TODAY’S STUDY: NEW ENERGY FOR A WORLD FIGHTING CLIMATE CHANGE

Climate Change: Implications for the Energy Sector (Key Findings from the Intergovernmental Panel on Climate Change Fifth Assessment Report)

June 2014 (World Energy Council and the University of Cambridge)

The Physical science of Climate Change

Rising temperatures:

The Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report (AR5) concludes that climate change is unequivocal, and that human activities, particularly emissions of carbon dioxide, are very likely to be the dominant cause. Changes are observed in all geographical regions: the atmosphere and oceans are warming, the extent and volume of snow and ice are diminishing, sea levels are rising and weather patterns are changing.

Projections:

Computer models of the climate used by the IPCC indicate that changes will continue under a range of possible greenhouse gas emission scenarios over the 21st century. If emissions continue to rise at the current rate, impacts by the end of this century are projected to include a global average temperature 2.6–4.8 degrees Celsius (°C) higher than present, and sea levels 0.45–0.82 metres higher than present.

To prevent the most severe impacts of climate change, parties to the UN Framework Convention on Climate Change (UNFCCC) agreed a target of keeping the rise in average global temperature since pre-industrial times below 2°C, and to consider lowering the target to 1.5°C in the near future. The first instalment of AR5 in 2013 (Working Group I on the physical science basis of climate change) concluded that by 2011, we had already emitted about two-thirds of the maximum cumulative amount of carbon dioxide that we can emit if we are to have a better than two-thirds chance of meeting the 2°C target.

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Impact of past emissions:

Even if emissions are stopped immediately, temperatures will remain elevated for centuries due to the effect of greenhouse gases from past human emissions already present in the atmosphere. Limiting temperature rise will require substantial and sustained reductions of greenhouse gas emissions.

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Key Findings

energy demand is increasing globally, causing greenhouse gas (GHG) emissions from the energy sector also to increase. The trend is set to continue, driven primarily by economic growth and the rising population. In recent years the long-term trend of gradual decarbonisation of energy has reversed due to an increase in coal burning.

Climate change presents increasing challenges for energy production and transmission. A progressive temperature increase, an increasing number and severity of extreme weather events and changing precipitation patterns will affect energy production and delivery. The supply of fossil fuels, and thermal and hydropower generation and transmission, will also be affected. However, adaptation options exist. significant cuts in GHG emissions from energy can be achieved through a variety of measures. These include cutting emissions from fossil fuel extraction and conversion, switching to lower-carbon fuels (for example from coal to gas), improving energy efficiency in transmission and distribution, increasing use of renewable and nuclear generation, introduction of carbon capture and storage (CCS), and reducing final energy demand.

strong global political action on climate change would have major implications for the energy sector. Stabilisation of emissions at levels compatible with the internationally agreed 2°C temperature target will mean a fundamental transformation of the energy industry worldwide in the next few decades, on a pathway to complete decarbonisation. incentivising investment in low-carbon technologies will be a key challenge for governments and regulators to achieve carbon reduction targets. Reducing GHG emissions also brings important co-benefits such as improved health and employment, but supply-side mitigation measures also carry risks.

The energy industry is both a major contributor to climate change and a sector that climate change will disrupt. Over the coming decades, the energy sector will be affected by global warming on multiple levels, and by policy responses to climate change. The stakes are high: without mitigation policies, the global average temperature is likely to rise by 2.6–4.8°C by 2100 from pre-industrial levels.

In the absence of strong mitigation policies, economic growth and the rising global population will continue to drive energy demand upwards, and hence GHG emissions will also rise. Climate change itself may also increase energy use due to greater demand for cooling.

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The means and infrastructure to produce and transport energy will be adversely impacted by climate change. The oil and gas industry is likely to suffer from increased disruption and production shutdowns due to extreme weather events affecting both offshore and onshore facilities. Power plants, especially those in coastal areas, will be affected by extreme weather events and rising sea levels. Critical energy transport infrastructure is at risk, with oil and gas pipelines in coastal areas affected by rising sea levels and those in cold climates affected by thawing permafrost.

Electricity grids will be impacted by storms, and the rise in global temperature may affect electricity generation including thermal and hydroelectric stations in some locations. Weather changes may also affect bioenergy crops. In general, the industry has options for adapting to climatic changes, but costs are likely to be incurred.

The energy sector is the largest contributor to global GHG emissions. In 2010, 35% of direct GHG emissions came from energy production. In recent years the long-term trend of gradual decarbonisation of energy has reversed. From 2000 to 2010, the growth in energy sector emissions outpaced the growth in overall emissions by around 1% per year. This was due to the increasing share of coal in the energy mix. From annual emissions of 30 gigatonnes (Gt) of carbon dioxide (CO2) in 2010, projections indicate that in the absence of policies to constrain emissions, the emissions associated with fossil fuel use, including the energy supply sector but also energy use in transport, industry and buildings would contribute 55–70 GtCO2 per year by 2050. To reduce emissions to levels commensurate with the internationally agreed goal of keeping the temperature increase since pre-industrial times below 2°C, the share of low-carbon electricity generation by 2050 will need to triple or quadruple. Use of fossil fuels without carbon capture would virtually disappear by 2100 at the latest. The energy sector would be completely decarbonised, and it is likely that technologies able to withdraw CO2 from the atmosphere would need to be deployed. Bioenergy with carbon capture and storage is one such technology (BECCS).

Replacing existing coal-fired heat and/or power plants by highly efficient natural gas combined cycle (NGCC) power plants or combined heat and power (CHP) plants can reduce near-term emissions (provided that fugitive methane release is controlled) and be a ‘bridging technology’ to a low-carbon economy. Increased use of CHP plants can reduce emissions. CCS, nuclear power and renewables provide low-carbon electricity, while increasing energy efficiency and reducing final energy demand will reduce the amount of supply-side mitigation needed. In 2012, more than half of the net investment in the electricity sector was in low-carbon technologies.

Nevertheless, a variety of barriers and risks to accelerated investment exist, including cost. Additional supply-side investments required to meet the 2°C target are estimated at USD 190–900 billion per year on average up to 2050. Much of this investment would yield co-benefits such as reduced air and water pollution, and increased local employment. But supply side mitigation typically also carries risks.

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Impacts of Climate Change

Three climate-change phenomena will have a particular impact on the energy sector: global warming, changing regional weather patterns (including hydrological patterns) and an increase in extreme weather events. Not only will these phenomena affect energy demand, in some regions they will also affect the entire spectrum of energy production and transmission. While most climate change impacts are likely to be negative, there could be some positive impacts such as lower energy demand in cold climates.

Rising temperatures coupled with a growing world population and economic growth will drive an increase in overall demand for energy. Rising income levels in poorer countries in warm climates are likely to lead to increased use of air-conditioning. Global energy demand for residential air-conditioning in summer is projected to increase rapidly from nearly 300 TWh in 2000, to about 4000 TWh in 2050. Much of this growth is due to increasing income in emerging market countries, but some is due to climate change. Colder, richer countries will see energy demand for heating fall, but could still see overall energy use increase.

Although thermal power plants (currently providing about 80% of global electricity) are designed to operate under diverse climatic conditions, they will be affected by the decreasing efficiency of thermal conversion as a result of rising ambient temperatures. Also, in many regions, decreasing volumes of water available for cooling and increasing water temperatures could lead to reduced power operations, operation at reduced capacity or even temporary shutdowns.

Extreme weather events pose a major threat to all power plants but particularly to nuclear plants, where they could disrupt the functioning of critical equipment and processes that are indispensable to safe operation including reactor vessels, cooling equipment, control instruments and back-up generators.

Changing regional weather patterns are likely to affect the hydrologic cycle that underpins hydropower generation. In some regions, a decline in rainfall levels and a rise in temperature, leading to increased water loss, could result in reduced or more intermittent ability to generate electricity.

Although projections contain large uncertainties, hydropower capacity in the Zambezi river basin in Africa may fall by as much as 10% by 2030, and 35% by 2050. On the other hand, hydropower capacity in Asia could increase.

Changing weather patterns and extreme weather events present challenges to solar and wind energy. An anticipated increase in cloudiness in some regions would affect solar technologies, while an increase in the number and severity of storms could damage equipment. Global warming and changing weather patterns are likely to adversely impact agricultural yields, with a knock-on effect on the production and availability of biomass for energy generation. While there might be some benefits in temperate climates, the reduction in yields in tropical areas is more likely than not to exceed 5% by 2050. In some rainy regions, open pits in the coal industry are likely to be impacted by increasing rainfall leading to floods and landslides.

Climate and weather related hazards in the oil and gas sector include tropical cyclones with potentially severe effects on offshore platforms and onshore infrastructure, leading to more frequent production interruptions. However, the decline in Arctic sea ice could lead to the opening up of new areas for oil and gas exploration, potentially increasing global oil and gas reserves.

Energy transmission infrastructure, such as pipelines and power lines, is also likely to be affected by higher temperatures and extreme weather events. Pipelines are at risk from sea-level rise in coastal regions, thawing permafrost in cold regions, floods and landslides triggered by heavy rainfall, and bushfires caused by heat waves or extreme temperatures in hot regions. Extreme weather events, especially strong wind, are projected to affect power lines.

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Resilience

There are various options by which the energy sector can improve its resilience to climate change.

A number of technological improvements are available for thermal power plants which, if implemented, will bring efficiency gains that more than compensate for losses due to higher ambient temperatures. Preventative and protective measures for nuclear power plants include technical and engineering solutions and adjusting operation to extreme conditions, including reducing capacity or shutting down plants. Weather resistance of solar technologies and wind power turbines continues to increase.

Coal mining companies can improve drainage and run-off for on-site coal storage, as well as implementing changes in coal handling due to the increased moisture content of coal. Pipeline operators may be forced to follow new land zoning codes and to implement risk-based design and construction standards for new pipelines, and structural upgrades to existing infrastructure.

Technical standards for power transmission lines are likely to be amended to force grid operators to implement appropriate adaptation measures, including in some cases re-routing lines away from high-risk areas.

Authorities can plan for evolving demand needs for heating and cooling by assessing the impact on the fuel mix. Heating often involves direct burning of fossil fuels, whereas cooling is generally electrically powered. More demand for cooling and less for heating will create a downward pressure on direct fossil fuel use, but an upward pressure on demand for electricity.

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Mitigation Options

As the sector producing the largest share of GHG emissions, the energy sector would be substantially affected by policies aimed at meeting the internationally agreed 2°C target for global warming. A number of mature options exist that can, if scaled up, result in substantial mitigation of the sector’s GHG emissions. However, the scale of the challenge is considerable. Pathways compatible with the 2°C target typically envisage achieving virtual decarbonisation of the energy supply at some point between 2050 and the end of the century. It is likely that ‘negative emissions’ – technologies that absorb CO2 from the atmosphere – will also be needed.

Options for mitigation include:

• Cutting emissions from fossil fuel extraction and conversion

• Switching to lower-carbon fuels, for example from coal to gas

• Improving energy efficiency in transmission and distribution

• Increasing use of renewable energy technologies

• Increasing use of nuclear energy

• Introduction of carbon capture and storage (CCS), and an extension into CCS plants that use bioenergy crops (BECCS) as an approach to achieving ‘negative emissions’

• Reducing final energy demand.

Fuel extraction and Conversion…Fuel switching…Increasing efficiency…Renewables…Nuclear energy…CCS and bioenergy…Reducing final energy demand…Co-benefits and risks…Policy…

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Conclusion

Climate change will affect the entire energy sector, through impacts and through policy. While the cost of mitigating emissions across all sectors could reduce annual consumption growth by 0.04–0.14%, the scale of the low-carbon transition and the opportunities for investment are likely to be larger in the energy sector than in others. Additional investments required in the energy system in order to keep the temperature increase since pre-industrial times below 2°C are estimated to be USD 190–900 billion per year on the supply-side alone, although this investment could realise important co-benefits for economies as a whole. However, infrastructure tends to be used for at least 30 years once built; so decisions made in the next couple of decades will be crucial in deciding whether the energy sector leads the way towards or away from a 2°C future.

Scenarios project that a fundamental transformation will be necessary if governments are to meet the globally agreed 2°C target. Generally, these scenarios envisage three parallel processes: decarbonisation of the electricity supply, expansion of the electricity supply into areas such as home heating and transport that are currently fuelled in other ways, and reduction in final energy demand. Much of the incremental investment will be in developing countries where demand is growing at a faster rate than in developed countries. The additional capital would be partly offset by the lower operating costs of many low-GHG energy supply sources. For government and regulators, a key challenge will be to ensure a price of carbon that incentivises extra investment in low-carbon technologies, continued investment in research and development, and an attractive fiscal and regulatory framework.

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