flexibility and the future of power - wärtsilä

Flexibility and the Future of PowerWärtsilä Capital Markets Day

Albert Cheung

November 26, 2019

1 Wärtsilä Capital Markets Day @albertwycheung

Source: BloombergNEF.

523

19

307

164

-

200

400

600

800

1,000

1,200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H2018

GW

Small-scale PV

Utility-scale PV

Offshore wind

Onshore wind

Total:1,013GW

A decade ago

132GW

Global wind and solar installations, cumulative to 2008


Energy transition challenges, 2008

How to drive down costs of clean energy and

reduce dependence on subsidies?

How to scale up deployments? How to raise and

deploy the capital required for the energy transition?

Costs

Scale


0

200

400

600

800

1,000

1,200

2010

2011

2012

2013

2014

2015

2016

2017

2018

$/kWh

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

euro / W

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$/W

Solar PV module prices Onshore wind turbine prices Lithium-ion battery prices

Technology costs plummeted

-94% since

2008

-37% since

2008

Source: BloombergNEF.

-85% since

2010


Source: BloombergNEF

Clean energy investment scaled up

17 24 30 41 52 62 80 94 106 126162

193 181231

178

2838

4871

86 85

123142 108 74

85

82 88

70

92

1424

43

57

62 49

68

88

7367

79

82 75

85

84

6086

121

169

200 196

271

324

286267

326

358344

386

354

0

50

100

150

200

250

300

350

400

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$ billion

AMER

EMEA

APAC

Global clean energy investment

Renewables market update 2019


-

200

400

600

800

1,000

1,200

2000200120022003200420052006200720082009201020112012201320142015201620172018

Cumulative GW

Small-scale PV

Utility-scale PV

Offshore wind

Onshore wind

Source: Bloomberg NEF.

And the rest is history

Global wind and solar installations

One terawatt of

wind and solar



Most competitive forms of power generation by country, 2019

Source: BloombergNEF. Note: Reflective of the cheapest benchmark project for each technology and market



Looking forwardBNEF New Energy Outlook


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1970 1980 1990 2000 2010 2020 2030 2040 2050

Historical world power

generation mixNEO 2019 power

generation mix

Coal

GasOil

Hydro

NuclearWind

SolarOther

Source: BloombergNEF, IEA

New Energy Outlook: ~50% wind + solar power globally by 2050

62% renewables

31% fossil fuels

48% wind and solar

Long-term outlook



Investment by technology, 2019-2050

$13.3 trillion new investment to 2050

$0.4

$0.7

$0.8

$1.9

$4.2

$5.3

Coal

Hydro

Nuclear

Gas

Solar

Wind

$ trillion, real 2018

Long-term outlook


Source: BloombergNEFSource: BloombergNEF

Global investment in power generation by region,

2018-2050 APAC investment in power generation by region,

2018-2050

Asia Pacific is the driving force behind global investment

$5.8

$2.6

$2.0

$1.9

$1.2

APAC

Europe

META

AMER

Rest of the World

$tn, real 2018

$2.9

$1.4

$0.6

$0.4

$0.2

$0.1

China

India

SoutheastAsia

Japan

South Korea

Australia

$tn, real 2018

Coal Gas Oil Nuclear Hydro Wind Solar Other

Long-term outlook


Europe transitions furthest, fastest

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2019 2025 2030 2035 2040 2045 2050

Europe

China

U.S.

80%

47%

34%

Wind and solar penetration



Keeping power sector on track for 2 degrees to 2030

2 degrees (NEO 2019)

NEO 2019

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2012 2018 2025 2030 2035 2040 2045 2050

MtCO2e


NEO2019

On track

Global power sector emissions


How will the future

power system operate?The race for flexibility


Flexibility


0

5

10

15

20

25

30

35

40

45

50

00:00 04:00 08:00 12:00 16:00 20:00

GW

Demand-side flexibility: dynamic EV charging

General load

EV dynamic

EV fixed

U.K. typical daily load profile, Q1, 2050



The U.K. power system in 2040

0

20

40

60

80

100

Oct 29, 2040 Oct 30, 2040 Oct 31, 2040 Nov 01, 2040 Nov 02, 2040 Nov 03, 2040 Nov 04, 2040

Generation (GW)

0

20

40

60

80

100

Aug 06, 2040 Aug 07, 2040 Aug 08, 2040 Aug 09, 2040 Aug 10, 2040 Aug 11, 2040 Aug 12, 2040

Generation (GW)

0

20

40

60

80

100

Dec 20, 2040 Dec 21, 2040 Dec 22, 2040 Dec 23, 2040 Dec 24, 2040 Dec 25, 2040 Dec 26, 2040

Generation (GW)

Week with low

renewable output

Week with median

renewable output

Week with high

renewable output

GasSolar

Wind

Curtailment

ChargingDischarging

Nuclear

Gas runs for days

Lots of curtailment



CCGT average fleet utilization Coal average fleet utilization

The dispatchable fleet will operate very differently

China

GermanyIndia

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

Optimal utilization range

China

GermanyIndia

U.S.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

Optimal utilization range


0

500

1,000

1,500

2,000

2,500

3,000

3,500

2012 2019 2025 2030 2035 2040 2045 2050

GW


Cumulative installed gas capacity

Gas capacity almost doubles to 2050

Peaker

Combined-cycle gas


0

500

1,000

1,500

2,000

2,500

3,000

3,500

2012 2019 2025 2030 2035 2040 2045 2050

GW

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2012 2019 2025 2030 2035 2040 2045 2050

PJ

Combined-cycle gas


Cumulative installed gas capacity Fuel burn

Gas capacity almost doubles to 2050, but gas burn only up ~22%

Peaker

Combined-cycle gas



0

200

400

600

800

1,000

1,200

1,400

2012 2019 2025 2030 2035 2040 2045 2050

GW

Rest of the World

Rest of APAC

India

China

Americas

META

Europe

Spotlight on gas peakers to 2050

Peaker gas: cumulative installed capacity by country/region (GW)

4.5x more

peakers in 2050


What about other flexibility technologies?

Non-gas flexibility: cumulative installed capacity by technology (GW)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2012 2019 2025 2030 2035 2040 2045 2050

GW

Demand response

Dynamic pricing

Utility-scale batteries

Small-scale batteries

Pumped hydro


Source: BloombergNEF. Note: GRE = gas reciprocating engine, OCGT and CCGT are open- and combined-cycle gas turbine respectively.

Levelized cost of capacity for batteries and gas Ramp-up times for batteries and gas

Duration and speed

CCGTOCGT

GRE

1 hour

4 hours

-

100

200

300

400

500

600

0 1 2 3 4 5 6 7 8 9 10

$/kW/yr (2018 real)

Peak duration (hours per day)

Capacity factor (%)8%4%0% 17% 21%

Battery 2019

Battery 2030

13% 25% 29%



Peaker gas: cumulative installed capacity Batteries: cumulative installed capacity

Batteries and peaker gas will co-exist

0

200

400

600

800

1,000

1,200

1,400

2012 2019 2025 2030 2035 2040 2045 2050

GW

Peaker gas

0

200

400

600

800

1,000

1,200

1,400

2012 2019 2025 2030 2035 2040 2045 2050

GW

Utility-scale batteries

Small-scale batteriesUtility-scale

batteries

Small-scale batteries

Peaker gas


Early signs from California

CAISO solar generation versus wholesale power price, average day 2011-18

Power

price

Utility-

scale

solar

DG




Max. required net load ramp as proportion of peak demand

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

10

20

30

40

50

60

70

80

90

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18

U.K. Germany U.S.- California Australia -South Australia

China -Gansu

Maximum hourly net load ramp rate

Peak demand

Maximum net load ramp capacity as % of peak demand (%)

Ma

ximum

ne

t loa

d ra

mp

ca

pa

city

/ pe

ak d

em

and

(%)C

ap

acity

(GW

)

Max ramp rates are

rising in several

markets

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

10

20

30

40

50

60

70

80

90

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18


China -Gansu

Maximum hourly net load ramp rate

Peak demand

Maximum net load ramp capacity as % of peak demand (%)

Ma

ximum

ne

t loa

d ra

mp

ca

pa

city

/ pe

ak d

em

and

(%)C

ap

acity

(GW

)


Source: BloombergNEF. Note: For detailed metric explanation, please see Research Note Global Power System Flexibility Review (web | terminal).

Minimum net load versus minimum turndown level of existing fleet

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

5

10

15

20

25

30

35

40

45

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18


China -Gansu

Minimum net load

Minimum turndown level of existing fleet

Minimum net load/ Minimum turndown level of existing fleet

Min

imum

ne

t load

to m

inim

um

ge

ne

ratio

n ra

tio

(%)

Cap

acity

(GW

)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

5

10

15

20

25

30

35

40

45

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18

20

13

20

14

20

15

20

16

20

17

20

18


China -Gansu

Minimum net load

Minimum turndown level of existing fleet

Minimum net load/ Minimum turndown level of existing fleet

Min

imum

ne

t load

to m

inim

um

ge

ne

ratio

n ra

tio

(%)

Cap

acity

(GW

)

Min. loading levels

fell in each market

last year

https://www.bnef.com/core/insights/19183/view

https://bloom.bg/2NHLrC1


Source: BloombergNEF. Note: power prices represent real-time or intraday power prices.

Negative power prices indicate a lack of flexibility

0%

1%

2%

3%

4%

5%

6%

7%

8%

20

10

20

12

20

14

20

16

20

18

20

10

20

12

20

14

20

16

20

18

20

10

20

12

20

14

20

16

20

18

20

10

20

12

20

14

20

16

20

18

U.K. Germany U.S.- California Australia - SouthAustralia

%

Negative price occurrences, 2010-18

% of hours in the year


Getting to two degreesElectrification and decarbonization



Total electricity demand, electrification

scenario

Total installed capacity, electrification

scenario, 2050

Scenario: full electrification of residential heat and road transport

0

10,000

20,000

30,000

40,000

50,000

60,000

2012 2019 2025 2030 2035 2040 2045 2050

TWh

Coal4%

Gas16%

Hydro5%

Onshore wind15%

Offshore wind4%

Utility-scale PV

36%

Small-scale PV

8%

24.4TW

NEO 2019

Electrification scenario

25% more

demand

28% more

capacity



Power demand, cold winter’s day, UK, 2040 Hourly generation, cold winter’s day, UK, 2040

Winter heat doubles peak demand in 2040

0

10

20

30

40

50

60

70

80

90

100

0:00 6:00 12:00 18:00

GWHeat Pumps

EV - DynamicLoad

EV - FixedLoad

General

Demand 0

10

20

30

40

50

60

70

80

90

100

0:00 6:00 12:00 18:00

GW Battery

Flexi

Solar

Onshore wind

Offshore wind

Hydro

Biomass

Other

Oil

Peaker gas

Gas

Coal

Nuclear

Demand


Heat and transport sector emissions

126Gt

100% electrification

BAU

0

2

4

6

8

10

12

2017 2020 2025 2030 2035 2040 2045 2050

GtCO2

Electrification lowers heat and transport emissions…


…but shifts them into the power sector

2 Degrees

100% electrification scenario

NEO 2019baseline

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2012 2019 2025 2030 2035 2040 2045 2050

MtCO2


How to decarbonize this

fully electrified system?

How to stay on track for 2º

beyond 2030?

Power sector emissions



Change in generation from NEO base case

Scenario: a 2º-compatible power system that includes heating and transport

-40,000

-20,000

0

20,000

40,000

60,000

80,000

100,000

2021-25 2026-30 2031-35 2036-40 2041-45 2046-50

GWh

Much more wind

and solar

Much less coal and

unabated gas



Change in generation from NEO base case

Scenario: a 2º-compatible power system that includes heating and transport

-40,000

-20,000

0

20,000

40,000

60,000

80,000

100,000

2021-25 2026-30 2031-35 2036-40 2041-45 2046-50

GWh

Much more wind

and solar

Much less coal and

unabated gas

‘Phase II’

decarbonization

technology


‘Phase II’ technology runs at low load factor


Load net of renewables, NEO 2019 and 2 degree scenario


LCOEs of example ‘Phase II’ decarbonization technologies

Coal CCSSolar

thermal

Fuel cell (Hydrogen)

Nuclear

Biogas peaker

CCGT CCS

0

50

100

150

200

250

300

350

400

450

500

0% 10% 20% 30% 40% 50% 60% 70% 80%

Capacity factors (%)

LCOE ($/MWh, nominal)

Utilization rangeneeded in a

2 degrees scenario


Solutions for ‘Phase II’ will need to be:

● Low/zero-carbon

● Rampable / flexible

● Economic at low load factors

● Able to run reliably for days during

challenging periods


Energy transition challenges, 2020+

Driving – and accelerating – deployment of

renewables and flexible resourcesDeployment

DevelopmentDeveloping the next generation of flexible

technologies for a 2º trajectory beyond 2030

Coverage.

Clean energy

Advanced transport

Commodities

Digital industry

BloombergNEF (BNEF) is a leading provider

of primary research on clean energy,

advanced transport, digital industry,

innovative materials, and commodities.

BNEF’s global team leverages the world’s

most sophisticated data sets to create clear

perspectives and in-depth forecasts that

frame the financial, economic and policy

implications of industry-transforming trends

and technologies.

BNEF research and analysis is accessible via

web and mobile platforms, as well as on the

Bloomberg Terminal.

Client enquiries:

Bloomberg Terminal: press <Help> key twice

Email: [email protected]

Learn more:

about.bnef.com | @BloombergNEF

Albert Cheung

[email protected]

@albertwycheung

Thank you!

https://bloom.bg/29jlB0k

mailto:[email protected]

https://about.bnef.com/mobile/

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