1. Estonian energy scenarios 2030, 2050 Mikael Togeby Anders Larsen

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

3. 3 Executive summary Other analyses BalmorelStream

4. HOW WILL THE FUTURE BE? 4

5. 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

6. 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

7. Eight scenarios 7

8. 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

9. LEVELIZED COST OF ELECTRICITY 9

10. 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. 11 6,000 full load hours per year, 2020

12. 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

13. Energy efficiency 13

14. 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

15. 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 2015 15

16. FOCUS ON DEMAND 16

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

18. District heating 18 Business as usual Energy efficiency

19. Heated area – residential 19 Business as usual Energy efficiency

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

21. SCENARIO RESULTS MODEL AREA 21

22. Electricity generation 22

23. SCENARIO RESULTS ESTONIA 23

24. Investments in electricity generation 24

25. Electricity generation 25

26. District heating generation 26

27. Stakeholder economics 27 (Mio. euro)ESTONIALATVIALITHUANIARUSSIANORDICGERMANY & POLANDTOTAL 110% Generator profits:-577-277-19-474-167-1257 Consumer surplus:35613526462126987 TSO profit:-2153236-92-38 Socio economic benefit:-223115824-133-308 CO2 collapse Generator profits:-471-1728-3881-22020-99918-49407-177426 Consumer surplus:24272835313431193107424213947360959 TSO profit:-58-16228329667429136092 Socio economic benefit:18971091153694698180167452189625 CO2 concern** Generator profits:2001351308615072303971814668253 Consumer surplus:-79-1560-2438-24705-39040-122899-190720 TSO profit:-98168-3010306-10438-20767-33839 Socio economic benefit:24-41-2363-9327-19081-125519-156307 Oil shale Generator profits:29756-178224366720 Consumer surplus:-69-41-2219-175-266-335 TSO profit:-372707-9539-13 Socio economic benefit:191-337447-46139371 RE focus** Generator profits:210105-6160-2184-2981-4850 Consumer surplus:719-205-208-4598-6069862634 TSO profit:10676-206416156536135568 Socio economic benefit:1035-24-475-4123-67976183351 Retort gas Generator profits:2294-15814-235-906-543466 Consumer surplus:6237262128134441594 TSO profit:028-186-13-9-164-343 Socio economic benefit:2356-93-146-35-103-2631716 Carbon leakage Generator profits:-1126-550-452-19279-5537-2960-29904 Consumer surplus:661336222302414993409440547 TSO profit:72140-486667779-332840 Socio economic benefit:-392-75-7161162923580211483 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.

28. CONCLUSION 28

29. 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

30. EXTRA 30

31. 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 2050. No new fossil investments – only rebuild of existing plants to fossil fuels