Chapter three: 2010 to 2050: Today’s situation, tomorrow’s vision
Maintaining decarbonisation momentum Many worry that the failure to sign a legally binding global agreement on reducing greenhouse gas emissions at the 2009 Climate Summit in Copenhagen will delay or dilute efforts to decarbonise. While a binding agreement would undoubtedly have provided greater clarity, much of the momentum for decarbonisation is, in any case, coming from national and regional initiatives rather than globally. Continuing delays at a global level may even present opportunities for better engagement, coordination and success at a regional level, if the political will is there. The most recent energy modelling results associated with the Intergovernmental Panel on Climate Change (IPCC) suggest that, to stand a chance of keeping global warming below a 2°C average limit, global CO2 emissions need to peak, and then start falling, before 202035. We therefore need to move forward quickly with decarbonising our major economies. The power generation sector can play a major part - CO2 emissions resulting from fossil fuel combustion in the power sector have been estimated to account for almost 26% of anthropogenic GHG emissions. This provides us with an opportunity to take specific action in an area that is a significant contributor to the problem.
3.4.2.
Tomorrow’s vision: A European energy policy and phase-out of subsidies
In our 2050 vision, both the national energy policy and the energy foreign policy of EU countries have been Europeanised. In addition, the European and North African energy policies have been aligned and there is close cooperation on electricity policy. Due to the synchronous grid operation of the North African and EU power grids, the EU and North African TSOs collaborate closely, especially on grid planning and operation. Since both the market and the transmission grids are operated and optimised internationally, there is one governing body regulating the EU-NA grids, as well as future expansions or structure changes. We would envisage that the decline in fossil energy trade, due to reduced need for fossil energy for power, may also have affected North African countries, especially Algeria and Libya, which could experience significantly reduced export income. Through proactive policy action, the economic impact of any decline in oil and gas export revenues can be managed, partly by new income streams coming from the export of renewable electricity, but mainly by a general diversification of the economy. Nonetheless, it is possible that the effects of the diminishing fossil energy revenues could still be felt in parts of the region in 2050. The 2050 vision will, hopefully, have been reached through a stable and predictable policy framework with a combination of regulations and obligations, as well as financial incentives and support mechanisms along the way. However, by 2050, we would expect all financial support mechanisms to have been phased out and all power technologies that are in use able to be operated on their own economic and technical merit, depending on their value to the system as well as their production costs. In our vision, it won’t just be technologies with the lowest production costs that are used. More expensive technologies with other beneficial characteristics are also valued. Intermittent sources may have very low levelised electricity costs, but will to some degree need a dispatchable reserve. Such dispatchable power plants may be more expensive per kWh due to the higher value of the dispatchable electricity but have a valuable role to play. We would envisage that the EU ETS and the price of carbon no longer play a role for the power sector as it is completely carbon neutral. On the path to 2050, however, the EU ETS will have played a key role in the decarbonisation of the power sector, by encouraging investment in renewables and discouraging new fossil-fired power generation early on through increasingly stringent caps and, over time, pushing existing fossil-fired plants from the market.
PricewaterhouseCoopers LLP
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