DIRECTING THE STRATEGIES OF THE ELECTRICITY PRODUCTION SECTOR IN ROMANIA BASED ON THE RESULTS OF THE INTEGRATED ANALYSIS - ECONOMIC AND ENVIRONMENTAL

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1 DIRECTING THE STRATEGIES OF THE ELECTRICITY PRODUCTION SECTOR IN ROMANIA BASED ON THE RESULTS OF THE INTEGRATED ANALYSIS - ECONOMIC AND ENVIRONMENTAL PAUL CALANTER PhD Institute for World Economy Romanian Academy 13 th September Blv., Bucharest ROMANIA paul.calanter@yahoo.com Abstract: The energy sector is one of the most important economic sectors, so an appropriate orientation of the strategies in this sector represents a vital element for the sustainable development of society. Problems associated to GHG emissions, especially carbon dioxide emissions, resulting from fossil fuel combustion, and those regarding the depletion of existing fuels, are global, European as well as national challenges. Adopting environmentally friendly technologies and increasing the use of renewable energy resources contribute to the mitigation of climate change, a phenomenon that is one of the greatest threats humanity faces today. The following paper will develop an eco-economic analysis scheme for the energy sector, which will be used for evaluating the electricity production technologies, as well as for the analysis and assessment of medium and long term development scenarios for the electricity production sector from Romania. Based on the results obtained from the integrated analysis, proposals regarding measures targeting strategies in the field of electricity production in our country will be formulated. Key-Words: energy, integrated analysis, strategies, greenhouse gases emissions 209

2 1. Introduction In the first part of this paper it will be presented an integrated analysis scheme - environmental and economic - for the electricity production sector, which was developed for the purpose of analysing and evaluating different technologies for electricity production. In the second part of the paper, the scheme will be used as a basis for assessing the development scenarios for energy production in Romania. Therefore, with the help of the scheme, each type of technology used in the system of electricity production in 2014 (Baseline scenario "0") is going to be evaluated, and starting from this reference two development scenarios will be elaborated based on the targets of European energy sector. In the final part of the paper, based on the results obtained from the application of the methodology, proposals will be formulated, for measures regarding the orientation strategies in the Romanian electricity production sector. 2. Integrated analysis scheme economic and environmental - for the process of electricity production Optimizing decisions on policies and measures in the field of climate change through an integrated analysis is becoming increasingly important as a basis for the development and selection of viable scenarios for sustainable development. In this context, an integrated analysis scheme will be developed, to be used as an instrument for evaluating the technologies for electricity production, and finally for guiding the strategies in the energy sector. The stages of elaboration of the integrated analysis scheme are the following: Establishment of the classes of indicators; Establishment of the indicators for each class; Assigning the weights for the classes and indicators; Assigning of scores to each indicator, and setting ranges of values associated with each score; Setting the composing algorithm; Setting the final result interpretation procedure. 2.1 Relevant indicators A first step in the development of the integrated analysis - economic and environmental - scheme is the establishment of the classes of indicators and their associated indicators. The classes of indicators, which are set out, are the following: economic indicators, energy indicators and environmental indicators. In the table no. 1 the relevant indicators for each class of indicators are presented. 210

3 Table no. 1: Classes of indicators and their associated indicators Source: Assumptions of the author 2.2 Algorithm Indicators weights The indicators used in the scheme of environmental and economic integrated analysis are included in the three classes of indicators. Weights were given to the classes of indicators and respective indicators, as follows: Table no. 2 : Indicators weights used within the integrated analysis Source: Working assumptions of the author By examining the table it may be noticed that equal weighting was given to each class of indicators. We have to mention the fact that the weights given to each class may vary depending on the moment in which the analysis is performed and the objectives of the space or entity for which the decision should be taken. 211

4 2.2.2 Scores Under the scheme of integrated analysis, there were awarded scores of "1" to "5", "1" representing the most unfavorable, and "5" being considered the most favorable. Table no. 3: Scores awarded to the indicators within the integrated analysis Source: Working assumptions of the author It can be mentioned that: For each score, the ranges are set evenly (the intervals are relatively equal); The Scores "2", "3" and "4" contain fixed values intervals, and the scores "1" and "5" contain a more widespread interval; The score for the indicator "Pollution with risk to health and environment" is assigned depending on the level of the generated pollution Composing algorithm After choosing the techniques to be analysed, the values of the relevant indicators presented in the first part of the paper are identified and the matrix of performance is developed. The composing algorithm is the following: In the case of each indicator, the interval for each value is identified, and the score is assigned. Each score is multiplied by the weight of the corresponding indicator. The values obtained are then added together, and the result represents the total score. This algorithm corresponds to a cumulative linear model, described by the following ecuation: 212

5 where: ASi total score for the technique i; W J weight of indicator j; r i,j score of the indicator j for technology i. (1) Interpretation of results As a result of the application of the proposed algorithm, to each alternative it is associated a total score. Based on this score, a ranking of techniques is shown, in the descending order of total scores obtained by each technique. In accordance with the manner in which the calculation algorithm was conceived, the technique with the highest total score is considered as optimal. The purpose of this scheme is to review several techniques for the production of electricity in a particular moment, in a certain area/region or in a specific situation, and finally, based on the results, solutions of orientation of the energy policies could be proposed. 3. Development scenarios for the electricity sector in Romania The ultimate objective of the integrated analysis scheme - economic and environmental - is represented by the orientation of the development strategies of the electricity production sector. In the followings, it will be evaluated and analysed the structure of the electricity production system in Romania on types of technologies, both in the present and on medium and long term. It will start from the baseline scenario (system structure in 2014) and will be developed two scenarios, which are grounded on the basis of the European Union forecasts with regard to the development of the energy sector. The methodology used to evaluate a development scenario of the electricity sector is the following: The technologies for producing electricity are identified; Using the integrated analysis scheme, the total score of each of the technologies for electricity production in Romania is calculated; The weighting of each technology in the national system is identified; In the case of each technology the total score will be multiplied by the corresponding weight within the national system, obtaining the technology score within the respective scenario. The scores for each technology within the scenario are summed, thus obtaining the final score of the scenario. 3.1 Evaluation of technologies for the production of electricity within the national system For electricity generation, in Romania there are used both types of technologies - with conventional sources and with renewable sources. These technologies are presented in the table no

6 Table no. 4: The technologies used in the national system of electricity production Source: Enel Romania Table no. 5: The performance matrix of the analysed technologies Source: Processing of the author Regarding the data presented in table 5, I make the following remarks: The indicator "unitary consumption" does not make sense for both nuclear energy and renewable sources of energy, because it pertains to the consumption of fossil fuels (coal, natural gas, fuel oil), and the generation of GHG emissions by burning them. In these cases, it shall be granted to the score "5". The indicator "resource availability" does not make sense in the case of renewable sources of energy, the score "5" being granted. The indicators relating to emission factors for CO2, CH4 and N2O have no sense for nuclear energy and renewable energy, since the indicators relate to the emissions generated by burning of fossil fuels, in all such cases the score of "5" being granted. The indicators "Investment cost for CCS system" and "Investment cost for NOx control systems" do not make sense in the case of nuclear energy and renewables because there is no implementation of such systems. In these cases it is granted "5" score. 214

7 Table no. 6: The scores assigned to the values corresponding to each indicator Source: Author s calculations Table no. 7: Application of the algorithm Source: Author s calculations Based on the data presented in the tables 6 and 7, the hierarchy of the technologies used in the national system of energy production, resulted after the application of the integrated analysis scheme - environmental and economic, is presented in the table

8 Table no. 8: Hierarchy of the technologies as a result of the application of the integrated analysis scheme Source: Author s calculations 3.2 Assessment of the current structure of the electricity production system in Romania The starting point of the analysis is represented by the structure by types of technologies, of the Romanian electricity production system in 2014 (baseline scenario-see figure no.1), the last year for which data is available. Figure no. 1: Baseline scenario - The structure by types of technologies, of the Romanian electricity production system, in 2014 Wind; 9.65 Solar; 1.55 Biomass; 0.64 Coal; Natural Gas; Hydroelectric; Nuclear; Oil; 0.06 Source: Processing of the author after the data supplied by Enel Romania According to the methodology presented above, total scores obtained for each technology after the application of the integrated analysis scheme will be multiplied by the share of the technology within the national system, and the numbers obtained will be summed up. The results are presented in the table

9 Table no. 9: Analysis of the baseline scenario Source: Author s calculations 3.3 Forecasts on the medium and long term on the structure of the electricity production system in Romania and assessment of predicted scenarios Elaboration of scenarios within the analysis started from the decarbonization forecasts drawn up at EU level, which take into account the range of values in which lies the share of each type of fuel in the primary energy consumption in 2030 and respectively The decarbonisation scenarios on medium and long term at EU level based on the ranges of values, in which the share of each fuel is situated in the primary energy consumption in 2030 and respectively in 2050, compared with results achieved in in %, are presented in figure no. 2. Figure no. 2: The decarbonisation scenarios on the medium and long term at EU level Source: European Comission - Energy perspective 2050, 2011 It was the author s assumption for the medium and long-term development scenarios for the electricity production sector from Romania, that this sector will follow the same trends with those expected at EU level for the entire energy sector. In comparison to the 2005 situation which led to the development by the European Commission of scenarios for EU 2030 and EU2050 (figure no. 2), the situation of Romania in 2014 (figure no. 1) is different, because in 2014 in Romania, the renewable energy sources have had a higher weighting than the one considered at European level as the reference basis for the scenarios drawn up by the European Commission. Under these circumstances the medium and long-term development scenarios of 217

10 the electricity production sector in Romania, elaborated in this research, will take into account the potential of each energy source in a possible margin that can be achieved from the technological point of view Scenario "1"- Medium term forecast of the structure of the electricity production system in Romania A forecast over medium term in terms of structure dynamics of the electricity production system has been elaborated on the basis of the structure of the electricity production system in Romania on types of technologies in 2014, and on the basis of the general objectives set out in the "Energy perspective 2050", drawn up by the European Commission. The focus was primarily on developing technologies that use renewable sources of energy. The author s forecasts are presented in the second column of the table 10. On medium term, it was forecasted an increase in the share of electricity from renewable sources with 7.3%, this percentage reaching 50.45%, above the share of electricity produced through conventional sources. Table no. 10: Analysis of scenario "1" - Medium term forecast on the structure of the energy production system in Romania Source: Author s calculations After the application of the calculation algorithm, the scenario "1" has obtained a total score of 3.84, compared the baseline scenario, which has obtained a score of only Scenario "2"- Long term forecast of the structure of the electricity production system in Romania In the scenario "2" it was made a long-term forecast on the structure of the electricity production system in Romania, having regard also to the basic structure of the current system and to the targets set out in the "Energy Perspective 2050". As it can be seen in the second column of the table no. 11 it was envisaged an increase in the share of renewable sources of energy, up to % from % under the baseline scenario (2014), and respectively from % in the scenario "1". This increase in the use of renewable sources is consistent with the trend in the use of renewables in the context of the European energy system. 218

11 Table no. 11: Analysis of scenario "2" - Long term forecast on the structure of the system of energy production in Romania Source: Author s calculations According to the calculation algorithm, scenario "2" obtained a score of 3.88, compared to scenario "1" (medium term), which recorded a score of 3.84, and baseline scenario, which obtained a score of Directing the strategies of the electricity production sector based on the integrated analysis In the following, directions will be drawn for guiding the strategies in the field of electricity production in Romania on the basis of the integrated analysis results. Therefore, there will be drawn directions for each electricity production technology, based on the score obtained by applying the integrated analysis scheme, on the results obtained by evaluating the development scenarios for electricity production and the specific elements of our country, namely the technical potential, the existing installations etc. 4.1 Technologies of energy production through conventional sources After the application of the integrated analysis scheme - economic and environmental, the technologies for electricity production that use conventional sources (coal, natural gas, oil and nuclear fuel) had obtained relatively weak scores in comparison to those that use renewable sources of energy, the only exception being the technology that uses natural gas. However, after performing the evaluation of the predicted scenarios (medium and long term) for the electricity production sector, it was found that, by the replacement of the fossil fuel technologies with technologies that use renewable energy sources it is obtained a positive effect Coal Technologies that use coal occupy the last place in the hierarchy obtained after the application of the integrated analysis scheme - economic and environmental (2.76 points). Also, a few flaws related to this type of technology in Romania can be added, namely the difficult mining conditions, certain difficulties related to the selective exploitation of coal, the low possibility to improve the production quality considering the current technology, low competition in the coal extraction activity, and the equipment which is outdated both physically and morally. 219

12 In addition, it has been observed that after the evaluation of the scenarios (medium and long term) by using the presented methodology, following the gradual lowering of the share of the coal technology, the scenarios have obtained a better score, a fact that demonstrates the need to decrease in the future the share of this type of energy production in Romania, at less than 10% in the structure of electricity production system Natural gas This type of energy production, namely the use of natural gas, is the only technology viable in eco-economic terms from all the technologies that use fossil fuels, a fact demonstrated by the score obtained after the application of the integrated analysis scheme (3.76 points). The advantages for our country, in this case are related to a substantial technical expertise, skilled human resources, experience in the natural gas industry, diversified and complex infrastructure, but also the possibility of attracting EU structural funds for the development of this type of technology. However, certain deficiencies are to be highlighted, namely limitations in the natural gas supply in times of consumption peak and the outdated transportation pipelines and regulating stations. So, as a result of this analysis, over the long term is established the fact that it must be taken into consideration the maintenance of a 10-15% share of the technology that uses natural gas, in the structure of national system for producing electricity in Romania Fuel oil After the application of the analysis scheme, the production of electricity through the use of fuel oil received a score of 3.26 points, being ranked second last within the hierarchy, beyond being only the technology using coal. In our country, electricity generation by using this method is insignificant (less than 0.1 %), this fact being due to certain risks and deficiencies of the crude oil sector, among which we may mention the low level of funding sources, in comparison with the needs for investment in extracting, refining, and for the development of the infrastructure linked to the transport of crude oil, the reduced activity in recent years and the absence of a national research institute in the petroleum sector. At the same time there was a decrease in the interest of private investors, due to the fact that there is an unpredictable fiscal and legislative framework in the long run. It may be noted that the full withdrawal of the electricity production via technological means that use oil would represent the best solution for our country in medium and long term Nuclear Among the technologies that produce electricity through the use of conventional fuel, the nuclear technology has achieved the second best score (3.47 points), being beaten only by the technologies that use natural gas. Although it cannot be underestimated the danger of the nuclear technology, however we may evidentiate certain competitive advantages of Romania in this case, namely the fact that our country has the advantages of a full nuclear fuel cycle, the fact that there is an appropriate research infrastructure and an advanced expertise in this field. 220

13 At the same time, we also emphasize the availability of certain opportunities in this field, which are related to the construction of Cernavoda Units 3 and 4, that offer a favorable prospect for producing more nuclear electricity, and to the initializing of certain integrated projects for the opening of new fields and upgrading the preparation-processing-refining capacities. In this context, by analysing the evaluation results of the development scenarios for electricity production, scenarios in which the share of nuclear energy in the production of electricity is increasing, we believe that in the long run the share of energy production using this technology will increase to approximately %. 4.2 Technologies for the production of electricity through renewable sources The technologies for electricity production through renewable sources (wind, hydro, biomass and solar) have obtained better results after the application of the integrated analysis scheme, compared to those that use conventional sources. In the following, directions will be proposed for guiding the strategies for the production of electricity through renewable sources, namely the implementation degree of the technologies that use RES within the national system of electricity production Hydroenergy The hydropower obtained the first place in the hyerarchy resulting by the application of the integrated analysis, with a score of In Romania, this type of electricity production holds an important share in the framework of the national system, accounting for approximately 73 % of the total energy produced from renewable sources in our country. At the same time, we must take into consideration the fact that the program of rehabilitation of the hydropower groups refers to the modernization until the year 2020 of some significant production capacities, with a total power of about 2400 MW. As a result of these improvements, it approximates a power increase of 70 MW and a substantial increase of the amount of produced electricity. In addition, until 2025, the plans for the development of hydroelectric capacity in our country refers to the construction of a hydroelectric group with accumulation by pumping, and having an output of 1000 MW at Tarnita-Lapustesti, and the construction of four groups, with a total power of 32.9 MW (4 x MW), at the confluence of the river Olt with the Danube. According to specialists, the entry into operation of the two hydroelectric power plants until 2025, would increase the average annual production capacity with about 2 TWh. Given the issues mentioned above, and the fact that in the development scenarios it was estimated an increase in the share of hydropower in Romania, and this has made a positive mark upon the total score obtained by the respective scenarios through the application of the presented methodology, we may estimate that the share of hydroelectric energy in our country will increase, reaching approximately 35 %, and this will become in a few years the main form of electricity production in our country Wind energy Through the application of the eco-economic analysis scheme, the technology for obtaining electric energy that uses wind sources has achieved a score of 3.98, being ranked second, after the hydropower. In Romania, the share of wind energy in the national system is 221

14 about 9 %, taking the momentum only in the last few years. The wind potential of our country is estimated at about GWh, Romania having the best conditions in South-East Europe. At the same time, the Black Sea offers the possibility of extending besides the seashores. Investments in wind energy in our country have increased significantly in recent years supported by green certificates system (grants offered at the expense of consumers), reaching 3.8 billion EUR in the period Another advantage is that in Romania the areas with good wind for energy production are sparsely populated, being an extra in terms of construction of wind parks. Thus, companies like EDP Renovaveis from Portugal, Iberdrola from Spain and OMV-Petrom are interested to invest in the construction of such plants in our country. Therefore, considering the score obtained in the analysis and the wind power potential from Romania, the share of this kind of technology should increase, up to approximately % on the long term Biomass The technology that produces electricity by using biomass has obtained the lowest score (3.26 points) from the technologies that use renewable sources. The main negative aspects of biomass usage are represented by the negative effects of deforestation, the forest acting as a sink, and the fact that plants require very large surfaces for cultivation, interfering with agricultural areas, which are allocated mainly for food production. Another negative effect is the development of significant quantities of carbon monoxide emissions from the combustion of biomass. At present, the share of the use of biomass for the electricity production in Romania is extremely low (about 0.6%), the biomass being generally used to produce thermal energy. On long term, we may presume the fact that biomass will continue to produce more thermal energy and maybe a lot of biogas, and its share in the electricity production system will not exceed 1% Solar energy Solar technology occupies the third place, with a score of 3.93 in the hierarchy of the technologies, after the application of the integrated analysis scheme - economic and environmental. At the same time, as a result of the increase in the share of solar energy in the elaborated scenarios and after the algorithm application it was obtained a better score. Romania has a significant solar potential, but this potential is being very little exploited in producing electricity using solar panels, the share of this type of energy representing 1.55% nationwide. Considering the significant positive effect of the implementation of solar panels to produce electricity instead of other types of technologies, we appreciate the fact that the share of solar power in Romania for electricity production should increase, in the long run to about 4-5%. 5. Conclusion In the context of the energy sector situation at European level and of the current economic crisis, the integrated multidisciplinary analysis is gaining momentum in the identification process of viable alternatives in terms of sustainable development. 222

15 This research is aimed at developing an integrated analysis scheme economic and environmental for the assessment of the electricity production technologies, scheme that was later used as a support system for the analysis of the structure of electricity production from Romania and of the development scenarios on medium and long term, elaborated by the author on the basis of the European level forecasts. Based on the carried out analysis, there were drawn development directions for each technology for the electricity production used in the national system from Romania, other specific criteria of our country being considered, like the technical potential or the condition of the existing installations. The outlined directions had as its basic principle the development of technologies that use renewable energy sources, these technologies obtaining a higher average score compared to classical technologies, through the application of the integrated analysis scheme. At the same time, it has taken into consideration the need for a reduction of the fossil fuels share in the national system for the electricity production, due to the fast depletion of these resources. These directions cannot be followed without a proper understanding of the long-term objectives and without a good cooperation of all the actors involved in the decision-making process. References: [79] ENEL Romania, (2015), System structure of energy production in Romania on the types of technologies in 2014; [80] European Commission, (2006), Reference Document on Best Available Techniques (BREF-BAT 2006); [81] National Institute of statistics, Tempo-online database; [82] Ministry of Environment and Climate Change, (2012), The National Inventory of Greenhouse Gases Emissions, ; [83] Şchiopu, E. C., (2011), Research on flue gas desulphurisation derived from lignite combustion using absorbent calcium hydroxide and sodium hydroxide solution, Annals of the "C. Brancusi" University of Târgu-Jiu, Engineering Series, Issue 1/2011; [84] Intergovernmental Panel on Climate Change, (2006), IPCC Guidelines for National Greenhouse Gas Inventories; [85] Risto, T., Aija, K., Comparison of Electricity Generation Costs, Lappeenranta University of Technology, 2008; [86] U.S. Energy Information Administration, (2013), Levelized Cost of New Generation Resources in the Annual Energy Outlook 2013; [87] European Commission, (2011), The decarbonisation scenarios on the medium and long term at EU level; [88] EMEP/EEA Air Pollutant Emission Inventory Guidebook, (2009), Chapter 1.A.1 Combustion in energy industries. Acknowledgement: This paper is financially supported within the project entitled Horizon Doctoral and Postdoctoral Studies: Promoting the National Interest through Excellence, Competitiveness and Responsibility in the Field of Romanian Fundamental and Applied Scientific Research, contract number POSDRU/159/1.5/S/ This project is co-financed by European Social Fund through Sectorial Operational Program for Human Resources Development Investing in people! 223