1. The wider socio-economic considerations on changes in the energy system Prof. Mikael Skou Andersen NERI, Dept. of Policy Analysis, University of Aarhus (DK)

2. NERI, University of Aarhus (DK) CEEH workshop, Risø-DTU, Febr. 6th 2008 Overview Politics and economics of energy supply Ranking of renewable energy in a CBA- perspective Some EVA results and implications for biomass Bottom-up versus top-down approaches Vision: linking of energy systems model with macro-economic perspective

3. NERI, University of Aarhus (DK) CEEH workshop, Risø-DTU, Febr. 6th 2008 The economics of energy supply

4. NERI, University of Aarhus (DK) CEEH workshop, Risø-DTU, Febr. 6th 2008 The politics of energy supply Besides oil price other drivers of energy policy –supply stability –broader international security considerations –environmental aspects (modest role) Energy policy tightly regulated and subsidised –in EU a prerogative of the member states –large-scale subsidies for nuclear energy –some liberalisation to promote efficiency –not primarily an economic issue Considerable vested interests in energy sector

5. NERI, University of Aarhus (DK) CEEH workshop, Risø-DTU, Febr. 6th 2008 20-20-20: A new target in energy policy EU Council of Ministers, March 2007: –20 per cent reduction of CO2 –20 per cent renewable energy –in 2020 Denmark –negotiations on new energy policy stalled in June 2006; have resumed now –EU requires 30 per cent renewables in DK in 2020, up from 15 per cent

6. NERI, University of Aarhus (DK) CEEH workshop, Risø-DTU, Febr. 6th 2008 Energy Agency: Biomass more efficient than wind energy 1% renewables: Million DKK in NPV discount rate 6%; oil 70 $/b Prod. Incl. CO2 Extern. Costs Market price adder Tax distort. Total Wind energy land power 240-304090340 Offshore wind power 430-3070130610 Biomass (straw) heat 90>-102070170 Biomass (wood chips) heat 130>-102070220 Solar heating170>-103060260

7. NERI, University of Aarhus (DK) CEEH workshop, Risø-DTU, Febr. 6th 2008 EVA: External costs in DKK - high and low estimates

8. NERI, University of Aarhus (DK) CEEH workshop, Risø-DTU, Febr. 6th 2008 EVA: Fuel mix and scrubber dependency for external cost per kWh

9. NERI, University of Aarhus (DK) CEEH workshop, Risø-DTU, Febr. 6th 2008 Amagerværket: a closer look AVEVA (m_2000)EVA (m_2001)EVA (m_2002)EVA Average Ecosense PM 2.5 -primary 35,7846,8341,3841,3334,83 SO 4 /SO 2 SO 2 /SO 2 SO 2 -total 9,51 2,00 11,51 10,57 2,45 13,02 10,29 2,07 12,36 12,3011,84 NO 3 /NO x O 3 /NO x NO x -total 15,03 -0,38 14,65 18,13 -0,36 17,77 17,63 -0,33 17,30 16,5812,93 Pb Hg 36,51 11,62 42,34 13,47 37,33 11,89 38,73 12,33- Table 3. Amagerværket/CoalCHP: External costs of air pollution emissions in Euro per kilogramme (2004-prices) for three consecutive meteorological years.

10. NERI, University of Aarhus (DK) CEEH workshop, Risø-DTU, Febr. 6th 2008 CBA of wind-energy (NPV with r=3%)

11. NERI, University of Aarhus (DK) CEEH workshop, Risø-DTU, Febr. 6th 2008 Bottom-up energy sector modelling vs. top-down macro-economic perspective Bottom-up modelling is appropriate from a technical point of view to capture detail of energy system In case of non-marginal changes in energy system a need to understand broader macro-economic implications and feed-back on the energy sector itself –e.g. impacts in agricultural and forestry sectors –second-order impacts on economic growth, employment etc.

12. NERI, University of Aarhus (DK) CEEH workshop, Risø-DTU, Febr. 6th 2008 Model availability for wider analysis of fossil-fuel phase-out RAMSES: Bottom-up model of Nordic energy sector of DK Energy Agency BALMOREL: Bottom-up model of Nordic-German energ sector EMMA: Energy-model as a satelitte model to ADAM; DK-macro-economic model –general equilibrium model principles E3ME: Energy-Economy-Environment model of EU- 27 including Denmark with high sector and fuel resolution –econometric time-series estimated model

13. NERI, University of Aarhus (DK) CEEH workshop, Risø-DTU, Febr. 6th 2008 THE END www.DMU.dk

14. NERI, University of Aarhus (DK) CEEH workshop, Risø-DTU, Febr. 6th 2008