1. Transitioning to a low-carbon economy The impact of Climate Change Policy on Energy Security
Matthew Wittenstein
Electricity Analyst, International Energy Agency
8 February 2017

2. Overview
COP21 set an ambitious agenda for meeting the challenge of climate change
Much more, though, needs to be done
Europe has gone farther than most regions, but challenges remain
Existing markets weren’t designed with high shares of VRE in mind
Increasingly interconnected power systems raise questions of coordination and responsibility
There are significant opportunities for Latvia and the Baltic States more broadly

3. CO2 emissions in a post COP 21 world
A 2 °C pathway requires more technological innovation, investment & policy ambition
CO2 emissions in a post COP 21 world 40
Trend post-COP 21 36
Energy efficiency
Fuel & technology
switching in end-uses
Renewables
Nuclear
CCS
Other 32
17.9 Gt Gt 28 24
2 °C Scenario 20 16
2010
2015
2020
2025
2030
2035
2040
Significant additional investments in efficiency, renewables, nuclear power and other low carbon technologies are required to reach a 2 °C pathway
Source: World Energy Outlook Special Briefing for COP21

4. In many markets, renewables are an economically rational choice
Historical and forecast LCOEs for typical onshore wind installations
Wind costs in indicative markets fell by 1/3 between 2008 and By 2040, average wind costs are expected to fall by an additional 10-25%. Solar costs could fall between 35-80%
Source: Medium Term Renewable Market Report 2016

5. Renewable technologies will come to dominate the power sector
EU generation mix to 2040, New Policies and 450 ppm scenarios
The share of carbon emitting technologies in the EU power system is set to decline, but additional policy support is needed to meet a 450 ppm target

6. Modeled wind deployment in the Baltic States, 2020-2050
Under some scenarios, the Baltics could see significant wind development
Modeled wind deployment in the Baltic States,
Wind power could be a significant domestic resource if properly supported and integrated into the Baltic power system.
Source: Nordic Energy Technology Perspectives 2016

7. Increasing penetrations of wind and solar change power system operations
New operational requirements with high shares of renewables (data for Germany using scaled wind data)
Contribution to peak demand
Load
Net load with 20% of wind energy in the generation mix
Larger ramps
Forecast errors
Potential over-generation
Fully unlocking system flexibility requires broader, more rapid, and more automated coordination across an increasingly complex set of resources.
Source: Adapted from IEA (2014) THE POWER OF TRANSFORMATION

8. What is the optimal generation mix?
Market value factor of wind and solar PV as a function of their market share in Germany
Investments are not only a matter of costs: the value of different technologies for the power system have to be factored-in.
Source: Hirth (2015)

9. Regional integration allows for greater integration of VRE
Multiple models for cross-border integration – but all require close collaboration and data sharing across a wide set of stakeholders.
Source: Seamless Power Markets (2014)

10. Nord Pool: harmonized market reflecting national differences
Nord Pool price zones and power flows (example)
E.g. Common market, national TSOs. Transmission planning, zone definitions, etc responsibility of TSOs, but impact common market.

11. The Baltic States and Europe as a whole benefit from increased interconnection
Interconnections are a key source of system flexibility, allowing for higher penetrations of increased deployment. They also provide system security benefits.
However, increasing interconnections and higher levels of VRE will require closer collaboration and market harmonization across borders.
Source: Nordic Energy Technology Perspectives 2016

12. Five principles for integrating variable renewables
Utilize and/or invest in flexible power plants
Require VRE to minimize – and, ideally, contribute to – system flexibility needs
Allow the full participation of demand-side measures
Utilise electricity storage
Strengthen transmission (including interconnectors) and distribution grids – and make them smarter
How?
Improve market design to provide proper price signals to all market participants
Leverage IT solutions throughout the power system

13. Thank you