Estonian energy scenarios 2030, 2050 Mikael Togeby Anders Larsen

Agenda How will the future be? Levelised cost of electricity Focus on demand Updated scenario results Conclusion 2

3 Executive summary Other analyses BalmorelStream

HOW WILL THE FUTURE BE? 4

What we know! “The era of cheap oil is over” (IEA) Energy policy will continue to be high on the agenda – A combination of: Environment/Economy/Security of supply EU will continue to be an important player for the development of national energy policy 5

What we don’t know Future CO 2 price Best oil shale options – To produce electricity? – To produce shale oil? – To supply retort gas for electricity generation? – Detailed cost and efficiency information is missing 6

Eight scenarios 7

The scenarios are not predictions Together they span a major part of possible futures – Input driven scenarios: Define input Let model develop energy system Study results and discuss! 8

LEVELIZED COST OF ELECTRICITY 9

Levelized cost of electricity 10 6,000 full load hours per year (Wind: 3,000/4,000), 2020 Rebuild from oil shale to coal attractive (limited potential)

11 6,000 full load hours per year, 2020

CHP! Combined heat and power (CHP) is an effective way to produce heat and electricity 40% of the current district heating in Estonia is delivered by CHP – In Denmark: 71% – Model result: This is also realistic for Estonia Including investments in heat storage By January 2014 Estonia shall report to EU about plans to develop CHP – The collective nature of district heating requires careful development of framework 12

Energy efficiency 13

Energy efficiency Estonian specific energy intensity is unusual high – Households is the biggest energy sector… Estonia must report to EU about how to implement the new Energy Efficiency Directive by December 2013 – Energy efficiency obligation or alternative policy instruments Reduced cost in energy efficiency scenario: x M€ (net present value, 5%) – This can be used as benchmark: Investments and costs of policy instruments must be lower than this value 14

Nord Pool By 3 June 2013 all Baltic states is part of Nord pool – Can greatly improve trading – Next important milestone to integrate Nordic and Baltic markets: EstLink 2 in 2014 SwedLit connection in

FOCUS ON DEMAND 16

Electricity 17 Business as usual Energy efficiency (36 PJ = 10 TWh)

District heating 18 Business as usual Energy efficiency

Heated area – residential 19 Business as usual Energy efficiency

Transport 20 Business as usual Energy efficiency Note: Conversion losses of electricity are not included

SCENARIO RESULTS MODEL AREA 21

Electricity generation 22

SCENARIO RESULTS ESTONIA 23

Investments in electricity generation 24

Electricity generation 25

District heating generation 26

Stakeholder economics 27 (Mio. euro)ESTONIALATVIALITHUANIARUSSIANORDICGERMANY & POLANDTOTAL 110% Generator profits: Consumer surplus: TSO profit: Socio economic benefit: CO2 collapse Generator profits: Consumer surplus: TSO profit: Socio economic benefit: CO2 concern** Generator profits: Consumer surplus: TSO profit: Socio economic benefit: Oil shale Generator profits: Consumer surplus: TSO profit: Socio economic benefit: RE focus** Generator profits: Consumer surplus: TSO profit: Socio economic benefit: Retort gas Generator profits: Consumer surplus: TSO profit: Socio economic benefit: Carbon leakage Generator profits: Consumer surplus: TSO profit: Socio economic benefit: Reference = Liberal scenario Net present value (5%) ** = EE demand (and reduced number of time steps) Positive benefit in RE focus scenario is due to EE demand scenario. Cost of reaching EE is not included.

CONCLUSION 28

Conclusions New future for oil shale? No regret options? – CHP – Energy efficiency – Biomass Energy planning in a liberalised market Political questions: – OK with coal? If yes, this is attractive in most scenarios 29

EXTRA 30

Balmorel – updated assumptions Wood chips resource unlimited and small plant inv. costs increased. Wood chips potential for entire model increased. Retort gas inserted as a fuel Western part of North west link (Sweden- Norway) scrapped District heating and electricity demand updated Wind data updated RE-scenario setup with 100% RE in electricity and district heating by No new fossil investments – only rebuild of existing plants to fossil fuels