energy in the netherlands efnl

8/3/2019 Energy in the Netherlands Efnl

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Energy in the Netherlands

Energy Forum NL

Optimized pathwaysto CO2 reduction inthe Dutch context


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The inormation and conclusions contained in this report

represent the collective view o the working groups in this

study, not that o any individual company or organization.

Any inormation and conclusions provided in this document

are or reerence purposes only; they are not intended nor

should be used as a substitute or proessional advice or

judgment in any given circumstance. The companies andorganizations involved do not guarantee the adequacy,

accuracy, timeliness or completeness o the reports

contents. These companies and organizations thereore

disclaim any and all warranties and representations

concerning said contents, expressed or implied, including

any warranties o tness or a particular purpose or use.


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ContentsIntroduction 1

Executive summary 3

1. Business as usual development o the Dutch energy system 8

1.1 ECONOMY-WIDE BAU 8

1.2 BUILDINGS SECTOR 10

1.3 INDUSTRY SECTOR 101.4 TRANSPORT SECTOR 11

1.5 AGRICULTURE SECTOR 12

1.6 POWER SECTOR 12

2. Possible abatement pathways 14

2.1 INTRODUCTION 14

2.2 NON-POWER SECTOR ABATEMENT IN THE PERIOD 2010-2030 16

2.3 POWER SECTOR ABATEMENT IN THE PERIOD 2010-2030 23

2.4 ABATEMENT IN THE PERIOD 2030-2050 30

3. Implications 363.1 POTENTIAL AREAS WHERE THE NETHERLANDS COULD LEAD ABATEMENT WITHIN THE EU 36

3.2 ROLE OF GAS 37

3.3 IMPLEMENTATION 39

3.4 CONCLUSION 41

Glossary 43

Appendix A: Power sector methodology and assumptions 45

A1 METHODOLOGY

A2 INPUT ASSUMPTIONS 49

Appendix B: Buildings sector methodology and key technologies 50

B1 METHODOLOGY 50

B2 HEATING TECHNOLOGIES 52

Appendix C: Biomass 56

Appendix D: Netherlands as a fexible energy provider 58

Appendix E: Carbon capture & storage 60

Appendix F: Lower coal build out sensitivity 62


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Optimized pathways to CO2 reduction in the Dutch context

1

IntroductionThis document reports the ndings o research undertaken by the EnergyForum NL (EFNL) which consists o companies active in dierent parts o theenergy sector: DONG Energy, EBN, Eneco, GasTerra, Gasunie, GDF SUEZ,and Shell. The group strives or a more long-term, stable energy policy andinvestment climate in the Netherlands, one that will help realize overall climateambitions. This report is part o the groups contribution to the energy debatein the Netherlands; it lays out a act-based, objective analysis o the potentialenergy mix i one assumes a continued ocus on carbon abatement.

In this report, the Energy Forum NL provides pathways that show how theNetherlands can best contribute to the EU target o 80% CO2e emissionreduction by 2050 compared to 1990. They particularly ocus on the goal orthe next 20 years: reducing CO2e emissions by 40% by 2030 compared to1990. The Forum selected 40% as a midway target or 80% in 2050; this allswithin the EU ambition o 40%-44% in 2030.1 The period beyond 2030, whichis much more uncertain, is modeled in less detail. However, the Forum tookcare to not let the choice o any pathway during 20102030 lock a pathwayater 2030 in or out.

A least cost approach, which works across sectors, is used to reduceemissions. In a least cost approach, all emission reduction measures areranked on costs and implemented progressively (starting rom the cheapest)

until the targeted abatement level is reached. In addition, a ew developingtechnologies are implemented even i they are more expensive thanalternatives. This choice prevents technology lock-in, ensures a more versatile,resilient energy system and provides a reasonable starting position or theperiod post-2030.

The report assumes a pan-European approach or the power sector, whichis the key sector in the Emissions Trading Scheme (ETS); in this case, Dutchabatement options compete with those in other EU countries. For theother sectors it uses a national approach. Non-cost actors, such as ease oimplementation (technological and societal), have been taken into account butnot to the same degree as costs.

The pathways and sensitivities in this report are meant to provide the readerwith a sense o the implications o possible choices, rather than to suggest thatany pathway is a hard truth. It should not be read as recommendations romthe Forum in avor o one technology over the other.

1 European Commission Roadmap or moving to a low carbon economy in 2050, 2011.


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Executive summaryThe Netherlands can achieve the derived EU CO2e emission reductionobjective o 40% in 2030 versus 1990 levels, as well as the 2050 target o 80%emission reduction. How it will do so, while minimizing costs, greatly dependson the way the EU will implement its targets.

Key messages emerging rom the study are:

Actual emissions in the Netherlands declined 3% between 1990 and 2010. Ino urther abatement action is taken (the so-called Business as Usual, or BAUpathway), total emissions in 2030 would increase 11% compared to 1990.

Reaching the EU ambition o 40% reduction by 2030 compared to 1990levels is technically possible but will require implementation o almostall currently available and developing technologies as well as increasesin energy eciency. Several routes are possible to achieve this, but eachdemands additional investments beyond the BAU and a substantialacceleration o current eorts.

The Netherlands is well positioned to lead the implementation and/or urthercommercialization o several abatement technologies. These include:biomass; wind o-shore; decentralized heat and cold storage; gas-baseddecentralized power generation; Carbon Capture and Storage (CCS);hydrogen; and adoption o electric vehicles. In all the explored pathways,

gas will continue to play a pivotal role in the residential sector ( throughcurrent and innovative technologies), the industrial sector, and the powersector (e.g., as base load and a balance or intermittent renewable sources).It could also grow in the road and marine transport sector.

The costs to Dutch society and routes to implementation vary substantiallybetween the dierent options. Compared to BAU, the total additionalcumulative cost to society in terms o investments and running costs is 10-30 bn or the period 2010-2030 (20-50 bn when excluding CO2 costs inboth BAU and the abatement pathway2). These numbers would translate toan increase o 50-185/yr per household including CO2 costs.

Given the long-term, capital-intensive nature o many energy investments,a stable, long-term policy ramework or investments and planning will be

indispensible to achieve the targeted abatement across all sectors.

Findings from the abatement options

In this study, the Forum explored several options to reach the targeted 40%emission reduction in 2030 versus the base year o 1990. The options dieredonly or the power sector and evolved around the regulatory ramework andpolicy choices assumed or that sector.

For the industrial, buildings, transport and agricultural sectors, a nationaloptimization approach was adopted3. Abatement options in these sectors were

2 The sectors part o the Emissions Trading System (ETS) must buy permits or CO2e

emissions. The costs depend on the amount o emissions and are thereore lower in the

implementation options that have lower emissions.

3 While the Industrial sector progressively joins the ETS, this study has not modeled Industrial

abatement optimization on an EU level due to its technical and implementation complexity.


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ranked on costs to determine which abatement levels per sector yielded thelowest total cost on the national level. The pathway assumed implementationwould move rom the cheapest to the most expensive measures until itreached the target abatement. This resulted in the ollowing abatement levels:buildings sector 59%, industry 30%, transport 37% and agriculture 23% by2030, compared to 1990 levels. Abatement costs additional to the BAU wouldbe around 350 mn/year (810 mn/yr without CO2 costs4). This is equivalentto 50 per year per household and 7 bn cumulative or the period 2010-2030.

For the power sector5, the EU Target abatement pathway assumes the ullimplementation o the National Renewable Energy Action Plans (NREAPs)beore 2020. It also presumes that ETS will unction well, in which case theEuropean power sector would implement the cheapest abatement measuresin all EU countries until the EU overall target o 60% is reached. Constraintsin inter-country transmission connections are taken into account. In theNetherlands, this EU Target pathway would result in a generation mixo 25% renewables (20% wind, 2% dedicated biomass and 3% co-redbiomass6), 46% gas, 18% coal, and 10% nuclear. Abatement costs on topo the BAU would be around 150 mn/yr or 3 bn or the period 2010-2030,equivalent to 20 per household. Excluding the avoided CO2e costs wouldroughly double that cost dierence with the BAU, since CO2e emissions are

much lower in the pathway with correspondingly lower costs or emissioncredits under the ETS system.

Power sector emissions in the EU Target pathway all signicantly versus BAU,but rise 7% in 2030 versus the 1990 base (while the EU as a whole reachesa weighted average o 60% reduction in this period). Three actors drive this:rst, Dutch power generation capacity will have grown aster than EU average.Second, this growth will give the Netherlands a relatively young generationfeet, which make the abatement measures aimed at older ossil plants moreapplicable to other countries. Third, in the pathway the Netherlands would beimplementing close to the maximum o wind on-shore and biomass, combinedwith an aggressive growth o wind o-shore. The remaining RES opportunitiesin the Netherlands are less cost attractive than those in other countries.

The Forum perormed three sensitivities on the EU Target pathway. Eachexplores the impact o a set o dierent inputs. See exhibit 1 overlea.

The Country target sensitivity assumes a 60% abatement target orthe Dutch power sector in 2030 (without unctioning ETS) and the ullimplementation o NREAP by 2020. Under these assumptions, theNetherlands would stop exporting power in order to decrease emissions.To abate the remaining emissions, wind production share would increase8% compared to the pathway, 4 GW o coal capacity would be convertedto dedicated biomass, and 4 GW o gas would be closed (because o the

4 The CO2 price used in this study is taken rom the IEA, World Energy Outlook, 2009 and

rises to 44/ tCO2 in 2030 (starting rom 15/tCO2 in 2010).

5 The percentages and capacities used in the power sector options are the result o the

modeling and can not be seen as a recommendation by the Forum.

6 Average share o biomass in co-fring plants will be 20-25% o inputs, which translates to

7-8% output share.


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export loss). The total cumulative costs would increase with 8 bn (17 bnwithout CO2) compared to the pathway.

The Country target with export sensitivity assumes a 60% abatementtarget or the Dutch power sector in 2030 (without unctioning ETS) butwith exports at the level o the EU target pathway (35 TWh). To reach 60%abatement, wind production share would more than double compared to thepathway and 4 GW dedicated biomass would be converted rom remainingcoal plants. The total cumulative costs would increase to 18 bn comparedto the pathway (21 bn without CO2). These costs are rom Dutch demand

only and exclude costs or benets rom export. As an alternative to the build-out o 7 GW o wind o-shore, gas plants could be retrotted with CCS. Thiswould require 6 GW o gas CCS and would reduce additional costs by 11 bncompared to the pathway (10 bn excluding CO2 costs).

The Single target sensitivity explores the impact i Europe were to meetthe 60% abatement ambition or the power sector or 2030 without anyother intermediate or derived targets. For the Netherlands, this wouldresult in a power mix o 15% RES, 19% coal, 53% gas, and 12% nuclear.Total production is 20 TWh (14%) less than in the pathway. The total costscompared to the pathway could be somewhat lower (up to 2% o thetotal power system costs o around 160 bn) or the period 2010-2030,depending on the incentives the Netherlands may have to pay to other

countries, and/or the cost to build the RES capacity or to develop alternativeabatement options.

Exhibit 1


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7 At a calorifc value o 35.17 MJ/m3.

In summary, the total additional cumulative cost to society in terms oinvestments and running costs are 10-30 billion higher or the abatementscenarios compared to BAU (and 20-50 bn higher excluding CO2 costs). Thiscorresponds to 50-185 per household (including CO2 costs). See exhibit 2.

Considerations for implementation

From a European perspective, the Netherlands is well positioned to lead

abatement in several areas, due to geological and inrastructural advantages.Examples o these include: CCS (above-average geological position, availabilityo o-shore depleted gas elds and continued use o ossil uels); biomass(excellent deep-sea harbors and inrastructure, availability o coal plants or co-ring, dense urban clusters or district heating by Combined Heat and Power(CHPs) on biomass); wind o-shore (shallow sea and good wind conditions);and decentralized power generation using existing gas inrastructure (micro-CHPs uel cells). The Netherlands can also lead in the transport sector thanksto its high density, which is suitable or charging clusters and relatively shortdistances driven, which benet the rollout o electrical and hydrogen poweredvehicles. Finally, it might be able to gain a competitive advantage by usinghydrogen in industry and residential heating.

Gas will continue to play an indispensable role in all abatement options. Totalgas demand in the abatement options will be in the range o 42 to 49 BCM per

Exhibit 2


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year (with a possible peak o 52 BCM)7. In power generation, gas is a criticaltechnology in all options, accounting or 35-55% o Dutch power generationand balancing the more intermittent technologies. In buildings, 70% ohouseholds will still use gas or heating and warm water in 2030. Furthermore,gas could have a role in decentralized power generation and hydrogenprovision or hydrogen-powered technologies.

The Dutch gas transport inrastructure, including the current capacityexpansion, will be sucient to provide the peak gas capacities needed or the

EU pathway and all sensitivities discussed in this report. This also holds truein cases with signicant wind capacity, where gas is likely to be critical or netbalancing.

For sound implementation o any options or signicant carbon abatement, aclear policy and investment ramework needs to be in place in the Netherlands(and Europe), as well as a strong, unctioning ETS. Many o the newtechnologies described above require substantial investments; even beorethat, a long-term stable nancial outlook is necessary or private parties toinvest in them. In addition, development beyond currently known technologiesshould be encouraged.

The current pace o implementation o the NREAP or the Netherlands is not

in line with the ambitious targets or 2020, so a signicant acceleration o thecurrent build-out o renewables may be needed i the Netherlands is to meet its2020 target.

For the period 2030-2050, the research indicates that the Netherlands canreduce its emissions by 80% by 2050 compared to 1990 levels. The pathwaydescribed in this study or the period 2010-2030 does not exclude anyoptions nor does it make any much more cost-disadvantaged versus another.Depending on the urther maturation o technologies and societal preerences,the Netherlands will need to create the best 2030-2050 pathway in the 2020s.


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Business as Usual development

o the Dutch energy systemThis chapter describes the Business as Usual (BAU) pathway, which is basedon the ECN BAU with xed policy case8. The BAU describes the energy andemission growth per sector rom 2010 to 2030, assuming no urther abatementmeasures are taken rom today. The BAU can be seen as the pathway thatthe Netherlands might have adopted i no abatement ambitions existed.It delineates the ve main energy-consuming sectors in the Netherlands,including the 1) buildings sector, 2) industry sector, 3) transport sector, 4)agriculture sector and 5) power sector.

1.1 ECONOMY-WIDE BAU

Dutch energy demand is expected to increase rom 4100 PJ in 2010 to 4550PJ in 2030; it should then decrease to 4350 PJ by 2050. A rise in energyconsumption in the power (1.7% p.a.), transport (0.3% p.a.) and industrysectors (0.6% p.a.) would drive the increase and more than oset the decreasein the buildings (-0.4% p.a.) and agriculture (-0.2% p.a.) sectors.

More specically, power demand would increase rom 98 TWh in 2010 to 109TWh in 2030, then decrease to 106 TWh in 2050. The two sectors with growingpower demand would be industry (0.7% p.a.) and buildings (0.1% p.a.). The

agricultural sector may see a 2.8% p.a. decrease due to the increased use oCombined Heat and Power (CHP) technology. See Exhibit 3 below.

Exhibit 3

8 Reerentieraming energie en emissies 2010-2020 - Energiebalans bij vastgesteld nationaal en

Europees beleid, ECN en Planbureau voor de Leeomgeving, april 2010.

1


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Gas demand would increase rom 47 BCM in 2010 to 57 BCM in 2030, thenslightly decrease to 51 BCM by 2050 (based on a caloric value o 35.17 MJ/m3). Increases in demand rom three sectors will probably drive the increase ingas demand in 2050 compared to 2010: power (1.6% p.a.), agriculture (0.8%p.a.) and industry (0.3% p.a.). The decreased gas demand in the buildingssector (-2.1% p.a.) partially osets this increase. See Exhibit 4 below.

Emissions in the Netherlands would grow by 11% until 2030 and thendecrease by 5% by 2050 compared to 1990. The largest contributors

to emissions in 2010 are likely to be the transport (32%, 74 MtCO2e/yr),industry (22%, 52 MtCO2e/yr) and power (20%, 48 MtCO2e/yr) sectors.See Exhibit 5 overlea. For the 2050 BAU, the abatement pathways aresubtracted rom the 2030 BAU and then extrapolated as i no additionalabatement would take place between 2030 and 2050. This prevents overlapbetween 2030 and 2050 levers.

Exhibit 4


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1.2 BUILDINGS SECTOR

The BAU assumes that energy demand in the buildings sector will decreaserom 712 PJ in 2010 to 652 PJ in 2030 (8% reduction). The reduction is thenet eect o a 14% increase in power demand and an 18% decrease in gasdemand. These numbers are based on an extrapolation o the ECN Withoutpolicy, which makes several assumptions including a housing stock o 7.7million in 2020 and autonomous penetration o eciency measures (e.g.,86% or condensing boilers and 80% or roo insulation).

Emissions in the buildings sector in 2010 were 30 MtCO2e/yr 13% o overallDutch emissions. Under BAU, autonomous eciency measures are expectedto reduce this to 6 MtCO2e/yr (20% compared to 1990 levels) by 2030.

1.3 INDUSTRY SECTOR

The BAU assumes energy demand in the industry sector will increase rom1740 PJ in 2010 to 1910 PJ in 2030 (10%).

Emissions in the industry sector in 2010 were 52 MtCO2e/yr or 22% ooverall Dutch emissions. Under BAU, emissions are expected to increase to

61 MtCO2e/yr by 2030. This growth is driven by two actors: 1) an outputgrowth o 1.4% in the chemicals sector and 1% in other industrial sectors

Exhibit 5


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and 2) a small increase o CHPs (Combined Heat and Power), which increaseemissions in industry but reduce emissions in the power sector. Whenconsidering the emissions growth, however, it is important to remember thatcompared to 1990 emissions it is still a reduction o 6% because abatementmeasures implemented between 1990 and 2010 reduced emissions 12MtCO2e/yr more than the expected increase between 2010 and 2030.

The chemical industry has a larger share o emissions in the Netherlandscompared to the rest o Europe (32% in NL vs. 11% in EU-27). Around 30% o

the emissions in the sector are dicult to abate as they come rom chemicalconversion processes (e.g., ethylene production) rather than burning uel.Abating CO2e rom these chemical processes would require a large-scaleindustry shit, which has not been included in the BAU or in the study.

1.4 TRANSPORT SECTOR

The BAU assumes transport sector energy demand will increase slightlyrom 1030 PJ in 2010 to 1100 PJ in 2030 (6%). The sectors emissions were74 MtCO2e/yr in 2010, which constituted 31% o overall Dutch emissions.Under BAU, an increase to 80 MtCO2e/yr (23% above 1990 levels) isexpected by 2030.

Road and domestic shipping comprise 55% o the energy demand in thetransport sector (570 PJ in 2010). The BAU assumes energy demand willincrease 12% in this segment to 640 PJ by 2030. Emissions may increaseslightly rom 42 MtCO2e/yr to 48 MtCO2e/yr, driven mostly by the MediumDuty Vehicle (MDV small truck and van) and Heavy Duty Vehicle (HDV largetruck) segments. Their combined emissions would increase by 24%, rom19 MtCO2e/yr in 2010 to 24 MtCO2e/yr in 2030 based on the OECD NorthEurope trend. In a third segment, Light Duty Vehicles (LDV passenger cars),energy demand and emissions are projected to increase slightly rom 22MtCO2e/yr in 2010 to 23 MtCO2e/yr in 2030. The BAU assumes that thenumber o light vehicles increases 2.3% until 2030 but that kilometers drivenper vehicle remains constant.

The air and maritime segments combined energy demand (460 PJ) andemissions (32 MtCO2e/yr) appear to remain constant rom 2010 to 2030.The energy demand in air transport decreases 15% (161 PJ in 2010 to 137PJ in 2030), but an equal absolute increase in maritime transport demandcompensates or it (299 PJ in 2010 to 324 PJ in 2030). Emissions in 2030compared to 1990 almost double in air transport (5 to 9 MtCO2e/yr) whilemaritime transport decreases rom 35 MtCO2e/yr to 24 MtCO2e/yr (31%reduction).9 The BAU also assumes that uel eciency does not change inany part o the transport sector (i.e., rozen technologies).

9 Dutch emissions and energy demand rom aviation and maritime are taken rom the ofcial

IPCC calculations or domestic emissions rom aviation and maritime. Potential abatement is

based on the Dutch share o the total EU abatement potential.


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1.5 AGRICULTURE SECTOR

The BAU assumes energy demand in agriculture will decrease rom 149 PJ in2010 to 142 PJ in 2030 (5%). These numbers are based on an extrapolation o theECN assumptions o a small increase in energy-saving measures in agriculture.

Emissions in the agriculture sector in 2010 are 27 MtCO2e/yr, which contribute11% to overall Dutch emissions. Under BAU, a reduction o 3 MtCO2e/yr(-10% compared to 1990 levels) is expected by 2030. An increase in energy-

saving measures can balance out the growth and intensication o the Dutchgreenhouses. Although increased penetration o gas-red heating with CHPsmay raise overall gas demand, CO2e abatement due to electricity eedbackrom CHPs reduces power sector emissions by reducing power demand.

1.6 POWER SECTOR

BAU in the power sector

The BAU assumes power demand will increase by 10% rom 100 TWh in 2010to 110 TWh in 2030, driven by the buildings (65 TWh), transport (54 TWh)and agriculture (increasingly negative demand due to excess decentralized

generation) sectors.

The current power mix in the Netherlands consists o 3.6 GW o coal (18%), 16GW o gas (67%), 3 GW o RES (13%) and 0.5 GW o nuclear (2%). This producesemissions o 44 MtCO2e/yr, with a CO2e intensity o 0.53 MtCO2e/TWh.

The BAU extrapolates current trends without any abatement ambitions. Itassumes the ollowing:

0.5 GW o coal and 3 GW o gas plants will retire by 2020 and an additional3 GW o gas plants will retire between 2020 and 2030 as they reach the endo their economical lietimes (see Appendix A or details)

4.5 GW o coal and 5 GW o gas plants which are currently underconstruction/planned will be completed by 2020

Two GW o RES will be developed by 2020 (committed build-out until 2015),which consists o 1.4 GW o wind on-shore and 0.6 o wind o-shore.Since the BAU assumes the most economical technology will be usedwithout additional abatement ambitions, it assumes that no additional RESconstruction will occur beyond the committed build-outs

1.6 GW o nuclear is planned, one reactor o the EPR type that is expectedto be operating by 2018

Between 2020 and 2030, 1 GW o wind on-shore will retire and will bereplaced by new wind on-shore

The Netherlands will become a net exporter by 2013 and will export 30-60TWh (varies per year) until 2030 (compared to an average import o 16 TWh

or the period o 2000-2010)


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Exhibit 6

The resulting power mixes in the Netherlands in 2020 and 2030 are givenin Exhibit 6. Emissions go up to 89 MtCO2e/yr in 2020 then decrease to 76MtCO2e/yr in 2030. This absolute emission growth masks an improvementin emission intensity, which alls rom 0.59 MtCO2e / TWh in 2010 to 0.44MtCO2e / TWh in 2030.


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Possible abatement pathways2.1 INTRODUCTION

The EU has ormulated sector abatement ambitions or 2030. When applied tothe Dutch sectors, these lead to an economy-wide abatement o 30% versus1990, which is lower than the EU total ambition o 40-44%. See Exhibit 7. Thereason why the Netherlands would only reach 30% is that the Dutch industrial,agriculture and power sectors emit relatively more than the EU average.

Given this challenge, this study has investigated options or the Netherlands to

meet the EU 40% ambition in the most cost-eective way without assumingup-ront sector targets.

To establish the lowest possible abatement cost, the study constructed across-sector cost curve. See Exhibit 8. This curve ranks potential measuresin all sectors by cost. The horizontal axis gives each measures abatementpotential, while the vertical axis shows the cost per ton o CO2e abated.Negative costs mean that these measures are actually saving costs with theassumed commodity prices.

With this cost curve it is possible to determine what measures are necessaryto reach a certain level o CO2e abatement or, in other words, how ar tothe right o the curve one has to go. To reach an economy-wide abatement

o 40% in 2030, an additional 130 Mt o CO2e must be abated versus theBAU. According to the graph in Exhibit 8, the measure with highest cost/ton

2

Exhibit 7


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needed to reach the targeted abatement could have costs o 180/t. The totalabatement costs o the non-power sectors combined would be around 800mn/year on top o the BAU, or the period 2010-2030. Including the avoidedcosts o CO2 in industry abatement costs would add another 340 mn/year.

The per-sector abatements relative to 1990 derived rom the country optimum aregiven in Exhibit 9 (overlea) and compared to the EU averages. The individual non-power sectors abatement options are discussed in more detail in Section 2.2.

A ew sector-specic points are worth highlighting:

The buildings and transport sectors would abatemore than EU average in relative terms

The industry and agriculture sectors would abateless than EU average in relative terms

The power sector would abate at EU average (60%) i a national abatementambition were assumed. For the power sector10 an EU-level optimization isalso possible; this would use the ETS system. As explained later in Section2.3, the impact o a country versus an EU-wide approach is signicant orthe Netherlands, as abatement in the Dutch power sector would be lessi EU-wide optimization is applied. Section 2.3 will discuss both options indetail with other sensitivities.

Exhibit 8

10 The European optimum option is limited to the power sector in this study. The industrial sector

is expected to become part o the ETS in the coming 5 years. However, given the uncertainty

on how industrial ETS will play out, the lack o historical data and the complexity o modeling

a European optimum across countries and industrial sectors has led this study to assume a

national target or industrial abatement


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2.2 NON-POWER SECTOR ABATEMENT IN THE PERIOD 2010-2030

2.2.1 Abatement in the buildings sector

Assuming an economy-wide, cost-optimum abatement ambition o 40%by 2030, the buildings sector would abate 12 MtCO2e/yr (59% o 1990emissions) through energy eciency measures (30% abatement, hal inautonomous energy improvements in the BAU, hal in additional energyeciencies) and uel shits (29% abatement). See Exhibit 10.

The energy eciency potential abatement measures in the buildings sector andthe associated costs are shown in Exhibit 11. Because most measures saverather than cost money, total annual savings could be 8 mn per year in 2030.It is crucial to note, however, that the energy eciency shit has been dicult tocapture in Europe so ar.

Fuel shits can propel urther abatement by shiting rom heating with acondensed boiler on gas to lower-emitting uels and technologies. Assessing theabatement potential or uel shits relies on economic and resilience actors.First, the analysis includes a wide mix o technologies because their cost anddevelopment are uncertain. Second, each technologys costs and potential are

calculated as much as possible, creating the cost curve in Exhibit 12 (overlea).Third, where easible technologies are split into application segments because

Exhibit 9


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Exhibit 10

Exhibit 11


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their cost can dier greatly rom location to location (e.g., the cost o districtheating depends greatly on the distance to the heat source; the dierential costo a heat pump in new builds is much lower than in a retrot). Finally, demandcould change (e.g., more need or cooling, dierent demand patterns due toelectrical vehicles), suiting some technologies better than others.

The abatement pathway this study assumes achieves 6 MtCO2e/yrabatement through uel shits and maintains a diverse mix o technologies.. Itis based on:

Micro-CHPs (5% penetration). Micro-CHPs have no direct abatementpotential because they use the same amount o gas as a condensingboiler (both have a thermal eciency o 95%). Their electric eciencyis 14%, but only when the device is used or heating, which limits theirpotential or decentralized electricity generation. Once micro-CHP uel cellsare commercially viable, decentralized electricity generation might becomemore attractive; their electricity eciency is likely to be around 45-55%depending on the technology. This study assumed that uel cells do notbecome commercially available on a large scale beore 2030.

Ground source heat pumps (21% penetration). Around 2018 (in the EUTarget pathway), Dutch power is assumed to reach an emission intensitylevel that would make a power-based heat pump more CO2e eective thanconventional gas-based heating technologies. Installation o heat pumps incombination with heat cold storage could enhance eciency (and cooling)

Exhibit 12


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and reduce peak capacity. As a result, heat pumps could have a marketshare o 50% o new builds and 25% o non-urban existing buildings witha total penetration o 21% by 2030.

District heating (7% penetration). Higher penetrations are technicallypossible, but at costs that are unattractive under the current regulationthat district heating cannot cost more than gas heating or end users. Heatproduction rom biomass and deep geothermal heat can unction as asustainable addition to district heating by residual heat.

Gas heat pumps in commercial buildings (1%) Biogas rom ermentation (0.5 BCM) (assumes 30% o the totalproduction capacity)

Condensing boiler using natural gas (67% penetration)

See Appendix B or urther explanations o each technology and the choicesmade about the uel shits.

2.2.2 Abatement in the industry sector

Industry would abate 15 MtCO2e/yr (29% o 1990 emissions) in 2030; thisassumes an economy-wide, cost-optimum abatement ambition o 40% in2030. The abatement measures include energy eciencies (11%), uel shits

(4%) and CCS (15 %.) See Exhibit 13 below.

Exhibit 13


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Abatement drivers include (see Exhibit 14):

Energy Eciency. Energy Eciency has a potential o 5 MtCO2e/yr andconsists o a wide variety o abatement levers, including: waste heatrecovery, improved maintenance and process control, smelt reduction (Ironand Steel sector) and CHPs.

Fuel shits. Heat pumps can replace low grade heating at a cost o 60-80/t,with a total potential o 2 MtCO2e/yr

CCS. CCS has a potential o 8 MtCO2e/yr at a cost o up to 60/t. Thepotential is limited because only large point emitters are suitable or CCSand additional CCS inrastructure is still needed.

Large-scale process shits. It is technically possible to shit to completelynew ways o production. For example, a plant could change iron makingrom a conventional blast urnace to a Cyclone Converter Furnace, atechnique currently in the laboratory stage. However, this study excludedthese options because they would require large CAPEX investments thatcould also be made outside Europe.

2.2.3 Abatement in the transport sector

The transport sector would abate 39 MtCO2e/yr (37% o 1990 emissions) in 2030,assuming an economy-wide abatement ambition o 40% by 2030. Energy eciency

measures (up to 25%) and uel shits (up to 12%) contribute to the abatement. Othe 39 MtCO2e/yr, 25 MtCO2e/yr is abated in the road sector, 4 MtCO2e/yr in the

Exhibit 14


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21

air sector and 10 MtCO2e/yr in the marine sector. See Exhibit 15 below.

Modal shits (e.g., a shit rom using cars to trains) were not included. Themost economical uel shit varies by each type o transport. Generally,electric solutions are most attractive or small cars that do not requentlydrive long distances. Hydrogen technology is most attractive or largerLDVs and MDVs.

This study assumed the ollowing, based on several studies that avored thecost-optimal technology without completely locking out technologies that

might experience cost breakthroughs (see Exhibit 16 overlea): Energy Eciency. Energy eciency has a potential o 26 MtCO2e/yr, o

which eciency improvements in the Internal Combustion Engine (ICE)are the largest lever (7.7 MtCO2e/yr).

Electric. This technology (plug-in hybrids and electric batteries) couldpenetrate the light duty vehicle (LDV) feet by up to 43% in 2030 and85% in 2050. Plug-in hybrids account or most o the electrication, with33% in 2030 and 66% in 2050; they are cheaper than electric batteryvehicles and enjoy a longer driving range.

Hydrogen. This technology could penetrate up to 11% o the light dutyvehicle feet (25% in the high penetration scenario) and 40% o the heavyduty vehicle feet in 2050. Hydrogen has a much longer driving range than

pure electric vehicles; as a result, the pathway assumed a higher hydrogenpenetration or heavy duty vehicles.

Exhibit 15


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Biouels. This energy carrier is attractive or all parts o the transport sectorand is expected to help abate emissions. This study assumes constrainedsupply in Europe, which must overcome uncertainties and barriers inregulation, land use, and transportation. Biouels are allocated to sectorswhere alternative abatement options are scarce, e.g., mainly aviation andHDVs. The total abatement potential through biouels in aviation is 25% (1.7MtCO2e/yr) in 2030 at a cost o around 10/tCO2.

2.2.4 Abatement in the agriculture sector

Agriculture would abate 4 MtCO2e/yr (23% o 1990 emissions) in 2030assuming an economy-wide, cost-optimum abatement ambition o 40% by

2030. The 2030 BAUs abatement is 10% compared to 1990 levels as shownin the previous chapter. The agricultural sector could abate an additional 4MtCO2e/yr (13% o 1990 levels) through implementation o heat pumps in4500 hectares o greenhouses and o (semi)-closed greenhouses in 2,270hectares o greenhouses at a cost o up to 50/t CO2e abated.

The Dutch abatement potential o 23% or the agriculture sector is still lessthan the published EU abatement ambition o 36-37% by 2030 comparedto 1990. The main reason or this is the Netherlands relatively large number

o greenhouses as compared to other European countries and the energy-eciency o these, many o whom (60%) already used CHPs in 2010. Further

Exhibit 16


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penetration o CHPs can reduce power sector emissions (as they lower powerdemand). The remaining solutions in agriculture (semi)-closed greenhouses,heat pumps and livestock management do not reach the European ambitiono 36-37% abatement. See Exhibit 18 overlea.

2.3 POWER SECTOR ABATEMENT IN THE PERIOD 2010-2030

The power sector plays a crucial role in overall abatement; it reduces emissionsin the power sector and it provides clean power to acilitate shits rom otheruels to electricity. Because o the sectors importance, this section covers threeareas. First, it describes the available abatement levers or the sector. Second,it discusses the EU Target pathway where the EU power sector reaches 60%abatement in the most cost-optimal manner. Third, it demonstrates threesensitivities: one where 60% abatement is achieved at a country level withoutexport; one where 60% abatement is achieved at a country level with export; andone where a CO2 ocus is assumed with no targets other than the 60% EU target.

Exhibit 17


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2.3.1 Potential abatement levers in the power sector

The Dutch power sector could potentially decrease the total amount o CO2eemitted rom its current feet with the ollowing abatement levers:

Increase the number o CO2e neutral plants by installing CCS on CO2eemitting coal and gas plants. Coal plants could also increase biomass co-ring or convert to biomass dedicated plants

Replace CO2e emitting plants with CO2e neutral ways o power generation.Options include: replace coal or gas plants with nuclear or RES capacity,

increase gas-red production and decrease coal-red production Stop producing or export, thus lowering total production

The abatement cost curve compares abatement costs o dierent levers tothe costs o non-abatement technologies that would be built in Business asUsual. The abatement costs o the options are technology and plant specic.See Exhibit 19 or the cost curve See Chapter 3 (Exhibit 29) or a discussionon production costs or new builds (in /MWh) o each technology.

The vertical axis in Exhibit 19 shows abatement costs per lever. These arethe costs o applying a lever as alternative to a coal or gas plant (the BAUtechnology). The x-axis shows the abatement potential per lever. The depictedcost curve deviates rom other cost curves in the report in the sense that ithas substantial overlap. In reality and in the modeling, each levers potentialis constrained by a combination o our actors: how much capacity already

Exhibit 18


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exists (e.g. switching coal to biomass); geographic limitations that cappotential (e.g. wind on/o-shore); political and societal choices (e.g., newnuclear capacity); and/or relative cost attractiveness. More detail ollows oneach o these constraints:

Replace fossil power production. The assumption that none o the newcoal plants (4.5 GW) built ater 2010 will be shut o signicantly constrainsthe potential or switching away rom coal. The assumed potential orswitching rom gas does not have a technical maximum, although costs can

make this unattractive in some cases.

Switch to CO2e neutral technologies

Wind on-shore. The potential to switch to wind on-shore is limited by itsmaximum assumed 5 GW capacity.

Wind o-shore. The potential to switch to wind o-shore is limited by itsmaximum assumed 15 GW capacity by 2030.

Solar PV. While possible, this option has not been studied in detail as thecosts currently make it very unattractive

Dedicated biomass. Retrots or existing coal plants are limited by thecapacity o coal plants built ater 2010 (4.5 GW).

CCS. This study assumes a maximum o 1 large coal plant to be ully CCSequipped by 2030. A sensitivity to apply more CCS is included in Appendix A.

Exhibit 19


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26

Change load factors of existing plants. From a CO2e perspective, thisaspect could only increase gas production at the expense o unabatedcoal production. The maximum potential is 34 TWh, which is driven bythe dierence between gas plants current load actors and their assumedmaximum o 60% (which allows gas plants to balance the system)

Reduce export production. The Netherlands installed capacity is morethan it needs to meet Dutch power demand. It could potentially closeproduction capacity and cut o exports. The cost o such a closure

beore the technical end-o-lietime o an asset could be oreited margins,estimated to be around 5/MWh or coal and gas.

2.3.2 EU Target pathway or power sector abatement

The EU Target pathway assumes the ollowing:

Implement the National Renewable Energy Action Plans (NREAPs) in full

and on time across the EU, including the Netherlands. The NREAPs are theplans each member state has developed to reach the 20-20-20 targetsagreed by the EU. Currently, most countries are not on track with thisimplementation, as shown in Exhibit 20 or wind. However, given these aremutually agreed upon ocial targets, this study assumes that the goals will

be reached.

The Netherlands current plans do not yet amount to the ull NREAP. AsExhibit 21 shows, the 2015 ambition is unlikely to be achieved unless thecurrent trend changes. Publicly available data also reveals that the morethan our-old increase in o-shore capacity between 2015 and 2020 lacksconcrete plans. Wind on-shore has less plan transparency, but it is unclearwhether the doubling by 2015 or the tripling by 2020 is on track.

Realize an EU-wide power sector abatement ambition in a cost-optimum way.The EU will realize its 60% power sector abatement ambition on an EU levelin 2030 versus 1990 by implementing the lowest-cost measures irrespectiveo their member states. Whoever takes an abatement measure will receive the

incentive o the ETS carbon price. For this study, this means the Dutch powersector has no xed abatement ambition. To develop the Dutch abatementnumbers, the study rst modeled the cost-optimum 60% abatement o theentire EU power sector. It then calculated the Netherlands share o this overallEU optimum power sector solution.

Completion of all coal and gas plants under construction. Currently 4.5GW o coal and 5.3 GW o gas are being built in the Netherlands. This studyassumes that one o the new coal plants will be ully tted with Carbon Captureand Storage (CCS) by 2025.

IEA prices for oil, coal, gas and CO2. The IEA WEO 2009 was used or allcommodities, except or gas. For gas, the IEA Golden Age o Gas price (2011)was used. See Appendix A or details.


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Exhibit 20

Exhibit 21


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With these assumptions and inputs rom the EU Target pathway, the DutchPower sector would evolve as ollows rom 2010 to 2030:

RES build-out o 10 GW in line with the NREAPs

Biomass co-red production will increase to 10 TWh in 2020 (average o20-25% co-ring)

1 coal CCS plant operating by 2016 with carbon storage rom 2025

No additional build o non-renewable plants beyond the coal and gas plants

already announced and the one additional nuclear plant Closure o all coal plants older than 30 years (3.6 GW), which is the mostcost eective way to abate CO2

Closure o 1 GW o gas plants, which is partly replaced by production romnew RES assets

The BAU calculated a domestic demand o 110 TWh in 2030. Ater addingthe increase in power demand rom uel shits ater abating the other sectors,domestic demand would be 125 TWh. The total 2030 production in the EUTarget pathway would be 160 TWh, which would allow an export o 35 TWhin 2030. This almost doubles production versus 2010 production o 82 TWh.Power sector emissions would be 50 MtCO2e, equivalent to an increase o

25% versus the 1990 base o 40 MtCO2e. See Exhibit 22.

Total power system costs additional to the BAU would be around 3bn or the period 2010-2030, including the avoided CO2 costs (13 bnexcluding the CO2 costs).11 This is 2% o the BAU costs o 110 bn orthat period. CAPEX would increase 70% versus BAU, equivalent to a riseo 14 bn. All these costs are based on consumption; in other words,export costs are excluded.

2.3.3 Power sector sensitivities

This section describes sensitivities and their potential impact compared to the EU

Target pathway described above:The Country target sensitivityassumes that the Netherlands must meet the 60%abatement ambition within the country, without the option to buy (or sell) additionalcredits through ETS. The 60% comes rom the country optimization explained insection 2.1. The 60% starting point makes it unattractive to produce emissions orexport-power; not only that, these emissions count towards the Dutch ambition.As a result, this pathway assumes no export, eectively lowering production by35 TWh to 125 TWh in 2030. However, reducing the volume to match domesticdemand is insucient to meet the 2030 ambition, which means that the carbonintensity o production must be improved as well.

I CCS and closing plants that are built ater 2010 are not options, then theNetherlands will need to convert the 3.5 GW o coal capacity built ater 2010 todedicated biomass plants. It will also need to close around 28 TWh (4.5 GW)

11 CO2 price assumed is > 44/tCO2 in 2030 (rom 15/tCO2 in 2010), taken rom the IEA,

World Energy Outlook, 2009.


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o gas capacity to compensate or lower demand. Finally, it will need to build 1GW o renewables on top o the NREAP requirements. Costs in addition to thepathway would be around 410 mn/year or the power sector, which is 55 p.a.per household. Total costs or 2010-2030 would amount to an additional 8 bncompared to the pathway (7 bn additional CAPEX). Excluding the avoided costso CO2 total additional costs or 2010-2030 would be 17 bn.

The Country target with export sensitivity is based on the assumption that theexisting capacity (including NREAP) will be used and not mothballed prematurely. It

also maintains the 60% abatement ambition in the Netherlands. In addition to thechanges in the Country target sensitivity, 35 TWh o wind (11 GW) supplies moreclean power. Costs, including cost savings or CO2, would be around 900 mn/year compared to the pathway or 120 p.a. per household. Total costs or 2010-2030 would add to an additional 21 bn on top o BAU (36 bn additional CAPEXcosts). I the avoided costs o CO2 were excluded, the total additional costs or2010-2030 would be 34 bn.

Instead o the wind build-out, it is also possible to continue export rom gas-redplants by applying CCS on 8 GW o gas-red capacity. Costs including CO2 wouldbe around 350 mn/year compared to the pathway or 50 p.a per household. Totalcosts or 2010-2030 would be an additional 10 bn on top o BAU (26 bn CAPEX).I the avoided cost o CO2 were excluded, the total additional cost or 2010-2030would be 24 bn.

Exhibit 22


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30

The Single target sensitivity explores the impact o ocusing on the single targeto 60% emission reduction or the power sector in 2030, without assuming anyintermediate or derived targets (e.g., a technology penetration target). It optimizesemissions on the European level. This approach leads to the ollowing mix in the Dutchpower sector: 15% RES (6 GW o RES including 1 GW o dedicated biomass), 19%coal (4 GW), 53% gas (14 GW), and 12% nuclear (2 GW). Costs would be up to 3bn less than the pathway, although some to all o this amount could be needed tomotivate other countries to increase their RES build-out and compensate or the

lower capacity in the Netherlands. Alternatively, the Netherlands could invest thismoney into urther developing other abatement options (e.g., hydrogen-based) tomaintain its contribution to the overall EU abatement eort. Excluding CO2 costs, thiswould be up to 8 bn.

The production mix, costs and emissions o the power sector sensitivities are in Exhibit 23.

2.3.4 Summary o Economic implications

The BAU power sector costs or the period 2010-2030 are around 155 bncumulative (111 bn excluding CO2 costs). The cumulative CAPEX or thisperiod is 20 bn.

The EU Target pathway has costs o around 3 bn additional to the BAU (13 bn

excluding CO2 costs). Its cumulative CAPEX is 14 bn higher. The urther costs perhousehold are 25 per year.

The power sector sensitivities costs are expressed as the dierence with the EUTarget pathway. The Country target sensitivity and the Country target with exportsensitivity have total expected costs o around 8 bn respectively with 18 bn ontop o the EU Target pathway (17 bn respective to 21 bn excluding CO2 costs).The additional costs per household are 55 respective to 115 per year. The Singletarget sensitivity would have costs o 0-3 bn less compared to the pathway,translating to potential household savings o 0 to 20 per year.

See Exhibit 24.


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Exhibit 23

Exhibit 24


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2.4 ABATEMENT IN THE PERIOD 2030-2050

All statements and calculations or the period 2030-2050 must be treatedcareully and be viewed as directional and indicative. This is becausevisibility into technical and cost developments over such long timeramesis very limited. Given these constraints, this study ocused on determiningwhether any pathway choice or the period 2010 2030 excluded anyparticular 2030 2050 option, rather than on identiying the best option orthe 2030-2050 timerame.

2.4.1 Non-power sector abatement or the period 2030-2050

The buildings sector will continue to rely on a mix o increased energyeciencies and urther uel shits to reach the 2050 abatement ambition o 95%versus 1990 (assuming the 2030 abatement o 60%). The energy eciency (EE)improvement in this period is assumed to come exclusively rom the improvedbuilding codes o new builds (assumed EPC code o 0.4); it would producean additional 10% abatement versus 1990. More uel shits would provide theremaining 25% as electrical heat pumps penetrate the market urther (e.g.,75% o new builds, growth o biogas to 2.8 BCM, and 21% o district heating).When combined, these levers could generate the required 9 MtCO2e/yr requiredto reach 95% abatement in 2050 versus 1990. It is important to note that

alternative developments the introduction o hydrogen-burning micro-CHPs,decentralized power generation or combined heat and cold storage maybecome more attractive or realistic in the meantime.

The industry sector abatement potential in the period 2030-2050 is assumedto equal the energy eciencies and uel shit during 2010-2030 in absolutesize. More CCS will also be needed. On top o the 8 MT CCS abatementbetween 2010 and 2030, an additional 20 Mt o CCS would be required or2030 - 2050. The total CCS amount o 28 Mt in 2050 is roughly equal to thetotal 2010 industrial emissions in the Rotterdam area and is about hal o thetotal 2050 industrial emissions. Storage potential in the Netherlands is sucient(around 2.2 GtCO2) and abatement costs will depend on the progress ourther commercialization. Currently, ull costs (including capture, transport and

storage) will range rom 60- 200 /tCO2 depending on the CO2 intensity othe industry point emitter and the storage location. Using hydrogen as a uel inindustry could potentially bring down costs urther, especially i CO2 storagecould be done relatively easily at the point where hydrogen would be producedrom natural gas.

Combining these industrial abatement levers would result in a 60% abatementin 2050 versus 1990 (up rom a 30% abatement in 2030).

The transport sector abatement could reach 95% in 2050 compared to 1990.Eciency improvements may enable a 31 MtCO2e/yr abatement o emissionscompared to 2050 BAU and uel shits could account or an additional 46MtCO2e/yr abatement. Road transport would need to shit more to electric

vehicles and hydrogen in the LDV segment and move toward compressed


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natural gas (CNG), hydrogen and biouels in the HDV segment. Maritimetransport could urther increase abatement through continued improvementsin energy eciency measures and possibly by shiting to cleaner burninguels. Raising the penetration o biouel in aviation accounts or the rest o theabatement improvements in 2050 compared to 2030.

The agriculture sector could abate 8 MtCO2e/yr (34% o 1990 emissions) in2050. The abatement potential rom energy-saving measures in greenhouses(e.g., heat pumps and (semi)-closed green houses) and livestock management

is assumed to double in 2030-2050 compared to 2010-2030.

See Exhibit 25 below or an overview o CO2e reductions in the non-power sector.

2.4.2 Power sector abatement or the period 2030-2050

The power sector has, in addition to energy eciency, roughly threetechnologies that it could use to achieve more abatement: Renewable energysources (RES), CCS, and nuclear. While it is o limited use to predict whatmix o these will ultimately prevail, it is critical to understand i any 2010-2030 abatement pathway locks-out any o these options. To investigate thispossibility, this study developed three scenarios that lead to 95% abatement.The results revealed that all options are still open at roughly equal costs o 10%

additional to the BAU.

Exhibit 25


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CCS-dominated mix assumes a 50:50 gas and coal CCS build-out, bothto replace older conventional ossil plants and to satisy demand growth.Nuclear and renewable capacities remain. This scenario leads to 78%abatement compared to 1990 levels; gas demand is 11 BCM. Total systemcosts are 155 bn o which 25 bn is CAPEX.

Nuclear and RES-dominated mix assumes a 50:50 nuclear and wind build-out to replace conventional uels ater retirement and satisy new demand.CCS retrot is applied to plants that will be built between 2010 and 2030.

This scenario leads to 95% abatement compared to 1990 levels and gasdemand drops to 2 BCM. Total system costs are 150 bn o which 40 bnis CAPEX.

Optimized mixo dierent technologies assumes a 50:50 mix between theNuclear and RES-dominated mix and the CCS-dominated mix. This scenarioleads to 87% abatement compared to 1990 levels and gas demand will be 6BCM. Total system costs are 155 bn o which 30 bn is CAPEX.

Each o these scenarios can be attained rom any start point in 2030. SeeExhibit 26.

Exhibit 26


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ImplicationsThis study showed that the Netherlands could meet the 2030 and 2050abatement ambitions despite its projected emissions growth in the comingyears. Abatement could be achieved most cost-eectively in a Europeancontext, where each country implements those levers that are the mostattractive or it. This chapter discusses the primary implications o thepathways covered earlier, including:

The Netherlands could take the lead in Europe in several abatement areas(section 3.1)

Gas will still play a role as an energy carrier (section 3.2) and

The need or a stable policy scheme given the long asset lie o manytechnologies and the need to oster a wide range o available technologies(section 3.3)

3.1 Potential areas where the Netherlands

could lead abatement within the EU

Several areas exist where the Netherlands could take the lead in a European context:

Carbon Capture and Storage (CCS). The Netherlands depleted gas

elds oer potential on-shore and o-shore storage spaces that are easilyavailable. A number o areas with concentrations o several large-emittinginstallations also make capture and transport relatively attractive (e.g.,Rotterdam, Amsterdam, and Eemshaven). Total potential is 2.2 Gt; theCCS pathway described in Chapter 2 assumes 50 Mt/yr rom 2025-2030.

Biomass and modern coal plants. Both biomass and coal will need tobe shipped in large quantities to Europe, mainly overseas. Netherlandsdeep-sea harbors, modern coal plants and space to build additional near-shore power plants (e.g., Rotterdam-Maasvlakte, Eemshaven) gives it anadvantaged position in these technologies. The Country Target pathwaydescribed in Chapter 2 assumes 7-12 Mt o biomass per year, equivalentto 5-10 times the 2010 total o EU imports, or 50% more than the current

weight o Dutch coal imports. Wind off-shore. The wind conditions, accessibility and shallow depth o the

potential Dutch o-shore locations are relatively attractive in a Europeancontext. As a result, the Netherlands could become one o the leaders inwind o-shore deployment in Europe. The Chapter 2 pathway assumes 6GW out o the total potential o 15 GW.

Gas residential solutions. The high penetration o the residential gasnetwork in the Netherlands gives it a head start with innovative gasresidential solutions like micro-CHPs Fuel Cells that convert natural gasinto heat and power (e.g. the SOFC or the PEM12 with reormer).

Hydrogen in Industry. Clean hydrogen could reduce industry emissionsat a similar cost and with less hassle than post-combustion retrot CCS.

Dutch industrys concentrated layout underlines this point; hydrogen couldbe produced centrally (with central CCS capture), then transported to the

3

12 SOFC=Solid Oxide Fuel Cell, PEM=Proton Exchange Mebrane uel cell.


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urnaces. CCS would have to retrot each urnace locally. Running 20% othe industrial urnaces on hydrogen could abate an additional 1 MtCO2e/yrin 2050. The current pathway has not assumed this option.

Hydrogen and Electric vehicles. The Netherlands high population densitycould make the conversion to a hydrogen inrastructure relatively lesscostly than in countries where people are more dispersed. On the supplyside, the availability o natural gas and CCS makes hydrogen productionrelatively attractive. Electric vehicles could also be attractive due to the

relatively short distances driven in the Netherlands. The current pathwayassumes a 20% penetration o hydrogen or medium and heavy dutyvehicles and a 15% electric vehicle penetration o light vehicles.

Nurturing a diverse technology mix will be essential to reach the targetedabatement. This is true or not only the technologies above, but also orother potential technologies that may urther mature, e.g. biochemicals orinnovative agricultural techniques. It enables the continued commercializationo technologies and the subsequent cost improvements. It will also helpcreate a feet o technologies, both in the power and in the non-powersectors, which will eventually become a more resilient energy system. Such asystem can help companies deal with commodity markets and environmentalregulations that are continuously in fux.

3.2 Role of gas

Gas is and will remain an indispensible energy carrier or realizing theintended abatement. It contributes in multiple sectors, ranging rom housingto transport. It is used in about 70% o residential buildings, is crucial inthe industrial sector as eedstock and or high-grade heat, and contributesto abatement in transport by directly ueling MDV and HDV and indirectlycausing uel shits to hydrogen.

In the power sector, it will produce between 35% and 50% o the power,depending on the pathway. Power generation with gas instead o coal halves

emissions per unit o energy generated - the CO2e intensity o gas in theNetherlands is 0.35-0.45 tCO2/MWh, while the CO2e intensity o coal is0.77-1.0 tCO2/MWh. Gas-red power can help meet the ambitious CO2ereductions when combined with the Netherlands unique CCS position. Gasor power generation also has more upside potential or a cleaner powersector:

Flexibility. Gas could be crucial in the journey toward a sustainable countryCO2e abatement in the uture:

Gas could accommodate high energy intensities during peak demand,while the present electricity inrastructure in the Netherlands wouldrequire signicant inrastructure investments as a result o a large-scaleenergy transition

Gas could act as back-up or intermittent power generation, such aswind energy and solar PV


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Security of supply. The available gas supply and the reliability o the gasnetwork puts the Netherlands in an excellent position to use gas or power,to export gas or power abroad or to overcome implementation issues

The proven gas reserves o both the Netherlands and Europe and anincreasing number o suppliers decrease risks o supply deaults rom anysource

The Netherlands has sucient gas inrastructure in place (Gasrotonde)to support the increased transmission capacity needed to ulll higher gas

demand in EuropeThe maturity o the gas network is a clear advantage over less maturetechnologies

In terms o overall volumes in the abatement pathways, gas demand will growrom 48 to 52 BCM rom 2010-2012, then slowly decline to 46 in 2017, growback to 52 in 2028 and slightly decline to 49 in 2030. See Exhibit 27 below.

Exhibit 27


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3.3 Implementation

In order to reach the abatement ambition in 2030, the Netherlands will needto ambitiously implement all the available abatement options (e.g. energyeciency, uel shit) and technologies (e.g. CCS, wind, biomass, nuclear,district heating). A stable, long-term policy outlook will be indispensible as well.

Navigating key infection points in each sector will be crucial in the coming 20years. These allow or implementation o all available technological options

and ensure that any scenario is still easible beyond 2030. Key infection pointsinclude: enorcing energy eciency in the buildings sector, accelerating build-out o low carbon technologies in the power sector and speeding up CCSpilots to have CCS available or the industry sector beore 2030 and the powersector beyond 2030. Exhibit 28 shows a ew examples o infection points thatthe Netherlands would need to achieve to be on track or the 2030 abatementtarget. The order and precise timing o these measures are approximate.

Exhibit 28


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The perspective of power companies

This study takes the societal perspective, which means that it optimizes or thelowest costs to society. Power companies take a dierent perspective: they lookat their potential revenue and prots when considering what technologies to buildand how to run them with existing assets.

The metric they most oten use is the Levelized Cost o Electricity (LCOE). Thisdescribes the cost o producing one MWh with a certain technology, under certain

assumptions about commodity prices and investment costs. Loosely speaking, ithe revenues rom that MWh exceed the LCOE, the plant would generate a prot;i not, it would be unprotable.

In the exhibit below, the LCOEs are given or the power production technologiesused in this study (see Appendix A or details). It shows that the majority otechnologies all within the same price range, making investment attractivenesso one technology over the other very sensitive to assumptions (i.e. learning ratesand uel prices) and regulatory interventions.

It is unclear to what extent the current Dutch and European regulation and marketpricing mechanisms provide power companies with the right incentives to realizethe abatement ambitions. I not, this could be a barrier towards realization o thepathway. This aspect has not been subject o this study.

Exhibit 29


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3.4 Conclusion

Reaching the EU ambition o 40% reduction by 2030 compared to 1990levels is technically possible; however, it will require implementation o almostall currently available and developing technologies and increases in energyeciency. Given the long-term capital-intensive nature o many energyinvestments, a stable, long-term policy ramework or investments and planningwill be indispensible to achieve the targeted abatement across all sectors. Isuch a pathway is chosen the Netherlands could take the lead in a Europeancontext on several areas or which it already has an advantageous startingposition, such as CCS, Wind o-shore, Biomass, Gas residential solutions andHydrogen. Throughout, gas will remain an important ecient energy carrier andin certain areas can acilitate abatement, e.g. balancing wind power generation,transport uel shits and urther development o decentralized power generation(Micro-CHPs uel cells) in buildings.


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43Energy in the Netherlands


GlossaryBAU Business As Usual

CAPEX Capital expenditures (investments)

CCS Carbon capture and storage

CHP Combined Heat and Power system

CO2e Carbon dioxide equivalent

COP Coecient o Perormance

OGF Depleted Oil and Gas Fields

ECF European Climate Foundation

ECN Energy research Centre o the Netherlands

EE Energy Eciency measure or CO2e abatement

ETS Emissions Trading Scheme o the European Union

FS Fuel Shit measure or CO2e abatement

GHG Greenhouse Gas

HDV Heavy Duty Vehicle (heavy trucks)

LDV Light Duty Vehicle (mainly passenger cars)MDV Medium Duty Vehicle (vans)

NREAP National Renewable Energy Action Plans. These planshave been submitted by all member states to the EU; theyoutline how each member state will realize its share o the EU20-20-20 targets

OPEX Operational expenditures

RES Renewable Energy Sources


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Appendix A: Power Sector

Methodology and assumptionsThis section outlines the methodology and assumptions the study uses or thepower sector. It also provides details on the pathways described in Chapter 3 othe report.

A.1 METHODOLOGY

Power demand is assumed to be the same across all pathways. The baselines

starting point is ECN, adjusted or other sectors eciency gains and uel shits.The study contains our sensitivities that the Netherlands could use to achievethe abatement ambition or 2030. These sensitivities are built around twodimensions: (1) CO2e emission reduction ambitions are applied at either acountry or EU-level; and (2) NREAPs are implemented in ull by 2020. SeeExhibit 30 or the methodology used to create the sensitivities.

A base case and three sensitivities are described below:

The EU Target pathway is the base case. It assumes that abatement ambitionsare met at the pan-European level and that individual countries meet theirNREAP targets by 2020. See Exhibit 31 or its specic logic and methodology.

This rest o this section contains three sensitivities to the base case.

The Country target sensitivity assumes that abatement ambitions are met atthe country instead o the pan-European level. NREAPs will be implemented in

Exhibit 30

A


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ull by 2020 and the Netherlands would meet its abatement ambition in 2030.Exhibit 32 (overlea) highlights this sensitivitys logic and methodology.

The Country target with export sensitivity assumes that abatement ambitionsare met at a country level. Export would remain equal to base case levels, soNetherlands cannot eliminate export to meet its abatement ambitions. The waythis sensitivity would work is outlined in Exhibit 33 (overlea).

The Single target assumes that abatement ambitions are met at the pan-European level and at the lowest cost possible. It does not take any othertargets into account. Exhibit 34 oers more detail on how it works.

Exhibit 31


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Exhibit 33

Exhibit 32


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Exhibit 34


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A. 2 INPUT ASSUMPTIONS

Oil, gas, coal, nuclear, CO2e prices

Commodity prices are based on the IEA World Energy Outlook (WEO) 2009.Gas price growth is based on IEA golden age o gas ( $7.4/mmbtu in 2009 to$10.1/mmbtu in 2030).

Power generation technologies

The key assumptions come rom the European Climate Foundation (ECF)Roadmap 2050 report. These include current and uture construction andoperation costs, uel eciencies, plant lietimes and learning rates, as detailedbelow in Exhibit 35.

Technical sensitivities

The study also modeled the eects o several key technical uncertainties onachieving the NL target. These included:

a) Biomass/coal CCS eects:

The current sensitivities assume that all coal plants without CCS that areless than 30 years old in 2030 will be converted to 100% dedicated biomassplants, which would produce 18 TWh more rom biomass. Current biomassproduction in the Netherlands is 3 TWh, which means biomass will total 21

Exhibit 35


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TWh by 2030. Said in a dierent way, the Netherlands will have to increaseits imports o biomass sevenold. The cumulative 2010-2030 costs under thisassumption would be around 13 bn lower than the Country target sensitivitywhere 5 bn is CAPEX.

b) Nuclear/gas CCS eects:

In all power model options discussed in this report the nuclear build-out iscapped at 1 new nuclear reactor by 2030. A sensitivity has been added or thelikelihood that this reactor may not be built. Assuming that gas CCS providesthe additional low-carbon production, the cumulative costs would be similarto the Country target sensitivity because decreases in CAPEX o around 2 bnoset uel cost increases.

c) Wind o-hore/gas CCS eects:

In the Country target with export sensitivity, the Netherlands would buildadditional wind o-shore to achieve the abatement ambition while meetingthe base case export level. Alternatively, it could retrot gas plants with CCS.Under current assumptions the latter would be cheaper, but large-scale CCSavailability beore 2030 is uncertain and has thereore not been assumed in thisstudy. I it becomes available or this purpose, total costs would be around 10bn lower than the Country Target scenario, driven by 16 bn lower CAPEX and

6 bn higher OPEX.

Exhibit 36


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Appendix B: Buildings Sector

Methodology and key technologiesB. 1 METHODOLOGY

In the buildings sector, the BAU is based on the baseline rom the ReerenceProjection Energy and Emissions 2010-2020 report, which ECN/PBL publishedin 2010. It shows that increased energy eciency will reduce energy demandor heating. The projected abatement sensitivities or 2030 assume even urtherenergy eciencies and insulation measures. To help achieve additional CO2eabatement, this study evaluated a uel shit toward more CO2e neutral heatingin buildings. It compared eciencies, energy use and CO2e emissions romseveral technologies e.g., heat pumps, district heating and micro-CHPs toa conventional condensing boiler using natural gas. A uel shit to biogas wasalso considered.

Energy efciency

Extra penetration above the autonomous penetration o energy eciencymeasures (BAU) uses the potential o the Meer met minder (More with Less)policy or six residential and non-residential segments (e.g., rental houses,oces). The abatement cost curve methodology is the analysis used tocalculate the abatement potential and abatement costs or energy eciencymeasures in the Dutch buildings sector.

Exhibit 37

B


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Exhibit 38


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Fuel shit

Realizing additional CO2e abatement requires a uel shit in buildings towardsmore CO2e neutral heating. Heating technologies penetration in 2030 isdetermined by each technologys penetration in its cheapest segment (Exhibit39). The abatement potential and cost calculations or each technology andsegment are analyzed with the abatement cost curve methodology, which iscomparable to the one used or the energy eciency measures in the buildingssector.

B. 2 HEATING TECHNOLOGIES

Electric heat pumps

Electric heat pumps are the most energy ecient technology or heatingbuildings. They divert heat stored in the surrounding air (aerothermal) or ground(ground source) to the building. Eciencies are expressed in the coecient operormance (COP), which usually has values between 2 and 4. The COP leveldepends on the heat source. Aerothermal heat pumps tend to have an averageCOP o 2.0 while ground source heat pumps tend to one o 3.25.

Currently, the CAPEX needed to install a heat pump is higher than that orinstalling conventional heating technologies, especially when it requires the

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installation o a ground well. This study assumed a 21% heat pump sharein 2030, mainly in new buildings and non-urban existing buildings. Bothsegments have the space needed to implement a heat pump system. Newbuilds also benet rom a CAPEX reduction when heat pumps are implementedin projects that contain several buildings. Additional inrastructure costs causedby the increased electricity demand rom heat pumps are included in theCAPEX calculations. These costs depend greatly on the location, number andtype o heat pumps installed.

Abatement calculations rom electric heat pumps subtract the power plantCO2e emissions required to produce the electricity or a heat pump rom theavoided CO2e, which is the amount that would be emitted by a conventionalcondensing boiler, taking into account a grid loss o 10.5%.

Gas heat pumps

Gas heat pumps use the same thermodynamic principles as the electric heatpump. The dierence between a gas-powered heat pump and an electric-powered heat pump is the energy source. Gas heat pumps use gas, whereaselectric heat pumps use electricity rom the grid or a decentralized, sustainableelectricity source (e.g., a hydrogen-powered uel cell). Gas heat pumpsare currently available only or commercial buildings. The dense Dutch gas

inrastructure could support increased gas demand rom gas heat pumps. Thiswould oer an advantage over the electric heat pump, where increases in peakpower demand in a cold spell could raise the chance o a power blackout i theinrastructure were not strengthened suciently.

The emission abatement rom gas-powered heat pumps has been calculatedas the dierence between the emissions rom a condensing boiler and thoserom a gas-red heat pump

District heating

District heating is a centralized heating technology that uses residual orsustainable heat rom heat sources such as power plants, waste burning orindustrial processes. Heat is transerred rom the source to the city through a

system o insulated pipelines. Warm water then reaches the end user via a heatexchanger at a building or neighborhood level. A 7% district heating share isassumed in 2030, which corresponds to 15 PJ residual heat use and 15 PJsustainable heat use, with 5 PJ biomass and 10 PJ deep geothermal heat.

The savings are calculated in the avoided emissions rom local CO2 boilers,minus the power used to transport the heat rom the central source to the endusers.

CO2e abatement rom district heating comes rom the amount o natural gas itprevents rom being burned in home to produce heat, minus the CO2 emittedto transport the heat rom the heat sources to the homes.

Micro-CHP

Micro-CHP is a technology that combines decentralized heat and electricityproduction. The technology is either based on a gas-powered combustion


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cycle (Micro-CHP Stirling) or a hydrogen-based uel cell (Micro-CHP PEMor SOFC). Currently, the customer still needs to make high up-ront CAPEXinvestments in this technology. However, CHPs possess multiple advantagesover other heating technologies, including: 1) they can be easily retrotted; 2)the current Netherlands gas inrastructure can support them; and 3) they canhelp balance peaks in electricity demand. Customers benet because CHPsco-produce electricity, which lowers electricity bills. However, micro-CHPStirling makes only limited contributions to abatement because it has the same

thermal eciency as a conventional condensing boiler and only produces 14%electricity when the device is turned on. The study assumes a 5% penetrationo CHPs in 2030.

CO2e abatement rom CHPs comes rom the avoided CO2 or powerproduction and transport that is now produced by the CHP.

Hydrogen

Fuel cell micro-CHPs are one orm o hydrogen uel. One micro-CHP uel cellthat runs continuously with stored heat could power 5 heat pumps, or around2.5 households. Currently, prices o Solid-Oxide Fuel Cell micro-CHP uel cells(SOFCs), which internally convert gas into hydrogen, are around 25,000 butsome experts expect prices to drop to under 7,000. This study assumes no

uel cells beore 2030.In the long-term, hydrogen may be cost-attractive in the buildings sector as aProton Exchange Membrane Fuel Cell micro-CHP (PEM,). No hydrogen useis assumed beore 2030 as the commercial availability o uel cell PEMs isassumed to happen ater 2030.

Biogas

Biogas rom ermentation, assumed to be CO2e neutral in this study, isincluded as an abatement lever. By 2030, 0.5 BCM biogas is assumed to beavailable to uel gas-powered heating devices in the building sector. Fermentingmanure o all stock in the Netherlands (1.6 mn cows and 8 mn pigs) wouldresult in a total production potential o 1.7 BCM. Current market ermentation

shares in the Netherlands are low (0.2%) compared to other countries suchas Germany (18%) and Denmark (7%)13. By assuming a ermentation share o30% o total production potential, the Netherlands can achieve 0.5 BCM obiogas in 2030.

Exhibit 40 below summarizes the assumed penetration levels or 2030. Exhibit41 shows the input assumptions per technology.

13 Ecoys, 2003. Internationale verkenning mestvergisting.


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Exhibit 40

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Appendix C: BiomassBiomass is a key component or the Netherlands to use in the power sector toabate its carbon ootprint. Currently, dedicated biomass plants produce 2 TWho power and coal plants that co-re biomass put out 3 TWh. In their NREAP,the Netherlands plan to increase their use o solid biomass to 12 TWh by 2020.

In the sensitivities where the Dutch power sector abates 60% by 2030, thisstudy assumed that coal plants younger than 30 years (3.6 GW) would beconverted to 100% dedicated biomass plants, preventing premature closureo new coal plants and adding 18 TWh o biomass in 2030. The total biomass

production would be 21% (the 18% plus the current 3% in the Netherlands).Co-ring would need to go up to 28% o energy input (6.6 TWh o electricity).

Biomass is an area where the Netherlands has advantages due to its relativelynumerous existing and new coal plants and deep-sea ports. Supply, however,could be constrained. See Exhibits 42 and 43. As the Netherlands would needto import wood pellets the availability o these pellets at avorable costs will bekey. At this point, the Netherlands already has a 40% share o EU exports.

Costs are currently around 110-140/ton (more than three times those o coaland refecting the lower energy eciency o biomass vs. coal). I demand orsolid biomass increases, these costs may not decrease.

To reach the 12 TWh o electricity production rom biomass that the NREAPs

plan or 2020, the Netherlands would need to import 5-10 mn tons o biomass.As a comparison, current world trade in wood pellets is 11 mn ton andcurrent storage capacity in Rotterdam harbor is 200,000 tons. See exhibit 42.Furthermore, i biomass has to be transported as it is currently rom overseas(e.g., North America, Canada) the CO2e emissions rom transport might behigher than that o coal or gas, thereby partly negating the CO2e benets obiomass versus coal and gas.

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Exhibit 43

Exhibit 42


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Appendix D: Netherlands as

a fexible energy provicerThis appendix explores the Netherlands opportunity to become a gas-to-power hub. In this option, the Netherlands would export fexible powerproduced rom gas within its own country. This option is only attractive iit is more protable and abatement-riendly than shipping the gas to thesecountries and turning it into power over there. It is not just a question oshipping costs o gas versus power, but also o societal acceptance o gasplants, gas availability, CCS availability, and regulations.

Based on the ollowing points, it appears that the Netherlands could be well

placed to become a gas-to-power hub or neighboring countries. However,urther detailed study is required to ully establish what circumstances wouldmake Netherlands as a fexible power hub an attractive proposition.

Potential reasons that the Netherlands could prosper in this role include:

The Netherlands has a plentiul gas supply. Large indigenous production,easy access to pipelines and LNG regas capacity ensure a secure, diversegas reservoir

The Netherlands can secure clean gas-red power because o its good CCSposition. There is 2.2 GtCO2 on- and near-shore storage potential and thepublic and private sector support CCS, especially when compared to someother European countries

The Netherlands has a strong interconnected power transmission network.In 2010, its available capacity (on yearly average) was 4 GW to Germany and2.3 GW to Belgium. All sensitivities modeled in this study only partially use thiscapacity. Transmission capacity is slated to grow over the next ten years to theUK, Germany, Norway, and Denmark

The amount o gas-red production that the Netherlands could in sourcerom its neighbors will depend on the amount needed in these neighboringcountries and the available gas and power transmission capacity available inthe Netherlands. In the options modeled in this study, neighboring countriesneed about 38 GW total o new gas capacity in the next 20 years (Exhibit 45below). On a yearly average basis, power transmission capacity to the Dutch

neighbors would support up to 7 GW o additional gas-red capacity in theNetherlands. However, available peak capacity is likely to be less. The sameholds true or the gas transport capacity. In a worst case sensitivity wherethe entire 7 GW capacity would have to be added to both the Dutch powerand the Dutch gas system, it would be expensed in ull on these plants, whichwould lead to additional costs o 6/MWh over the lietime o these plants.This is about 10% o the expected LCOE o gas-red power production. Thesecosts could potentially be justied by better CCS and regulatory conditions inthe

energy in the netherlands efnl

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