RES Integration for Increasing

of Energy Supply Security in Latvia:

ENVIRONMENTAL AND ECONOMICAL FACTORS

NEEDS FORUM 2 “Energy and Supply Security – Present and Future Issues”

Krakow 5-6 July 2007

6th RTD Framework Programme Integrated Project

Ivars Kudrenickis, Gaidis Klavs,

Janis Rekis

Institute of Physical Energetics, Latvia

Plan of presentation

Part I: Energy supply development trends and National Energy Strategy Part II: Integrated analysis of RES utilization, energy supply security and climate change mitigation factors in the national energy system developmentPart III: RES in Latvia power production and DH sector: assessment of employment effects and regional benefits

Part I: Energy supply development trends and National Energy Strategy

0

50

100

150

200

250

300

350

1990 2000 2001 2002 2003 2004 2005

PJ

0

0,25

0,5

0,75

1Electricity

Fuel wood

Natural gas

Oil productsand shale oil

Peat

Coal etc.

Self-sufficiency

35% 34% 34%

33%36% 36%

14%

Trends in primary energy supply

Primary energy flows in 2005

Import of oil products from rest of world

12,3%

Import of electricity from Estonia and Lithuania 3,2%

Import of coal from CIS 1,7%

Import of oil products from CIS

16,8%

Import of electricity from Russia 0,7%

Import of natural gas from Russia

28,8%

SHARE OF DOMESTIC ENERGY RESOURCES IN TPER

36,5%

National Energy Strategy 2007-2016

The principal measures identified to increase energy supply security

Increase in supply security and sustainability of national energy system has to be basic criteria for economic analysis and decision-making related to its development.

Diversification of fuels or fuel supply sources, relates both imported and local ones.

Latvia active participation in the common EU policy - power

interconnection with European power systems (Nordel, UCTE), expansion of Incukalns underground gas storage; regional co-operation with Baltic sea region states, particularly, Lithuania and Estonia.

Effective use of resources in all stages: extraction, conversion, transportation and end-use.

National Energy Strategy 2007-2016

The quantitative targets:

1. Self-supply of total primary energy at the level of 37% (year 2025)

2. RES-E share of 49.3% in the electricity supply (year 2010)

3. Biofuels share of 10% (year 2016) and 15% (year 2020) in the transport sector

Local resources: future challenges

despite significant improvement of energy intensity indicator, further growth of total primary energy supply is expected

to meet the indicated target of self-supply, the challenging growth in use of local resources, especially RES, have to be reached: per 25% in year 2020 and 40% in year 2025, compared with existing one 0

20

40

60

80

100

120

140

2005 2020

Energyintensity

TPES

Localresources

Energy, economy and environment indicator interaction

Environmental indicators 2004

Source: Key world energy statistics 2005. IEA - CO2 emissions from fuel combustion only

48,447,1

35,439,3

4647,745,5

41,243,5

43,244,5

45,44745,8

0

2000

4000

6000

8000

1999 2000 2001 2002 2003 2004 2005

GWh

0

10

20

30

40

50

60%

RES-e

Fossil fueland import

RES-esharecorrected

RES-eshare

RES-E share in power production

RES-E structure in year 2005

1 %

2 %

3 %

2 %

95 %

Large HPP Small HPP Wind Biogas

Part II: Integrated analysis of RES utilization, energy supply security and climate change mitigation factors

Research Tasks

integrated analysis of national energy system development taking into account both:

RES wider utilization, energy supply security, climate change mitigation

factors. finding optimal structure of primary

sources balance for power production optimisation model MARKAL applied

Description of modelled scenarios

REF REF-CAP REF-CCAP REF-RESE

Target for GHG emissions’ restriction in energy sector

No In year 1990 energy sector contributed 72.2% (18690 kT) of national GHG emissions.

Annual restriction of GHG emissions:

year 2010: 92% - 17195 kTstarting from year 2015:

75% - 14018 kT

Cumulative restriction

of

GHG emissions for

the period

up to year 2050:

725764 kT

No

Target for minimal RES-E share

in the total electricity supply

No No No 49.3% starting

from year 2010

0

2

4

6

8

10

12

REF (2015)

REF+CAP(2015)

REF+CCAP(2015)

REF+RESE(2015)

REF (2025)

REF+CAP(2025)

REF+CCAP(2025)

REF+RESE(2025)

TWh

Wind

Biomass

Import

Coal +biomass

Hydro

Gas

Modelling results: primary sources for power production

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

2000 2005 2010 2015 2020 2025 2030

kTon

REF

REF+CAP

REF+CCAP

REF+RESE

Kyoto

Modelling results: total GHG emissions in energy sector

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

REF (2015)

REF+CAP(2015)

REF+CCAP(2015)

REF+RESE(2015)

REF (2025)

REF+CAP(2025)

REF+CCAP(2025)

REF+RESE(2025)

kTon

Agriculture

Households

Service

Industry

Energygeneration

Transport

Modelling results: division of GHG emissions among end-users of energy sector

Modelling results: RES-E share in the power production

0

10

20

30

40

50

60

2000 2005 2010 2015 2020 2025 2030

%

REF

REF-CAP

REF-CCAP

REF-RESE

Principal conclusions

1. Hydro and natural gas are the main primary resources for power production in all scenarios

2. In reference scenario (REF) coal use, together with 15% solid biomass co-firing, will be new important source for power production thus increasing supply security. However the reference scenario without defining particular environmental targets in conditions of increased power demand will not allow to fulfil the objectives of EU climate policy

3. RES-E target alone can not be enough effective instrument to mitigate climate change: RESE scenario target will allow in year 2030 to fulfil GHG emissions according Kyoto protocol only, but not be enough to fulfil strong obligations for post-Kyoto period.

4. To fulfil post-Kyoto obligation, RES-E target should be applied together with other climate change mitigation instruments, taking GHG emissions restriction obligation as a departure point (scenarios CAP & CCAP).

REF+

CAP

REF+

CCAP

REF+

RESE

GHG mitigation marginal costs,

year 2030, EUR (2000) / t 63 42

GHG mitigation costs,

average for the period 2005-2025,

EUR (2000) / t

41 15 45

RES-E additional costs, average for the period 2005-2025, EUR (2000) / MWh 4,0

GHG emissions mitigation costs and RES-E additional costs

the highest costs are indicated at the beginning of the period; the factor of fossil fuels prices and forecasted trends of RES-E technologies’ specific

investments strongly influence the calculated additional costs.

Part III: RES in Latvia power production and DH sector: Assessment of employment effects and regional benefits

Research Tasks

To estimate economical benefits of RES integration into national power production system in accordance of the target to reach RES share 49.3%

To assess economical impact of potential wide use of non-traditional RES – straw – for district heating

New capacities assessed

Biomass (Wood) CHP - 70 MWel

Wind: onland (135 MW) and

off-shore (77 MW)

Biogas – 8 MWel

Straw DH - 46 MWth

Possible approaches

Use of standard factors – the installation and operation of a given energy production capacity are associated with the specific number of jobs

Production chain analysis –identifying of the wages share in the value chain of a given energy production installation

Job places per 100 GWh annually produced electricity

Fossil technologies 1-6

Wind 15-20

Solar PV 50-54

Solar thermal 25-27

Small hydro 8-9

Biomass, forestry waste 18-19

Biomass, energy plantations 64

Biogas, agriculture waste 58

Source: R.E.H.Sims, “Biomass and Agriculture: Sustainability, Markets and Policies”, OECD Publication, Paris, September 2004, pp.91-103

Pre-feasibility study of employment, based on production chain analysis model

Facilitycost

OMcost

Fuelcost

Technologyvalue chain

O & Mvalue chain

Fuelvalue chain

End-user

All costs RE

energy

30%

70%

80%

20%

Totalandperunit

Estimation of the wages part of the value chain

Wages

Equipment

Income ofthe supplier

Fuel cost at the facility

=

Localization of the employment

Localregional

Nacional

Transnational

Employment

Source:

Tyge Kjær,Roskilde University

Production Chain Assessment Methodology

Example: Biomass CHP, steam turbine, 0.6-4.3 MW

Efficiency

Electricity

Heat

25%

65%

Annual operating hours 5600

Specific investments, mill.LVL/MW

Operation & Maintenance costs (% of investments per year)

Biomass fuel cost, LVL/GJ

3.29

4

1.75

Wages share of total investments

(comprising Latvian local share)

8%

(20%)

Wages share of O&M costs

(comprising Latvian local share)

50%

(80%)

Wages share of fuel costs

(comprising Latvian local share)

80%

(100%)

Production Chain Assessment Methodology

Example of onland Wind

Annually produced power, GWh 298

Installed capacity, MW 135

New direct job places

Job places related to investments 151

Investments’ jobs calculated per 1 year of technology life-time

7.5

Job places related to O&M 68

Total new full-time job places 76

Tax revenues (direct jobs)

Tax revenues in state budget, LVL 285 000

Tax revenues in municipal budgets, LVL 125 400

note: 1 EUR ~ 0,7 LVL

Production Chain Assessment MethodologyExample of Biomass CHP Steam

turbineGasifiers

Power production capacity, MW 35 35

New direct job places

Job places related to investments

(assessed as new – 100%)

158

(158)

115

(115)

Investments’ jobs calculated per 1 year of technology life-time

8 11

Job places related to O&M

(assessed as new – 75%)

154

(116)

246

(185)

Job places related providing wood fuel

(assessed as new – 50%)

317

(158)

264

(132)

Total new full-time job places 282 328

Tax revenues (direct jobs)

Tax revenues in state budget, LVL 1 057 475 1 229 971

Tax revenues in municipal budgets, LVL 465 300 541 200

Production Chain Assessment results: Employment effect and related tax

revenues

New capacities

(MW)

New direct jobs

New indirect

jobs

Tax revenues in state

budget

(LVL)

Tax revenues in municipal budgets

(LVL)

Straw DH 46 51 76 478 114 210 375

Biogas-E 8 50 75 468 739 206 250

Wind-E 135 onland +

77 off-shore

173 259 1 621 837 713 625

Biomass (Wood) CHP

70 610 915 5 718 616 2 516 250

Thank You !

Aizkraukles 21, Rīga,LV-1006 Latviaenergy@edi.lv

Institute of Physical Energetics