IDA´s klimaplan 2050: Tekniske energisystemanalyser og samfundsøkonomisk konsekvensvurdering - Baggrundsrapport

100% Renewable Energy and Large Reductions in fuel consumption
The current primary energy supply in Denmark, i.e. fuel consumption and renewable energy for production of electricity and heat for households, transport and industry, is approx. 800 PJ. If new initiatives are not taken, it is expected that energy consumption will decrease marginally until 2015, but then increase gradually until 2050 to about 950 PJ. Initiatives are proposed in IDA's Climate Plan 2050 which can reduce primary energy supply to 707 PJ in 2015, 556 PJ in 2030, and 442 PJ in 2050. At the same time, the share of renewable energy from wind turbines, photovoltaic, solar thermal, wave energy, and biomass will be increased. The share of renewable energy in the reference energy systems increases from about 16 per cent in 2008 to 22 per cent in 2015 and to about 25-29 per cent in 2030 and 2050. The share of renewable energy in the Climate Plan increases to 30 per cent in 2015 and 47 per cent in 2030. In 2050 the entire Danish energy system, incl. transport, is based on 100 per cent renewable energy.

The energy system in IDA 2015 is based on measures which can be realised with current technology. In IDA 2030 large parts of the transport system are changed, district heating systems are heavily expanded, there are more efficient power plants, more mature and new renewable energy technologies are introduced, and further energy savings implemented. In general large parts of the fossil fuel consumption are replaced by electricity demands, especially within transport, with battery electric vehicles and electrically powered trains. In IDA's Climate Plan 2050, an energy system is designed which is based on 100 per cent renewable energy, starting from the initiatives proposed in IDA 2015 and IDA 2030. This is partly to ensure that these energy systems do not stand in the way of this objective and partly because of the Danish Government's objective that Denmark shall be 100 per cent independent of fossil fuels and nuclear power, when the oil and natural gas resources stop. The result is that this is possible, but there is a key issue surrounding the consumption of biomass: should biomass be used to generate electricity for direct use or should it be used for the production of synthetic fuels. A balance must be met between these two requirements to utilise the biomass resource effectively and therefore, an estimate is presented in this report for this balance.

Further savings are presented and more renewable energy is introduced in IDA 2030 toward a 100 per cent renewable energy system. There are sufficient domestic biomass resources to meet demand for both the IDA 2015 and IDA 2030 scenarios. However, there are additional challenges in the 2050 energy system when 284 PJ of biomass is used in the Climate Plan. This can potentially be supplied with domestic resources, but conversely it will not leave many resources for producing other material goods, if this is to be based on biomass as well. Therefore, due to these limitations on domestic biomass, there is a further challenge in the future regarding the fuel consumption in industry and aviation. It is uncertain if these demands can be met using direct or indirect electricity production (i.e. electrolysis), or whether further savings must be introduced.

A 100 per cent renewable energy system has been designed which potentially can be maintained by domestic biomass resources. It must however be emphasised that there is no objective in the Climate Plan not to do international trade with biomass. However the Climate Plan ensures that Denmark does not merely become dependent on imports of biomass, instead of being dependent on imports of oil, natural gas and coal which is the case in the reference scenario, once Denmark does not have any resources left in the North Sea.
Large reductions in greenhouse gas emissions
The initiatives in the Climate Plan reduce the emission of greenhouse gases by about 90 per cent in 2050 in comparison to 2000. The energy system constitutes only a part of the greenhouse gases emissions. For the Climate Plan this part will be reduced to 34 million tonnes CO2 in 2015, 19 million tonnes CO2 in 2030, and is completely removed in 2050. Beyond this, reductions in greenhouse gas emissions from industrial processes and from agriculture are proposed. Considering these, the emissions of greenhouse gasses in 2050 can be reduced to 7.2 per cent of the emissions in 2000. However, if an extra contribution from aircraft due to discharges at high altitudes is also included, the reduction in 2050 is 10.2 per cent of the emission in 2000.

Better socio-economic solutions with more renewable energy
The Climate Plan will be implemented over a period from now until 2050 by continuously replacing worn-out facilities when their lifetime expires, meaning they need to be replaced regardless of implementing the Climate Plan. Therefore, as a point of departure for this study, the expenses are calculated as extra expenses through investing in better facilities in comparison to the reference energy system. There are however exceptions to this. The socio-economic costs are calculated as annual expenses in each of the years 2015, 2030, and 2050. The annual costs in the Climate Plan's energy systems are compared with the payments in the reference in each of the applicable years.

In 2015 and 2030 the difference with the middle fuel and CO2 price assumptions is 9 and 20 billion DKK/year respectively. On top of this there are advantages regarding saved health costs, commercial potentials, and employment effects. In addition a more robust situation is reached with the IDA Climate Plan as the combined costs for energy are less sensitive to fluctuations in oil prices and CO2 costs. It is worth noting that between 50 and 95 billion DKK/year will be used for fuels from now until 2030, depending on the fuel prices. It is proposed in the Climate Plan that these expenditures be reduced to between 29 and 51 billion DKK/year, again depending on the fuel prices. Two advantages can be obtained from the IDA 2015 and 2030 proposals. Firstly, they are less expensive than the reference energy systems, and secondly, these systems are significantly less sensitive to fluctuations in the fuel prices. In the future one must however expect that the world will continue to experience fluctuating fuel prices and neither constantly high nor constantly low oil prices. IDA 2050 is based on 100 per cent renewable energy and the cost analyses of this system also indicated that large savings can be achieved. Such estimates are however associated with significant uncertainties.

International electricity exchange has also been analysed. It should be noted that the economic benefits of the IDA Climate Plan due to the international exchange of electricity is insignificant compared to the economic benefits due to the annual costs of the system itself, which amounts to several billion DKK/year to the advantage of IDA 2015 and IDA 2030. Even large changes in assumptions regarding international electricity trade in the means for electricity market exchange are not critical for the comparison. The large difference in costs between the various systems can be summed up by stating that the Climate Plan has large investments, while the reference has large fuel costs. Hence the cost comparison completed here is especially sensitive to both changes in the fuel prices and changes in the interest rate and investment requirements. Therefore, analyses have been done at three fuel levels and two CO2 offset price levels. However, none of results change the general picture that the Climate Plan has lower costs than the reference. Nor are the results changed when the investment levels are increased by 50 per cent, although the earnings do become lower. The same is the case if the real interest rate is at 6 per cent instead of 3 per cent. It must be pointed out however that this applies to the combined package. With an altered interest rate or scope of investment, several of the individual measures will then have a negative economic result.

Health costs
The health costs have been estimated on the basis of six different emissions to the air: SO2, NOx, CO, particulates (PM2.5), mercury, and lead. In IDA's Climate Plan 2050 the highest reductions are in the emissions of NOx, CO, and small particulates, while there are smaller reductions in the other emissions. The reduced emissions are primarily caused by lower coal demands for the power plants, less diesel and petrol in the transport sector, reduced demand for oil in industry, and a reduced demand for wood in individual household heating-systems. On the other hand, the emissions increase marginally because of more straw, wood, biogas, etc.

The health costs calculated here are based on the latest published data for costs connected to different technologies in different point sources. The costs are based on enumerated lost work days, hospital admissions, health damage, deaths, etc. In IDA 2015 and IDA 2030 these costs have been reduced to approximately 13 and 8 billion DKK respectively. Thus there are savings in the health costs of approx. 2 billion DKK in 2015 and approximately 7 billion DKK in 2030, if the measures in the climate plan are implemented. Approx. 0.9 billion DKK of the saved costs in 2015 are located in Denmark and about 2.3 billion DKK in 2030. The rest of the savings in health costs are placed in the neighbouring countries. The health costs included are based exclusively on the six emissions and do not include environmental costs due to damage to nature and animal life, nor costs from extraction of fuels and materials abroad, e.g., from a coal mine in South Africa. Thus it is a conservative evaluation of externality costs. If the socioeconomic environmental and health costs due to the CO2 emissions on top of the six emissions analysed here are included, a conservative estimate shows that the above-mentioned savings are approximately twice as large. The health costs have also been analysed for 2050. Here the potential savings in health costs are 9.5 billion DKK, out of which 2.4 billion DKK is saved in Denmark.

Commercial potentials
A systematic implementation of the technologies that are included in IDA's Climate Plan 2050 will include significant opportunities to increase exports. These commercial potentials are evaluated for the Climate Plan with a starting point in the current and historic export of energy technologies in Denmark. It is estimated that IDA's Climate Plan 2050 can create a potential export of energy technology that climbs from the present approx. 64 billion Danish crowns in 2008 to approx. 200 billion DKK/year going forward to 2030.
It must be emphasised that this type of quantification is associated with significant uncertainties and must be considered an estimate. However the rough estimate provides a good overview of the technologies which can be exploited if the Climate Plan is implemented. It must also be emphasised that these potential earnings come on top of the earnings that are shown through the changed operation and structure in the energy system itself.

Employment effects
The starting point for the estimation of the employment effect is the division in annual costs for the Climate Plan compared with that in the reference. To begin estimating the employment effects, the annual costs for both the Climate Plan and the reference were broken down into investments and operations. An implementation of the Climate Plan 2050 includes a change in the costs for fuel to expenditures for investments and hence, the Danish society will not be burdened with extra costs for energy. Such changes will include higher Danish employment while also improving the balance of payments. This effect is increased further if the above-mentioned commercial potentials in the form of increased exports are also realised. In the Climate Plan, expenditures for fuels are reduced while expenditures for operations and maintenance are increased. In addition, an extra investment of just below 1 trillion DKK is made in the Climate Plan compared to the reference, which is spread out over the period going forward to 2050.

The extra employment created in Denmark by the Climate Plan compared with the reference has been estimated with these methods and assumptions to be approximately 30-40,000 jobs. Jobs will be lost in the handling of fossil fuels, but jobs will be created through investments in energy technology. In the long term, the employment will settle down as investments reduce and the transition to a 100 per cent renewable energy system is complete, so that there are about 15,000 extra jobs in the IDA Climate Plan compared to the reference for 2050. In practice this reduction will probably spread over a period of years.

It is important for a number of reasons to place the large employment effort as early as possible in the period. The first reason is that the labour force as a share of the total population is falling in the entire period going forward to about 2040 and therefore, the largest labour capacity to undertake a change of the energy system is in the beginning of the period. The second reason is that the Danish North Sea resources will run out during the next 20 years. Hence it is important to develop such energy systems and changes as early as possible in the period. Finally, the potential increase in the export of energy technologies which can replace the oil and natural gas exports will be reduced and could disappear entirely in the course of 10-20 years.
The above-mentioned effects on the employment do not include the job creation as a result of increased export of energy technology, i.e. the commercial potentials described above. These advantages will be an additional benefit of the Climate Plan. With an assumption of a 50 per cent import share, an annual export of 200 billion DKK will generate in the order of up to 200,000 jobs, depending on where the exports would have been without the Climate Plan, the extent of unemployment, and the potential for these people to be employed in other export trades. In relation to this, it should be noted that everything else being the same, a share of Danish labour will be made available as the oil and gas extraction in the North Sea comes to an end.