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Springtij | September 2017

Versnellen van de energietransitie : kostbaar of kansrijk ? Een gedachten -experiment voor Nederland. Springtij | September 2017. Messages to remember. 01. It is possible to reach (deep) decarbonization. The energy transition will be costly, but also provides economic opportunities.

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Springtij | September 2017

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  1. Versnellen van de energietransitie: kostbaar of kansrijk?Eengedachten-experiment voor Nederland Springtij | September 2017

  2. Messagestoremember • 01 • It is possible to reach (deep) decarbonization • The energy transition will be costly, but also provides economic opportunities • 02 • 03 • Increased electrification drives further rollout of renewables

  3. To achieve EU 2050 ambition Netherlands needs to accelerate with factor 3 CO2 equivalent emission,% change as of 1990 • 110 • 100 -16% -20% -80% -40% -60% • 224 • 197 • 0.7%./yr • 90 • 187 • 80 • 179 • 70 • 134 • 60 • 50 • 87 • 2%./yr= 3x • 40 • 30 • 45 • 20 • 10 • 0 • 1990 • 2000 • 2010 • ‘14 • 2020 • 2030 • 2040 • 2050 • ‘16 SOURCE: CBS

  4. We selected a set of measures Assumptions used • Transport • Shift to electricity for domestic shipping, buses, light duty vehicles, and motor cycles • Shift to hydrogen for trucks Buildings • Improved insulation • Shift to electric, district (and geothermal), and biogas space heating • Shift to biogas (18%) and electric (82%) water heating and cooking • Industry • Shift from oil and gas furnaces and steam boilers to electric versions • Example shift from coal blast to biogas and electric furnaces • Efficiency improvements • Other demand • Energy efficiency improvements of 1% per year • Power • Gas, coal, and oil are replaced by wind, solar, biomass and gas as backup • Introduction of flexibility measures SOURCE: McKinsey MGI, CE Delft, CPB, CBS

  5. The current energy system is largely dependent on fossil fuels Netherlands energy demand in 2014; flow between energy sources and sectors, PJ • Energy sources • Sectors • Natural gas • 1,114 • Transport • 438 • Oil • 709 • Residential • 373 • Coal • 377 • Commercial • 315 • Renew-ables1 • 136 • Industry • 840 • Other • 77 • Agriculture, fishing & other • 160 • Electricity • (net import) • 53 • Power sector2 • 343 (net) 1 Includes: hydro, geothermal, solar, wind, and biomass 2 Only includes net use for central power production (320 PJ) and transmission and distribution losses (23 PJ); energy sector own use (e.g., oil consumption in refining is included in industry) SOURCE: Centraal Bureau voor de Statistiek (2014), “Energiebalans” and “Energieverbruik” databases

  6. In 2040, the energy system would look and function very differently Netherlands energy demand in 2040; flow between energy sources and sectors, PJ • Energy sources • Sectors • Natural gas • Transport • Residential • Oil • Coal • Commercial • Renew-ables1 • Industry • Other • Agriculture, fishing & other • Power sector2 1 Includes: hydro, geothermal, solar, wind, biomass, and hydrogen 2 Includes net biomass use (94 PJ), gas use (111 PJ) and own use and transmission and distribution losses

  7. When striving for 80% reduction by 2040 the role of renewables and power increases further Netherlands energy demand in 2040; flow between energy sources and sectors, PJ • Energy sources • Sectors • Natural gas • Transport • Residential • Oil • Coal • Commercial • Renew-ables1 • Industry • Other • Agriculture, fishing & other • Power sector2 1 Includes: hydro, geothermal, solar, wind, biomass, and hydrogen 2 Includes net biomass use (94 PJ), gas use (37 PJ), and own use and transmission and distribution losses

  8. An annual investment of ~EUR 10 billion would be needed to move towards a 60% CO2 reduction by 2040 Indicative net investment need, EUR billions, 2020 to 2040 • ~10 EUR billion/ yearor ~3% • of annualbudget • 20 • 200 • 45 • 20 • 135 Economic impact • Direct impact of investments and changes in import – export balance • Shifts towards sectors with higher multipliers • Attraction of new economic activities Note: Cumulative investment varies strongly with commodity prices (incl. offshore wind, PV) • 30 • Transport • Residential • and • Commercial • Industry • Estimate investment need to adjust demand • RES build out (excluding grid) • Networkand • connection • costs • Total • additional investment • System and Generation • Demand

  9. CO2e emissions from industry have reduced 2x faster than total emissions in the Netherlands • CO2 equivalent emission,% change as of 1990 • Total emissions • Industry emissions • 110 • -16% -20% -40% -80% -60% • 100 • 224 • 197 • 90 • 187 • 80 • 70 • -32% • 60 • 50 • 40 • 30 • 20 -95% • 10 • 0 • 1990 • 2000 • 2010 • ‘14 • 2020 • 2030 • 2040 • 2050 • ‘15 SOURCE: CBS, National Inventory Report (1990-2014)

  10. FIG 2: A game of clusters - 67 Mtonindustrial CO2 emissions • Industrial facility • 29 • 158 Mton • Dedicated power plant • 0,1 MtonCO2 Total emissions Netherlands CO2e(CH4/N2O/F) CO2e (CO2) • 6 MtonCO2 • CCS • 120+ • 45 • CCU • End of life emissions mostly outside NL • 38 • 7 • 22 • Energy-relatedemissions • Process-emissions • 5 • 0.3 Top 10% industrial facilities are responsible for >65% of CO2 emissions • Recycling • Recycling • Reuse SOURCE: PRTR Netherlands, National Inventory Report 2016 – data for 2014

  11. FIG 3: Overview of industrial CO2 emissions, split by functional use • Emissions per sector, estimated Mton CO2/yr, 2014 • Total1 • 22 • 12 • 11 • 6 • 16 • 67 • 0 • 7 • 1 • 1 • 2 Process emissions • 4 • 12 • 1 • 1 • High temperature heat production at one steel plant is industry’s largest CO2 emissions source On site transport • 3 • 6 • 5 • 7 Electricity (e.g., machine drive) • 19 • 10 • 2 • 6 High temperature heat • 22 • Ammonia and ethylene production result in 11 MT of process and heat-related emissions • 1 • 4 • 14 • 3 Mid temperature heat • 4 • 2 • 2 • 4 Low temperature heat • 1 • 1 • 0 • 0 • Nearly every sector produces emissions by generating low-and medium-temperature heat • Chemicals • Iron and steel • Petroleum refining • Food processing,beverages and tobacco • Otherindustries NOTE: Difference in totals due to rounding 1 Emissions from biomass are excluded; 2 On-site transport not allocated to specific sectors SOURCE: Manufacturing Energy Consumption Survey (2013); National Inventory Report (2016); expert interviews; CE Delft DenktankenergiemarktIndustrielewarmtemarkt 2013; expert interviews

  12. FIG 5: • Assumed impact on industrial • CO2 emissions by 2040 Six ways to move industrial decarbonization forward – reaching 60% by 2040 • Assumed impact electricity related • emissions (excl. from baseline of 45 Mton) 60% reduction compared to 1990 levels progressing all options MtCO2, 2014 – 2040 • Theoretical maximum and minimum potential by 2050 Options • 3 • Energy efficiency • Electrification of heat demand • Change of feedstock • Develop routes to reuse and recycle materials • Decide on steel production route(s) • 6 • Develop CCS/U capabilities 19.6 • Total reduction • 4 • 23 SOURCE: Centraal Bureau voor de Statistiek (2014), “Energiebalans” and “Energieverbruik” databases, National Inventory Report (1990-2014)

  13. FIG 6: Following these measures, energy demand is reduced by 15% and CO2 emissions by 46% (>20 Mton) Industry energy demand, incl.feedstock, PJ Industrial direct CO2 emissions, MtonCO2 • Kunen we hierverschillende t9nten blauwdoen per industry? Endan de kolommenwel in zelfdekleurstelling? • 14071 • 45 • -12% • -17% • 1,237 • 1,166 • -46% • Chemicals • -74% • 24 • Petroleum refining • 12 • Iron and steel • Food processing, beverages and tobacco • Other industries 2014 2040 60% CO2 reduction 2050 80% CO2 reduction 2040 60% CO2 reduction 2050 80% CO2 reduction 2014 1 840 PJ of energy demand and 567 PJ of feedstock. Data used in our previous report is based on a preliminary publication of the energieverbruik and energiebalans numbers of CBS, which is shown here and adds up to 840 PJ energy consumption for industry. The final CBS reporting on energieverbruik and energiebalans adds up to 833 PJ SOURCE: CBS-data for 2014

  14. Industry transition in the Netherlands – the missing link October 2017

  15. Back up

  16. Power sector: “80% renewable power supply” by 2040 would be needed illustrative scenario, other choices also possible • Wind • 62% of production ~11 thousand turbines1 • 6% of Dutch North Sea • 3,500 km2 • 1880 km2 • 33 GW • Solar • 12% of production ~63 million solar panels2 • Third of current roof area • ~120 km2 • 21 GW • Biomass 8% 8,500 kton dry biomass3 • Conversion of existingcoal plants to biomass • 4 GW • As illustration, 5 GW of (seasonal) storage • Flexibility measures • Other choices would also be possible, e.g. with larger role for (coal/gas) CCS, imports • 5GW 1 45% capacity factor, turbines of 3 GW2 1.65 m2 per solar panel, 235 kW 3 17 MJ/kg biomass, 2 ktons/km2

  17. At our current pace, we will finish the remaining carbon budget within 30 years Carbon budget compared tocarbon reserves 2°C Carbon budget emissions to 2100, bntonnes CO2e • 3,670 • 3,000-5,400 • Gas, unconventional • Gas, conventional • Oil, unconventional • Oil, conventional • Coal • At current pace budget runs out before 2050 • ~900 • ~900 • 2°C carbon budget • 1750-1985 • 1985-2015 • CH4/N2O/F, 2015-2100 • 2016-2100 • Carbon reserves • 2°C carbon budget • Historical emissions • Future emissions SOURCE: Team analysis

  18. Four major levers are needed to enable the energy transition Final energy consumption1,2, 2013 and 2050, in EJ • 640 • Increasing energy efficiency limits the rise of energy consumption 431 • CCS/U decarbonizes the use of fossil fuels3 • 373 Fossil fuels • Switch to zero emission energy carriers, e.g., electricity or hydrogen Power sector – Fossil fuels Power sector – Renewables Biomass and waste • Renewablesreplace fossil fuels • 2013 • 2050 1 Final energy consumption within the 2oC scenario of the IEA 2 Increase of energy demand is determined via the relative increase of CO2 emissions w/o energy efficiencies 3 The fossil fuels amount processed using CCS/U was determined to be 25% of the total amount of fossil fuels by relating the CO2 emission reduction compared for the 2DS and 6DS scenario 4 The fossil fuel power sector also includes nuclear energy SOURCE: Source: IEAETP 2016

  19. Fig voor Box section: Options can create additional value for the Netherlands – but do not outweigh their investment in absence of global CO2 price Near positive business case New economic activity Drive change in energy system • Roll out with support • Create optionality in mid temperature heat: Help balance grid and further integrate intermittent renewables • Efficiency: relatively positive business cases • Scale up • CCS/U: Build on well-developed, diverse offshore industry and chemicals industry • Reuse and recycling: Leverage unique transport and logistics capabilities, in combination with chemicals industry • Bio-to-Chem routes: Build on both agriculture and food capacilities as wel as chemicals and refining experience • Innovation • Electrolysis R&D: Hydrogen to help balance and buffer the energy system Further electrification:help drive change in energy system • Steel route(s): different routes will either impact economy activity (e.g. CCS/CCU) or help change the energy system, or both (e.g. EAF or H2-based DRI)

  20. The challenges … • International context of majority of industrials • Brown field, not green field • Opex – not capex

  21. …but alsoopportunitiesfor the Netherlands • Leading position of Dutch industry – cherished investment • Dense, varied clusters – infrastructure and circulariry • Innovative food and agri sector – high end bio-to-chem • Logistics infrastructure – ability to recycle at scale • Stable and well connected energy system

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