Presented by G. K. C. Opathella ANALYSES OF SELECTED ENERGY POLICY OPTIONS TO IMPROVE ENERGY SECURITY: THE CASE OF SRI LANKA Presented by G. K. C. Opathella Thesis Committee: Prof. Ram M. Shrestha (Chairperson) Prof. S. Kumar (Member) Dr. N. Mithulananthan (Member) 14th May 2008

Outline Background Objectives and Methodology What can be expected in future energy system? Conclusions

Background-Why Energy Security? Source: Energy Conservation Fund, 2005 Share of petroleum is increasing (43% in 2005) Only three main primary energy sources for many years Few feasible hydro power projects to be developed Petroleum bill was 1.2 billion US$ (6% of GDP) in 2004 and 2.5 billion in 2007 (7.7% of GDP) Expected average economic growth rate is 7.4% annually

Branches of Energy Security Primary Energy Demand Energy Import Dependency Source Diversification Supplier Diversification Economic Vulnerability

Objectives Overall Objective Finding policy solutions to improve long term energy security Specific Objectives Developing a long term energy planning model for Sri Lanka Identifying the effects of energy supply reduction targets Analyzing the performance of renewable portfolio standard policy in order to improve long term energy security Analyzing the effects of carbon tax policy for the improvement of energy security

How can we approach? (Methodology) Overall Methodology Reference Energy System Reduction Targets and Policies Energy Security Indices

Primary Energy Demand

What can we expect in future? Without any policy intervention, Sri Lanka is highly dependent on energy imports. But correct policies can create considerable difference Diversification of energy sources can be further Improved with correct policies such as renewable portfolio standard

What can we expect in future? Diversification of energy suppliers would improve in future and appropriate policies can help to improve it further A drop of economic vulnerability is expected. Import reduction targets and RPS policy would reduce it further

Conclusions Total primary energy reduction targets fail to improve all aspects of energy security except overall energy intensity and per capita consumption Having 80% of energy import reduction target (discussed in EI80), it is possible to improve all the aspects of energy security with 9% increase of total system cost Case, RPS25 shows the best performance compared to base case and all RPS cases Energy import dependency and vulnerability aspects are improved due to carbon tax. But higher tax levels (higher than level mentioned in CT(60-120)) would not add any extra benefits in terms of energy security. Doubling the biomass consumption both in industry and electricity generation sectors is recommended in order to achieve 80% energy import reduction target. Apart from the biomass, more than 5% of total primary energy should be supplied by wind electricity generation by 2025 in order to achieve better energy security

Thank You

Reference Energy System Sri Lanka

Target and Policy Cases

Overall Methodology Long term energy planning model Model with renewable portfolio standard policy Model with energy supply reduction targets Scenario results Special changes Run the model Energy security indices Estimations Comparison of energy security improvements Energy and economic data Model formulation Model with carbon tax policy Conclusions and recommendations for the improvement energy security and further research opportunities Results of the sensitivity analysis Forecasted demand data

Indices Net Energy Import Ratio (NIER) NIER = Net Energy Imports Domestic Supply + Net Energy Imports Diversity Index (Shannon-Wienier Index) Where; Si is the share of primary energy of sources i Diversification of Primary Energy Demand (DoPED) Vulnerability = Expenditure on energy import Total GDP Herfindhal Hirschman Index (HHI) Where; K is the share of primary energy of supplier i Energy Intensity(EI), Per capita primary energy consumption(PCPEC), Per capita final energy consumption(PCFEC), Per capita emission (PCE) form energy and demand sectors

Results Energy Security in 2035 85 92 62 80 52 1.36 1.19 1.41 1.43   Without Any Policy Primary energy demand reduction target Energy import reduction target Renewable portfolio standard Carbon tax Dependency (%) 85 92 62 80 52 Source Diversification (SWI) 1.36 1.19 1.41 1.43 Supplier Diversification (HHI) 4067 4799 4094 3885 4193 Vulnerability (%) 4.5 5.1 4.3 4.1

Results of Total Primary Energy Reduction Target Cases Under higher reduction targets petroleum consumption is increased. Coal and biomass consumptions are decreased. This is due to high efficiency of petroleum consuming technologies compared to other technologies. Percentage Change in Total Undiscounted Cost TPEC95 1 TPEC90 2 TPEC85 4 TPEC80 10

Results of Energy Import Reduction Target Cases Under the energy import reduction targets biomass wind energy supplies are increased. Coal consumption is decreased. Coal is the most inefficient importing energy. Therefore, it drops compared to the base case Percentage Change in Total Undiscounted Cost EI90 7 EI80 9 EI70 11 EI60 13

Results of RPS Cases More wind and biomass power generations are expected under the RPS policy. Demand for coal is decreased. Due to the promotion of renewable energy coal based electricity generation is partly switched to renewable based electricity generation Percentage Change in Total Undiscounted Cost RPS10 1 RPS15 3 RPS20 5 RPS25 7

Results of Carbon Tax Cases Coal has the highest emission factor. Therefore, under the carbon tax policy coal consumption is decreased. Both biomass and wind energy supplies are increased. In higher tax cases biomass supply would reach to maximum level at the end of the planning period Percentage Change in Total Undiscounted Cost CT(20-40) 10 CT(40-80) 18 CT(60-120) 25 CT(80-160) 31