Biomass role in achieving the Climate Change & Renewables EU policy targets. Demand and Supply dynamics under the perspective of stakeholders .IEE 08 653 SI2. 529 241

Deliverable 5.7

PRIMES Biomass model projections

E. Apostolaki, N. Tasios, A. DeVita, P. Capros

E3MLab - ICCS

March, 2012

Content

Content

Preface

1Introduction

2Context and assumptions

3Modelling methodology

3.1 Reference scenario context

3.2 Decarbonisation scenario

4Overview of scenario results

4.1 Reference scenario and variants

4.2 Decarbonisation scenario and variants

4.3 Comparison of scenarios

5Conclusive remarks

6References

Preface

This publication is part of the BIOMASS FUTURES project (Biomass role in achieving the Climate Change & Renewables EU policy targets. Demand and Supply dynamics under the perspective of stakeholders - IEE 08 653 SI2. 529 241, ) funded by the European Union’s Intelligent Energy Programme.

In order to determine the impacts of policies implemented on the biomass supply system, the economics of supply of biomass/waste for energy purposes were simulated with the updated PRIMES Biomass model. This report presents the modelling result analysis.

The sole responsibility for the content of this publication lies with authors. It does not necessarily reflect the opinion of the European Communities. The European Commission is not responsible for any use that may be made of the information contained therein.

1Introduction

This report, part of Work Package 5 of Biomass Futures Project, aims at contributing in determining the impacts of policies promoting renewable energy sources and addressing climate change mitigation by simulating the economics of supply of biomass and waste for energy purposes with the PRIMES biomass model. In the course of this project several scenarios were constructed and analysed. Further in the course of this project the database was reviewed and the PRIMES biomass model was fully updated (see deliverable 5.5). The modelling results presented have been carried out with the updated model version.

The PRIMES Biomass Model is a model of the PRIMES family developed at E3Mlab/ICCS of the National Technical University of Athens and is used to complement the main PRIMES model by computing the optimal use of biomass resources for a given demand. The PRIMES Biomass model covers all EU 27 countries separately, as well as computing totals for the EU27, EU15 (old Member States) and NM12 (new Member States); the time horizon of the model is 2050, running by 5-years steps, as the other models of the PRIMES family.

The PRIMES Biomass Model is linked with the PRIMES large scale energy system model and can be solved either as a satellite model through a closed-loop process or as a stand-alone model. It is an economic supply model that computes the optimal use of biomass resources and investments in secondary and final transformation, so as to meet a given demand of final biomass energy products, projected to the future by the rest of the PRIMES model.It performs dynamic projections to the future from 2015until 2050 in 5-year time period step with 2000 to 2010 as calibration years, itendogenously computes the energy and resource balances to meet a given demand by PRIMES model (or other external source), it calculates investments for technologies, costs and prices of the energy forms as well as the greenhouse gas (GHG) emissions.

Furthermore, the PRIMES biomass supply model determines the consumer prices of the final biomass products used for energy purposes and also the consumption of other energy products in the production, transportation and processing of the biomass products. Prices and energy consumption are conveyed to the rest of the PRIMES model. A closed-loop is therefore established. Upon convergence, a complete energy and biomass scenario can be constructed.

For the purpose of the Biomass Futuresproject several scenarios were constructed: an updated reference scenario run with the new model version, using the demand from the Reference scenario as run by the overall PRIMES model and a Reference scenario variant with the energy demand derived from the National Renewable Energy Action Plans (NREAP). Further three scenarios were run within a decarbonisation[1] context: the first scenario reran the decarbonisation scenario as used for the ”Low carbon energy roadmap”(EC,2011)with the new model version, the second scenario assumed a very high biomass demand therefore simulating a “maximum biomass” case and a third scenario assumed the same demand as the “standard” decarbonisation scenario, but stricter sustainability criteria with the inclusion ofthe effect of indirect land use change (ILUC) emissions.

In this report first the assumptions and methodologywill be described,then the results of the modelling process will be presented and analysed. Finally, a comparative analysis between the scenarios results will be carried out and conclusive remarks will be presented.

2Context and assumptions

In the context of the EU legislation for 2020 aiming at reducing GHG by at least 20% below 1990 levels and increasing the use of renewable energy sources (RES) in gross final energy demand to 20%, which includes a minimum share of 10% RES in the transport sectors, the use of bio-energy products is expected to increase considerably compared to current levels. Biomass, in the form of bio-energy products, is expected to be used in all energy sectors, e.g. power generation, end user heating etc. Further for biomass based energy sources the fuel quality directive sets out specific criteria which include minimal emission savings from bio-energy products and minimal criteria for the sustainable production of biofuels.

All the scenarios constructed and analysed within this report assume that the targets set for 2020 in EU legislation therefore20% emission reduction target, 20% RES in gross final energy demand, 10% RES in the transportation sector, are met. The achievement of the targets is implemented in the PRIMES energy system model and the demand delivered to the PRIMES biomass model therefore already includes these targets.The legislation relating to emission reductions and the sustainability of the biomass and biofuel production is also taken into account. A list of the legislation, common to all scenarios relating to biomass for energy consumption can be found in Table 1.

Table 1: Summary of policies relating specifically to biomass common to all scenarios

RES directive 2009/28/EC / Legally binding national targets for RES share in gross final energy consumption are achieved in 2020; 10% target for RES in transport is achieved for EU27, as biofuels can easily be traded among Member States; sustainability criteria for biomass and biofuels are respected; cooperation mechanisms according to the RES directive are allowed and respect Member States indications on their "seller" or "buyer" positions.
Fuel Quality Directive 2009/30/EC / Modelling parameters reflect the Directive, taking into account the uncertainty related to the scope of the Directive addressing also parts of the energy chain outside the area of PRIMES modelling (e.g. oil production outside EU).
Biofuels directive 2003/30/EC / Support to biofuels such as tax exemptions and obligation to blend fuels is reflected in the model The requirement of 5.75% of all transportation fuels to be replaced with biofuels by 2010 has not been imposed as the target is indicative. Support to biofuels is assumed to continue. The biofuel blend is assumed to be available on the supply side.

The PRIMES biomass model takes the demand for bio-energy products split by categories from the overall PRIMES energy system model. The PRIMES energy system model is a partial equilibrium model that simulates the response of energy consumers and the energy supply systems to different pathways of economic development and exogenous constraints and drivers. The PRIMES energy system model [2]has a high level of detail both in supply side (mainly power and steam generation) and in the demand side (including the representation of numerous industrial sectors, detailed residential sector demand and for the tertiary sectors) and provides detailed outputs relating to among others energy consumption by fuel, costs, prices and emissions. For the PRIMES biomass model the energy consumption by fuel for the biomass products is taken and a scenario within the same overall policy context is constructed.

The updated version of the PRIMES biomass supply model[3] is fully updated and calibrated to the years 2000and 2010 to the latest available statistics and therefore has updated the demand for 2010 compared to the previous projections;this implies that the demand projections from the overall PRIMES model have been updated to the new data. Resulting adjustment factors are also used to adapt the future projections.

3Modelling methodology

The PRIMES biomass model is a demand driven model, which is designed to take the demand from the PRIMES model, but other exogenous demand assumptions are possible; the model then computes the optimal use of biomass resources and investments in secondary and final transformation, so as to meet thegiven demand of final biomass energy products. The model computes endogenously the energy and resource balances to meet a given demand by PRIMES model (or other external source), it calculates investments for technologies, costs and prices of the bio-energy forms as well as the emissions of pollutants. For the feedstock prices the model uses cost-supply curves. The model uses exogenous assumptions about land availability; these have been updated in the course of this project and are now based on the land availability estimates found in EEA (EEA,2007).Estimates about yields are also taken into account in the model as exogenous parameters which vary over time; the estimates used in the Reference scenario are based on EEA studies. In the decarbonisation scenarios it is assumed that additional agricultural policies and technology developments may increase the yield of energy crops. The technologies available in the Primes Biomass model for the generation of the final energy products are summarised inTable 2.

The production pathways described include feedstock used, the technology and the end energy product obtained. Starch crops include resources such as maize, wheat, barley etc and sugar crops refer mainly to sugar beet and sweet sorghum. Oil as a feedstock includes oil crops rapeseed, sunflower seed, olive kernel etc, imported palm oil and non agricultural oils, such as waste oil and fat. Woody biomass is an aggregated category which includes lignocellulosic crops, forestry and forest residues, wood waste, ligno-cellulosic part of agricultural residues etc, whereas organic waste refers to biodegradable wastes such as manure, sewage, animal waste, the biodegradable part of municipal waste etc. Regarding ligno-cellulosic crops there is a distinction between pure wood crops, such as poplar, willow etc, and short rotation herbaceous lignocellulosic crops like miscanthus, switch grass, reed etc.

The end products available in the PRIMES biomass model include biofuels for transportation and other bio-energy commodities such as biogas, small scale solid (mainly pellets) and large scale solids (mainly for use in power generation). The PRIMES Biomass model has a large level of detail for the transportation fuels which include diesel and gasoline from biomass, bio-kerosene for aviation and bio-heavy for navigation, as well as biogas. For gaseous products the model differentiates between biomethane, biogas upgraded to pipeline quality and biogas, not upgraded. For gasoline and diesel the model differentiates between non-fungible fuels, equivalent to so called 1st generation biofuels which must be either blended to run on conventional ICE engines, or require engine modifications to be used in pure form, and fully fungible biofuels which derive from processes such as Fischer-Tropsch (FT)-synthesis where the output fuel is fully determined and can therefore be produced in order to be used in existing engines.

Imports and exports of biomass in the Primes Biomass model are both biomass feedstock and end bio-energy products; trade occurs both between EU Member States and with other countries outside the EU. Tradable feedstock considered are pure vegetable oil, which is mainly imported palm oil and solid biomass for further processing. The end products traded are, solid biomass, fungible and non-fungible biodiesel, bio-ethanol and bio-kerosene.

The trade that takes place between Europe and the rest of the world includes as main providers for wood CIS and North America, while for sugarcane bio-ethanol Brazil. Imported oil is for the most part palm oil mainly from Indonesia and Malaysia.

For every scenario, the demand for the projected years from 2015 up to 2050 was obtained from the Primes model or was determined through the National Renewable Energy Action Plans (NREAP). For the historical years 2000, 2005 and 2010, the model was calibrated so as to be consistent with Eurostat statistical data.

The scenario construction is described in detail below for the five scenarios analysed within this project; the aim of the different scenarios was to assess the economics of the supply of bio-energy commodities under different policy contexts.

Table 2: Production Technologies in Primes Biomass model

FEEDSTOCK / TECHNOLOGY / END PRODUCT
Starch, Sugar / Fermentation / Bioethanol
Woody Biomass / Enzymatic Hydrolysis and Fermentation / Bioethanol/ Biogasoline
Woody Biomass / Pyrolysis, deoxygenation and upgrading / Biogasoline
Woody Biomass / Pyrolysis, Gasification, FT and upgrading / Biogasoline
Woody Biomass, Black Liquor / Gasification, FT and upgrading / Biogasoline
Aquatic Biomass / Transesterification, Hydrogenation and Upgrading / Biogasoline
Vegetable Oil / Transesterification / Biodiesel (non fungible)
Starch, Sugar / Enzymatic Hydrolysis and deoxygenation / Biodiesel (non fungible)
Vegetable Oil / Hydrotreatment of vegetable oil and deoxygenation / Biodiesel (fungible)
Woody biomass / Gasification and FT / Biodiesel (fungible)/ Bio-kerosene
Aquatic Biomass / Transesterification and Hydrogenation / Biodiesel (fungible)
Woody biomass / Pyrolysis and deoxygenation / Biodiesel (fungible)/ Bio-kerosene
Aquatic Biomass / Transesterification and Hydrogenation / Bio-kerosene
Woody biomass / HTU process / Bio Heavy Fuel Oil
HTU process and deoxygenation / Biodiesel/ Bio-kerosene
HTU process, deoxygenation and upgrading / Biogasoline
Woody biomass / Gasification and methanol Synthesis / Biomethanol
Woody biomass / Gasification and DME Synthesis / BioDME
Woody biomass, Black Liquor / Gasification / Biogas/ Biomethane
Woody biomass / Enzymatic Hydrolysis / Biogas/ Biomethane
Woody biomass / Catalytic Hydrothermal Gasification / Biogas/ Biomethane
Organic Wastes / Anaerobic Digestion / Biogas/ Biomethane/ Waste Gas
Woody biomass / Pyrolysis / Bio Heavy Fuel Oil
Black Liquor / Catalytic Upgrading of black liquor / Bio Heavy Fuel Oil
Landfill, Sewage Sludge / Landfill and sewage sludge / Waste Gas
Industrial & Municipal Waste / RDF / Waste Solid
Woody biomass / Small Scale Solid/ Large Scale Solid

3.1Reference scenario context

For the Biomass Futures project, aside from the standard Reference scenario which was updated within the course of this project a further variant of the Reference scenario which will be called NREAP variant in the following. The two scenarios differ in the demand of bio-energy products assumed within the scenarios whereas all other aspects, concerning policies and the resulting drivers, are maintained the same. The standard Reference scenario utilises the demand as it results from the PRIMES Energy System model in the Reference scenario as used for Roadmap 2050 (EC, 2011), with updated demand following the 2010 statistics; the variant of the Reference scenario, in the following NREAP variant,assumes the demand derived from the National Renewable Energy Action Plans (NREAPs) that the EU member states submitted in 2010.

3.1.1Reference scenario

The Reference or baseline case for this study is the so called Reference scenario delivered by the PRIMES model to the European Commission and is fully described in the publication “EU Energy Trends to 2030”.[4]The bio-energy products demand used within this study refers to the updated Reference scenario published in the Low Carbon Economy Roadmap (EC, 2011), where the Reference scenario was expanded to include projections up to the year 2050. The biomass scenario presented within this study refers to this updated scenario with projections to 2050. The version presented within this study was quantified with the updated PRIMES biomass model and is fully updated to the statistics up to 2010; therefore the demand from the PRIMES model was adjusted to reflect the newest developments.

TheReference scenario assumes the implementation of the entire EU Climate and Energy package for 2020;further it takes into account all policies adopted by the EU until March 2010. The scenario assumes that policies are successfully implemented and that no further policies are introduced.Therefore, the reference scenario achieves a 20% greenhouse gas emission reduction compared to 1990 and the target of 20% RES in gross final energy consumption including the 10% RES in transport target.

Whereas most policies are introduced in the overall energy system context and therefore in the overall PRIMES energy system model, some policies are specifically accounted for in the PRIMES biomass model and these can be found in Table 1.

The split of bio-energy demand by use is undertaken in the PRIMES energy system model, which projects in which sectors and for which uses the bio-energy commodities will be used; the PRIMES biomass model takes the bio-energy products split by bio-energy fuel type (e.g. gas from biomass and waste, biodiesel, solid biomass, etc.), as derived from the overall PRIMES and computes the optimal use of biomass resources and investments in secondary and final transformation.

3.1.2NREAP variant

The NREAP variant was constructed by adapting the demand as described by the NREAPs to the PRIMES biomass model input. The NREAPs include information about the biomass contributionin the electricity, heating and cooling, and transport sectors in years 2010-2020, therefore include the use of biomass by secondary (heat and power generation) or final energy demand (direct use in final energy demand). The use of biomass thus specified had to be transformed into equivalent amounts of biomass energy commodities as defined by the PRIMES biomass model. Whereas in the transport sector the demand as expressedin the NREAPS already is in the form of biomass energy commodities (i.e. amounts of biodiesel, bio-ethanol, etc. consumption), in the other sectors the amounts of biomass as expressed as final energy commodities, including secondary transformation (e.g. electricity from biomass, rather than inputs into the power generation sector).