Project Volt Gas Volt (English)

1

CONTENTS

3 Introduction 3The German example 3 Feasibility in France 4 The advantages of this solution 5 French companies already on board 6 German partner companies 6 Project costs 7 The real cost of nuclear power 7 A revolutionary approach 7 Financing the VGV project 9 What is being done in France now?

2

Introduction

Project Volt Gas Volt (VGV): The credible substitute to nuclear power.

AT LAST, electricity generated from wind and solar sources, converted into methane, can be stored and re-used as a source of energy! The Volt Gas Volt (VGV) project is the first credible substitute that can lead to the phase-out of nuclear and fossil power and the development of a safe, powerful and independent energy model.

The technical solution outlined in this document consists of combining the expansion of renewable energy with an electricity storage solution. Converted into methane, electricity can be stored in the existing natural gas grid. It can then be re-used either as a fuel for transport or in combined heat and power plants.

The main obstacle today to massive deployment of these two important renewable energy technologies (wind and solar) is the intermittence of their production. Sometimes they produce a surplus, sometimes not enough. Storing surplus energy production is obviously the key to bringing about a technological change.

A solution that draws on the German model SolarFuel, a company based in Stuttgart, Germany, has solved the problem of long-term energy storage at demonstration level. A 250 KW demonstration plant has been built. Audi is building the first industrial-scale plant (6.3 MW) expected to be up and running in June 2013.

The energy storage concept being developed in Germany is surprisingly simple: the electricity generated is used to perform the electrolysis of water, producing hydrogen and oxygen. The oxygen can be used for other purposes or simply released into the air as a totally harmless emission.

Hydrogen presents problems in terms of storage and household use, unlike methane, for which grids already exist. The solution is therefore to combine it with CO2 to produce methane, which is purer than natural gas. The methane is then pumped into and stored in the existing natural gas grid and used like natural gas. Since the CO2 is simply recycled, no additional CO2 is emitted into the air. It is suitable for all types of uses, including in natural gas-powered vehicles, to generate electricity for all purposes including electric vehicles, and for thermal and industrial uses.

If generated in sufficient quantities, it could totally replace the present-day uses of natural gas and perhaps ultimately most fossil fuels. The terms used for this product in Germany are substitute natural gas or e-gas. We call it VGV for Volt Gas Volt.

The feasibility of application in France: the proposed way forward Our proposal for France is very simply to use the solution developed in Germany, but adapted, refined and massively scaled-up for France. It would give France an export and job-creating industry with real future potential.

Storing methane produced from the conversion of solar and wind energy in the existing French natural gas grid will give the grid a new dimension of renewable energy storage. This process solves the problems of the intermittence of renewable energies, energy storage, CO2 emissions, energy independence issues (which include military and financial costs) and the unfortunately well known risks of nuclear energy.

3

This system can store energy for months, long enough to last through periods of heat or cold, or lack of wind or sun, and can be used almost anywhere. No other system offers such possibilities. The storage of pumped water is limited in its application to elevated areas that allow large-scale pumping. Compressed air in underground formations is generally limited to two days. The best largescale system for a battery, NGK's NAS insulator battery, can store a certain number of megawatts, but only for six hours. However, this battery is already operational but costs $3.5 to â‚Ź4 million per MW. N.B.: Methane is, of course, a potent greenhouse gas, perhaps 20 times more potent than CO2.

However, the VGV solution would allow its storage in existing natural gas grids, which in any case, even without our solution, will have to be reinforced to prevent leaks (leaks for shale gas can be as high as 9%, according to certain studies). In any event, the proposed solution makes further drilling unnecessary. This solution therefore does away with the perceived need for the use of shale gas and resolves a number of geopolitical problems by reducing energy dependence.

The advantages of this solution a) Addressing the problem of intermittent renewable energy German scientists have carried out a simulation of the possibility of meeting 100% of projected energy demand in Germany in 2050 with renewable energy (largely wind energy). In the absence of energy storage, the simulation showed that the surplus energy generated by wind turbines is more or less equivalent to the average demand shortfall for one year. However, without storage, there are tremendous differences between supply and demand, from one hour and from one day to the next, which could result in blackouts and the total loss of surplus energy produced on days of overproduction. Storing and using energy as needed, either as electricity or in the form of gas for heating, transport or industrial use, would solve the energy problem to a large extent.

The simulation was discussed at an Audi presentation, "Power-to-Gas: the missing link in renewable energy systems", in Vienna on 31 May 2012, by Dr Hermann Pengg. (http://www.youtube.com/watch?v=hOn1FkwPjMA).

The German natural gas grid is roughly twice as large as the French grid: 220 TWh of gas in Germany compared with 110TWh in France. The German gas grid is sufficient to supply the entire country with two months of gas-generated electricity. In 2010, France generated 539 TWh of electricity, according to the CIA Fact Book. If France were to reduce its nuclear generation capacity by one third, replacing it with renewable energy, mainly wind power, the existing French gas grid seems sufficient to cover a few days or even weeks of the intermittence that could result. If more underground storage space should prove necessary, it could be installed. b) Decentralizing gas production The concept consists of locating the electricity-to-gas plant near the source of renewable energy and, in Germany, near a biogas installation. In France, it could be put near a biomass power plant installation. This will help minimise transport costs. Another possibility consists of setting up installations in an area where "lost" heat can be used for district heating. This provides another source of revenues and thus increases the overall efficiency of the process. A third possibility is to locate installations as close as possible to existing combined heat and power plants (CHP), which obviously are already connected to the electricity grid. That would reduce or possibly even eliminate the need to build new costly electricity grid sections. c) Using CO2 In Germany, CO2 is emitted by biogas production plants. According to SolarFuel, ZSW and IWES, Germany emits large quantities of CO2. "The [VGV] process can generate more than 25 TWh of substitute natural gas per year simply by using the CO2 contained in crude biogas from the roughly 6,000 biogas plants currently being operated in Germany. If the goal is to switch to 100% production of renewable energy, estimates are in a range of 20 to 40 TWh per year."

4

What network of plants needs to be built to store surplus electricity from wind and solar installations to replace a nuclear plant?

The VGV process is likely to become increasingly efficient, as it is still a brand new application of an existing technology. While it is impossible for now to give an "average" in answer to the above question, a good many clarifications can already be given.

France holds a strong hand that could improve the return on investment and speed up the development of renewable energy.

If France wishes to phase out nuclear and fossil fuel, massive investments will be needed in renewable sources – wind and solar energy – regardless of whether it adopts the VGV approach or not. With VGV, energy that would otherwise be lost can be stored and renewable energy production infrastructure needs would therefore be smaller, even though costs will remain high.

Greenpeace and others have estimated the cost of 100% renewable energy. We will not get into that debate other than to clarify the usefulness of VGV at every stage, since no renewable energy production is lost. The VGV technique is reliable for a continuous supply.

French companies already on board Two major French companies, Alsthom and Schneider Electric, along with the Belgian group Solvay Rhodia, acting through their jointly owned venture capital firm, Aster Capital, have acquired a €4 million stake in SolarFuel, thus becoming the largest shareholder after the founder. They announced their acquisition, on 4 October 2012, of capital in this company originally set up with 100% own funds. SolarFuel and Audi are building the 6.3 MW plant that will produce e-fuel.

Potential German partner companies The project is quite advanced in Germany, according to the German Energy Agency (DENA). A 25 kW pilot gas-fired plant has been operating since 2009 under the joint responsibility of the BadenWürttemberg Centre for Solar Energy and Hydrogen Research (ZSW) in partnership with SolarFuel GmBH and the Fraunhofer Institute for Solar Energy Systems.

At the Baden-Württemberg Centre for Solar Energy and Hydrogen Research, another demonstration project in the form of a 250 kW research plant was completed in December 2012. This demonstration plant supplies a standard gas product that is certified today as a natural gas substitute. In 2010, the consortium's project won the innovation and climate protection prize awarded by the German gas industry.

Today, a ZSW cooperation entity that includes SolarFuel GmBH and IWES is in charge of developing this process. IWES is supervising grid connection and Solar Fuel is responsible for marketing.

Another type of organisation could be conceived of, however. Michael Sterner, who invented the process of manufacturing gas from electricity (VGV), points out that the process is now in the public domain and this this key development for renewable energy could thus be compared to open source software.

Furthermore, France could draw on the functioning of the German Energy Agency, a key player in the development of e-fuel. This agency is organised like a private company, 50% owned by the federal government and 50% by a number of German banks: KfW Bankengruppe (26%), Allianz SE (8%), Deutsche Bank AG (8%), and DZ BANK AG (8%). DENA has set up a substitute gas platform where industrial partners can share information and experience. GDF/Suez is one of the partners, although its participation currently seems limited to discussions with platform participants.

The objective is to test this solution in pilot and demonstration projects with a view to developing an economically viable product on an industrial scale.

5

VGV could become the equivalent of the European Airbus in its field!

Does the VGV solution come at an acceptable cost?

The first small-scale industrial installation (6.3 MW) for the conversion of electricity into gas is currently being built in northern Germany by Audi, in collaboration with SolarFuel and EWE (a biogas user). Current production costs are high – around 25 euro cents per kWh of gas produced. The aim is to reduce this cost to around 8 cents per kWh by 2018.

To understand the challenge of achieving this goal, this has to be compared with the price of imported Russian gas, including transport costs, which today is around 4 to 5 cents per kWh (2 euro cents not counting transport). No one knows what the price will be in 2018, however. In addition, a carbon tax would make imported gas more expensive. Conversely, the integration of CO2 in the production cycle will bring down prices. The investment cost for the first plant is estimated at €20 to €30 million.

Additional savings possible Total costs of the transformation could of course be reduced significantly through energy savings and efficiency. Less consumption means less infrastructure and consequently lower costs.

We consider in our model that energy savings efforts will at least cancel out any expansion of consumption due in particular to the growth of new information and communication technologies (ICTs). This is a very cautious, even pessimistic approach, because France could certainly do better, considering its delay. A French household consumes 35% more electricity than a German household today. The German government is also aiming for a 10% reduction in electricity consumption by 2020 and a 25% reduction by 2050 from 2008 levels.

Aims and achievements are not always identical.

Cost can also be reduced by cutting back on the immediate need for a smart grid. Although costs continually decline with photovoltaic (PV) panels, placing them on nearly every southern facing roof with a two-way interactive connection to a smart grid is another matter altogether. The costs of PV are currently €100 per MGWh. But the smart grid is very expensive. For the United States, the Electric Power Research presented estimates in a 2011 report, "Estimating the Costs and Benefits of the Smart Grid". It is estimated that building a national-scale smart grid in the United States will cost up to €24 billion per year for 20 years. However, with massive development of Volt Gas Volt and of wind energy, the immediate need for smart grids would be lessened.

The real cost of nuclear energy The cost of an EPR (European pressurised reactor) is astronomical and the technology is potentially dangerous. The price of an EPR is now estimated at €8.5 billion, after initially being announced at €3.3 billion. It will also entail considerable operating costs, whereas wind farms and Volt Gas Volt plants have almost no operating costs. Flamanville produces radioactive waste whereas wind and solar energy have a life cycle that can be controlled in terms of pollution. Nuclear plants generate an uninsurable risk whereas wind and solar energy present minimum risk that can be covered by insurance contracts. Gas-related risks are serious but incomparable with those of an event like the Fukushima disaster.

The question is therefore whether the construction of the only EPR foreseen in France should be maintained. A single reactor meant to operate for 60 years would require intolerable costs both upstream and downstream if not shared amongst a number of reactors. Indeed, either it is considered a preliminary production unit, and as the Court of Auditors has pointed out, at least nine more reactors would have to be built, or we should abandon this extremely costly project developed

6

in the 1990s, whose placing into service remains hypothetical and uncertain to date.

The outright abandoning of this project will increasingly be justified primarily for financial reasons.

Indeed, the revised nuclear megawatt-hour price is around €60 per kWh for amortized reactors once important post-Fukushima safety works have been completed.

The kilowatt-hour price for Flamanville stands at between €90 and 100. The current kilowatt-hour production price for onshore wind installations is €70 and continues to decline. The kilowatt-hour price of photovoltaic is €100 and also continues to decrease.

In other words, from the financial and economic point of view, the production cost curves for renewable energy are already crossing those for nuclear, the latter not including the real cost of decommissioning and above all of insurance. Insurance will become inevitable, as the head of the Nuclear Safety Authority (ASN) estimates at €600 to €700 billion the cost of a major nuclear accident in France. In a 2007 report, the IRSN (French Institute for Radiological Protection and Nuclear Safety, a government agency) report gave a much higher figure--an overall cost of up to €5,800 billion for the French economy in the event of a Fukushima type event at a single nuclear power installation, that of Dampierre in North-Central France.

What would the kilowatt-hour price for nuclear power be if an insurance premium were factored in, as is the case for any other company, to compensate for the risk of a Fukushima-like event? We would point out that Tokyo was saved from an evacuation after Fukushima only because, exceptionally, the wind was blowing in the other direction!

A revolutionary approach: using nuclear power to subsidise its own phase-out France is unique in that its nuclear plants cannot use all the electricity they could generate, for lack of demand. If this potential production became real and supplied the Volt Gas Volt plants, they could operate at nearly 100% capacity. This would help speed up the return on investment in VGV for the development costs of the energy transition.

Nuclear power would thus help subsidise the transition while allowing for a reduction in the number of plants in operation. Indeed, the build-up of renewable energy installations whose surplus production would be bought by VGV installations would permit the correlative decline in nuclear power production. This would lead in time to a 100% phase-out of nuclear-generated electricity.

In the meantime, the VGV solution would take advantage of nuclear energy that would otherwise be lost. By storing this electricity, EDF could keep a level of nuclear production determined on the basis of the contribution of renewable energy and the reduction of consumption, but could shut down the oldest and most dangerous nuclear plants while maintaining the same level of power production through the VGV process.

This system would help pay for the cost of developing electricity produced from the gas grid through the use of 100% of the production capacities of renewable energy. Once the VGV installations have been amortised to a large extent, the energy sources would be wind and solar, without nuclear.

Financing Project VGV: the Green Redemption Fund This 30-year fund would also encompass an industrial development plan. Its board of directors, the private investment instruments it sets up and the necessary tax changes should ideally be approved by referendum and could be annulled only by another referendum, the goal being to build the necessary level of confidence. In any event, creation of the fund should be a condition for assuring the project's sustainability.

The VGV project would assure development of the system on an industrial scale, the reindustrialisation of France with a new green energy system, the reduction of nuclear capacity from

7

75% to zero for electricity production, research and development, and the development of decentralised production sites and other sites with large industrial capacity. There would be a commitment to lock up the investments for a period of 30 years. This commitment is made as a guarantee that the necessary amounts will be paid over time, for the sole purpose of ensuring the energy transition via a cross-generational initiative.

The following different types of financing could co-exist: A share of the "nuclear rent" paid by all French citizens and that must be invested in France (since the nuclear risk cannot be insured, these payments will be the nuclear industry's guarantee of its conversion). It goes without saying that, as soon as EDF complies with the political decision to phase out nuclear energy, it will play a major role in the VGV project.

An annual contribution of at least €1 billion from the oil and gas industries in the form of a reallocation of public subsidies paid until now to the oil sector – which total €19 billion according to the Court of Auditors - with the rest allocated to debt reduction. Gas produced by the VGV system would be bought on this basis. Initially, VGV (artificial methane produced by the VGV system) will be more expensive than fossil gas, but ultimately will be less costly.

The allocation of emissions allowances (the validity of which is called into question) and the carbon tax, once it is in place. A carbon tax levied directly on fossil fuels could be calculated on the BTU equivalent of the oil needed to produce a tonne of CO2. Based on the Rocard-Juppé plan, which comes to around €10 per barrel of oil equivalent, this tax would generate around €8 to €10 billion a year in France alone, and more than €100 billion if applied to the Europe of 27. This would also be the basis of the calculation of the carbon tariff on imported goods and services produced using fossil fuels.

Individual savings accounts blocked by the holder in return for an exemption from inheritance taxes.

Several solutions are possible, provided these funds are locked up for 30 years and earmarked for the younger generations.

Private green funds could help finance the global fund. We can give thought to a system similar to the foundation scheme used in Belgium and elsewhere (though currently not legal in France). An exemption could be considered for this specific type of fund that would not offer any short-term advantage to the depositor. It goes without saying that all funds will have to be invested in green energy and that all profits will be re-invested in green energy. This could create a magnet effect and draw capital into France.

Capital and interest could be blocked for 30 years and the transmission to heirs would offer particularly attractive conditions.

A debate should be launched to encourage allocation of the wealth tax to the fund.

The Green Redemption Fund could use COFACE-type mechanisms to secure the receivables of wind farms and solar installations. This use could multiply tenfold the amount of private financing of renewable energy installations.

The Green Redemption Fund must have investment capacities. It would be interesting to draw on methods used in other countries for this type of investment. REITs, for example, the American equivalent of FPI, invest either in real estate (land or buildings) or in real estate mortgages. In the United States, this investment vehicle now covers gas pipelines and photovoltaic installations.

The Green Redemption Fund could acquire strategic companies (national and foreign) to enable France to catch up from its delay in renewable energy.

8

What is being done in France now?

The German solution exists and is operational, but research is also under way in France.

First, the direct use of hydrogen (some 65 billion Nm3 of hydrogen are produced annually in Europe) is still a potential solution for decentralised energy production. The solution of injecting hydrogen directly into the gas network at levels of 6% to 20% is a very interesting option. Hydrogen can be directly stored and injected into the gas grid to help reduce carbon and increase yields.

Experiences (such as the AMI GRHYD programme with GDF-Suez, CEA, etc.) are being assessed in France, with a view to two potential uses: - the urban gas network - captive fleets of public service vehicles as a start, an option that could subsequently be brought into widespread use (hythane).

The option of biomass and algae/CO2 is also interesting. It needs to be developed further because current yields are still too low to make these solutions economically viable for the short and medium term. Massive support for research in these areas is essential.

9