SMART Portugal 2020: Reducing Emissions and Increasing Energy Efficiency through ICT. SMART 2020 National Report Portugal

Transcription

1 SMART Portugal 2020: Reducing Emissions and Increasing Energy Efficiency through ICT SMART 2020 National Report Portugal

2 SMART Portugal 2020: Reducing Emissions INSTITUCIONAL SUPPORTERS: SUPPORTERS: Acknowledgements: This report was commissioned by APDC. Particular thanks to the members of the Steering Committee and the editorial team, who helped to develop and sustain the project. The analysis contained in this report would not have been possible without analysis from BCG, co-editing by Jorge Vasconcelos and Carla Pedro. Special thanks to the participation of individuals within the sponsoring companies (listed above), who were involved throughout the analysis. We are grateful to the experts we consulted for general guidance and to develop our regional case studies (Appendix 6) and also to the many others not listed who have supported along the way.

3 SMART Portugal 2020 : Reducing Emissions Promoter: Supporters: Steering Committee: APDC Coordinator: Jorge Vasconcelos Analysis: BCG Boston Consulting Group APDC GeSI Alcatel-Lucent Cisco CTT EDP Efacec Ericsson, HP IBM Logica ONI PT REN Sonaecom, T-Systems Vodafone Visabeira Global Real Life Technologies Zon APDC Carla Pedro Diogo Vasconcelos Margarida Couto Vanda Jesus GeSI Global e-sustainability Initiative Luís Neves ANACOM José Amado da Silva ERSE Vítor Santos Jorge Esteves José Braz CNEL Coordenação Nacional da Estratégia de Lisboa Carlos Zorrinho Alcatel-Lucent António Beato Teixeira Cisco Carlos Brazão Juan Carlos Castilla Rubio CTT Alberto Pimenta EDP António Vidigal Paulo Almeida Sérgio Figueiredo Efacec Alberto Barbosa Ericsson Hans-Erhard Reiter HP IBM Logica ONI Carlos Janicas José Joaquim Oliveira António Pires dos Santos Vergílio Rocha Luís M.F. Barruncho Xavier Martin PT Alcino Lavrador David Lopes Fino Gomes João Bastos REN José Penedos Artur Lourenço Sonaecom José Pinto Correia Luis Tavares T-Systems Rui Franco Vodafone Ana Mesquita Veríssimo Luísa Pestana Visabeira Global / Real Life Technologies Paulo Varela Alexandre Brancal ZON Manuel Sequeira

4 SMART Portugal 2020: Reducing Emissions SMART Relatório Nacional Portugal INSTITUCIONAL SUPPORTERS: Conscious of the urgency in promoting increased energy production and consumption efficiency, the ERSE considers studies such as the present as extremely useful, given their contribution to stimulating the industry in the sense of developing technical solutions aimed at encouraging consumers to rationalise consumption and promoting the most adequate energy and regulation policies. SUPPORTERS: Alcatel-Lucent considers that the contribution given by telecommunications companies to reducing the environmental impact and better managing energy resources in our planet assumes increasing importance. Therefore, the company has decided to actively contribute as a partner in the Smart Portugal 2020 study. The company is committed to environmental sustainability, particularly focusing on climate change, taking advantage of its innovation and development teams to create new environment-friendly and energy-efficient technologies, striving to reduce the environmental impact of its operations. As a technological leader, Alcatel-Lucent actively associates itself to its stakeholders, which include its customers and suppliers, in order to address environmental sustainability and climate change issues throughout its supply chain. Alcatel-Lucent actively participates in the United Nations Global Compact - Caring for Climate initiative and has received the Sustainability Yearbook 2008 SAM Silver Class Award. Cisco was an active partner in the Smart2020 Study. We believe that Technology can help companies to be more efficient. Our commitment is shown in the solutions we develope, in our position in the Market and in the way we work internally. Environmental Policy The CTT Group adopts the principles of Sustainable Growth, the environmental aspect being part of its corporate strategy and practices. The Group assumes clear commitments in terms of continuous improvement in environmental performance, with a view to minimising and preventing the environmental impacts resulting from Group business in local communities, neighbouring areas and the environment in general, [namely]: (...) By promoting increased energy efficiency within the Group s estate and automobile fleet, as well as controlling and reducing the levels of atmospheric emissions; EDP is one of the largest Renewable Energy operators in the World. Being an innovative and early adopter of ITC solutions, EDP has been an active partner in the launch of some of the reference Portuguese companies in this area. EDP strongly relies on ICT for managing its worldwide operations, and is presently implementing, with Portuguese software houses a set of last generation systems which will help insure its competitive advantage. Among them InovGrid, a reference project is the area of the smart grids, and Skipper an innovative system for managing power plants, on an Utility 2.0 approach. As part of its development philosophy, EDP uses Open Source Software, whenever relevant. Efacec is committed with the development of innovative solutions for the Energy and Mobility sectors, using the latest technologies applied to the efficient use, monitoring, communication and management of related resources, contributing for the reduction of the CO2 emissions from critical society activities, a key factor for the world sustainable development. Ericsson believes that telecommunications will become an integrated and natural part of everyday life for the majority of the world s population, while contributing to social and economic development. Technology is triggering change towards a more sustainable world. Telecommunication can remove obstacles in the path of sustainability and create a smarter, more resource-efficient society. It can enhance the delivery of education, health care, government services and raise quality of life. With climate change high on the global agenda, our contribution to a less carbon-intensive society is a key focal point. Ericsson is demonstrating that wise use of energy is core to our business. Since our greatest environmental impact occurs when our products are in operation, continuous improvements in product energy efficiency play an essential role. Actions and innovation as well as leadership and vision are needed to tackle the environmental challenges of the future. Green IT issues have been assuming increasing relevance for technological companies, as a way of meeting Customer needs and achieving sustainable growth objectives. HP has been increasing its investment in renewable energies while simultaneously betting on energy-efficient solutions and technologies for its Customers. In this way, we commit to reducing energy consumption and carbon emissions by approximately 16%, by In this sense, it is imperative that we support energy-efficiency awareness studies.

5 SMART Portugal 2020 : Reducing Emissions SMART Relatório Nacional Portugal In a global world where everything is becoming intelligent and connected, addressing energy and environment challenges and opportunities requires innovative technology and deep business insight. IBM has a unique ability to bring technology innovations, business process transformation, and industry expertise together in a comprehensive set of solutions to help clients tackle their energy and environment issues and opportunities. Portuguese Companies need to take action on energy management, the environment, and sustainability. Their customers, employees, regulators, investors, and other stakeholders look to them to address issues and opportunities in this area with actions that produce genuine results that improve their environmental and financial results. Companies of all sizes need to look across their operations, prioritize their focus areas and investments, and take action now. Logica, as a leading European IT and business services company, aligns its business strategy along with the European and Global sustainability initiatives, thus contributing to the most innovative and comprehensive answers of the ICT industry. Through its Energy & Utilities Competence and Innovation Centre based in Portugal with Portuguese solutions, Logica is committed to address efficient Energy and Water management as part of the same global challenge in tackling scarcity and waste of resources. Through its Intelligent Transportation area Logica contributes to efficient transportation management and carbon emissions reduction targets. On the services side, Logica s IT Outsourcing organization focuses on energy efficient Data Centres and infrastructures management. The Smart 2020 study is therefore a guideline for Logica s activity and understanding of the key market drivers. Oni Communications has always been particularly aware of environmental issues, namely carbon footprint reduction, having several internal and customer-oriented initiatives in course, in order to achieve the objectives of SMART2020. Awareness to the need for environmental protection is already a reality across our various business sectors. Due to its specific characteristics, the communications sector is assuming a leading role in this challenge, not only by possible rationalisation measures within the business, but mostly for its very significant impact on many other sectors, namely its contribution to digitisation of numerous activities. Our commitment towards a sustainable future: promoting innovation, respecting the environment and valuing society. Through its mastering of telecommunications ant IT, Mankind has extended its intervention ability and its intelligence to the most remote locations. It was possible to achieve a decentralised decision ability within society, regarding machinery, buildings and large energy systems, as well as monitor the resulting effects. The work of Mankind became more perfect, more efficient, less energy-consuming and less carbon-producing. Within the scope of its social responsibility and mission, REN lends its unconditional support to increased synergies between ITC and the various society sectors, particularly the energy sector, praising this APDC initiative. Sonaecom strongly believes the challenges for the telecommunications sector and the opportunities identified for the future development of ICT sector will potentially lead to the almost global replacement of products and services for digital solutions or to the use of new technologies as the engine of an energetically efficient society. We recognise the important role of ICT in enhancing social inclusiveness, empowering people and creating a carbon free society. T-Systems is the Deutsche Telekom Group business division including services aimed at corporate customers. Recently, the company presented its Green ICT portfolio in Lisbon, which evidences the way in which ITC may improve efficiency and sustainability practices within companies. Having led the SMART 2020 International study, T-Systems would necessarily lend its support to the SMART 2020 Portugal study. We believe that what constitutes a problem and a social responsibility issue today will represent an opportunity tomorrow, for all companies learning how to benefit from ITC. Real Life Technologies, included in the scope of Visabeira Global, may contribute in a differentiating manner to Portuguese development, through Information Technology and Communication solutions contributing to CO2 emissions reduction in various sectors, such as transports, energy, industry and services, ensuring sustainability and economical growth within a perspective of social responsibility and concern for the environment. Vodafone Portugal considers that climate change constitutes a universal problem, which may only be solved through global contributions. In this sense, Vodafone Portugal commits to continue promoting and applying the most effective measures to reduce greenhouse gas emissions, namely carbon dioxide, both by acting on the level of its own business and by developing mobile technology solutions aimed at effectively meeting the challenges of environmental quality preservation. Carbon emissions reduction is a social responsibility shared by all. However, companies have an accrued responsibility in the sense of reducing these emissions. Therefore, ZON wishes to contribute to finding a solution for this problem. The Smart Portugal 2020 study shows that ITCs are able to reduce greenhouse gas emissions through the implementation of good practices in companies. ITCs also allow creation of technological solutions aimed at reducing emission of gases resulting from several human activity sectors. ZON is very enthusiastic about the market opportunities identified by this study regarding creation of new products and markets. Therefore, the company will continue to implement the good ITC practices identified by the study and develop entertainment and communication alternatives entailing low gas emissions.

6 SMART Portugal 2020: Reducing Emissions 1: Forewords page 006 1: Forewords A unique opportunity The recent financial crisis caught the world off guard, undermined trust in the markets and is being tackled by governments though gigantic bailouts. Climate change has been studied and scientifically proven and its consequences are also gigantic. The difference is that this time, no bailout, no matter how large, will be enough to meet the largest systemic risk at the planetary scale. Sustainability is the only possible path and there is no more time to waste. This report is a true call for action. More than a report, it represents a unique opportunity for all: public authorities, companies and citizens. From society, new behaviours are needed rethinking the use of private cars, adopting new mobility and telework solutions, being able to control energy consumption among others. It is a change that requires participation, involvement and joint creation from all. From markets, new business opportunities are expected the crisis and the birth of a new paradigm create an enormous pressure to innovate, with an attitude of Creative destruction. In areas such as electric grids, transport and building management, the report identifies tangible opportunities. From Governments and regulators, appropriate policies are needed ones that are able to orchestrate disperse intelligence, both inside and outside the public sector, to foster low carbon solutions, technologies and infrastructures. It was in this context, and with this sense of urgency, that the Associação Portuguesa para o Desenvolvimento das Comunicações (APDC) chose climate change as one of its priorities. There are three reasons for this choice: In the first place, APDC has positioned itself as a mobilizing agent for the civil society around one of the sectors with a higher contribution to the Portuguese GDP, for the modernization of the national economy and for the promotion of innovation the Information and Communication Technology (ICT) sector. No other sector in the economy has, in recent history, contributed as much to change the ways in which we work, communicate and interact. Mobilizing this sector for the fight against climate change will have a tremendous impact on the Portuguese society. In the second place, ICT is a fundamental part of the solution. Without ICT, it is not possible to achieve the ambitious European and national targets in terms of Green carbon emissions reduction. ICT can give a decisive contribution to improve energy efficiency. This means creating a new wave of opportunities, particularly relevant in times of crisis, for all sectors and specifically for ICT players. The conclusions of the Smart Portugal 2020 are clear: realizing the opportunity presented by ICT to reduce carbon emissions can have a direct positive impact of 2.0 to 2.3 billion per year on the Portuguese economy. In the third place, thinking of a society with lower carbon intensity means relying on new infrastructures for the future: broadband access through next generation networks. Making optic fibre available for all should be a national priority, not only for economic sustainability reasons, but also for environmental sustainability. Let us turn the challenges of climate change and financial crisis into a unique opportunity for the Portuguese society and the Portuguese economy. If the initiatives presented in the Smart Portugal report are implemented, Portugal will become more sustainable and technology companies will come out of this difficult context as global leaders in products and services to promote energy efficiency. Diogo Vasconcelos APDC President

7 SMART Portugal 2020 : Reducing Emissions 1: Forewords page 007 Jorge Vasconcelos Coordinator of APDC s Working Group ICT and Energy Reducing emissions through ICT is possible All over the world, citizens, industry and governments are deeply concerned with the current financial crisis. Restoring the credibility and the well functioning of financial markets is indeed a top priority in order to avoid serious economic and social damage. However, this should not distract us from another equally important priority: to avoid the collapse of planet Earth due to climate change. It is technically feasible, financially possible and economically wise to reduce greenhouse gas emissions, thus avoiding the catastrophic consequences of climate change. Portuguese greenhouse gas emissions are currently well above the allowed values for 2012 and the expected targets for This situation has heavy moral, political and economic consequences. Therefore, it is urgent to act. A few months ago, the Global e-sustainability Initiative (GeSI), under the charismatic leadership of Luis Neves, together with the Climate Group, published the Smart 2020 study; it shows how the application of information and communication technologies (ICT) can achieve a 15% reduction of greenhouse gas emissions worldwide. Inspired by the Smart 2020 study, APDC, under the active chairmanship of Diogo Vasconcelos, decided to investigate how ICT can help Portugal reaching its international commitments and, simultaneously, boost economic development. The study Smart Portugal 2020 shows that ICT currently accounts for only 1.0MtonCO2e or 1,2% of total Portuguese emissions. ICT emissions are expected to increase 0.7% per year in the period due to the inevitable increase in the use of ICT. But the main message of the present study is that ICT-enabled measures have a potential for CO2e emission reductions of around 15% of the overall emissions expected in about ten times the expected footprint of the ICT industry in Portugal. Such a reduction is enough to meet Portuguese emissions targets for 2012 and even to reach the more ambitious targets currently under discussion for The direct economic value associated with these reductions is about 2.2 billion per year. The three priority areas identified in the Smart Portugal 2020 study account for 55% of the total emission reduction potential. These priority areas are: electricity, transportation and energy use in buildings. The systematic application of ICT to power systems allows not only a more efficient use of electricity (namely through improved demand side management and reduction of network losses), but also an increased and cost-effective penetration of electricity generation based on renewable energy sources. This means that the carbon contents of each kwh can be substantially reduced and the natural renewable resources available in Portugal can be further exploited, thus increasing security of energy supply and reducing imports of fossil fuels. Since 2001, Portugal has successfully implemented an aggressive policy aimed at increasing penetration of renewable energy. ICT allows this policy to be further developed and to evolve from a quantitative, generation approach, to a qualitative, systems approach. As regards transportation and energy use in buildings, the study Smart Portugal 2020 shows how Portugal can learn from international experiences and introduce innovative, costeffective solutions. I would like to thank APDC for having launched this initiative, BCG for their professional commitment and all participating ICT, energy and transportation undertakings and experts for their precious contributions. Thanks to their enthusiasm and vision it was possible, in a short period of time, to identify practical ways of reducing greenhouse gas emissions and creating new business opportunities in Portugal. It was an honour and a gratifying experience to lead this project.

8 SMART Portugal 2020: Reducing Emissions 1: Forewords page 008 It is Time for Action The Global e-sustainability Initiative (GeSI) was created in 2001 by a group of Information and Communication Technology (ICT) companies in response to the United Nations Millennium Goals (MDG). As GeSI Chairman I had the privilege to Chair the Steering Committee which led to the most recent GeSI publication Smart2020 enabling the low carbon economy in the information age. This report quantified, for the first time, the significant potential contribution that ICT can make at a global scale to improve energy efficiency and address climate change, while driving economic growth. It is a good example of the potential of ICT to drive sustainable change while enabling other sectors to achieve greater efficiency. SMART Portugal 2020 reducing emissions and increasing efficiency through ICT, the first national report of its kind following the SMART2020 Global report, represents a first step in the contribution of the Portuguese ICT industry to address the Climate Change challenge. Both reports are a call for action; for the ICT industry but even more for those who ultimately carry the responsibility of designing the global and national climate change policy frameworks, which are needed to keep the planet sustainable and safe, and to ensure that the future of young generations is not jeopardized. As a Portuguese citizen, I could not be prouder and more pleased with the vision and determination of Diogo Vasconcelos, APDC Chairman, and Jorge Vasconcelos, Chairman of the APDC Congress and leader of this study. It is impressive how, in such a short period of time, they brought together the necessary team and conditions to realize this project. More than a report, SMART Portugal 2020 is the foundation for a more sustainable future for Portugal. This foundation must be continually strengthened. In times of economic uncertainty, SMART Portugal 2020 puts forward a comprehensive set of ICT solutions which enable important impacts and efficiencies in relevant sectors of the Portuguese economy. Furthermore, it sets out the necessary pre-conditions to help address the Climate Change challenge in Portugal. The ICT sector is ready to fulfill its role as enabler of economic and social development. But the sector can not act alone. Appropriate policy environments that foster ICT deployment, especially research and development, along with an appropriate financial framework, are necessary to implement ICT sustainability related solutions. It is now time for the policy makers to understand the role that ICT can play and to undertake the necessary steps that will enable it to play its role not only in realizing the United Nations Millennium Goals, but also in laying the foundations for a more sustainable and harmonious future. This is the challenge I want to leave. Luis Neves GeSI Chairman

9 SMART Portugal 2020 : Reducing Emissions Contents page 009 Contents Página: 006 1: Forewords 010 2: Summary 015 3: Context 017 4: Portuguese carbon footprint : Portuguese ICT industry carbon footprint 026 5: The ICT enabling effect : Direct ICT reductions 035 6: Priority areas : Power management : Buildings : Transportation 051 7: Portugal 2020 implications : Public authorities : Citizens and Companies : ICT industry 057 8: Concluding remarks 059 9: Appendix 1 Forecast methodology & definitions : Appendix 2 Assumptions & sources :Appendix 3 Portuguese carbon footprint: sector by sector : Energy : Industry : Transport : Residential/services (excluding ICT) : TIC : Appendix 4 The ICT enabling effect: sector by sector reduction : Energy : Industry : Transport : Residential/services (excluding ICT) : Appendix 5 The SMART Way : SMART Cities : SMART Energy : SMART Inter-City : SMART Industries : Appendix 6 Acknowledgments : Appendix 7 Sources used : Appendix 8 Acronyms

10 SMART Portugal 2020: Reducing Emissions 2: Summary page 010 2: Summary The Kyoto protocol represented the first quantitative commitment from the international community to limit the potential damage caused by global warming. Signed in 1997 by thirty-four countries, the agreement acknowledged that man-made emissions are a root cause of global warming and defined a target for 2012 of an average 8% reduction in Green-House Gases (GHG) emissions relative to The increased awareness about the problems caused by increased GHG emissions coincided with a period in which the Information and Communication Technologies (ICT) industry experienced substantial growth. With the development and increased pervasiveness of innovative products and services such as the Internet or mobile telephony, the industry s impact in our economies and everyday lives is bigger and more visible today than it has ever been. This level of impact and visibility has increased the responsibility of the ICT industry to take action in the fight against climate change. In 2008, the Global e-sustainability Initiative (GeSI), an industry-led initiative to further sustainable development in the ICT sector, launched the SMART 2020 Enabling the low carbon economy in the information age report with the objective of determining the global ICT carbon footprint as well as how ICT could enable a reduction in emissions, both in the industry itself and in other sectors of the economy. The report examined how the application of ICT could not only deliver energy savings and carbon reduction, but do so in a way that drives even greater economic growth and productivity. The report quantified the global footprint of the ICT sector in 2020 at around 2.7% of global emissions, but also identified potential for ICT to enable about a 15% decrease in CO 2 emissions in other areas of the economy. This decrease is over five times the size of the industry s own footprint, and is the result of potential ICT-enabled initiatives in five key areas: electric grids, buildings, logistics, motors and dematerialisation. In order to assess the potential for change in Portugal and to outline an action plan, the Associação Portuguesa Para o Desenvolvimento das Comunicações (APDC) launched the SMART Portugal 2020 project, with the support of The Boston Consulting Group. This project is the first of several efforts worldwide to localise the conclusions of the SMART 2020 report and derive implications at a country level, a necessary step to foster discussion, galvanise support and establish actionable plans to realise the potential identified. This report is the first output of this project. The work behind this report was carried out in three phases: I. A first phase to establish the current and forecasted Business As Usual (BAU) Portuguese carbon footprint to 2020, highlighting the ICT sector footprint; II. A second phase to detail the potential for ICT to enable improvement in different sectors of the economy, including the ICT sector itself; III. Finally a third phase to identify initiatives with the highest potential, including a highlevel analysis of implementation requirements. In 2006 (the last year for which data is available) Portuguese GHG emissions represented 82.7MtonCO 2 e, well above the binding target set for Of this 82.7MtonCO 2 e, 59.2MtonCO 2 e (72%) were the direct result of energy consumption (and associated transformation and transport/distribution processes), with the remaining attributed mostly to industrial process emissions, waste and agriculture. This shows the extent to which the fight against climate change is linked to the fight for higher energy efficiency.

11 SMART Portugal 2020 : Reducing Emissions 2: Summary page The Industry sector as considered in this document includes all activities related to Process and Manufacturing Industry and Construction 2 European directive that establishes the need for certain sectors (the directive sectors, which include power generation, cement, metallurgy, glass, paper pulp and ceramics) to account for and obtain licenses for the CO2 emitted by their installations 3 Depending on assumptions for the impact of power management initiatives 4 Aligned with current EC forecasts and assumptions 5 Prices assumed as follows: Electricity 0.06/kWh; Diesel 0.39/litre; Gasoline 0.48/litre (excluding fuel taxes) With emissions from energy consumption allocated to end user sectors, the ones with the highest emission rates in 2006 were, industry 1 with 23.7MtonCO 2 e, transport with 20.1MtonCO 2 e and residential/services (excluding ICT) with 14.4MtonCO 2 e. In 2006 ICT accounted for only 1.0MtonCO 2 e (1.2% of total emissions), although this value does not include embodied carbon emissions that took place during the manufacture and transport of ICT equipment, which mostly takes place outside Portugal. In the estimates made in the SMART 2020 global report embodied emissions were included, hence ICT weight in the overall emissions was higher (at 2.7 %). Of the high emitting end user sectors, only industry is covered by the European Emissions Trading Scheme (ETS) Directive 2 and hence with direct visibility on the costs of CO 2 (and even this coverage is only partial). The residential and services sectors are only affected by CO 2 allowance prices so far as they are reflected in electricity prices, and transport is currently not affected in any way. The estimates made for the SMART Portugal 2020 report by The Boston Consulting Group forecast that in 2020, in a Business As Usual (BAU) scenario, Portuguese emissions should remain relatively stable, amounting to 81.1MtonCO 2 e. This estimate considers the evolution of each different sector and the expected economic evolution over the next 11 years and is, as far as time horizons allow, consistent with projections and estimates performed by other entities, including the reference scenario of the PNAC (Plano Nacional Para as Alterações Climáticas), as published by the Portuguese state. In general terms, stabilisation of emissions will be related to lower emissions per unit of GDP, either through technological evolutions or cleaner electricity generation, which will offset an increase in demand from the different sectors. A careful analysis of ICT-enabled measures, when applied to the Portuguese economy and with Portuguese expert opinions taken into account, highlighted a potential for CO 2 e emission reductions of around 15% of the overall emissions expected in about ten times the expected footprint of the ICT industry. This represents 11.9 to 12.6MtonCO 2 e 3, of which 0.4MtonCO 2 e would come directly from the ICT sector. Such a reduction would be enough to meet Portuguese emissions targets for 2012 and even reach the more ambitious targets currently under discussion for The direct economic value associated with these reductions ranges from 2.2 billion to 2.3 billion per year. These values only take into account the avoided CO 2 emissions cost, which stands at approximately 0.4 billion given a target price of 35 for CO 2 allowances 4, and the end user value of the energy saved (as either electric power or fossil fuel), which amounts to the remaining 1.8 billion at current prices 5. Capture of this environmental and economic value depends on the development of cost-effective technologies and solutions, and their application in the marketplace. The total impact is likely to be higher, since indirect effects such as technology development, or potential additional effects such as reduced investment in energy production, transport and distribution were not considered in this overall number. Also not considered was the value of potential upside and additional economic growth associated with the creation of a new ICT-supported sustainability cluster. The identified potential for ICTbased reductions depends on two factors; the starting point of each sector in terms of energy (and hence emissions) efficiency and the role that ICT can play in enabling those reductions. It is therefore not surprising that the two largest areas of opportunity identified are transportation and residential/services, specifically to more efficient use of energy in buildings. These are sectors that are currently not covered by the ETS directive, and where change has been less pressing than in, for example, industry. Achieving substantial

12 SMART Portugal 2020: Reducing Emissions 2: Summary page 012 reductions in these sectors will require monitoring and providing relevant incentives to a very fragmented set of decision makers, with all that this implies in terms of information gathering, processing and data transmission. In addition to these two sectors, a substantial opportunity was identified in better management of electricity generation, transmission and consumption. ICT-based real time information gathering, transmission and processing can allow better planning and usage of electricity, facilitate greater use of renewable sources in electricity generation, and produce substantial savings across a broad range of sectors. The three priority areas identified in the SMART Portugal 2020 project account for 55% of the total emission reduction potential identified and represent substantial opportunities for the development of the ICT industry: Transportation, with a direct economic value of 477M through the adoption of urban mobility management systems. These systems can continuously monitor real emissions and adjust automotive taxation accordingly. A combination of direct incentives and congestion management initiatives, such as congestion gates, dynamic parking pricing or traffic light coordination can effectively reduce congestion and emissions in the urban perimeter. This value does not include increased penetration of electric cars, which, in spite of their long term potential to reduce emissions, are not expected to represent more than 3% of the overall fleet in 2020 (11 years from now) due to the slow rotation of the installed base 6. Power management, with an economic value of M (depending on assumptions for the effectiveness of the proposed solutions in shaping the demand curve). This increased ICT-based potential is driven by two key factors. The first is improved grid and consumption monitoring and control, allowing for better dispatch planning and increased capacity to handle intermittent renewable generation or distributed micro generation. The second is consumption management, which allows for demand shaping and peak shaving, reducing network losses and the need for the highly responsive but polluting thermal sources used for peaks. ICT-enabled buildings efficiency improvements represent 410M of economic value, in addition to the improvements in emissions from electricity generation already accounted for above. These savings are achievable by optimising energy usage through utilising ICT-enabled building management Systems (operating independently of technological changes to grids) to monitor and control consumption of different types of home or office equipment such as lighting, appliances, Heat Ventilation and Air Conditioning (HVAC). This value does not consider non-ict building, efficiencies e.g. in architecture and insulation that can also contribute to lower energy consumption and therefore lower emissions. Realising this potential will require willingness and determination to act from all stakeholders involved, but in return will deliver significant benefits that the country cannot afford to waste. Policy makers should adopt policies that foster the development and adoption of these types of innovative solutions, which in turn can bring positive results at several levels for the country: as well as being costeffective, they can generate new business and job opportunities, whilst encouraging more sustainable behaviours: Implementing key initiatives in transport would require allowing and facilitating real time measurement of emissions and changing the automotive taxation regime to shift a higher percentage of the tax burden from fixed (IA, IUC) to variable components linked to actual emissions. Implementing power management initiatives would require not only defining the appropriate framework and responsibilities, specifically in financing and operation, but also aligning the incentives of the different players. 6 Government projections predict that electric cars may represent approximately 20% of total car sales in 2020

13 SMART Portugal 2020 : Reducing Emissions 2: Summary page 013 Changing the remuneration scheme for regulated Transportation and Distribution (T&D) assets will help realise the potential benefits from increased energy efficiency, and coordination of initiatives to increase renewable energy penetration and new segments (e.g. electric cars) will better align the incentives of power producers. Implementing building management initiatives would require the roll out of energy efficiency certification that takes into account the benefits of the adoption of building management technologies, and translates the improved energy efficiency into tax incentives or penalties, helping foster adoption by providing coherent incentives for citizens and companies. Changing policies in this way would curb the growth in emissions of non regulated sectors, help Portugal to reach the proposed targets, and would also improve the trade balance by lowering the need for imports of primary energy and emission allowances. Furthermore, it would help develop a sustainability cluster, creating opportunities for Portuguese companies to develop pioneering exportable solutions, fostering economic development and growth on a low carbon intensity industry. Citizens and companies would have to change habitual behaviours and make use of the new tools at their disposal. In transportation, citizens would need to use ICT tools to rethink use of private cars and optimise their mobility options,; technology can facilitate the adoption of best-practices in order to reach sector sustainability; In power management, citizens and companies would benefit from demand management related savings, through accepting measures such as selective interruptability or power limitation contracts. An increased visibility of energy costs would also promote increased awareness on energy use; In building efficiency, citizens and companies would react to incentives and adopt solutions that increase efficiency, leveraging potential gains in the medium term. By doing so, they will not only benefit from a more sustainable environment, but also from substantial improvements in energy savings, competitiveness and quality of life. For its part, the Portuguese ICT industry has the responsibility and the opportunity to deliver the required solutions and help in identifying and overcoming the implementation hurdles associated with such a major transformation, while developing new and interesting business areas. While most of the technologies involved in the implementation of the proposed solutions are already developed (and in some cases already deployed), a substantial effort is still required in systems integration, standardisation and industrialisation: In transport systems, a standard solution must be developed (at least at the national level, even if international standardisation allows higher scale and lower costs) that allows real time monitoring of emissions as well as access controls. Even if the technologies involved (metering of emissions, user interface, communications with authorities, authentication, etc.) are well known to the industry, special attention must be paid to the system integration and industrialisation in order to minimise overall system cost and effort involved in roll-out (installation); In power management systems, standardisation of metering procedures and data transmission, but also of user interface and in-built or external actuators to control specific appliances, places challenges that should be met, ideally at the European level. In building systems, adoption will be highly dependent on the ability to build on and repackage existing technologies and solutions to develop systems that are cost effective, as well as easy to deploy

14 SMART Portugal 2020: Reducing Emissions 2: Summary page 014 and user-friendly. This ease of deployment must consider the need to retrofit systems into existing buildings and to adapt to the potentially lower level of technician specialisation. By taking these steps, the Portuguese ICT industry has an opportunity to establish a leading position in this globally important issue, taking advantage of a sizeable business potential not only in Portugal but also in other markets. In fact, the advanced technological nature of the solutions to be developed is a strong enabler for exportability, even more so given the increasing importance of environmental issues on international business agendas. In addition to these product/system enablers, ICT could develop specialised value added optimisation systems for the various end customer segments. As stated in the original SMART 2020 report by GeSI and the Climate Group The ICT industry, in partnership with other emitting sectors, has a key role in helping make society s impact visible and to demonstrate in aggregate the demand for new ways of reducing that impact. So, as before, the sector may cast itself back in the role of the solution provider, and this time in one of greatest challenges of our time: fighting climate change. Even though the solution does not lie entirely in the ICT sector, ICT has the potential to be the unifying thread, bringing together Government, Companies, Citizens and solutions. ICT s potential can be rapidly realised through existing technologies, know-how, and overall solutions. Decisions required from policy makers are known. Impacts on consumer and company habits have been identified. Society is increasingly aware of the problem and receptive to the adoption of these solutions. Now is the time to act.

15 SMART Portugal 2020 : Reducing Emissions 3: Context page 015 3: Context Thirty-four countries were involved in the legally binding Kyoto Protocol, the agreement negotiated with the support of the United Nations Framework Convention on Climate Change (UNFCC). This agreement sets an average reduction of 8% by 2012 on Green House Gases (GHG) emissions for the EU15 countries relative to 1990 levels. This overall target for the EU15 countries was later allocated between them through the Burden Sharing Agreement, signed in June 1998 and taking into account their respective starting points and expected economic evolutions. In the Portuguese case, the target set for 2012 is for total emissions of 75.1MtonCO 2 e (a 27% increase in GHG emissions relative to 1990). However, this limit has already been exceeded and historical trends and initiatives in place show that the Portuguese target is not likely to be met by Moreover, discussions on a post-2012 target have started and the proposals are even more ambitious: Portugal will probably need to reduce its GHG emissions to about 71.3MtonCO 2 e by The cost of inaction is much higher than the cost of action. The Stern report strengthens this argument by demonstrating that an increase in the average temperature of more than 2 o C is expected if we carry on with Business As Usual, and 2 o C is generally accepted as the point beyond which significant and irreversible damage might occur. The unsustainable level of GHG emissions may produce serious damage to our planet. Rising awareness of the negative impact of allowing GHG emissions to increase at current rates has been the tipping point for a drastic change in public perception. Portuguese companies, mainly those under the scope of the Emissions Trading Scheme (ETS) directive, are starting to realise that urgent measures are required to both reduce their carbon emissions and also to have a positive impact in reshaping the Portuguese carbon footprint. The economic environment is changing, creating a materially different perspective for companies targeting sustainability; an environmental conscience is being generated by climate alerts and in many cases, emissions will represent real operational costs in the near future. In reality, two main levers determine the course of action for modern companies on sustainability: the first is the increasing need to reduce OpEx (which can be achieved by reducing consumption and hence spend on energy); the second is that environmental responsibility is becoming not only a duty but also an increasingly important attribute of brands and their perception by consumers. This is also true for the ICT (Information and Communication Technologies) industry. Although it is true much can be done to improve the industry s own footprint, when one considers the whole of the economy, ICT is far more likely to be part of the solution to address the global climate challenge. In 2008, the Climate Group published the SMART 2020 Enabling the low carbon economy in the information age report on behalf of the Global e-sustainability Initiative (GeSI), an industry-led initiative to further sustainable development in the ICT sector. This report was a result of a 6 month project to analyse the worldwide ICT carbon footprint and identify the potential for emissions reduction in this sector as well as potential to enable reduction in other sectors. The study identified 5 main opportunities for reduction: SMART motors, SMART logistics, SMART buildings, SMART grids and dematerialisation. The SMART concept created is intended to be common to all areas of the economy Standardisation, Monitoring, Accountability, Rethinking and Transformation. The SMART 2020 study highlighted the potential impact the ICT sector can have on the reduction of worldwide emissions, showing that ICT-enabled reductions could amount to 5 times the sector s own footprint by The SMART Portugal 2020 study,

16 SMART Portugal 2020: Reducing Emissions 3: Context page 016 commissioned by APDC (Associação Portuguesa Para o Desenvolvimento das Comunicações) with the support of The Boston Consulting Group, is the first of several efforts worldwide to localise the conclusions of the SMART 2020 report and derive implications at the country level, a necessary step to foster discussion, galvanise support and establish actionable plans to realise the potential identified. The study so far has been conducted in three consecutive phases: The first phase identified the national carbon footprint. Total Portuguese emissions were split by economy sector, and forecasts were projected to 2020 in a Business As Usual scenario; The second phase identified ICT-enabled measures with high potential for emissions reduction. Beyond the direct impact on the ICT sector, ICT technologies confirmed the much more important effect that they can have in enabling reduction in the other sectors of the economy; The third phase detailed key high impact measures, including a high level plan for adoption of these levers to reduce Portuguese emissions. This report serves to communicate the study results and to explain the methodologies and assumptions used. As such it follows closely the structure of the work performed so far. The first part, Section 4, focuses on understanding the current carbon footprint of the Portuguese economy and on forecasting its evolution to 2020 in a Business As Usual scenario, including an estimate of the ICT industry s footprint. Section 5 focuses on identifying the potential for reduction of the ICT industry s direct footprint, as well as on identifying and quantifying ICT-enabled initiatives to reduce the carbon footprint of other sectors. Section 6 focuses on further developing those initiatives that have the highest potential for emission reduction and a high ICT content, considering specific technological developments needed, implementation hurdles and financial impacts. Finally, Section 7 derives the high level implications of the identified priority initiatives for policy makers, citizens, companies and the ICT industry. The report ends with concluding remarks (Section 8) that sum up the opportunity and call for action.

17 SMART Portugal 2020 : Reducing Emissions 4: Portuguese carbon footprint page 017 4: Portuguese carbon footprint According to APA (Agência Portuguesa do Ambiente), in 2006, the latest year for which official data is available, Portuguese Green House Gases (GHG) emissions represented 82.7MtonCO 2 e. This value has been relatively stable since 1999, but is well above the 75.1MtonCO 2 e target defined for Portugal in the Burden Sharing Agreement, which allocated emission reduction efforts among the EU15 countries. The extent to which the fight against climate change is linked to the efforts for higher energy efficiency becomes evident after analysing the composition of emissions in Portugal. In 2006, around 70% of all emissions were directly linked to energy consumption, both from end users and transformation into other types of energy.

18 SMART Portugal 2020: Reducing Emissions 4: Portuguese carbon footprint page 018 Transport and industry are the largest end users, representing around 50% of the emissions linked to energy consumption. Production of other types of energy, mostly electricity, accounts for around 35% of the emissions associated with energy consumption. In order to gain a better understanding of the drivers behind GHG emissions in Portugal we need to understand the end users driving those emissions. This means that we must understand how primary energy is used and by whom.

19 SMART Portugal 2020 : Reducing Emissions 4: Portuguese carbon footprint page 019 Electricity production emissions come from the use of different fossil fuels in the generation mix (e.g. coal, gas, oil), and the technological efficiency of production equipment. Taking this and the amount of non-emitting (mostly renewable) sources used into consideration each unit of electricity will be associated with an average amount of emissions, the so called carbon content. The SMART Portugal 2020 approach accounted for electricity emissions by allocating them within each sector according to electricity consumption. Since each unit of energy consumed by an end-user (electricity, gas, biomass, etc.) is associated with a certain amount of emissions, the responsibility, and therefore the solution, should be split according to a user s energy demand and consumption. If this method is not used, electricity generation would be responsible for 19.3MtonCO 2 e, making it the second largest emitting sector immediately after transport. To summarise, allocating all emissions to end-user sectors shows the highest emitting sectors in 2006 were industry/ construction with 23.7MtonCO 2 e, transport with 20.1MtonCO 2 e, and residential/services (excluding ICT) with 14.4MtonCO 2 e. These three sectors account for 37%, 24% and 17% respectively of total 2006 emissions.

20 SMART Portugal 2020: Reducing Emissions 4: Portuguese carbon footprint page 020 The ICT sector accounted for only 1.0MtonCO 2 e in Although it represents a low share of total emissions (1.2%), the ICT Portuguese emissions do not take into account embodied carbon emissions. The worldwide emissions do consider them, and as Portugal is a net importer of devices and equipment, the volume of emissions induced globally by the Portuguese ICT sector is substantially higher, estimated at 1.9MtonCO 2 e. Two other areas related with energy production were also considered, due to their high potential for ICT-enabled emissions reduction; the first is energy production and transformation, for instance pumping and oil refining, and the second is energy losses from production and distribution. The remaining sectors were not detailed separately (agriculture and waste). Indeed, they were considered to have very low potential for ICT-enabled emission reduction; hence emissions were projected based on the forecasts for their sector s growth.

21 SMART Portugal 2020 : Reducing Emissions 4: Portuguese carbon footprint page CAGR: Compound Annual Growth Rate To forecast future carbon emissions, each sector was analysed using different drivers so that projected tendencies could be applied to model the evolution of sector emissions. Due to its cross-sector effect, electricity generation was analysed separately, with trends such as the current and planned national production mix detailed and projected, and considering the international energy situation and efficiency plans in place in Portugal. The resulting Portuguese carbon footprint projected for 2020 is expected to reach 81.1MtonCO 2 e, in a Business As Usual scenario. The forecasted BAU scenario shows total emissions stabilising (approximately -0.3% CAGR 7 in total emissions from 2007 to 2020) without any effect on economic growth (approximately 1.8% CAGR growth in GDP from 2007 to 2020), which is only achievable through a significant decrease in the carbon intensity of the economy, but is not enough to meet the 2012 BSA (75.1MtonCO 2 e) and even further from meeting the proposed targets for 2020 (71.3MtonCO 2 e).

22 SMART Portugal 2020: Reducing Emissions 4: Portuguese carbon footprint page 022 The resulting calculation with a year by year projection for emissions from each consuming sector in a BAU scenario is included in Appendix 3. The resulting emission forecast is in line with other existing reference scenarios. Recent government projections 8 point to values between 80.9 to 84.6MtonCO 2 e for 2010 (depending on the extent of implementation of measures considered). SMART Portugal 2020 s projection of 82.3MtonCO 2 e for 2010 lies within this range. Projections for each of the main end-user sectors are: Industry/construction: stabilisation of emissions (-0.3% CAGR ) resulting in 22.8MtonCO 2 e in 2020; Transport: Slight decrease in emissions (-0.7% CAGR ) leading to 18.3MtonCO 2 e in 2020, including new developments in all transport modes (e.g. new railway and air travel capacities, electric car); Residential/services (excluding ICT): Slight decrease in emissions (-0.7% CAGR ) to 14.3MtonCO 2 e in Because of its relevance to the overall carbon footprint it is also worth focusing on the evolution of emissions from electricity 8 MEI A policy with ambition

23 SMART Portugal 2020 : Reducing Emissions 4: Portuguese carbon footprint page 023 generation and as a result, on the role of energy policies. The evolution of electricity emissions is related to two key levers: The first is the change in the amount of electricity consumed. This is related to the levels of activity or output of the different sectors, as well as to the energy efficiency (the amount of electricity required to generate one unit of output or activity). Higher or lower demand has direct implications on generation, with demand for more energy being met by increased use of emitting (e.g. CCGT) generation. Energy efficiency programs set by the government directly reduce expected emissions from electricity generation by lowering consumption. The second lever is the emissions required to generate one unit of electricity. For example, a higher mix of Renewable Energy Sources (RES) in electricity generation mean that for each kwh generated, less CO 2 e is emitted. An expected increase in use of renewable energy sources through investments in wind and hydro will allow 48% of national generation to be from non-emitting sources in a 2020 BAU scenario. The consideration and separation of both levers is key to correctly determining emission evolution scenarios. This enables the separation of the impact of public policies on national generation mix and unit emissions

24 SMART Portugal 2020: Reducing Emissions 4: Portuguese carbon footprint page 024 from the evolution of demand, and its impact on electricity consumption. In particular, it is worth mentioning the impact of public policies in increasing the use of non-emitting sources, namely by fostering renewable energies. The SMART Portugal 2020 scenario considered the latest government plans in terms of renewable capacity increase. The execution of these policies is a key driver of the overall emissions evolution pattern. For example an increase in the use of non-emitting sources in the overall mix of electricity generation will decrease the carbon content of every MWh consumed. This will lower the emission factor from 0.35tonCO 2 e/ MWh in 2007 to 0.22tonCO 2 e/mwh in 2020 in the assumed BAU scenario. A detailed description of the hypothesis and assumptions for the different sectors can be found in Appendix : Portuguese ICT industry carbon footprint For the scope of the SMART Portugal 2020 study, and in order to ensure methodological consistency, the ICT sector was defined exactly as in the global SMART 2020 report. This includes PCs and peripherals, IT services and Telecom networks and devices. In the ICT sector, consumer expectations and demands are increasing at the same rate as technological developments. This is mainly driven by increasing penetration of devices, demands on processing power and communication capabilities. ICT emissions are expected to increase 0.7% per year in the period due to the continuing changes in the ICT industry.

25 SMART Portugal 2020 : Reducing Emissions 4: Portuguese carbon footprint page Form factor: mix of installed base between laptops and desktops 10 Confirmed through aggregation of data from 4 largest network operators This small increase in ICT sector emissions is a result of different dynamics according to the sub-sector considered: Personal computer emissions are forecast to grow at 1.4% CAGR to reach 0.59MtonCO 2 e by 2020, mostly due to a large increase in the number of PC s, although partially offset by a change in form factor 9 from the current high consumption of desktops to a situation where laptops are dominant; Telecom devices emissions are forecast to stabilise at 0.24MtonCO 2 e (-0.2% CAGR ) as an increase in the number of devices, especially Customer Premises Equipment (CPE s), is offset by lower emissions/consumption per device; Telecom networks are forecast to see a clear reduction in emissions 10 (-3.5% CAGR ) as investments are made in lower consuming networks (next generation fibre optics networks NGN) or increased energy efficiency. Emissions should be at 0.08MtonCO 2 e by 2020; Datacenters are expected to see a large rise in emissions (2.1% CAGR ), mostly due to a large increase in the number of servers, meeting an increasing demand for processing power. Emissions should be at 0.21MtonCO 2 e by A detailed description of the hypothesis and assumptions for the different ICT subsectors can be found in Appendix 3.

26 SMART Portugal 2020: Reducing Emissions 5: The ICT enabling effect page 026 5: The ICT enabling effect As seen in Section 4, in a BAU scenario, the Portuguese carbon footprint is expected to reach 81.1MtonCO 2 e by In this total footprint, the ICT sector is responsible for approximately 1.13MtonCO 2 e (1.2% of the total). The size of the number makes it clear that regardless of the potential to reduce ICT s direct footprint, this will not be a major contribution to the solution of the overall problem, although reduction is possible and should be pursued. The larger prize for the ICT industry will be as part of the overall solution, mainly through its ability to enable reduction in emissions from other sectors. A careful analysis of ICT-enabled measures, applied to the Portuguese economy, and taking into account input from experts on the situation in Portugal, highlighted a potential for CO 2 e emission reductions of 11.9 to 12.6MtonCO 2 e. This represents 15% of the overall emissions expected in 2020, roughly ten times the ICT sector s direct carbon footprint in This reduction in GHG emissions has a total economic value of 2.2 billion, of which 0.4 billion is CO2e reductions and 1.8 billion is energy savings. The transport sector is responsible for the majority (~57%) of these savings, with the residential/services sector and energy auto-consumption/ energetic losses sector at ~20% and 12% respectively. This is, in fact, a conservative value that does not take into account possible breakthrough or disruptive technologies that may transform the CO 2 emission landscape even further. Unexpected success of technologies associated with mass implementation of microgeneration/distributed generation, mass adoption of the electric car, or even breakthrough technologies in computer virtualization or cloud computing may provide even greater reductions in CO 2 emissions than identified here. Even in this more conservative approach, the full realisation of the identified ICT-enabled reductions would be enough to meet the proposed 2020 targets for Portugal. Analysis shows that the sectors with the highest potential reductions in emissions are transport with 6.2MtonCO 2 e and residential with 2.4MtonCO 2 e. These two sectors account for approximately 72% of the identified reduction impact. Three key factors explain the high relevance of these sectors on the overall ICT-enabled reduction potential identified in Portugal: Both sectors are substantial emitters. Transportation accounts for 23% of total emissions in Portugal and residential/ services accounts for 18% in 2020 (in a BAU scenario). This makes them respectively the 2nd and 3rd largest emitting sectors. Neither transport nor residential/services are included in the current ETS directive 11 (except indirectly through electricity 11 Although power generation is included in the ETS, electricity consumption is not. The end result is that emission reducing initiatives today are mostly focused on reducing emissions through increasing renewables without focusing on reducing emissions through increased energy efficiency in consumers.

27 SMART Portugal 2020 : Reducing Emissions 5: The ICT enabling effect page 027 production), and therefore are not subject to CO 2 price signals and incentives to curb emissions as in industry. In these two sectors, emissions depend on the individual behaviours of a fragmented set of decision makers (home owners, automobile drivers), rather than regulating large emitting units. Reducing emissions therefore requires monitoring and providing coherent incentives to this large, disparate set of decision makers, with all that this implies in terms of information gathering, processing and transmission. This is something that plays to ICT s strengths, and a number of technologies and solutions have been developed in recent years to address these concerns.

28 SMART Portugal 2020: Reducing Emissions 5: The ICT enabling effect page 028 In transport four key ICT initiatives account for 79% of the total ICT-enabled reduction potential 12 of 6.2MtonCO 2 e: A congestion management system could be applied to the major Portuguese urban areas, as in the London congestion charge case study, with a potential impact of 1.4MtonCO 2 e. ICT involvement would be crucial to achieving this from gate control to monitoring devices to real time pricing implementation and traffic data processing software. A pay-as-you-emit initiative would allow real time monitoring and accounting of real emissions. ICT solutions are required for real time monitoring, information transmission and data processing at different levels (users, tax authorities, city traffic managers). Combining these with an automotive tax reform, including the application of the polluter-payer principle, would allow a reduction of 1.0MtonCO 2 e. This also relies on ICT to measure, process and transmit emissions data to both the driver and the tax authorities. Widespread adoption of freight logistics optimisation software could achieve significant carbon footprint savings through more efficient route planning, delivery scheduling and an increase in load factors an estimated reduction of 1.5MtonCO 2 e coming mainly from fuel savings. Such solutions are already commercially available in Portugal 13. Driver training could represent a potential saving of 1.1MtonCO 2 e, mainly through changing driving styles to reduce emissions; in this case, ICT s main involvement is through simulation tools for the training of professional drivers and other citizens. 12 Calculation details and assumptions in Appendix 4

29 SMART Portugal 2020 : Reducing Emissions 5: The ICT enabling effect page E.g. Be On product from RealLife Technologies 14 Energy efficiencies through non-ictenabled actions not included in estimates In buildings, the identified emission reduction potential comes from the introduction of ICT-enabled functionalities in building energy management 14. This reduction potential could amount to 2.4MtonCO 2 e by deploying ICT-enabled energy efficiency systems, e.g. development of household equipment with lower consumption on standby, variable speed drives for HVAC or building temperature and air monitoring systems. More complex systems can maximise energy efficiency by introducing: Real time consumption monitoring, with warning and displays; Customised information and advice on how to continuously improve energy efficiency; Centralised and remote control; Automated control for lights, HVAC, appliances (in home or in office). There is clear potential, particularly in office buildings, for convergence with other relevant management systems to increase savings potential (e.g. access, control, security, communication etc.). These ICT-enabled savings can be implemented autonomously by building owners or occupants, independently of changes to the systems or overall intelligence of the electricity distribution grid, but with the potential for further reductions if smart grid technologies are implemented. Electricity generation and Energy & Energetic Losses have potential for sizeable reductions of 1.2MtonCO 2 e and 1.1MtonCO 2 e respectively, which would be achievable through the deployment of active grid management systems, commonly referred to as smart grids. These include communication and control capabilities in the network as well as household interface equipment (e.g. smart meters). The grid must be able to handle the diverse requirements of a network of the future, where information flows become increasingly complex and bidirectional. These include capabilities to handle information transmitting from producers to consumers, from grid management systems to microgeneration and developed distributed generation, as well as the symmetric information flows coming from the consumers to the grid. Achieving this requires the ability to handle a new network paradigm, one resembling the early Internet. This would include new bidirectional communication and client control capabilities, household meter systems with the ability to implement time of day/real time pricing, interruptability contracts, actuators able to selectively switch off or reduce consumption of appliances in response to price signals or other information provided by the grid, or improved user information, which would together allow consumers to play a part in optimising the operation of the system. By doing this, ICT-enabled solutions facilitate the system s operation and the handling of distributed generation, managing both supply and demand while providing consumers and suppliers with greater usable information. In the industrial sector, the application of ICT-enabled solutions would allow reductions of 0.5MtonCO 2 e, mostly through better process monitoring and control and the application of variable control motors, which manage consumption to adapt to real time conditions and demands instead of operating continuously at full power. This potential is relatively small as emissions from this sector are already limited by the ETS directive, and hence a substantial saving has already been considered in the Business As Usual scenario. The ICT sector was also found to have potential to reduce its direct footprint by nearly 40% vs. the Business As Usual scenario. While this is sizeable in relative terms, it represents no more than 0.4MtonCO 2 e, or 0.5% of total emissions by When considering the ICT-enabled emission reduction potential, it is also important to consider an effect usually referred to as the rebound effect. This effect occurs when initiatives implemented to reduce carbon emissions result in an equivalent emission through another activity, generated by the initial initiative. Two key levers exist to

30 SMART Portugal 2020: Reducing Emissions 5: The ICT enabling effect page 030 minimise the rebound effect: Definition of initiatives that do not create user habits where current emitting activity is tradable with other emitting activity; Clear definition of incentives that reward lower emissions due to activity and do not reward only the activity (rewarding the end and not the means ). Fully addressing the rebound effect will require other types of public policies such as emission caps or green certificates, not considered in the scope of this project. The impact of these ICT-enabled initiatives is not exclusively on the reduction of GHG emissions and the related contribution to sustainability. Considering the estimated CO 2 price and end user value of the different energy forms that could be saved (power, fuel), it is possible to determine the direct economic value of the identified initiatives. This direct economic impact from a full application of SMART Portugal initiatives would range from 2.2 billion to 2.3 billion. Of this value, CO 2 emission reductions account for 19%, with the remaining coming from the different forms of energy savings in the transportation sector, savings were quantified in terms of fuel saved although for the other sectors savings considered electricity savings. This estimate of economic value is clearly conservative, since it does not account for other indirect or less tangible impacts that could be considered. These include potential business benefits for the ICT industry from additional sales of solutions developed or innovative commercial offers created through proposed solutions for different end clients. For example, increased communication capabilities with clients will not only allow suppliers to have greater knowledge of consumer profiles and create tailored energy consumption offers, but also serve as a portal to offer valueadded services to clients, stimulating market liberalisation. Another potential source of economic value is cost-avoidance in capital investments, namely in energy production, transport and distribution infrastructures, which would be a result of reduced energy consumption or

31 SMART Portugal 2020 : Reducing Emissions 5: The ICT enabling effect page Assuming a 3 to 5 year delay in investments (source: Austin, US) and reduction in grid capacity related investments; analysis for Portugal showed a very high correlation between grid length, energy distributed and investments in grid expansion better usage of the installed infrastructure. As an example, the implementation of smart grids could allow a 220M to 450M reduction 15 in capital investment in electricity T&D networks. Further detail on the identified ICTenabled initiatives and their impact on the emissions of the different sectors can be found in Appendix 4.

32 SMART Portugal 2020: Reducing Emissions 5: The ICT enabling effect page : Direct ICT reductions A sector built on the basis of constant innovation and growth, the ICT sector has not always paid attention to its energy efficiency. Although consumption reduction has been an area for innovation, current growth in processing and equipment capabilities mean that energy efficiencies are mostly offset by an increase in unit demand. However, the ICT sector is capable of greatly improving its energy efficiency, mostly through applying existing innovations across all equipment categories or by selectively launching ever more efficient products. Although the percentage reduction of the Portuguese ICT footprint in a SMART 2020 scenario is the largest of all the analysed sectors, with up to 40% reduction, this full potential is limited to 0.43MtonCO 2 e, or 0.5% of the total emissions, as the sector only accounts for 1.2% of total emissions in the 2020 BAU scenario. A 40% reduction in emissions represents 144M in annual savings (due to avoided CO 2 e and a reduction in consumed electricity).

33 SMART Portugal 2020 : Reducing Emissions 5: The ICT enabling effect page Source: original SMART 2020 report, EnergyStar 5.1.1: PCs PC emissions in the BAU scenario already point to an increase in energy efficiency. This higher efficiency is a result of the expected increase in penetration of laptops, which will replace less efficient desktops. Additional savings could be achieved through an increase of PC power management capabilities. This is especially relevant when the machine is not utilised, as many existing computers have little or no consumption reduction. Potential for savings is large, as research points to up to 60% of corporate desktops remaining on during the night. Up to 50% additional saving in desktops and 25% in laptops can be achieved by implementing best-practices in stand-by consumption reduction as well as active system power management : Telecom devices Current telecom devices are highly inefficient when in stand-by mode. Most mobile phones have little or no stand-by power management systems, and high consumption levels even when not charging. Most CPE devices also have little or no stand-by power management systems, consuming the same amounts online or offline. Governments, regulators and suppliers are increasingly aware of this unnecessary consumption. Nokia-Siemens and Sony- Ericsson have created stand-by power reduction programs with aggressive objectives, while the market as a whole is aiming for 1 Watt standby consumption objectives in the medium-long term. Programs vary from reducing actual stand-by consumption to mechanisms that warn users to disconnect chargers not in use. An average of 50% reduction in overall energy consumption for devices can be achieved, driven by increased energy efficiency programs by equipment manufacturers as well as reduction in consumption while in standby mode. This opportunity by equipment type is determined by analysing the potential for energy savings by applying current bestpractices (e.g. in power management) and industry targets such as 1 Watt stand-by to current usage patterns : Telecom networks As stated in the Telecom networks carbon footprint Section above, analysis of emissions due to Telecom networks was based on interviews with the main Portuguese telecom network operators. Incremental reduction would be achievable through additional initiatives currently being piloted around the world. These include: More efficient base station amplifiers; Advanced stand-by power management; Solar and/or wind-powered base stations; Night battery operation. Interviews with all major Portuguese telecom operators indicate a maximum achievable emissions reduction of 23% in 2020 compared to the BAU scenario.

34 SMART Portugal 2020: Reducing Emissions 5: The ICT enabling effect page : Datacenters Datacenters are the fastest growing emissions sub-sector. Growth in capacity, processing power and number of servers are driving up emissions. This accelerated growth has come to the attention of all stakeholders; from Governments, companies and manufacturers, to the general public. However, research and detailing of best-practices has shown that there is substantial room for reduction in datacenters emissions. Currently datacenters consume energy both in server power consumption and in cooling and power systems. Existing data shows that non-operation related consumption (e.g. cooling) represents up to 50% of datacenters total consumption. Best-practice benchmarking has shown that up to 40% energy savings are obtainable through intelligent system and housing design, most through reduction of cooling and powering needs 17 not related to actual server utilisation. Additionally, developments in multi-processing programs and systems are allowing an increase in server virtualisation, reducing the number of servers needed by pooling resources and utilising unused server power. Overall, a 40% reduction in server energy needs, and 28% reduction in number of servers needed may be achieved through the introduction of both best-practices and new virtualisation technologies. The result is a potential 44% reduction in datacenters subsector emissions. 17 Source: Google efficient servers and efficient datacenters benchmark

35 SMART Portugal 2020 : Reducing Emissions 6: Priority areas page 035 6: Priority areas The initiatives identified to obtain the necessary emissions reduction have different levels of both impact and ICT involvement. In order to identify priority areas for development, the initiatives were ranked according to their CO 2 e reduction impact, potential value and level of ICT involvement. The CO 2 e reduction impact and potential value of the different initiatives were quantified in Section 5 and detailed in Appendix 6. ICT involvement was assessed qualitatively, by considering the device, communication and software requirements for each initiative. Three key opportunities emerge from this prioritisation matrix: energy sector (electricity generation/transportation/ distribution); Building efficiency, which consists of ICT-enabled solutions to reduce energy consumption in buildings without the need for bidirectional real time information exchange with electricity grids; and two key initiatives in transportation congestion management and pay-as-you-emit.

36 SMART Portugal 2020: Reducing Emissions 6: Priority areas page 036 Combined, these three initiatives achieve 55% of the total identified reduction potential, and recurring direct savings (in terms of avoided emissions and energy costs) of around 1.2 billion per year in Given the magnitude of the potential impact and degree of ICT involvement, these initiatives have been further investigated to identify the key implementation requirements and potential obstacles that will need to be overcome.

37 SMART Portugal 2020 : Reducing Emissions 6: Priority areas page : Power management Using ICT to measure, transmit and process energy transit information improves grid monitoring and control. This allows better planning of capacity dispatching and better capacity to handle an increased amount of variable generation by renewable sources or distributed micro generation. Consumption management is enabled by a set of features usually called Demand Side Management (DSM), which gives higher visibility of consumption and more differentiated price signals, as well as direct actuation or even selective interruptability of circuits or devices by the electricity supplier. Allowing the customer to directly view consumption and prices tends to result in an immediate reduction in electricity demand. DSM also enables demand shaping and peak shaving, reducing losses and the need to use the most polluting sources. Network losses are proportional to the square of the transmitted power, so by reducing peak consumptions, a more than proportional reduction in losses is achieved. All these capabilities of power management rely on a high level of ICT involvement. From physical metering devices for the monitoring of energy transits to the advanced software required for real time analysis, ICT is required as an integrated solution, enabling differentiated capabilities. The devices required include instrumentation and metering for the assessment of consumption levels, load and generation at different points in the grid. Visibility should be strengthened with the use of specific user interfaces and equipment controllers to allow increased responsiveness from user-based dynamic pricing. It is also necessary to allow grid-consumer interaction to optimise potential efficiencies within residences (e.g. permitting DSM capabilities). Greater control could be achieved by using energy-controlling devices for electric appliances, allowing effective peak shaving and appliance interruptability, as well as monitoring of individual appliance consumption; A good communication infrastructure is needed in order to enable bidirectional dispatch of information, which is key to giving dynamic pricing signals to the consumer. Remote control of equipment is also needed in this type of set-up. Security standards are critical to avoid security hazards and fraud; Integrating consumer information with generation data relies on advanced software capabilities, which should be able to collect process and display in intuitive formats (e.g. consumption profiles per household with incurred costs) or act automatically on a given set of rules. Implementation of ICT capabilities in power generation vary widely depending on definitions and capabilities included. Capturing the full potential implies a more inclusive solution, capable of handling the different aspects needed to prepare a grid to handle the demands of future networks. From management of grid assets (including clients, power lines and generation units), to obtaining and processing information related to grid and consumption, a comprehensive smart grid solution will need complex, yet obtainable ICT solutions to reach the full potential identified. Handling efficient, but intermittent, generation from renewables as well as dispersed production and microgeneration will only be possible through an end-to-end ICT-enabled smart grid approach to power management. The real time feedback on consumption, electricity flows and network incidents attained through the use of ICT in the grid are essential for better coordination of dispatch and consumption, as well as for better use of network assets, lowering the need for additional investment and associated emissions. Smart grid technologies are also the basis for activating relevant DSM features, e.g. allowing for peak shaving.

38 SMART Portugal 2020: Reducing Emissions 6: Priority areas page 038 Similarly, although estimated to have a smaller impact up to 2020, the large scale development and roll-out of the Electric Car is dependent on a complete smart grid solution, due to the technological difficulties a non-smart grid solution would have in handling such a dramatic shift in the grid network paradigm. However, not all systems present the solutions, and not all have the same capabilities. A worldwide, or even Europeanwide, standard is far from being achieved, yet Portugal already has projects in development that seek to solve at least some of the problems pointed out earlier. The EDP led InovGrid, which involved multiple technology partners, encompasses all elements in the power transportation, distribution and consumption chain, while ISA s SUIT project stands closer to the Smart Meter solution, focusing on the multi-utility concept. The implementation of grid automation and Demand Side Management systems enables between 308M and 470M of savings, depending on the extent of consumption management implemented:

39 SMART Portugal 2020 : Reducing Emissions 6: Priority areas page M in CO 2 allowance costs by allowing greater penetration of intermittent non-emitting renewable generation. Expert interviews highlight the need for intelligent grid operation systems to allow an increase in penetration of intermittent generation. Implementation of power management systems would allow an increase in the amount of renewable energy sources in the overall electricity production mix to 58%, up from 48% in the BAU scenario. 26M from increased grid control and the ability to introduce greater amounts of microgeneration/distributed generation (increasing from 10% to 20%, resulting in a 380 GWh reduction in network losses) 88M from a 1.8% reduction in electricity consumption due to the introduction of DSM and consumption management capabilities across the network. This is achieved by a 10% reduction in peak consumption requiring CO 2 e emitting generation (at the low end of existing trial results), and 3.9% reduction in network losses due to the associated reduction of network peaks. The high range of peak consumption reduction in current

40 SMART Portugal 2020: Reducing Emissions 6: Priority areas page 040 trials points to a 15% percent decrease. This would result in a 4.9% reduction in consumption and 10.2% reduction in network losses, increasing the overall potential to 250M. 152M from increased user consumption visibility through smart grid displays, and implementation of dynamic energy pricing, where consumers shift consumption to lower emitting hours, resulting in an additional reduction of 0.5% per year (effectively eliminating 2.0 TWh of consumption by 2020). These savings would be realised by stakeholders along the value chain, and are in addition to the positive environmental impacts for society resulting from the increased used of RES, and the economic impact resulting from the reduced need to purchase CO 2 allowances. The network operator would benefit from increased planning capabilities and improved quality of service by reducing energy cuts. He would also benefit from better usage of the network and lower investment needs, although these savings are not considered in the direct economic impact. The distributor would be able to offer a differentiated service based on the additional services supplied, competing on more than just the simple gap between power sourcing and retail prices. The economic value created in this process was also not considered in the direct impact, since it is hard to separate the incremental value from the transfer in value among different stakeholders. The client would feel the benefits of this more efficient use of energy each month as

41 SMART Portugal 2020 : Reducing Emissions 6: Priority areas page 041 energy bills decrease (a value that is included since energy savings are considered at end-user prices). The investments needed for a power management solution would range from 0.6 billion to 2.4 billion. These values were estimated using international benchmarking of similar solutions, including a lower and higher technological complexity. Payback periods range from 1 to 8 years. Major constraints in the adoption of such systems are linked with regulatory issues. The current market structure and price dynamics do not align the incentives of power generators with the deployment of technologies that are able to reduce consumption, particularly peak consumption. To offset this, it is necessary to either rethink the power generation remuneration scheme, or to make sure the incentives are sufficiently high for increased renewable penetration and new segment creation (e.g. electric cars). On the transport and distribution side, a remuneration based on rate of return regulations encourages increased investments, but need for these is limited by the deployment of smart grids. Rethinking the roles, incentives and remuneration scheme of the different players in the power business is a key step to realise the environmental and economic benefits enabled by ICT in the power industry. The limited number of players in the Portuguese market, ambitious targets set for renewable penetration and the public support of the electric car project may also act as powerful motivators for the adoption of this type of technology. Expert interviews, current technology and an analysis of initiatives in place show that the greatest challenge to maximising scale efficiencies seems to lie in the adoption of common standards. These would enable even shorter paybacks than the ones estimated in

42 SMART Portugal 2020: Reducing Emissions 6: Priority areas page 042 the current situation. Major players are already involved in many pilot projects in Europe, with no common technological framework. While the base technologies are ready for deployment, these multiple pilot projects on different scales and technologies around the world illustrate that standardisation is required at the national level for the system to be implemented. International standardisation is not a necessity, but would further minimise investment requirements,, and allow the full benefits of cross-border competition to be realised. 6.2: Buildings A potential 410M reduction is achievable by implementing ICT-enabled solutions to increase energy efficiency and reduce emissions in buildings. This value considers only the savings potential from ICT systems to monitor and control energy consumption within the building that are deployed independently of any technologies adopted in the electricity transmission grid. It should be noted that further potential exists in this sector via the deployment of smart grids, specifically in demand side management (considered in Section 6.1) and the provision by energy management services, particularly in the residential segment. It also already takes into account the optimised scenario for the expected electricity generation mix in 2020 as described above. It is therefore completely incremental to the potential identified in power management systems. Savings from non-ict initiatives, such as low consumption lighting, architecture or thermal insulation also have a substantial potential to reduce emissions by lowering the energy consumption needed for lighting or climate control. These initiatives should be pursued but were not contemplated in the calculations. The most basic ICT-enabled initiatives relate to occupancy-based lighting and air conditioning, while more sophisticated initiatives involve rethinking entire building construction and management processes, from design phase (optimised engineering and architecture software tools used to enable better energy planning) to active and predictive (anticipative) energy management. Other areas include a reduction in consumption for different household appliances (e.g. active power management, low power stand-by) including HVAC systems, kitchen and other electrical (household and office) appliances. Involving ICT technology is critical to reach the identified reduction potential: Devices are required to gather and relay real time information to users and equipment through specific sensors (e.g. temperature, lighting, presence) and actuators (e.g. light controllers) allowing continuous optimisation of consumption profile both proactively by the consumer and automatically by the device; Reliable and secure communication platforms are required to enable deviceto-device and user-to-device connections. These would be the base for centralised equipment control, allowing optional remote energy management by the user; Advanced software should enable remote information processing, consumption optimisation and energy consumption management. Once again, the software should be able to integrate information coming from the grid and from existing

43 SMART Portugal 2020 : Reducing Emissions 6: Priority areas page Portuguese Economy Ministry s PNAEE program already points to a ~9% energy efficiency increase in Homes and Offices and is considered in the BAU scenario (although the implementation of the program is not yet in place) microgeneration/local production, proposing suitable efficiency measures to the consumer. The 410M estimated savings assume a 25% reduction in building energy consumption which is achievable through the deployment of most of the above mentioned ICT-enabled solutions (design and architecture improvements were not considered, although they may also benefit from ICT through project support and simulation tools). It is a conservative scenario based on European benchmarks and discussion with Portuguese experts. More aggressive estimates and case studies exist in Portugal, but these were weighted and scaled down for 2020 in light of the current situation in Portugal, efficiency programs already in place 18, and the slow implementation speed that is usually expected in the construction sector. The 410M direct savings are mostly (~84%) attributable to a reduction in energy consumption, with reductions in CO 2 emission costs making up the balance. Therefore, the majority of savings will be accrued directly by the consumer, as they reduce their energy spend. Companies have been the most willing to install sophisticated energy efficiency systems due to their increased sensitivity to cost savings. The different levels of ICT sophistication involved translate into different amounts of investment and reduction potential. Industry expert interviews indicate payback periods of 5-9 years for this type of solution in Portugal, depending on the specific solution and the savings realised. This would imply that an investment of 2.1 billion to 3.7 billion is required to achieve the identified potential.

44 SMART Portugal 2020: Reducing Emissions 6: Priority areas page 044 Without policy changes, the implementation of this type of solution will not be quick. The long lifespan of buildings and the reluctance from builders to invest in more advanced solutions (due to a lack of value to solutions by the market) are common obstacles. Furthermore, in order to realise the identified potential, adoption in existing buildings will need to be fostered. Widespread improvement of building efficiency could only happen if efficiency standards are enforced by public authorities. The introduction of construction standards with certification and auditing processes will allow annual taxes (e.g. IMI) to be adjusted according to the energy efficiency of the buildings, encouraging existing owners to invest in order to obtain a higher grade certification. This does, however, require that

45 SMART Portugal 2020 : Reducing Emissions 6: Priority areas page 045 the certification process acknowledges and keeps up to date with efficiency improving solutions until a certification process for the solutions themselves is put in place. The need for the Portuguese state to curb emissions in sectors not covered by the ETS directive creates a powerful incentive for the adoption of these policy changes. From a technological standpoint, many of the required solutions are available, with the key challenge remaining in standardisation and retrofit simplicity. Standardisation is key to achieve scale and hence lower costs to make the business case even more compelling. More important, however, is the ability to develop solutions that are simple to deploy, particularly for retrofits. This simplicity includes for example the use of wireless communication technologies to minimise civil works and the installation skills required from technicians.

46 SMART Portugal 2020: Reducing Emissions 6: Priority areas page : Transportation The adoption of an integrated urban transportation strategy could enable substantial emissions reductions in Portugal. Combining congestion management with a pay-as-youemit system could, if applied in the major Portuguese cities, achieve direct savings in the region of 477M. These two initiatives were highlighted as they have a high ICT-enabled impact and are top concerns for European authorities when considering sustainable mobility. Congestion management systems have been highlighted by the European Commission recently as a key driver to achieve a more sustainable transport system. Several similar initiatives have been launched internationally and served as basis for the identification of the potential reduction. Singapore City pioneered this type of solution in 1975 with traffic reductions reaching as much as 45%. Following Singapore s success, Seoul achieved up to a 25% reduction in traffic in their first year of implementation 19. Stockholm recently launched a congestion program; during a seven-month trial in 2006 up to 14% emission reductions were achieved the full deployment during 2007 was a natural consequence. 19 APEIS Asia-Pacific Environmental Innovation Strategies

47 SMART Portugal 2020 : Reducing Emissions 6: Priority areas page European Union position paper on public transport 21 Victoria Transport Policy Institute Winwin Emission Reduction Strategy Industry experts agree that for the Portuguese case, a conservative emission reduction of 20% is obtainable, similar to the direct impact of the London congestion charge on emissions 20. London is frequently cited as a successful business case for congestion management in Europe. A congestion management scheme works along several levers. Urban charges to enter the city, adequate parking pricing strategies and the increase of traffic light management are all possible components of a sophisticated congestion management system. The pay-as-you-emit initiative would allow a real application of the polluter-payer principle, in much the same way as in business sectors currently covered by the ETS. The costs related to vehicle emissions would be directly linked to the users and their actual usage. International studies 21 estimate savings in the range of 10% to 15% on distances travelled after application of pay-as-you-emit schemes. This implementation could be one of two scenarios: Online real time transmission of information, allowing a better knowledge of user profiles and east analysis of critical areas; Offline storage of information which would then be sent off periodically for processing, requiring lower levels of complexity. The implementation of a pay-as-youemit and congestion management system in Portuguese cities would require a high level of ICT involvement at different levels: Car devices would be required for vehicle identification and emissions monitoring.

48 SMART Portugal 2020: Reducing Emissions 6: Priority areas page 048 Several interconnected devices would be needed for traffic control: static devices at city limits to monitor entry, video cameras to visualise real time traffic flows and sensors to monitor real time parking use; Using the online mode would require a permanent synchronisation scheme to ensure that vehicle information is integrated with real time city traffic and that dynamic pricing policies could be used. Different prices should be adopted for different vehicle types (e.g. exemptions for environmentally friendly vehicles) and occupancy features (high load factors could have charge benefits), while considering the vehicle mix and traffic flow. Alternatively, using the offline mode requires sophisticated web platforms so that users can submit information periodically for payment purposes. Regardless of whether online or offline is chosen, the communications channel security will be crucial to avoid tampering of information and fraud; The software involved requires a strong set of capabilities. It will need to integrate information from real time traffic conditions (including traffic volumes, parking load ) and generate a dynamic price. The next step which is to proceed with billing also relies on software features to ensure effectiveness and reliability. It is worth noting that in the context of the electric car project, similar technological solutions are being considered.

49 SMART Portugal 2020 : Reducing Emissions 6: Priority areas page The assumed base was 80% of total urban emissions. Although there are no statistics for geographical dispersion of emissions, it is estimated that greater Lisbon (including Setúbal) and greater Oporto (which account for ~60% of the population) would be enough to cover 80% of emissions 23 The Stockholm Congestion Charging Trial Expert Group Summary; Payback estimation considering internalisation of benefits such as road safety In terms of savings, up to 477M per annum could be obtained across various stakeholders. 277M of this would come from congestion management schemes applied to various Portuguese cities 22 ; saving around 1.4MtonCO 2 e and 0.5 billion litres of fuel, assuming similar results to those obtained for the London congestion charge scheme. The remaining 200M would be generated by the pay-as-you-emit scheme, assuming the lower end (10%) reduction identified in international reports is achievable in the Portuguese case and assuming that only passenger cars and light duty vehicles would be affected. Users would see direct savings through using their vehicle in a more efficient way, reducing their consumption and related fuel costs. A consequence of this would be an improved national Trade Balance as less fuel is imported. Finally, the government would have a significantly reduced need to buy CO 2 licenses, reducing emission expenditures and Trade Balance impact. Again, the solutions described provide an effective way for national authorities to influence and curb a fragmented but very substantial emission base, which is not covered by the ETS directive, but is nonetheless a key contributor to the overall excess emissions of the country. In terms of investments, the complexity required by the system will determine the time to payback. The Stockholm case, for instance, estimates payback at less than 5 years 23. Assuming the cost per vehicle is between 250 and 1,000, the payback period will range from 4 to 17 years. This means that deployment of very advanced solutions would require large scale gains over current deployments (usually at the fleet level) to substantially reduce paybacks.

50 SMART Portugal 2020: Reducing Emissions 6: Priority areas page 050 These investments would be based on strong technological platforms, including devices for emissions monitoring and driver information displays, secure communications to relay information to central processing units, and software to process emissions information as well as establishing congestion pricing, calculating and charging taxes or creating value added services for fleet owners and end users. Given the widespread adoption needed to realise the full potential and the complexities of the logistics operation to deploy the solution, the ease of installation will be critical and the reliability of the overall technological package will define system credibility. Policy and regulation also has an important role to play. Improved visibility may drive more responsible use of automotive transportation, but achieving the full potential will require an overhaul of the automotive taxation system (IA, IUC, and ISP) in order to align overall taxation with actual emissions. This will mean transferring part of the tax burden from fixed components (IA, IUC) to a new emissions-linked tax. Charges would need to be cautiously implemented to avoid a significant political backlash and a perception of increased tax burden across the board. In reality, introducing an environmental component linked to actual emissions may contribute to a fairer system, where responsible behaviours are rewarded and where taxations such as ISP may be managed more effectively, so as not to affect overall income, and to minimise tax leakages, particularly to Spain through ISP arbitration. In addition, city or metropolitan area authorities must deploy congestion management systems. The Portuguese case has some specific features that make it attractive for this type of solution, especially the high concentration of population in a limited number of metropolitan areas. The adoption of a mobility management scheme is highly dependent on the willingness of users to change behaviour and on a well designed financing scheme. Stakeholders benefiting from the adoption of such measures must be clearly identified, and cost/revenue profiles need to be designed to meet the needs of each stakeholder group.

51 SMART Portugal 2020 : Reducing Emissions 7: Portugal 2020 implications page 051 7: Portugal 2020 implications Realising the identified ICT-enabled opportunities could be enough for Portugal to meet the proposed EU targets for 2020, as they indicate a potential 15% versus the BAU scenario. The three priority areas alone would represent an 8.5% reduction vs. the BAU scenario, closing 70% of the gap to likely 2020 targets. Realising this potential requires willingness and determination to act from all stakeholders involved, but will deliver significant benefits that the country cannot afford to waste. Indeed, all key stakeholders could benefit from the adoption of SMART Portugal 2020 initiatives to combat the expected sustainability problem: public authorities will have to cope with the challenge of reducing emissions in the near term to meet Kyoto targets; citizens with increased social responsibility need to engage in cultural change; ICT has a strong involvement in the SMART initiatives, and by being part of the solution, can find and use new business opportunities. However, to extract the maximum potential from ICT enablement, several constraints must be tackled. Authorities must adapt policies to bring incentives in line with the adoption of sustainable innovative solutions. Regardless of sector, the success of the reduction strategies relies on more ambitious policies transferring responsibility to citizens. On their side, citizens have a key role to play in the success of the initiatives acceptance of new measures by using new tools and changing cultural behaviours will determine how successful the implementation becomes. Finally, the ICT industry needs to carefully estimate the potential investments and hurdles to be overcome in the implementation of such a transformation and hence decide on core capabilities that need to be developed for application in Portugal. 7.1: Public authorities The SMART Portugal 2020 report identifies a set of initiatives that create an opportunity for Portugal to set standards in the effort to curb GHG emissions. With application of the all the initiatives identified, Portugal would be well positioned to reach the agreed Kyoto targets and those that are being discussed for 2020, becoming a case study for the other member states. This report indicates a course of action with different levers that could be pulled in critical sustainability areas from tackling sectors currently not covered by the ETS directive, like transportation, to a general increase in business efficiency, linked with energy and logistics improvements. Realising the potential upsides estimated in the SMART Portugal 2020 will require strong support from policy makers. This is especially true for the priority areas identified. The largest reduction opportunities identified require significant policy realignment current legal frameworks are not in line with government ambitions to promote increased efficiency and technological development, especially in fragmented sectors such as buildings or transportation. For the transport sector, realising the full potential requires adoption of real time monitoring tools and a change in the automotive taxation system so that emission costs are made visible to the user. The adoption of these tools by the automotive industry is not

52 SMART Portugal 2020: Reducing Emissions 7: Portugal 2020 implications page 052 likely to happen in the medium term as it would require an implausible level of standardisation. Thus, local adoption is highly dependent on local authorities willingness to act. A shift in the automotive tax burden is an example of action that should be promoted on a local/national scale. The transfer of a high percentage of the overall tax burden from fixed (IA, IUC) to variable components linked to actual emissions, without necessarily changing the overall tax burden, would require ICT devices to ensure the success of the overall solution. A reduction or increase in the total tax burden remains a purely political decision. Furthermore, this change in automotive taxation would allow a greater degree of flexibility in assigning tax benefits to specific sectors (the benefit would be linked to the vehicle and not to the type of fuel), and in avoiding fuel tax arbitration to Spain (as previously discussed). Similarly in power management initiatives, implementation would initially require the definition of responsibilities. The impact on key stakeholders currently in the electricity sector should be further detailed so that authorities could adapt regulatory frameworks, and so that technology development initiatives (e.g. increase in use of renewable energy sources, electric cars) and timings can be implemented according to the potential investments and savings at stake. For each stakeholder, redesigning remuneration schemes is critical to assure the correct incentives for the introduction of the identified solutions. Whether by changing the

53 SMART Portugal 2020 : Reducing Emissions 7: Portugal 2020 implications page 053 relative weights of price formation components (renewables), or by rethinking existing remuneration schemes applicable to regulated T&D assets, realising potential benefits is made more attractive due to the reduced investment needed for the solutions identified. A similar path would be required for a review of buildings certification. Although building energy certification is already in place today, capturing the benefits of the adoption of SMART solutions implies that these benefits should be transferred to the user by tax incentives (or in the opposite by tax penalties) so that citizens and companies have a positive business case persuading them to adopt efficiency tools. To conclude, the overall impact in the broader Portuguese economy could be very positive. The impacts identified for the different industry areas would also result in a potential improvement of the National Trade Balance by reducing fuel imports and eliminating future CO 2 related payments. However, reaching the identified potential requires policy makers to take a proactive approach to validation of local conditions for application of the initiatives, and to decide on the best course of action for promotion of initiatives. ICT can only help realise potential if the regulatory landscape is realigned to increase society s responsibilities. At an European level, the energy efficiency legislation is now under revision. It is likely that buildings directives will be reinforced and a set of detailed guidelines for the energy sector could come up; these initiatives will be supported by respective financing schemes required. Finally, ICT enablement will be focused in the short term by the European Commission, and a lasting ICT policy framework is expected to arise. The Portuguese economy would benefit from the development of technological clusters, with advanced applications and solutions for sustainability, a topic at the top of international agendas. Applying these solutions in Portugal and achieving the expected positive results would increase international focus on national solutions, and have a direct impact on the international perception of the Portuguese technology industry. 7.2: Citizens and Companies SMART Portugal 2020 initiatives encourage citizens and companies to share a common goal: behave in a responsible way to fight climate change. This common attitude can only come from an increased accountability for emissions responsibility, in both in industries already under ETS directive, and in other sectors like residential/services and transport, currently outside regulation. From the citizen s perspective, reducing GHG emissions is part of an increased social responsibility. As expressed in the Context Section of this report, the impacts from Climate Change could seriously damage the outlook for future generations, and as a consequence, individuals today need to change social behaviours. From a corporate perspective, the adoption of environmentally friendly practices would be source of value creation. The inherent reduction of costs would come from several areas: savings from energy efficiencies, not only from electricity consumption but also primary fuels, savings on emissions related cost, with lower taxation levels; and Capex savings by optimising asset use. The link between environmental behaviour and taxation has the potential to be the missing link and trigger a behavioural change. Individual and corporate actions are expected to change as taxation becomes more directly influenced by their own behaviours. An emission-conscious attitude would benefit from reductions in energy cost, making environmental awareness even more important. In addition, several of the initiatives described here have a direct implication on an individual s quality of life, be it in terms of air quality, lower

54 SMART Portugal 2020: Reducing Emissions 7: Portugal 2020 implications page 054 traffic congestion or overall energy savings. That being said, citizens will be forced to rethink their lifestyle in the different sectors covered by SMART Portugal In transportation, users should consider the new taxation and resulting cost of vehicle ownership to develop different mobility strategies. The use of public transport and the adoption of eco-friendly driving attitudes would increase, driven by the direct cost to the individual. On the power management side, consumers should be open to a shift towards a more rational use of electricity. Both citizens and companies should be alert to pricing signals and react accordingly; they should also be willing to actively reshape their consumption profiles to allow the introduction of cheaper and less polluting generation methods. The same attitude should increase adoption of efficiency standards across households. If a structured incentive scheme is in place, people will tend to adopt solutions more quickly. Successful implementation of energy efficiency schemes is already happening in Portugal, as evidenced by the increased penetration of energy efficient lamps in public and private lighting. 7.3: ICT industry SMART Portugal 2020 is a key opportunity for the Portuguese ICT industry. The initiatives identified require a high level of ICT involvement, with the development of specific solutions incorporating advanced technology. Beyond the direct business opportunity from ICT as an enabler, it is an opportunity for the Portuguese ICT industry to be recognised for its technological leadership, both in Portugal and abroad. In fact, the ICT enablement effect identified by SMART Portugal 2020 highlights the business opportunity that exists for ICT. Estimated savings in terms of carbon emissions and energy can only be reached with significant ICT investment. However, first pay-back estimates confirm the sound business case underlying those investments. Portugal, due to its characteristics in terms of size, demographics and market structures makes an attractive living lab to showcase many of these solutions before deployment abroad. The majority of the technologies involved in the initiates already exist. The required effort lies mostly in packaging integrated solutions, with specific applications and features that enable real savings, rather than developing entirely new technologies. However, not all initiatives depend on enactment of policy changes. The economic benefits and stakeholder concentration required to make them happen create business opportunities with an impact on overall emissions that should be pursued by the ICT industry. The existence of market conditions suitable for the deployment of these solutions is demonstrated by the solutions and projects already in development. The ICT industry is active in production of environmental solutions, and does not need to wait for policy makers to move before it can become a larger part of the solution to the climate change problem. Areas such as logistics planning for freight forwarders and logistics operators, initiatives in the ICT industry to reduce its own footprint, or the increasing offer of dematerialised services show the ability of the industry to initiate a change. Even in areas where public policy might be required for full deployment and achievement of the potential identified in the research (such as building automation systems), the industry is already active. The challenge lies in systematically identifying specific areas of opportunity that can be tapped into, and developing adequately packaged solutions to address those areas. This means a targeted approach to the needs of specific customer segments, catering for specific concerns and eliminating cost-adding features that are not valued by these clients.

55 SMART Portugal 2020 : Reducing Emissions 7: Portugal 2020 implications page 055 Although technologically all the pieces are in place, in many cases substantial efforts are still required for standardisation and industrialisation to achieve the required reliability, cost and ease of deployment. In transport systems, even if the technological building blocks are in place, a standard solution must be developed that allows real time emissions monitoring and access control. This type of solution can be deployed nationally, although wider standardisation would allow higher scale economies and easier adoption. The technologies involved (metering of emissions, user interface, communications with authorities, authentication, etc.) are known to the industry, but significant effort is needed to effectively industrialise the technology and meet requirements for overall cost and ease of roll-out. In power management systems, several pilot programs are already in place to demonstrate the feasibility of the solutions proposed. However, challenges remain in the standardisation of metering procedures and data transmission, in user interfaces and in external or in-built actuators to control specific appliances. Ideally, and in order to realise the maximum scale advantage, standardisation at an European level should be sought; however, given the large number of projects and trials already underway at the European level with no common technological platform, standardisation at the national level, with leveraging of international scale at the sub component level (e.g. sensors, actuators) is probably the most realistic approach. Given the critical nature of the services being managed, security and system integrity are additional key features to be developed in the process.

56 SMART Portugal 2020: Reducing Emissions 7: Portugal 2020 implications page 056 In building systems, adoption will be highly dependent on the ability to build on the existing technologies to develop solutions that are cost effective and easy to deploy, including retrofitting into existing buildings, a key barrier to widespread adoption. This requires a targeted effort to package existing technologies into solutions that can be deployed with minimal retrofit construction works and that take into account the skill set required from technicians in installation. The deployment of SMART initiatives with high ICT involvement in Portugal will be an opportunity for the Portuguese ICT industry to be recognised for its technological leadership. Industrialising and deploying solutions for SMART Portugal 2020 would increase ICT industry capabilities and product portfolio. Moreover, the successful results predicted for Portugal would improve international perception of Portuguese technological capabilities. As a consequence, the ICT industry could increase its exportability and generate new business in other countries following the same SMART path. In addition, the platforms for data gathering and systems actuation created for different initiatives will enable the development of value added services (e.g. consumption optimisation algorithms, usage pattern analysis, payment for services) for end users based on those resources.

57 SMART Portugal 2020 : Reducing Emissions 8: Concluding remarks page 057 8: Concluding remarks As stated in the original SMART 2020 report by GeSI and the Climate Group, The ICT industry, in partnership with other emitting sectors, has a key role in helping make society s impact visible and to demonstrate in aggregate the demand for new ways of reducing that impact. In an age of uncertainty, where the effects of climate change are already being felt (and are occurring at the same time as one of the largest global financial crises of the last 100 years), Governments, Companies and Citizens are looking for solutions that will allow business and people to thrive without compromising the long term sustainability of the planet. Solutions will need to be innovative and fundamentally change the way we work, travel and entertain ourselves. If there is one sector where innovation has always been a cornerstone, it is ICT. Over the last few decades the sector has brought increasing innovation to our fingertips, revolutionising the way we live. The time has come for the sector to re-cast itself in the role of a key solution provider. And this time the solution is for one of our biggest global challenges the fight against climate change. In Portugal s case the sector can reduce emissions by over 10X its own footprint, and become a critical pillar by reducing Portuguese emissions by up to 15% versus expected 2020 levels. This is enough to achieve the targets needed for sustainability proposed by the European Union. Even though the solution is not purely driven by the ICT sector, no sector like ICT

58 SMART Portugal 2020: Reducing Emissions 8: Concluding remarks page 058 has the potential to be the unifying thread to achieve this solution, bringing together Government, Companies, Citizens and solutions. Quick steps should be taken to realise an emission reduction potential of 11.9CO 2 e and to capture the estimated 2.2 billion of opportunities identified for the Portuguese economy. The ICT sector should serve as the unifying thread and work along side other sectors and policy makers to develop the necessary next steps to realise this potential broadly discussing the conclusions and recommendations of this study, structuring a detailed roadmap and implementing the initiatives along the main areas of action identified. For the ICT sector this means, in the first instance proactively identifying and pursuing opportunities to develop solutions that are independent from policy changes or other third party actions. At the same time, it is important to acknowledge that the largest potential for change lies in areas where policy change is a requirement for either the implementation of initiatives or realisation of the full potential. It is up to the ICT industry to identify the key stakeholders and policy agents for the initiatives outlined in this report, and work with them in defining the solutions (technological and policy) that simultaneously maximise the contribution to GHG emission reduction and align the incentives of the different stakeholders with rapid deployment of solutions. The stakeholder vision developed in Appendix 5 The SMART Way, is a first contribution to thoughts on how this can be achieved. ICT s potential can be rapidly realised through existing technologies, know-how, and overall solutions. Decisions required from policy makers are known. Impacts on consumer and company habits have been identified. Society is increasingly aware of the problem and receptive to the adoption of these solutions. Now is the time to act.

59 SMART Portugal 2020 : Reducing Emissions 9: Appendix 1 Forecast methodology & definitions page 059 9: Appendix 1 Porecast methodoly & definitions Drivers in forecasting electricity generation emissions were production mix, specific emissions per raw material and technological efficiency. Industry/construction footprint estimation was based on sales projection and specific emissions per unit of output.

60 SMART Portugal 2020: Reducing Emissions 9: Appendix 1 Forecast methodology & definitions page 060 Transportation footprint was estimated for each sub-sector: roads considered fleets, specific emissions and distances travelled, aviation considered air movements, railways considered total passenger-km and navigation considered port movements.

61 SMART Portugal 2020 : Reducing Emissions 9: Appendix 1 Forecast methodology & definitions page 061 Residential and services (excluding ICT) was assessed using total inhabitants, average consumption per capita and generation emissions. The ICT sector was split into four main areas: personal computers, telecom devices, telecom networks and datacenters.

62 SMART Portugal 2020: Reducing Emissions 9: Appendix 1 Forecast methodology & definitions page 062 Personal computer estimates were based on number of units, consumption per unit and specific generation emissions. Telecom device projections were also based on the number of units, their consumption and specific generation emissions.

63 SMART Portugal 2020 : Reducing Emissions 9: Appendix 1 Forecast methodology & definitions page 063 Telecom network estimates have been forecasted according to interviews with the 4 main network operators. Datacenter estimates were based on the number of servers, their consumption and specific generation emissions.

64 SMART Portugal 2020: Reducing Emissions 10: Appendix 2 Assumptions & sources page : Appendix 2 Assumptions & sources Energy Assumptions Sources Generation Generation emissions driven by increase in electricity consumption and expected generation mix Electricity consumption based on expected EU consumption and government energy efficiency plans Generation mix based on government plans for electricity generation mix DGEG REN MEI EU Primes Model INESC Autoconsumption Network losses Auto-consumption based on maintenance of current consumption levels (electricity and refining) Auto-consumption as a percentage of current energy balanced maintained Network losses based on level in previous year with percentage gain due to penetration of micro-generation and distributed generation 10% penetration of Micro-generation (resulting in ~1% reduction in electricity network losses) DGEG REN EU Primes Model DGEG REN INESC Industry Assumptions Sources Sales growth Specific emissions Sales driven by GDP forecasts and specific adjustments with sector specificities Poor GDP evolution in the short term (decreasing until 0.7% in 2009) but then increasing to reach ~2% from 2012 on Reductions up to 2020 assumed to result from application of best-practice technologies already available in the market 28% for cements, 15% for pulp and paper, 9% for metals and 13% for others Economist Intelligence Unit Instituto Nacional de Estatística Expert interviews Tracking Industrial Energy Efficiency and CO2 Emissions - International Energy Agency Agência Portuguesa do Ambiente

65 SMART Portugal 2020 : Reducing Emissions 10: Appendix 2 Assumptions & sources page 065 Transport Assumptions Sources Railways Road Passenger evolution projected according to RAVE studies and international benchmarks Ramp-up was estimated based on French SNCF and Spanish AVE cases Railway specific emission reductions were limited assuming all of the fleet will be electrical and renewal of remaining 35% diesel stock Considering average emissions of 50g/pass-km for the electrical train and 115g/pass-km for the diesel one, potential optimisation of 31% in emissions for the coming years Emissions for the road sector were based on the European Union 2012 targets available for the automotive industry Average total fleet specific emissions in 2020 assumed to be similar to EU targets for new cars in g/km for PCs, 175g/km for LDs, 600g/km for HCs and 100g/km for MBs Car fleet growth were extrapolated according to historical growth analysis and recent trends Average travelling distances assumed to be constant through the years in a Business As Usual scenario 10,220 for PCs, 16,715km for LDs, 45,545km for HCs and 10,000km for MBs Modelo Integrado de procura de Passageiros Steer Davies Gleave, RAVE Benchmarking Steer Davies Gleave Anuário dos Transportes 2008 Instituto Nacional de Estatística Agência Portuguesa do Ambiente ACAP Associação Automóvel de Portugal ANECRA Associação Nacional das Empresas do Comércio e da Reparação Automóvel European Commission Agência Portuguesa do Ambiente

66 SMART Portugal 2020: Reducing Emissions 10: Appendix 2 Assumptions & sources page 066 Aviation Maritime Aviation movements were based on projections including the new airport Assumes movement forecasts that already exist for future years (one movement includes landing and takeoff) Specific emissions extrapolated from historical analysis Movements (one port entry) and specific emissions extrapolated from historical analysis Estimativas de Procura Parsons FCG, NAER ANA Aeroportos de Portugal Agência Portuguesa do Ambiente IPTM Instituto Portuário e dos Transportes Marítimos Agência Portuguesa do Ambiente Residential Assumptions Sources Electric consumption Slight decrease of consumption in residential and services sector due to lower electrical emissions Increase in per capita electricity consumption Non-electric emissions maintained as increased efficiency offsets increased penetration Increase in electrical efficiency of ~10% based on government programs DGEG MEI PPPEC INE

67 SMART Portugal 2020 : Reducing Emissions 10: Appendix 2 Assumptions & sources page 067 ICT Assumptions Sources Personal computers Increase in emissions due to increased penetration of PC s Increase in number of personal computers for both private and commercial use Large penetration and slight substitution effect between desktops and laptops No evolution in unitary consumption as more powerful PC s require more energy Penetration growth declines as penetration approaches those of more technological nations IDC INE World Development Indicators database ASE 2007 energy report Telecom devices Telecom device emissions growth stabilises as increased efficiency offsets increased device penetration High increase in number of mobile devices in first few, but slowing as saturation limit is reached Large investments in broadband networks with large increases in number of clients with CPE devices Slight decrease in unitary equipment efficiency based on equipment manufacturers IDC ANACOM Merrill Lynch Global Wireless Matrix Nokia Ericsson APDC associates Telecom networks Increase in telecom network efficiency due to decreased emissions per kwh Average electricity consumption maintained due to gained electrical efficiencies balancing increased network capabilities APDC Associates Datacenters Increased emissions due to maintained growth in number of datacenters Increase in number of servers following international trends No electric energy consumption savings considered as more powerful datacenters require more energy to run and cool IDC US EPA

68 SMART Portugal 2020: Reducing Emissions 10: Appendix 2 Assumptions & sources page 068 Economic Assumptions CO2 price in 2020 = 35/ton CO2e Electricity Price = cent 6.0/kWh Fuel: Gasoline = 0.48/litre Diesel = 0.39/litre BCG Analysis DGEG

69 SMART Portugal 2020 : Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page : Appendix 3 Portuguese carbon footprint: sector by sector This section details the assumptions behind the growth projections for each of the main sectors considered: Electricity, split into energy generation, energy (energy sector auto-consumption) and energy losses; Industry/construction sector; Transport sector; Residential and services sector (excluding ICT); ICT sector.

70 SMART Portugal 2020: Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page : Energy : Generation As stated in Section 4, from an emission production perspective electricity generation is responsible for 19.3MtonCO 2 e of emissions in Portugal. These emissions are influenced by two factors actual electricity consumption by sector (e.g. ICT, residential/services, etc.) and the national electricity production mix of emitting and non-emitting energy sources (e.g. coal, gas and fuel vs. hydro, wind and other non-emitting sources). To clearly split the analysis between these two effects (production effects versus consumption effects) electricity generation was analysed separately from electricity consumption. Although electricity consumption was allocated to each end user sector and emissions were analysed from a consumption point-of-view, a clear analysis of the electricity production sector is key in order to understand what scenarios/initiatives are due to changes in the generation mix (maintaining these in the electricity generation sector), and what scenarios/initiatives are due to increased electricity efficiency or changes in electricity consumption (linked to each consumption sector). As such, electricity generation was analysed in parallel with other sectors, influencing their emissions through changes in unitary emissions per kwh consumed. To project a 2020 BAU scenario of emissions (and to determine potential for emission reduction) several assumptions were used for electricity generation in Portugal: Emissions only relate to electricity production inside the Portuguese borders. As such, emissions related to electricity produced outside national borders was considered as non-emitting (due to emissions being produced outside national borders), and total electricity produced equals national production plus net imports (net imports equals imports minus exports); Changes due to an increase or decrease in rain and hydro generation availability were not modelled, and an average value was considered for hydro production in relation to installed capacity; Energy sector auto-consumption and network losses were considered as an independent emitting sector, included in analysis in the same way as the remaining consuming sectors. This maintained the independent influences from each sector s drivers, relating energy sector specific emissions to energy sector specific trends. Inputs from several sources were used to determine a 2020 scenario for electricity generation, including; 24 Government scenarios for existing and new generation as well as expected electricity generation mix; EU Primes Model predictions on electricity intensity (consumption per capita); 25 Existing Government programs for electric efficiency and impact on EU electricity intensity models; Conservative projections of the increase in penetration of microgeneration/ distributed generation (up to 10% of installed capacity) in consumer locations, resulting in decreased electricity demand from consumers. 24 Latest scenarios set on publications from MEI A policy with ambition 25 PNAEE, Portugal Eficiência Plano Nacional de Acção para a Eficiência Energética; PNAC, Plano Nacional de Alterações Climáticas; PPEC, Plano de Promoção de Eficiência ao Consumo

71 SMART Portugal 2020 : Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page 071 This data enabled scenarios to be modelled that take into account not only expected electricity demand but also expected generation mix. Electricity demand projections based on various sources (EU, Government Plans, and electricity sector Stakeholders) resulted in a BAU annual growth rate of 2.0% in electricity demand. This result is more aggressive than EU targets which point to a reduction of EU electricity consumption growth from 3.1% to 2.4% in 2010 to This is due to specific Portuguese government programs and measures impacting electricity consumption. The specific emissions of the power generation segment take into account the latest policies and initiatives implemented by the Portuguese administration. The latest publications from the Ministry of Economy highlight the plan to keep Portugal at the top end for renewable energy penetration in European countries. The latest scenarios set by the administration have four main underlying assumptions: Gradual elimination of fuel generation, leading to full elimination by 2010; Increase of renewable and non-emitting electricity generation (through growth of wind and hydro) to reach 45% renewable electricity by 2015 and 48% by 2020; Maintain the gradual decline of the amount of coal generation in the overall mix, as seen over the last 5 years (reduction from 30% of national electricity generation from coal in 2002 to 27% in 2007, and gradual decline to 22% in 2020 as new gas units come online); Remaining demand captured by Natural Gas generation. Moreover, technological advances are

72 SMART Portugal 2020: Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page 072 expected to impact unit emissions, regardless of the fuel used to produce electricity. To that extent, technological efficiency gains across emitting sources have been included for this projection. The resulting scenario predicts an increase in non-emitting generation from 40% to 48% ( ), or an increase in energy from renewable generation amounting to an additional 12 TWh from 2007 to This scenario also includes the following assumptions: Conversion, in 2014, of +800 MW of conventional coal to clean coal; Increased ability to use renewable energy sources (approximate +33% increase in availability). For electricity generation sector emissions, the scenario projects a 3.3% CAGR reduction in unit emissions (CO 2 e emitted per kwh generated) from a 2007 starting point of 0.35tonCO 2 e emitted per kwh to 0.22tonCO 2 e/ kwh in This translates to a 1.3% CAGR reduction in total electricity generation emissions. This reduction is especially relevant because it affects the emissions in all electricity consuming sectors, and is an important factor in each sector 2020 BAU scenario. +4,063 MW in natural gas up to 2012; Decommissioning of fuel plants after 2010; The emissions from the power sector are expected to be 16.0MtonCO 2 e by 2020, a 17% decrease during the period

73 SMART Portugal 2020 : Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page 073

74 SMART Portugal 2020: Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page : Autoconsumption Auto-consumption is related to both the generation plants/hydro pumping consumption and to refining activities. Therefore, SMART Portugal 2020 projections assumed a continued stable share of gross energy production for plant/pumping consumption and used the historic trend observed for refining activities. This estimate results in a small increase in emissions related to energy sector autoconsumption (0.4% CAGR growth), equal to 3.9MtonCO 2 e in 2020.

75 SMART Portugal 2020 : Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page For this report network losses are measured as a percentage of total gross generation + net imports (therefore including auto-consumption and MAT consumption). Network losses are usually reported from exit reference point, therefore measured as a percentage of consumption, excluding MAT consumption and auto-consumption (resulting in higher values: 2004 = 8.61%; 2005 = 8.09%; 2006 = 7.19%) :Network losses 26 The last sub-sector in electricity generation is emissions due to electricity transportation and distribution losses. In 2007, 7.7% of gross electricity production did not reach the end consumer. In a Business As Usual scenario, network losses will decrease due to the penetration of microgeneration/distributed generation, which in a conservative scenario could account for up to 10% of total generation by The reduction in network losses will be driven mainly by less high-voltage/lowvoltage transformations and lower distances from generators to consumers. This 10% penetration of microgeneration/distributed generation results in a reduction of network losses from 7.7% to 6.7%, and a lower unit emission factor, with a CAGR decrease of 2.5% in emissions associated with electric network losses.

76 SMART Portugal 2020: Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page : Industry The emissions coming from the manufacturing/process industries and construction will be driven by the increase in output (measured as sales) and also the reduction in specific efficiencies that the sector is expected to achieve. The growth in output was modelled as a function of the growth in GDP, where Economist Intelligence Unit forecasts were used. Different factors were considered when translating GDP to industry output for each industrial sector. The increase in efficiency, in a Business As Usual scenario, results from the alignment with best-practice technologies already available in the market. To that extent, SMART Portugal 2020 used international reports with best-practice benchmarks that revealed potential savings for each sector. This increased emissions efficiency comes mainly from improvements in energy and feedstock efficiency, since no major breakthroughs which can reduce process emissions (e.g. in clinker production) were considered in this or any other scenario.

77 SMART Portugal 2020 : Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page 077 This results in a slight decrease of the industry sector emissions, at a CAGR of -0.3% until 2020, and total emissions of 22.8MtonCO 2 e in 2020.

78 SMART Portugal 2020: Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page : Transport For the projections in this sector, aviation, road transportation, railways and maritime were considered separately. This split allowed a more specific forecast for each sub-sector, taking in account its particular dynamics. Transport emissions are expected to decrease from 20.1MtonCO 2 e in 2006 to 18.3MtonCO 2 e in : Road Emissions from road transportation account for the large majority of total transport emissions (95% in 2006). The projections were detailed by vehicle type (passenger cars, light duty cars, heavy cars and motorbikes) and for each of these a specific scenario was considered. The evolution of emissions associated with each vehicle type was based on three key elements: A forecast of the fleet evolution in terms of number of vehicles; Average number of km travelled by car by year; Average emissions per km per vehicle.

79 SMART Portugal 2020 : Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page 079

80 SMART Portugal 2020: Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page 080 The observed trends for all types of vehicles are very similar: the increase in car fleets will be offset by a decrease in emissions, undeniably a key concern for the European Commission. As the pictures show the emissions projections assume a continuation in the growth trend for automobile stock, but also a reduction in emissions per km, in line with the targets set by the European Commission for the automotive industry. By 2020, the average of the rolling stock will be emitting in line with the targets set for new vehicles in : Aviation, Railways and Maritime The aviation sector will face significant changes during the period The new Lisbon International Airport in Alcochete is expected to become a hub for connections from Europe to both Latin America and Africa. To address this, the emission projections include an estimate of movements 27 taking into account the new infrastructures. Nevertheless, the specific emissions by movement were analysed historically and the historic decline in emissions is used going forward, mainly driven by technological progressions and efficiency gains in engines. 27 Parsons FCG, NAER estimates

81 SMART Portugal 2020 : Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page 081 Similar changes are expected in the rail sector. The high speed projects to connect Lisbon-Madrid and Lisbon-Porto are expected by 2013 and 2015 respectively, and will impact the demand side of rail transportation in Portugal. The projections have taken into account the forecasts from RAVE for the new demand in the sector (passenger-km). In addition to these studies, international benchmarks have been studied to clearly understand and model the ramp-up phase and transported passengers. Another crucial element for these projections was to credibly estimate the potential for specific emissions reduction in a Business As Usual scenario. Rail emissions have historically been rapidly decreasing, due to the migration from diesel to electrical locomotives. For this reason, the potential reduction has been limited assuming penetration of electrical equipments rises from 65% (2006) to 100% (2020).

82 SMART Portugal 2020: Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page 082 The maritime sector will, predictably, face fewer changes. The sector has been quite stable and no major influences are expected to affect the sector materially for the period under analysis. This being said, the projections have taken into account a slight increase through the years, according to the historical analysis 28 and including all Portuguese ports. The same historical perspective has been used to forecast unit emissions; following other modal trends, these are likely to decrease, although at a slower rate than in other transport means (once again, reductions will be driven by more efficient engines and equipments on board). 28 IPTM Instituto Portuário e dos Transportes Marítimos

83 SMART Portugal 2020 : Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page For ICT definition see section PNAEE, Portugal Eficiência Plano Nacional de Acção para a Eficiência Energética 11.4: Residential/services (excluding ICT) The residential/services sector is the one that includes a higher portion of overall ICT content. However, as one of the main goals of this study was to detail the ICT industry s own impact, ICT has been detailed separately, and excluded from residential/services. Therefore, all considerations in this section will not relate to ICT-related emissions 29. The key factor for the emissions evolution is energy consumption. Effectively, two main forces are responsible for shaping the energy landscape of the future in the residential and services sector: a tendency for higher consumptions offset by decreasing direct emissions (both of electricity and other forms of energy). In terms of electricity, the increasing per capita consumption will come from the continual increase in penetration of appliances such as powerful TVs, HVAC equipments, consoles, kitchen appliances, etc. In terms of other energy forms (e.g. natural gas), the same trend will be observed more equipment in households, although technological improvements in these appliances will allow consumption to stabilise. Government programs already in action 30 plan to reduce ~10% of residential and office consumption by 2015, mostly through better construction materials and non-ict related energy efficiencies.

84 SMART Portugal 2020: Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page 084 The improvements in emissions efficiency are related to the generation efficiencies as previously described in electricity generation, Section Residential/services emissions are expected to decrease slightly from 15.0MtonCO 2 e in 2006 to 14.3MtonCO 2 e in 2020.

85 SMART Portugal 2020 : Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page : ICT

86 SMART Portugal 2020: Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page : Personal Computers The penetration rate of Personal Computers (PCs) in Portugal in 2006 was 0.19PCs/user, substantially lower than in other EU countries. Portugal is slowing moving in line other countries as penetration rates increase through the younger generation who are more used to living with IT. A clear example of this is the success of Government initiatives in this field through subsidised computers for schoolchildren of all ages. This should result in a strong increase to 0.63PCs/user by 2020, aligning with current best-practice rates (e.g in Netherlands in 2006). This strong growth represents a CAGR of 8% in the number of PCs over the period. This forecasted increase will be come mainly through an increase in laptops (once again, the target of government subsidies). Since laptops have substantially higher energy efficiency than desktop PCs, and current substantial progress on overall energy efficiency of PCs and peripherals is expected to continue, electricity consumption will grow at a lower rate of 5% CAGR during the period This leads to an overall increase of PC emissions of 1.4% per year (CAGR ), improved by the additional impact of the expected reduction in unit emissions per unit of electricity (see Section on energy generation).

87 SMART Portugal 2020 : Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page 087

88 SMART Portugal 2020: Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page : Telecom devices The expected emissions from telecom devices are influenced by two different factors. Although a continued increase in penetration rates is expected, it will happen at a slower rate than in previous years. A decrease in unit equipment consumption is also expected, mostly due to reduction in stand-by consumption of devices. Portugal has one of the highest penetration rates of mobile phones per capita in Europe: the penetration rate reached 134% in As a consequence, the increase in the number of mobile phones will be slower (1% CAGR ) than previous years, even when taking in account expected penetration of device-to-device communication. However, Customer Premises Equipment (CPEs) will see strong growth during the period. This growth will be driven by two main forces: the rising penetration of TV equipment in our houses and Internet related broadband devices. The first case is related to the multiple applications available today for our TVs, e.g. set-top boxes. The second case is linked to the tendency for increased connectivity, which leads to the increase in the number of routers. All telecom devices considered were identified as very inefficient devices in standby power consumption. Interviews with experts and companies showed that companies are starting to focus on this consumption, therefore a slight reduction in power consumption per device was assumed.

89 SMART Portugal 2020 : Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector BAU page 089

90 SMART Portugal 2020: Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page 090 The result is a stabilisation (-0.2% CAGR ) of telecom devices emissions at around 0.24MtonCO 2 e in 2020.

91 SMART Portugal 2020 : Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page : Telecom Networks The analysis of the likely evolution of telecom network consumption, and hence emissions, was mainly based on interviews with APDC associate members, major Portuguese mobile network operators were interviewed and their views used in the overall estimate. In the coming years, the networks will change dramatically. Indeed, the major players are already working on lowering network consumptions by swapping from copper to optical fibre technology. Transition to optical equipment will allow considerable cost savings, through both energy saving, with the subsequent impact on CO 2 emissions reductions, and maintenance expenditure. This trend is key to the projected emission reductions, decreasing at 3.5% CAGR from 2007 to 2020.

92 SMART Portugal 2020: Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page : Datacenters Datacenters are the fastest growing ICT sub-sector by emissions. International trends are for increasing computational power, with an impact not only on direct server consumption, but also on ancillary services (e.g. cooling). This tendency towards increased processing capacities can also be observed in Portugal. As a result, we can predict a strong increase in the number of servers, but also in the direct consumption per server (driven by higher capacity). Therefore, increased electrical consumption will be the key driver for the high negative impact forecasted on emissions. This expected tendency is in line with international expectations on growth in number of datacenter servers as well as expected growth of datacenter unit consumption. The expected 5.2% CAGR in number of servers from 2007 to 2020 (representing a 93% growth in number of servers), is accompanied by a slight increase in server unit consumption, resulting in a 5.8% CAGR in total datacenter consumption up to This represents a doubling of electricity consumption by datacenters in Portugal to 2020.

93 SMART Portugal 2020 : Reducing Emissions 11:Appendix 3 Portuguese carbon footprint: sector by sector page 093 Even if the reduction of unit emissions in electricity generation already mentioned (see Section on electricity generation above) is included, emissions from datacenters increase with at 2.1% CAGR from 2007 to 2020, representing 0.21MtonCO 2 e in 2020.

94 SMART Portugal 2020: Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction page : Appendix 4 The ICT enabling effect: sector by sector reduction 12.1: Energy : Generation Currently, energy transport and distribution grids are mostly passive elements, carrying energy that is produced based on consumption estimates. These estimates are made without recourse to real time information on consumption or network load, and without the ability to communicate and act on end user consumption. The use of ICT to communicate real time energy consumption, and to act, also in real time, on the different network elements and consumption points, enable a substantial improvement in overall system efficiency.

95 SMART Portugal 2020 : Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction page 095 Combining this ability to forecast energy needs more accurately at any given moment with active demand side management, which reduces total demand and shapes the load curves by shaving peaks, enables a higher and more cost-effective penetration of renewable/non-emitting technologies in the overall electricity production mix. This penetration will continue to be limited by the low predictability of most renewable sources (it is hard to determine when the wind will blow or when it will stop, with existing alternatives, e.g. thermal generation, being more expensive); however, a more accurate measurement of real needs with DSM, and potentially use of storage elements such as batteries (e.g. in electric cars), would enable an increase in installation of intermittent renewable power and higher usage of the existing base, leveraging the push made in recent years by the Portuguese authorities for a higher capacity in renewable energy. As a consequence, direct emissions would drop from 0.220tonCO 2 e per MWh, in a BAU scenario, to 0.204tonCO 2 e per MWh in a SMART scenario by 2020 (from an increase of between 48% and 58% in renewable generation). Reductions in energy consumption translate into a reduction in emissions from 16.0 to 12.3MtonCO 2 e. This value is split into two effects: The first is reduction due to energy no longer consumed. This reduces electricity consumed by 12.3 TWh electricity, saving approximately 2.5MtonCO 2 e (split across sectors). These CO 2 e savings are due to energy efficiency initiatives, and are not considered as savings due to increasing renewable generation, but decreasing emitting generation.

96 SMART Portugal 2020: Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction page 096 The second is saving due to increasing generation from renewable sources in the national mix (from 48% to 58%), which has on the effect of improving all the remaining consumption by reducing the CO 2 e emission costs for electricity consumed. This effect saves 1.2MtonCO 2 e. Only the second effect is considered for electricity generation (final potential is a 1.2MtonCO 2 e reduction), while the remaining savings are allocated to the sector responsible for the reduced consumption. The result is lower unitary emissions for all electricity consuming sectors. This reduction has an economic value of 42M (due solely to CO 2 e costs avoided since no actual electricity is saved). To isolate the effects, the whole of these savings have been accounted for in power management initiatives. Other initiatives affecting consumption in end user sectors are accounted for using the reduced emission factor in order to avoid overlaps : Energy transformation & energetic losses An increased control over the network, mainly driven by more accurate predictability, could enable additional use of distributed production and microgeneration in the grid. This would require strong ICT involvement, as the monitoring of grid status is dependent on pervasive measurement devices that are able to communicate data and receive instructions, as well as advanced software and processing tools. Stabilisation of the grid could allow an additional 10% penetration of microgeneration by This increased penetration of microgeneration, much of which will be renewable (an effect already accounted for in generation), enables a further reduction of emissions by requiring a lower number of high voltage/low voltage transformations and a shorter distance between production and consumption. This has an impact on network losses, estimated at 0.08MtonCO 2 e and 380

97 SMART Portugal 2020 : Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction page 097 GWh; with an associated financial value of 26M. However, the major reduction potential could come from the full implementation of Demand Side Management (DSM). In fact, the management of individual client consumptions would allow application of selective interruptability or power limitation, reshaping the consumption periods according to the amount of generation available. Additionally, DSM is also important in compensation for intermittent wind/solar generation, thus avoiding more expensive (e.g. tertiary) reserve capacity. DSM would require an integrated approach with high ICT involvement. From the control of devices in households or offices to real time consumption monitoring and conveying real time price signals, all the information integration and analysis relies on ICT enablers. Implementing DSM would allow peak shavings in the current power consumption (load) curve, either through the activation of interruptability contracts or through the provision of adequate price signals. Given the results achieved in pilot tests in the US (Washington, Austin, California), DSM could enable a 10-15% reduction of peak demand, which would, in a typical Portuguese load curve, represent 2-5% of total power and hence emissions. Furthermore, because of the quadratic nature of network losses, shaving 10-15% of peak energy could represent 4-10% of total network losses. The overall impact of DSM implementation could reach 0.26MtonCO 2 e with savings of 1,289 GWh; the associated financial value would range from 266M to 428M. ICT could provide devices and software to monitor real time consumption and provide real time price signals, so that consumers can assess and rethink their behaviour. ICT could support consumer price signalling features and increased consumption visibility: the consumer would move to use of more efficient equipments and so limit consumption to what is really needed when it is really necessary. In this field, using ICT-enabled monitoring and communication equipment would be essential to transmit consumption profile to users, including data such as dynamic pricing, improvement options and maintenance programs. Research by the Carbon Trust in the UK estimates that this increased visibility could reduce consumption by up to 0.5% per year.

98 SMART Portugal 2020: Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction \page 098 Total potential for increased consumption visibility and application of dynamic pricing to clients gives a reduction of 2,064 GWh, or 0.75MtonCO 2 e in avoided emissions. This represents up to 152M per year in CO 2 e and electricity savings. Another key aspect to be considered is the increased use of the capacity in the installed network. The above mentioned trials in the US have shown investment delays in local infrastructures of 3-5 years; this means lower levels of Capex required for grid expansion and maintenance while achieving the same quality of service. Pilot projects that implement power management systems using ICT are occurring worldwide, as the sector implements these innovations in the Grids. Examples include a pilot in California and in several European countries, which confirm the maturity of the technology and its readiness for deployment. Considering the 3 detailed initiatives, up to 1.1MtonCO 2 e reduction is possible, from a decrease in 3.7 TWh, worth 266M.

99 SMART Portugal 2020 : Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction page : Industry Identifying SMART reduction initiatives in industry involved analysis and discussion of the area with industry experts. This is a sector already within the scope of the ETS directive and therefore already has strong incentives to curb CO 2 emissions. It is, therefore, not surprising that there is not a huge potential for further ICT-enabled optimisation, something that was confirmed by the various sources used to estimate the potential reduction. The PNAEE, Plano Nacional de Acção para a Eficiência Energética, in its industry workgroup, identified several optimisation levers, split by area. These areas were considered to be the initiatives that could bring more significant reductions across industry. Here are the four major transversal fields of action identified: Electrical motor systems, connected to all types of engines, pumps and other industrial equipment used in industrial processes. Electric engines are used more in European industries due to their elasticity (easiness of use and charge flexibility); Heating and cooling production, taking into account cogeneration and all combustion and heat recovery systems; Lighting, including optimisations in terms of electricity consumption related to the use of more efficient equipment and occupancy based systems; Industrial process efficiency, which covers topics such as monitoring, effluents treatment, process integration, equipment maintenance and other related issues.

100 SMART Portugal 2020: Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction page 100 ICT has different levels of involvement in each of these fields. For the electrical motors and the lighting initiatives, ICT is likely to be an important enabler: in electrical motors, monitoring devices allow the visualisation of working conditions and fine-tuning if needed; in lighting, sensors can manage occupancy based consumption and efficiency across the process. In the other two areas of interest, ICT would be used mainly for simulation tools used in the designing phase that precedes any industrial process change/optimisation. Therefore ICT-enabled potential in these areas is not as significant. For the assessment of this potential, several sources were used to estimate a range for emissions reduction 31. A maximum 0.5MtonCO 2 e ICT-enable reduction was identified within the industry, equal to approximately only 0.5% of total national emissions by 2020, or 67M in value. 31 PNAEE estimates consider total potential identified for the industry applied to industry emissions by 2020 in the BAU scenario; IEA estimates are based on best potentials for each industry sector; GeSI estimates are based on same share of ICT enablement in industry as adopted in the global SMART 2020 report

101 SMART Portugal 2020 : Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction page : Transport In the global SMART 2020 report, SMART logistics was identified as having major potential in Europe; similar results were expected for Portugal as transportation is the second largest emitting sector. An analysis of best-practices internationally, in parallel with a discussion of strategies with industry experts, led to the identification of seven reduction initiatives with significant ICT involvement. These initiatives were detailed in terms of ICT-enablers for emissions reduction and in terms of direct economic value involved. However, the real value of the initiatives could even be higher as some externalities have not been considered in this report. It is the case of the increase in safety or the higher service quality that come from the use of intelligent transport systems. Transportation initiatives could be worth 1.2 billion, although 79% of the potential would come from four initiatives: payas-you-emit, congestion management, freight logistics and driver training. Pay-as-you-emit This initiative is based on the concept of increased responsibility for those who actually emit. A monitoring system of emissions would establish a polluter-payer principle across the transport sector, forming a link between real emissions and vehicle charges. The initiative requires a high level of ICT involvement. The basis would be the development of an in-car device to measure

102 SMART Portugal 2020: Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction page 102 emissions in real time. Two alternatives could then be considered: either the online mode, where information would be sent in real time for processing, or the offline mode, where it would be stored for later treatment. This second alternative would require the adoption of submission standards so that the driver could be charged periodically (rather than in real time). The monitored information could also be displayed in real time to the driver, increasing his awareness of environment impact and cost, motivating a smoother driving. International studies identify a potential 10-15% saving on distances travelled 32, although a more conservative scenario has been used for Portugal after estimates from industry experts. Only passenger cars and light duty vehicles were assumed to reach a 10% reduction, giving a potential emissions reduction of 1.0MtonCO 2 e. Considering the additional 0.4 billion litres of fuel saved, pay-as-you-emit could have an economic value of 200M. Of this, 82.5% is from fuels savings, directly linked with user cost reductions, and the remaining 7.5% is from avoided emissions. Congestion management The congestion management initiative could act on several levers in order to reduce city traffic congestion, all of them requiring heavy use of ICT. These can include the more traditional parking taxation right through to the application of tolls in the boundaries of the major cities. Singapore pioneered use of such systems in traffic reductions reached 45% with a very simple toll system. Since then, similar systems have been implemented in other developed cities worldwide, such as Seoul with a 25% reduction in traffic during 32 Victoria Transport Policy Institute Winwin Emission Reduction Strategies

103 SMART Portugal 2020 : Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction page APEIS Asia-Pacific Environment Innovation Agency 34 The Stockholm Congestion Charging Trial Expert group summary 35 European Union position paper on public transport 36 INE Censo E.g. Luis Simões fleet management system the first year 33, or the more recent adoption in Stockholm, with up to 14% emission reductions in a seven-month trial in The congestion charges applied in London are another example of strategies to reduce emissions. In fact, in only 5 years a very positive result of 20% CO 2 e emissions reduction has been achieved 35. In addition to the emission profile of the Portuguese economy, which makes transportation a key area of action, the demographics of the country, with the two major urban areas (greater Lisbon, including Setúbal and greater Oporto) accounting for more than 60% of the population (Lisbon and Oporto) 36, make congestion management not only a high impact initiative, but also relatively easy to action (when compared to other countries). Another key aspect for the success of the congestion management scheme is the alternatives that the users will have for city transport. Public transport services need to be adjusted to cope with increased traffic, potentially through a restructure of the network. In Portugal, the very low load factors of public transport (e.g. 21% load factor in Carris in 2007) indicate that free capacity available will be able to cope with at least some of the additional demand. The implementation of a similar system in Portuguese cities would require strong ICT involvement at different levels. A car device would be required for vehicle identification. Several interconnected devices would be needed for control: static ones at the city limits for the entry monitoring, video cameras to visualise real time traffic flows and sensors to monitor real time parking use. A permanent synchronisation scheme would be required to ensure that vehicle information is integrated with real time city traffic and that dynamic pricing policies could be used. Different prices should be adopted for different vehicles types (e.g. exemptions for environmentally friendly ones) and occupancy features (high load factors could have charge benefits), always considering the vehicle mix and traffic flows. The pricing strategy for the urban parking could also be reshaped with online usage information. Although parking is already charged for in major Portuguese cities, parking fees are still not sufficient to dramatically affect major congestion. A significant increase in the peak time price in problematic areas would considerably reduce the number of trips to cities by car and would encourage the use of public transport. A more ambitious scenario would be to develop the current traffic light management systems, (e.g. Gertrudes in Lisbon), and increase their capability to incorporate real time traffic information, not only from each specific street, but also from other areas affecting or being affected by the behaviour of each traffic light. Nowadays, this system coordinates traffic lights to create waves of traffic depending on time of day. However, it could incorporate traffic information and proactively manage major bottlenecks by redirecting problematic flows, adapting dynamically to traffic as well as conducting traffic to desired city locations. In Portugal, this initiative could save up to 1.4MtonCO 2 e or 0.5 billion litres, assuming the same level of impact as the London congestion charge scheme could be achieved on 80% of the BAU urban emissions (a conservative scenario considering other referenced examples). This has a direct economic value of 346M in avoided CO 2 emissions and saved fuel. Freight logistics Optimising freight logistics can bring significant savings from both an emissions and economic perspective. Several levers can be incorporated into fleet management systems to increase operators efficiency. In Portugal, these applications are already being used today, although in a specific set of more developed fleets, and with a lower level of functionality 37. ICT involvement, through global positioning systems located in the vehicle and real time traffic visualisation, enables continuous optimisation of routes and related consumption. The optimisation

104 SMART Portugal 2020: Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction page 104 takes into account distances, roads, traffic, and the type of activity to be performed. Such systems have been shown to reach conservative travel and consumption reductions of 10% in Portugal, as national heavy duty fleets are very fragmented 38 and related operations are still not optimised with advanced applications. Freight optimisation could also be developed through integration of other functionalities, such as increased load factors and better scheduling integrated into fleet management systems. Load factor optimisation for duty vehicles, typically lower in the return phase, has room for improvement. This would require development of web platforms for operators to match available free capacity and demand for transport. ICT would enable optimisation by increasing vehicle occupancy. Freight Logistics could also enable optimisation of the city delivery system, with a direct impact in terms of traffic optimisation. Retail supply chains today are designed by product type, instead of an optimised service by destination. In the optimised case, each retailer would only be visited once and the same logistics operator would deliver all categories of goods. In a well structured system, there would be benefits for everyone involved. The retailer would be more efficient, as it would only receive one delivery. The logistics operator would have the same business volume, assuming a reasonable distribution of deliveries, and would operate mainly in a single zone, with reductions in traffic allowing faster service with less fuel consumption. Society would benefit from lower traffic related emissions. Overall savings estimated for Portugal could reach 1.5MtonCO 2 e and 0.6 billion litres of fuel, representing 275M of value, mainly due to a reduction in fuel consumption, and also cost efficiencies for logistics operators. Driver training This initiative has proven to have a potential consumption reduction of up to 15% by training drivers to adopt a more eco-friendly attitude. However, taking into account the profile of Portuguese drivers, the estimated impact would be about 1.1MtonCO 2 e, given a more conservative estimate. This initiative could be worth 227M in terms of direct CO 2 and fuel value. Compared to other initiatives, ICT involvement in this initiative would not be very intense. Simulation technologies could be developed to allow training sessions for not only professional drivers, but the whole of society. Monitoring and visualisation applications would enable drivers to track their own behaviour and adopt a smoother style. Virtualisation The virtualisation of different tasks can avoid a significant amount of travel. Many applications, all of them based on ICT, could have an important impact in transportation besides the dematerialisation itself. Leading companies are starting to promote tele-working in spite of the existing cultural barriers. Videoconferencing, for instance, is considered to potential for reduction of up to 22MtonCO 2 e in Europe, by avoiding up to 20% of business travel. In fact, business travel could be replaced in many occasions by ICTenabled applications that reduce transportation dependency. Another area with significant interest is the Portuguese e-government strategy. The increasing availability of services that can be performed online helps reduce vehicle travels related to such services, as well as the pure 38 Portuguese heavy duty fleets are still fragmented, resulting in a reduced investment capacity per fleet from the operators

105 SMART Portugal 2020 : Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction page Potential targets of 0.25MtonCO2e for Lisbon and 0.1MtonCO2e for Oporto 40 Electric car chosen as indicative was the Tesla dematerialisation of physical support. Details of dematerialisation effects on physical purchases are detailed below in the residential/services section. The overall virtualisation impact could reach 0.6MtonCO 2 e reduction, assuming Portugal aligns with European average travel reduction by Intermodality Intermodality should be considered for both freight and passengers. In both cases, ICT could have significant involvement on the freight side, technologies can be used to optimise transportation costs taking into account available options in real time and to track freight paths through devices such as RFID; on the passenger side, the use of ICT can support the development of personal travel systems, allowing individuals to assess mobility options in real time. On the freight side, the major obstacle in the Portuguese market is the low quality of service that is currently offered by less emitting methods. The most considered alternative is rail, as emissions can be reduced by up to 65%. However, efficient transportation of goods by train has a minimum distance requirement, on top of scheduling flexibility for charging procedures. On the passenger side, reduction targets can be met by a shift from road to train. The targets identified by the PNAC seem achievable and have been discussed with industry experts. Much of this is likely to be due to an increased use of underground railways (Metro) in urban areas. A total reduction of 0.5MtonCO 2 e could be achieved with fuel savings totalling up to 0.2 billion litres. Electric car enablers The electric car is relevant whenever discussing the future of transportation. However, technological maturity has not yet been reached and full deployment of this technology in car fleets would require several structural changes in the infrastructure. Several options are now being developed, such as charging spots or battery exchange stations, but there is not a single standard solution to cope with the common difficulties related with the recharging. The main change required would come from managing the load on the electric grid that would come with mass adoption. Some vehicles are already equipped with simple charging systems, but the increase in electricity demand in peak hours (typically by 18h-21h, when people arrive home) would exceed generation capacity. Therefore, such penetrations implicitly require the presence of smart grids for simplicity and comfort of use. Electric engines are still being demonstrated and their reliability is still to be proven; therefore, the penetration of this technology among car fleets by 2020 is estimated to range from 1% to 5%, following expert estimates for the Portuguese market. In order for estimates to be conservative, this report considered a penetration of 3% in the passenger car fleet by However, more ambitious scenarios have been discussed during the interviewing phase, with more ambitious projections pointing 10 to 12% of car fleets penetration. Electric cars are not emissionsfree; their fuel, electricity, is responsible for emissions during generation. To estimate the potential reduction, a specific electric vehicle 40 was used as a benchmark; for the same distance travelled, it was 80% less polluting than conventional vehicles in A total reduction

106 SMART Portugal 2020: Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction page 106 of 0.1MtonCO 2 e could be reached, and the economic value at stake would represent 24M. Besides the initiatives identified before, the car sharing/car pulling has also been studied. The concept means to increase the load factor of the vehicles, typically fostering the idea of sharing the vehicle within the community. The penetration levels are believed to remain low, although some initiatives of the kind appear in the European panorama 41 and also in Portugal 42. This scenario has low fixed costs, and that represents an incentive for the reduction of vehicle ownership concept. Due to the low expected penetration rates and respective reduced impact, as well as low ICT enablement potential, the initiative was not considered in the total transportation potential. 41 E.g. Liftshare.com platform in the UK 42 E.g. Mob Car Sharing by Carris

107 SMART Portugal 2020 : Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction page : Residential/services (excluding ICT) Potential reductions in this sector can be split in two major fields of action: energy efficiency and dematerialisation. One of the EU s critical levers, building energy efficiency, has a very high potential to reduce energy consumption. Pilot projects throughout the EU, and particularly in Portugal, indicate savings potential of ~30% in all buildings by using ICT to create, and renovate, green buildings. Reduction potential of 15-20% were identified and realised, even in buildings with energy efficiency measures already in place. ICT plays a central role in achieving this potential: Energy efficient building design, through simulation and modelling; Implementing energy efficient home equipment (e.g. Intelligent equipment that actively optimises energy consumption levels); Constant monitoring of equipment consumption levels; Adapting equipment consumption according to a need or occupancy basis; Intelligent and variable motor systems in heating and cooling. The BAU scenario considers a 10% energy efficiency improvement in residential and services, which, in the absence of a specific initiative to foster intelligent building management, will come mostly from replacement of tungsten lamps for low consumption lighting and other non-ict related measures. These measures reduce emissions by lowering the amount of energy required for lighting or climate control. The SMART scenario considers an incremental energy efficiency improvement of up to 25%. This potential equals 1.9MtonCO 2 e, or 5.6 TWh, resulting in a financial potential of approximately 410M. Process dematerialisation could bring significant reductions in consumption of physical materials. Indeed, as mentioned above, e-government services are an example where physical supports are avoided, but other situations can follow the same path. Dematerialisation is only possible due to an increased penetration of broadband services and PC s in the home, and allows many services to be moved online, with important effects on the emissions profile for the average citizen. Availability of on-line services combined with widespread broadband penetration eliminates the need for: Purchase of physical entertainment media, or in the near future, even of paper (books or newspapers); Paper based communication, a reality already felt today as most work related communication goes online; Many of the trips made by citizens to banks, public entities, supermarkets, or even work. Replacing all media purchases with online content could have an impact of approximately 20ktonCO 2 e in Portugal. Likewise, avoiding 25% of paper usage could avoid a further 410ktonCO 2 e per year. The total dematerialisation opportunity represents financial savings of 0.15M per year in avoided CO 2 e costs. Also, as previously calculated

108 SMART Portugal 2020: Reducing Emissions 12: Appendix 4 The ICT enabling effect: sector by sector reduction page 108 in the virtualisation initiative in transport, approximately 0.6MtonCO 2 e can be avoided due to tele-presence or tele-working. It is estimated that each new adult broadband user in Portugal enables a saving of ~290kgCO 2 per year. This number does not affect the final conclusion since it is assumed that, by 2020, broadband penetration will have reached its saturation point, but the speed with which access spreads does have an impact on how fast reductions are realised. The total potential reduction for the residential and services sector, in CO 2 emissions, represents up to 2.36MtonCO 2 e with financial savings of 426M.

109 SMART Portugal 2020 : Reducing Emissions 13: Appendix 5 The SMART Way page : Appendix 5 SMART Way As said before in this report, the original SMART 2020 global report identified five main areas for emissions reduction: SMART Motors, SMART Logistics, SMART Buildings, SMART Grids and Dematerialisation. This framework organises intervention areas from the perspective of solutions, allowing exhaustive coverage of ICT enabling applications. In addition to the original SMART perspective, the SMART Portugal 2020 study highlighted the need for an actionable perspective to ensure initiatives were put in the field. Therefore, reduction strategies were grouped according to the area of action and primary interfaces for its application. With this complementary perspective, the initiatives identified in this report can be arranged in four key blocks: SMART Cities, SMART Inter-city, SMART Power and SMART Industries. Each of these has clear policy and industry interfaces (ministries, municipalities, regulators, associations, etc.), and through the development of specific ICT solutions, a defined set of end-users who would be involved as stakeholders, all connected by ICT companies: Smart Cities bring together Government Internal Administration Entities and Municipalities with Consumers, Constructors and Public transportation companies; Smart Power brings together Government Energy Entities, Regulators and Power Sector Companies;

110 SMART Portugal 2020: Reducing Emissions 13: Appendix 5 The SMART Way page 110 Smart Inter-city brings together Government Transportation Entities with Freight Companies; S mart Industry brings together Government Industry Entities with Industrial Goods Companies.

111 SMART Portugal 2020 : Reducing Emissions 13: Appendix 5 The SMART Way page : SMART Cities SMART Cities has the goal of reducing emissions and consumption in cities to reshape urban environments and living for sustainability. This group has the largest potential for emissions reduction at 6.8MtonCO 2 e. Several initiatives from transportation and energy efficiency contribute to the identified potential. ICT is crucial for the development of a green city in two key areas: Sustainable Urban Development ICT give planners, designers and consumers access to sustainable energy, creating a multi-stakeholder sustainable partnership by monitoring and measuring sustainable energy use, identifying key areas for intervention and constantly balancing energy use and comfort levels all the way from design to consumption; Sustainable Mobility ICT is a key lever in creating an integrated framework, a vision for city transportation including investment and scenarios, measuring and monitoring results and then passing benefits (and costs) directly onto sustainable mobility users. Sustainable Urban Development relies on the ability to access and utilise information on energy consumptions. ICT allows not only the monitoring of the current situation but also the processing of energy efficiency data, and therefore different stakeholders at different levels of urban development can profit from ICT involvement.

112 SMART Portugal 2020: Reducing Emissions 13: Appendix 5 The SMART Way page 112 Sustainable Urban Development requires careful planning and an integrated set of policies to encourage green behaviour. A new urban mobility paradigm would require a realistic regulatory framework, increasing citizens responsibility over emissions. Mobility management should use ICT platforms to increase alternative transportation offers and reduce private car use. A consumer s behaviour should be directly linked to their direct cost rather than to a cost distributed through society. The greater Toronto initiative is a well known example of the adoption of bestpractices across different environmental areas, with the launch of a local program to increase city sustainability: The City of Toronto s environment, community and economy should be healthy and vibrant and should meet the needs of today without compromising the ability of future generations to meet their needs. 13.2: SMART Energy SMART Power considers the initiatives that rely on ICT to reduce emissions related to increasing dependence on energy production, transformation and demand. Potential carbon reduction is up to 2.3MtonCO 2 e and all initiatives are related to information gathering and flow across the power generation grid, right through to end users. The SMART Power concept groups initiatives that optimise power generation, transportation and consumption in an integrated and dynamic way. The combination of SMART Grids and DSM has a stronger effect than if the effects of the two were considered separately.

113 SMART Portugal 2020 : Reducing Emissions 13: Appendix 5 The SMART Way page 113 On the generation side, better coordination of dispatching and consumption gives increased predictability and as a consequence, use of renewable generation could increase (as well as microgeneration). On the transportation side, increased penetration of renewables would reduce highvoltage/low-voltage transformations, resulting in lower network losses. This effect would be strengthened by the potential peak shavings in demand. Transportation would benefit from better asset use, meaning lower network investments for the same service level. On consumption, real time monitoring is key to consumer awareness and behaviour change. DSM would also allow interruptability, a key feature to manage grid load and reduce emissions in generation. 13.3: SMART Inter-City SMART Inter-city includes all the initiatives related with the optimisation of flows between cities and production centres. This area has a potential reduction of 2.3MtonCO 2 e, and all related initiatives have a transportation origin. The optimisation of logistics is not just a question of environment responsibility anymore. The use of ICT applications can bring benefits in areas such as fuel expenditures through with route optimisation, supply chain

114 SMART Portugal 2020: Reducing Emissions 13: Appendix 5 The SMART Way page 114 efficiencies through load factor improvements and risk diversification. Indeed, beyond route and load optimisations, the use of alternative transportation methods reduces exposure to oil market price volatility, and therefore reduces the business risk exposure. Consequently, SMART Inter-city should be considered an opportunity for value creation rather than a simple path to regulatory compliance. 13.4: SMART Industries SMART Industries include all the initiatives covering industry efficiency. As previously stated, there is limited opportunity for optimisation in Portuguese industry. Several levers were identified in this study, but with reduced impact. Two factors contribute to this reduced potential: on the one hand, industry is one of the sectors covered by the ETS regulation, resulting in optimisation over the last few years; on the other hand, Portuguese industry has a limited effect on the economic landscape. Overall, a potential reduction of 0.5MtonCO 2 e could be achieved.