Support for low emission development in SEE: decarbonisation of the residential sector in Montenegro Modelling: Aleksandra Novikova, PhD | IKEM | University of Greifswald Input information from the reports of: Prof. Dr Zoran Miljanic , Biljana Gligoric, Prof. Dr Igor Vušanovic Zsuzsa Szalay, PhD & Tamas Csoknyai, PhD | Budapest Technical University Podgorica, 27 October 2015

Outline Objective Method and boundaries Modelling steps, results and their discussion Demographics Buildings stock turnover Energy consumption and CO2 emissions in the base year, calibration Business-as-usual trends of energy consumption and emissions SLED policy packages Impact of policy packages and associated costs Other possible scenarios and sensitivity analysis

Objective To assist the design of energy efficiency and climate mitigation policies in the residential buildings of Montenegro with the information on: What are the future trends of energy consumption and CO2 emissions? What are the key influencing factors? What are the priority sector segments for policies? What kind of policy packages and what level of policy efforts are required to make the residential buildings low energy/carbon in the medium/long term future? What are the associated costs? How high are possible energy savings and CO2 emission reduction?

Architects & policy experts Economists & policy experts Modelling steps Bottom-up approach Architects & policy experts Economists & policy experts Step 1: Development of the buildings topology Step 5: Construction of the buildings stock model Step 2: Calculation of the present buildings performance Step 6: Construction and calibration of the energy sector balance in 2013-2014 Step 3: Calculation of possible retrofit packages (BAU, standard, ambitious) Step 7: Calculation of baseline energy consumption and CO2 emissions until 2030 Step 4: Calculation of costs for retrofit packages Step 8: Formulation of policy packages, evaluation of their impact and associated costs

Only thermal comfort is included into our analysis Model boundaries Only thermal comfort is included into our analysis Space heating, space cooling, and water heating Building categories falling out Vacation buildings (not covered by the EPBD) Retrofit options: energy efficiency and fuel switch No impact of climate change

Modelling tool LEAP is a widely-used software for energy policy analysis and climate change mitigation assessment developed at the Stockholm Environment Institute

Objective To assist the design of energy efficiency and climate mitigation policies in the residential buildings of Montenegro with the information on: What are the future trends of energy consumption and CO2 emissions? What are the key influencing factors? What are the priority sector segments for policies? What kind of policy packages and what level of policy efforts are required to make the residential buildings low energy/carbon in the medium/long term future? What are the associated costs? How high are possible energy savings and CO2 emission reduction?

Demographics Population Persons per household Until 2030: the energy development strategy of Montenegro by 2025, medium scenario 2031 – 2050: the continuation of trends Persons per household 3.2 in 2011 (CENSUS) 2.7 in 2050, 2.5 in 2070 ( 2.0 in 2050 in Europe, European Commission (2011): WETO-T) The number of inhabited dwellings almost equals the number of households European Commission. 2011. World and European Energy and Environment Transition Outlook (WETO-T). Bertrand Château and Domenico Rossetti di Valdalbero (Eds.)

Buildings stock evolution

Buildings stock demolition The demolition of the buildings stock is assumed to occur according to the Weibull curve % left = exp (-(t+c)/a)^b, where t- year a - scale factor b - shape factor, assume 2.5 c - location parameter, assume 0 Only inhabited buildings were analyzed Estimated mean buildings lifetime, years A1. Built ...1945 120 A2. Built 1946...1970 100 A3. Built 1971...1990 100 A4. Built 1991...2000 100 A5. Built 2001...2015 100 A6. Built 2016… 100 Dwelling construction is estimated as the gap between the demand for dwellings and the remaining dwellings stock Take the lifetime from Serbia? The same buildings categories

Buildings stock replacement Fig. Age category A. Buildings built before 1945

Objective To assist the design of energy efficiency and climate mitigation policies in the residential buildings of Montenegro with the information on: What are the future trends of energy consumption and CO2 emissions? What are the priority sector segments for policies? What kind of policy packages and what level of policy efforts are required to make the residential buildings low energy/carbon in the medium/long term future? What are the associated costs? How high are possible energy savings and CO2 emission reduction?

Buildings stock replacement The growth in new floor area (1-1.6% yr.) is due to The demolition rates of old buildings (+) The growing number of households (+) More large houses, where floor area per dwelling is smaller than that in small houses (-) The larger floor area of new dwellings (+)

Changing structure of the floor area by building type

Calibration

Calibration for thermal comfort Floor area heated 55% ´The duration of heating 16 hours Floor area cooled (zones 1 and 2) 50% The duration of cooling (zones 1 and 2) 12 hours Billion kWh = TWh Electricity for appliances and cooking is about 25% of the total sector balance

Uncertainty about the balance for the residential sector The buildings sector balance (MONSTAT 2014) x the share of the household sector in the buildings sector in the Montenegrin strategy to 2030

Objective To assist the design of energy efficiency and climate mitigation policies in the residential buildings of Montenegro with the information on: What are the future trends of energy consumption and CO2 emissions? What are the key influencing factors? What are the priority sector segments for policies? What kind of policy packages and what level of policy efforts are required to make the residential buildings low energy/carbon in the medium/long term future? What are the associated costs? What are the associated costs? How high are possible energy savings and CO2 emission reduction?

Business-as-usual scenario The buildings retrofit rate is 1% of the old stock/yr. Only the first happening retrofit is considered, this is why the model shall not be used for the analysis to the long-term Business-as-usual retrofit 20% energy demand reduction Some fuel switch: after retrofit, households in old buildings start heating with the same energy sources as households in new buildings of the same building type More cooling, 100% penetration of air-conditioners No other policies than the acting buildings code (2003) are in place

BAU: Final energy consumption by energy source 12% FEC – final energy consumption

Baseline: Final energy consumption by buildings age categories

Only for orientation and setting priorities Baseline: Final energy consumption by building type From the long-term perspective, the key categories for policy making are new buildings and those built in 1971 - 1990 Only for orientation and setting priorities

Baseline: Final energy consumption by building type The priority segment: small buildings

Baseline: Final energy consumption by climate zone

Baseline: Final energy consumption by end-use Space heating will remain to be the largest energy end-use Shall we increase the correction factors for cooling in BAU?

Baseline: direction and indirect CO2 emissions

Objective To assist the design of energy efficiency and climate mitigation policies in the residential buildings of Montenegro with the information on: What are the future trends of energy consumption and CO2 emissions? What are the key influencing factors? What are the priority sector segments for policies? What kind of policy packages and what level of policy efforts are required to make the residential buildings low energy/carbon in the medium/long term future? What are the associated costs? Which energy savings and emission reductions are possible?

Policy packages Objective: low energy/carbon stock in the medium/long term Policies: regulatory, financial incentives, market based, information. Regulatory the most effective costs effective

SLED scenarios Reduction of energy demand Fuel switch Increase in the level of comfort, heating Longer duration of heating (18 hours) Larger floor area heated (70% floor area heated) Increase in the level of comfort, cooling Longer duration of cooling (14 and 16 in standard and ambitious improvement) Larger floor area cooled (55/60% floor area cooled in standard and ambitious improvement)

Objective To assist the design of energy efficiency and climate mitigation policies in the residential buildings of Montenegro with the information on: What are the future trends of energy consumption and CO2 emissions? What are the key influencing factors? What are the priority sector segments for policies? What kind of policy packages and what level of policy efforts are required to make the residential buildings low energy/carbon in the medium/long term future? What are the associated costs? Which energy savings and emission reductions are possible?

Final energy consumption SLED Moderate: Low energy/carbon buildings stock in 2070 Final energy consumption 17%

SLED Moderate: Final energy savings by energy source

SLED Moderate: electricity savings 33%

SLED Moderate: Final energy savings by building age category

SLED Moderate: Final energy savings by building type

SLED Moderate: Final energy savings by climate zone

SLED Moderate: Final energy savings by end-use

SLED Moderate: final energy consumption per m2 17%

SLED Moderate: Avoided CO2 emissions 33%

Objective To assist the design of energy efficiency and climate mitigation policies in the residential buildings of Montenegro with the information on: What are the future trends of energy consumption and CO2 emissions? What are the key influencing factors? What are the priority sector segments for policies? What kind of policy packages and what level of policy efforts are required to make the residential buildings low energy/carbon in the medium/long term future? What are the associated costs? Which energy savings and emission reductions are possible?

Assumptions Financial analysis Energy prices Discount rate 10% (could very from 1% to 15%) Market loan rate 10% Subsidized loan rate to 0% Loan term 10 years Energy prices Electricity 0.10 EUR/kWh Growth rates 0.8%/yr. in 2015-2020, 1.2%/yr. in 2021-2025, and 1% in 2025-2030 Wood 40 EUR/m3 = 0.04 EUR/kWh Growth rates 1.5%/yr.

Affected floor area: new buildings

Affected floor area, retrofit of existing buildings

Incremental cost per m2 The largest share of the cost is for insulation, then window replacement and the exchange of heating systems

Incremental investment (SLED – BAU) GDP Albania = 13 billion USD

Costs of the grants (for the government)

Loans: costs for the government – “buy-down” rate Add the costs of loans for the households

Costs of the building codes (for households)

Saved energy costs

Profitable investment Annualized investment cost 17 EUR/m2 vs saved energy costs 70 EUR/m2 (discount rate 10%, lifetime 20 years) Investment until 2030 are 980 million EUR (not discounted), saved energy costs are ca. 290 million EUR and will last for many years ahead

Final energy consumption SLED Ambitious: Low carbon buildings in 2050, retrofit rate 2% Final energy consumption 26%

SLED Ambitious: Low carbon buildings in 2050, retrofit rate 2% Electricity savings 47%

Affected floor area: new buildings

Affected floor area, retrofit of existing buildings

SLED Ambitious: Low carbon buildings in 2050, retrofit rate 2% Incremental investment (SLED – BAU) GDP Albania = 13 billion USD

SLED Ambitious: Low carbon buildings in 2050, retrofit rate 2% Total investment (without BAU) -> combining deep thermal efficiency retrofit with the BAU retrofit activities is critical GDP Albania = 13 billion USD

SLED Ambitious: Low carbon buildings in 2050, retrofit rate 2%

SLED Ambitious: Low carbon buildings in 2050, retrofit rate 2% Annualized investment cost 17 EUR/m2 vs saved energy costs 73 EUR/m2 (discount rate 10%, lifetime 20 years) Investment until 2030 are 1,4 billion EUR (not discounted), saved energy costs are ca. 440 million EUR and will last for many years ahead

Other scenarios and sensitivity analysis

aleksandra.novikova@ikem-online.de