Flexibility and the Future of Power Wärtsilä Capital Markets Day Albert Cheung November 26, 2019
Flexibility and the Future of PowerWärtsilä Capital Markets Day
Albert Cheung
November 26, 2019
1 Wärtsilä Capital Markets Day @albertwycheung
Source: BloombergNEF.
523
19
307
164
-
200
400
600
800
1,000
1,200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H2018
GW
Small-scale PV
Utility-scale PV
Offshore wind
Onshore wind
Total:1,013GW
A decade ago
132GW
Global wind and solar installations, cumulative to 2008
2 Wärtsilä Capital Markets Day @albertwycheung
Energy transition challenges, 2008
How to drive down costs of clean energy and
reduce dependence on subsidies?
How to scale up deployments? How to raise and
deploy the capital required for the energy transition?
Costs
Scale
3 Wärtsilä Capital Markets Day @albertwycheung
0
200
400
600
800
1,000
1,200
2010
2011
2012
2013
2014
2015
2016
2017
2018
$/kWh
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
euro / W
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
$/W
Solar PV module prices Onshore wind turbine prices Lithium-ion battery prices
Technology costs plummeted
-94% since
2008
-37% since
2008
Source: BloombergNEF.
-85% since
2010
4 Wärtsilä Capital Markets Day @albertwycheung
Source: BloombergNEF
Clean energy investment scaled up
17 24 30 41 52 62 80 94 106 126162
193 181231
178
2838
4871
86 85
123142 108 74
85
82 88
70
92
1424
43
57
62 49
68
88
7367
79
82 75
85
84
6086
121
169
200 196
271
324
286267
326
358344
386
354
0
50
100
150
200
250
300
350
400
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
$ billion
AMER
EMEA
APAC
Global clean energy investment
Renewables market update 2019
5 Wärtsilä Capital Markets Day @albertwycheung
-
200
400
600
800
1,000
1,200
2000200120022003200420052006200720082009201020112012201320142015201620172018
Cumulative GW
Small-scale PV
Utility-scale PV
Offshore wind
Onshore wind
Source: Bloomberg NEF.
And the rest is history
Global wind and solar installations
One terawatt of
wind and solar
Renewables market update 2019
6 Wärtsilä Capital Markets Day @albertwycheung
Most competitive forms of power generation by country, 2019
Source: BloombergNEF. Note: Reflective of the cheapest benchmark project for each technology and market
Renewables market update 2019
7 Wärtsilä Capital Markets Day @albertwycheung
Looking forwardBNEF New Energy Outlook
8 Wärtsilä Capital Markets Day @albertwycheung
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1970 1980 1990 2000 2010 2020 2030 2040 2050
Historical world power
generation mixNEO 2019 power
generation mix
Coal
GasOil
Hydro
NuclearWind
SolarOther
Source: BloombergNEF, IEA
New Energy Outlook: ~50% wind + solar power globally by 2050
62% renewables
31% fossil fuels
48% wind and solar
Long-term outlook
9 Wärtsilä Capital Markets Day @albertwycheung
Source: BloombergNEF
Investment by technology, 2019-2050
$13.3 trillion new investment to 2050
$0.4
$0.7
$0.8
$1.9
$4.2
$5.3
Coal
Hydro
Nuclear
Gas
Solar
Wind
$ trillion, real 2018
Long-term outlook
10 Wärtsilä Capital Markets Day @albertwycheung
Source: BloombergNEFSource: BloombergNEF
Global investment in power generation by region,
2018-2050 APAC investment in power generation by region,
2018-2050
Asia Pacific is the driving force behind global investment
$5.8
$2.6
$2.0
$1.9
$1.2
APAC
Europe
META
AMER
Rest of the World
$tn, real 2018
$2.9
$1.4
$0.6
$0.4
$0.2
$0.1
China
India
SoutheastAsia
Japan
South Korea
Australia
$tn, real 2018
Coal Gas Oil Nuclear Hydro Wind Solar Other
Long-term outlook
11 Wärtsilä Capital Markets Day @albertwycheung
Europe transitions furthest, fastest
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2012 2019 2025 2030 2035 2040 2045 2050
Europe
China
U.S.
80%
47%
34%
Wind and solar penetration
Source: BloombergNEF
12 Wärtsilä Capital Markets Day @albertwycheung
Keeping power sector on track for 2 degrees to 2030
2 degrees (NEO 2019)
NEO 2019
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2012 2018 2025 2030 2035 2040 2045 2050
MtCO2e
Source: BloombergNEF
NEO2019
On track
Global power sector emissions
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How will the future
power system operate?The race for flexibility
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Flexibility
15 Wärtsilä Capital Markets Day @albertwycheung
0
5
10
15
20
25
30
35
40
45
50
00:00 04:00 08:00 12:00 16:00 20:00
GW
Demand-side flexibility: dynamic EV charging
General load
EV dynamic
EV fixed
U.K. typical daily load profile, Q1, 2050
Source: BloombergNEF
16 Wärtsilä Capital Markets Day @albertwycheung
The U.K. power system in 2040
0
20
40
60
80
100
Oct 29, 2040 Oct 30, 2040 Oct 31, 2040 Nov 01, 2040 Nov 02, 2040 Nov 03, 2040 Nov 04, 2040
Generation (GW)
0
20
40
60
80
100
Aug 06, 2040 Aug 07, 2040 Aug 08, 2040 Aug 09, 2040 Aug 10, 2040 Aug 11, 2040 Aug 12, 2040
Generation (GW)
0
20
40
60
80
100
Dec 20, 2040 Dec 21, 2040 Dec 22, 2040 Dec 23, 2040 Dec 24, 2040 Dec 25, 2040 Dec 26, 2040
Generation (GW)
Week with low
renewable output
Week with median
renewable output
Week with high
renewable output
GasSolar
Wind
Curtailment
ChargingDischarging
Nuclear
Gas runs for days
Lots of curtailment
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Source: BloombergNEFSource: BloombergNEF
CCGT average fleet utilization Coal average fleet utilization
The dispatchable fleet will operate very differently
China
GermanyIndia
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
Optimal utilization range
China
GermanyIndia
U.S.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
Optimal utilization range
18 Wärtsilä Capital Markets Day @albertwycheung
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2012 2019 2025 2030 2035 2040 2045 2050
GW
Source: BloombergNEF
Cumulative installed gas capacity
Gas capacity almost doubles to 2050
Peaker
Combined-cycle gas
19 Wärtsilä Capital Markets Day @albertwycheung
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2012 2019 2025 2030 2035 2040 2045 2050
GW
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2012 2019 2025 2030 2035 2040 2045 2050
PJ
Combined-cycle gas
Source: BloombergNEFSource: BloombergNEF
Cumulative installed gas capacity Fuel burn
Gas capacity almost doubles to 2050, but gas burn only up ~22%
Peaker
Combined-cycle gas
20 Wärtsilä Capital Markets Day @albertwycheung
Source: BloombergNEF
0
200
400
600
800
1,000
1,200
1,400
2012 2019 2025 2030 2035 2040 2045 2050
GW
Rest of the World
Rest of APAC
India
China
Americas
META
Europe
Spotlight on gas peakers to 2050
Peaker gas: cumulative installed capacity by country/region (GW)
4.5x more
peakers in 2050
21 Wärtsilä Capital Markets Day @albertwycheung
What about other flexibility technologies?
Non-gas flexibility: cumulative installed capacity by technology (GW)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2012 2019 2025 2030 2035 2040 2045 2050
GW
Demand response
Dynamic pricing
Utility-scale batteries
Small-scale batteries
Pumped hydro
22 Wärtsilä Capital Markets Day @albertwycheung
Source: BloombergNEF. Note: GRE = gas reciprocating engine, OCGT and CCGT are open- and combined-cycle gas turbine respectively.
Levelized cost of capacity for batteries and gas Ramp-up times for batteries and gas
Duration and speed
CCGTOCGT
GRE
1 hour
4 hours
-
100
200
300
400
500
600
0 1 2 3 4 5 6 7 8 9 10
$/kW/yr (2018 real)
Peak duration (hours per day)
Capacity factor (%)8%4%0% 17% 21%
Battery 2019
Battery 2030
13% 25% 29%
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Source: BloombergNEF
Peaker gas: cumulative installed capacity Batteries: cumulative installed capacity
Batteries and peaker gas will co-exist
0
200
400
600
800
1,000
1,200
1,400
2012 2019 2025 2030 2035 2040 2045 2050
GW
Peaker gas
0
200
400
600
800
1,000
1,200
1,400
2012 2019 2025 2030 2035 2040 2045 2050
GW
Utility-scale batteries
Small-scale batteriesUtility-scale
batteries
Small-scale batteries
Peaker gas
24 Wärtsilä Capital Markets Day @albertwycheung
Early signs from California
CAISO solar generation versus wholesale power price, average day 2011-18
Power
price
Utility-
scale
solar
DG
Source: BloombergNEF
25 Wärtsilä Capital Markets Day @albertwycheung
Source: BloombergNEF
Max. required net load ramp as proportion of peak demand
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
10
20
30
40
50
60
70
80
90
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
U.K. Germany U.S.- California Australia -South Australia
China -Gansu
Maximum hourly net load ramp rate
Peak demand
Maximum net load ramp capacity as % of peak demand (%)
Ma
ximum
ne
t loa
d ra
mp
ca
pa
city
/ pe
ak d
em
and
(%)C
ap
acity
(GW
)
Max ramp rates are
rising in several
markets
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
10
20
30
40
50
60
70
80
90
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
U.K. Germany U.S.- California Australia -South Australia
China -Gansu
Maximum hourly net load ramp rate
Peak demand
Maximum net load ramp capacity as % of peak demand (%)
Ma
ximum
ne
t loa
d ra
mp
ca
pa
city
/ pe
ak d
em
and
(%)C
ap
acity
(GW
)
26 Wärtsilä Capital Markets Day @albertwycheung
Source: BloombergNEF. Note: For detailed metric explanation, please see Research Note Global Power System Flexibility Review (web | terminal).
Minimum net load versus minimum turndown level of existing fleet
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
5
10
15
20
25
30
35
40
45
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
U.K. Germany U.S.- California Australia -South Australia
China -Gansu
Minimum net load
Minimum turndown level of existing fleet
Minimum net load/ Minimum turndown level of existing fleet
Min
imum
ne
t load
to m
inim
um
ge
ne
ratio
n ra
tio
(%)
Cap
acity
(GW
)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
5
10
15
20
25
30
35
40
45
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
20
13
20
14
20
15
20
16
20
17
20
18
U.K. Germany U.S.- California Australia -South Australia
China -Gansu
Minimum net load
Minimum turndown level of existing fleet
Minimum net load/ Minimum turndown level of existing fleet
Min
imum
ne
t load
to m
inim
um
ge
ne
ratio
n ra
tio
(%)
Cap
acity
(GW
)
Min. loading levels
fell in each market
last year
27 Wärtsilä Capital Markets Day @albertwycheung
Source: BloombergNEF. Note: power prices represent real-time or intraday power prices.
Negative power prices indicate a lack of flexibility
0%
1%
2%
3%
4%
5%
6%
7%
8%
20
10
20
12
20
14
20
16
20
18
20
10
20
12
20
14
20
16
20
18
20
10
20
12
20
14
20
16
20
18
20
10
20
12
20
14
20
16
20
18
U.K. Germany U.S.- California Australia - SouthAustralia
%
Negative price occurrences, 2010-18
% of hours in the year
28 Wärtsilä Capital Markets Day @albertwycheung
Getting to two degreesElectrification and decarbonization
29 Wärtsilä Capital Markets Day @albertwycheung
Source: BloombergNEFSource: BloombergNEF
Total electricity demand, electrification
scenario
Total installed capacity, electrification
scenario, 2050
Scenario: full electrification of residential heat and road transport
0
10,000
20,000
30,000
40,000
50,000
60,000
2012 2019 2025 2030 2035 2040 2045 2050
TWh
Coal4%
Gas16%
Hydro5%
Onshore wind15%
Offshore wind4%
Utility-scale PV
36%
Small-scale PV
8%
24.4TW
NEO 2019
Electrification scenario
25% more
demand
28% more
capacity
30 Wärtsilä Capital Markets Day @albertwycheung
Source: BloombergNEFSource: BloombergNEF
Power demand, cold winter’s day, UK, 2040 Hourly generation, cold winter’s day, UK, 2040
Winter heat doubles peak demand in 2040
0
10
20
30
40
50
60
70
80
90
100
0:00 6:00 12:00 18:00
GWHeat Pumps
EV - DynamicLoad
EV - FixedLoad
General
Demand 0
10
20
30
40
50
60
70
80
90
100
0:00 6:00 12:00 18:00
GW Battery
Flexi
Solar
Onshore wind
Offshore wind
Hydro
Biomass
Other
Oil
Peaker gas
Gas
Coal
Nuclear
Demand
31 Wärtsilä Capital Markets Day @albertwycheung
Heat and transport sector emissions
126Gt
100% electrification
BAU
0
2
4
6
8
10
12
2017 2020 2025 2030 2035 2040 2045 2050
GtCO2
Electrification lowers heat and transport emissions…
32 Wärtsilä Capital Markets Day @albertwycheung
…but shifts them into the power sector
2 Degrees
100% electrification scenario
NEO 2019baseline
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2012 2019 2025 2030 2035 2040 2045 2050
MtCO2
Source: BloombergNEF
How to decarbonize this
fully electrified system?
How to stay on track for 2º
beyond 2030?
Power sector emissions
33 Wärtsilä Capital Markets Day @albertwycheung
Source: BloombergNEF
Change in generation from NEO base case
Scenario: a 2º-compatible power system that includes heating and transport
-40,000
-20,000
0
20,000
40,000
60,000
80,000
100,000
2021-25 2026-30 2031-35 2036-40 2041-45 2046-50
GWh
Much more wind
and solar
Much less coal and
unabated gas
34 Wärtsilä Capital Markets Day @albertwycheung
Source: BloombergNEF
Change in generation from NEO base case
Scenario: a 2º-compatible power system that includes heating and transport
-40,000
-20,000
0
20,000
40,000
60,000
80,000
100,000
2021-25 2026-30 2031-35 2036-40 2041-45 2046-50
GWh
Much more wind
and solar
Much less coal and
unabated gas
‘Phase II’
decarbonization
technology
35 Wärtsilä Capital Markets Day @albertwycheung
‘Phase II’ technology runs at low load factor
Source: BloombergNEF
Load net of renewables, NEO 2019 and 2 degree scenario
36 Wärtsilä Capital Markets Day @albertwycheung
LCOEs of example ‘Phase II’ decarbonization technologies
Coal CCSSolar
thermal
Fuel cell (Hydrogen)
Nuclear
Biogas peaker
CCGT CCS
0
50
100
150
200
250
300
350
400
450
500
0% 10% 20% 30% 40% 50% 60% 70% 80%
Capacity factors (%)
LCOE ($/MWh, nominal)
Utilization rangeneeded in a
2 degrees scenario
Source: BloombergNEF
Solutions for ‘Phase II’ will need to be:
● Low/zero-carbon
● Rampable / flexible
● Economic at low load factors
● Able to run reliably for days during
challenging periods
37 Wärtsilä Capital Markets Day @albertwycheung
Energy transition challenges, 2020+
Driving – and accelerating – deployment of
renewables and flexible resourcesDeployment
DevelopmentDeveloping the next generation of flexible
technologies for a 2º trajectory beyond 2030
Coverage.
Clean energy
Advanced transport
Commodities
Digital industry
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Albert Cheung
@albertwycheung
Thank you!
39 Wärtsilä Capital Markets Day @albertwycheung
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