Techno-Economic Perspectives on Biofuel Futures – Modelling Transport Sector Strategies in an Energy System Context

Doctoral thesis, 2011

The high oil dependence and the continuous growth of energy use in the transport sector have in recent years triggered interest in transport biofuels as a measure to mitigate climate change and improve energy security. This work aims to examine techno-economic interactions linked to transport biofuel strategies in national and regional energy systems and their implications for the cost-effective realisation of energy policy objectives. The work applies an explorative, quantitative modelling approach, in which applications of the optimising energy system model MARKAL are developed and utilised. The thesis is based on four papers. Paper I and Paper II apply a regional perspective with the Västra Götaland region of Sweden as the geographical focus. Paper I studies system aspects of biomass gasification technologies, and Paper II examines the prospects for biogas from anaerobic digestion and the implications of different strategies for gas distribution. Paper III and Paper IV model the Swedish road transport sector as an integrated part of the national energy system. Paper III assesses the impact of transport fuel tax designs on the competitiveness of different fuel and technology options, and Paper IV investigates potential transport fuel pathways for oil reduction in the passenger car fleet. Both at the regional and national scale, the results show that limitations in low-cost biomass supply induce a trade-off between biomass use in the transport sector and biomass use in the stationary energy system. The latter option is often a more energy-efficient way of reducing CO2 emissions. However, which is the more cost-effective measure depends on energy market conditions in general and the oil price in particular. Higher energy service demands and more stringent climate targets increase the incentives for energy-efficient resource utilisation. Such development pushes biomass use towards stationary applications (heat and power) and increases the competitiveness of energy-efficient vehicle technologies such as hybrids and electric vehicles. However, in the medium term, transport fuel pathways based on biomass gasification show large potential of being a cost-effective option for lowered oil dependence. From a techno-economic perspective, biogas from anaerobic digestion is generally better used as transport fuel than for heat and power generation. Due to limitations in local vehicle gas markets, enhanced conditions for biogas distribution imply a somewhat higher cost-effective total biogas utilisation but, in particular, a shift from biogas use in heat and power generation to biogas use in the transport sector. An expansion of the natural gas grid implies possibilities of higher cost-effective biogas utilisation levels due to increased opportunities for low-cost biogas distribution to large potential markets. However, from a bioenergy perspective, a grid expansion also involves risks due to increased competition from natural gas. Transport fuel taxation provides important incentives for acceleration of the competitiveness of energy-efficient vehicle technologies such as hybrids and electric vehicles. Tax exemptions increase the attractiveness of biofuels from a vehicle user perspective, but can lead to increased CO2 emissions in the stationary energy system. As a consequence, the CO2 abatement costs associated with biofuel tax exemption policies can be high; however, cost reductions are possible through concurrent schemes for vehicle energy efficiency. For a given CO2 reduction, the results indicate (for a range of scenarios) that the incremental energy and technology costs of a complete oil phase-out in the Swedish passenger car fleet are lower than about one-fourth of the current governmental transport fuel tax revenues.