Print Email Facebook Twitter Future profitability of fossil-fuelled power plants in the Netherlands Title Future profitability of fossil-fuelled power plants in the Netherlands Author Alsem, J.D. Contributor Chappin, E.J.L. (mentor) Weijnen, M.P.C. (mentor) Correljé, A.F. (mentor) Wirtz, A.C. (mentor) Faculty Technology, Policy and Management Department Energy and Industry Date 2013-04-26 Abstract The EU and the Netherlands have set multiple energy transition objectives for the year 2020. In 2009 the European Council has formulated long term goals to reach 80-95% greenhouse gas emission reduction targets for 2050, which comes down to an 80% CO2-emission reduction overall and a 95% CO2-emission reduction in the fossil-fuelled power production sector. Since power production capacity investments are only done by power production companies in the liberalized market, they are key players with a vital role for achieving CO2-emission reductions and an energy transition. Since the future electricity market situation is uncertain, it is interesting to get more insight in how different scenarios will affect the profitability of power plants and how the profitability could affect the investments that contribute to the energy transition. The EU and governments of the member states therefore have to cooperate with the power production companies to specify the roadmaps and realize the energy transition. The main goal of this research is to explore the possible profitability of Dutch fossil-fuelled power plants in 2020. The main research question is formulated as follows: What role do fossil-fuelled power plants play in the energy transition? This question touches upon both the importance of having fossil-fuelled power generation capacity available for meeting the power demand and the energy transition which implicates achieving the European and national energy policy objectives. From a stakeholder analysis it follows that the Dutch government and power producers are very dependent on each other. While power producers strive for continuity and making profits, the government wants to maintain a low electricity price, high security of supply and wants to protect the climate and environment. The research method applied for this research consists of linear modeling the Dutch merit order, a scenario analysis with the merit order model and spreadsheet modeling in order to be able do to a profitability analysis of power production portfolios. For the scenario analysis 36 scenarios for the year 2020 were created, based on different settings for the natural gas price, coal price and CO2-emission price. For all the scenarios the profitability of the Dutch expected installed fossil-fuelled power production capacity in 2020 is determined. The most important variables that cannot be influenced by the owners of the fossil-fuelled power plants, but do affect the profitability of these plants, are: the natural gas price, coal price and CO2-emission price. From the model outputs it can be concluded that the natural gas price, coal price and CO2-emission price all should be increased in order to cause a shift in the merit order so that gas-fired power plants become cheaper than coal-fired power plants. Only when this shift in the merit order is created with a high coal price and CO2-emission price, a CO2-emission reduction occurs. Since the majority of the installed power production capacity in 2020 is fossil-fuelled, the security of supply depends mainly on the fossil-fuelled power production capacity. Unprofitable power plants could be mothballed or shut down by the energy producers, which would lead to a very low security of supply. However, since the electricity has to remain affordable, a balance between the values of the three variables has to be found. As becomes clear from the scenario analysis, the CO2-emission price level needs to increase significantly before any shifts in the merit order are realized. This should be done by market intervention, since the CO2-emission price will most likely not reach the desired value through the market. However, a Dutch national increase of the CO2-emission price does not per se lead to the desired effect, if the power producers in neighbouring countries do not experience the same market conditions as in the Netherlands. An increased CO2-emission price on the European level should therefore be encouraged. Subject energy transitionprofitabilitypower plant To reference this document use: http://resolver.tudelft.nl/uuid:de74f530-d3ef-4e52-928f-aba7ab46d6bd Access restriction Campus only Part of collection Student theses Document type master thesis Rights (c) 2013 Alsem, J.D.