline levels.
- Prices of natural gas were projected to increase by 35% to 206% over the
baseline levels. Prices of coal for electricity production were projected
to increase to about 2.5 to 9 times the baseline levels. And, despite a 7%
to 40% decrease in fossil generation, fossil fuel expenditures increase 81%
to 238% over baseline levels.
- About 9% to 43% of total generation will shift away from coal relative to
the baseline. The large shift over this limited time period would reflect
significant structural changes and potentially large stranded costs. Roughly
half of this is replaced by natural gas generation, while most of the remainder
is not replaced as a result of reduced demand. Renewable generation beyond
baseline levels generally does not enter the mix until at least 2020.
None of the studies quantify the potential stranded costs associated with the
premature retirement of existing generation.