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  1. 1. Energy & Carbon Targets Cost Effective Delivery in a Changing Market Gerry Duggan
  2. 2. Background • In 2007 we had - Full employment - General Government Debt (as %of GDP) of 25% - Ready access to low cost finance • In 2010 conditions are very different - Unemployment is projected to reach 13.75%, - General Government Debt (as % of GDP) of 80% - Very restricted access to funding y g • The same policies cannot be correct for both situations it ti
  3. 3. Background • Under the terms agreed by EU member states in response to the Kyoto Protocol - Ireland was required to limit total GHG emissions to 113% of 1990 levels in the period 2008-2012 2008 2012 - Ireland was obliged to increase the contribution of electricity produced from renewable sources to 13.3% by 2010 - All EU member states were required to increase the overall share of biofuels in the transport sector to 5.75% by 2010
  4. 4. Ireland s Ireland’s Kyoto Compliance Strategy GHG Reduction Target Renewable Target
  5. 5. Background • Despite earlier concerns that Ireland would considerably overshoot its Kyoto target it now y y g appears that - The GHG reduction target will be met, because of the th severity of the economic downturn it f th i d t - The renewable electricity target (RES-E) will be significantly exceeded - The biofuels target (RES-T) wil be missed by a very large margin, but it had been discredited due to its impact on food prices
  6. 6. Background • Under the terms of EU’s 20/20/20 commitments in relation to Copenhagen p g • The EU differentiated between large emitters, such as power stations, larger industries and large commercial sites and smaller users • The emissions from large facilities are to be reduced by 20% from 1990 levels under an EU wide Emissions Trading Scheme (ETS) • Emissions from smaller sources i.e. from the non-ETS sector are to be controlled at national level to achieve EU agreed target levels g g
  7. 7. Background • Under the terms of EU’s 20/20/20 Strategy - Ireland is required to reduce GHG emissions in the non-ETS sector by 20%, from 2005 levels, by 2020. - Irelandis obliged to increase the contribution of renewable energy to Final Energy Demand from 4.2% 4 2% in 2008 to 16% in 2020 and - Irelandis required to increase the overall share of energy energ from rene able so rces in Transport to renewable sources 10% by 2020 • Meeting these targets requires a different strategy to that adopted for meeting the Kyoto targets
  8. 8. Challenge to Comply with the EU’s 20/20/20 Strategy St t GHG Reduction Renewables Target in RES-T RES T RES-E Target Non-ETS Sector RES-H
  9. 9. Baseline Projections 2005 2020 %Change GNP Index 100 124.3 24.3% Final Energy Consumption Mtoe 12.5 14.6 17.1% Non ETS Energy Emissions Mt 24.2 24 2 26.8 26 8 11.1% 11 1% Non ETS Energy Emissions Target 80% of 2005 values in 2020 Mt 19.3 q Emission Reduction Required Mt 7.5 27.9%
  10. 10. Non-ETS Baseline Energy Emission Projections 2020 P j ti Industrial Agricultural Energy Commercial Residential Surface Transport p
  11. 11. Road Transport Fuel Consumption in RoI 4500 4000 3500 3000 2500 Road Freight ktoe 2000 Private Car 1500 1000 500 0 1990 2007
  12. 12. Emission Reduction Required by 2020 RES-T RES-H Additional non-ETS
  13. 13. Achieving the additional non-ETS emissions non ETS • A strategy to achieve reductions required in the private gy q p motoring sector is in place • Targets have been developed in the Residential & Commercial sectors but the financial and engineering C i l t b t th fi i l d i i resources to deliver these targets have not been committed to date • No serious consideration has been given to the critical need to reduce emissions from the road freight sector in Ireland A much higher level of investment in supply Ireland. chain management is an essential starting point to developing a strategy for the sector
  14. 14. Cost of Failure to Meet Non-ETS Emissions T E i i Targett Mt CO2 Conservation Effort Required by 2020 5.4 Cost of Emission Permits to Reach Target €m p.a. @ Current CO2 Permit Prices of €13.6/t 73 @ Eirgrid’s Projected Cost of €41.6 in 225 2020 But the penalty for failure to meet target is in fact much higher
  15. 15. Renewable Energy Target in 2020 Baseline If Non-ETS Targets Met Mtoe Mtoe Final Energy Consumption 14.6 11.7 Renewable Target 16% of FEC 2.34 1.87 Less Existing Biofuels 0.51 0.51 Additional RES-H 0.22 0.22 Additional RES T RES-T 0.45 0 45 0.45 0 45 1.18 1.18 RES-E Requirement 1.16 0.69 TWh 13.50 8.03
  16. 16. Renewable Energy Target in 2020 Baseline If Non-ETS Targets Met TWh TWh RES-E Requirement 13.50 8.03 Less 2010 RES-E (Est) Hydro 0.72 0.72 Wind Wi d 3.38 3 38 3.38 3 38 LFG 0.11 0.11 4.21 4.21 Additional RES-E Requirement 9.29 3.82 Additional Generation Required MW MW if All Wind @ 31.2% LF 3400 1400
  17. 17. Are There Alternatives to this Amount of Wind Wi d • One option is to use Short Rotation Forestry ( p y (SRF) ) Biomass in Existing Peat Stations • Stations were designed for 50% biomass firing, this could possibly be raised to 100% ld ibl b i dt • This would require an investment in the agricultural sector of - €175m for 50% biomass firing - €350m for 100%biomass firing • This would increase RES-E output by 1.2 or 2.4 TWh @ 80% Load Factor
  18. 18. Comparison with Wind Powered Generation • Wind powered generation will cost €2.25m/MW, when grid reinforcement and interconnection costs h id i f t di t ti t are included • Wind powered generation makes almost no contribution to meeting peak demand • Onshore wind operates at about 31 2% load factor 31.2% • To produce 1.2 TWh p.a. from wind requires - the installation of 440MW of generation capacity - an investment of €1.0bn • Th wind power requires almost six times the Thus i d i l t i ti th investment in SRF to produce the same amount of renewable energy
  19. 19. Comparison with Wind Powered Generation • Almost all the hardware required for wind turbines, network connection, grid reinforcement & interconnectors is imported. • Th the expenditure of €1 0b on wind power Thus th dit f €1.0bn i d development would create - very little employment in Ireland, in relation to the amount invested - virtually no employment in the midlands, which has particular unemployment problems
  20. 20. Comparison with Wind Powered Generation • Replacing 50% of peat with biomass would reduce p g p CO2 emissions by 1.3 mt p.a. • Installing 440MW of wind powered generation would g p g reduce CO2 emissions by approx 0.5 mt p.a. in 2020 • Thus replacing peat by biomass would be 2.5 times as beneficial as wind in reducing CO2 emissions • SRF biomass, used in existing peat stations, is 15 times more effective, in capital cost terms, than wind in reducing CO2 emissions in the Electricity Sector
  21. 21. Benefits of using SRF Biomass in Existing Peat St ti P t Stations Baseline If Non-ETS Targets Met TWh TWh Additional RES E Requirement RES-E 9.29 9 29 3.82 3 82 RES-E output 346MW @80% LF with 50% SRF Firing 1.21 1.21 100% SRF Firing 2.42 2.42 Wind Requirement with MW MW 0% SRF Firing 3400 7.65 1400 3.15 50% SRF Firing 3060 6.89 1060 2.39 100% SRF Firing 2720 6.12 720 1.62
  22. 22. Electricity Sector Capital Investment Requirement R i t Investment Requirement Baseline If Non-ETS Targets Met Wind Farms €1.5m/MW Grid Reinforcement & Interconnectors €0.75m/MW Total Wind €2.25m/MW €2 25m/MW Wind Related Investment with MW €bn MW €bn 0% SRF Firing 3400 7.65 1400 3.15 50% SRF Firing 3060 6.89 1060 2.39 100% SRF Firing 2720 6.12 720 1.62
  23. 23. Can the Costs of Wind Powered Generation Be R d B Reduced d • Yes, by developing wind farms in locations with significant spare transmission capacity
  24. 24. Conclusions • The key requirement of Irish Energy Policy has to be • to focus on reducing - Non-ETS sector emissions - Final Energy Consumption by 20 % by 2020 • Achieving these targets would g g - Reduce the cost of energy imports by €1335m p.a. at current prices - Eliminate the need to purchase CO2 emission permits at a estimated cost of €225m p.a. -R d Reduce electricity sector capital investment l t i it t it l i t t requirements by almost €4.5bn
  25. 25. Conclusions • Wind and Wave Power and Smart Metering will make No N contribution to meeting these targets t ib ti t ti th t t • We thus need to immediately focus investment and engineering resources on - Energy Conservation - Supply Chain Management, to reduce road freight fuel use - Biomass production and biofuel development
  26. 26. Conclusions • Capital investment in the electricity sector can be reduced by a further €2 2b b using biomass d db f th €2.2bn by i bi instead of peat in the existing peat stations • This would require an investment of €350m in the agricultural sector but it would produce a very significant employment boost in the midlands • Capital investment in the electricity sector could be even further reduced by prioritising the development of wind farms located in areas where the required transmission reinforcement can be cost effectively p provided