CLIMATE CHANGE MITIGATION ANALYSES ENERGY SECTOR...CLIMATE CHANGE MITIGATION ANALYSES ENERGY SECTOR...

Ministry of Environment and Physical Planning The Government of the Republic of Macedonia

CLIMATE CHANGE MITIGATION ANALYSES

ENERGY SECTOR

THIRD NATIONAL COMMUNICATION TO UNFCCC

Draft Report – Working version

Reasearch Center for Energy, Informatics and Materials, Macedonia Academy of Sciences and Arts

(ICEIM-MANU)

30 August, 2013

II

This document presents the climate change mitigation potential in the energy sector and further proposes

mitigation measures and estimates their feasibility, CO2 reduction and possible co-benefits. This document

provides important guidance for policy-makers in developing adaptation strategies and further strengthens

the dialogue, information exchange and cooperation among all the relevant stakeholders including

governmental, non-governmental, academic, and private sectors.

This paper has been produced with the technical support of the United Nations Development Programme

and financial support by Global Environment Facility.

IV

TABLE OF CONTENTS

EXECUTIVE SUMMARY 1

1. INTRODUCTION 2

2. BASELINE SCENARIO 5

2.1. DEMAND PROJECTIONS 5

2.2. FINAL ENERGY CONSUMPTION 6

2.3. POWER SECTOR – INSTALLED CAPACITY AND OUTPUT 8

2.4. PRIMARY ENERGY SUPPLY 11

2.5. CO2 EMISSIONS 12

2.6. SUMMARY 13

3. MITIGATION SCENARIOS 15

3.1. GROUP 1: EU MITIGATION SCENARIOS 15

3.1.1. FINAL ENERGY CONSUMPTION 16

3.1.2. POWER SECTOR – INSTALLED CAPACITY AND OUTPUT 16

3.1.3. PRIMARY ENERGY SUPPLY 17

3.1.4. TOTAL SYSTEM COSTS 17

3.1.5. CO2 EMISSIONS 18

3.1.6. SUMMARY 19

3.2. GROUP 2: QERLC MITIGATION SCEANRIOS 20





V


3.2.6. SUMMARY 24

3.3. GROUP 3: BAU DEVIATION MITIGATION SCENARIOS 25






3.3.6. SUMMARY 30

3.4. COMPARATIVE ASSESSMENT 30

4. CLIMATE CHANGE MITIGATION ACTION PLAN 31

APPENDIX I: DATA SOURCES AND KEY ASSUMPTIONS 32

APPENDIX II: METHODOLOGY – MARKAL MODEL DESCRIPTION 38

VI

List of Figures

Figure 1. Climate Change Mitigation Workflow ............................................................................................... 3

Figure 2. Electricity Load Profile ........................................................................................................................... 6

Figure 3. Final Energy Consumption by Fuel Type under Baseline Scenario (ktoe) ................................. 7

Figure 4. Final Energy Consumption by Sector under Baseline scenario (ktoe) ....................................... 8

Figure 5. Installed Capacity of Existing and New Build Power Plants under Baseline Scenario (MW) 9

Figure 6. Total Investment Cost of New Power Plants and Gas Pipe line under Baseline Scenario

(MEuros) ................................................................................................................................................................... 10

Figure 7. Electricity Generation and Import under Baseline Scenario (GWh) ........................................ 11

Figure 8. Primary Energy Supply under Baseline Scenario (ktoe) ............................................................... 12

Figure 9. CO2 Emissions under Baseline Scenario (kt) .................................................................................. 13

Figure 10. Definition of EU mitigation scenarios ............................................................................................. 15

Figure 11. Final Energy Consumption by Fuel Type under EU mitigation scenarios (ktoe) ................ 16

Figure 12. Installed Capacity of Existing and New Build Power Plants under EU mitigation scenarios

(MW) ......................................................................................................................................................................... 16

Figure 13. Electricity Generation and Import under EU mitigation scenarios (GWh) ......................... 17

Figure 14. Primary Energy Supply under EU mitigation scenarios (ktoe) ................................................ 17

Figure 15. Total system costs for the Baseline scenario and EU mitigation scenarios (2012Meuros)18

Figure 16. CO2 Emissions by sectors under EU mitigation scenarios (kt) ................................................ 18

Figure 17. Total CO2 Emissions under Baseline scenario and EU mitigation scenarios (kt) ................ 19

Figure 18. Definition of QERLC mitigation scenarios .................................................................................... 20

Figure 19. Final Energy Consumption by Fuel Type under QERLC mitigation scenarios (ktoe) ........ 21

Figure 20. Installed Capacity of Existing and New Build Power Plants under QERLC mitigation

scenarios (MW) ....................................................................................................................................................... 21

Figure 21. Electricity Generation and Import under QERLC mitigation scenarios (GWh) ................. 22

Figure 22. Total system costs for the Baseline scenario and QERLC mitigation scenarios

(2012Meuros) .......................................................................................................................................................... 22

Figure 23. Primary Energy Supply under QERLC mitigation scenarios (ktoe) ......................................... 23

Figure 24. CO2 Emissions by sectors under the QERLC mitigation scenarios (kt) ................................ 23

VII

Figure 25. Total CO2 Emissions under Baseline scenario and QERLC mitigation scenarios (kt) ....... 24

Figure 26. Definition of BAU Deviation Mitigation Scenarios ...................................................................... 25

Figure 27. Final Energy Consumption by Fuel Type under BAU Deviation Mitigation Scenarios (ktoe)

..................................................................................................................................................................................... 26

Figure 28. Installed Capacity of Existing and New Build Power Plants under BAU Deviation Mitigation

Scenarios (MW) ...................................................................................................................................................... 26

Figure 29. Electricity Generation and Import under BAU Deviation Mitigation Scenarios (GWh) ... 27

Figure 30. Primary Energy Supply under BAU Deviation Mitigation Scenarios (ktoe) ........................... 28

Figure 31. Total System Costs under Baseline and BAU Deviation Mitigation Scenarios (2012 M

Euros) ........................................................................................................................................................................ 28

Figure 32. CO2 Emissions under BAU Deviation Mitigation Scenarios (kt) ............................................. 29

Figure 33. Total CO2 Emissions under Baseline and BAU Deviation Mitigation Scenarios (kt) .......... 29

Figure 34. MARKAL Building Blocks .................................................................................................................. 38

VIII

List of Tables

Table 1. Key Demand Drivers in Baseline Scenario ......................................................................................... 5

Table 2. Additional Power Plant Capacity by Fuel Type under Baseline Scenario (MW) ....................... 9

Table 3. CO2 Emissions by Sectors under Baseline Scenario (kt) .............................................................. 13

Table 4. Key Indicators for Baseline Scenario ................................................................................................. 13

Table 5. Definition of EU mitigation scenarios ................................................................................................ 15

Table 6. Key Indicators for the Baseline Scenario and EU mitigation scenarios ..................................... 19

Table 7. Definition of QERLC Mitigation Scenarios ....................................................................................... 20

Table 8. Key Indicators for the QERLC mitigation scenarios ...................................................................... 24

Table 9. Definition of BAU Deviation Mitigation Scenarios ......................................................................... 25

Table 10. Investment Costs under BAU Deviation Mitigation Scenarios (MEuros) ............................... 26

Table 11. Total CO2 Emissions under Baseline and BAU Deviation Mitigation Scenarios (kt) ........... 29

Table 12. Key Indicators for BAU Deviation Mitigation Scenarios ............................................................. 30

Table 13. Key Data Sources ................................................................................................................................. 32

Table 14. Existing Power plants .......................................................................................................................... 33

Table 15. Characterization of Key Power Plant Options ............................................................................. 34

Table 16. Investment costs for revitalization of TPP Bitola.......................................................................... 35

Table 17. Investment costs for revitalization of TPP Oslomej .................................................................... 35

Table 18. Key Constraints in the Baseline Scenario ....................................................................................... 36

Table 19. Energy Price Trajectory Assumptions (Euro/GJ) .......................................................................... 36

ACRONYMS

{The list will be updated accordingly}

ICEIM-MANU Research Center for Energy, Informatics and Materials Macedonian Academy of Sciences and Arts

MARKAL MARKet ALlocation

EE Energy efficiency

TPP Thermal power plant

HPP Hydro power plant

CO2 Carbon dioxide

FiT Feed in tariff

RES Renewable energy source

PV Photovoltaic

CHP Combined heat and power

WEO World Energy Outlook

O&M Operation and maintenance

GHG Greenhouse gases

HH Household

NR Non-residential

UNITS

MW Megawatt

GW Gigawatt

MWh Megawatt hour

GWh Gigawatt hour

GJ Gigajoule

MEuro Million Euros

t tonne

kt kilotonne

Mt Mega (Million) tonne

ktoe thousand tons of oil equivalent

1

EXECUTIVE SUMMARY

2

1. INTRODUCTION

This assignment is a part of the project “Third National Communication (TNC) to the United Nations

Framework Convention on Climate Change (UNFCCC), implemented by UNDP and the Ministry of

Environment and Physical Planning (MoEPP), with the aim to strengthen the information base,

analytical and institutional capacity of the key national institutions to integrate climate change

priorities into country development strategies and relevant sector programs.

Climate Change Mitigation is one of the key thematic areas of the TNC which is built upon the

respective analyses conducted under Second National Communication, but also is accountable for

the developments meanwhile, particularly for the specific position of the Republic of Macedonia

(RM) under UNFCCC and (European Union) EU candidate status. In case that RM enters EU by 2020,

it will also start implementing EU mitigation policies and measures, such as increase of share of

renewables, participation in emissions trading system, obligatory buildings and equipment standards,

labelling and certification of equipment and buildings, phasing out of inefficient technologies as

incandescent light bulbs and retiring or obligatory retrofitting of inefficient plants. The sum of the

measures, together with EU effort sharing scheme, will allow for achieving necessary emission

reduction. In case that RM does not enter EU by 2020, it will still continue to participate in Energy

Community, with similar targets in renewables, energy efficiency and phasing out of inefficient

plants. The country will probably choose to continue transposition of other directives, but with

slower pace. It will then have choice between joining Annex I and offering Quantified Emission

Limitation or Reduction Commitment (QELRC) type of target, or to stay in the position of developing

non-Annex I country and offer target in form of baseline deviation. In all cases similar type of policies

and measures will be implemented, but with different speed and intensity.

Accordingly, the mitigation analysis under TNC addresses the following questions:

What the country can expect in terms of possible greenhouse gases (GHG) emissions

limitation/reduction targets in view of the ongoing UNFCCC negotiations about future

climate regime and of the EU candidate status?

What measures/activities can be undertaken in order to achieve the GHG emissions

limitation/reduction?

How costly would be the different levels of ambition for GHG emissions

limitation/reduction?

3

What is the mitigation potential of non-energy sectors?

How to involve as many as possible relevant stakeholders and set the priorities applying

participatory approach?

How to diffuse the climate change mitigation in the relevant sectoral policies and ensure

joint and cooperative action?

Answering of these questions has required involvement of different performers, with specific roles

and assignments, but acting in partnership with one another. The organization of work with the

main performers and outcomes is schematically presented in Figure 1.

Figure 1. Climate Change Mitigation Workflow

4

Besides an intensive analytical work within and across different sectors, the mitigation analysis has

also included participatory work with a number of relevant stakeholders, particularly when it has

come to evaluation and prioritization of the measures in the mitigation action plans. Moreover, not

less important is the capacity building and knowledge transfer component realized through

engagement of chief technical advisor, international expert and expert support for the modeling

work in non-energy sectors.

This report presents the work of the Research Center for Energy, Informatics and Materials of the

Macedonian Academy of Sciences and Arts (ICEIM-MANU) who has been assigned a task to conduct

a comprehensive assessment of climate change mitigation potential of the national energy sector by

making use of MARKAL energy system model (MARKAL modelling task). Important to note is that

“national energy sector” should be considered in a wider sense, since the MARKAL model covers the

emissions which are associated with fuel combustion, incorporating thus energy supply and demand

sectors - households, industry (fuel combustion emissions), transport, commercial and services and

agriculture (fuel combustion emissions).

Hence, ICEIM-MANU team has developed a baseline scenario and three groups of mitigation

scenarios until 2050, with emissions limitation/reduction targets as defined by the international

expert. The national mitigation scenarios have included measures and activities from the sectoral

portfolios delivered by the international expert, which can be applied and modelled in Macedonian

conditions. The work of ICEIM-MANU has also included a sensitivity analysis and a comparative

assessment of the economic aspects of different types and levels of emissions limitation/reduction

targets corresponding to different level of ambition of the national policies. At last, based on the

analytical results, the nationally appropriate mitigation measures and actions are summarized in a

mitigation action plan for the energy sector.

As a final point, it should be emphasized that the findings of this study should have an indicative

character, to show “where we are and where to go” with regards to climate change mitigation.

Given the dynamics of relevant developments at national and at international level, as well as high

level of uncertainties associated with the UNFCCC process and the EU accession, this should be

rather seen as a building of analytical capacities in the country to generate a solid base for well-

informed and wise policy-making and for devising the national position in the international and

European negotiation processes.

5

2. BASELINE SCENARIO

{The numbers in text will be updated according to the latest results}

To assess the impact of different climate change mitigation policies and programs on the evolution

of the energy system in Macedonia, a Baseline scenario was developed, taking into account specific

characteristics of the national energy system, such as existing technology stock, all possible new

technology options, resource availability and import options, and near-term policy interventions. For

this purpose all available national data sources (State Statistical Office, National energy balances,

etc.) as well as some international databases (e.g., International Energy Agency) were utilized. The

full list of information sources and key assumption for the Baseline scenario is provided in Appendix I.

2.1. DEMAND PROJECTIONS

The energy demand projections for the Baseline scenario over the considered planning horizon

(2011 – 2050) are based on the exogenous economic and demographic projections (drivers) and

assumptions regarding each service demand’s sensitivity to changes in the assumed driver. The

model must satisfy these demands in each time period, by using the existing capacity and/or by

implementing new capacity for end-use technologies. Table 1 provides key demand drivers, GDP and

population growth rates, for the Baseline scenario and how their changes reflect on the future

energy demands in all sectors by end-use services.

Table 1. Key Demand Drivers in Baseline Scenario

Category Assumption

GDP growth rate (annual average) 3.21% (2011-2029), 3.26% (2029-2050)

Sectoral growth rates*

Residential 1.58%

Commercial 2.30%

Industry 1.62%

Agriculture 2.80%

Population growth rate (annual average)

-0.24%

* Overall growth rate for useful energy based on projections for the different energy services in each sector,

during the period 2011 – 2050

6

Another key issue for development of the Baseline scenario is the electricity load profile of the

country, which is necessary to better allocate the seasonal energy demands. The electricity load

profile for 2012, which was used in the model is shown on Figure 2

Figure 2. Electricity Load Profile

2.2. FINAL ENERGY CONSUMPTION

Under the Baseline scenario, energy consumption is projected to grow by 30% in terms of final

energy by 2029, and by 80% till 2050. The most significant share in final energy consumption have

diesel and electricity use, as well as the natural gas, available through import (Figure 3). The diesel

consumption will increase in for almost 190% between 2011 and 2050, mainly due the increased

utilization in transport sector. The electricity consumption will slowly increase during the planning

period with overall growth of 28%. The coal consumption will also increase with overall growth of

128%, mainly in the industry. Gas consumption increases significantly, especially after 2030 mainly in

commercial and industrial sectors. The penetration in residential sector is limited, due to large

investment requirements in distribution infrastructure.

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Figure 3. Final Energy Consumption by Fuel Type under Baseline Scenario (ktoe)

*SOL-Solar; GEO – Geothermal; HFO – Heavy fuel oil; KER – Kerosene; AVF – Aviation fuel;

LPG - Liquefied petroleum gas

There is significant uncertainty around gas prices, which has an important impact on gas

consumption in future years. The current prices, used as the base price in the model, are projected

forward based on IEA WEO assumptions. However, current prices are very high due to the low levels

of import via the pipeline. If import levels were to increase (as predicted under the Baseline

scenario), the relative gas prices under the contract would decrease. The modeling of this issue

needs further consideration, having in mind the new connection of the country to the “South Stream”

gas pipeline.

The highest increase of the final energy consumption over the period 2011 -2050 (around 147%) can

be noticed in the transport and commercial sectors (Figure 4), followed by Industrial sector and

agriculture, while in the residential sector the final energy consumption will change relatively slowly.

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Oil (HFO, KER, AVF)

LPG

Heat

Gasoline

Gas

Electricity

Diesel

Coal

Bunker Fuel

Biomass

Biofuels

8

Figure 4. Final Energy Consumption by Sector under Baseline scenario (ktoe)

2.3. POWER SECTOR – INSTALLED CAPACITY AND OUTPUT

To address the electricity demand which is almost 30% of the total final consumption in 2029 and 25%

in 2050, certain investments in new generation capacities will take place. Total installed capacity

used for electricity generation during the period 2011 - 2050 is shown on Figure 5. By 2017 the

existing coal power plants will be revitalized to satisfy the requirements under the LCP Directive1 and

will be available for operation until 2032, at least the three units of TPP Bitola (with around 600 MW).

Existing gas-fired power plants will also be available until 2032 with total capacity of 290 MW, while

existing hydro power plant will available during the whole planning period with the same capacity of

579 MW.

1 Directive 2001/80/EC on the limitation of emissions of certain pollutants into the air from large combustion plants (the LCP Directive) (http://ec.europa.eu/environment/air/pollutants/stationary/lcp/legislation.htm)

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Agriculture

http://ec.europa.eu/environment/air/pollutants/stationary/lcp/legislation.htm

9

Figure 5. Installed Capacity of Existing and New Build Power Plants under Baseline Scenario (MW)

New power generation capacity additions between 2014 and 2050 are shown in Table 2. Coal power

plants remain one of the main producers of electricity with new installed capacity of 600MW

between 2032 and 2050. The other investments are in hydropower, with cumulative additional

capacity of 363 MW by 2050, or three new large hydro power plants (HPP Sv. Petka, HPP Boskov

Most and HPP Lukovo Pole) and small HPPs. Also, in 2035 two large and one small new gas power

plants will be built, with cumulative installed capacity of 565 MW. Incentivized by a feed-in tariffs,

wind and solar power plants also make an important contribution with 160 MW.

Table 2. Additional Power Plant Capacity by Fuel Type under Baseline Scenario (MW)

Plant Type 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050

Coal 0 0 0 0 200 500 500 700 700 700 700 700 700

Gas 0 0 130 130 130 130 130 790 920 920 920 920 920

Hydro 67 221 250 278 306 334 363 363 363 363 363 363 363

Wind 36 65 100 100 150 150 150 150 150 150 150 150 289

Solar 4 4 4 4 4 4 25 25 25 25 25 25 25

Total New Capacity

107 290 484 512 790 1118 1168 2028 2158 2158 2158 2158 2296

% of Installed Capacity

5.6% 15.3% 24.2% 25.2% 34.2% 42.4% 43.5% 77.8% 78.8% 78.8% 78.8% 78.8% 79.9%

Figure 6 shows the capital investment requirements associated with the new capacity added

in each three year period.

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New solar

New wind

New hydro PP

Existing hydro PP

Existing oil-fired PP

New gas-fired PP

Existing gas-fired PP

New coal PP

Existing coal PP

10

Figure 6. Total Investment Cost of New Power Plants and Gas Pipe line under Baseline Scenario (MEuros)

* Investment levels are not annual but cumulative for each three-year period

The investment expenditures for new power plants and devices are incurred as demand rises and

existing power plants and devices reach the end of their operational lifetimes. Under the Baseline

scenario, to add the 1852 MW of new generation capacity by 2050, a total investment of 3045 €

million is required including 8 € millions for new transmission and distribution networks. Significant

level of investment of around 1000 € million can be noticed in 2035 when the old power plant are

retired and new additional capacities (mainly gas-fired and coal PP) are built. Also, additional

investment in new gas pipeline of 156 € millions is needed.

From the generation output of the considered power plants (Figure 7), it can be noticed that the coal

PP dominate. The existing coal PP (only revitalized TPP Bitola) will work almost with the full capacity

until 2032. The existing gas power plant will be also utilized by 2032, but not with the full capacity,

because of the new coal power plants, starting in 2026, which are cheaper to operate than the

existing gas-fired CHPs with full capacity. In 2035, when the existing coal and gas-fired PP are retired,

the new gas-fired PP will take significant part in electricity generation by 2050, together with the new

coal power plant. The other generation capacities (hydro, wind and solar PP), will operate mostly

with full capacity. Also, a small amount of electricity import can be noticed, which remains almost at

the same level over the planning period.

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Distrib. losses red.

Gas Pipeline

T&D Lines

Solar PP

Wind PP

Hydro PP

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Coal PP

11

Figure 7. Electricity Generation and Import under Baseline Scenario (GWh)

2.4. PRIMARY ENERGY SUPPLY

Primary energy supply in 2029 is projected to be 2366 ktoe and 3821 ktoe in 2050, increasing from

2006 levels by 40% and 126%, respectively.

In addition to the significant growth in primary energy supply, the supply becomes more diverse. As

shown in Figure 8, the share of imported natural gas increases over the planning period, accounting

for 17% of total supply in 2029 and 30% in 2050. The growth in transport demand is reflected in the

consumption of oil products (imported) and crude oil, increasing their share in the primary energy

supply to 6% in 2029 and 8% in 2050 for oil products and 47% in 2029 and 33% in 2050 for crude oil.

The share of coal as primary energy source remains at the same level of 10% by 2029, but with the

construction of new coal power plants it will increase to 14% by 2050. The contribution of renewable

energy sources (excluding biomass) to total primary energy during this period grows from 8% in

2011 to 10% in 2029, and back to around 8% in 2050, but in absolute values the primary energy

supply from RES grows by 99% over the period 2011-2050. This is primarily due to additional wind

capacity in the power sector. The biomass contribution by 2029 is almost the same at around 10%,

even decreases in 2050 to 6%.

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12

Figure 8. Primary Energy Supply under Baseline Scenario (ktoe)

The total discounted system cost for realization of the Baseline Scenario is estimated to be 49418 €

millions.

2.5. CO2 EMISSIONS

CO2 emissions are projected to change from 9.5 Mt in 2011 to 12 Mt in 2029 and 2050, or by 29%,

with predominant share of power generation (Figure 9). The decrease in 2035 is a result of the

retirement of the existing coal and gas power plant units. The emissions will rise again when new

coal power plants enter into the system (in 2035). Also, a significant growth of the CO2 emission

form the other sectors can be noticed, particularly from transport and commercial sectors. As a

result of the growing number of vehicle fleet and increased consumption of petroleum products the

CO2 emissions from transport will increase for more than 100%. The increased emissions from

commercial sector are mainly because of the increased utilization of gas in this sector.

The CO2 emissions from all energy sectors are given in Table 3.

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Oil Products

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Geothermal

Electricity

Crude Oil

Coal

Biomass

13

Figure 9. CO2 Emissions under Baseline Scenario (kt)

Table 3. CO2 Emissions by Sectors under Baseline Scenario (kt)

2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050

Agriculture 75 46 49 52 56 60 65 70 75 80 85 89 94 99

Commercial 165 342 228 240 256 271 288 305 327 352 384 425 476 540

Industry 1346 1245 1261 1332 1414 1497 1582 1659 1724 1811 1898 1981 2092 2192

Power Sector 6327 7043 7069 6518 6549 7704 9141 9348 6624 6841 7040 7230 7325 7310

Residential 145 144 146 153 163 179 216 260 307 339 378 410 474 543

Transport 1424 1490 1546 1754 1904 2064 2259 2475 2655 2863 3052 3241 3355 3482

Total 9481 10311 10298 10049 10343 11774 13550 14118 11712 12286 12837 13376 13816 14166

2.6. SUMMARY

Table 4. Key Indicators for Baseline Scenario

Indicator 2011 2032 2050

Annual Growth

Rate 2011 - 2032 (%)

Annual Growth

Rate 2011 - 2050 (%)

Overall Growth 2011 -

2032 (%)

Overall Growth 2011 -

2050 (%)

Final Energy Consumption (ktoe) 1863 2758 3754 1.89% 1.81% 48.07% 101.55%

Power Plant Capacity (MW) 1838 2687 2875 1.82% 1.15% 46.17% 56.43%

Electricity Generation & Import (GWh)

8870 11945 14980 1.43% 1.35% 34.67% 68.88%

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Year

Transport

Residential

Power Sector

Industry

Commercial

Agriculture

14

Primary Energy Supply (ktoe) 1691 2525 4529 1.93% 2.56% 49.33% 167.81%

CO2 Emissions (kt) 9481 14118 14166 1.91% 1.03% 48.90% 49.41%

The highest increase of the final energy consumption is in the transport and commercial sectors.

Diesel and electricity have the largest share in the final energy consumption over the entire planning period. After 2035 the natural gas and coal have increasing share due to increased demand of these fuels in commercial and industry sectors.

The existing coal power plants will be revitalized and will operate until 2032.

The existing gas-fired power plants will be operate until 2032, although not always in full capacity.

After 2030, new capacities based on coal (603 MW) and on gas (565 MW) will be installed in the power system.

Until 2050, total 363 MW of new hydro capacity will enter the power system, (three large hydro power plants - HPP Sv. Petka, HPP Boskov Most and HPP Lukovo Pole and incentivized small HPPs).

Until 2050, total 160 MW of incentivized wind and solar capacities will enter the power system (currently this is the maximal capacity to be supported with feed-in tariffs).

A total investment of 3045 € million is required for the additional 1690 MW of new generation capacities by 2050, including 8 € millions for new transmission and distribution networks.

Additional investment in new gas pipeline of 156 € millions is needed.

Primary energy supply becomes more diverse with increased share of natural gas, crude oil and oil products and renewable energy sources.

{New bullets will be added relevant for transport sector and/or other demand side technologies}

The level of CO2 emissions will grow by 29%, with predominant share of power generation.

15

3. MITIGATION SCENARIOS

3.1. GROUP 1: EU MITIGATION SCENARIOS

Table 5. Definition of EU mitigation scenarios

2020 2030 2040 2050

EU_Low

0%

-20% -30% -40%

EU_Medium -30% -45% -60%

EU_High -40% -60% -80%

Figure 10. Definition of EU mitigation scenarios

16

3.1.1. FINAL ENERGY CONSUMPTION

Figure 11. Final Energy Consumption by Fuel Type under EU mitigation scenarios (ktoe)



3.1.2. POWER SECTOR – INSTALLED CAPACITY AND OUTPUT

Figure 12. Installed Capacity of Existing and New Build Power Plants under EU mitigation scenarios (MW)

17

Figure 13. Electricity Generation and Import under EU mitigation scenarios (GWh)

3.1.3. PRIMARY ENERGY SUPPLY

Figure 14. Primary Energy Supply under EU mitigation scenarios (ktoe)

3.1.4. TOTAL SYSTEM COSTS

18

Figure 15. Total system costs for the Baseline scenario and EU mitigation scenarios (2012Meuros)

3.1.5. CO2 EMISSIONS

Figure 16. CO2 Emissions by sectors under EU mitigation scenarios (kt)

19

Figure 17. Total CO2 Emissions under Baseline scenario and EU mitigation scenarios (kt)

3.1.6. SUMMARY

Table 6. Key Indicators for the Baseline Scenario and EU mitigation scenarios

Indicator Baseline EU_Low EU_Medium EU-High

Apsolute difference

Relative difference

Apsolute difference

Relative difference

Apsolute difference

Relative difference

Total Discounted System Costs (20012M€)

51,181 51,725 544 1.1% 52,243 1,063 2.1% 52,487 1,307 2.6%

Final Energy Consumption (ktoe)

113,101 112,043 -1,057 -0.9% 111,088 -2,013 -1.8% 108,857 -4,244 -3.8%

Power Plant Capacity (MW)

33,738 31,019 -2,719 -8.1% 30,852 -2,887 -8.6% 33,330 -408 -1.2%


489,919 458,764 -31,156 -6.4% 460,187 -29,733 -6.1% 469,332 -20,587 -4.2%

Primary Energy Supply (ktoe)

125,198 134,595 9,397 7.5% 132,140 6,942 5.5% 132,454 7,256 5.8%

CO2 Emissions (kt)

504,354 302,613 -201,741 -40.0% 269,871 -234,483 -46.5% 234,929 -269,425 -53.4%

20

3.2. GROUP 2: QERLC MITIGATION SCEANRIOS

Table 7. Definition of QERLC Mitigation Scenarios

2021-28 2029-36 2037-44 2045-52 QERLC _Low +20% +10% 0% -10% QERLC _MediumLow +10% 0% -10% -20% QERLC _Medium 0% -10% -20% -30% QERLC _MediumHigh -10% -20% -30% -40% QERLC _High -20% -30% -40% -50%

Figure 18. Definition of QERLC mitigation scenarios

21


Figure 19. Final Energy Consumption by Fuel Type under QERLC mitigation scenarios (ktoe)




Figure 20. Installed Capacity of Existing and New Build Power Plants under QERLC mitigation scenarios (MW)

22

Figure 21. Electricity Generation and Import under QERLC mitigation scenarios (GWh)


Figure 22. Total system costs for the Baseline scenario and QERLC mitigation scenarios (2012Meuros)

23


Figure 23. Primary Energy Supply under QERLC mitigation scenarios (ktoe)


Figure 24. CO2 Emissions by sectors under the QERLC mitigation scenarios (kt)

24

Figure 25. Total CO2 Emissions under Baseline scenario and QERLC mitigation scenarios (kt)

3.2.6. SUMMARY

Table 8. Key Indicators for the QERLC mitigation scenarios

Indicator Baseline BAU-Low BAU-Medium BAU-High

Apsolute difference

Relative difference

Apsolute difference

Relative difference

Apsolute difference

Relative difference


51,181 51,338 157 0.3% 51,521 341 0.7% 52,092 911 1.8%


113,101 112,774 -327 -0.3% 112,434 -667 -0.6% 111,677 -1,424 -1.3%


33,738 31,415 -2,323 -6.9% 33,330 -408 -1.2% 33,330 -408 -1.2%


489,919 458,764 -31,156 -6.4% 469,332 -20,587 -4.2% 469,332 -20,587 -4.2%


125,198 141,572 16,373 13.1% 137,455 12,257 9.8% 132,267 7,069 5.6%

CO2 Emissions (kt)

504,354 345,878 -158,476 -31.4% 320,961 -183,393 -36.4% 285,950 -218,404 -43.3%

25

3.3. GROUP 3: BAU DEVIATION MITIGATION SCENARIOS

Table 9. Definition of BAU Deviation Mitigation Scenarios

Group 3 scenarios 2020 2028 2036 2044 2052

BAUdev_Low -10% -15% -20% -25% -30%

BAUdev_Medium -15% -20% -25% -30% -35%

BAUdev_High -20% -30% -40% -50% -60%

Figure 26. Definition of BAU Deviation Mitigation Scenarios


0

2000

4000

6000

8000

10000

12000

14000

16000

2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050

kt

Year

Baseline

BAUdev_Low

BAUdev_Medium

BAUdev_High

26

Figure 27. Final Energy Consumption by Fuel Type under BAU Deviation Mitigation Scenarios (ktoe)


Figure 28. Installed Capacity of Existing and New Build Power Plants under BAU Deviation Mitigation Scenarios (MW)

Table 10. Investment Costs under BAU Deviation Mitigation Scenarios (MEuros)

2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050

BAUdev_Low

New PP 112 270 690 187 125 289 579 510 300 329 25 173 940

T&D Lines 56 1 1 0 9 3 2 4 2 4 3 2 1

Gas Pipeline 0 0 126 34 19 17 10 68 21 46 31 25 119

0

500

1000

1500

2000

2500

3000

3500

4000

4500

LOW MED HIGH LOW MED HIGH LOW MED HIGH LOW MED HIGH LOW MED HIGH

2011 2020 2032 2041 2050

kto

e

Year

Renewables (SOL, GEO)

Oil (HFO, KER, AVF)

LPG

Heat

Gasoline

Gas

Electricity

Diesel

Coal

Bunker Fuel

Biomass

Biofuels

0

500

1000

1500

2000

2500

3000

3500


2011 2020 2032 2041 2050

MW

Year

New solar

New wind

New hydro PP

Existing hydro PP

Existing oil-fired PP

New gas-fired PP


New coal PP

Existing coal PP

27


27 31 36 37 32 32 32 0 0 0 0 0 32

Total Investment

195 301 853 257 185 341 622 582 323 379 59 201 1092

BAUdev_Medium

New PP 112 270 777 45 273 593 411 510 164 329 25 173 935

T&D Lines 56 3 0 4 3 3 2 3 2 4 3 3 1

Gas Pipeline 0 0 135 18 12 10 19 67 25 43 21 0 75


27 31 36 37 32 32 32 0 0 0 0 0 32

Total Investment

195 304 948 105 320 638 463 580 192 376 49 176 1044

BAUdev_High

New PP 112 270 832 45 125 289 623 736 650 787 131 173 966

T&D Lines 56 10 0 0 1 3 1 2 2 3 3 3 3

Gas Pipeline 0 0 140 19 19 16 4 0 0 0 0 0 0


27 31 36 37 32 32 32 0 32 0 32 0 0

Total Investment

195 311 1008 101 177 340 661 737 684 791 166 177 968

Figure 29. Electricity Generation and Import under BAU Deviation Mitigation Scenarios (GWh)


0

2000

4000

6000

8000

10000

12000

14000

16000


2011 2020 2032 2041 2050

GW

h

Year

Import

New solar

New wind

New hydro PP

Existing hydro PP

New gas-fired PP


New coal PP

Existing coal PP

28

Figure 30. Primary Energy Supply under BAU Deviation Mitigation Scenarios (ktoe)


Figure 31. Total System Costs under Baseline and BAU Deviation Mitigation Scenarios (2012 M Euros)

0

1000

2000

3000

4000

5000

6000


2011 2020 2032 2041 2050

kto

e

Year

Renewables(Sol,Wind,Hydro)

Oil Products

Natural gas

Geothermal

Electricity

Crude Oil

Coal

Biomass

50000

50500

51000

51500

52000

52500

53000

Baseline BAUdev_Low BAUdev_Medium BAUdev_High

20

12

MEu

ros

Scenario

29


Figure 32. CO2 Emissions under BAU Deviation Mitigation Scenarios (kt)

Table 11. Total CO2 Emissions under Baseline and BAU Deviation Mitigation Scenarios (kt)

Scenario 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050

Baseline 9481 10311 10298 10049 10343 11774 13550 14118 11712 12286 12837 13376 13816 14166

BAUdev_Low 9453 9564 9280 5693 6193 6521 6910 7266 8033 8453 9032 9494 9929 10020

BAUdev_Medium 9453 9400 8888 5757 6143 6430 6769 7189 7953 8407 8962 9363 9339 9316

BAUdev_High 9453 9267 8576 5794 6188 6506 6869 7197 7383 7029 6858 6688 6326 5964

Figure 33. Total CO2 Emissions under Baseline and BAU Deviation Mitigation Scenarios (kt)

0

2000

4000

6000

8000

10000

12000


2011 2020 2032 2041 2050

kt

Year

Transport

Residential

Power Sector

Industry

Commercial

Agriculture

0

2000

4000

6000

8000

10000

12000

14000

16000

2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050

kt

Year

Baseline

BAUdev_Low

BAUdev_Medium

BAUdev_High

30

3.3.6. SUMMARY

Table 12. Key Indicators for BAU Deviation Mitigation Scenarios

Indicator Baseline BAUdev_Low BAUdev_Medium BAUdev_High

Apsolute difference

Relative difference

Apsolute difference

Relative difference

Apsolute difference

Relative difference


51,181 51,550 369 0.7% 51,809 628 1.2% 52,945 1,764 3.4%


113,101 112,765 -336 -0.3% 112,657 -444 -0.4% 111,977 -1,124 -1.0%


33,738 31,415 -2,323 -6.9% 30,852 -2,887 -8.6% 33,330 -408 -1.2%


489,919 458,764 -31,156 -6.4% 460,187 -29,733 -6.1% 469,332 -20,587 -4.2%


125,198 141,260 16,062 12.8% 139,805 14,607 11.7% 133,599 8,401 6.7%

CO2 Emissions (kt)

504,354 347,519 -156,835 -31.1% 340,113 -164,240 -32.6% 300,290 -204,064 -40.5%

3.4. COMPARATIVE ASSESSMENT

31

4. CLIMATE CHANGE MITIGATION ACTION PLAN

32

APPENDIX I: DATA SOURCES AND KEY ASSUMPTIONS

The analysis for Macedonia’s energy sector is based on numerous data inputs and assumptions,

therefore requires a set of key national data sources. For Macedonia, the sources of this information

are listed by data requirement in Table 13 below.

Table 13. Key Data Sources

Data Requirement Source

2011 Energy Balance National Energy Balances (from the State Statistical Office2 and the Ministry

of Economy3)

Domestic Energy Prices Energy Regulatory Commission4 (Annual report for 2011)

Resource Potential, including imports/exports

Strategy for Energy Development of the Republic of Macedonia until 20305

Strategy for Utilisation of Renewable Energy Sources in the Republic of

Macedonia by 20206

Program for Realization of the Energy Development Strategy in the Republic of Macedonia for the Period 2013 - 2017

Installed capacity and characterization of existing electricity and CHP plants

Annual Report for 2011 of the JSC Macedonian Power Plants - AD ELEM - for the electricity generation capacities (www.elem.com.mk)

Reports of TE-TO AD Skopje (www.te-to.com.mk)

Load Profile Demand curves for 2012 from the Electricity Transmission System Operator of Macedonia - AD MEPSO (www.mepso.com.mk)

Fuel prices projections World Energy Outlook (WEO) 2011 (provided by World Bank)

In the model there are two types of technologies, existing and new. The basic parameters of the

existing electricity and heat generation plants are given in Table 14. All data in this table are taken

from the relevant institutions mentioned in the Table 13.

2 http://www.stat.gov.mk/pdf/2012/6.1.12.82.pdf

3 http://www.economy.gov.mk/ministerstvo/sektori_vo_ministerstvo/sektor_za_energetika/energetski_bilans_2013-2017.html

4

http://www.erc.org.mk/odluki/Godisen%20izvestaj%20za%20rabota%20na%20Regulatornata%20komisija%20za%20energetika%20za%202011%20godina.pdf

5 http://www.ea.gov.mk/projects/unece/docs/legislation/Macedonian_Energy_Strategy_until_2030_adopted.pdf

6 http://www.uncsd2012.org/content/documents/677Strategy_for_utilization_RES_Macedonia.pdf

http://www.elem.com.mk/

http://www.te-to.com.mk/

http://www.mepso.com.mk/

http://www.stat.gov.mk/pdf/2012/6.1.12.82.pdf

http://www.economy.gov.mk/ministerstvo/sektori_vo_ministerstvo/sektor_za_energetika/energetski_bilans_2013-2017.html



http://www.ea.gov.mk/projects/unece/docs/legislation/Macedonian_Energy_Strategy_until_2030_adopted.pdf

http://www.uncsd2012.org/content/documents/677Strategy_for_utilization_RES_Macedonia.pdf

33

Table 14. Existing Power plants

Plant Type/Fuel Capacity

(MW) Efficiency Availability

Fixed O&M (M€/GW)

Variable O&M

(€/MWh)

Retirement year

Thermal power plant Lignite 736 31% 73% 25.31 4.60 2017

Power plant Bitola/Lignite 627 31% 73% 2017

Unit 1 209 31% 73% 2017

Unit 2 209 31% 73% 2017

Unit 3 209 31% 73% 2017

Power plant Oslomej/Lignite 109 31% 60% 2017

Power plant/HFO 198 34% 65% 2020

Power plant/Hydro 579 100% 30% 15.9 1.9

Big HPP 551.8 After 2050

Vrben 12.8 100% 40% After 2050

Vrutok 172 100% 26% After 2050

Raven 21.6 100% 28% After 2050

Tikves 116 100% 18% After 2050

Kalimanci 13.8 100% 14% After 2050

Globocica 42 100% 58% After 2050

Spilje 84 100% 41% After 2050

Kozjak 80 100% 21% After 2050

Matka 9.6 100% 48% After 2050

Small HPP 27.2 After 2050

Pena 3.3 100% 33% After 2050

Zrnovci 1.4 100% 34% After 2050

Pesocani 2.7 100% 43% After 2050

Sapuncica 2.9 100% 39% After 2050

Dosnica 4.1 100% 42% After 2050

Turija 2.2 100% 27% After 2050

Modric 0.2 100% 20% After 2050

Babuna 0.7 100% 43% After 2050

Belica 0.3 100% 46% After 2050

Glaznja 2.1 100% After 2050

Popova Sapka 4.8 100% 43% After 2050

Strezevo 1 2.4 100% After 2050

Strezevo 2 0.1 100% After 2050

CHP gas 260 52% 90% 64.6 1.4 2032

TE-TO 230 52% 90% 2032

Kogel 30 44% 85% 2032

34

Plant Type/Fuel Capacity

(MW) Efficiency Availability

Fixed O&M (M€/GW)

Variable O&M

(€/MWh)

Retirement year

Energetika 30 44% 85% 2032

Heating plant (centralized)/Natural gas (PJ/a)

17.345 96% 20% 1.46 0.95 After 2050

The other group is new technologies that are introduced in the model with the following data:

Investment cost, Operation and Maintenance cost (Fixed and Variable), efficiency, installed capacity,

life time and availability factor, so the model can select which technology is the most cost effective,

based on these input data (Table 15). All data, except the investment costs, are taken from the

Strategy for Energy Development of the Republic of Macedonia until 2030 and Strategy for

Utilisation of Renewable Energy Sources in the Republic of Macedonia by 2020.

Table 15. Characterization of Key Power Plant Options

Power Plant Type Start Date (Available)

Life-time Efficiency* Installed Capacity

(MW)

Availability Factor

Investment Cost (M€/GW)

Fixed O&M (M€/GW)

Variable O&M

(€/MWh)

Bitola revitalization 2018 15 0.32 650 0.74 462 25.31 1.28

Oslomej revitalization**

2018 15 0.32 109 0.74 392 25.31 1.28

Lignite Fired 2027 30 0.37 200 0.8 1725 25.31 1.28

Lignite Fired 2030 30 0.37 300 0.8 1725 25.31 1.28

Lignite Fired 2033 30 0.37 300 0.8 1725 25.31 1.28

Gas CHP*** 2016 20 0.52 230 0.85 1090 8.08 1.38

Gas CHP*** 2016 20 0.52 40 0.85 1090 8.08 1.38

Gas CHP*** 2016 20 0.44 30 0.90 1090 8.08 1.38

Gas CHP*** 2016 20 0.44 30 0.90 1090 8.08 1.38

Gas CHP*** 2016 20 0.44 30 0.90 1090 8.08 1.38

Gas Fired 2016 30 0.58 130 0.9 1090 8.08 1.38

Gas Fired 2016 30 0.58 300 0.9 1090 8.08 1.38

Gas Fired 2016 30 0.58 300 0.9 1090 8.08 1.38

Gas Fired 2016 30 0.58 300 0.9 1090 8.08 1.38

Hydro - SvPetka 2012 50 1 36 0.19 1500 4.47 0.20

Hydro - Boskov most 2017 50 1 68 0.22 1818 4.47 0.20

Hydro – Lukovo Pole 2018 50 1 58 0.32 1638 4.47 0.20

Hydro - Gradec 2021 50 1 55 0.51 5577 4.47 0.20

Hydro - Chebren 2022 50 1 333 0.29 1712 4.47 0.20

Small hydro 2012 50 1 120 0.29 2400 4.47 0.20

Hydro - Galiste 2021 50 1 194 0.16 2016 4.47 0.20

Hydro - Veles 2024 50 1 93 0.37 5258 4.47 0.20

Hydro - Babuna 2025 50 1 17 0.38 5176 4.47 0.20

35

Power Plant Type Start Date (Available)

Life-time Efficiency* Installed Capacity

(MW)

Availability Factor

Investment Cost (M€/GW)

Fixed O&M (M€/GW)

Variable O&M

(€/MWh)

Hydro - Zgropolci 2025 50 1 17 0.37 5529 4.47 0.20

Hydro - Gradsko 2025 50 1 17 0.44 6235 4.47 0.20

Hydro - Kukiricani 2025 50 1 17 0.54 6118 4.47 0.20

Hydro – Krivolak 2025 50 1 17 0.54 6118 4.47 0.20

Hydro – Militkovo 2025 50 1 17 0.54 7529 4.47 0.20

Hydro – Demir Kapija 2025 50 1 24 0.55 6167 4.47 0.20

Hydro - Gavato 2025 50 1 17 0.56 8471 4.47 0.20

Hydro - Dubrovo 2025 50 1 17 0.54 7294 4.47 0.20

Hydro - Gevgelija 2025 50 1 17 0.57 6824 4.47 0.20

Wind (central), with FIT

2015 20 1 150 0.14-0.32 1601-1494 25.6 0.00

Wind (central) 2015 20 1 210 0.14-0.32 1617-1509 25.6 0.00

Solar PV (decentralized) with

FIT 2012 30 1 25 0.155-0.310 2134-1067 31.4 0.00

Solar PV (decentralized)

2012 30 1 95 0.155-0.310 2134-1067 31.4 0.00

Nuclear 2029 10 0.36 1000 0.90 4560 80 1.96

*The efficiency of lignite power plants was provided by the World Bank team under Green Growth Project ** The depletion of the lignite mine, requiring the TPP Oslomej to be upgraded to burn imported coal ***Electricity efficiency for CHP plants.

Revitalization of Bitola units includes seven measures (Table 16) with total cost of 300 MEuros.

Table 16. Investment costs for revitalization of TPP Bitola

Measure M€

1 Revitalization of boilers 20

2 NOx 30

3 Sox 65

4 PM 35

5 Turbines

150 6 Generators

7 Automation

Total 300

Investment cost for revitalization of boilers, NOx, SOx and PM are taken from official document from

AD ELEM (internal document for the activities of AD ELEM, 2011). The investment cost for the rest

three measures are obtained from the World Bank team.

The revitalization of TPP Oslomej is projected to be 43 MEuros (Table 17). Investment costs for each

measure, as in the case with revitalization of Bitola, are taken from official document from AD ELEM

(internal document for the activities of AD ELEM, 2011).

Table 17. Investment costs for revitalization of TPP Oslomej

Measure M€

1 Revitalization of boilers 4.3

36

2 NOx 6.4

3 SOx 13.9

4 PM 7.5

5 Turbines 7.5

6 Generators 2.1

7 Automation 1.1

Total 42.7

In order to develop more plausible scenarios and properly reflect the situation in Macedonia a series

of constraints has been introduced (Table 18). The limits for the potential of the wind and solar

technologies are based on the Strategy for Utilisation of Renewable Energy Sources in the Republic

of Macedonia by 2020.

Table 18. Key Constraints in the Baseline Scenario

Sector / Issue Constraint

Resource supply

Domestic resources

RES potential

Small HPP with Feed in Tariff Limited potential for small HPP (up to 120 MW), with FiT 90 €/MWh

Wind with Feed in Tariff Limited potential for wind power plants (up to 150 MW by 2030), with FiT 89 €/MWh

Wind without Feed in Tariff Limited potential for wind power plants (up to 210 MW by 2030)

Solar with Feed in Tariff Limited potential for PV installation (up to 25 MW), with FiT 140 €/MWh

Solar without Feed in Tariff Limited potential for PV installation (up to 95 MW)

Imports No limit

Price for imported electricity, running from 7.3 – 10 €cents/kWh

Exports Not allowed

Electricity generation

Technology availability Revitalized TPP Oslomej using imported coal

The location and the capacities of the large hydro power plants are limited (based on the available National Studies of the hydro potential in the country)

*

In addition to the previous assumptions, the technical losses in transmission and distribution

network are projected to be 2.35% and 13.54%, respectively.

In terms of the energy prices Macedonia model uses its 2011 "border/mine-mouth" price for energy

sources, and any sectoral adjustments to these (for delivery and mark-up (but not taxes)). The

import prices are provided by macro-economic team of the Green Growth Program (Table 19).

Table 19. Energy Price Trajectory Assumptions (Euro/GJ)

Energy Form 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050

Biomass (Country price)

3.7 5.5 5.6 5.8 6.0 6.2 6.4 6.5 6.7 7.4 8.2 9.0 9.9 10.9

Coal - Brown 3.0 2.4 2.3 2.4 2.5 2.5 2.5 2.6 2.6 2.6 2.7 2.7 2.7 2.8

Coal - Hard 3.4 2.6 2.6 2.7 2.7 2.8 2.8 2.9 2.9 2.9 3.0 3.0 3.0 3.1

Coal – Lignite (Import)

4.1 5.0 5.5 5.8 6.1 6.4 6.7 7.0 7.3 7.5 7.8 8.1 8.4 8.7

Coal –Lignite (Country price)

1.4 2.1 2.7 3.3 3.8 4.3 4.6 4.8 5.0 5.2 5.4 5.5 5.7 5.9

37

Gas 14.3 6.9 7.4 7.8 8.1 8.4 8.6 8.7 8.8 8.9 9.1 9.2 9.3 9.4

Nuclear 3.0 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6

Oil - Crude 14.7 13.5 14.3 15.0 15.5 16.0 16.3 16.6 16.9 17.2 17.5 17.7 18.0 18.3

Oil - Distillate 19.1 17.5 18.6 19.5 20.1 20.8 21.2 21.6 22.0 22.4 22.7 23.1 23.4 23.8

Oil - HFO 11.9 10.9 11.6 12.1 12.5 12.9 13.2 13.5 13.7 13.9 14.2 14.4 14.6 14.8

Oil - Kerosene 20.6 18.9 20.0 21.0 21.7 22.3 22.9 23.3 23.7 24.1 24.5 24.8 25.2 25.6

Oil - LPG 16.2 14.8 15.7 16.5 17.0 17.6 18.0 18.3 18.6 18.9 19.2 19.5 19.8 20.1

{New Tables will be added with the technologies characteristics on the demand side and in transport sector}

38

APPENDIX II: METHODOLOGY – MARKAL MODEL DESCRIPTION

MARKAL (an acronym for MARKet ALlocation) is a bottom-up, dynamic linear programming model of

the energy system of one or several regions that provides a technology-rich basis for estimating

energy dynamics over a multi-period horizon. The model, first developed in the late 1970s for energy

planning, continues to undergo development and refinement. Energy Technology Systems Analysis

Programme (ETSAP) coordinates these activities, and is sponsored by the International Energy

Agency (IEA)7.

As with most energy system models, energy carriers in MARKAL interconnect the conversion and

consumption of energy. This user-defined network includes all energy carriers involved with primary

supplies (e.g., mining, petroleum extraction, etc.), conversion and processing (e.g., power plants,

refineries, etc.), and end-use demand for energy services (e.g., boilers, automobiles, residential

space conditioning, etc.). The demand for energy services may be disaggregated by sector (i.e.,

residential, manufacturing, transport and commercial) and by specific functions within a sector (e.g.,

residential air conditioning, heating, lighting, hot water, etc.). The building blocks depicted in Figure

34 represent this network, referred to as a Reference Energy System.

Figure 34. MARKAL Building Blocks

The optimization routine used in the model’s solution selects from each of the sources, energy

carriers, and transformation technologies to produce the least-cost solution subject to a variety of

constraints. The user defines technology costs, technical characteristics (e.g., conversion

efficiencies), and energy service demands. As a result of this integrated approach, supply-side

7 http://www.iea-etsap.org/web/reports/markal-irg.pdf

http://www.iea-etsap.org/web/reports/markal-irg.pdf

39

technologies are matched to energy service demands. The specification of new technologies, which

are less energy - or carbon-intensive, allows the user to explore the effects of these choices on total

system costs, changes in fuel and technology mix, and the levels of greenhouse gases and other

emissions. Therefore, MARKAL is highly useful for understanding the role of technology in carbon

mitigation efforts and other energy system planning settings.

A variety of different constraints may be applied to the least-cost solution. These constraints include

those related to a consistent representation of the energy system, such as balancing energy inputs

and outputs, utilization of capacity, replacement of expended capacity by new investments and

satisfaction of demand. In addition, environmental or policy issues, such as greenhouse gas

emissions may be examined in several ways, including sectoral or system-wide emissions limits on an

annual basis or cumulatively over time. Alternatively, the imposition of a carbon tax or other fee

structure could be modeled if desired. As a result, various costs for carbon may be generated for

different levels of emission reductions. In this way, future technology configurations are generated

and may be compared. If constraints are also placed on the types of technologies and rates of

penetration, the configuration of the entire energy system will change. In all cases, MARKAL will

produce the least-cost solution which meets the provided set of constraints.

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