We review the status of a 1.4 GW, 8 GWh underground pumped hydro storage (U-PHS) project in the southern Netherlands, which has been under development since the 1980s. Its history shows how the prospect of a large-scale U-PHS for The Netherlands (a country whose proverbial flatness prohibits PHS) has been attractive in every decade, based on proven technology in a subsurface location with validated properties, and solid analysis of its economics. Although the ongoing energy transition clearly requires massive electricity storage, (U-)PHS projects are challenging investment propositions, in The Netherlands, as elsewhere. This case study illustrates a point of general relevance, namely that although the project execution risk, related to uncertainty with respect to subsurface integrity, is very low, the transition risk, associated with the intrinsic uncertainties of an electricity system in transition, is significant. We point out mitigation strategies for both risk categories.

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District heating represents a viable way to reduce carbon dioxide emissions in the built environment. This paper aims to assess the extent to which the market revenues of multiple heat production technologies can cover their fixed costs in a competitive wholesale district heating market. Marginal-cost pricing is applied in a case study of the Netherlands. A linear programming model incorporating heat supply and demand is developed to obtain hourly dispatch and heat market prices. It is concluded that low carbon heat generation technologies tend to have low short-run marginal costs. All examined heat producers have an under-recovery of fixed costs in a range between 60% and 90% except the waste incineration combined heat and power plant. It has an overall return on investment of 44% and 12% within the reference and heat pump scenario respectively. Although marginal-cost pricing may ensure cost-efficient dispatch, the market revenues are far from enough to recoup the investment costs for the majority of the heat producer, let alone the network costs. Significant additional remuneration is required to sustain a competitive heat market and ensure sufficient investment in new generation capacity in the long run.@en

Full decarbonisation of the electricity system is one of the key elements to limit global warming. As this transition takes place, the electricity system must maintain system adequacy and remain affordable to consumers. In liberalised electricity markets investors are seen as key actors driving this transition. Due to the intermittent character of renewable assets, such as wind or solar parks, electricity systems with large shares of renewable electricity will need to become increasingly flexible. Evaluating whether specific market designs provide the right incentives to invest in flexibility, requires the simulation of realistic investor behaviour. Agent-based modelling provides the means to explore heterogeneous, imperfectly informed and boundedly rational investor behaviour within different electricity market designs. We evaluated two market designs; “energy-only” markets and markets with a Capacity Remuneration Mechanism (CRM). We conclude that energy-only markets, even with strong carbon pricing, do not incentivise investors to deliver a fully renewable, reliable and affordable energy system. Therefore policy makers should focus on developing CRMs which can work in combination with market incentives to reach a fully renewable, reliable and affordable electricity system in the second half of this century.

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Transparent, consistent accounting of climate-related energy targets is a fundamental building block to the architecture of international climate agreements. Many of these climate targets focus on the transition of the energy system which has led to the development of various energy transition scenarios. Now that fossil resources are being replaced by non-combustible and renewable energy sources a re-assessment of the applicability of the current set of metrics on which these energy scenarios are based is necessary. Now that energy derived from renewable and non-combustible resources with abundant availability but limited instantaneous availability becomes more prominent the ongoing electrification of the energy system combined with the decarbonisation of the electricity system has caused the current set of energy scenario metrics to become ambiguous. More specifically we show that Total Primary Energy (TPE) and its related indicators, Energy Efficiency (EE), Energy Intensity (EI) as well as the key metric Electricity Generation Capacity (EGC) have become unrepresentative, potentially misleading and for a large part irrelevant. This is problematic as these metrics steer climate policy and investment decisions based on statistical artefacts rather than valid representation of the energy system. This study concludes with a set of requirements on energy scenarios to overcome these problems that will lead energy scenarios to focus on Total Final Consumption within a mix of related energy metrics.

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The deployment of low-emission alternative fuels is crucial to decarbonise the transport sector. A number of alternatives like hydrogen or dimethyl ether/methanol synthesised using CO₂ as feedstock for fuel production (hereafter refer to “CO₂-based fuels”) have been proposed to combat climate change. However, the decarbonisation potential of CO₂-based fuels is under debate because CO₂ is re-emitted to the atmosphere when the fuel is combusted; and the majority of hydrogen still relies on fossil resources, which makes its prospects of being a low-carbon fuel dependent on its manufacturing process. First, this paper investigates the relative economic and environmental performance of hydrogen (produced from conventional steam methane reforming and produced via electrolysis using renewable energy), and CO₂-based fuels (dimethyl ether and methanol), considering the full carbon cycle. The results reveal that hydrogen produced from steam methane reforming is the most economical option and that hydrogen produced via electrolysis using renewables has the best environmental profile. Whereas the idea of CO₂-based fuels has recently gained much interest, it has for the foreseeable future rather limited practical relevance since there is no favourable combination of cost and environmental performance. This will only change in the long run and requires that CO₂ is of non-fossil origin, i.e. from biomass combustion or captured from air. Second, this paper address unresolved methodological issues in the assessment of CO₂-based fuels, such as the possible allocation of emissions to the different sectors involved. The outcomes indicate that implementing different allocation approaches substantially influences the carbon footprint of CO₂-based fuels. To avoid allocation issues, expanding the boundaries including the entire system and is therefore recommended.

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To attain a better understanding of the energy transition we have applied Agent Based Modelling (ABM) to Integrated Assessment Modelling (IAM) in an abstract model with which we developed a proof of concept model of society’s response to a changing climate and energy system. Although there is no doubt that large scale neoclassical IAMs have provided key insights for business decisions and policy makers, we argue that there is a need for an approach that focuses on the role of heterogeneous agents. With our abstract ABM based on agents with heterogeneously spread discount rates we were able to give a new perspective on appropriate discount rates in the discussion between mitigation and adaption to climate change. We concluded that applying ABM to IAM yields good prospects to the further development of the implementation of society’s response to a changing environment and we propose future additions of the model to include adaptive behaviour.

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