MARKAL Model for Macedonia Macedonian Academy of Sciences and Arts (MANU) Skopje, March 1, 2011.

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Presentation transcript:

MARKAL Model for Macedonia Macedonian Academy of Sciences and Arts (MANU) Skopje, March 1, 2011

Organization Chart for Strategic Planning Activity USAID Ministry of Economy IRG/CRES Consultant Team Planning Team Ministry Coordinators MANU

Planning Team  Key organizations involved in model development – Ministry of Economy (MoE) – Research Center for Energy, Informatics and Materials - Macedonian Academy of Sciences and Arts (ICEIM - MANU)  Composition of the Planning Team Ministry Coordinators: Elena Kolevska Viktor Andonov (Core Group Member) Support Team: Acad Jordan Pop-Jordanov Acad Gligor Kanevce (Core Group Leader) Acad Tome Bosevski Prof. Anton Causevski Prof. Natasa Markovska Verica Taseska (Core Group Member) Nikola Bitrak (Core Group Member) 3

4 Introduction to MARKAL

Key Aspects of MARKAL  Encompasses an entire energy system from resource extraction through to end-use demands as represented by a Reference Energy System (RES) network  Employs least-cost optimization  Identifies the most cost-effective pattern of resource use and technology deployment over time  Provides a framework for the evaluation of mid-to-long-term policies and programs that can impact the evolution of the energy system  Quantifies the costs and technology choices that result from imposition of the policies and programs  Identifies the benefits arising for various policies and programs (e.g., increase energy security and economic competitiveness, reduced emissions) 5 5

MARKAL Reference Energy System 6

What types of policy questions is it good at answering?  Impacts of technology development programs  Mandatory micro-measures in each sector: building code, building retrofit programs, modal-split incentives in freight and passenger transports, energy efficiency programs, etc. vehicle standards  Energy taxes, investment subsidies (e.g., green and white certificates, clean/efficient technologies)  Renewable portfolio or performance standards  Energy security evaluation (oil/gas/nuclear fuel imports energy options evaluation)  Emission targets and mechanisms (e.g., cap and trade, taxes, sector intensity)  Merits of education, information dissemination  Impact of social constraints, e.g. nuclear

Key Inputs  Current Energy Balance and characterization of the associated stock of existing technologies  Resource supply (step) curves, and cumulative resource limits  The characterization of future technology options – Fuels in/out, efficiency, availability, technical life duration – Investment, fixed and variable O&M costs, and “hurdle” rates – Emission rates – Limits on technical potential – Performance degradation (e.g., efficiency, maintenance costs)  Demand breakdown by end-use – Demand for useful energy – Own price (and income) elasticities {optional} – “Simplified” load curve  Discount rate, reserve margin 8

Key Indicators  Total cost of the energy system – Investment and operating costs for power plants and demand devices – Expenditure on fuels – Other annual expenditures  Total primary energy – Domestic production and imports by fuel  Fuel consumption levels – Electricity generation fuel mix – Fuel choice and levels for each service demand – Electricity timing and level (peak) by season/time-of-day  Investments requirements for new supply and demand technologies – Nature and timing of power plant builds, and refurbishment – Device (and fuel) choice  Energy (marginal) prices – Fuel to each demand sector (with/without subsidies) – Electricity by time-of-use  Emission – Sources and levels – (Marginal) cost of carbon 9

Activities Undertaken  Development of Reference scenario, reflecting current knowledge of energy system evolution and probable future options (planning period )  Key areas of analysis – Renewable Target analysis, based on EC analysis of RE contribution, and in support of domestic RE Implementation Plan. – Energy Efficiency (EE) analysis, allowing for greater uptake of efficient technologies, implying appliance standards, for example. In addition, combined analysis with RE target. – Sensitivity analyses: postponed investment in electricity generation capacity, higher RE Targets, CO2 tax, CO2 cap 10

11 Reference (Business-as-usual) Scenario Assumptions  Calibrated to 2006 Energy Balance  National assumptions of economic growth and demographics, and their relationship to future demand for energy services  Generally aligned with Strategy for Energy Development of the Republic of Macedonia until 2030  Base year energy prices from Macedonian sources, international energy price for projections from IEA-WEO 2009  Firm power plant builds (and retirements)  Continued use of conventional fuels and technologies  Limited introduction of conservation or demand management measures  Known national policies (e.g. Feed-in Tariffs (FIT) for wind/solar)

12 Renewable Energy Analysis: Defining the Target & Goal  Renewable Energy (RE) share in base year (2005) – Based on national data sources, cross-checked with IEA and other public statistics – US EIA data used to inform ‘normalised’ hydro levels  Flat rate increase of 5.5% on base year RE share – Figure based on EU 27 equally sharing half of their total ambition  Additional requirement based on relative level of GDP per capita in 2005 – Assumes additional effort per capita adjusted to account for relative GDP level – Percentage increase calculated as additional effort divided by forecast final energy in 2020  Determine the optimal mix of power sector and demand shift to renewable sources, and what it displaces and costs

13 Energy Efficiency Potential Analysis Description  Reference scenario assumption is that mainly conventional demand devices are chosen and limited conservation is the norm  Use level of improved demand technology options for each demand service allowed them to reach up to 50% of the market share for new device purchases in 2030  Reflects policies to set appliance and building standards and limit the use of inefficient devices (e.g. prohibiting incandescent bulbs)  Determine the economic optimal penetration level of the efficient and conservation options, and the resulting energy savings and costs

14  Renewable scenario is slightly more expensive (~0.42% or €62 million NPV (2006)) compared to the Reference Case, reflecting the high cost of the renewable technologies  Higher penetration of energy efficiency technologies can lead to significant reductions in system costs (-2.3%), due mainly to savings on fuel (-6.3%), even when RE Targets are imposed Impact on the Overall Cost of the Energy System (% change) 14

15 Difference in Annual Energy System Costs  Annual costs (relative to Reference) increase under the RE target case once target implemented in 2021, rising up to €29 million by 2021 and stabilizing  Promoting Energy Efficiency can lead to significant annual savings in fuel supply of around 6.3% in 2030 without RE Target and 7.9% when there is an RE Target in place

Changes in Total Primary Energy  In all three scenarios - large reduction of imported gas  In the EE cases - important reduction in oil imports (transport sector not included)  In the RE cases - significant displacement of fossil fuels (as expected) totalling 1246 ktoe over the planning horizon 16

Electric Generation and Imports – (change from Ref.) 17  Under RE Target case: Increased generation from hydro plant ( ) and wind (in 2030); Reductions in coal and gas generation and electricity imports  Under EE and RE+EE case reductions in gas-fired generation and more hydro generation in RE+EE case

18 Decrease in Final Energy Consumption by Sector  Under the energy efficiency cases overall reduction in final energy consumption reaches 5% in 2030, mainly from electricity and oil  More efficient appliances for lighting, cooling and heating in buildings, and in iron & steel and non-metallic minerals industry (advanced technologies mainly using electricity and biomass).

19  Under RE Target case fossil fuels generation (coal- and gas-fired) is displaced by hydro, resulting in cumulative CO 2 emissions reduction of 1.5%  Under EE case lower demand of electricity reduces the gas-fired generation, leading to cumulative emissions reductions of around 3%  The combination of both, lower demand and displacing fossil fuel generation with renewables under RE+EE case, reduces the CO 2 emissions by ~4 %. Cumulative difference in CO 2 Emissions 19

Conclusions – RE Target  Renewable targets are achievable at modest additional cost (result of significant investment levels in renewable generation as part of the current energy strategy)  The most cost-effective technologies are hydro and wind generation to the limits of their availability (incentives must be in place to ensure the required investment levels)  A higher RE target can achieve important co-benefits of enhancing energy security and lowering carbon emissions. 20

Conclusions – Promoting Energy Efficiency  Economic benefits could be significant due to availability of negative cost options.  A wider economic assessment of the barriers to uptake and appropriate policy mechanisms should be undertaken.  Model results should be used as a starting point to identify the most economically attractive technologies. 21

Conclusions - Synergies RE and EE  Energy efficiency plays a key roll for achieving renewable target, energy security, and climate change mitigation goals  Both renewable and energy efficiency strategies have strong synergies with low carbon objectives  The analytic framework provides an important ability to assess a wide range of energy policy issues, and to advise the formulation of comprehensive strategies to guide the development of the Macedonian energy system 22