Powering Europe - European Wind Energy Association

annex
fiGURE 19: lonG-tERM MaRGinal Costs foR Coal-fiRED anD Gas-fiRED Plants in GERMany 2020
166
€/MWh
70,0
60,0
50,0
40,0
30,0
20,0
10,0
0,0
Natural Gas
to prices). The demand data input above is given exogenously.
The model then calculates the actual demand
in accordance with specified income and price
elasticity 19 .
Investments
In both scenarios, wind and other renewable capacities
are fixed, as described on page 142. But the Classic
Carbon model contains a module that generates
investments in electricity capacity based on the gap
between supply and demand.
Hence, if the exogenous given capacity development is
not sufficient to meet power demand, the model would
determine the additional investments needed endogenously.
The general logic behind endogenous investment
decisions is that if the price of electricity exceeds
the long-term marginal cost of the least expensive conventional
technology, there will be investment in this
technology. The overall costs of each technology depend
on the technology’s capital costs, fuel costs, efficiency,
CO2 costs, fuel transport costs and other variable
Generation volumes
Coal
Capital cost
Fixed O&M
Non fuel variable cost
Fuel and transport cost
CO2-price
and fixed costs. Investments are, subject to restrictions,
usually made in coal-fired or gas-fired capacity.
However, conventional investments are restricted in
two main aspects. First, the model restricts endogenous
investments in nuclear, as developments in
these technologies tend to be influenced to a large degree
by politics. Second, the potential investment levels
and investment technologies are capped for each
country according to the existing capacity profile so
that the model cannot define unlimited investments in
only one technology.
Figure 19 compares the assumed long-run marginal
costs for new CCGT and new coal-fired capacity for Germany
in 2020. The figure is based on the assumption
that a CCGT unit is run with an availability of 85% whereas
a coal condensing unit is run with a slightly higher
availability, 90%. 20 With the applied assumptions, coal
is the least-costly technology in 2020. As fuel transportation
cost is the only component that varies between
the countries, it can be deduced that most capacity investments
in Western Europe generated by Classic are
in coal capacity, given the fuel and CO2 prices that the
19 price elasticities are an expression for a percentage change in demand following a percentage change in price. For example, if
demand drops by 0.5% following a 1% price increase, the price elasticity equals 0.5. The elasticity is therefore a measure for how
flexible (or sensitive) the demand is with respect to price changes.
20 The availability of a condensing unit in the classic model is a model result and could thus deviate from the assumptions in above figure.
Powering Europe: wind energy and the electricity grid