1. Ea Energianalyse Copenhagen, 20 October 2008 Anders Kofoed-Wiuff Ea Energy Analyses Towards  50% oil reduction  50% CO2 emissions reduction …in 2030 Energy Scenarios for the Baltic Sea Region

2. Ea Energianalyse Contents of presentation Characteristics of the Baltic Sea Region Two scenarios for the Baltic Sea Region in 2030 towards –50% oil reduction –50% CO2 emissions reduction Opportunities for cooperation – some concrete ideas

3. Ea Energianalyse CHARACTERISTICS OF THE BALTIC SEA REGION

4. Ea Energianalyse *including Germany, excl. Russisa

5. Ea Energianalyse New dem. Old dem. *including Germany, excl. Russisa

6. Ea Energianalyse CO2-emissions (Gt) *including Germany, excl. Russisa

7. Ea Energianalyse Infrastructure

8. Hydro Nuclear Bio Nuclear Bio Hydro Coal Nuclear Wind Coal Hydro, Gas Oilshale Nuclear Coal Gas Wind Gas Coal Hydro Nuclear Expected high economic growth GAS OIL GAS OIL

9. Ea Energianalyse Oil and gas production * Russia not included

10. Ea Energianalyse Gross energy consumption

11. Ea Energianalyse

13. Electricity generation by source

14. Source: Eurostat

15. Bioenergy Potential as share of gross energy demand Calculation based on stats from DG TREN and EEA

16. Bioenergy resources Source: European Environment Agency (2006): How much bioenergy can Europe produce without harming the environment?

17. Wind energy resource

19. Ea Energianalyse SCENARIOS FOR THE BALTIC SEA REGION  50% oil reduction  50% CO2 emissions reduction …in 2030

20. Developing scenarios BSR Scenario Fuel prices Economic growth Infrastructure Technology Development Saving potentials RESULTS Renewable resources

21. Two scenarios (and a reference) Small-tech Energy savings District heating - CHP Biomass Wind, wave, solar Improved fuel economy Electric vehicles Modal-change ICT Big-tech Carbon Capture & Storage Nuclear power Biomass Improved fuel economy Electric vehicles Biofuels Energy Transport …or perhaps a combination

22. Key decision makers Politicians (EU, regional, national) Local politicians and planning authorities Car industry Big power producers Energy consumers Wind/solar industry Farmers Energy manufacturing industry Grid companies Bio-fuel refineries District heating companies

23. Nuclear power Today – 15 GW Big-tech – 24 GW – No phaseout in Sweden and Germany. New nuclear in Poland, Lithuania and 6 th reactor in Finland Small-tech – 9 GW – Phaseout in Germany, 50 % phaseout in Sweden – No nuclear in Lithuania

24. Carbon Capture and Storage Key measure in Big-tech – 30 GW power capacity equipped with CCS supplying 22 % of overall electricity demand – all large thermal power plants commissioned beyond 2020 with CCS. Coal power plants commissioned in the period 2010-2020 are prepared for CCS Assuming – 90 % cleaning eff. – 10 %-point electric efficiency loss

25. Small-tech calls for smart grids and ICT

26. Growth and demand 2.6 % GDP growth annually in both scenarios – app. 90 % over 25 years Same energy services – but with higher efficiency Fuel economy cars Energy savings 2030 Final energy demand Savings Space heating: 15 % Electricity and proces energy: 20 %

28. Potential for CHP based district heating

29. Transport 20052030 Small-tech 2030 Big-tech Fuel economy160 g CO 2 /km100 g CO 2 /km Electric vehicles25% Biofuels5%15% ICT3 % of transport work shifted Modal change9 % of transport work shifted

30. Improvements in fuel economy

31. Today’s efficiency potential

32. Passenger transport 1.8 % growth p.a.

33. Results

35. 85 % of oil/gas production from Norway

36. Ea Energianalyse Security of supply in EU27, including production from Norway

37. Ea Energianalyse Critical Assumptions Critical assumptions Small-tech scenarioBig-tech scenario - Energy saving potentials are harvested (many barriers that are not only economic) - Local planning effort to expand district heating and cooling systems (to enjoy benefits of combined heat power) - Off-shore wind grid infrastructure - Dependent on the commercialization of carbon capture and storage technology - Public support for more nuclear power - Fossil fuels and uranium are accessible at reasonable prices. Both - Intelligent energy systems and markets - The increased production of biomass for energy conversion. - The fuel economy of new cars is improved considerably. - That electric vehicles or plug-in hybrids are commercialized

38. Ea Energianalyse Development of nominal fuel prices from 1960 to 2006 (annual averages) Coal Gas Oil

39. Ea Energianalyse OPPORTUNITIES FOR COOPERATION – SOME CONCRETE IDEAS

40. Ea Energianalyse Opportunities for cooperation Energy infrastructure –Including integration of large amount of wind Energy markets –Electricity and gas Demonstration of CCS Biomass technologies Sustainable cities and metropolises –District heating and CHP –Energy savings –Transport Cooperation on energy efficient appliances and buildings

41. Ea Energianalyse Source: Airtricity Coordination of off-shore wind (hydro >< wind) Integrated electricity grids Integrated electricity markets Baltic countries Scandinavia

43. Ea Energianalyse Next steps Data for Russia Economic consequences Detailed model analyses –Gas and electricity systems – benefits of interconnectors Stakeholder involvement – proces of dioalog

44. Ea Energianalyse Process of dialogue Politicians Utilities Energy planners Project developers Researchers Others Questions Answers

46. Economic results Annuitized value of the entire energy system in the scenario year (2030) i.e. – the average annual capital costs – costs for fuels, operation and maintenance, CO2-costs Not considered – Health benefits – Cost of modal change and efficiency in transport – Transaction costs related to implementation Technology and fuel costs may divert from projections Therefore: interpret results with caution To be prepared

47. Economics Fuel price projectionsOil (USD/bbl) Gas ($/MBtu) Coal ($/ton) Low (IEA projection 2007*) 627.361 High (Prices in September 2008) 11516179 Small-tech CO 2 : 45 €/t Results from STOA – EU27

48. Economics Fuel price projectionsOil (USD/bbl) Gas ($/MBtu) Coal ($/ton) Low (IEA projection 2007*) 627.361 High (Prices in September 2008) 11516179 Big-tech CO 2 : 45 €/t Results from STOA – EU27

50. Source: Dena

51. Source: Airtricity

52. Source: Russian Analytical Digest 29/07

56. Potentials for district heating in EU ECOHeatCool

57. Increased demand for fuel and not a 100% reduction of CO2 emission Power Heat Coal CO2 with CCS with CCS

58. Expected oil peak is one of the reasons for reducing oil consumption in the scenarios

59. There are huge global resources of coal, but peak in coal production may not be so fare away World coal production in the equivalent of a million tons of oil based on proved recoverable reserves. Energy Watch Group, 2007. www.energywatchgroup.org. 2030

60. STREAM model System balance model System balance model Energy demand model Energy demand model Energy flow model STREAM was developed in cooperation between: The Danish TSO (Energinet.dk), The major Danish power producer (DONG Energy), Consultants EA Energy Analyses Ltd. and Risø National Laboratory for Sustainable Energy, Technical University of Denmark. STREAM has been further developed to cover all EU-27 countries. - Each country can be modelled individually or in groups of countries. Characteristics 1.It includes the whole energy system 2.It is fast to use (changing of scenarios during a meeting) 3.Publicly available - transparent

61. Technology lifetime Buildings Infrastruct. Power plants Wind turbines Cars Appliances 10 20 30 40 Years 2030

62. Electricity and heat supply Small-tech Big-tech Decentralised structure Centralised structure

63. Average energy consumption in Danish buildings Liters of oil per m 2 Building regulation- Danish new buildings

64. Appliances Example: refrigerators and freezers

66. Source: Dena

67. 2007-12-10www.eksponente.lt67 Baltic power grid reconnection strategies “Status quo” Krievij a Ukrain a Baltkrievi ja Polij a Čehij a Vācij a Lietuv a Latvij a Igaunij a Somij a Norvēģij a Dānij a Zviedrij a NORDEL UCTI/ CENTRAL Russia Ukraine Belorus Poland Czec h Germany Lithuani a Latvia Estonia Finland Norway Dānmark ja Sweden Integrated Baltic and CIS energy system NORDEL UCTE/ CENTRAL Europe ESTLINK 350 MW 11.2006 Lithuania - Sweden 1000 MW Lithuania – Poland 1000 MW

71. Energy savings - large potentials… Saving potentialDescription Heating existing buildings 42 %Improved insulation etc. Lighting65 %Compact fluorescent lighting Water heating65 % High efficient electric water heater and solar water heater Major appliances40-60 % Increasing appliance efficiency standards at 2-3% per year Small appliance standby 40 % Reduce standby power req. of televisions, set-top boxes etc. Source: McKinsey Eurima

72. Energy savings in the scenarios Efficiency improvements in reference, Big-Tech and in Small-Tech Percentage saving compared to today’s level Energy form Energy savings in DG-Tren, reference and Big-Tech Additional savings in Small-Tech TertiaryElectricity20-30 %10-20 % Heating20-30 %6-10 % IndustryEnergy20-30 %10-16 % ResidentialElectricity20-35 %10-20 % Heating20-40 %7-15 % Stays within potentials identified in other studies.

73. The costs of savings? Uncertainty concerning the costs of savings Using high fuel prices the investment costs in the energy savings in the Small-Tech scenario could be 5 times higher and still give a net benefit. With the low fuel prices it could be 2.5 times higher. Prices used in the scenarios: 18-25 €/GJ for electricity savings 10-16 €/GJ for heat savings

74. Saved investments in the power system due to reduction in electricity demand The 16% additional electricity savings in Small- tech scenario reduces demand for power capacity 2,500 PJ electricity is saved each year in the Small-Tech scenario replacing around 200 power plants at 600 MW capacity.

75. Saved investment in the power system due to flexible electricity demand 2% of the total electricity demand is assumed to be flexible in the Small-Tech scenario e.g. 30% of residential electricity used for refrigerators and freezers and thereby reduces peak load by 50 GW 50 GW cut in peak load saves investments in 80 peak power plants at 600 MW capacity.

76. Why is it difficult to achieve the savings? What should be done? EPC (European Policy Centre) – Gain without pain: towards a more rational use of energy: New policy measures are needed + active use of existing directives, such as the Eco-Design Directive. Third-party financing (such as ESCO’s) should be promoted. All public sector organizations should have ambitious targets (including the European Institutions). Metering and individual pay by the user is important.

77. What should be done? E.g. as pointed out in “Capturing the European Energy Productivity Opportunity”, McKinsey&Company, September 2008. Four key areas to get right: – Setting energy-efficiency standards for appliances and equipment. – Upgrading the energy efficiency of new buildings and remodels. – Raising corporate standards for energy efficiency – Investing in energy intermediaries (e.g. ESCO’s)

78. Why combined heat and power production? (CHP) Higher fuel efficiency – it costs around 30% more fuel to produce the power and heat separately!