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20 Dec.2013 ,

Regulatory and Market Aspects of Demand-Side Flexibility

Abstract from CEPI response to CEER public consultation


Background


The Council of European Energy Regulators (CEER) has recently launched the public consultation “C13-PC-71: Regulatory and Market Aspects of Demand-Side Flexibility”.
Below an abstract from the CEPI response to main questions raised by CEER on:
1. main opportunities and benefits for demand-side flexibility;
2. main barriers to the emergence/functioning of demand-side flexibility;
3. most important 'preconditions' necessary for the emergence/functioning of demand-side flexibility


CEER Consultation Questions


1. What do you see as the main opportunities and benefits for demand-side flexibility in existing/future markets and network arrangements? How would you prioritise these?


1.1 Existing markets
The pulp and paper industry has already engaged, where possible, in demand-side programmes.
Mechanical pulping, an electro-intensive process, can be used for “peak shaving” programmes. It can react at reasonably short notice, like as short as 15 minutes and, depending on the frequency and schedule of interruptions, up to one hour. However, these are indicative figures, which need to be carefully assessed at mill level, as they will vary in function of the trade-offs between benefits from balancing the electricity system, the need to meet paper demand, and the overall economic impact that balancing the grid would have on the production process.


In some countries, paper production also participates in “valley filling” programmes: the whole industrial process is shifted to the night or to the weekends to optimise baseload electricity production. Example of this can be found, for instance, in Austria or Belgium. In Norway there are also provisions for flexibility markets where industry can participate. In this case, the transmission operator asks for bids.


The potentials for further exploring “peak shaving” or “valley filling” programmes are however limited. Beside auxiliary processes, the paper making process has little margins of flexibility when it comes to demand-reduction programmes. Moreover, most of the energy required from the sector (steam and electricity) are generated on-site, therefore mostly off the grid.


There is however quite some untapped potential if the market will develop flexible solutions for absorbing excess electricity supply at critical times (see next paragraph).


1.2 Future markets
One of the main criticalities of the electricity system is how to properly integrate electricity generated from “variable”, or “non-programmable” renewable energy sources (NP RES), like wind and solar, at a time of low or no demand. Curtailing these sources is particularly inefficient, as they produce at zero marginal prices. While most of R&D programmes are focussing on energy storage, the pulp and paper industry is in a rather unique position to potentially providing solutions to

  • efficiently absorbing excess of electricity supply,
  • while creating vale for the EU economy,


Most importantly, all this could be already delivered with current technologies.


To explain how this would be possible, few words on the pulp and paper industry are necessary.


CEPI represents 959 mills located in 18 European countries. According to our latest figures, in 2011 the European pulp and paper industry consumed 111 TWh of electricity, of which 57 TWh (52%) produced on-site via co-generation units. In 2011 the sector also consumed 557 TJ, or 155 TWh-equivalent, of heat, all on-site generated.


Combining the two figures for on-site generation, the sector generated and consumed about 212 TWh of energy in 2011. This is all energy sitting outside the energy system boundaries. To put these figures into context, it is worth noticing that in 2011 total European electricity production from wind and solar was about 223 TWh.


What would happen if, at a time of excess of electricity supply, the sector would ramp up electricity demand by ad-hoc moving form off to on the grid? It would absorb the peak of cheap electricity supply while maintaining the industrial output unchanged. Meaning more value per kWh, less primary energy consumption, less carbon emissions. In one word: a more competitive industry.


In most cases technology is already available and deployable. For instance, it would be sufficient to install an extra, highly-efficient electric boiler. With the support of additional RDI projects, more options could be envisaged in the near future, whereby electro-technologies could be used in the drying process.


The geographical distributions of mills in Europe allows for cost-effective absorption of excess electricity produced by decentralised energy sources, substantially reducing the need to costly investments in grid extensions.


Last but not least, this cost-effective measure will also reduce the need for additional costs to remunerate unused thermal capacity for electricity generation (so-called Capacity Remuneration Mechanisms – CRM), as the impact of NP RES on the running hours of conventional power plants will be largely mitigated.


Regulatory barriers are the main reason for not making this a reality. Without addressing this aspect first, it will be impossible for any mill operator to start any cost-benefit analysis to assess how to adapt a mill operation in a way that would deliver on-site financial benefits.


1.3 Existing network arrangements
In almost all CEPI countries, existing network arrangements act as a barrier against the absorption of excess supply of electricity.


The only exception is Norway. There, already since 1999, the government promoted the installation of electric boilers on industrial sites (although other incentives were already earlier in place). The rationale was to absorb seasonal excess of hydro electricity generated. The boilers are activated in remote by the network operators.


In exchange for this flexibility, industrial operators have a significant reduction in grid charges. While the usual tariff for the transmission grid (Statnett) is 170 NOK/kW (about 20 €/kW) in 2013, the tariff for flexibility load is 43 NOK/kW (about 5 €/kW). In addition there are distribution charge and taxes. Since 2010 the flexibility grid fee is open for all that can offers to decouple the load either by remote control or at 15 minutes or 2 hour notice.


For customers with remote control, the grid operator can move the load from day to night. The grid operators are very satisfied with this system. The possibility to decouple load has proven to save the grid from collapse. The use of flexible load in periods with excess of electricity stabilizes the grid.
We strongly encourage national regulators to urgently use the Norwegian example as a best practice case for promoting and valuing flexibility markets in their own countries.


2. What do you see as the main barriers to the emergence/functioning of demand-side flexibility? How would you prioritise these?


2.1 Legislative barriers/difficulties
In many cases, the industry is subject to stringent energy efficiency targets. In case of demand side flexibility, deliberately stopping CHP units would negatively impact the industry performance.
To promote energy efficiency programmes while incentivising demand side flexibility, it should be clearly stated in the legislation that importing electricity from the grid would be done in order to absorb
the load from NP RES, such as wind and solar. Therefore the electricity imported should be counted as 100% energy efficient.


2.2 Regulatory barriers/difficulties
This is the key barrier for demand-side flexibility in absorbing excess electricity supply from NP RES.
Currently, network tariffs and network charges (including levies and taxes) are set in a way that discourages industries from accessing the grid.


This approach is in principle correct, as it tends to promote stable and predictable demand from big energy users.


However, in this context, the network operator needs a service to balance the network. A service the industry is ready to provide. But here is the paradox: instead of being remunerated for such a service, industry would have to pay for offering it, to the benefit of the network operator.


In Germany, for instance, should a paper mill decide to import electricity from the grid, it would face additional costs up to more than 70 €/MWh.


Moreover, a mill has a very flat power consumption profile, like i.e. 7000 (or 7500 or 8000) full load hours a year. On this basis, it enjoys a reduced grid fee, i.e. in Germany it pays only 20% (or 15% or 10%) of the normal fee. Normal grid fee depends on local grid operator and might be between 5 to 11 €/MWh. When taking additional load from the grid, the profile will no longer be flat and the 7000 hours threshold might not be reached anymore. As a consequence, the mill would have to pay the remaining 80 to 90% of the grid fee.


A proper regulatory framework should incentivise both the “off-the-grid” baseload demand, and the flexibility to bring “on-the-grid” ad hoc electricity demand to help matching the excess of electricity generation from NP RES.


2.3 Market barriers/difficulties
It should be clear that RES balancing is not an industry prerogative. Industry can be part of the solution, and is willing to do so, provided there is a business case supporting it.
Industry lacks crucial information to build a proper business case. There should be some sort of guarantee on the minimum yearly number of hours one should reasonably expect to be called for balancing the market.


This minimum number of hours should be provided by the regulator and/or network operator and should be the founding element of any contractual agreement.


Moreover, commodity prices will have to be extremely low (or even negative) to compensate for the loss of revenues from CHP/green certificates or other support schemes. In fact, if commodity prices
would be on the level of the fuel used normally, it would just be equal costs for steam generation, but no compensation for lost electricity generation.


Energy supply contracts may need to be adapted to incorporate this additional flexibility.


3. For each of the barriers identified above, please describe the most important 'preconditions' necessary for the emergence/functioning of demand-side flexibility
To promote demand side flexibility in absorbing excess of NP RES supply, the following minimum preconditions would be required:


- Removal of regulatory barriers to create extra demand for electricity at a time of need: no extra costs (tariffs, levies, taxes) when participating in DSF programmes


- Maintain current incentives for on-site generation


- DSF to be compatible with energy efficiency targets: 100% energy efficiency for electricity taken from the grid when participating in DSF programmes


- Need for regulators/network operators to guarantee a minimum yearly amount of hours a paper mill should reasonably expect to be called when participating in DSF programmes.


Lastly, participation in DSF programmes would require significant changes in the way industry operates, both from a technological and industrial processes perspective. Support for Research, Development and Innovation would be needed.


For more information, please contact Nicola Rega at n.rega@cepi.org

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18 Oct.2013

CEPI comments on the discussion document ‘Paper Vapour – the climate impact of paper consumption’ from the European Environmental Paper Network

http://environmentalpaper.eu/shrink/wordpress/wp-content/uploads/2013/07/paper-vapour-discussion-paper-c.pdf

The European Environmental Paper Network (EEPN) presented preliminary findings of their Paper Vapour report. The report aims to show that paper has a large climate impact and it questions the carbon neutrality of wood fibre. The Confederation of European Paper Industry (CEPI) analysed the report. CEPI advises a major reworking of the draft report before publishing final findings. There are several reasons for this:

I. The data do not match the sources referenced

The report concludes that pulp and paper industry emissions are 7 kg of vapour per kg produced leading to total emissions that are larger than those of waste and landfilling, chemicals, oil and gas, fuel and power, steel and aluminium and iron combined.

It uses data from the World Resource Institute (WRI). However, the report does not show the original WRI data for all sectors. In table 2 a new figures was inserted for the percentage of the pulp and paper sector. In the original WRI publication the emissions from pulp, paper and print are set to be 1.1% (http://www.wri.org/chart/world-greenhouse-gas-emissions-2005). Instead a number seven times higher than the original was included based on separate calculations. The report lists this fact only on page 11, which is misleading. Either WRI figures should be used entirely to be able to compare them correctly or all sector figures need to be re-calculated on an equal basis. At the moment the figures in table 2 do not add up to 100% any longer; they exceed that figure.

2. The underlying data are unlikely at best

The emissions of industry sectors are well documented by the International Energy Agency (IEA). The IEA publications on industrial efficiency and CO2 emissions show that 70% of industrial emissions are emitted by three sectors: iron and steel, non-metallic minerals (cement) and chemicals and petrochemicals. The direct emissions from the pulp, paper and print industry together add up to 189 Mtonnes in 2005 at global level, 2.8% the of industrial emissions (IEA Energy Technology Perspectives). These data are based on national country statistics. EU steel sector emissions in EU ETS published by the European Environment Agency (EEA) are around 140 Mtonnes in non-crisis years, four times that of the 35 Mt from the European pulp and paper industry according to EEA statistics.

The IEA data divided by the global production figures used in the report (328 Mt pulp and paper produced), lead to a direct emission of 189/328 = 0.58 t/t as a global average, compared to the 0.34 t/t for Europe. These are direct emissions only. When adding indirect emissions from electricity in line with European data (0.34 vs. 0.10, CEPI sustainability report based on EU ETS and energy consumption statistics), the number used for direct production emissions in the report is 100% higher than reality.

Vice versa, the weighted average of 1.51 t/t used in the EEPN report would lead to 546 Mt global emissions for the paper industry, compared to the realistic 189 Mt from the IEA statistics.


3. The combination of data leads to mistakes

In table 1, data from a multitude of sources are combined resulting in an altered total figure. Similarly, the combination of different data leads to mistakes. An example is ‘Debarking and Chipping’. US data from a single study are used in the report in this instance. The emissions (0.45 t/t) are higher than the overall EU average production emissions. Moreover, debarking and chipping for pulp production is included in pulp production statistics, because they are part of our production process.

Wood chipping in the US, meant for exports of bio-energy, is delivering wood to the power sector, not to the pulp and paper industry. Additionally, a Carbon mass balance credit is added without any further explanation. Again a number is used higher than the real and verified emissions from paper production today. The source is the author of the report himself. CEPI believes a clearer explanation is needed to understand how these figures have been calculated.


4. The key number is not explained

A crucial discussion is missing from the report, linking forest accounting with the number 6.83 t/t in the first section. This number doubles the emission calculation made in the report, without explanations on how it is derived. The source seems to be the grey picture on page 5, which is not referenced properly. It seems to relate to a virgin paper production cycle. It is also unclear to what the percentages in the picture refer to. Yet this picture seems to be the basis for the entire allocation of biomass emissions, without any further explanation. The conclusions of the report are very difficult to assess, as the calculations included are contrary to current standards in life cycle accounting, monitoring or reporting rules in legal frameworks and the UNFCCC accounting rules

Carbon neutrality is an issue in emission accounting, based on the UNFCCC accounting rules, including LULUCF. The emissions of carbon emitted when burning wood for energy are calculated in the national forestry (LULUCF) accounts, enabling a zero factor to be used for biomass.

The report quotes in many cases from an article in the Science magazine and the discussions in the USA. The so called accounting error in forest carbon accounting as referred to in the Science articel is an issue for non-Kyoto countries. However, it is clear that in Europe, having signed the Kyoto protocol and following the agreements reached in Durban, proper forest accounting is taking place. It is based on the LULUCF legislation and a zero emission factor from the EU Monitoring, reporting and verification guidelines. Around 80% of all wood used in the European industry is coming from EU forests and the pulp from known and established planted forests.

But the core of the matter remains, if the wood used is sourced from sustainably managed sources one cannot double count carbon stock, flow approaches and forest and biomass emissions, as seems to be the case in this study. In Europe forest carbon stock has been growing for years, and proper forest accounting is taking place.


5. The report compares apples and pears

The report makes comparisons between the pulp and paper sector and other sectors in society, to emphasise the size of emissions calculated. The comparisons are flawed for a number of reasons. Some were mentioned before, additionally, the constructed pulp and paper LCA style number in the report is compared to non LCA data of other sectors. The basis for the calculations are completely different. In addition, the word “direct” emissions is used incorrectly in several cases throughout the report, not in line with scope 1 and scope 2 emissions normally used in reporting on industrial emissions.


6. Old and US data are used for a European study

The paper was commissioned by the European paper network and is intended for the European discussion, but only two of the sources are European and no European data has been used. CEPI strongly feels the data should also be European and reflect the real situation in the European production and consumption of paper and board. The current discussion paper does not. To address imports of paper into Europe for consumption, a weighted average can be calculated. But the fact remains that the vast majority of paper used in Europe is produced in Europe from European raw materials.

7. Sources are unclear

Last but not least, the study should avoid quoting background studies made by the same author, without further references. This leaves figures untraceable. Nine out of the 11 data used are either (co)sourced to Jim Ford, Climate for Ideas or EPN. There are many more public studies and materials available that could have been used, providing additional data and references.

In a nutshell, verification of the conclusions made in the report based on the calculations, data and sources presented is not possible. The 7 kg of paper vapour is not backed by the material presented. CEPI recommends a complete overhaul of the report to be credible.
For more information, please contact Marco Mensink at m.mensink@cepi.org

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06 Sep.2013

Extra emission cut should be wake-up call

The European Commission just announced it will cut free allocation of emission credits to industry with an additional 6% in 2013 - adding up to a startling 18% extra cut by 2020. The decision is very harsh as even the most carbon efficient companies in Europe will not receive the credits they need to operate.

It is time to make a reality check on all recent and misleading statements implying that EU ETS does not impact European industry.

The idea was simple. Industries receive free allocation of credits based on a benchmark. Only the 5% best installations receive what they need, all others have to buy carbon credits.

The decision on the so-called C-factor is part of the ETS directive. However, the factor was thought to come into force only at the end of the 2013-2020 trading period. It will now apply from the start and will be very high by 2020. This sheds a completely new light on the discussions around backloading in Brussels in the last months. Several hundred million Euros will be added to the already uncompetitive energy costs in Europe, just for the paper industry alone.

The publication of the C-factor takes place without the paper mills knowing their exact 2013 allocation yet, which causes increasing unrest in the industry. CEPI calls upon the Commission to publish the 2013 allocation data immediately.

“The huge cut in allowances is very disappointing for CEPI members, and a wakeup call for the discussions on ETS in Europe”, said Marco Mensink, CEPI Deputy Director General. “The European Commission will have to give maximum clarity on the calculations made. Not even two years ago the Commission was working on innovation tools based on an expected surplus of free credits, which would not have to be allocated. Now we start the period with a 6% shortage for this year alone.”

This information should have been on the table in the backloading debate where proponents of strong measures stated that the industry will not have to buy any credits in the coming period. This is simply not true. This is a wake-up call for the Member States as well.

European CEOs were just told today that investments in Europe face another layer of costs. Carbon leakage is real – it is the loss of investments Europe urgently needs.


For more information, contact Daniela Haiduc at (d.haiduc@cepi.org), mobile: +32 473 562 936.

Note to the Editor

CEPI aisbl - The Confederation of European Paper Industries
The Confederation of European Paper Industries (CEPI) is a Brussels-based non-profit organisation regrouping the European pulp and paper industry and championing industry’s achievements and the benefits of its products. Through its 18 member countries (17 European Union members plus Norway) CEPI represents some 520 pulp, paper and board producing companies across Europe, ranging from small and medium sized companies to multi-nationals, and 950 paper mills. Together they represent 24% of world production.

European Commission documents announcing the C-factor:

http://ec.europa.eu/clima/policies/ets/cap/allocation/docs/20130905_nim_en.pdf - page 14

http://ec.europa.eu/clima/policies/ets/cap/allocation/docs/20130905_scuf_en.pdf

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04 Sep.2013 ,

The cloud begins with coal - An overview of the electricity used by the global digital ecosystem

The cloud begins with coal
Big data, big networks, big infrastructure- An overview of the electricity used by the global digital ecosystem

A study by Digital Power Group

The information economy is a blue-whale economy with its energy uses mostly out of sight. Based on a mid-range estimate, the world’s Information-Communications-Technologies (ICT) ecosystem uses about 1,500 TWh of electricity annually, equal to all the electric generation of Japan and Germany combined -- as much electricity as was used for global illumination in 1985. The ICT ecosystem now approaches 10% of world electricity generation. Or in other energy terms – the zettabyte era already uses about 50% more energy than global aviation. This recent study (August 2013) by Digital Power Group includes interesting facts about the use of electricity by smart phones and tablets.

You can read the complete paper at : http://www.tech-pundit.com/wp-content/uploads/2013/07/Cloud_Begins_With_Coal.pdf?c761ac&c761ac.

 

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10 Jul.2013

EEA report: Bioenergy production must use resources more efficiently

Using biomass for energy is an important part of the renewable energy mix. However, bioenergy production should follow EU resource efficiency principles, according to a new report from the European Environment Agency (EEA). This means extracting more energy from the same material input, and avoiding negative environmental effects potentially caused by bioenergy production.


The report, ‘EU bioenergy from a resource efficiency perspective’, primarily looks at the potential for energy from agricultural land, although it includes forest and waste biomass in the overall analysis. Bioenergy should be produced in line with EU objectives to use resources more efficiently, the EEA report says. This means reducing the land and other resources needed to produce each unit of bioenergy and avoiding environmental harm from bioenergy production. According to the EEA analysis, the most efficient energy use of biomass is for heating and electricity as well as advanced biofuels, also called ‘second generation’ biofuels. First generation transport biofuels, for example, biodiesel based on oilseed rape or ethanol from wheat, are shown to be a far less efficient use of resources.


Download the report here: http://www.eea.europa.eu/pressroom/newsreleases/bioenergy-production-must-use-resources
 

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