© Siemens AG 2013. All rights reserved

Going all electric? Finding the best way to bring energy to the end user

Venice, May 24, 2013

Gas Infrastructure Europe (gie)Annual Conference, May 23-24, 2013

Dr. Volkmar Pflug, Vice President Market and Competitive Intelligence

Siemens AG, Sector Energy

Page 2 © Siemens AG 2013. All rights reserved

What can drive gas consumption in power generation?

• How is the power generation sector going to dispatch gas-fired power plants?

• Are all-electric applications a significant driver for power and gas demand?

• What are the main challenges and opportunities of gas power plants in Europe today?

• What role might the gas grid play for energy transport and storage in the future?

Core Questions to be addressed

Page 3 © Siemens AG 2013. All rights reserved

European Power Sector delivers ~1/3 of the final energy –thereof ~1/4 of the gas consumption comes from power generation

Source: IEA Statistics, Siemens Scenario calculations

Industry

Building/Others

2010

1,816

8%(153)

32%

18%

5%6%

10%

20%

Electr./CHP

Transport

in Europe, Mtoe

Natural Gas

Oil

Coal &peat

Nuclear

Other (biofuels)

Hydro

2010

1,816

26%(465)

33%

17%

13%

9%3%

Supply Demand

Primary Energy / Gas

Page 4 © Siemens AG 2013. All rights reserved

European Power Sector can only deliver a moderate growth to gas demand – even considering all-electric development

Source: IEA Statistics, Siemens Scenario calculations

Industry

Building/Others

2010

1,816

8%(153)

32%

18%

5%6%

10%

20%

Electr./CHP

Transport

Power Generation Europe, TWh

100

31%

10%

RE w/o Hydro

+13%

+12%

Gas

Other fuels/ energy resources

2030

3,748

895(24%)

45%

All electricapplications

Efficiency Gains

--1,261

Economic Growth

1,605

2010

3,303

798(24%)

66%

~100TWh potential from all-electric

(e-cars, heat pumps ...)

in Europe, Mtoe

Natural Gas

Oil

Coal &peat

Nuclear

Other (biofuels)

Hydro

2010

1,816

26%(465)

33%

17%

13%

9%3%

Supply Demand

Power Generation (TWh)Primary Energy / Gas

Page 5 © Siemens AG 2013. All rights reserved

European Power Sector can only deliver a moderate growth to gas demand – even considering all-electric development

Source: IEA Statistics, Siemens Scenario calculations

Electr./CHP

Transport

Industry

Building/Others

2010

1,816

8%(153)

32%

18%

5%6%

10%

20%

Power Generation Europe, TWh

100 3,748

+12%

+13%

Gas

RE w/o Hydro

Other fuels/ energy resources

2030

895(24%)

31%

45%

All electricapplications

Efficiency Gains

--1,261

Economic Growth

1,605

2010

3,303

798(24%)

10%

66%

~100TWh potential from all-electric

(e-cars, heat pumps ...)

in Europe, Mtoe

Oil

Coal &peat

Natural Gas

33%

Nuclear

Other (biofuels)

Hydro

2010

1,816

26%(465)

17%

13%

9%3%

in Europe, Mtoe

2030

1,829

175

330

+11%

Electr./CHP

Supply Demand Demand

Gas in othersectors

Power Generation (TWh)Primary Energy / Gas PE / Gas

Page 6 © Siemens AG 2013. All rights reserved

Primary Energy / Gas

While in regions with a low gas price a coal-to-gas switch provides an economic path for CO2 emission reduction

3,748

895(24%)

2,852(76%)

2010

3,303

798(24%)

2,505(76%)

Gas

Other fuels/ energy resources

2030

Europe

Gas

Other fuels/ energy resources

2030

4,805

1,946(40%)

2,859(60%)

2010

4,354

1,030(24%)

3,324(76%)

USA USA:• Low gas price < 3 €/GJ (<$ 4 per

mmbtu) due to very economic shale gas exploration

• Stimulates investment in gas power plants replacing old coal plants

• Significant lever to reduce CO2emissions at low cost

Europe:• High gas price >7 €/GJ due to oil price

indexation• Only moderate investment in gas power

plants in spite of need for highly flexible capacity

• Significant lever to reduce CO2emissions at low cost

Source: IEA Statistics, Siemens

Power Generation (TWh)

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Although gas power plants perfectly fit to a low-carbon power generation, there are threats for an adequate investment

Economic path for reductionof CO2 emissions

Perfect complement tofluctuating Renewables

1

2

Compatibility to power-to-gasstorage option

3

Low load factors

Low spark spread

Low CO2 price

1

2

3

Threats (regional / temporarily):Drivers for Gas in Power Generation:

Page 8 © Siemens AG 2013. All rights reserved

CO2 Emissions (Mt CO2)Power Generation, gross (EU-27, TWh)

Scenario: A complete Coal-to-Gas shift could reduce CO2 emissions by ~30%1

809

412 1173 1173

484

2030

3748

0 31

1380

783

382

2030

3748

31

895

783

382

2012

3269

70754

880

346

CoalOilGas

Nuclear

Hydro

OtherRenewables

Regular Planning Coal-to-Gas Shift

Source: Siemens calculations

CO2 emissons (Mt)1230 860 495

495

860

1.230

-30%

20302012

-60%

2030

Regular Planning Coal-to-GasShift

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CCPP requires lowest specific investment per 1 ton of CO2 emission reduction

740650

1200

195

Solar PVGas CCPP Wind Onshore

Wind Offshore

*vs. an existing coal SPP (efficiency 38%);(assumed load factors: CCPP 60%, Solar PV 11%, Onshore 24%, Offshore 48%);always for the same amount of power generation

1

Specific investment per 1 t CO2 emission reduction (€/t CO2)*

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Among three scenarios for low carbon energy mix the “Focus Gas” scenario is the most economic one

1,421

1,368

1,540

1,399

Import/ExportFeed-In-TariffT&D OPEX

CO2 CostsFuel CostsO&M Costs

Storage CostsT&D CAPEXPower Generation

Cumulated Cost by Type of Cost 2011-2030 [bn €]

CAPEX OPEX

FocusRenewables

Focus Gas

Scenarios

BalancedMixof RE & CCPP

Planning Case0

50

100

150

200

250

300

350

400

1990 1995 2000 2005 2010 2015 2020 2025 2030

Mt/a

Focus GasFocus Renewables

Balanced Mix Renewables& highly efficient Gas

- 50% CO2 reduction target by 2030 (basis 1990)

- 40% CO2 reduction target by 2020

Source: Siemens calculations

Planning Case

3 scenarios to reach CO2 target in 2030 Cumulated Costs

1Example

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Renewable force conventional power plants to lower loads and more frequent operation breaks

0

100

200

300

400

500

0 10 20 30 40 50 60 70 80 90 100Residual Load (GW)

Residual Load Ranges

20122030

No.

of o

pera

tion

brea

ks >

1h p

er y

ear

Total number of breaks >1h: 2012: 2200 per year 2030: 4000 per year

Solution ideas:

Strategic Reserve (lowest impact in market)

Capacity Payments

New renewables regulatory regime (i.e. no more preferred feed-in)

Stabilize CO2 price (i.e. reduce certificate volume, introduce carbon floor price)

1/2

Spark Spread for Combined Cycle Plants

Residual load/operation breaks for conventional plants

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Integration of Renewables will become essential -Gas power plants can provide flexible backup power

Source: Siemens

Imbalance of Demand and Supply (2020)

2

The increasing high share of fluctuating Renewables (Solar, Wind) in Europe will challenge the conventional power plants in terms of:• Fast positive/negative load ramps

• Frequent operation breaks and start-

ups from the rest mode

• Low annual load factors

Combined cycle gas power plants provide the highest operation flexibility and the lowest investment

Operation flexibility by plant types

Flexible capacity needs to be rewarded!

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Power generation in Germany shifting from gas to coal againin 2012 due to low carbon price causing higher CO2 emissions

Source: IHS CERA, AGWE, UBA, eia (net generation, rounded values)

-5.7 €/t

2012

7.6

2011

13.3 931917

+14 Mio. t

20122011

276263

+14 TWh

2012

70

Gas

2011

83

Gas

3

-13 TWhCoal Coal

Carbon Price (€/t CO2)Power GenerationCoal & Gas (TWh)

GHG Emissions(Mio. t CO2e)

Carbon Price: ~0 €/tCO2Coal: 1’730 (42%) 1’520 (37%)Gas: 1’100 (25%) 1’230 (30%)

Mio. t CO2e: 5’500 5’300Lowest emissions

since 20 years

Low gas price in USA drives power generation and reduction of CO2 emissions

Page 14 © Siemens AG 2013. All rights reservedPage 14 Oct 2012

Storage required for a long-term full decarbonization of thepower sector – Gas grid is the most promising large-scale storage

Power Generation Conversion In / Out Utilization

Photovoltaic

Wind Power

Inter-mittent

generation PEM-Electrolyzer

+ -

O2 H2

H2O

Conventional(e.g. fossil)

Grid

Steadygeneration

CO2

CH4

H2

Direct utilization (no storage step)

Industry

Industry(usage ofH2)

CC-Turbine

Energy (Re-Electrification)

Fuel Cell Car

Mobility(H2-refueling)

H2

CH4

H2 storage

(injection)

Methanation / CO2 utilization

(Sabatier-Process)

Gas pipeline

(in-jec-tion)

For long-term storage of temporarily excess power from renewables hydrogen/methane production and feed-in of the synthetic gas into the pipeline system is feasible

Power Sector

Gas Sector

H2

3

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• Modest growth in electric power consumption in Europe +13% (2030 vs. 2010)• Economic growth + demand from further electrification mainly compensated by efficiency gains• Gas-fired power plants expected maintain its 25% share to total power generation until 2030

• Low CO2 price Shift towards coal-fired power generation at present

• Dispatch of gas-fired power plants only, if gas price becomes significantly lower: Gas providers need to push hard for additional supply sources to remove the current oil price-indexation

• Gas-fired power generation replacing coal most economic way to reduce CO2 emissions Regulatory framework needs to make power plant investment feasible Review of Renewable Energy Policies. Consider EPS for new (and old?) plants?

• Gas-fired power generation optimal complement to intermittent renewables Flexibility of capacity must be rewarded in a future regulatory system

• Long run: Complete decarbonization of power generation requires energy storage Gas grid seems to be the most promising way for storing energy from “power-to-gas”.

Conclusions

Gas price is the most critical factor to increase consumption in power generation

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2

3

4

5

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