RES Integration for Increasing of Energy Supply Security in Latvia: ENVIRONMENTAL AND ECONOMICAL FACTORS Ivars Kudrenickis, Gaidis Klavs, Janis Rekis Institute of Physical Energetics, Latvia NEEDS FORUM 2 “Energy and Supply Security – Present and Future Issues” Krakow 5-6 July 2007 6th RTD Framework Programme Integrated Project

Plan of presentation

Part I: Energy supply development trends and National Energy Strategy Part II: Integrated analysis of RES utilization, energy supply security and climate change mitigation factors in the national energy system development Part III: RES in Latvia power production and DH sector: assessment of employment effects and regional benefits

Part I:

Energy supply development trends and National Energy Strategy

Trends in primary energy supply

150 100 50 0 350 PJ 300 250 200 14% 35% 34% 34% 33% 36% 36% 1990 2000 2001 2002 2003 2004 2005 1 0,75 0,5 0,25 0 Electricity Fuel wood Natural gas Oil products and shale oil Peat Coal etc.

Self sufficiency

Primary energy flows in 2005

Import of oil products from rest of world 12,3% Import of electricity from Estonia and Lithuania 3,2% SHARE OF DOMESTIC ENERGY RESOURCES IN TPER 36,5% Import of natura l ga s from Russia 28,8% Import of electricity from Russia 0,7% Import of oil products from CIS 16,8% Import of coal from CIS 1,7%

National Energy Strategy 2007-2016

The principal measures identified to increase energy supply security Increase in supply security and sustainability of national energy system has to be basic criteria for economic analysis and decision-making related to its development.

 Diversification of fuels or fuel supply sources, relates both imported and local ones.

 Latvia active participation in the common EU policy - power interconnection with European power systems (Nordel, UCTE), expansion of Incukalns underground gas storage; regional Estonia.

co operation with Baltic sea region states, particularly, Lithuania and  Effective use of resources in all stages: extraction, conversion, transportation and end-use.

National Energy Strategy 2007-2016 The quantitative targets:

1.

Self-supply of total primary energy at the level of 37% (year 2025) 2.

RES-E share of 49.3% in the electricity supply (year 2010) 3.

Biofuels share of 10% (year 2016) and 15% (year 2020) in the transport sector

Local resources: future challenges

  despite significant improvement of energy intensity indicator, further growth of total primary energy supply is expected to meet the indicated target of self-supply,

the challenging growth in use of local resources, especially RES, have to be reached:

per 25% in year 2020 and

40% in year 2025

, compared with existing one

140 120 100 80 60 40 20 0 2005 2020 Energy intensity TPES Local resources

Energy, economy and environment indicator interaction

Environmental indicators 2004

Source: Key world energy statistics 2005. IEA - CO 2 emissions from fuel combustion only

RES-E share in power production

8000 6000 4000 2000 0 GWh 45,5 45,8 47,7 47 46 45,4 44,5 39,3 43,2 35,4 47,1 43,5 % 60 48,4 50 41,2 40 30 20 10 0 1999 2000 2001 2002 2003 2004 2005 RES-e Fossil fuel and import RES-e share corrected RES-e share

RES-E structure in year 2005

95 % 1 % Large HPP 2 % 3 % Small HPP 2 % Wind Biogas

Part II: Integrated analysis of RES utilization, energy supply security and climate change mitigation factors

Research Tasks



integrated analysis of national energy system development taking into account both:

 RES wider utilization,  energy supply security,  climate change mitigation

factors.



finding optimal structure of primary sources balance for power production



optimisation model MARKAL applied

Description of modelled scenarios

Target for GHG emissions’ restriction in energy sector Target for minimal RES-E share in the total electricity supply REF REF-CAP REF-CCAP REF RESE

No No In year 1990 energy sector contributed 72.2% (18690 kT) of national GHG emissions.

Annual restriction

of GHG emissions:  year 2010: 92% - 17195 kT  starting from year 2015: 75% - 14018 kT

Cumulative restriction

of GHG emissions for the period up to year 2050: 725764 kT No No No 49.3% starting from year 2010

Modelling results: primary sources for power production

12 TWh 10 8 6 4 2 0 REF (2015) REF+CAP (2015) REF+CCAP (2015) REF+RESE (2015) REF (2025) REF+CAP (2025) REF+CCAP (2025) REF+RESE (2025) Wind Biomass Import Coal + biomass Hydro Gas

Modelling results: total GHG emissions in energy sector

20000 kTon 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2000 2005 2010 2015 2020 2025 2030 REF REF+CAP REF+CCAP REF+RESE Kyoto

Modelling results: division of GHG emissions among end-users of energy sector 18000 kTon 16000 14000 12000 10000 8000 6000 4000 2000 0 REF (2015) REF+CAP (2015) REF+CCAP (2015) REF+RESE (2015) REF (2025) REF+CAP (2025) REF+CCAP (2025) REF+RESE (2025) Agriculture Households Service Industry Energy generation Transport

Modelling results: RES-E share in the power production

60 % 50 40 30 20 10 0 2000 2005 2010 2015 2020 2025 2030 REF REF-CAP REF-CCAP REF-RESE

Principal conclusions

1.

2.

3.

4.

Hydro and natural gas are the main primary resources for power production in all scenarios In reference scenario (REF) coal use, together with 15% solid biomass co-firing, will be new important source for power production thus increasing supply security. However the reference scenario without defining particular environmental targets in conditions of increased power demand will not allow to fulfil the objectives of EU climate policy RES-E target alone can not be enough effective instrument to mitigate climate change: RESE scenario target will allow in year 2030 to fulfil GHG emissions according Kyoto protocol only, but not be enough to fulfil strong obligations for post-Kyoto period.

To fulfil post-Kyoto obligation, RES-E target should be applied together with other climate change mitigation instruments, taking GHG emissions restriction obligation as a departure point (scenarios CAP & CCAP).

GHG emissions mitigation costs and RES-E additional costs

REF+ CAP REF+ CCAP REF+ RESE GHG mitigation marginal costs, year 2030,

EUR (2000) / t

GHG mitigation costs, average for the period 2005-2025,

EUR (2000) / t

RES-E additional costs, average for the period 2005-2025,

EUR (2000) / MWh

63 41 42 15 45 4,0

  the highest costs are indicated at the beginning of the period; the factor of fossil fuels prices and forecasted trends of RES E technologies’ specific investments strongly influence the calculated additional costs.

Part III: RES in Latvia power production and DH sector: Assessment of employment effects and regional benefits

Research Tasks



To estimate economical benefits of RES integration into national power production system in accordance of the target to reach RES share 49.3%



To assess economical impact of potential wide use of non-traditional RES – straw – for district heating

New capacities assessed



Biomass (Wood) CHP - 70 MW el



Wind : onland (135 MW) and off-shore (77 MW)



Biogas – 8 MW el



Straw DH - 46 MW th

Possible approaches



Use of standard factors

– the installation and operation of a given energy production capacity are associated with the specific number of jobs 

Production chain analysis

–identifying of the wages share in the value chain of a given energy production installation

Job places per 100 GWh annually produced electricity

Fossil technologies Wind Solar PV Solar thermal Small hydro Biomass, forestry waste Biomass, energy plantations Biogas, agriculture waste Source: R.E.H.Sims, “Biomass and Agriculture: Sustainability, Markets and Policies”, OECD Publication, Paris, September 2004, pp.91-103

1-6 15-20 50-54 25-27 8-9 18-19 64 58

Pre-feasibility study of employment, based on production chain analysis model Facility cost Technology value chain O & M value chain Fuel value chain 30% 70% 20% OM cost 80% Fuel cost All costs RE energy End user Total and per unit Estimation of the wages part of the value chain Income of the supplier = Fuel cost at the facility Wages Equipment Localization of the employment Employment Local regional Nacional Transnational Source: Tyge Kjær,Roskilde University

Production Chain Assessment Methodology Example: Biomass CHP, steam turbine, 0.6-4.3 MW Efficiency Electricity Heat 25% 65% Annual operating hours Specific investments, mill.LVL/MW Operation & Maintenance costs (% of investments per year) Biomass fuel cost, LVL/GJ Wages share of total investments (comprising Latvian local share) Wages share of O&M costs (comprising Latvian local share) Wages share of fuel costs (comprising Latvian local share) 5600 3.29 4 1.75

8% (20%) 50% (80%) 80% (100%)

Production Chain Assessment Methodology Example of onland Wind Annually produced power, GWh Installed capacity, MW New direct job places Job places related to investments Investments’ jobs calculated per 1 year of technology life-time Job places related to O&M Total new full-time job places Tax revenues (direct jobs) Tax revenues in state budget, LVL Tax revenues in municipal budgets, LVL

note: 1 EUR ~ 0,7 LVL

298 135 151 7.5

68 76 285 000 125 400

Production Chain Assessment Methodology Example of Biomass CHP Steam turbine Gasifiers Power production capacity, MW Job places related to investments (assessed as new – 100%) Investments’ jobs calculated per 1 year of technology life-time Job places related to O&M (assessed as new – 75%) Job places related providing wood fuel (assessed as new – 50%) Total new full-time job places Tax revenues in state budget, LVL Tax revenues in municipal budgets, LVL 35 35 New direct job places 158 (158) 8 115 (115) 11 154 (116) 317 (158) 246 (185) 264 (132) 282 328 Tax revenues (direct jobs) 1 057 475 465 300 1 229 971 541 200

Production Chain Assessment results: Employment effect and related tax revenues Straw DH Biogas-E New capacities (MW) 46 8 Wind-E Biomass (Wood) CHP 135 onland + 77 off-shore 70 New direct jobs 51 50 New indirect jobs 76 Tax revenues in state budget (LVL) 478 114 Tax revenues in municipal budgets (LVL) 210 375 75 468 739 206 250 173 259 1 621 837 713 625 610 915 5 718 616 2 516 250

Thank You !

Institute of Physical Energetics

Aizkraukles 21, Rīga, LV-1006 Latvia [email protected]