The Value of Technology for Climate Change Mitigation€¦ · The Value of Technology for Climate Change Mitigation Leon Clarke, Haewon Chon GTSP Technical Review May 23, 2007. 2

The Value of Technology for Climate Change Mitigation

The Value of Technology for Climate Change Mitigation

Leon Clarke, Haewon ChonGTSP Technical Review

May 23, 2007

2

The Value of Technology

3

The Value of Technological Advance

+Gen III No CCS

+Gen III w/ CCS

WR

E550

-

1

2

3

4

Valu

e (T

rillio

n 19

90 U

S$)

Value of Advanced NuclearWRE 550 Scenario

+Gen III

No CCS

+Gen III w

/ CCS

WR

E75

0

WR

E65

0

WR

E55

0

WR

E45

002468

101214

Valu

e (T

rillio

n 19

90 U

S$)

Value of Advanced Nuclear

Cost of Carbon Policy & Value of Nuclear PowerUnconstrained Uranium Resource Case

4

Value of Three Suites of Technological Advance

Cumulative Carbon Emissions and Cumulative Compliance Cost across Scenarios

$0

$2

$4

$6

$8

$10

$12

$14

Level 1 Level 2 Level 3 Level 4

Cum

ulat

ive

Glo

bal C

ompl

ianc

e C

ost

(Tril

lion

U.S

. 200

0$, 5

% D

isco

unt R

ate)

0

200

400

600

800

1,000

1,200

1,400

Cum

ulat

ive

Car

bon

Em

issi

ons

(GtC

)

All Advances

Reference Technology

Cumulative Emissions

Advanced Technology

5

Some Advances are Complements

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

$20.0

H2 and End-use Efficiently

Separately

H2 combinedwith End-use

Efficiency

H2 and CCSseparately

H2 and CCScombined

Trill

ions

of 1

990

US

$ D

isco

unte

d at

5%

209

5 to

200

5

H2 and CCS combined

CCS only

H2 only

H2 combined with End-useEfficiencyEnd-use Efficiency only

Substitutes Complements

-16%

12%

Temperature Stabilization at 2oC Cost Reductions for Alternative Technology Improvements, Calculated Independently and in Combination

6

Planning a Strategy for Technology Development

7

Question 1: What Portfolio of Approaches?

Emissions InstrumentsEmissions

Instruments

•Emissions Taxes•Emissions Quotas•Tradable Permits

Technology InstrumentsTechnology Instruments

Technology-Push

Instruments

Technology-Push

InstrumentsDemand-Pull Instruments

Demand-Pull Instruments

Government R&DPublic-Private PartnershipsR&D Subsidies

Adoption SubsidiesTax Breaks for RenewablesUtility DSM Programs

Technology StandardsCatalytic Converters

Other FactorsOther

Factors

•Patent Law•Trade Policies•University System•Antitrust Policies

A wide range of policy options can spur technological advance

8

Question 2: How Much Effort and How to Allocate?

Evidence generally points toward a diversified portfolio (Blanford & Clarke, 2003):

Decreasing returns to scale in R&DRisk managementHeterogeneous applicationsSpillovers

But there are many diversified portfolios…how should funding and emphasis be allocated between research areas?

9

The Normative R&D Strategy ChallengeAct-Learn-Act-Learn-.....

LearnAct

PortfolioChoice

Act

PortfolioChoice

…….

LearnLearn

PortfolioChoice

ActPortfolioChoice

Act

1. R&D planning is problem of dynamic control under uncertainty

2. The implications of actions we take today depends crucially on the series of actions we take in the future in response to what we learn

3. There is more value to R&D than advancing technology• Learning about the potential for improvement• Maintaining capabilities/minimizing adjustment costs

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How can we better inform R&D strategy: (1) how much effort is appropriate?(2) how should it be allocated?

Total Policy Cost

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

-0.25

% E

Effic

Base

_Stab

Wind

& S

olar

BioTe

ch

Geol C

arb C

CS

+0.25%

EEf

ficH2 E

nd U

ses

H2 Wind

&Solar

+0.25%

EEf

fic H

'2

Carb

CCS

& H

2H2 &

BioT

ech

+0.25%

EEf

fic H

2 Wind

&Solar

H2 & C

CS &

BioT

ech

+0.25%

EE

H2 C

CS B

io W

&S

Cost

(Tr

illio

n $9

0US) Individual Technologies

Binary Technologies Cominations

Multiple Technologies Cominations

Value of Technology

Integrated Assessment Models

R&D Allocation Under Uncertainty

Portfolio Models, Decision Analysis

ISSUES

TOOLS

1-p

p

1-p

p

Potential for Advance, R&D Impact on Advance

Technology AssessmentsHistorical Analysis

The Normative R&D Strategy Challenge

Issues and Tools

The Normative R&D Strategy Challenge

Issues and Tools

11

Technical Challenges: Uncertainty

StabilizationGoal

StabilizationGoal

TechnologicalAdvance

TechnologicalAdvance

DrivingForces

DrivingForces

PolicyApproach

PolicyApproach

Value of Technology

Value of Technology

The value of technology depends on a broad set of factors that cannot be known today with certainty.

What policies are used to achieve climate goals?

What climate goals will society choose?

What advances will occur in other technologies?

What will be the dynamics of key drivers such as population growth and economic growth?

Explore the relationships between value and abatement

Explore the relationships between value and abatement

12

Technological Advance and

Carbon Abatement

13

Link to Exploratory Research to Inform Portfolio Analysis

Part I: (Erin Baker & Jeffrey Keisler) Expert probabilistic assessments on the relationship between R&D and technological advance

Focusing initially on electricity technologies

Part II: (Matthias Ruth & Haewon Chon) Assessment of impacts to costs of emissions reductions using MiniCAM

One element is to look at the relationship between prices and abatement at different times in the future

14

0

5

10

15

20

25

2000 2020 2040 2060 2080 2100

GtC

/yr

450 ppmv550 ppmv650 ppmv750 ppmvReference

Looking at Emissions Reduction in 2050

In 2050, Reductions in 450 ppmv are roughly 70 percent. For 550 ppmv, reductions are roughly 30 percent.

In 2050, Reductions in 450 ppmv are roughly 70 percent. For 550 ppmv, reductions are roughly 30 percent.

Consider abatement versus carbon prices in 2050.

Consider abatement versus carbon prices in 2050.

• 10 percent abatement corresponds to roughly 1.4 billion tonnes C




15

$0

$100

$200

$300

$400

$500

$600

$700

$800

2020 2040 2060 2080 2100

$/to

nne

C (

2000

$)

450 ppmv

550 ppmv

650 ppmv

750 ppmv

A Hotelling Price Path through 2050

Assume the carbon price rises at roughly 5 percent through 2050.

Prices rise at the rate of interest, modified by carbon uptake rates, until stabilization is reached.

Prices rise at the rate of interest, modified by carbon uptake rates, until stabilization is reached.

Note that we are working with the MiniCAM CCSP technology and other assumptions.

Note that we are working with the MiniCAM CCSP technology and other assumptions.

16

Solar Power AssumptionsFive Technology scenarios

Frozen Tech case assumes no technological advancement from 2005 efficiency (36c/kWh).PV12c: meeting 12c/kWh in 2050PV 9c: meeting 9c/kWh in 2050PV 6c: meeting 6c/kWh in 2050PV 3c: meeting 3c/kWh in 2050

Assumed requirement for backup power (gas turbine) as grid penetration increases

This is a simplification for the purposes of this analysis.

Not accounting for benefits of distributed generationNo constraints on hydrogen productionAssume CCS is not available(Some solar examples use a different reference scenario than CCSP)

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0.1

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0.6

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0.8

0.9

1

0.00 0.05 0.10 0.15 0.20

Solar capacity ratiokW(PV) / kW(total)

back

up r

equi

rem

ents

kWh(

back

up)/

kWh(

PV

)

17

0

100

200

300

400

500

600

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

Emissions Reduction from Reference in 2050

$/to

nneC

(19

90$)

36c - 20% constraint


6c - 20% constraint

3c - 20% constraint

Solar Power and Abatement Costs

A constant $10/tonne benefit for 50 percent abatement would be worth $70 billion in 2050.

A constant $10/tonne benefit for 50 percent abatement would be worth $70 billion in 2050.

Benefits are constrained by limits on grid penetration

Benefits are constrained by limits on grid penetration

** Note that this slide is based on the MiniCAM CCTP scenarios, which differ from the MininCAM CCSP scenarios.

18

0

100

200

300

400

500

600

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


$/to

nneC

(19

90$)

36c - 20% constraint12c - 20% constraint6c - 20% constraint3c - 20% constraint6c - no constraint3c - no constraint


Both cost and ultimate potential determine impact

Both cost and ultimate potential determine impact

“Threshold”effect around 6c/kWh in this scenario –depends on competing technologies

“Threshold”effect around 6c/kWh in this scenario –depends on competing technologies

** Note that this slide is based on the MiniCAM CCTP scenarios, which differ from the MininCAM CCSP scenarios.

Substantial benefits with no carbon policy

Substantial benefits with no carbon policy

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0

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 95%

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3% 10% 20% 30% 40% 50% 60% 70% 80% 90% 95%Ele

ctric

ity P

rodu

ctio

n (E

J)

36c/kWh (20% Constraint)

Eliminating the constraint allows for substantial additions of solar.

Eliminating the constraint allows for substantial additions of solar.

The two constrained cases are not that different, even with dramatic reduction in cost.

The two constrained cases are not that different, even with dramatic reduction in cost.

Electricity ChangeRenewablesNuclearBiomassCoal w/CCSCoal w/o CCSGas w/CCSGas w/o CCSOil w/CCSOil w/o CCS

6c/kWh (20% Constraint) 6c/kWh (No Constraint)

-80

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3% 10% 20% 30% 40% 50% 60% 70% 80% 90% 95%-80

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3% 10% 20% 30% 40% 50% 60% 70% 80% 90% 95%Solar substitutes with nuclear when constraints are removed.

Solar substitutes with nuclear when constraints are removed.

Diff

eren

ce in

Ele

ctric

ity

Pro

duct

ion

Rel

ativ

e to

36

c/kW

h (E

J)

20

0

200

400

600

800

1000

1200

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


$/to

nneC

(19

90$)

36c - 20% constraint - noNuke

6c - 20% constraint - noNuke

6c - no constraint - noNuke

0

200

400

600

800

1000

1200

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


$/to

nneC

(19

90$)


6c - 20% constraint

6c - no constraint


With Nuclear Power

Without Nuclear Power

The “threshold” depends on the presence of substitute and complementary technologies

The “threshold” depends on the presence of substitute and complementary technologies

Technological improvement is increasingly valuable at higher levels of abatement

Technological improvement is increasingly valuable at higher levels of abatement

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6c/kWh (No Constraint)No Nuclear

Ele

ctric

ity P

rodu

ctio

n (E

J)The absence of nuclear and CCS leads to substantial increases in solar deploymentat 6c/kWh.

The absence of nuclear and CCS leads to substantial increases in solar deploymentat 6c/kWh.


6c/kWh (No Constraint)With Nuclear

These charts are based on different reference scenarios.

These charts are based on different reference scenarios.

Diff

eren

ce in

Ele

ctric

ity

Pro

duct

ion

Rel

ativ

e to

36

c/kW

h (E

J)

22

Five capture technologies were explored

Parasitic Energy Loss

(%)

Non Energy Cost

(2005$/tC)Capture Rate (%)

Technology 1 23 30 90Technology 2 10 24 90Technology 2+ 10 24 98Technology 3 3 11 90Technology 4 3 10 100** Technology characteristics based on solicitations by Erin Baker and Jeff Keisler

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1400

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%


$/to

nneC

(19

90$)

No CCS

Tech 2 (Med-Cost 90% Capture)

Tech 2+ (Med-Cost 98% Capture

Tech 3 (Low-Cost 90% Capture)

CCS and Abatement Costs

At the costs considered, simply having CCS (at the parameters considered) is more important than the variations in cost at most abatement levels,

At the costs considered, simply having CCS (at the parameters considered) is more important than the variations in cost at most abatement levels,

At higher levels of abatement, the capture rate determines value.

At higher levels of abatement, the capture rate determines value.

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-50

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Ele

ctric

ity P

rodu

ctio

n (E

J)

Diff

eren

ce in

Ele

ctric

ity P

rodu

ctio

nR

elat

ive

to T

echn

olog

y 2

(EJ)

Technology 2(Med-Cost, 90% Capture)

Technology 3(Low-Cost, 90% Capture)

Technology 2+(Med-Cost, 98% Capture)

Cost is key driver at intermediate abatement levels.

Cost is key driver at intermediate abatement levels.

Capture rate is key driver at high abatement levels.

Capture rate is key driver at high abatement levels.

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25

Two Nuclear Cost Scenarios

REF: Capital cost declines to $1500/kW by 2050

ADV: Capital cost decline to $1000/kW by 2050

Nuclear Capital Cost

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2020 2035 2050 2065 2080 2095

2005

$/kW

REF

ADV

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Nuclear Cost Reductions and Abatement Costs

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


Car

bon

Pri

ce, $

/ton

neC

(20

00$)

REF

$1000/kW

pre-combustionNuclear provides relatively constant benefits over the full range of abatement

Nuclear provides relatively constant benefits over the full range of abatement

The value of CCS increases with the abatement level

The value of CCS increases with the abatement level

27

Ele

ctric

ity P

rodu

ctio

n (E

J)

Reference Nuclear (no CCS)

Advanced Nuclear (no CCS)

Reference w/Med-Cost, 90% Capture CCS

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eren

ce in

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ctric

ity P

rodu

ctio

nR

elat

ive

to R

efer

ence

Nuc

lear

(no

CC

S) (

EJ)

28

Summing Up

Some technological advances provide limited benefits at low carbon prices (CCS), whereas others can provide meaningful benefits at low carbon prices (e.g., improvements in solar and complementary technologies).The potential for benefits depends on the ability to overcome barriers to large-scale expansion (e.g., solar power).We only looked at electricity technologies.

29

Where to Next

30

Where should we be headed?

Continue to understand interactions with abatement levels looking at a wider spectrum of technologies.Look at other dimensions of the value space:

Regional value analysesInteraction of advance and diffusion/adoptionInteraction with policy regime

Portfolio analysis?

Documents

The Value of Technology for Climate Change Mitigation€¦ · The Value of Technology for Climate Change Mitigation Leon Clarke, Haewon Chon GTSP Technical Review May 23, 2007. 2