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In my last post, I discussed some of the barriers to eliminating natural gas generation on the way to a decarbonized electricity system. In this post, I discuss different views on the Path to a “Net Zero” decarbonized economy. What do they say about the future of natural gas generation? And how might Wärtsilä’s engine technology fit into a decarbonized energy system?
Here I review a decarbonization study developed by EPRI that shows two significantly different future power systems depending primarily on whether carbon capture and storage is adopted. In either case, gas generation is required for reliability while renewables do the heavy lifting of decarbonization. In the case where CCS is not widely adopted, hydrogen fuels become critical. While it is just one study amongst many, I think it does a good job of highlighting the major competing visions of a decarbonized economy. Given many uncertainties about which vision will win, I offer some no regrets options that work with either one.
What is Net Zero?
Net Zero is generally defined as a global carbon cycle in balance, where emissions of carbon to the atmosphere are offset by equal amounts of carbon sequestration, either from natural processes (ocean absorption, tree growth, etc.) or technological interventions like direct air capture and geologic sequestration. The 2015 Paris Agreement set global greenhouse gas emissions (GHG) targets with a goal of limiting long-term global average temperature to well below 2°C (3.6°F) above pre-industrial levels, and ideally less than 1.5°C (2.7°F) in the year 2100. Achieving this would require emissions to be cut by roughly 50% by 2030 and achieve Net Zero GHG by mid-century.
Modeling Pathways to Net Zero
Countless studies and oceans of digital ink have been spent describing possible pathways to a net zero economy by 2050. These “deep decarbonization studies” model all sectors: power generation and transportation, industry (especially cement, steel, fertilizer, and plastic/petrochemicals), and building heating and cooling. The power sector is believed to be the “easiest” to decarbonize due to the declining cost of renewables. Most decarbonization plans address the rest of the economy through an “electrify everything” approach in transportation and buildings with battery vehicles and heat pumps. Electricity would also be used to make green hydrogen to decarbonize the other hard to abate sectors (air travel, shipping, steelmaking, etc.) For some sectors like cement, carbon capture and storage may be the only viable mitigation strategy.
The big debate in the modeling community is around whether the power system can or should be decarbonized using solely wind, solar, hydro, batteries and green hydrogen (let’s call this the “green new deal” view or GND), or renewables, batteries, hydro, carbon capture and storage, hydrogen, and nuclear (this is the “all of the above” or ATA). The former approach appears achievable in optimization models, but this generally requires a 3x build out of transmission, a massive build out of renewables, and acceptance of large volume of renewable curtailment. The latter approach requires less land and less transmission but comes with some thorny questions around carbon capture and storage infrastructure as well as nuclear cost and waste concerns. If you believe there are real and durable constraints around land use, permitting, transmission build out, and social acceptance of renewable projects, you might lean more towards the ATA approach. If you think those are surmountable obstacles, especially if you can use policy tools, and you fundamentally question the viability and economics of CCS and nuclear, you might lean towards the GND approach.
The Low Carbon Resources Initiative (LCRI) Net Zero 2050 Study
The Electric Power Research Institute has modeled both approaches in a good, somewhat under the radar study available online called the LCRI Net Zero 2050 Deep Decarbonization Pathways Study (EPRI Net Zero Study). The EPRI Net Zero study uses their US-REGEN model to simulate energy flows through the economy from primary fuel to end use.
The left side of the chart shows the “primary” energy fuels: petroleum, natural gas, coal, renewables, and nuclear. As you move right, you see the various transformations and flows until it becomes “final” energy, or the energy employed in useful work in the demand sectors: buildings, industry, and transportation, as well as fuels used as industrial feedstocks. Carbon capture and natural climate solutions are also included as options to achieve Net Zero. The study created three scenarios, “all options,” “higher fuel cost,” and “limited options.” All options included CCS, while limited options does not.
What does the EPRI study show for the optimal power grid generation fleet?
The next chart shows EPRI’s 2050 power system results across all the scenarios for the capacity of the US generation fleet.
It turns out limiting the option for CCS makes a major impact on the composition of the power grid. In the Limited Options scenario (with no CCS), the 2050 power system requires nearly 5x more wind and solar capacity (3,710 GW vs 800 GW) and 4x electrical storage (640 GW vs 180 GW). Between 490 and 790 GW of natural gas generation is still required, which is significantly more than the roughly 400 GW of gas capacity in 2020. Up to 380 GW of that gas fleet would have CCS and up to 92 GW of hydrogen generation for peaking and balancing. According to the report, when CCS is used, “annual U.S. natural gas consumption could remain at levels similar to today, even in a net-zero energy future.” With no CCS, “renewable and synthetic natural gas can substitute for fossil supply as the economy-wide emissions target approaches zero.” This analysis lends another layer of evidence to our view that the future does not lie in exotic technologies or massive expansion of nuclear. It is a simple formula: renewables, batteries and other types of electrical storage, and fast, flexible natural gas generation with pollution control and/or clean hydrogen fuel.
The next chart shows how we reach Net Zero in each scenario.
In the All Options case, a lot of heavy lifting comes from captured and stored emissions from fossil fuels and from bio-energy. In the Limited Options scenario, the potential for negative emissions from fossil and bioenergy CCS is much lower. This is the essence of the GND vision, a Net Zero target in which fossil fuels are eliminated completely from the energy system. The marginal cost of carbon reductions, that is the cost of the last ton eliminated to achieve net zero, is nearly 10x cheaper in the All Options case versus the Limited Options case. This suggests that with currently known technology it is not a good use of society’s resources to squeeze every last drop of carbon out of the electricity system.
In the All Options case, hydrogen plays a limited role. It is quite a different story in the Limited Options case. The report says “Perhaps the most significant change is the supply of hydrogen from electrolysis to meet both direct and indirect demand. The expanded role for hydrogen combined with the shift from production from gas with CCS to production from electrolysis has major implications for the scale of the electric sector, with electricity consumed for hydrogen production of over 4000 TWh, as large as total electricity demand today” (emphasis mine).
Let those sentences sink in. According to this study, without CCS, we would need to add enough clean energy, equivalent to the total amount of electric power produced today just to create enough hydrogen for synthetic fuels.
The Role of Gas in Net Zero
Where does this leave natural gas generation in a Net Zero power system. According to EPRI, “Natural gas could continue to play a large role in a net-zero energy system if CCS is available, both by enabling the use of gas with carbon capture and by allowing limited gas use via carbon offset where capture is not possible. Without CCS, renewable and synthetic natural gas can substitute for fossil supply as the emissions target approaches zero.” In other words, if capture and sequestration from fossil combustion and bioenergy becomes viable, it is largely cost-effective to maintain the gas fleet. If it’s not, then gas is still needed for renewable balancing and reliability. Some of that gas can be substituted for hydrogen or other synthetic fuels, albeit at much higher cost to society. Again, gas generation is simply not going away under any Net Zero plan.
Of course, this is just one study amongst many. The 100% wind, water, solar, batteries and green hydrogen camp will point to their favorite studies showing their preferred technologies are the most reliable and cost-effective. There are many reasons to be skeptical of CCS and new nuclear. One should also have realistic expectations about the uncertainty of long-term Net Zero studies in general. Asking computer models to solve for Net Zero decades in the future is mostly an exercise in speculation.
Given the many uncertainties about the viability of CCS and next generation nuclear, we believe the best strategy is to double down what you know works now. Wartsila’s Path to 100 study offers the following advice to “Front Load” Net Zero:
Begin by adding renewables as fast as possible. As renewables pass 20% of system energy, they need more balancing resources such as batteries and reciprocating engines. Then phase out the old, inflexible units such as coal and steam gas boilers. That is plenty of work for the next few decades. We’ll know more about how to decarbonize the last 20% when we get there, but in theory it can be done with clean synthetic fuels used in what remains of the thermal fleet.
Stay tuned for my next post on valuation of flexible dispatchable resources like RICE and storage and how it impacts today’s decisions for a highly uncertain future.