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

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

Primary energy flows in 2005

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

National Energy Strategy 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

Energy, economy and environment indicator interaction

Environmental indicators 2004 Source: Key world energy statistics IEA - CO 2 emissions from fuel combustion only

RES-E share in power production

RES-E structure in year 2005

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 REFREF-CAPREF-CCAPREF- RESE Target for GHG emissions’ restriction in energy sector NoIn year 1990 energy sector contributed 72.2% (18690 kT) of national GHG emissions. Annual restriction of GHG emissions:  year 2010: 92% kT  starting from year 2015: 75% kT Cumulative restriction of GHG emissions for the period up to year 2050: kT No Target for minimal RES-E share in the total electricity supply No 49.3% starting from year 2010

Modelling results: primary sources for power production

Modelling results: total GHG emissions in energy sector

Modelling results: division of GHG emissions among end-users of energy sector

Modelling results: RES-E share in the power production

Principal conclusions 1. Hydro and natural gas are the main primary resources for power production in all scenarios 2. 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 3. 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. 4. 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).

REF+ CAP REF+ CCAP REF+ RESE GHG mitigation marginal costs, year 2030, EUR (2000) / t6342 GHG mitigation costs, average for the period , EUR (2000) / t RES-E additional costs, average for the period , EUR (2000) / MWh4,0 GHG emissions mitigation costs and RES-E additional costs 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 technologies1-6 Wind15-20 Solar PV50-54 Solar thermal25-27 Small hydro8-9 Biomass, forestry waste18-19 Biomass, energy plantations64 Biogas, agriculture waste58 Source: R.E.H.Sims, “Biomass and Agriculture: Sustainability, Markets and Policies”, OECD Publication, Paris, September 2004, pp

Pre-feasibility study of employment, based on production chain analysis model Source: Tyge Kjær,Roskilde University

Production Chain Assessment Methodology Example: Biomass CHP, steam turbine, MW Efficiency Electricity Heat 25% 65% Annual operating hours5600 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) 8% (20%) Wages share of O&M costs (comprising Latvian local share) 50% (80%) Wages share of fuel costs (comprising Latvian local share) 80% (100%)

Production Chain Assessment Methodology Example of onland Wind Annually produced power, GWh298 Installed capacity, MW135 New direct job places Job places related to investments151 Investments’ jobs calculated per 1 year of technology life-time 7.5 Job places related to O&M68 Total new full-time job places76 Tax revenues (direct jobs) Tax revenues in state budget, LVL Tax revenues in municipal budgets, LVL note: 1 EUR ~ 0,7 LVL

Production Chain Assessment Methodology Example of Biomass CHPSteam turbine Gasifiers Power production capacity, MW35 New direct job places Job places related to investments (assessed as new – 100%) 158 (158) 115 (115) Investments’ jobs calculated per 1 year of technology life-time 811 Job places related to O&M (assessed as new – 75%) 154 (116) 246 (185) Job places related providing wood fuel (assessed as new – 50%) 317 (158) 264 (132) Total new full-time job places Tax revenues (direct jobs) Tax revenues in state budget, LVL Tax revenues in municipal budgets, LVL

Production Chain Assessment results: Employment effect and related tax revenues New capacities (MW) New direct jobs New indirect jobs Tax revenues in state budget (LVL) Tax revenues in municipal budgets (LVL) Straw DH Biogas-E Wind-E135 onland + 77 off-shore Biomass (Wood) CHP

Thank You ! Aizkraukles 21, Rīga, LV-1006 Latvia Institute of Physical Energetics