Workshop II - Integrated Modelling of Environment and Energy Policy Departamento de Ciências e Engenharia do Ambiente Research work funded by FCT/MCES and POCI 10 supported by FEDER

Workshop II - Integrated Modelling of Environment and Energy Policy Workshop II Integrated Modelling of Environment and Energy Policy Portuguese energy system scenarios for 2030 and Greenhouse Gas emissions Departamento de Ciências e Engenharia do Ambiente FCT - Faculdade de Ciências e Tecnologia UNL - Universidade Nova de Lisboa DCEA-FCT/UNL

Workshop II - Integrated Modelling of Environment and Energy Policy Overview TIMES_PT –Structure and information sources –Objective Function for optimisation –Energy Services Demand –Model Inputs: primary energy potentials, technologies databases (costs, efficiencies and availability of electricity generation technologies), etc Energy Scenarios –Energy Consumption (total, sector, electricity generation) –Energy imports and exports –Technologies profile –CO2e emissions Analysis of CO2e Abatement Scenarios

Workshop II - Integrated Modelling of Environment and Energy Policy TIMES_PT Structure, Inputs and Outputs, Information Sources

Workshop II - Integrated Modelling of Environment and Energy Policy Dynamic model of linear optimization, that configures the energy system in such way as to minimize the net total cost of the system, while satisfying a number of constrains of the demand TIMES Model Objective function – maximization of total surplus (the step function it allows the optimization through linear programming) Analyze the system behaviour over a certain period of time and assume that the energy markets are in perfect competition and the agents have a perfect knowledge of his evaluation Assume a linear behavior between the outputs and inputs (However, does not mean that production functions behave in a linear fashion)

Workshop II - Integrated Modelling of Environment and Energy Policy Objective Function (Minimization of Total System Costs) Discounted sum of the annual costs minus revenues: + Investment costs + Costs for sunk material during construction time + Variable costs + Fix operating and maintenance costs + Surveillance costs + Decommissioning costs + Taxes - Subsidies - Recuperation of sunk material - Salvage value NPV: net present value of the total costs ANNCOST: Total annual cost d: general discount rate REFYR: reference year for discounting YEARS: set of years for which there are costs (all years in the horizon + past years if costs have been defined for past investments + a number of years after the life time of the technology if some investment and dismantling cost are still being incurred, as well as the Salvage Value

Workshop II - Integrated Modelling of Environment and Energy Policy Reference energy system in TIMES_PT Technologies or Processes Commodities Commodity Flow

Workshop II - Integrated Modelling of Environment and Energy Policy Base Model Structure – Main Sectors Refinery, imports and renewable energy Electricity Transports Industry Households, Commercial and Agriculture

Workshop II - Integrated Modelling of Environment and Energy Policy Main Information Sources in TIMES_PT General Structure Economic Sectors Existing Technologies/Processes (aggregation level) Processes flow Technologies Standard information technologies description (Ex: mass balances) Stocks (Ex: installed capacity) Efficiency Availability factor Input/Output ratio Specific Parameters (Ex: CHPR) Energy Balance Demand division Load Diagram (timeslices) DGGE & Eurostat Energy Balances ADENE (EURECO Project) DGGE National Emissions Inventory INE EDP, PEGOP, Turbogás, Valorsul, Cogen, EDM, EDA (…) PTEN PNAC Studies and Publications (...) NEEDS with minor adjustments/corrections NEEDS

Workshop II - Integrated Modelling of Environment and Energy Policy TIMES_PT Exogenous Inputs: Energy services demand, New energy technologies, primary energy potential, policy assumptions

Workshop II - Integrated Modelling of Environment and Energy Policy – Annual Demand (DEM)Annual Demand Cement (Mt) Paper (Mt) Iron & Steel (Mt) Glass (Mt) Pkm (Million Pkm) Tkm Other Industries (PJ) Agriculture (PJ) Resid. Space Heating (PJ) Resid. Space Cooling (PJ) Water Heating (PJ) Etc. – Elasticities of final demands to macroeconomic drivers, income (ELASI) and price (ELASP)ELASIELASP – Autonomous efficiency improvement in industry (AEEI)AEEI – Base year data (DEM 2000 ) – Residential Data – Population growthPopulation growth – World energy pricesWorld energy prices – Technical progress, energy intensity and labour productivity evolution – EU-22 GDP growth target (2 to 2.5%) – Energy pricesEnergy prices – Primary Energy potential and costsPrimary Energy potential and costs – New and Existing TechnologiesNew and Existing Technologies – Policy assumption (e.g. CO2 eq emissions restrictions) Model Structure: Exogenous inputs GEM-E3 Optimization function – Energy ScenariosEnergy Scenarios – Technology profile – System costs – Emissions TIMES_PT – National Macroeconomic Drivers (DRGR) GDP growthGDP Private consumption as a proxy for disposable incomePrivate consumption Sectoral production growth: industry, services, transports and agriculture. – PRGR: Price Evolution (PRGR) GEM-E3: General Equilibrium Model for Energy-Economy-Environment Inputs Outputs Residential Demand Generation * DEM t * = Industry, Commercial, Transports and Agriculture demand generation

Workshop II - Integrated Modelling of Environment and Energy Policy – Temperature Correction for year 2000 – Efficiency Improvement of Insulation of Existing Dwellings (NEEDS) – 1% per year – Cooling target (3% in 2000 to 50% in 2050 (INETI) – Number of persons per household in 2000 (INE) Generation of energy services demand in the Residential Sector Existing Dwellings – Population growth, – Evolution of the number of persons per household (DGGE) – Existing Dwelling (base year calibration: 2000 – INE) – Demolishing Rate (INE) – Existing/New Dwellings Share (INE) Heat Demand New Dwellings – Number of Existing/ New Dwellings Cooling Demand Hot Water Demand – Heat/Cooling/Hot Water Demand per Dwelling Total Heat/Cooling/Hot Water Demand

Workshop II - Integrated Modelling of Environment and Energy Policy GEM-E3 inputs World energy prices (€2000/GJ) Import price crude oil 6,515,385,415,796,566,947,017,087,157,23 natural gas 3,654,094,134,465,175,395,455,505,565,61 coal 1,601,511,611,701,761,801,811,821,831,84 Population Source: DGTREN, EU Index(2000=100 )

Workshop II - Integrated Modelling of Environment and Energy Policy 12% 17% GDP 7% Private Consumption National Base Scenario: associated with the Social Security Sustainability Report of the National State Budge for 2007 EPC Base Scenario: corresponds to the basic hypotheses defined in the Aging Group of Work, a sub- committee of the Economical Politics Committee (EPC) that assists the ECOFIN (European Commission). DPP – MAOTDR: reference scenario used in the update of the mid-term evaluation of the macroeconomic impact of the Community Support Framework III GEM-E3 outputs – Macroeconomic Drivers

Workshop II - Integrated Modelling of Environment and Energy Policy Demand Growth % year ( / ) Space Cool. (4,5% / 3,9%) Glass (2,5% / 1,9%) tkm (2,6% / 1,8%) Clinker (2,0% / 1,5%) Pulp (1,6% / 1,0%) Iron & Steel (1,0% / 0,3%) Water Heat (1,1% / 0,5%) pkm (0,7% / 0,4%) Space Heat (0,8% / 0,5%)

Workshop II - Integrated Modelling of Environment and Energy Policy 2,0% Clinker, Pulp, Glass, Iron & Steel Demand *Source: Industrials Association of container glass, Saint-Gobain (flat glass) and 2000 data from Statistic National Institute (INE) Clinker Glass Pulp Iron & Steel 2,5% 1,6% 1,0% 1,5% 1,9% 1,0% 0,3% * 2000 values from NIR

Workshop II - Integrated Modelling of Environment and Energy Policy Energy Prices in TIMES_PT Oil Natural Gas Coal All energy prices are tax free

Workshop II - Integrated Modelling of Environment and Energy Policy Primary Energy Potentials in TIMES_PT Reference Non Energy Extr. costs (€/GJ) (VIEWLS project) Wood Products (PJ) (+28%) Assumed a maximum growth 30% of 2000 capacity 4.89 Biogas (PJ)0.129 (+100%) GPPAA & Extrapolation of PNAC Waste Scenarios Crops for Biofuel (PJ)0.015 (+100%) Extrapolation of Renewable Energy Portugal Forum 1.30 Biofuel production (PJ)0.050 (+100%) Best guess based on 2008 expected installed capacity Municipal Waste (PJ)7.310 (+27%) Extrapolation of PNAC Waste scenarios 5.81 Industrial Waste – Sludge (PJ)0.02 (+100%) Best guess 5.81 Hydro (PJ) (+20%) Assumed a maximum growth of 20% of 2000 capacity 0.00 Wind onshore (GW)0.65 (+98%) Conservative assumption based on REN 0.00 Wind offshore (GW)0.02 (+100%) Best guess 0.00 Solar- heating (PJ)0.838 (+98%) Extrapolation of Renewable Energy in Portugal Forum 0.00 Solar-electricity generation (GW)0.02 (+100%) Best guess 0.00 Geothermal (PJ)0.68 (+93%) Extrapolation of Renewable Energy Portugal Forum 0.00 Waves (GW)0.05 (+100%) Cruz, J., Sarmento, A. (2004). Energia das Ondas 0.00

Workshop II - Integrated Modelling of Environment and Energy Policy New Technologies Characterization - Costs

Workshop II - Integrated Modelling of Environment and Energy Policy New Technologies Characterization – Total costs

Workshop II - Integrated Modelling of Environment and Energy Policy TIMES_PT Calibration for base year: 2000 Electricity Generation Industry Commercial Households Transports Agriculture

Workshop II - Integrated Modelling of Environment and Energy Policy Energy Scenarios Base Scenario Renewable Energy Scenario Kyoto Scenario

Workshop II - Integrated Modelling of Environment and Energy Policy TIMES_PT Scenarios - main policy assumption Base Scenario Renewable Energy Scenario Kyoto Scenario CO 2 eq. emissions restrictions (27% above 1990 levels in ) Min. 39% of the electricity consumed in 2010 is from renewable sources Biofuel targets for 2010 (5.75%) Minimum use of Municipal Waste & Wood Waste Use existing natural gas power plants & at least new 200 MW in No new Coal Power Plants before 2015 & no increase in coal in final sectors Nuclear is not an option Limited electricity imports (+100% 2005) and exports (+100% 2000); Limited coal imports (+20% 2000) Limits on CHP (centralised: 14% in 2030 & industry: +40% in 2020) No carbon sinks; No credits from Kyoto mechanisms

Workshop II - Integrated Modelling of Environment and Energy Policy Primary Energy Consumption % 83% 86% 84% 74% 6% > % > % = % > % > % < 2000

Workshop II - Integrated Modelling of Environment and Energy Policy 61% 67% 17% 57% 63% Total Final Energy Consumption % 66% 64% 17% > % > % > % > % 23% 17% 18% 25%

Workshop II - Integrated Modelling of Environment and Energy Policy * TIMES_PT GHG Energy & Process Emissions +27% (above 1990) +79% (above 1990) +81% (above 1990) GHG per capita and GHG/GDP Base ton CO 2 eq/inhab tonCO 2 eq/M€ 2% -19% 17% -26% Renewables ton CO 2 eq/inhab tonCO 2 eq/M€ 0% -21% 17% -26% Kyoto ton CO 2 eq/inhab tonCO 2 eq/M€ -17% -34% 0% -36% * * PNAC Low Ref Scenario PNAC High Ref Scenario

Workshop II - Integrated Modelling of Environment and Energy Policy 27% > % 47%41% Total Final Energy Consumption: Industry 60%54% 42% 31% 53% > % > % 33% 35% 36% 49% 31% > 2000

Workshop II - Integrated Modelling of Environment and Energy Policy 14% 4% 25% Total Final Energy Consumption: Commercial % 31%32% 31% 25% 30% 11% < % > % > % > % < % 5% 14% 7%

Workshop II - Integrated Modelling of Environment and Energy Policy 47%45% Total Final Energy Consumption: Residential % 42%44%45% -1% < % < % 25% 19% 1% > % > % < 2000

Workshop II - Integrated Modelling of Environment and Energy Policy Residential Space Heating in 2020 Technologies Profile

Workshop II - Integrated Modelling of Environment and Energy Policy 59%* Net Electricity Generation %* 62%* 59%* 71%* 60%* 34%* 20% > % > % > % > % > % > 2000 * CHP not considered

Workshop II - Integrated Modelling of Environment and Energy Policy Main Electricity Generation Technologies Profile: 2020 Coal CHP Coal CCGNWind CHP CoalCCGN CHP Wood CHP Ex Wind CCNGHydro CHP Coal Wind Hydro CHP Ex Coal CHPGN

Workshop II - Integrated Modelling of Environment and Energy Policy Analysis of CO2e Abatement Scenarios for 2030 Base Scenario Kyoto Scenario CO 2 emission restrictions Scenarios

Workshop II - Integrated Modelling of Environment and Energy Policy GHG Emissions Base +30% Kyoto +20% +10% 0% -10% * * PNAC Low Ref Scenario PNAC High Ref Scenario

Workshop II - Integrated Modelling of Environment and Energy Policy CO2e Abatement Costs * Kyoto +27%

Workshop II - Integrated Modelling of Environment and Energy Policy Electricity Generation Technologies Profile:2020

Workshop II - Integrated Modelling of Environment and Energy Policy Next steps in TIMES_PT Add elasticities Adjust primary energy potentials and extraction costs Include supply curves for primary energy SOx, NOx, TSP, PM10, PM2.5 emission limits Include carbon sinks and Kyoto mechanisms Add energy taxes (ISP, VAT) Simulation of policy instruments: EU ETS, renewables feed-in-tariffs, support mechanisms to natural gas Estimate of sector marginal CO2 abatement costs curve Next workshop: June 2007 – Quantification of effects of policy instruments in place

Workshop II - Integrated Modelling of Environment and Energy Policy Telf: ext

Workshop II - Integrated Modelling of Environment and Energy Policy Departamento de Ciências e Engenharia do Ambiente

Workshop II - Integrated Modelling of Environment and Energy Policy Primary Energy Consumption

Workshop II - Integrated Modelling of Environment and Energy Policy Elasticities considered to generated demand Price Elasticity (ELASP) The price elasticity has been assumed to be -0,3 for all demand categories with the exception of: Residential Cooking = -0,1 Commercial Cooking and Commercial Public Lighting = -0,2 Demand Category < ≥ 2020 Residential Heating 0,50,30,2 Hot water 0,80,50,2 Cooling 0,8 0,3 Appliances 0,80,50,25 Other 0,3 0,25 Commercial Heating 0,60,350,2 Hot water 0,60,40,3 Cooling 0,5 0,4 Appliances 1,00,6 Other 0,80,4 Industry Energy Intensive 0,8 Other 1,0 Transport Passeng. Car 1,0 0,95 Public 1,01.01,0 Freight Road 0,8 Rail 0,9 Air 1,2 1,0 Navigation 0,9 Agriculture 0,60,50,3 Income Elasticity (ELASI)

Workshop II - Integrated Modelling of Environment and Energy Policy Autonomous Efficiency Improvement in Industry Demand CategoryAEEI for the Industrial demand Ammonia 0 Chlorine Cement Glass Flat Glass Hollow Lime Non Energy Consumption - Others Other Non Ferrous Metals 0,005 Other Chemicals High Quality Paper Iron and Steel 0,01 Aluminium Copper Other Non Metallic Minerals Low Quality Paper Other Industries Non Energy Consumption - Chemicals

Workshop II - Integrated Modelling of Environment and Energy Policy TIMES_PT Policy Assumptions Nuclear will not be implemented due to political inacceptability Electricity generated from gas combined cycle power plants at least equivalent to 1100 MW installed capacity from following energy sources diversification policy and support to use of natural gas New coal power plants only from 2015 onwards following energy sources diversification policy and support to use of natural gas Electricity generation from municipal waste will continue until 2030 following waste management scenarios Electricity generation from wood residues will continue throughout the lifetime of Mortágua plant following forest fire control policies In % of consumed diesel and gasoline in transport will be biofuels Electricity imports max 60 PJ in 2030; exports max 30 PJ in 2030; coal imports max 20% more than 2000 Minimum of 1.1 MW wind onshore in 2005 as in fact happened No dedicated heat power plants – all heat will be produced with CHP Limited centralized CHP (max. 2% of generated electricity in 2010 and 14% in 2030) and CHP in industry CHP (max 32% in 2001, 38% in 2010 and 40% in 2020) No further penetration of coal in industry, residential, commercial and agriculture No carbon sinks and no possibility to buy CO2 reduction credits

Workshop II - Integrated Modelling of Environment and Energy Policy New Technologies Characterization – Efficiency and Availability

Workshop II - Integrated Modelling of Environment and Energy Policy Energy Imports and Exports Electricity Imports and Exports

Workshop II - Integrated Modelling of Environment and Energy Policy TIMES_PT Scenarios - main policy assumption Base ScenarioKyoto Scenario CO 2 emission restrictions Scenarios CO 2 eq. emissions restrictions (27% above 1990 levels in ) (+30%, +20%,+10%, 0%, -10%, -20%, -30%) 1990 levels in Min. 39% of the electricity consumed in 2010 is from renewable sources Nuclear is not an option No carbon sinks; No credits for Kyoto mechanisms Limited electricity imports and exports No new Coal Power Plants before 2015 New 200 MW Natural Gas Power Plants (in ) Limits on CHP Biofuel targets for 2010 Municipal Waste, Wood Residues

Workshop II - Integrated Modelling of Environment and Energy Policy Fonte: E.Value (2004) 1)PIB p2000 Source:UE GHG per Capita: GHG per GDP: Tonnes CO 2 /M€ 2000

Workshop II - Integrated Modelling of Environment and Energy Policy 61% 67% 17% 57% 63% Total Final Energy Consumption % 66% 64% 17% > % > % > % > % 23% 17% 18% 25%