Estonian energy scenarios 2030 2050

The first Balmorel model runs

2

Purpose of this…

• It is the first model runs – not final results!– 30 time steps per year

• Will be increased to 72

• Can be used to find errors• An exercise to help understand the model• First attempt to present condensed results

– “Millions of numbers => Important key numbers”

Procedure for this meeting

• 37 slide (+ extra!)• Difficult to have dialogue during presentation• Room for questions allocated after each

section– Slide 11, 19, 23, 29, 32 and

What we have learned

• Add oil shale based power generation to list of possible investments

• Start investments in 2018– Compute 2012 + 2018, 2019, 2020, 2022,…

• Check biogas costs• Substitution price for oil shale from 2016 (or

later)– Mining cost until then

To be discussed after presentation

Scenarios

– Two scenarios included:• Reference• Liberal market (= reference without 110% requirement)

– Focus on the electricity and district heating sector

Reference

Liberal marketCO2 concern Renewable energy focusCO2 market collapse

Combination scenario

110%

Oil shale short term opportunity costs

20122014

20162018

20202022

20242026

20282030

20322034

20362038

20402042

20442046

20482050

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Oil shale mining costsOil shale long term opp costOil shale short term opp costCoal priceEu

ro/G

J

Note: We have used the short term opportunity costs of oil shale in the following scenarios

7

Introduction

• Balmorel– Optimal dispatch (a given year, with given technology)

• Input:– Electricity and heat demand– Fuel prices– Capacities (generators, transmission) and efficiencies

• Output:– Generation per unit, flow between areas– Costs, emissions

– Optimal investments• Input:

– Cost of technologies– Interest rate, time horizon

• Output:– New MW generation and transmission

8

“Optimal dispatch”

Area 2Generation: 0-100 MW

Marginal price: 150 X/MWh

Area 1:Generation: 0-100 MW

Marginal price: 100 X/MWh50 MW

Demand Generation Price Transmission

Area 1 Area 2 Area 1 Area 2 Area 1 Area 2

10 10 20 0 100 100 +10

10 40 50 0 100 100 +40

40 60 90 10 100 150 +50

50 60 100 10 100 150 +50

75 75 100 50 150 150 +25

40 150 90 100 100 150 +50

MW MW MW MW X/MWh X/MWh MW

9

Model set-up

• Model area– Baltic states, Nordic countries, Poland, Germany,

NW Russia and Belarus• Belarus modelled as transit country (No demand, no

power plants)

– 23 price areas

LVLT

FI

EE

DK_EDK_W

DE_NW DE_NE

DE_CS BLR

SE_S

SE_NSE_M

NO_S

NO_O

NO_NNO_M

RU

RU_KAL

PL

2011

RESULTS: TONS CO2, MWH

12

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2022

2024

2026

2028

2030

2035

2040

2045

2050

Reference

0

100

200

300

400

500

600

700

800

Natural gasCoal and lignitePeatOilOil shaleWaste

CO2

emis

sion

(Mt/

year

)CO2 emission – model area

Endogenous investments from 2015

Note: Different step of X-axis, corresponding to simulated years

13

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2022

2024

2026

2028

2030

2035

2040

2045

2050

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2022

2024

2026

2028

2030

2035

2040

2045

2050

Reference Liberal market

0

1

2

3

4

5

6

7

8

Oil shaleCoalNatural gasOilWaste

CO2

emis

sion

(Mt/

year

)

CO2 emission – Estonia110% requirements results in new investments from 2024

Results are equal in the two scenarios from 2011 to 2022

14

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2022

2024

2026

2028

2030

2035

2040

2045

2050

Reference

0

200

400

600

800

1,000

1,200

1,400

1,600

WindBiomassBiogasSolarCoal CCSCoal and ligniteNatural gasPeat Oil shaleOilGeoNuclear HydroWaste

TWh/

year

Electricity generation – model area

Natural gas

Hydro

Wind

Nuclear

Coal CCSCoal & lignite

15

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2022

2024

2026

2028

2030

2035

2040

2045

2050

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2022

2024

2026

2028

2030

2035

2040

2045

2050

Reference Liberal market

-

2.0

4.0

6.0

8.0

10.0

12.0

WindNatural gasCoalWood chipsBiogasOilOil shaleWasteHydro

TWh/

year

Electricity generation – Estonia

Note: higher coal and natural gas generation in reference scenario due to 110 % capacity requirement

16

Electricity from renewables - Estonia20

11

2012

2013

2014

2015

2016

2017

2018

2019

2020

2022

2024

2026

2028

2030

2035

2040

2045

2050

Reference

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

WindBiogasWood chipsHydroWasteTW

h/ye

ar

Note: Liberal market scenario practical the same

17

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2022

2024

2026

2028

2030

2035

2040

2045

2050

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2022

2024

2026

2028

2030

2035

2040

2045

2050

Reference Liberal market

-

5

10

15

20

25

30

35

ElWood chipsStrawBiogasNatural gasOil shaleCoalOilWaste

PJ/y

ear

District heating generation – Estonia

Note: increased coal generation in reference scenario

18

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2022

2024

2026

2028

2030

2035

2040

2045

2050

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2022

2024

2026

2028

2030

2035

2040

2045

2050

Reference Liberal market

-

20

40

60

80

100

120

Waste Halm Biogas Natural gas Wood chips Coal Oil Oil shale

PJ/y

ear

Total fuel consumption – Estonia

Note: higher wood chips consumption in liberal market scenario

INVESTMENTS

20

Investment in elec. generation – model area

Note 2: Remember 5 years time step in the last part: More investments per time step

Note 1: Large investments in first year with endogenousinvestments indicate an unbalance in earlier years

2015 2016 2017 2018 2019 2020 2022 2024 2026 2028 2030 2035 2040 2045 2050Reference

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

WindCoal CCSCoalSolarNatural gasBiomassBiogasNuclear GeoWaste

MW

/yea

r

Note 3: Wind and solar investments in 2040 and beyond are primarily in Germany due to NREAP

21

2015

2016

2017

2018

2019

2020

2022

2024

2026

2028

2030

2035

2040

2045

2050

2015

2016

2017

2018

2019

2020

2022

2024

2026

2028

2030

2035

2040

2045

2050

Reference Liberal market

-

100

200

300

400

500

600

700

WasteCoalNatural gasWindBiomassBiogas

MW

/yea

rInvestment in elec. generation - Estonia

Note: Additional coal and gas investments to meet 110 % requirement in reference scenario

22

Elec. capacity in Estonia

20112012

20132014

20152016

20172018

20192020

20222024

20262028

20302035

20402045

20500

500

1000

1500

2000

2500

3000

Reference

Existing New Cap requirementM

W/y

ear

20112012

20132014

20152016

20172018

20192020

20222024

20262028

20302035

20402045

20500

500

1000

1500

2000

2500

3000

Liberal market

Existing New

MW

/yea

r

110 % requirement

RESULTS: PRICES

24

Electricity prices - Estonia20

11

2012

2013

2014

2015

2016

2017

2018

2019

2020

2022

2024

2026

2028

2030

2035

2040

2045

2050

0

10

20

30

40

50

60

70

80

90

100

ReferenceLiberal market

EUR/

MW

h

Note: Investments from 2015 results in decrease in electricity price and less oil shale generation

25

Electricity prices – region

20112012

20132014

20152016

20172018

20192020

20222024

20262028

20302035

20402045

20500

20

40

60

80

100

120

FinlandLatviaLithuaniaPolandNW RussiaEstonia

EUR/

MW

h

26

Import balance(TWh/year) 2012 2015 2020 2030 2040 2050Estonia -2.4 -4.3 -3.4 -3.0 -3.6 -7.3Latvia 0.8 4.0 9.0 7.6 -6.2 -1.7Lithuania -2.0 -5.2 -5.6 -8.2 -6.7 -6.2Finland -0.9 -0.9 -9.1 -8.1 -15.6 -17.0NW Russia 2.6 8.5 17.9 13.9 13.8 12.2Belarus 0.0 0.0 0.0 0.0 0.0 0.0Poland 12.6 6.7 -9.1 -16.1 -5.0 -13.3Sweden -5.1 -1.5 -4.4 4.7 16.0 26.4Denmark 7.3 5.0 16.6 15.2 -7.2 -13.4Norway 2.6 4.7 11.0 27.6 39.8 55.6Germany -15.6 -17.1 -22.9 -33.6 -25.5 -35.3

(TWh/year) 2012 2015 2020 2030 2040 2050Estonia -2.4 -4.3 -3.4 -5.3 -6.5 -9.9Latvia 0.8 4.0 9.0 8.0 -6.0 -1.9Lithuania -2.0 -5.2 -5.6 -8.1 -4.3 -2.5Finland -0.9 -0.9 -9.1 -8.1 -15.6 -17.1NW Russia 2.6 8.5 17.9 14.3 14.1 13.3Belarus 0.0 0.0 0.0 0.0 0.0 0.0Poland 12.6 6.7 -9.1 -14.6 -4.4 -14.1Sweden -5.1 -1.5 -4.4 4.8 16.0 26.1Denmark 7.3 5.0 16.6 15.6 -7.2 -13.6Norway 2.6 4.7 11.0 27.6 39.8 55.6Germany -15.6 -17.1 -22.9 -34.3 -25.9 -35.8

Note: Estonia (and Lithuania and Latvia) as significant importers of electricity – large import from Russia etc.

Reference

Liberal

27

Transmission 2011(MW) BLR_BLR DE_CS DE_NE DE_NW DK_E DK_W EE_R FI_R LT_R LV_R NO_M NO_N NO_O NO_S PL_Central PL_NW PL_S PL_SE PL_W RU_ARK RU_KAL RU_KAR RU_KOL RU_KOM

BLR_BLR 500

DE_CS 3060 3330 700 171 821

DE_NE 3060 1200 600

DE_NW 3330 1200 1500

DK_E 600 600

DK_W 950 600 1000

EE_R 350 1300

FI_R 350 100

LT_R 500 2000 700

LV_R 1300 2000

NO_M 900 600

NO_N 100 900 50

NO_O 5200

NO_S 700 1000 600 2500

PL_Central INF INF INF INF

PL_NW 598 INF INF INF INF

PL_S INF INF INF INF

PL_SE INF INF INF INF

PL_W 1280 INF INF INF INF

RU_ARK 1E+100

RU_KAL 700

RU_KAR INF

RU_KOL INF

RU_KOM INF

RU_NOV

RU_PSK 500 500 500

RU_STP 500 350 INF

SE_M 740 550 2300

SE_N 1200 750 700

SE_S 600 1700 600

28

Investments in transmission - MW(MW) Reference Liberal market

Year 2030 2035 2040 2045 2050 2030 2035 2040 2045 2050

From Finland

To Estonia 175 205

From Norwat N

To Finland 291 294

From Norway S

To Denmark W 220 669 78 213 691 473

To Norway M 406 535 865 288 406 525 865 410

From Sweden M

To Denmark W 990 670

To Lithuania 44

From Sweden N

To Norway N 330 208 379 293 893 330 208 389 293 770

From Sweden S

To Denmark E 386 55 344 129

To Poland 1000 1000

From Poland NW

To Germany S 187 606 1020 373 1065 1110

From Poland W

To Germany S 99

Total 330 614 1596 2819 4616 330 614 1705 3258 4899

RESULTS: ECONOMY

Welfare economics

• Net present value of savings in liberal market scenario is 73 mio. Euros (compared to reference)

• Increased consumer costs due to higher electricity price

(Mio. euro) ESTONIA LATVIA LITHUANIA RUSSIA NORDIC GERMANY & POLAND TOTALGenerator profits: 103 29 16 4 179 6 336Consumer surplus: -22 -21 -27 -34 -182 -5 -292TSO profit: 5 5 -4 19 4 -2 27Public profit: 0 0 0 0 1 0 1Socio economic benefit: 85 12 -14 -10 2 -1 73

Generator profits

• Generator surplus of 103 mio. Euro (NPV) in Estonia

• Significant decrease in Estonian capital costs

ESTONIA LATVIA LITHUANIA RUSSIA NORDIC GERMANY & POLAND TOTAL - revenue from electricity sales -578 75 212 128 321 102 259

- fuel costs -161 18 39 51 24 11 -18 - variable costs -16 1 12 4 6 13 21 - fixed costs -69 3 11 15 20 14 -6 - capital costs (new units) -285 13 128 54 85 46 40

- CO2-price -150 11 5 - 6 12 -

117 Total 103 29 16 4 180 6 337

DISCUSSION

Biogas plants81 Centralised Biogas Plants - Input: 800 Tons per Day

Technology Centralised Biogas Plant with CHP  2015 2020 2030 2050Energy/technical dataDaily input of manure & organic waste in tonnes 800

Biogas output Nm3/m3 raw material 25 - 30 24 - 28 24 - 28  Electricity efficiency (%) net 40 - 45 43 - 48 45 - 50  Electricity generating capacity (MW) 3,0 3,1 3,2  Heat generation capacity (MJ/s) 3,6 3,2 3,0  Availability (%) 98 98 98  Technical lifetime (years) 20 20 20  Construction time (years) 1      Own electricity consumption, kWh per ton biomass 4      

Own heat consumption, kWh per m3 of raw material 34      

Total plant investment, excl. transport equipment and co-generation plant (M€)

9,5 9,0 9,0  

Total investment, co-generation plant (M€) 0,49 0,49 0,49  Specific investment, incl. co-generation plant (M€/MW) 3,4 3,2 3,2  

Total O&M (€/tonnes supplied raw material), excl. transport 2,2 2,2 2,2  

Total O&M (€/MWh) 31 31 31  

Observations - Estonia

• The model invests in new coal power when it starts investing in 2015 because this has less costs than oil shale.

• The 110 % target results in investments in coal power capacity when the majority of the Narva oil shale plants are decommissioned by the end of 2023

• From 2026 the capacity requirement is met by investing in natural gas power plants

• Investments in renewables in Estonia limited to NREAP and biogas only

Observations – surrounding system

• The model only to some extent invests in additional nuclear capacity in Poland and Lithuania (and not in Russia and Finland) from 2030

• Coal CCS deployment in Poland, Germany and Lithuania from 2040 to 2050.

Important questions

• Should we use a historic oil shale price for 2011 and 12 and when is there enough oil shale refinery capacity to use a pure opportunity costs oil shale price?

• Is investments in new coal power plants acceptable in Estonia in the short and long term?

What we have learned

• Add oil shale based power generation to list of possible investments

• Start investments in 2020 (generation)– Compute 2012 + 2020, 2022,…– Investment in new transmission from 2026

• Check biogas costs• Substitution price for oil shale from 2016 (or

later)– Mining cost until then

Russia

• Current version:– Limited transmission capacity (3 x 500 MW)– No investment in new transmission capacity to/from Russia– “Perfect market”– No CO2 cost in Russia = Carbon leakage

• Options:– CO2 goal for Russia– Border tax– Limiting capacity– Require a fixed balance to Russia, e.g. X GWh import

Next steps

• Update Latvian and Lithuanian data when we receive feedback from TSOs

• Forecast for district heating demand• Simulation of all scenarios (change in oil shale

opportunity costs due to different CO2 price)• Update of technology catalogue• Increase time resolution

EXTRA SLIDES

Reference scenario

Reference scenario – Business as usual i.e. with a requirement of having inland production capacity equal to 110 % of the hourly peak demand, current trend in energy efficiency, an oil shale price is a function of the international oil price, and WEO 2012 forecast of CO2 prices in their new policy scenario i.e. 23-31-34 €/ton CO2 in 2020-2030-2035, respectively. The price in 2050 set to 45 €/ton CO2.

The 110 % requirement is calculated as follows:110 % of peak demand – 150 MW

Liberal market scenario

Liberal market scenario – A scenario with reduced requirements for inland Estonian electricity capacity. In this scenario the impact of setting a lower capacity requirement is analysed. This scenario have no specific requirement for Estonian capacity.

Updated assumptions• Investments in new generation capacity from 2015• Data on existing Estonian power plants• Estonian electricity consumption updated according to BAU forecast• Estonian biomass and wind resources according ENMAK resource report• Investment possible in new nuclear power plants in Lithuania, Poland and

Finland after 2030. Costs based on IEA and actual costs: 4.1 mio. EUR/MW• CCS not possible in Estonia, Finland and Sweden due to geological

conditions• NREAP requirements considered as a minimum RE target beyond 2020• Model invests in new transmission capacity from 2030• Opportunity costs of oil shale based on short term marginal costs (more

about this in next slides)

Oil shale opportunity costsMethod

The opportunity costs of oil shale seen from the existing power plants at Narva from 2011 to 2050. The model will then consider the efficiencies at existing Narva power plants and electricity prices etc.This substitution price could be estimated as either the short or long term marginal costs:- Short term costs:

- fuel oil price x refinery efficiency - oil shale refinery OPEX – refinery CO2-costs- Long term costs:

- fuel oil price x refinery efficiency - oil shale refinery CAPEX - oil shale refinery OPEX – refinery CO2-costs.

We assume the refineries are already in operation and base our cost estimate on short term marginal costs.

Oil shale opportunity costsAssumptions

1. Reference oil price set to fuel oil based on price forecast from IEA World Energy Outlook 2012.2. Mining fee (royalty) 2011-2014: 1,1 euro/tonnes. 2014-2050: 2,4 euro/tonnes3. Mining costs (ex transport and royalty): 2011: 10,5 euro/tonnes, 2030: (10,5+16)/2= 13,25

euro/tonnes. 2050: 16 euro/tonnes. For the years between these points I have made a linear projection.

4. Transport costs to Narva: 3 euro/tonnes in all years5. OPEX of refinery: 21 euro/tonnes in all years.6. CAPEX of refinery: Average of Enefit and Petroter: 10 euro/tonnes per year with an interest

rate of 10 % and 20 years pay back time.7. 1 tonnes of oil shale rock set to contain 2,33 MWh or 8,33 GJ energy - based on the report of

the resource group.8. Refinery efficiency set to 70 % based on the report of the resource group. This is in line with

the efficiency of the existing Petroter refinery.9. CO2 price forecast based on IEA World Energy Outlook New Policies scenario with an

adjustment to the historic 2011 and 2012 CO2 price level.10. CO2 emission based on Enefit 280 data: 0,36 tonnes CO2/bbl shale oil. I have estimated

the calorific value of 1 bbl oil shale to 5,52 GJ and used an refinery efficiency of 70 %.