Potential CO2 Emissions Reduction in Russia: Analysis on RU-TIMES Model

1. Potentials of CO2 Emissions Reduction in Russia: Analysis on RU-TIMES Model Oleg Lugovoy International Energy Workshop 2009 17-19 June 2009, Venice

2. Outline • Motivation • Coverage • Calibration • Scenarios • Results • Further steps

3. Motivation • Official point of view in Russia: “CO2 emissions will reach 1990 level by 2020” (Concept of LR development, MED 2008) • Current CO2 projections in Russia come from IO-models, econometric models, experts estimates • Apply bottom-up analysis to CO2-emissions projections in Russia

4. Coverage: as part of Emissions from fuel combustion ~57% Source: IEA

5. Coverage: as part of all CO2 emissions ~32%

6. Calibration of RU-TIMES: data by PP • Capacity & Capacity use (kW, hours) • Fuel mix consumption in 2005, by fuels (tce) • Electricity and heat production and sales in 2005 (mWh, GCal)

7. Data by PP have been aggregated by consumed fuels • Econometric estimates (cross-section, Bayesian approach, symmetric regression, 2005 data): • actual efficiency of power plants, heat plants • actual efficiency and other parameters (CET) of combined heat and power (CHP) plants • Calibration to energy balance (IEA)

8. Looking for potentials of emissions reduction • Efficiency growth (conventional techs) • Changes in fuel mix production structure (more hydro, nuclear, renewable sources)

9. Efficiency growth (conventional techs) • Renewal of current tech stock: • 80% of current stock of coal and gas plants will be upgraded up to 2030 • Efficiency gap of “new” and “old” technologies: • From ~33% to ~40% for coal • From ~36% to ~50% for gas

10. Efficiency growth: RAO UES (2007)

11. Renewable energy potentials in Russia • Wind • Solar • Small Hydro • Geothermal • Low potential heat • Bio-fuels from waste

12. Wind power plants in Russia: existing and potential (estimates) Source: Estimates of Institute of Energy Strategy, Russian Academy of Engineering, Union of Scientific and Engineering NGO (2007)

13. Wind power potential and use

14. Geothermal potential ~75-80% of territory, geothermal energy could be efficiently used for district heating in cities villages, entity  ~4000 geothermal wells have been drilled in the country ~ 6 billion US$ has been already spent by Government on exploration and drilling activities (estimated in current prices) Source: Russian Association of Geothermal Energy Society

15. Waste-pellets production potential in Agriculture Source: Estimates of Institute of Energy Strategy, Russian Academy of Engineering, Union of Scientific and Engineering NGO (2007)

16. Renewable energy sources: “Technical” potential “Technical” potential – Technically feasible potential Source: Estimates of Institute of Energy Strategy, Russian Academy of Engineering, Union of Scientific and Engineering NGO (2007)

17. Renewable energy sources: “Economic” potential vs. Fossil Fuels Extraction “Economic” potential – competitive potential under current economic conditions Source: Estimates of Institute of Energy Strategy, Russian Academy of Engineering, Union of Scientific and Engineering NGO (2007)

18. Competitiveness of renewables in Russia 1. Wind power plant in Yeisk • Source: Yermolenko “Project planning results of wind power plant in Krasnodarsky Krai”, presentation at workshop “Current state and development perspectives of wind power plants in Russia”, 27 May 2008, Moscow. http://e-apbe.ru/library/2008.05.27-Ermolenko.pps • Capacity 50 MW wind power plant • Greta Inc (Canada) • Average wind speed • expected 4-6 m/sec (based on Hydromet and NASA estimates) • measured 6-8 m/s • estimated generated power 170GWh/year • pay-back period of investments: 8 years with price of electricity 1.5-1.8 Rubles/kWh (5.5-6.6 US cents per kWh)

19. Competitiveness of renewables in Russia (#2) 2. Biogas reactor for power, heat and fertilizer production project in Yeisk • Source: Yermolenko “Livestock waste for electricity and heat production project”, presentation at “Current state and development perspectives of renewable energy in South Federal District” workshop, 25 Sep 2008, Rostov-na-Donu, Russia. http://www.e-apbe.ru/actions/Ermolenko.rar • Organic fertilizer: 1 million tons a year. • Biogas: 4.7-5.7 thousand m3/day • Biogas can be used for production: • - Electricity: 3-4 GWh/year • - Heat: 7-10 thousand GCal/year • - Motor fuel: 1-1.4 mln liters/year • - Gas (in natural gas equivalent): 1-1.4 millions cubic meters • Total costs: 80 millions rubles (~3 mln USD in 2007). • Pay-back period of investments: 0.7-1 year

20. Competitiveness of renewables in Russia (#3) 3. Experimental low potential heat pump station TNS-1 in Novoshakhtinsk, Rostov oblast • Source: Cherny A.V. «Sozdanie jenergeticheskogo kompleksa v g. Novoshahtinske s ispol'zovaniem VIJe» (in Russian), presentation on a workshop “Current status and perspectives of renewable energy”, Sep-25 2008, Rostov na Donu. http://www.e-apbe.ru/actions/2008_09_25_Cherny.ppt • The TNS-1 provides heat to: • Central city hospital #1, Child health clinic, Child isolation (infection) hospital, Public school #27, vocational school #58, Nursery #34, • TNS-1 supply hot water to: • Central city hospital #1. • Estimated pay-back period 6 months with heat tariff 800 rubles/GCal (2 times lower then expected tariff in 2009). Two low heat pumps stations (TNS-2 & TNS-3) are under construction, 5 district coal heat plants will be closed.

21. Estimated Tidal Hydro Potential • Mezensk THYD 15GW • Penzhinsk THYD 87GW • Tugursk THYD 6.8GW • Costs? • Average IEA estimates for all new techs

22. Electricity and Heat production from Fossil fuels vs. Renewables potential and Fossil Fuels extraction

23. Scenarios

24. Scenarios • Official (MED, 2008): • Innovative (~6.5%/year 2009-2030), baseline • Energy & Raw material (~5.5-6.5%/year) • Inertial (~4.5%/year) • Crisis scenarios: • 3 years recession & 6.5%/year after • 3 years recession & 4.5%/year after • Policy: • CAP & Trade • Carbon tax

25. Economic Growth Scenarios

26. Optimistic & Pessimistic Scenarios

27. Electricity demand projections

28. Population growth scenarios

29. Electricity generation by fuels, “Innovative” scenario without policy (Reference)

30. Electricity generation by fuels, “Innovative” scenario without policy (Reference)

31. 30 Scenarios

32. CO2 emissions projections 1990 level

33. Producers Costs (PV) over 25 years (Objective Variable)

34. Conclusions • In the study we apply official and alternative projections of GDP growth, electricity demand, domestic prices for energy, extraction and exporting volumes of fossil fuels, and targeted structure of electricity and heat generation to calibrate RU-TIMES model, formulate scenarios and estimate CO2 emissions trends. • According to our estimates, even in the case of the most ambitious scenario for economic growth and electricity and heat demand growth, CO2 emissions in power and heat sector won’t exceed 90% of 1990 level by 2020. • There are few main reasons of expected CO2 reduction in Russia: • Targeted growth of share of nuclear and large hydro (MED, EFA) • Targeted growth of renewables in power and heat production, • Efficiency growth of generating capacity due equipment upgrade.

35. Conclusions (cont.) • Our survey of real cases of renewable technologies implementation in Russia shows high competitiveness of the technologies comparing to conventional fossil-fuel based techs, and short-term of pay-back of investments in renewables. Market of renewable energy in Russia is not in cost equilibrium. • Cap and Trade policy allows reduce costs for producers with lower emissions pathway. • According to IEA estimates, energy efficiency might contribute up to 40% in emissions reduction by 2050. Recent study of energy efficiency in Russia (IFC) found 40% potentials for energy efficiency growth in Russia. This provide additional room for improvements and GHG reduction.

36. Further steps • Full coverage of GHG emissions from fuel consumption • Modeling energy demand • Policy selection under uncertainty – stochastic analysis

37. Thank you! olugovoy@edf.org