Analyzing technological change in low carbon power generation

Doktorsavhandling, 2009

In order to mitigate climate change while satisfying the growing global electricity demand, technological change within the power generating system is crucial. New low carbon technologies need to replace the current more carbon-intensive options. Promoting this change – at the necessary pace – requires policy instruments; creating efficient policy instruments requires a comprehensive understanding of the dynamics of technological change and current trends. This four-paper thesis addresses the development, deployment, and diffusion of low carbon power generating technologies. The purpose is to better understand the drivers behind technological change, to explore current trends and assess future developments, and to consider the range of impacts of policy instruments in this context. Paper I uses experience curves to analyze the historical development of a technology expected to play a prominent role in future power generating systems, the combined cycle gas turbine. The results indicate that the rapid price decrease observed at the time rather reflected a temporary market behavior than an underlying production cost decrease. Analysis of other factors, e.g., technical performance improvements is an important complement to economic improvement analysis. Paper II investigates the deployment and diffusion of CO2-efficient power generating technologies in developed and developing countries. The results demonstrate that historical CO2-efficiencies tend to converge globally toward more efficient technologies. This suggests that if developments of new low carbon technologies are induced by, e.g., imposing stringent CO2 constraints on developed countries, these technologies will likely diffuse to regions with less stringent climate policies, e.g., developing countries, leading to additional CO2 reductions. Paper III explores the implications of international carbon emission trading for the development and deployment of advanced power generating technologies. A cost-optimization energy system model is applied using experience curves to endogenously model technological change. The results indicate that in general inter-regional trading provides stronger incentives for improvements in fossil-based technologies than for deploying advanced renewable technologies. However, technological change is mainly influenced by the level of future emission limits and by whether these levels are known well in advance. The results also stress the importance of early markets for new technologies, as early investments may significantly influence future technology trajectories. Paper IV analyzes a potential early market for the emerging renewable energy technology, biomass integrated gasification combined cycle (BIGCC). Data from a plausible reference market, the Indian sugarcane industry, is used in the analysis applying experience curves in future cost development modeling. The results indicate a large potential for cost reductions, if learning opportunities are provided, but additional financial support is required to make the technology commercially viable. The Clean Development Mechanism (CDM), using a project-by-project approach and at current carbon price levels, is likely to be sufficient to induce investments in the BIGCC technology to promote deployment and diffusion only once other measures have provided the initial support to create markets.