WORKGROUP REPORT ON GREENHOUSE GAS REDUCTION IN ENERGY SECTOR

Transcription

1 WORKGROUP REPORT ON GREENHOUSE GAS REDUCTION IN ENERGY SECTOR MINISTRY OF ENERGY AND NATURAL RESOURCES GENERAL DIRECTORATE OF ENERGY AFFAIRS Ankara

2 CONTENTS CHAPTER STRUCTURE OF THE ENERGY SECTOR Energy Policies Production Consumption Imports and Exports Energy end consumption Electricity CHAPTER II ENERGY PLANNING General Energy Planning and Supply-Demand Balance CHAPTER III SCENARIOS FOR REDUCING GREENHOUSE GAS EMISSIONS CAUSED BY ENERGY SECTOR IN TURKEY, AND THEIR OUTCOME Methodology Scenarios Basic Approaches Reference Scenario Outcomes General Energy Energy end consumption Primary Energy Supply and Net Energy Imports Emissions Comparison Between Scenarios Outcome of Alternative Scenarios CHAPTER IV MEASURES FOR CONTROLLING GREENHOUSE GAS EMISSIONS Incentive Mechanisms For Controlling Emissions In Turkey CONCLUSION

3 TABLES Table 1 : Primary Energy Sources Production... 4 Table 2 : Primary Energy Sources Consumption... 6 Table 3 : Development of Energy Demand, Production and Imports/Exports (thousand TEP)... 8 Table 4 : Total Energy end consumption by Resources... 9 Table 5 : Distribution of General and Energy end consumption by Sectors, KTEP...10 Table 6 : Electricity Development...13 Table 7 : Development of Installed Electricity Power Capacity by Resources, MW...14 Table 8 : Development of Electricity Consumption by Sectors, GWh...15 Table 9 : General Energy Demands, MTEP...17 Table 10 : Distribution of Final Energy Demand by Sources, MTEP...18 Table 11 : Distribution of Final Energy Demand by Sectors, MTEP...19 Table 12 : Production Targets For Primary Energy Sources, MTEP...21 Table 13 : Energy Resource Imports, MTEP...22 Table 14 : Development of Energy Demand, Production and Imports, thousand TEP...23 Table 15 : Long-term Electricity Demand, TWh...23 Table 16 : Electricity Production by Resources, TWh...24 Table 17 : Reference Scenario, Energy end consumption, MTEP...28 Table 18 : Reference Scenario, Primary Energy Supply (MTOE)...30 Table 19 : Reference Scenario, CO 2 Emissions...31 Table 20 : Reference Scenario, CH 4 Emissions...31 Table 21 : Reference Scenario, N 2 O Emissions...31 Table 22 : Reference Scenario, NO X Emissions...32 Table 23 : Reference Scenario, SO 2 Emissions...32 Table 24 : Comparison Between Reference Scenario and Greenhouse Gas Reduction Scenario...33 FIGURES: Figure 1 : Energy Production by Resources, thousand TEP... 5 Figure 2 : Energy Supply by Resources, thousand TEP... 7 Figure 3 : Energy end consumption by Resources, thousand TEP... 9 Figure 4 : Energy end consumption by Sectors, thousand TEP...10 Figure 5 : Industrial Sector Energy Consumption, thousand TEP...11 Figure 6 : Housing Sector Energy Consumption, thousand TEP...12 Figure 7 : Development of Electricity Production, GWh...13 Figure 8 : Development of Installed Power, MW...14 Figure 9 : Sectoral Electricity Consumption, GWh...16 Figure 10 : General Energy Demand by Resources, thousand TEP...18 Figure 11 : Final Energy Demand by Resources, thousand TEP...19 Figure 12 : Final Energy Demand by Sectors, thousand TEP...20 Figure 13 : Energy Production by Resources, thousand TEP...21 Figure 14 : Energy Resource Imports, thousand TEP...22 Figure 15 : Sectoral Electricity Consumption, GWh...24 Figure 16 : Development of Electricity Production, GWh...25 Figure 17 : Reference Scenario, Energy end consumption by Sectors (Net, BTEP)...29 Figure 18 : Reference Scenario, Energy end consumption by Fuels...29 Figure 19 : Reference Scenario, Primary Energy Supply (KTEP)...30 Figure 20 : Comparison Between Reference Scenario and Primary Energy Supply-Imports-Exports

4 CHAPTER I STRUCTURE OF THE ENERGY SECTOR 1. Energy Policies Energy policies play a substantial role in realizing economic growth and social development targets in a sustainable way. Like other world countries, Turkey's fundamental policy is to provide energy in a timely, adequate, reliable, competitively-priced and environment-friendly manner. In this context, it is important to: Ensure energy supply security and reliability, Increase strategic petroleum and natural gas storage capacity, Diversify resources, Attach importance to utilization and development of domestic and renewable resources, Utilize and develop different technologies, and increase domestic production, Increase efficiency of energy at all stages from its production to consumption taking into account the size of investment need and environmental impacts, Increase fuel flexibility (allowing for the use of alternative energy sources in production), Make best use of our country s potential to become an energy corridor owing to our geostrategic position, and participate at all stages to the process of transmitting Middle Eastern and Caspian petroleum and natural gas to the world market (share from reserves, transmission, refinery, marketing, LNG), Structure the energy sector as a functioning market, and in a way that is based on transparency and competition, Participate in and ensure integration with regional cooperation projects, Take into consideration environmental impacts at all stages. Given that EU candidate status of our country is now official, and that negotiations will be initiated within a certain calendar, compliance with EU acquis is a priority target for Turkey. To that end, the Electricity Market Regulatory Authority was established by Law No for the purpose of controlling markets and creating an environment of liberal competition, which was later renamed by Natural Gas Market Law No as the Energy Market Regulatory Authority (EPDK). The agency was assigned the task of regulating and controlling the petroleum market in accordance with Petroleum Market Law No. 5015, and the liquefied petroleum gases market in accordance with Liquefied Petroleum Gases (LPG) Market Law No Such regulation aims at creating a financially sound, stable and transparent energy market which is capable of operating in a competitive environment according to private law provisions for providing consumers with electricity, natural gas, petroleum and LPG in an adequate, high-quality, uninterrupted, low-cost and environment-friendly manner; and at ensuring an independent market regulation and control. 2. Production While Turkey s primary energy production is based mainly on coal and renewable energy resources (hydraulic, biomass, wind, solar and geothermal), consumption demand is met, next to these resources, with petroleum and increasingly with natural gas recently. 4

5 Table 1: Primary Energy Sources Production Hard coal (thousand tons) Lignite (thousand tons) Asphaltite (thousand tons) Petroleum (thousand tons) Natural gas (million scm) Hydraulic (GWh) Geothermal & wind, elect. (GWh) Geothermal, heat (KTEP) Solar (KTEP) Biomass (KTon) Total (KTEP) Increase rate (%/year) Source: ETKB In 2005, Turkey s primary energy resource production was realized at 25,2 MTEP (Million Tons of Petroleum Equivalent). Of the total primary energy resources production, 47 was coal, 10 was petroleum, 4 was natural gas, 14 was hydraulic and geothermal electricity, and 25% was other renewable resources. Between 1990 and 2005, production of wood and animal/vegetable waste, which are referred to as non-commercial fuels, suffered a significant demand-related decrease due to the fact that our country developed further, and access to energy became much easier. In the same period, solar and wind energies started to appear in the balances, and significant increases were recorded in geothermal heat consumption as well. Lignite production increased from 44,4 MT (Million Tons) in 1990 to 65 MT in 1998, but starting with this year, lignite production started to fall due to the decrease in the amount of lignite consumed at power plants, which was realized at 55,3 MT in Coal has an important place in Turkey's domestic resource based energy production policy. In 2005, share of total coal production in primary energy resources production was 45% with 11,4 MTEP. Hydraulic energy production increased from 23,1 billion kwh in 1990 to the level of 42,2 billion kwh in 1998, but due to draught, 2001 production was realized at a mere 24,01 billion kwh. And in 2005, hydraulic energy production was realized at 39,6 billion kwh. Our energy production suffered from irregularities in certain years due to fluctuations in flow rates of rivers installed with hydroelectricity power plants. 5

6 Figure 1: Energy Production by Resources, thousand TEP While petroleum production was realized at 2,4 million tons in 2005, this production amount is equal to 8% of the total petroleum demand. Starting in 1976 in Turkey, Natural gas production was 980 million m 3 in In 2005, Turkey s energy supply increased by 4,3% compared to 2004, and was realized at 91,6 MTEP. 3. Consumption Comparing 1990 and 2005, one sees significant changes in the structure of energy resources. Being dominated by petroleum (45%) in 1990, energy supply was still dominated by petroleum (33%) in 2005, while share of natural gas increased from 6% to 27% due to its rapid increase in recent years. In spite of the significant reduction in the use of bio-fuels, which are grouped under renewable resources, the increase observed in geothermal heat, solar and wind energies caused total production of these resources to remain at the same level, but their share in the overall production decreased from 14% to 7%. Within this period, coal consumption decreased from 31% to 28%, and hydraulic energy consumption nearly doubled with its share in the energy supply stayed at 4% like in

7 Table 2: Primary Energy Sources Consumption Hard coal (KTon) Lignite (KTon) Asphaltite (KTon) Petroleum (KTon) Natural gas (Mm 3 ) Hydraulic (GWh) Geothermal & wind, elect. (GWh) Geothermal, heat (KTEP) Solar (KTEP) Biomass (KTon) Net electricity imports (GWh) Secondary coal (KTon) Total consumption (KTEP) Increase rate (%/year) Source: ETKB Looking at the consumption of these resources; hard coal consumption increased from 8,2 million tons in 1990 to 19,4 million tons in 2005 with a yearly average increase of 5,9%. Lignite consumption increased from 45,9 million tons in 1990 to 55,3 million tons in In 2005, 88% (48,6 Mt.) of the lignite supply was consumed by thermal power plants. In 2005, 18% (13,4 MTEP) of total energy end consumption was coal. Petroleum consumption increased from 23 MT in 1990 to 30 MT in 2005 with a yearly average increase of 2%. About half of petroleum is consumed in the transportation sector, which figure reached 13,7 MTEP in Natural gas consumption increased rapidly particularly due to natural gas import agreements executed as of mid-1980s. Of the total primary energy supply in 2005, 27% was natural gas with 27,3 billion m 3 ; 47% of the total natural gas supply was used for electricity generation activities. Starting with 500 million m 3 in 1987, gas imports reached around 27 billion m 3 in million m 3 of natural gas produced in Turkey covers only 4% of the consumption in Remaining part of the demand is imported by means of pipelines or in the form of liquefied natural gas (LNG). Renewable energy production reached 10,1 MTEP in 2005, which amount is equal to 11% of the total primary energy supply. Renewable energy production is second to total coal production in Turkey's primary energy production. Energy produced from renewable resources corresponds to 40% of the domestic production. Half of the renewable energy supply (5,3 MTEP) consists of biomass (wood, animal/vegetable wastes). Furthermore, 7% of energy end supply is produced from renewable resources other than hydraulic energy, which figure is higher than European average. And the remaining part comes from other resources, a major part of which is hydraulic. 7

8 Figure 2: Energy Supply by Resources, thousand TEP 4. Imports and Exports While almost all kinds of energy resources are available in our country, energy resources other than lignite and hydraulic are very far from meeting country demand. Historically being heavily dependent on external resources for meeting the energy demand, Turkey s Ratio of Meeting Demand by Domestic Production was 27.5% in In other words, Turkey s total energy imports, which was realized at 72,4 MTEP in 2005, corresponded to 72.5% of total energy supply. Table 3: Energy Demand-Production-Imports-Exports Development (thousand TEP) Demand Production Imports Exports Bunker Net Imports Increase (%/year) - 6,2 9,1-8,8 9,5 11,6 4,5 5,3 TYUKO* (%) 46,3% 41,3% 32,6% 34,3% 30,8% 27,8% 28,0% 27,5% *TYUKO: Ratio of Meeting Demand by Domestic Production Note: Increases for years 1990, 1995 and 2000 are given in yearly average increase. Source: ETKB In energy resource imports, raw petroleum and petroleum products have the first place with 47% (34,5 MTEP), which is followed by natural gas with 33% (24,3 MTEP), coal and coal products with 19% (13,5 MTEP), and electricity with 1% (0,05 MTEP) respectively. In 2005, our energy resource exports including bunker was 5,8 MTEP, majority of which consisted of petroleum products (97,3%), and the remaining part was electricity. 8

9 5. Energy end consumption Being 41,6 MTEP in 1990, energy end consumption (NET) yearly average reached 73 MTEP in 2005 with an increase of 3,8%. From 1990 to 2005, a significant change took place in Turkey s energy end consumption structure, particularly in consumption of electricity and natural gas. Share of natural gas increased from 1,9% in 1990 to 18% in 2005, while share of electricity increased from 9,4% to 15% within the same period. Table 4: Total Energy end consumption by Resources Hard coal (KTon) Lignite (KTon) Asphaltite (KTon) Petroleum (KTon) Natural gas (Million m 3 ) Electricity (GWh) Geothermal, heat (KTEP) Solar (KTEP) Biomass (KTon) Secondary coal (KTon) Total Energy end consumption (KTEP) Growth Rate (%) ,9 6,1 9,3 6,2 5,8-8,9 Source: ETKB While increases were observed in both use of geothermal heat and solar energy consumption in this period, there were decreases in the consumption of non-commercial fuels. Furthermore, wind-driven electricity production started as of Largest share in energy end consumption for 2005 belongs to petroleum with 36%. Figure 3: Energy end consumption by Resources, thousand TEP 9

10 Looking at the distribution of energy end consumption by sectors from 1990 to 2005; being dominated by the housing and services sector (37%) in 1990, consumption started to concentrate more on the manufacturing sector (44%) including non-energy consumption which was around 2 MTEP in 2005, which was followed by housing and services (32%), transportation (19%) and agriculture (5%) sectors. As these ratios suggest, while the highest yearly average increase rate from 1990 to 2005 was realized in the manufacturing sector, the lowest increase was observed in the housing and services sector. Table 5: Distribution of General and Energy end consumption by Sectors, KTEP 1990 % 1995 % 2000 % 2001 % 2002 % 2003 % 2004 % 2005 % Manufacturing Housing and serv Transportation Agriculture Non-energy Energy End Consumer Transformation Sector Total Consumption Source: ETKB Figure 4: Energy end consumption by Sectors, thousand TEP Comparing 1990 and 2005, one sees that share of petroleum decreases and it is no more the primary fuel of the manufacturing sector (a reduction from 41% to 15%), being replaced by coal (37%). Within the same period, the share of natural gas being used in the sector continued to increase rapidly from 5% to 22%. Share of electricity increased from 16% to 18%. 10

11 Figure 5: Industrial Sector Energy Consumption, thousand TEP Housing and services sector consumption increased by one third to become 23,7 MTEP in 2005 compared to a 15,4 MTEP in This increase is attributable to population increase rate, enhancement of living standards, and rapid increase in building activities. Housing and services sector consumes the highest number of energy resources from a resource diversity perspective. Of the energy consumed in the housing and services sector, 27% came from renewable energy resources. This particularly originates from wood and animal/vegetable waste (22%), which are grouped under renewable resources, and of energy resources, geothermal heat is 4% and solar is 1%. While geothermal heat is used for heating houses and greenhouses, solar energy is used for heating water. Rising rapidly in this period, share of electricity increased from 9% to 22%. Improvement of living standards, and increase in the use and diversity of electrical household appliances caused a rapid increase in electricity consumption within the sector. Introduced in 1988, share of natural gas has become 27%. 11

12 Figure 6: Housing Sector Energy Consumption, thousand TEP Energy consumption of the transportation sector increased from 8,7 MTEP in 1990 to 13,7 MTEP in 2004 with an increase of 63%. Turkey s transportation sector being dominated by passenger and freight transportation on land, majority of the energy produced in the sector is used in land transportation. Of the total energy consumption as of the end of 2005, 85% was in land, 10 was in airways, 3% was in maritime, and 2% was in railways. Being used in railway transportation in 1980s, coal was later replaced by electricity. As of 2005, primary fuel consumed in the sector was petroleum products, and a small amount of natural gas and electricity is also consumed. Since LPG consumption was recently encouraged in automobiles for preventing transportation-induced pollution in our country, there were significant increases in share of LPG in total petroleum products consumed in transportation. In 2005, share of LPG in total petroleum products became 11%. Energy consumption of agriculture sector increased from 2 MTEP in 1990 to 3,4 MTEP in Within Turkey s total energy end consumption, share of the agriculture sector increased from 3,5% in 1980 to 5% in Energy need of the sector being met from diesel oil and electricity, share of electricity increased from 1% in 1980 to 11% in Per capita energy consumption, which was 944 KGPE (kilogram of petroleum equivalent) in 1990, reached 1284 KGPE in Electricity Being a secondary source of energy, consumption of electricity recorded significant increases as of 1980s. By the end of 2005, yearly average of electricity production was realized at GWh with an increase of 7,1%, compared a GWh in With 636 million kwh of imports and 1798 million kwh of exports, consumption was 161 billion kwh in

13 Table 6: Electricity Development Installed power capacity (MW) Production (GWh) Imports (GWh) Exports (GWh) Gross supply (GWh) Increase rate (%) ,4-1,1 4,5 6,5 6,3 7.2 Net consumption (GWh) Increase rate (%) Per capita consumption (net) (kwh) Per capita consumption (gross) (kwh) Source: ETKB Figure 7: Development of Electricity Production, GWh In 2005, total installed electricity power reached the level of MW. Electricity is critical in the energy sector. Electricity is an energy that attracts increasing demand in even energysaturated developed countries. Of the total installed power in 2005, MW (67%) was thermal, MW (33%) was hydroelectricity, and 35 MW was geothermal and wind energy power plants. Having the highest share in the thermal capacity until 1985, the share of lignite power plants started to decrease as of this year due to natural gas fueled power plants added to the system. Table 7: Development of Installed Electricity Power Capacity by Resources, MW 1990 % 1995 % 2000 % 2001 % 2002 % 2003 % 2004 % 2005 % Hard coal 332 2, , , , , , Lignite , , , , , , Petroleum , , , , , , Natural gas , , , , , , Geothermal 18 0,1 18 0,1 18 0,1 18 0,1 18 0,1 15 0, Other (*) 0, ,2 43 0,2 43 0,1 47 0,1 48 0, Total Thermal , , , , , , Total Hydro , , , , , , TOTAL *Wind, Biomass and multi-fuel etc. Source: ETKB 13

14 Figure 8: Development of Installed Power, MW Looking at the distribution of electricity production by resources; of the GWh of production realized as of 2005, GWh (75%) came from thermal power plants, GWh (25%) from hydroelectricity power plants, and 284 GWh from geothermal, wind and renewable and waste power plants. As of 2005, natural gas power plants have a significant share of 44% in electricity production. Table 8: Development of Electricity Consumption by Sectors, GWh Manufacturing Housing Agriculture Transportation Total Per capita consumption (Net) (KWh) Source: TEDAS 14

15 Looking at the distribution of electricity consumption by sectors; while electricity consumption of the manufacturing sector, which had a share of 62% in 1990 with GWh, reached GWh in 2005, share of this sector in total consumption decreased to 49%. And while consumption in the housing and services sector increased from GWh to GWh, share of this sector in total electricity consumption increased from 36% to 47%. Share of the agriculture sector increased from 1% to 3%, and consumed amount reached GWh. Within the same period, there were no significant changes in share of the transportation sector in total electricity consumption. Figure 9: Sectoral Electricity Consumption, GWh Per capita net electricity consumption reached 1846 kwh compared to a 786 kwh in 1990, and in the meantime, per capita gross electricity consumption reached 2254 kwh in 2003 compared to a 958 kwh in

16 CHAPTER II ENERGY PLANNING 1. General Energy Planning and Supply-Demand Balance Planning studies conducted by the Ministry of Energy and Natural Resources employed MAED, WASP and BALANCE sub-modules of the ENPEP model values contained in the first section of the report are provisional realization figures, and since planning studies started in 2005, and year 2003 was taken as basis by the model, 2005 values contained in the said section are results obtained from the model. According to the outcome of this study, the general energy demand is expected to increase from 92 MTEP in 2005 to 223 MTEP in 2020 with a yearly average increase rate of 6,1%. Table 9: General Energy Demands, MTEP Hard coal and secondary coal Lignite and asphaltite Petroleum Natural gas Hydraulic Nuclear Renewable Net electricity imports TOTAL Increase (%) Per capita consumption (KTEP) Source: ETKB Looking at the distribution of demand by resources, one sees that in 2005, share of coal was 29%, petroleum was 37%, natural gas was 22%, hydraulic was 4%, while share of other renewable energy resources was 8%, which shares are expected in 2020 to become 37% for coal, 27% for petroleum, 23% for natural gas, 4% for hydraulic, 5% for new and renewable resources, and 4% for nuclear. Being 1284 KGPE in 2005, per capita general energy consumption is expected to reach 1631 KGPE in 2010, 2040 KGPE in 2015, and 2541 KGPE in

17 Figure 10: General Energy Demand by Resources, thousand TEP Table 10: Distribution of Final Energy Demand by Sources, MTEP Hard coal and secondary coal Lignite and asphaltite Natural gas Petroleum Renewable Non-energy Electricity NET INCREASE (%) Source: ETKB Being 73 MTEP in 2005, yearly average of energy end consumption is expected to reach 177 MTEP in 2020 with an increase of 6,1%. Share of petroleum is expected to decrease from 37% in 2005 to 31% in 2020; total share of electricity is expected to increase from 19% to 24%, coal from 21% to 24%, and natural gas from 11% to 14%; share of renewable energy resources is expected to decrease from 10% to 5%. 17

18 Figure 11: Final Energy Demand by Resources, thousand TEP Table 11: Distribution of Final Energy Demand by Sectors, MTEP 2005 % 2010 % 2015 % 2020 % MANUFACTURING HOUSING AND SERVICES TRANSPORTATION AGRICULTURE NON-ENERGY INTERNAL CONSUMPTION ENERGY END CONSUMPTION Source: ETKB Looking at the distribution consumption by sectors from 2005 to 2020; having the highest share in 2005 with 37%, the manufacturing sector is expected to maintain its position and again have the highest share in 2020 with 43%; share of the transportation sector is expected to increase in intermediary periods from 19% to 20%, but regress back to 19% at the end of the planning period; and share of the housing and services sector is expected to decrease from 30% to 27%. 18

19 Figure 12: Final Energy Demand by Sectors, thousand TEP Primary energy resource production targets of our country, which are based on presently proven reserves, are given in Table 11. Significant increase is expected in the production of lignite and hydraulic energy. Lignite production is expected to increase from 12 MTEP in 2003 to 32 MTEP in 2020 with a yearly average increase rate of 7%, while hydraulic energy is expected to increase from 4 MTEP to 9 MTEP in the same period with a yearly average increase rate of 6%. Thus, production of primary energy resources is expected to increase from 27 MTEP in 2005 to 38 MTEP 2010 and to 66 MTEP in 2020 with a yearly average increase rate of 6,1%. Table 12: Production Targets For Primary Energy Sources, MTEP HARD COAL LIGNITE ASPHALTITE 0,3 0,3 0,3 0,3 PETROLEUM NATURAL GAS 0,4 0,2 0,2 0,2 NUCLEAR 8 8 HYDRAULIC WIND 0,4 1 1 GEOTHERMAL, ELECTRICITY 0,1 0,4 0,4 0,4 GEOTHERMAL, HEAT SOLAR 0,4 0,5 1 1 WOOD ORGANIC WASTE TOTAL INCREASE (%) Source: ETKB 19

20 Figure 13: Energy Production by Resources, thousand TEP While almost all kinds of energy resources are available in our country, energy resources other than lignite and hydraulic are not enough to meet country demand. In reliably meeting our energy demand, which increased in parallel to our industrialization and development, importing energy is inevitable today as it will be inevitable in the future. Below are the names and amounts of energy resources planned to be imported in coming years. Table 13: Energy Resource Imports, MTEP PETROLEUM NATURAL GAS COAL ELECTRICITY 1 TOTAL (THOUSAND TEP) INCREASE (%) 5,3 5,1 6,0 Source: ETKB 20

21 Figure 14: Energy Resource Imports, thousand TEP Being 68 MTEP in 2005, total energy imports are expected to reach 92 MTEP in 2010, and 158 MTEP in While petroleum had the largest share of 53% in total energy imports of 2003, it is followed by natural gas with 30%, and hard coal with 17%. In 2020, petroleum will be 38% followed by natural gas with 33%, hard coal with 28% and electricity with 1%. As Table 13 suggests, since our energy resources and therefore our production amounts are limited, and consequently imports are gradually increasing, the Ratio of Meeting Demand by Domestic Production, which was 35% in 2000, is expected to become 30% in Table 14: Development of Energy Demand, Production and Imports, thousand TEP DEMAND PRODUCTION IMPORTS TYUKO* (%) *TYUKO: Ratio of Meeting Demand by Domestic Production Source: ETKB Table 15: Long-term Electricity Demand, TWh MANUFACTURING HOUSING AND SERVICES AGRICULTURE TRANSPORTATION NET DEMAND GROSS DEMAND PER CAPITA CONSUMPTION, kwh (Gross) Source: ETKB 21

22 Being 163 billion kwh in 2005, yearly average of gross electricity demand is expected to become 499 billion kwh in 2020 with an increase of 7,7%. Having a share of 50% with 64 billion kwh of net electricity demand in 2005, demand of the manufacturing sector is expected to reach 228 billion kwh in 2020, which corresponds to a share of 52%; and the housing and services sector is expected to decrease from 60 billion kwh (47%) in 2005 to 195 billion kwh (45%) in Figure 15: Sectoral Electricity Consumption, GWh Table 16: Electricity Production by Resources, TWh Coal Petroleum Natural gas Nuclear Hydraulic and Renewable TOTAL

23 Figure 16: Development of Electricity Production, GWh Contribution of nuclear energy to electricity production is expected to be around 7% in The thermal/hydraulic balance in production being 74% thermal to 26% hydraulic in 2005, it is expected to be 76% thermal to 24% hydraulic in Being 1994 kwh in 2005, per capita electricity consumption is expected to reach kwh by the end of 2005, kwh in 2010, and kwh in This amount is still very much below the level in developed countries. 23

24 CHAPTER III SCENARIOS FOR REDUCING GREENHOUSE GAS EMISSIONS CAUSED BY ENERGY SECTOR IN TURKEY, AND THEIR OUTCOME The study titled Energy Sector Modeling aims at composing information obtained from other studies with a view to perform an integrated system analysis that produces solutions for various energy and environment issues and offers different options; and presenting results to decision makers. Said work was managed using BALANCE, a sub-module of the ENPEP (Energy Planning and Evaluation Program) Model developed by Argonne National Laboratories (ANL). 1. Methodology This study was completed by the Energy, Environment and Economic Systems Analysis Center of Argonne National Laboratories (ANL-CEEESA) through cooperation and support of ETKB, EUAS and TEIAS. Analytic methodology of the study is based on ENPEP (Energy and Power Evaluation Program) which is an integrated energy, environment and economic analysis modeling system. ENPEP was developed by ANL with support from International Atom Energy Agency (IAEA), and was offered to the service of developing countries for increasing analysis abilities of countries, establishing the ideal structure to that end, and to conduct a comprehensive system analysis through alternative studies ranging from macroeconomy to environmental impacts. While the MAED (Model of Analysis of Energy Demand) module of ENPEP is used in our country for planning general energy and electricity demand, the WASP (Wien Automatic System Planning Package) module is used for planning electricity production. And the BALANCE module plans the fossil and renewable energy flow which covers all stages from extraction to end consumption of energy, and also conducts an environmental analysis of greenhouse gases and other gases arising from such energy flow. Based on a generalized balance model approach, the model is a system of concurrent and nonlinear relations which defines change occurring in the amount and price of energy in each link of the energy chain from production to consumption. Other than the foregoing, the VALORAGUA model was used for assessing the hydraulic-related part of the electricity system. 2. Scenarios Initially, a Reference Scenario was created in order to allow for a comparison between alternative scenarios, and to create a basis for these. A Reference Scenario is a business-asusual scenario that reflects existing government policies and the technological situation. The Greenhouse Gases (GHG) Reduction Scenario, which was adapted to the model for analysis, was created particularly for analyzing policies and technologies for reducing CO 2, CH 4 and N 2 O gases. The scenarios are listed below: Low Demand Scenario (Low Growth Scenario), Increasing demand side efficiency (Demand Side Management-DSM Scenario), Nuclear power plant scenario (No Nuclear Scenario), Increasing use of cogeneration facilities in manufacturing sector (Cogeneration Scenario), 24

25 3. Basic Approaches MAED July 2004 results, which were officially published by the ETKB as the latest energy demand series and electricity demand estimations, were used. During the electricity production energy period, lowest cost was assumed for the entire system. Main macroeconomic data like economic, social and demographic information were taken from the Undersecretariat of State Planning Organization. Price Planning period, which is used for imported coal, raw petroleum and natural gas price projections in the reference scenario and in all alternative scenarios, was taken as between Real discount rate was agreed upon as 10% (starting from 2003). All prices were quoted in US Dollars currency rate of Indices were taken from US Energy Department data. Greenhouse gas emission factors for all sectors and technologies were taken from IPCC (Intergovernmental Panel on Climate Change) Guide; PM, NO X and SO 2 emission factors for electricity sector were taken from EUAS data; emission factors for transportation sector were taken from study titled Emission in Non-Electricity Sectors; dust emission factors for non-electricity sectors were taken from AP Reference Scenario Outcomes 4.1. General Energy Energy end consumption According to MAED data, energy end consumption is to increase from 68 MTEP to 177 MTEP between 2003 and 2020, which corresponds to a yearly increase of 5,8%. Increase rate is 6,5% in manufacturing sector, 6,1% in transportation sector, 5,3% in housing sector, 4,7% in agriculture, and 2,6% in non-energy respectively. Greatest increase rate among fuels is seen in hard coal and coke (by 8,1%). With this increase rate, hard coal and coke are equal to 21,5% of total consumption by the end of the planning period (14,9% in 2003). Although natural gas also realized a high increase rate (6,8% yearly), its share in total increased very little (from 12,2% to 14,2%). Having the second highest increase rate (7,7%), share of electricity increased within the same period from 17,7% to 24,3%. On the other hand, renewable resources increased with an average yearly increase of 1,8% from 6,9 MTEP to 9,3 MTEP, while its share in total was reduced by half. This is mainly due to the decrease in non-commercial bio-fuels. Table 17: Reference Scenario, Energy end consumption, MTEP Sector Manufacturing (MTEP) Housing (MTEP) Transportation (MTEP) Agriculture (MTEP) Non-energy (MTEP) Internal consumption (MTEP) TOTAL (MTEP)

26 4.1.2 Primary Energy Supply and Net Energy Imports Primary energy supply is expected to increase from 84 MTEP to 223 MTEP within the planning period from 2003 to We turned toward imports in order to meet the demand for petroleum products, which increased after full-capacity operation of the refineries. Therefore, share of raw petroleum within total supply decreased by more than half while share of natural gas was almost maintained with an increase from 19,5 MTEP to 51,6 MTEP. Total energy imports increased from 60,6 MTEP to 157,3 MTEP at the end of the planning period. In spite of such increase in imports, Turkey's dependence on imports slightly decreased (from 77,7% to 70,8%). While 41,6% of imports was raw petroleum in 2003, this figure decreased to 17,6% in On the other hand, share of petroleum products increased from 7% to 20,5%. Figure 17: Reference Scenario, Energy end consumption by Sectors (Net, BTEP) Figure 18: Reference Scenario, Energy end consumption by Fuels 26

27 Table 18: Reference Scenario, Primary Energy Supply (MTOE) Fuel Hard coal/coke (MTOE) Lignite/Asphaltite (MTOE) Petroleum (MTOE) Natural gas/lng (MTOE) Hydro (MTOE) Nuclear (MTOE) Renewable (MTOE) Net Electricity Imports (MTOE) TOTAL (MTOE) Figure 19: Reference Scenario, Primary Energy Supply (KTEP) Figure 20: Comparison Between Reference Scenario and Primary Energy Supply-Imports-Exports 4.2. Emissions Looking at the Reference Scenario from an emissions point of view, one sees that carbon dioxide emissions increase from 213 million tons to 605 million tons with a yearly average increase of 6,3%. While the high increase rate (7,1%) in the electricity sector is due to the dependency on solid fuels, the lower increase rate (5,9%) in the manufacturing sector is attributable to the use of natural gas and electricity. CO 2, CH 4, N 2 O, NO X, CO, NMVOC, SO 2 and dust emissions calculated by the model are given below: 27

28 Table 19: Reference Scenario, CO 2 Emissions Sector Electricity (10 6 tons/year) Manufacturing (10 6 tons/year ) Transportation (10 6 tons/year ) Housing (10 6 tons/year ) Agriculture (10 6 tons/year ) TOTAL (10 6 tons/year ) Table 20: Reference Scenario, CH 4 Emissions Sector Electricity (10 3 tons/year) Manufacturing (10 3 tons/year)) Transportation (10 3 tons/year) Housing (10 3 tons/year) Agriculture (10 3 tons/year)) Mining (10 3 tons/year) TOTAL (10 3 tons/year) Table 21: Reference Scenario, N 2 O Emissions Sector Electricity (tons/year) , , , Manufacturing (tons/year ) , , , Transportation (tons/year ) Housing (tons/year ) 1, , , , Agriculture (tons/year ) TOTAL (tons/year ) 3, , , , Table 22: Reference Scenario, NO X Emissions Sector Electricity (10 3 tons/year) Manufacturing (10 3 tons/year)) Transportation (10 3 tons/year) , Housing (10 3 tons/year) Agriculture (10 3 tons/year)) TOTAL (10 3 tons/year) 1, , , , Table 23: Reference Scenario, SO 2 Emissions Sector Electricity (10 3 tons/year) , , , Manufacturing (10 3 tons/year)) Transportation (10 3 tons/year) Housing (10 3 tons/year) Agriculture (10 3 tons/year)) TOTAL (10 3 tons/year) 1, , , , Comparison Between Scenarios In comparing the scenarios, emission reductions and cost efficiencies of alternative scenarios were assessed as follows: Emission increase, total cost increase and net energy import increases were calculated by taking the difference between values of alternative scenarios and the Reference Scenario. While obtained minus (-) values suggest emission reduction compared to the reference scenario, plus (+) values point at an increase in emissions. And the unit reduction cost was calculated by dividing total cost increase into cumulative emission increase. Results are given in the table below. 28

29 As Table 23 suggests, the DSM scenario is regarded as the potential alternative whereby policies related to climate change will be implemented. This scenario both ensures reduction of CO 2 /greenhouse gas emissions, and presents with negative cost efficiency. According to this scenario, application of similar energy saving methods in houses and industrial facilities both ensures 7,1% reduction in emissions, and also cost efficiency presents as -113,6 $/ton. In other words, for one ton of CO 2 reduced with this scenario, it is possible to save 113,6 dollars. Table 24: Comparison Between Reference Scenario and Greenhouse Gas Reduction Scenario SCENARIOS Total Economic Cost Billion 2000 US Dollars Net Energy Imports Cost US Dollars Cumulative CO2 Emissions (1000 ton) % CO2 Reduction CO2 Cost Efficiency ($/ton) Cumulative MTCE Emissions (1000 ton) % MTCE Reduction MTCE Cost Efficiency ($/ton) Reference Scenario 350, , Low Demand Scenario 330, , ,84-32, ,79-114,0 Scenario For Increasing Demand Side Efficiency 334, , ,06-31, ,05-113,6 No Nuclear Scenario 346, , ,33 n.a ,30 n.a. Cogeneration Scenario 350, , ,59 n.a ,55 n.a. While emissions are reduced by 8,8% in the Low Demand Scenario as well, this scenario is not regarded as a suitable scenario since it would have a narrowing impact on economy. No Nuclear Scenario causes an increase of 1,3% in CO 2 /greenhouse gas emissions during the planning period. While there is a reduction in total cost, cost efficiency could not be calculated since there is an increase in emissions. In the Cogeneration Scenario, both emissions and cost seem to increase. That is why cost efficiency was not calculated here either. 6. Outcome of Alternative Scenarios Analyzing the results of Turkey s First National Report Energy Sector Modeling Project using the BALANCE model, one concludes as follows: Energy end consumption will reach 177 MTEP in 2020 compared to a 68 MTEP in Manufacturing will reach the highest share, and will be followed by housing and transportation sectors. And the Primary Energy supply will increase from 84 MTEP to 223 MTEP by the end of the same period. Total energy imports will increase from 61 MTEP to 157 MTEP. Total energy-induced economic cost of the system is 350,4 billion US Dollars. And the net cost of energy imports is 167,9 billion US Dollars. Total CO 2 emissions will increase from 213 million tons to 605 million tons with a yearly average increase of 6,3%. Best scenario for reducing greenhouse gas emissions is the Scenario For Increasing Demand Side Efficiency. By just increasing efficiency in manufacturing and housing sectors, it is possible to secure a reduction of 7,1% in CO 2 /MTCE emissions. 29

30 Furthermore, cost efficiency is calculated at -31,6 $/ton, in other words, 31,6 dollars is saved for every ton of CO 2 reduced. Although it reduces emissions by 8,8%, Low Demand Scenario is not regarded as a suitable scenario since it is possible through shrinkage of the economy. 30

31 CHAPTER IV MEASURES FOR CONTROLLING GREENHOUSE GAS EMISSIONS 1. Incentive Mechanisms For Controlling Emissions In Turkey Measures aiming at supporting and encouraging renewable energy sources within the framework of Electricity Market Law No and the relevant legislation are grouped under seven headings: 1) Legal entities, who file an application for obtaining a license for building a production facility based on renewable energy resources, will not be charged for other than one percent of the licensing fee. 2) For production facilities based on renewable energy resources, annual license fee will not be collected for the first eight years following the facility completion date entered into such licenses. 3) For connecting to the system, TEIAS and/or legal entities with distribution licenses give priority to production facilities that operate on renewable energy resources. 4) In cases where the sales price of electricity produced at a renewable energy based production facility is below or equal to sales price of TETAS, and there is no other supply source that is cheaper, legal entities with retail licenses will be obliged to prefer renewable energy based production facilities for buying electricity to be sold to ineligible consumers. 5) Production facilities based on renewable energy resources will be exempted from the obligation to submit their load shedding offers to the Market Financial Reconciliation Center pursuant to the Balancing and Reconciliation Regulation, and to act in compliance with the load shedding instructions to be given by the National Load Distribution Center. Cogeneration type production facilities are also covered. 6) Pursuant to the Communiqué on Procedures and Principles for Financial Reconciliation in the Electricity Market, wind energy based production facilities and canal-type hydroelectricity production facilities who sell electricity to legal entities with wholesale and retail licenses will be exempted from the provisions of the aforesaid Communiqué, and they will not be subject to financial reconciliation until effective date of the Balancing and Reconciliation Regulation. 7) Legal entities with production, autoproducer and autoproducer group license, who perform production at production facilities based on renewable energy resources, may purchase electricity from private sector wholesale companies provided that they do not exceed the average yearly production amounts specified/appropriated for one calendar year in their licenses. 31

32 CONCLUSION Being a developing country, Turkey s energy demand is increasing rapidly. Average demand for electricity and general energy was respectively 7-8% and 4-5% in the past, and increase rate s are expected keep up the same trend for the next 15 to 20 years. This shows the necessity of providing needed energy in a reliable, economical and environment-friendly manner taking into account the international agreements of which we are signatory. For equalizing or at least approximating Turkey s standing, within the next 15 to 20 years, to other OECD group countries in terms of indicators like economy, energy, etc, which are listed in Annex-1 of United Nations Framework Convention on Climate Change (FCCC), it is inevitable for Turkey to take necessary steps in the direction of the shared but differentiated responsibilities principle of the Convention, and within means of our national economy. The Kyoto Protocol, to which Turkey is not a signatory, aims at reducing CO 2 emissions of Annex-1 countries down to 5.2% below the level of 1990 from 2008 to 2012, and took effects as of 2005 in a way to include flexibility mechanisms as well. Being engaged in a rapid process of integration with world economy, our country is channeling efforts into the goal of completing its infrastructure, realizing its development targets, increasing social welfare, and to bring its manufacturing sector up to a level where it can compete in the international arena. While this brings about a rapid increase in our energy demand, as the three Rio Conventions suggest, Turkey s objective is to reach its targets in a sustainable manner. Our target in the energy sector is to provide energy in a: timely, adequate, reliable, competitively priced, and environment-friendly manner, one that ensures economic growth and supports social development initiatives. For attaining the vision and main targets defined above, and ensuring supply security and reliability, main energy policies of our country are: Increasing our strategic petroleum and natural gas storage capacity, Diversification of resources and countries, Prioritizing the use and development of new domestic and renewable resources, Ensuring balanced distribution in energy consumption components Use and development of different technologies, and increasing domestic production, Making best use of our potential to become an energy corridor, Making demand management more effective, Increasing efficiency of energy at all stages from its production to its consumption, Increasing fuel flexibility (allowing for the use of alternative energy sources in production), Participating at all stages to the process of transmitting Middle Eastern and Caspian petroleum and natural gas to the world market (share from reserves, transmission, refinery, marketing, LNG), 32