CCSA Summary: IEA World Energy Outlook 2012 Report

INTRODUCTION The annual World Energy Outlook 2012 Report prepared by the International Energy Agency presents the projections of energy trends through to 2035 in the context of environmental sustainability, energy security and economic development. The research covers renewables, oil, natural gas, coal and nuclear power in OECD and non-OECD countries based on several policy scenarios, together with an update on the increase in carbon dioxide emissions. This summary encompasses key developments in demand, production and trade with regard to CCS, coal and gas, which are extensively covered in Part A of the report. HIGHLIGHTS OF THE REPORT CHAPTER 1 of the report called Understanding the Scenarios introduces the general trends on the world energy arena taking into consideration several scenarios: Current Policies Scenario, which assumes no change in current policies; New Policies Scenario (the central one), existing policies are maintained and recently announced commitments and plans, including those yet to be formally adopted, are implemented in a cautious manner; 450 Scenario, according to which the long-term concentration of greenhouse gases in the atmosphere needs to be limited to around 450 parts per million of carbon-dioxide equivalent; Efficient World Scenario, which reflects the adoption of all economically viable steps to improve energy efficiency. The report states that some of the key uncertainties in the scenarios relate to prospects for carbon capture and storage (CCS), solar power, advanced biofuels, advanced vehicle technologies and nuclear power. The pace of development of CCS technology remains highly uncertain. It could prove to be critical to the prospects for coal use in many regions, while in the longer term it is also likely to be critical to the prospects for natural gas and energy-intensive industries globally. The technology exists to capture CO2 emissions from power stations and industrial plants, and to transport and permanently store the gas in geological formations, but only a handful of commercial-scale CCS projects are currently operating. Experience yet to be gained from the operation of further large demonstration projects, particularly in the power sector, will be critical to public acceptance, driving down costs and, hence, to the prospects for its widespread deployment. Looking at the different scenarios, CCS technology is deployed only on a very limited scale in the power sector in the New Policies Scenario, but much more widely in the 450 Scenario thanks to stronger CO2 price signals and faster cost reductions.The other two scenarios do not touch upon the projections on CCS. Among the highlights of CHAPTER 2 Energy Trends to 2035 it is worth mentioning that according to the New Policies Scenario projections, global primary energy demand increases by 35% between 2010 and 2035, or 1.2% per year on average. In particular: Coal demand rises by 21%: Its demand is projected to continue to rise in the medium term, with growth slowing from around 2020, reaching around 6 000 million tonnes of coal equivalent (Mtce) in 2035, 21% higher than in 2010. Coal met 45% of the rise in global energy demand between 2001 and 2011, growing faster than total renewables; Natural gas by a remarkable 50%.

China accounts for the largest share of the projected growth in global energy use with demand rising by 60% by 2035, followed by India (where demand more than doubles) and the Middle East. OECD energy demand in 2035 is just 3% higher than in 2010, but there are dramatic shifts in its energy mix as fuel substitution sees the collective share of oil and coal drop by fifteen percentage points to 42%. With the assumed expansion of the global economy of almost 140% and an increase of 1.7 billion in the worlds population more energy will be needed to satisfy growing demand for energy services, even though new policies and programmes are put in place to encourage energy savings. Fossil fuels oil, coal and natural gas will continue to meet most of the worlds energy needs. Fossil fuels, which represented 81% of the primary fuel mix in 2010, remain the dominant sources of energy through 2035 in all scenarios, although their share of the mix in 2035 varies markedly. It is highest in the Current Policies Scenario (80%) and lowest in the 450 Scenario (63%). Among the fossil fuels, the biggest uncertainty with respect to future use relates to coal: demand increases by 59% between 2010 and 2035 in the Current Policies Scenario, while in the 450 Scenario, it declines sharply over the same period, after peaking before 2015 (see Table 2.1).
Table 2.1 World primary energy demand and energy-related CO2 emissions by scenario (Mtoe)

With a substantial presence of fossil fuels in the generation fuel mix - which is projected to increase there is a big concern over the level of emissions released into the atmosphere. Based on preliminary estimates, energy-related CO2 emissions reached a record 31.2 Gt in 2011, representing by far the largest source (around 60%) of global carbon dioxide. Emissions continue to rise in the New Policies Scenario, putting the world on a path that is consistent with a long-term average global temperature increase of 3.6 C above levels that prevailed at the start of the industrial era. As shown by the Current Policies Scenario, without these new policies, we are on track for a temperature increase of 5.3 C. The 450 Scenario is compatible with around a 50% chance of limiting the temperature rise to 2 C. In view of the uncertainties in temperature and emissions levels, which are directly linked to the development of carbon intensive industries - for instance coal - CHAPTER 5 of the report Coal Market Outlook provides an overview of global coal demand and supply trends including coal markets and developments in pricing and investment. Taking into consideration the rising trend in coal utilisation, particularly in China, India and the United States (see Table 5.1), a number of policy measures should be in place to decarbonise the energy sector. Thus the report mentions the importance of the deployment and development of

carbon capture and storage facilities as one of the efficient technologies which helps to drastically diminish coal-related greenhouse gas emissions released to the atmosphere. The report stresses that well-designed government policies can reduce emissions from coal use, in one of four ways: deploying energy-efficient technologies in the use of coal; improving electricity end-use efficiency, which will lead to reduced coal consumption; reducing the share of coal in the energy mix; implementing new technologies, such as underground coal gasification and especially CCS technology which can, if given substantial and successful financial support, reduce emissions substantially from coal use in power plants and industrial facilities.

Table 5.1 Coal demand by region and scenario (Mtce)

It is stressed in the report that in view of the long lifetimes of coal-use in industry and even more so in power generation, current large-scale investments in capacity additions will lock-in CO2 emissions for decades, unless CCS technology can be retrofitted to at least some of these plants, and suitable sinks are available. For this reason, a rapid shift in investment, at least to the most efficient coal-fired technologies available, is needed to minimise the future environmental and local air pollution impacts of coal. Furthermore, if CCS were not widely adopted in the 2020s, to achieve the goal of limiting long term global temperature increase to two degrees Celsius would require a heavy reliance on other low-carbon technologies for all new generating plants and acceptance of very high cost measures, such as premature plant closures (IEA, 2011a). According to the Power Sector Outlook section of the CHAPTER 6, over 80% of the growth in electricity demand arises in non-OECD countries, over half in China (38%) and India (13%) alone. In terms of electricity use, industry remains the largest end-use sector through 2035. Over the Outlook period, average electricity prices increase by 15%, driven by higher fuel prices. In line with the projections, global CO2 emissions from the power sector are about 20% higher in 2035 than in 2010, but average CO2 intensity falls by 30% as more renewables, gas and efficient plants are deployed. Almost two-thirds of the capacity in operation today is still in operation in 2035. Emissions from these plants are effectively locked-in, unless future policy actions lead to their early retirement or retrofitting with CCS equipment, or changes occur in fuel prices that affect operational decisions (e.g. idling more expensive power plants).

Table 6.2 Electricity generation by source and scenario (TWh)

In the New Policies Scenario, gross electricity generation increases by over 70% worldwide, or 2.2% per year, from 21 408 terawatt-hours (TWh) in 2010 to almost 36 640 TWh in 2035. Fossil fuels continue to dominate the generation fuel mix. Using the New Policies Scenario as the basis for many of the key projections in this chapter, it is estimated that by 2035, China accounts for 46% of global coal-fired generation with India overtaking the United States as the second largest coal-power generator. Before 2020, a few gigawatts of CCSfitted coal plants are installed in line with existing plans and funding for demonstration projects. After 2020, support policies and CO2 pricing lead to a small additional number of CCS-fitted coal plants being built. In total, these plants have a capacity of 67 GW and generate about 440 TWh by 2035 around 4% of total coal-fired output. World gas-fired generation expands from 4 760 TWh in 2010 to about 8 470 TWh in 2035 in the New Policies Scenario, its share of total power generation increasing by one percentage point to 23%. The projected increase will mostly occur in non-OECD countries, with China alone accounting for 20% of the worldwide growth and the Middle East for 18%. The report however lacks data on projections of CCS deployment in the gas industry, along with the amount of emissions which can be saved by integrating CCS into gas-fired power stations. Climate Change Mitigation and the 450 Scenario are presented in CHAPTER 8 which stresses that global CO2 emissions in 2011 increased by 3.2% and reached a record high of 31.2 Gt; in 2035 the amount increases to 37 Gt. The transformation of the global energy system in the 450 Scenario requires additional cumulative investment of $16 trillion compared with the New Policies Scenario, but delivers significant co-benefits in terms of reduced fossil-fuel import bills and local air pollution. Energy efficiency contributes more than half of all emissions savings, while renewables account for 21%, CCS for 12% and nuclear for 8%. According to the 450 Scenario, in order to stay within strict emissions limits, there is a need for the overall share of low-carbon energy sources (renewables, CCS, and nuclear) to be increased from 19% in 2010 to 42% in 2035. See Figure 8.6.

Figure 8.6 Electricity generation from low-carbon technologies and share by scenario, 2010 and 2035

Electricity generated from fossil-fuel plants with CCS, nuclear and wind see the largest incremental gains in the 450 Scenario relative to the New Policies Scenario. Among these, CCS achieves the largest growth in electricity generation in absolute terms, compared to the New Policies Scenario, since it relies mostly on carbon pricing. There is a clear message in the report that CO2 abatement can be achieved nearly equally through a substantial increase in energy efficiency and the widespread adoption of CCS. Figure 8.7 details the contribution made by specific mitigation measures to reduction in CO2 emissions. In 2020, almost three-quarters of the emissions saved originate from energy efficiency, including electricity savings, end-use efficiency and power plant efficiency. The share of efficiency in CO2 abatement declines towards the end of the projection period as renewables and CCS are used more widely. From 2020 on, efficiency-related savings in the power sector decline as many of the newly-built power plants are retrofitted with CCS in the 450 Scenario as opposed to the introduction of very efficient coal without CCS and gas-fired power plants in the New Policies Scenario.
Figure 8.7 Global energy-related CO2 emissions abatement in the 450 Scenario relative to the New Policies Scenario

The IEA analysis shows that among the most important abatement measures is CCS, which saves 2.5 Gt CO2 in 2035, becoming a significant source of mitigation from 2020 onwards. Rising CO2 prices will push China and the United States to deploy very efficient coal-fired power stations which will be

retrofitted with CCS in the following years. It is stressed in the projections that the best results in emissions savings within these countries are achieved through the use of CCS and renewables. An implicit carbon price rising above $75/tonne CO2 will cause almost all coal-fired power plants installed after 2012 to be retrofitted with CCS from the end of the 2020s. CONCLUDING FINDINGS WITH REGARD TO CCS The findings stress the importance of widespread CCS deployment as a key solution to mitigate CO2 emissions and decarbonise the power sector globally, however there are still many uncertainties over the pace of this process with only a few commercial-scale CCS projects in operation. If governments globally aim to achieve the goal of limiting temperature increases to 2 C, more than two thirds of current proven coal reserves should not be commercialised before 2050, unless CCS facilities are widely integrated into carbon intensive industries, such as coal, gas and oil. Countries with rich fossil fuel reserves (China, India, the United States, Russia and a number in the Middle East) will particularly struggle to cope with the burden of increasing carbon taxes, unless CCS plays a significant role in their long-term energy policies.