Modelling Platform for Pan-European Energy Scenarios and External Costs of Energy Technologies

1. The NEEDS TIMES Pan EU modelling platform and main results of scenario analysis New Energy Externalities Development for Sustainability Final Conference "External costs of energy technologies" Vincenzo Cuomo Markus Blesl, Denise Van Regemorter RS2a “Modelling Pan European Policy scenarios” Brussels, February 17-th, 2009

2. Main objectives Developing a new modelling framework for the EU as a whole, especially its multi-country aspect with trade exchanges among countries Contributing to policy evaluation through Integration of different objectives in one global modelling environment, allowing to evaluate their mutual interactions Evaluation of the optimal mix of options to reach severe energy-environmental targets Assessment of the structural changes in the energy system and the role of technologies in different boundary conditions Assessment of the role of external costs in the definition of policy strategies Scenario analysis for the evaluation of key EU targets

3. Modelling Pan European Energy Scenarios • Policy objectives: • Stabilization of CO2 concentrations • Security of energy supply • Improvement of environmental quality • Scenario analysis: • Long term post-Kyoto strategies • Enhancements of EU endogenous resources • Effects of the internalisation of external cost of local air pollutants • Modelling platform: • Multi-region integrated Pan-European model including the full range of information and data from LCA and ExternE • l Key aspects: Main EU Directives Stakeholder preferences Country level detail …

4. A common integrated structure NEEDS Project The NEEDS modelling platform LCAof the most relevant power supply options • Based on the TIMES multi-period linear optimization models generator • Common structure of country models (RES-Reference Energy System) • Common sources for the main data (energy balances, material flows, air emissions) Energy system models of 30 EU countries (EU27, CH, IS, NO) TechnologyDatabase (inv cost, oper cost, efficiency, ...) Pan European Model • Externalitiesof technologies for the production, transport, transformation and consumption of energy The NEEDS TIMES PEM represents the reference modelling platform for several outreach projects/proposals in the framework of EU Programs

5. The TIMES models generator • Partial Equilibrium model • Maximisation of the consumer/producer surplus • Supply and demand quantities equilibrate through prices changes • Perfect foresight • Long term time horizon, to support the definition of long term strategies, taking into account different standards of energy devices, technology development and policy targets • High technological detail in energy supply and end-use sectors (both existing and future technologies), potential of fossil and renewable resources by country, resulting in a data intensive model • Approach based on full energy costs along the life-time of technologies and within the time horizon, i.e. including LCA components and external costs • Normative perspective, focussed on the development needed under a policy scenario

6. The country models • Country models based on a common structure (RES): Supply: • Reserves, resources, exploration and conversion • Country specific renewable potential and availability Electricity and Heat production: • Public electricity plants • CHP plants and heating plants Industry: • Energy intensive industry • Other industries • Residential and Commercial: • All end use demand Transport: • Different transport modes • Geographical coverage: • 30 European countries (EU 27 + Iceland, Norway and Switzerland) • Time horizon: • 2000-2050 • Energy carriers included: • (Eurostat, 2005) energy balances, with some aggregations • Materials explicitly modelled: • Only those flows whose production requires much more energy or which are important for the production processes (e.g. scrap steel). • Pollutants included: • GHG (CO2,CH4,N2O,SF6); • LAP (SO2,NOx,CO,NMVOC,PM2.5,PM10) The Iron and Steel industry RES Stream RS2a

7. The technology database A basic but fairly complete set of technologies and processes (existing and future) was carried out and included into the model’s data input for analysing technology development on the time horizon and performing scenario analysis. It includes a default set of technological and economical parameters and additional information on LCA and ExternE data, collected into a format suitable to be converted into a model user-interface ready format and available for direct import into the models Sectors considered • Upstream (172) • Heat and Electricity generation (124) • Industry (223) • Residential and Commercial (504) • Transport (53)

8. Cyprus The Pan European TIMES model It is more than the sum of the 30 national models: • A multi-region approach at Pan EU level integrates the single EU countries’ energy models • representation of the main energy exchanges between EU countries and also with non EU countries, • Electricity trades are modeled via trade technologies • it allows to reflect links and to impose constraints at the European level, reflecting the coordination of policies across borders and, consequently, the harmonisation of the underlying country models features and assumptions. The NEEDS-TIMES modelling platform allows to performing a more effective policy analyses both on country level and in a EU wide perspective enabling the definition of cross country constraints.

9. Main outputs Optimal energy-technology pathways by scenario Marginal costs of CO2 and resources Mix of fuels and technologies in electricity production and end-use sectors Emission pathways by scenario Long-term Oil and Gas demands by each EU country, by scenario The implemented modeling platform has a built in flexibility and distinguishes clearly the exogenous parameters from the endogenous variables. These features make it an effective tool to analyse the effects of different policy alternatives and to perform a sensitivity analysis of solutions

10. The NEEDS Reference Scenario The reference scenario describes the development of the EU-27 energy system in agreement with most of present policies and the latest DG TREN projections. Main assumptions - Business as usual trend of all exogenous assumptions around drivers, energy prices and policies, as derived with the help of the general equilibrium model GEM-E3 (EU22 countries), and macroeconomic and energy price background assumptions in line with the DG TREN 2005 projections. - No limits on CO2 emissions; a specific climate policy allowing for a proper evaluation of Kyoto and post Kyoto targets was not considered, instead a tax of 10 Euro/ton for CO2 was applied. - Use of renewable energies, in line with national policies aimed to promoting their utilization. - Implementation of country decisions as concerns nuclear. In particular, nuclear phase out was considered in countries with corresponding aims or agreements (Germany, Netherlands, Belgium and Sweden).

11. The NEEDS Scenarios The baseline results indicate that EU needs policies to control carbon emissions and to become less dependent on oil and gas imports. Thus, the following scenariosweredefined in agreement with stakeholders:

12. New frontiers opened by the NEEDS modelling platform The NEEDS modelling platform constitutes an integrated tool for the analysis of the EU as well as national energy systems, evaluating the effectiveness of different policy instruments and their long term impact in terms of energy and technology mix, emissions and costs. A tool for supporting stakeholders’ decisions, in order to evaluating: • The impact of targeted air quality EU policies (emissions standards) on emissions, costs and climate change • The full costs and benefits of EU Directives that have an impact on the energy system • The impact of different Post Kyoto strategies on the future of energy technologies • The impact of alternative internalisation policies and their contribution to sustainability • The technologies and policies that exhibit the most robust behaviour in an overall sustainability perspective

13. Further modelling improvements • Integration of additional sustainability criteria in models in order to more fully analyse sustainability of energy systems • Integration with risk analysis • Integration with other models covering the rest of the economy and more social aspects • Use of multi-attribute optimization techniques combined with decision making analyses, to elaborate a compromise between the policy targets and the preference of EU stakeholders.

14. Future perspectives and recommendations The TIMES NEEDS Pan EUmodelling platformis now available and allows exploiting synergies and trade-offs for climate, local environments and energy systems It should be maintained and updated to be applied in new studies for policy analyses

15. Current E.U. sponsored Projects & Proposalsusing Pan-EU TIMES models The set up of the NEEDS TIMES models pave the way for the development of a wide range of possible applications and have fostered a number of outreach initiatives among which: Contribution to EU and national policy analysis (e.g. Ministry of Environment of in Estonia – GHG reporting Template, IEA/ETO ETP2008 report New research projects (VII FP, IEE) RES2020: 2007-2009: Focus on renewable energy for EU at horizon 2020 and beyond PLANETS: 2008-2010: Focus on advances on how to deal with uncertainty in global and EU Climate Policies REACCESS: 2008-2010; Focus on Security of Energy Supply for EU at horizon 2050 REALISEGRID: 2008-2010: Focus on Intra-EU (+ Balkans) Electricity Exchanges and Infrastructure

16. Presentations of policy scenario results will be given by • Markus Blesl (IER,University of Stuttgart) • Denise Van Regemorter (CES,Katholieke Universiteit Leuven)