1. The NEEDS-TIMES models to support the definition of strategies for the security of energy supply SIXTH FRAMEWORK PROGRAMME [6.1] [ Sustainable Energy Systems] C. Cosmi, V. Cuomo with the contribution of Blesl M., Kypreos S., Van Regemorter D., Ahlgren E., Assoumou E., Bruchof D., Caldés N., Cleto J., De Miglio R., Di Leo S., Gargiulo M., Giannakidis G., Grohnheit P. E., Kanudia A., Kober T., Krook Riekkola A.,, Labriet M., Lavagno E., Lechon Y., Lehtila A., Loperte S., Loulou R., Macchiato M., Pietrapertosa F., Pursiheimo E., Salvia M. NEEDS Forum 2 - Energy Supply Security – Present and Future Issues 5-6 July, Krakow (Poland)

2. This presentation The problem NEEDS and the RS2a The Scenarios for NEEDS Some results Conclusions and further developments

3. EU-30 – Dependence according to energy product Source: European Commission

4. The problem Trends in the European Union : An increase of energy consumption not balanced by an adequate production increasing external dependence of energy products (actually imports 50% of its energy requirements but it could rise to 70% within the next 20 to 30 years if no measures are taken) structural weaknesses of energy supply It is necessary to introduce a strategy of security aimed at reducing the risks:  Economic (steady rise in oil prices)  Social  Ecological (damages caused by the energy supply system: accidental or related to emissions of pollutants)  Physical Community dimension of energy policies to manage the interdipendency of Member States to:  combat climate change  complete the internal market

5. The Green Paper "Towards a European strategy for the security of energy supply" of 29 November 2000 [COM(2000) 769] “… to ensure the uninterrupted physical availability of energy products on the market at an affordable price for all consumers, whilst respecting environmental concerns” to reduce the risks linked to energy dependency (specially regarding fossil fuels such as petroleum - the dominant resource) to rebalance EU supply policy by clear action in favour of a demand policy, aimed at controlling its growth by encouraging a real change in consumer behaviour through, for example, taxation measures. to combat global warming with regard to supply, promoting new renewable energy sources for example, financing their development with financially viable energy. to provide a stronger mechanism to build up strategic stocks and to foresee new import routes for increasing amounts of oil and gas. Objective of a long-term energy strategy:

6. Modelling Pan European Energy Scenarios in the NEEDS Project Overall objective of the project: To evaluate the full costs and benefits (i.e. direct + external) of energy policies and of future energy systems, both at the level of individual countries and for the enlarged EU as a whole. RS2a Objectives: Generate the energy models of 28 EU countries, linked by energy and emissions trades that constitute the basis of the multi-region NEEDS Pan EU model. Integrate LCA and Externalities into the NEEDS Pan EU model. Define a baseline and a selection of policy scenarios to assess key energy and environment issues in Europe

7. User Interfaces  VEDA-FE (Front End)  VEDA-BE (Back-End) Methodology  Bottom-up Model  Perfect competition  Perfect foresight  Optimisation (LP)  Minimimum cost solution  Linear objective function and Constraints  Techno economic and environmental input parameters Models Development  The 29 EU country models  The NEEDS TIMES Pan European model TIMES The Integrated Markal Efom Systems FEATURES  Implementation in GAMS  Regional Resolution  Elastic demands  Vintaging  Multiperiodal  Load curves Source: IMAA elaboration on slide from M. Blesl (IER) The modelling framework

8. Main features of the NEEDS-TIMES models  Long term time horizon (2000-2050, by 5-year step), to take into account different standards of energy devices and technologies development  high technological detail, in energy supply and end-use sectors  full representation of all energy vectors included in the detailed energy balances  break down of demands for energy services Schematic representation of the Reference Energy System (Source: M. Blesl, IER – University of Stuttgart)

9. The NEEDS Pan EU Model Structure Pan European TIMES Model Base Year Templates ELC RCA IND TRA SUP SubRes New Techs ELC RCA IND TRA SUP Scenariofiles Demand Projection x-base Zyssettings UC scenarios Trade scenarios Other Scenario files Additional DD-files pumpstg ELC_peak com_bndnet Scenario constrains (Source: IER)

10.  evaluation of policies at technology level both on country level and EU wide perspective  capability of analysing the impacts of different policies and price mechanisms (such as different tax or subsidy schemes for commodities and technologies)  capability of evaluating the expected long-term results of LCA  scenario analysis The NEEDS TIMES models The Pan-EU model is more than the sum of the 28 national models as it allows to impose constraints at the European level that “coordinate” policies across borders. The model allows both Pan-EU policy evaluation together with the analysis of fragmented national policies and it is thus appropriate in evaluating the benefits of cooperation.

11. The Scenarios for the Pan-EU model Policy scenarios: Environmental issues linked to energy use A Post-Kyoto climate policy to stabilize CO2 concentrations below 450 ppmv following the EU COM (2007)2 Air Quality Policies Energy policies aiming at reducing the EU-dependency on energy imports Enhancement of endogenous energy resources Reference scenario (Baseline): all exogenous assumptions around drivers, energy prices and policies follow a BAU trend (GEM-E3 model). macroeconomic and energy price background assumptions are in line with the latest DG TREN projections. no specific climate policies such as to allow a proper evaluation of Kyoto and post Kyoto targets. country decisions implemented for nuclear.

12. Enhancement of endogenous energy resources Reduce import dependence on oil and gas by introducing constraints on imports as fraction of primary energy use. This will increase the use of  renewables, energy efficiency and conservation,  biomass for bio-fuels and eventually hydrogen production  advanced nuclear for those countries they want to keep this option Based on conclusions, propose standards on renewables and efficiency and make recommendations for the use of nuclear energy. Identify for EU the importance of “Strategic partnerships” for oil and gas imports and propose policy options for “Strategic reserves”

13. Some Results Multi country runs: the NEEDS Pan- European model preliminary results Enhancements of endogenous resources: The Italy case study.

14. Multi country runs: the NEEDS Pan- European model preliminary results

15. Primary energy consumption Multi country runs P A N E u r o p e a n m o d el On the full time horizon the total increase of consumption is about 30 % with: Coal +52% Natural gas +28% Oil +10 %

16. Net energy import Multi country runs P A N E u r o p e a n m o d el Net imports increase 89 % on overall with: Natural gas increasing from 5563 PJ to 18519 PJ Oil increasing from 15988 PJ to 32067 PJ Coal increasing from 6765 PJ to 10992 PJ

17. Net electricity generation Multi country runs (source: IER) P A N E u r o p e a n m o d el Net electricity production increase: 59 % (net installed capacity in 2050 of 1360 GW). The technology share in 2050 is: Natural gas 22 % (with an increasing contribution of gas fuelled CHPs) Coal+ lignite 26 % Oil 1% Nuclear 28 % Hydro 14% Wind 5% Other renewables4%

18. Final energy consumption – All sectors Multi country runs P A N E u r o p e a n m o d el There is a 36% increase on the full time horizon (from 46997 PJ to 64124 PJ) with an increase of: RPPs + 8% Natural gas +18% Electricity +62% Coal +162% Renewable +116%

19. Final energy consumption - Industry Multi country runs P A N E u r o p e a n m o d el Coal is the most used fuel, its share increases from 17% to 36% Electricity use increases from 28 % to 30% Waste share in 2050 is about 2%

20. Final energy consumption Residential Multi country runs P A N E u r o p e a n m o d el There is a 15% increase on the full time horizon (from 12052 PJ to 13809 PJ) with an increase of: Renewable +62% (representing 14% of households consumption in 2050) Electricity use +42% (representing 26% of households consumption in 2050) Natural gas +20% (representing 39% of households consumption in 2050) RPPs (Oil) - 21% (representing 14% of households consumption in 2050)

21. Final energy consumption - Transport Multi country runs P A N E u r o p e a n m o d el Transport consumption on the full time horizon increase 26%, oil products representing more than the 90% of consumption. Gas consumption is negligible at year 2000 becoming 312 PJ in 2050 (2%), whereas Methanol and Hydrogen (Others), are being used from 2010 and their contribution in 2050 accounts for 1% of the transport energy demand.

22. Total CO2 emission Multi country runs P A N E u r o p e a n m o d el Carbon dioxide CO2 emissions increase 29% on overall. In 2050 the contribution of the different sectors is: Conversion 26% (+7%) Industry 34% (+88%) Transport 23% (+14%), Households 17% (+ 11%)

23. A country model: The Italian case study

24. BAU scenario assumptions: Italy SUPPLY  No nuclear power plants will be installed according to the outcomes of 1987 national abrogative referendum  PV target: 1000 MW of new plants within 2015 (Ministerial Decree of 6 February 2006) RES potential for 2008-2012 according to the Italian White Paper:  Wind on-shore: 2 500 MW  Mini-hydroelectric power plants: 3 000 MW  Geothermal: 800 MW  Waste: 800 MW DEMAND  Transport sector: implementation of the national consumption of biofuels and other renewable fuels as follows (D.Lgs.128/2005): 1.0 % within 2005 2.5 % within 2010  Residential sector: set up of 3 000 000 m 2 of solar collectors within 2010 (according to the White Paper) ItalyItaly A country model

25. Primary energy consumption On the full time horizon the total increase of consumption is about 21% (oil decrease -13%) with the following share in 2050: Natural gas 41% Oil 36% Coal+14% Other renewables 7% in 2050) Electricity 2% ItalyItaly A country model

26. Net energy import A country model Large dependence by Natural gas, Coal and Oil imports. On the overall time horizon: Coal import increase + 97% Gas import increase + 74% Oil import decrease - 4% ItalyItaly

27. Fuel consumption - All sectors ItalyItaly A country model There is a 37% increase on the full time horizon (from 5698 to 7784 PJ) with an increase of: Natural gas +47% (representing 32% of consumption in 2050) Electricity use +39% (representing 18% of consumption in 2050) RPPs+ 7% (representing 32% of consumption in 2050) Heat, Coal and Renewables increase more than 100% representing respectively 7%, 6%, 2% of final energy consumption in 2050. Methanol and Hydrogen accounts for 1% of FEC in 2050.

28. Enhancement of endogenous resources: the Italy case study The scenarios: GAS30: 30% reduction of natural gas import in 2010 and 2050 OIL20: 20% reduction of oil products import in 2010 and 2050 OIL15_GAS20: 15% reduction of oil products import and 20% reduction of gas in 2010 and 2050 DAMAGE: damage costs on local pollutant emissions and CO2 (provisional values, to be revised) Damage factors were applied to emissions from combustion already included in the model

29. Damage costs References: *Holland M. & P. Watkiss. BeTa – Benefits Table database: Estimates of the marginal external costs of air pollution in Europe. Version E1.02a. Created for European Commission DG Environment by netcen, 1999 (http://europa.eu.int/comm/envir onment/enveco/air/betaec02a.pdf)http://europa.eu.int/comm/envir onment/enveco/air/betaec02a.pdf ** ExternE Exernalities of Energy Methodology 2005 Update Edited by P. Bickel and R. Friedrich Published by Directorate General for Reserach Sustainable Energy Systems, EUR 21951, ISBN 92-79- 00423-9 (2005) Damage costs (Euro/ton pollutant) NOX*TSP*SO2*VOC* CO2 ** Values from literature 71001200050002800 19 Damage costs (Euro/ton pollutant) NOX 1 PM10 1 SO2 1 VOC 1 CO2 2 Italy case study1600097000180003500 139 Source: 1 D. Van Regemorter- Internal working paper 2 Hamacher T., et al. Fusion Engineering and Design. Issue 56-57 pp 95.103, 2001.

30. Trade-off curve: Natural gas -10% Import of gas -20% -30% increase of the total discounted system cost: 1% Natural gas cost: 3.84 kEuro/PJ (2005)

31. Trade off curves: oil -10% Import of oil -20% 7% increase of the total discounted system cost Oil cost: 6.51 kEuro/PJ (2005)

32. Primary energy consumption by scenario Natural gas Oil Renewable - Natural gas consumption increases in OIL20 and Damage - Oil is substituted by natural gas when damage costs are considered - Renewable (including waste) consumption increase when fossil fuels use is constrained (OIL15_GAS20 scenario) Natural gas

33. Net imports by scenario Natural gas Oil - natural gas import increases in OIL_20 and DAMAGE - the introduction of damage factor determines a reduction of oil import but seems to have no effect on gas imports

34. Emissions PM10 emissions CO 2 emissions - PM10 emissions decrease considering the damage factors (DAMAGE scenario) - CO2 emissions decrease only decreasing the fossil fuel consumptions (OIL15_GAS20 scenario) The optimisation of consumption in the BAU scenario allows decreasing both the emissions of PM10 and CO2.

35. Conclusions The results shown are far from providing unquestionable solutions but should be regarded as a first step toward the implementation of the integration process, pointing out the main problems to be faced with. It is necessary to:  consider different scenarios of fossil fuels prices evolution.  examine in more details the different sectors, providing a quite large portfolio of technologies by sectors to obtain cost- effective solutions.  agree on data and assumptions, among the different methodologies, in order to set up interchangeable harmonized sets of data and produce coherent results  Perform a sensitivity analysis of results. Social acceptability is a fundamental parameter that should be considered for deriving and implementing the policy measures.

36. Conclusions The NEEDS – TIMES modeling framework constitutes a powerful tool for comprehensive quantitative analyses and modeling internalization strategies, that allows to integrate into an unique modeling platform inputs coming from other methodologies (in particular LCA and ExternE) and is suited to support the formulation of long-term energy, environmental and economic policies both at national and Pan-European level. It is nevertheless necessary to harmonize the data input and outputs among the different methodologies in order to perform convergent iterative evaluation that could improve the response of each of them. The nature of models, the large uncertainties of the data and the changing boundary conditions lead to a continuous update of data and software, so that the results should be even regarded as the “best possible” with the available data and the considered boundary conditions.

37. Work in progress …… Revision of the assumptions regarding technology characterisation and damage costs Statistical comparison of country results – BAU Scenario (Multivariate Data Analysis techniques are being applied, cluster analysis is in progress) Integration of updated generalised damage factors and LCA data in the Pan EU model Scenario analysis at Pan EU level with focus on key energy-environmental policy issues Thank you for your attention!

38. Additional slides

39. The scenarios: final configuration 1.Reference BAU Scenario (Baseline) which basic assumptions were adapted to the latest DGTREN projections. For nuclear the country decisions have been implemented. 2.Post-Kyoto climate policy to stabilize CO2 concentrations below 450 ppmv following the EU COM (2007)2 (one scenario without variants) with the Kyoto climate policy implemented. 3.Enhancement of endogenous energy resources, (constraining imports of fossil fuels to foster the use of renewables, efficiency standards and new nuclear) 4.Improvement of environmental quality by indigenizing externalities related to local air pollution (i.e., w/o global externalities)

40. Scenario variants Two variants could be investigated: A crisis scenario under moderate economic growth and pessimistic technological change assumptions to check for robust but conservative technological options. A case of improved environmental quality by endogenizing externalities related to local air pollution and global externalities to assess synergies.

41. Electricity generation capacity Multi country runs P A N E u r o p e a n m o d el

42. Fuel input - electricity generation Multi country runs P A N E u r o p e a n m o d el

43. Final energy consumption - Commercial Multi country runs P A N E u r o p e a n m o d el

44. Final energy consumption in agriculture Multi country runs P A N E u r o p e a n m o d el