Greenhouse Abatement Options in the Stationary Energy Supply Sector Background Paper

33 Pages·1999·0.17 MB·English

Greenhouse Abatement Options in the
Stationary Energy Supply Sector
Background Paper
For Discussion by the Annex I Expert Group on the UNFCCC
15-16 September 99
Gene McGlynn
Environment Directorate
OECD
This paper provides background to a roundtable discussion at the Annex 1 Experts Group Meeting on 16
September 1999. Comments on an earlier draft were gratefully received from Evelyne Bertel, Jean Cinq-
Mars, Jan Corfee-Morlot, Carlos Ocaña, Jonathan Pershing, and Midori Tani. All errors or omissions are
the sole responsibility of the author. Further comments or questions can be sent to:
Gene McGlynn
[email protected]
phone: [phone]
fax: [phone]
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
Table of Contents
Participant’s Guide:.................................................................................................1
1. Scope and context .................................................................................................4
1.1 Scope of this paper................................................................................................................................................4
1.2 Background and context........................................................................................................................................5
2. Past Trends............................................................................................................7
2.1 Changes in Energy Supply....................................................................................................................................8
2.2 Key trends and issues............................................................................................................................................9
2.2.1 Institutional....................................................................................................................................................9
2.2.2 Technical.....................................................................................................................................................10
3. Abatement measures ..........................................................................................11
3.1 Zero-Emission Fuels...........................................................................................................................................14
3.1.1 Promoting Renewables................................................................................................................................14
3.1.2 Promoting Nuclear.......................................................................................................................................17
3.2 Lower Emission Fuels.........................................................................................................................................19
3.2.1 Switching from coal and oil to natural gas..................................................................................................19
3.3 Efficiency of energy transformation and distribution.........................................................................................22
3.3.1 Increased use of cogeneration/CHP.............................................................................................................22
3.3.2 Improving combustion efficiency in power plants......................................................................................23
3.3.3 Reducing transmission and distribution losses............................................................................................24
3.4 Some lessons from experience............................................................................................................................26
3.4.1 Issues Related to Specific Approaches........................................................................................................26
3.4.2 General Issues..............................................................................................................................................27
References................................................................................................................29
Annex - Questions on Individual Measures.........................................................31
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
Participant’s Guide:
Roundtable on Greenhouse Abatement Measures in the
Stationary Energy Supply Sector
This paper provides background for a roundtable discussion at the meeting of the Annex 1 Experts Group,
15-16 September 1999. The roundtable is intended to examine issues in the development and
implementation of good practice national measures that reduce the greenhouse intensity of stationary
energy supply through:
• greater penetration of renewables;
• greater use of nuclear;
• switching from coal and oil to natural gas;
• greater use of cogeneration/CHP;
• increased combustion efficiency in power generation; and,
• reducing transmission and distribution losses.
An agenda of presentations of individual measures by national delegates is below. These presentations
may raise questions specific to consideration of certain technological approaches, such as those included in
the relevant sections of this paper and summarised in Table A. However, delegates are also asked to
consider and discuss the following questions relating to more strategic assessment of options in this sector:
What are the key social, technical and economic factors driving strategy choice in the stationary
energy supply sector?
What are the key criteria used to assess potential policy measures? Are these linked to broader
strategies (e.g. preference for market-based approaches, enhancing competitiveness)?
How far can countries rely on energy market reform to deliver key aspects of energy supply
abatement? How can and has market reform been adapted to address climate change concerns?
Is there a role for international co-operation to contribute to better implementation of energy
supply abatement measures?
These questions concern the analysis used to decide on specific abatement measures, given national
sources of emissions and the range of potential approaches to mitigate these. This strategic policy choice
is central to an effective and efficient response to greenhouse gas emissions.
1
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
Table A - Considerations in assessing technical options for emissions abatement in energy supply
Approach Technical emissions Rationale stated for government Abatement cost (i.e. costs relative to Other (non-cost)
abatement potential (Kyoto involvement (other than greenhouse BAU technology) considerations
timeframe/long term) savings)
All Energy Supply Limited by rate of new See below Varies – see below Preference for demand side
Measures construction, cost of retiring abatement?
existing plant/ 100%
Renewables Limited by cost/ Unlimited if Other environmental benefits Cost-effective in niche applications. Some localised environmental
storage is addressed Energy diversity High cost in many mainstream concerns
applications, but costs falling. Some
Industry and technology
community willingness to pay extra
development/exports
for renewable energy
Past support for competing technologies
Nuclear Zero in many countries, Limited Other environmental benefits Depends on discount rates and fossil Concerns over potential
due to approval & construction Energy security fuel costs; but generally high rising accidents, nuclear waste
times/ Potentially all electricity with market liberalisation disposal and weapons
generation if concerns proliferation.
addressed
Fuel switching to Limited by turnover rates and Enhanced competition in energy markets Generally low for electricity Infrastructure availability.
natural gas inability to convert many Other environmental benefits when generation, especially for new plant
existing plants/ Very large, substituting for coal and in competitive markets
limited only by fuel
Energy diversity
accessibility
Cogeneration Perhaps a doubling of current Enhanced competition in energy markets Low where application is appropriate Limit on suitable sites
rates/Limited to 30-40%(?) of Information failure in markets
electricity generation
Other environmental benefits
Local industrial/residential development
Enhanced Significant in new plant but Enhanced competition in electricity markets Gradual improvements very cost- Changes to fuel may swamp
combustion limited in existing plant/Large effective; rapid change can be costly changes available through this
efficiency approach
Reduced Limited/Limited unless Enhanced competition in electricity markets Small changes cost-effective. Co- Few perceived ancillary
transmission and colocation of load and location depends on transmission benefits of this approach to
distribution losses generation is much greater pricing signals. make beyond no regrets actions
attractive
2
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
Roundtable Agenda and Contributions
Topic Speaker
9:30 Meeting Kyoto Targets/Greenhouse reduction options Lee Schipper/Fritjof Unander/Gene McGlynn
and the Stationary Energy Supply Sector (background OECD Secretariat
presentations)
10:00 Promoting Renewable Energy: Experience with the Richard Kettle
NFFO [title]
ENT Directorate
Department of Trade and Industry
1 Victoria Street
London SW1H 0ET
UNITED KINGDOM
Phone: [phone]
Fax: +44 171
EMail: [email protected]
10:20 Nuclear Energy Policy in Japan Midori Tani
Director, Global Environment Affairs Office
Ministry of International Trade & Industry
1-3-1 Kasumigaseki
Chiyoda-ku
Tokyo 100-8901
JAPAN
Phone: [phone]
Fax: [phone]
Email: [email protected]
10:40 Break for coffee/tea
11:00 Mitigation effects of the domestic implementation of the Emilio Minghetti
EU Directive on electric markets Technical Support Unit
Ministry of Industry
General Directorate for Energy and Mineral Resources
DGERM, MICA
Via Molise 2
I-00100 Roma
ITALY
Phone: [phone]
Fax: [phone]/2269
Email: [email protected]
11:20 Effects of energy market reform on greenhouse emissions Tracy Terry
in the United States Economist
Department of Energy
Office of Policy
1000 Independence Ave SW PO-21
Washington DC 20585
UNITED STATES OF AMERICA
Phone: [phone]
Fax: [phone]
Email: [email protected]
11:40 The role of CHP in abating greenhouse gases in Denmark Ture Hammer
Danish Energy Agency
44 Amaliegade
1256 Copenhagen K
DENMARK
Phone: +45 33 92
Fax: +45 33 11
E-mail: [email protected]
12:00 Efficiency Standards for Power Generation in Australia Gwen Andrews
Chief Executive Officer
Australian Greenhouse Office
GPO Box 621
Canberra ACT 2601
AUSTRALIA
Phone: [phone]
Fax: +61 2
Email: [email protected]
12:20-1:00 General discussion
3
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
1. Scope and context
1.1 Scope of this paper
Stationary energy use accounted for 64% of total Annex I greenhouse gas emissions in 1990 and around
60% in 19961. About 98% of the emissions from this sector are CO2.
The IEA World Energy Outlook projects that, without further policies, CO2 emissions from stationary
energy use will increase by 27% from 1990 to 2010 in OECD countries, and decline by 12% in transition
economies, for a total increase of 14% in Annex I countries (IEA 1998)2. If these projections were
realised, reductions of around 40% would be needed in other sectors - energy and non-energy - to achieve
the Kyoto Protocol targets. However emissions in the transport sector are also expected to grow rapidly.
Even when considering mitigation options for non-energy emission sources, or alternatively from outside
Annex 1 through the CDM, achieving Kyoto targets will require abating emissions in the stationary energy
sector.
While measures to increase energy efficiency from the demand-side will be important to this effort, the
focus of this paper is on measures taken to reduce greenhouse emissions from the supply side. Increased
end use efficiency has played a significant role in restricting greenhouse emissions growth in the past, and
there is considerable potential for further cost-effective action. However, attention to supply side
emissions will also be required. This paper considers the range of approaches to addressing emissions
from the supply side, while recognising that this is just one aspect of a comprehensive greenhouse response
strategy.
The “stationary energy supply sector” (SESS) refers to the transformation and provision of non-transport
energy to end-users. It includes electricity production, oil refining and other energy transformation, as well
as the supply of electricity, natural gas, coal and oil products to end users, whether industrial, commercial
or residential. For the purposes of this paper, abatement options aimed directly at upstream energy
production (oil and gas production, coal mining, etc) are not considered. However, actions addressing
energy transformation and fuel choices will have upstream impacts that can be significant.
In some respects the distinction between the energy supply sector and demand-side measures is artificial.
Whenever energy is supplied, there must also be a demand. So measures that affect demand will also
impact on supply. However, this paper focuses on the ways that energy is produced and delivered for final
consumption, rather than on the amount which is used. The paper sets out context on the importance of the
SESS to overall greenhouse response, the main strategies taken to address emissions from this sector, and
some lessons from experience to date.
This paper considers sector specific measures only. While there are many potential advantages of
comprehensive approaches such as carbon taxes and domestic tradable emissions permits, countries
continue to rely heavily on sector specific approaches, and this paper is intended to support better
development and implementation of such approaches.

1 From UNFCCC “official” national statistics, excluding LUCF. Based on available data. A number of countries,
including some large emitters, have not yet reported data for 1996.
2 IEA 1998. Note that in this publication, OECD and transition economies are slightly broader than Annex 1
membership. However, the emissions from non-Annex 1 countries within these categories are small and would not
significantly affect these figures.
4
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
1.2 Background and context
Table 1 shows the breakdown of emission sources from Annex 1 countries in 1996. Stationary energy use
accounts for around 60% of total emissions.3 The largest sub-sector is “energy industries” which includes
electricity generation as well as refining. Electricity production accounts for the largest and growing
proportion of these emissions. From 1971 to 1995, Annex II CO2 emissions from electricity as a
percentage of total energy CO2 emissions grew from 26% to 35%, despite improvements in the average
emissions intensity of electricity production. (Ellis and Treanton 1997). This is due to the steadily
increasing share of electricity consumption in total final consumption (see Table 2), and the relatively high
emissions per unit of delivered energy from electricity. Table 2 also shows the different patterns of energy
use among different sectors, significant declines in direct combustion of coal and oil, and the growth in
direct combustion of natural gas.4
Table 1 - Sources of Emissions in Annex 1, 1996
Fuel Combustion 82%
Energy Industries 29%
Industry/Construction 17%
Transport 22%
Residential/Commercial/Agriculture 13%
Other 1%
Fugitive Emissions from Fuels 3%
Industrial Processes 3%
Agriculture 8%
Waste 4%
Total 100%
Source: UNFCCC “official” national data. Not all countries have reported data for 1996
There is no direct match between the SESS as defined in this paper and UNFCCC inventory categories.
However, “Energy Industries” would be the focus of many abatement measures in the SESS, and account
for a large percentage of emissions in most Annex 1 countries (see Table 3). Those countries where this is
not the case are those which rely heavily on renewables or nuclear power for their electricity needs. Even
these countries need to pay careful attention to the energy supply sector in the future if energy demand
grows and the potential for further major hydro or nuclear power is limited. For example, while energy
industries accounted for only 20% of national emissions in Sweden in 1996, growth in this sector
accounted for 73% of total emission growth. On average, “energy industries” accounted for 46% of the
total change in national emissions from 1990 to 1996.5

3 That is, the 82% from energy combustion less the 22% from transport. This figure is not exact since some fugitive
emissions are from leakage in gas supplies and so rightly belong with energy supply. Also, the energy used to refine
transport fuels could be allocated to transport but this is not done here.
4 Shares of fuels in electricity production are discussed more fully in Section 3.2.1 and summarised there in Table 7.
5 Does not include countries where energy industries moved in the opposite direction to total emissions.
5
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
Table 2 - Shares of Fuels in Final Consumption, OECD
1971 1980 1990 1996
Industrial
Coal 18% 15% 16% 11%
Oil 39% 37% 31% 32%
Gas 23% 25% 26% 28%
Electricity 14% 17% 22% 24%
Renewables 4% 5% 3% 4%
Heat 1% 2% 1% 1%
Commercial
Coal 8% 6% 4% 1%
Oil 51% 43% 34% 33%
Gas 23% 23% 24% 26%
Electricity 18% 26% 36% 38%
Renewables 0% 0% 0% 1%
Heat 0% 1% 1% 1%
Residential
Coal 15% 11% 8% 3%
Oil 35% 27% 20% 19%
Gas 28% 33% 35% 38%
Electricity 15% 22% 29% 29%
Renewables 5% 5% 6% 7%
Heat 1% 2% 3% 3%
Total
Coal 15% 12% 11% 6%
Oil 43% 38% 32% 32%
Gas 23% 26% 27% 29%
Electricity 14% 19% 25% 27%
Renewables 4% 5% 4% 4%
Heat 1% 2% 2% 2%
Source: IEA Energy Statistics
Growth in emissions from energy industries was strong in most countries other than EITs. Growth in this
sector occurred even in some EIT countries where overall emissions declined. For Annex 1 as a whole,
however, emissions from this source grew by only 1% from 1990-96, compared with an increase in overall
emissions of 2%6. This is due to the decline in EIT emissions from this sector and to a large fall in
Germany and the UK for reasons of economic and sector policy changes. In the case of the UK, subsidy
reform resulted in significant reductions in emissions.

6 Source: UNFCCC “official” national data. Data for Liechtenstein, Lithuania, Russian Federation, Slovakia, Slovenia, Ukraine
were unavailable. 1995 data used for Iceland, Italy, Luxembourg, Japan, and Spain. 1994 data used for Portugal. Excludes LUCF
sector. If data for missing EITs for whom data is lacking were included, both energy industry and overall emissions
would likely decline. It should also be noted that increases in some countries and declines in others nearly cancel
each other out. As a result, the overall change in Annex 1 emissions is very small, so small changes would lead to
large changes in percentage outcomes. Therefore, aggregate figures should be treated with caution.
6
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
Table 3 - Importance of Energy Industries to Annex 1 Emissions
Energy industries Percentage Energy industries
emissions as growth in energy emissions growth
percent of total industries as a percentage of
national emissions, 1990-total national
emissions, 1996 96 emissions growth,
1990-96 a
Estonia 81% -35% 56%
Romania 69% 23% -21%
Denmark 48% 70% 87%
Bulgaria 46% 13% -9%
Poland 45% -25% 51%
Greece 42% 4% 29%
Czech Republic 38% -41% 103%
Finland 37% 53% 188%
Australia 37% 15% 64%
Monaco 35% 38% 43%
Germany 34% -13% 46%
Hungary 34% -28% 46%
United States 30% 8% 29%
Japan 29% 6% 34%
United Kingdom 29% -13% 72%
Spain 27% 12% 40%
Italy 27% -6% -110%
Latvia 25% -53% 29%
Ireland 25% 30% 117%
Netherlands 24% 10% 23%
Portugal 24% 1% 3%
Canada 21% 5% 9%
Sweden 20% 61% 73%
Belgium 20% 4% 8%
Norway 17% 32% 36%
Austria 16% 4% 18%
France 11% -9% -99%
New Zealand 8% 4% 11%
Luxembourg 8% -56% 33%
Switzerland 2% -2% 5%
Iceland 0.1% -15% 0%
Source: UNFCCC “official” national data. Data for Liechtenstein, Lithuania, Russian Federation, Slovakia, Slovenia, Ukraine
were unavailable. 1995 data used for Iceland, Italy, Luxembourg, Japan, and Spain. 1994 data used for Portugal. Excludes LUCF
sector.
a - A negative number in this column indicates that energy industries emissions moved in the opposite direction to total emissions.
For Romania and Bulgaria, this means that energy industry emissions increased while total emissions declined. For Italy and
France, energy industry emissions fell while total emissions increased.
c - Russian data are available for total emissions but not for energy industries. Thus, they are excluded from this analysis.
However, with Russian total data included, total emissions decline for Annex 1 countries. It is likely that energy industries’
emissions also decline .
2. Past Trends
7
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE
2.1 Changes in Energy Supply
Growth in emissions from stationary energy use has been relatively subdued over most of the last 25 years,
with CO2 emissions only 12% higher in 1995 and 16% higher in 1996 than in 1971 (see Figure 1). This is
the result of conflicting drivers of emissions in this sector. Both GDP per capita and population have risen,
leading to greater levels of output and energy use. However, the energy intensity of production (i.e. the
final energy consumed per unit of production) has fallen by almost 40% from 1971 to 1996. Combined
with a small fall in emissions intensity (i.e. tonnes of CO2 per unit of final energy consumed) largely due
to an increase in nuclear and some shifts to natural gas, this has not quite offset the increases in output,
leading to a small increase over time in emissions (see Figure 2). This suggests that, to achieve the
reductions in the energy sector required to meet Kyoto targets, even with continuing energy efficiency
improvements, will require attention to the supply side of the equation, which is the focus of this paper.
Outside OECD, Annex 1 emissions are dominated by transition economies of eastern Europe and the
Former Soviet Union, where massive falls in GDP following economic and political restructuring around
1990 have led to significant falls in energy-related emissions in most of these countries.
Figure 1 - Growth in Emissions in OECD countries
OECD Energy CO2 emissions
1971-1996
200
150
Transport
100
Stationary
50
0
1 4 7 0 3 6 9 2 5
7 7 7 8 8 8 8 9 9
9 9 9 9 9 9 9 9 9
1 1 1 1 1 1 1 1 1
Source: IEA Energy Statistics
8
DRAFT FOR COMMENT ONLY - DO NOT CITE OR QUOTE