SLED scenario assessment for

Macedonia

László Szabó, PhD – András Mezősi, PhD –Zsuzsanna Pató, PhD

Regional Centre for Energy Policy Research

Skopje, Macedonia

November 20, 2015

Outline of the presentation

1. Modelling methodology

2. Scenario definitions

3. Model results for Macedonia

4. Regional outlook for Western Balkans

2

1. Modelling methodology

3

Introduction

• Main tools:

‣ Electricity Market Model of REKK

‣ Network model of EKC

• Market impacts in the three analysed scenarios of SLED

(REF, CPP, AMB) are modelled with REKK European

Electricity Market Model (EEMM)

‣ Market price

‣ Electricity trade whole EU+neighbourhood

‣ Necessary RES support

• Network impacts with EKC network model

• Sensitivity analysis, e.g. for hydro generation (modelled

under average rainfall conditions, but in the sensitivity

assessment the impacts of dry years are also simulated)

4

55

►Partial equilibrium model, perfect competition

in production

►36 countries (of which 6 exogenous: Morocco,

Tunisia, Turkey, Moldova, Russia and Belarus)

►The model calculates the marginal cost of

around 5000 power plant blocks and sets up the

merit order country by country

►Power flow is ensured by 85 interconnectors

between countries

►Model calculates electricity flows and

congestions on cross-border capacities

►Taking into consideration the merit order and

exports/import, the model calculates equilibrium

prices

►Constraints in production and network

capacity, prices do not equalise across borders

Model functionality

6

Input data sources

• Information on PPs from

Platts database, for

modelled country from

national sources

• Future capacity expansion

from national strategic

documents

• Availability/utilization rates

‣ Hydro availabilities:

historical utilization rates for

country and season

‣ Wind and PV: JRC

• Prices

‣ Fossil fuel price forecase

from US EIA and IEA

‣ Natural gas TTF spot price

and oil index price

Gas/Oil ST Coal ST/Biomass CCGT

1960 37,0% 35,0%

1965 38,0% 36,0%

1970 39,0% 37,0% 50,0%

1975 40,0% 38,0% 50,0%

1980 41,0% 39,0% 50,0%

1985 42,0% 40,0% 50,0%

1990 43,0% 41,0% 50,0%

1995 44,0% 42,0% 52,5%

2000 45,0% 43,0% 55,0%

2005 46,0% 44,0% 56,5%

2010 47,0% 45,0% 57,0%

2015 48,0% 46,0% 58,0%

2020 49,0% 47,0% 59,0%

2025 50,0% 48,0% 60,0%

2030 51,0% 49,0% 61,0%

Year of

commissioning

Fuel efficiency for various power plant types

• Efficiency parameteres from

literature; dependent on the

commission year and the type of the

PP (see table)

7

Determining short-term marginal cost

Short term marginal cost

=

Fuel cost

+

CO2 cost

+

Variable part of the OPEX

+

Energy tax

Merit order curves - examples

8

99

Modelled baseload prices in 2015

(€/MWh), and the yearly trade flows

Base load prices and total yearly trading in 2015

45

45

38

48

33

48

3638

31

31

36

47

33

44

55

43

40

40

57

59

37

46

36

4039

56

44

31

38

46

37

38

31

44

36

32

1010

Modelled baseload prices in 2025

(€/MWh), and the yearly trade flows

Base load prices and total yearly trading in 2025

50

51

47

49

71

50

4342

25

24

33

40

17

47

48

37

48

47

51

54

36

47

35

4949

49

44

23

38

35

46

48

23

49

46

49

11

Model output

• Equilibrium price in a demand period

• Baseload and peakload prices

• Electricity trade between countries

‣ Price of cross border capacities

• Production by plant

‣ Fuel consumption

‣ CO2 emissions

12

2. Scenario definitions

Methodology

The SLED analysis is based on assessing three scenarios:

• Reference scenario (REF);

• Currently Planned Policies (CPP);

• Ambitious Climate Scenario (AMB).

For Macedonia the SLED scenarios were based on Markal model

scenarios of MANU

Scenario assumptions were related to six dimensions:

‣ carbon value;

‣ energy/excise tax;

‣ environmental standards;

‣ deployment of renewable energy technologies;

‣ deployment of conventional generation technologies; and

‣ electricity demand (integrating assumptions on end-use energy

efficiency improvement).

13

Main information sources

• Macedonian Academy of Sciences and Arts (MANU),

Scenarios based on the First Biennial Update Report on

Climate Change (September 2014) – based on the

WOM, WEM and WAM scenarios of Markal

• Second Energy Action plan of Macedonia (2014)

• Report on Energy & Climate Policy – Macedonia (2014)

• Strategy for utilisation of renewable energy sources in

the Republic of Macedonia by 2020 (2010)

• Stakeholder consultation with Ministry representatives

held in November 2014

14

SLED Scenario definition-

REFERENCE

15

Scenario assumptions Reference GHG scenario (REF)

TaxationIntroduction of EU ETS

ETS to be introduced in 2025

Introduction year of minimum excise duty

Year of introduction: 2020

Electricity supply

Enforcement of environmental standards (LCP Directive)

Oil PP (Negotino) is phased out from 2015. Bitola TPP gets a desulphurisation system in 2017. Oslomej TPP (lignite PP) is closed for

refurbishment between 2016 and 2020.

RES-E deployment Without measures (WOM) MARKAL model

Conventional capacity developments

Closure of Negotino

Refurbishment of Bitola and OslomejNew capacities:

Gas-fired CCGT (440 MW) – 2019

Bitola 4 (200 MW) – 2025

Coal (200 MW) – 2028

Coal (400 MW) – 2030

Electricity demand Electricity demand WOM MARKAL model

SLED Scenario definition- CPP, AMB

16

Scenario assumptions

Currently Planned Policies GHG scenario (CPP)

Ambitious GHG policy scenario (AMB)

Taxation

Introduction of EU ETS

CO2 cost in 2020 is 40% of the ETS price, from 2025 ETS is introduced

ETS to be introduced in 2020

Introduction year of minimum excise

dutyYear of introduction: 2020 Year of introduction: 2018

Electricity supply

Enforcement of environmental standards (LCP

Directive)

Oil PP (Negotino) is phased out from 2015. Bitola TPP gets a

desulphurisation system in 2017. Oslomej TPP (lignite PP) is closed for

refurbishment between 2016 and 2020.

Oil PP (Negotino) is phased out from 2015. Bitola TPP gets a

desulphurisation system in 2017. Oslomej TPP (lignite PP) is closed for refurbishment between 2016

and 2020.

RES-E deploymentWith existing measures (WEM)

MARKAL model With additional measures (WAM)

MARKAL model

Conventional capacity

developments

Closure of Negotino

Refurbishment of Oslomej

No new capacities

Closure of Negotino

Refurbishment and Oslomej

No new capacities

Electricity demand

Electricity demand WEM MARKAL model WAM MARKAL model

Electricity consumption

• Reference: we can observe a significant difference

between the REF and CPP-AMB scenarios, due to the

nature of REF – it represents a Without Measures

(WOM) scenario

• Energy efficiency improvements are the main drivers for

further reductions in the energy efficiency scenario

17

RES-E capacities 1

18

REFERENCE capacity values (MW)

Assumptions:

• Hydro capacity expansion is limited to 2016 level

• From 2017 no any new capacity is installed in the scenario

• Thus it serves as a comparative scenario

RES-E capacities 2

19

CPP scenario capacity values (MW)

AMB scenario capacity values (MW)

• Significant increase in hydro capacities (over 60% in next 15

years)

• Wind also contributes with up to 150 MW capacities

Present cross-border capacity

20

From To O D D O

AL MK 0 0

BA RS 488 403

BA ME 483 440

GR MK 329 151

GR AL 250 250

HR RS 507 429

HU RS 689 758

ME AL 400 400

MK BG 96 215

RO RS 570 347

RS ME 540 583

RS MK 491 253

RS AL 223 223

RS BG 162 250

Origin and

destination countryNTC valueHU

RSBA

MKME

AL

BG

GR

HR

IT

429

507

758

689

250162

250

250

488403

440

483

400

400

0

0

253

491

215

96

329 151

223

223

583

540

Planned cross-border capacities

21

Country 1 Country 2Year of

commissioningInvestment status O D D O

RS RO 2017 Approved 800 800

BA ME 2023 Planned 600 600

IT AL 2020 Planned 500 500

RS MK 2015 Under construction 400 1000

MK AL 2019 Planned 600 600

AL RS 2016 Under construction 500 500

IT ME 2018 Under construction 1000 1000

RS BA 2022 Planned 600 600

RS ME 2022 Planned 600 600

HU

RSBA

MKME

AL

BG

GR

HR

IT

600600

600

600

600

600

1000

400

RO

800 800

1000

1000

500 500

600

600

500

500

Under construction and

approved categories are

used in the model runs

till 2030. IT-AL is not

realised in the modelling

period.

3. Scenario Assessment Results

22

Modelling result – baseload electricity

price, (wholesale) €/MWh in real terms

23

Modelling result – peakload price,

(wholesale) €/MWh in real terms

24

Wholesale price evolution

• The main factors influencing the wholesale price

developments in Macedonia:

‣ Generation expansion in the fossil based generation in the region

is high. Over 7000 MW capacity (mainly lignite and coal) is built

in the countries: AL; BA; BG; GR; HR; HU; ME; MK; RS; RO

according to the national plans

‣ New RES capacities above 12000 MW are also contributing to

the price drop till 2020.

‣ Higher interconnectedness in the region also allows trade of

electricity (higher NTC)

• These new capacity expansion is illustrated in the

following slide for the region

25

New PPs in the wider region*

26

Region includes the following countries: AL; BA; BG; GR; HR;HU; ME; MK; RS;

RO;

New coal-based power generation, MW New RES-E generation capacity, MW

Electricity mix

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Generation mix and CO2 emissions

• Macedonia is characterised by dominating coal and lignite generation

share and low level of import in the modelled period.

• The Reference scenario sees further expansion of fossil generation with

increasing carbon emission levels.

• Import is increased in the scenarios except for the AMB scenario, where

it remains at low level.

• Concerning renewables, hydro is expanded in the CPP and AMB

scenarios, the rest of the technologies have limited contribution (lower

utilisation rates)

• Significant drop in CO2 emissions is observable in the CPP and AMB

scenario compared to the reference year values.

• Still, Macedonia is characterised by higher carbon intensity than the

ENTSO-E average in all years.

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CO2 emissions per capita

29

Total investment cost of new PPs,

m€, 2015-2030

30

Source of unit investment cost: Serbian Energy Strategy and Fraunhofer (2013)

•There is a significant investment cost need in the various scenarios:

• The Reference scenario has a 2.3 Billion € investment need over the

following 15 years period, reduced to 1.4 Billion in the AMB scenario due

to the lower coal and lignite expansion

• The main contributing part in the REF scenario are the coal and lignite

plants , while in the CPP and AMB scenarios these are the hydro

investments, but these are still the most economical RES options in the

country.

Yearly RES-E support need,

m€/year

31

Unit RES-E support, €/MWh

32

RES-E support vs CO2 revenues

33

4. Regional Outlook

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Baseload prices (€/MWh)

35

30

35

40

45

50

55

60

AL BA ME MK RS AL BA ME MK RS AL BA ME MK RS AL BA ME MK RS

2015 2020 2025 2030

Bas

elo

ad p

rice

, €/M

Wh

REF CPP AMB

Regional generation mix with different

CO2 prices in the AMB scenario (2030)

36

0

10 000

20 000

30 000

40 000

50 000

60 000

-20 000

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

0 5 10 15 20 25 30 35 40 45 50

CO

2em

issi

on

, kt

Elec

tric

ity

mix

, GW

h

CO2 price, €/t

Net import Other fossil Other RES-E Hydro

Natural gas Coal and lignite CO2 emission

Generation mix change in the case

of low hydro availability (2030)

37

-4 000

-3 000

-2 000

-1 000

0

1 000

2 000

3 000

4 000

REF CPP AMB REF CPP AMB REF CPP AMB REF CPP AMB REF CPP AMB

AL BA ME MK RS

Elec

tric

ity

pro

du

ctio

nch

ange

, GW

h

Net import

HFO, LFO

Hydro

Natural gas

Coal and lignite

Conclusions 1

• The wholesale price is dependent on regional generational capacity expansion

rather than on the ambition level of climate policy.

• Macedonia is currently a net importer of electricity and continues to be an

importing country in the all scenarios. However, in the AMB scenario the country

could effectively limit the import of electricity by 2030 to a very low level due to the

lower demand and the significant increase in hydro-based generation

• CO2 emission intensity remains higher than the electricity system in Europe, in

spite the high share of hydro-based generation, due to the high share of coal.

• If the country introduces a price tag for carbon emission, the government

revenues would be significant, well above the required RES-E support budget

after 2020.

• Macedonia could still develop significant capacities in hydro generation, which

could be a very valuable asset for the future operation of the electricity system. At

the same time, the electricity system would be more sensitive to meteorological

conditions (precipitation levels and patterns).

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Conclusions 2

• Macedonia is sensitive to meteorological conditions: in the short term, severe

droughts could drive up prices by EUR 7-8/MWh, and in the long term by EUR 3-

4/MWh. In such a year the country would still rely heavily on imports, but in the

AMB scenario imports could be significantly reduced.

• If the fossil based generation is expanded as assumed in the REF scenario it

would significantly increase carbon emissions in the country.

• If further cooperation is enhanced within the region and with EU member states,

the country could further utilise its hydro potential. Stricter climate policy would

create more demand for its hydro-based generation.

• The assessment of network impacts shows that the Macedonian electricity

transmission system would not require additional network reinforcements in the

future to cope with the planned RES capacity increase in the scenarios. If the

presently planned network additions are not built, contingencies would not

appear in the system.

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Thank you for your attention!

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