Outlook on Market Segments for Biomass Uptake by 2020 in Greece

Transcription

1 Biomass role in achieving the Climate Change & Renewables EU policy targets. Demand and Supply dynamics under the perspective of stakeholders. IEE SI Outlook on Market Segments for Biomass Uptake by 2020 in Greece Arturo Castillo and Calliope Panoutsou (Imperial College) December 2011 Acknowledgments: The Biomass Futures team would like to thank Dr Stella Bezergiani (CPERI), Mr Nikos Chatzigiannis (Hellenic Pellets), Dr Manolis Karabinis & Dr Panagiotis Gramellis (CERTH) for their support throughout the study and for sharing their valuable knowledge for the country. 1

2 Contents 1. Introduction Energy markets, renewable energy and bioenergy Key national policies Demand Current state of bioenergy consumption in the Greek energy market Projected targets Supply Current state of bioenergy supply Projected targets in NREAP Comparison with biomass futures supply curves for 2010 and Market segment analysis Heat and electricity/ CHP Key influencing factors and potential market volume of the heat, electricity- CHP sector Quantitative assessment of the heat, electricity and CHP sectors in Greece for Transport Key influencing factors and potential market volume of the transport sector Quantitative assessment of biofuels for transport in Greece for Analysis and recommendations Annexes Annex I Annex II Cases modelled in the heat, electricity/ CHP sectors Annex III Key figures of selected biofuels chains

3 1. Introduction The first section of this report provides background to national renewable energy use as well as the targets and the most significant support mechanisms to enable further deployment of renewable energy generation. The emphasis is on biomass energy in the electricity, heating/cooling and transport sectors. An overview of the expectations by 2020 for demand of renewable energy is presented as expressed by the Greek government, in particular in the recently submitted National Renewable Energy Action Plan (NREAP) Energy markets, renewable energy and bioenergy Renewable energy production in 2008 amounted to 1.64 Mtoe and contributed approximately 7.8% of total gross final energy consumption and represented approximately 16.3% of primary energy production. From that total, biomass use in households accounted for 600 ktoe and its use in industry for 265 ktoe. Biofuels accounted for 63 ktoe and biogas, mainly for electricity generation, for 35 ktoe. Although there has been interest and investment in Greek wind and solar resources, there remains a promising but untapped biomass potential. Energy sector modelling used to compile the NREAP revealed that the contribution of renewable energy needs to be nearly treble the current deployment. The Greek government recognises that beyond new legislation there will need to be substantial technical, spatial and administrative changes in order to achieve this. In determining the future energy mix the government will consider cost-effectiveness, domestic value added, security of energy supply, installation costs as well as socio-economic and demographic factors. The Greek government is introducing targeted measures that correspond to the noninterconnected parts of the electricity system, such as the islands, and to the interconnected mainland. Biomass plays a significant role in the following measures: i. Adoption of new technology to allow exploitation of biomass resources in co-firing mode in existing large-scale power stations, notably lignite-fired. ii. Enhanced deployment of interconnected medium and small-scale renewable energy generation facilities including biogas. iii. The main priority for the islands is to gradually connect them to the mainland system to decommission the local oil-fired generation plants. In terms of heat, new financial incentives have been introduced to support the production of heat from renewables, including biomass. Concurrently, the Energy Performance of Buildings Regulation (commonly known as KENAK) is the main legislative vehicle that sets out the minimum requirement of energy from renewable sources that must be provided within each building for heating and cooling. It applies across the domestic, industrial and tertiary sector parts of the building stock. 3

4 The efforts to increase the contribution of renewable sources in transport promote the use of more efficient vehicles and the substitution of fossil fuels with biofuels is mentioned; however the annual quota allocation for biodiesel production is decreasing since Key national policies One of the initiatives of the government aiming to fulfil the obligations is the law L3851/2010 in particular OG A/85/2010 on accelerating the development of Renewable Energy Sources to deal with climate change. It tackles local barriers, rationalises the feed-in tariff scheme and establishes specific regulations on the use of renewable energy in buildings through the Energy Performance in Buildings Regulation OG407/B/2010. In addition, law L3851/2010 sets targets for 2020 for the share of renewable energy in final energy consumption, electricity generation, contribution to heating and cooling as well as transport. The specific contribution of renewable energy by sector is as follows: i. 40% of electricity ii. 20% of heating and cooling iii. 10% of transport Based on the modelling performed by the NREAP working committee, bioenergy is projected to contribute to achieving the electricity target through the installation of 250MW of capacity of both biogas and solid biomass. To achieve the renewable heat target, the government plans for continuous growth of solar thermal in the residential and tertiary sector and gradual deployment of heat pumps, whereas the contribution of biomass in the residential sector is projected to remain stable. It is important to note that biomass is only fourth in terms of contribution size amongst renewable energy sources for electricity and its total contribution by 2020 is not expected to change substantially. For the entire period between 2010 and 2020 installed capacity for biomass generation will remain under 300MW. By contrast, wind is by far the largest contributing source and with a constant growth rate achieving in excess of 7400MW by The second largest contributing source is solar photovoltaic also with a fairly constant growth rate reaching more than 2100MW by In terms of heat, biomass is expected to remain the largest contributing source albeit with a modest growth rate from just over 1000ktoe in 2010 to just over 1200ktoe in By contrast, heat pumps are expected to become the third largest contributing technology with a growth rate of one order of magnitude from less than 20ktoe in 2010 to nearly 300 ktoe in Although there are currently no dedicated areas for cultivation of short rotation forestry or perennial grasses, the government envisages that scenarios and plans for such cultivation will be included in the Programme for Rural Development of Greece (PRDG), which is reviewed annually. 4

5 As mentioned in section 3.1 agricultural policy changes are underway as a result of Common Agricultural Policy reform. The changes have the three-fold purpose of shifting production from crops such as tobacco and sugar beet to energy crops, of avoiding land degradation and of reinvigorating the rural economic sector. In addition, there are approximately 60,000 ha of previously set aside land that can be brought into production of energy crops. Industry CHP was addressed in 2006 within the framework of law L3468/2006, which regulated high-efficiency CHP and introduced relevant feed-in tariffs by technology. Law 3851/2010 further refined the tariffs and the duration of power purchase agreements. It targets biomass and biogas plants for which interest had been limited and eliminates pricing differences between electricity from the mainland and the non-interconnected islands. Policies concerning industry power generation are enshrined in the National Development Law L3522/2006. It sets out subsidies for capital investment in renewable energy installations for electricity or heat, which were treated as favoured investments classified as high technology or environmental protection initiatives. The total investment subsidy ranges from 20% to 60% depending on the region and the size of the company. The law is designed to support regions with high unemployment and low per capita income, which in some cases might coincide with rural areas with suitable biomass availability potential. For auto-generators feed-in tariffs as shown in table 2 are valid for a maximum capacity of 35MW concerning surplus electricity fed into the grid with a limit of 20% of the total energy produced by the plant. 2. Demand This section defines the market segments in the heat, electricity and transport sectors in terms of user type and user needs. It identifies for these segments recognised by government and industry any specific support mechanisms and active monitoring via collection of statistical data for these segments. Using available data and forecasts, such as those published in the NREAP, this section describes their current status and expected development by The table below lists segments, their user types and needs, and relevant support mechanisms. These segments are recognised by the Greek government and industry. This is evidenced by the references made to these segments in government policies and plans, including the NREAP, and the fact that these segments are targeted by support mechanisms. It shows how some instruments apply to several segments and also aim at fostering supply and/or demand. 5

6 Segment User type / needs Support mechanism Heat domestic Households in rural areas Households (from kwe on average) who will either use locally sourced wood or invest in pellet boilers that have recently (during the last five years) been introduced in the local market. Heat services Buildings in the public and commercial sector Buildings in the public sector (ie. Schools; municipality offices, etc.) or commercial sites (such as shopping centres in rural areas) who have average size of kwe and will source biomass from ;local suppliers or pellet manufacturers Energy Performance of Buildings Regulation ΚΕΝΑΚ (OJ4407/Β/2010). Dedicated electricity Small autogenerators Smaller sites (100kWe -5MW) sourcing local wood chip, energy crop or agricultural residue. Some use of heat possible. Law 3468/2006 detailing the exemption from Generation Licence for biomass and biofuel plants with installed capacity 100kWe. Law 3851/2010 stipulates that neither a licence nor an exemption decision is required for plants with installed capacity 1MWe Dedicated electricity from biomass Including biodegradable waste and co-firing facilities Utilities; Investors, individual installations Larger stations (5-50MW) built near marine ports that require secure supplies of imported wood chip. Laws 2244/1994, 3468/2006, 3851/2010 Lay out the Feed-in Tariff scheme applicable per kwh produced from renewable sources Liquid biofuels Liquid biofuels End users of biofuel-compatible cars Individuals or companies that will select to invest in low emission vehicles Investors and oil refineries Biodiesel plant owners and potential investors for bioethanol plants Suppliers of imported biodiesel or bioethanol Laws 2052/1992, 3831/2010 and 2960/2001 setting out the exemption of low emission vehicles from the fuel consumption, the circulation and the additional special taxes as well as the registration tax. Laws 33/2008, 638/2008, 1143/2008, 1626/2008, 1683/2009, 2499/2009 setting forth the JMDs on annual quota allocation for biodiesel production and distribution to oil refineries for blending Table 1. Summary of policies that foster bioenergy Table 2 presents further details on feed-in tariffs for bioenergy valid from June It is noteworthy that feed-in tariffs for bioenergy do not differentiate between interconnected and non-interconnected grid. At this point it is worthwhile to note that the existing tariffs for biomass are amongst the higher ones across EU27. 6

7 Mainland and Noninterconnected Specific source islands ( /MWh) Biomass 1MW (excl. biodegradable 200 sewage) Biomass > 1MW 5MW (excl. 175 biodegradable sewage) Biomass > 5MW (excl. biodegradable 150 sewage) Landfill gases, sewage treatment and 120 other biogas types (including biodegradable sewages) 2MW Landfill gases, sewage treatment and other biogas types (including biodegradable sewages) > 2MW Gas from biomass 3MW 220 Gas from biomass > 3MW 200 Table 2 Summary of Feed-in Tariffs for biomass-derived electricity 2.1 Current state of bioenergy consumption in the Greek energy market To put in context the share of renewable, and specifically biomass-derived, sources of energy as of 2010 the following key figures can be enumerated: i) Total electricity production in Greece was TWh Of which renewable sources accounted for 7.84 TWh or 13% ii) Renewable installed capacity amounted to 4.11 GW Of which biomass and biogas accounted for 0.06 GW iii) Final energy consumption in Greece was Mtoe Within the national total biomass and biogas accounted for 1.01 Mtoe Within the national total biofuels for transport accounted for 0.11 Mtoe 2.2 Projected targets In order to illustrate the expected development of demand in form of sectoral consumption it is useful to present estimates for the reference year 2005 and the key years 2010, 2015 and Figure 1 depicts energy consumption estimates as defined in the official NREAP projections within the reference scenario. 7

8 Figure 1 Greek sectoral energy consumption projections Estimated gross final energy consumption including transmission and other system losses is projected to reach the following values: i) In 2005 a total of 21,649 ktoe ii) In 2010 a total of 22,714 ktoe iii) In 2015 a total of 23,150 ktoe iv) In 2020 a total of 25,262 ktoe The development of overall energy demand is a function of the pace at which the Greek economy recovers from the recent downturn. According to government calculations, it is anticipated that there will be an increase in demand from 2016 onwards due to the expected economic recovery after The following figures summarise the anticipated share of biomass types in the provision of the bioenergy required to meet the contribution to the overall renewable targets. Figure 2 depicts the contribution to installed capacity and to actual output from solid biomass and biogas sources. 8

9 ktoe Output (GWh) Capacity (MW) MW GWh MW GWh Biogas Solid biomass Figure 2. Share of capacity and output by source of electricity Figure 3 presents the anticipated output of biomass contributing to heating and cooling and displaying the fraction corresponding to biomass use in households. 1,400 1,200 1, Solid biomass Solid biomass in households Figure 3. Biomass-derived heating and cooling Figure 4 shows the projected output of transport energy by biofuel type differentiating between domestic and imported sources. 9

10 ktoe Bioethanol including imports Bioethenol domestic supply Biodiesel including imports Biodiesel domestic supply Figure 4. Contribution to transport energy by biofuel type 3. Supply This section is addresses the supply of indigenous and imported biomass feedstock that supports the market segments described in the above section. The potential supply by 2020 is described using data from the NREAP and comparing them to the supply curves developed within the Biomass Futures project. 3.1 Current state of bioenergy supply In terms of biomass-derived energy for transport, to comply with the commitments of 6.3% of fossil fuel usage by 2015, it will be necessary to produce 148,000 tonnes of biodiesel. This production will require approximately 16,000 hectares, hence it is evident that a significant reform of agricultural practices supplemented by imports will be needed to meet the requirements by 2015 and Although current biodiesel production equates to four-fold the volume needed to meet the 2010 commitments, between 70% and 80% of the feedstock for production facilities is imported, while some producers resolve to waste cooking oil to increase their overall feasibility as the annual quota allocation for biodiesel production is decreasing. The response of the Greek government to the task to meet the targets by 2015 and 2010 consists of strategic actions that will aim at balancing agricultural production, non-food crop production, land protection and rural development. Key measures are listed below: i) Inclusion of dedicated short rotation forestry in the rural development plan ii) Increase the efficiency of and reform incumbent agricultural practices iii) Shift from agricultural crops (tobacco, cotton, wheat and sugar beets) to energy crops rather than using degraded land 10

11 iv) Reversal of the dependence on imported oilseeds v) Support for non-food crops vi) Intensification of bioethanol imports 3.2 Projected targets in NREAP Based on modelling underpinning the NREAP the envisaged supply contributions by specific biomass source are included in Table 3. These contributions are best shown in tabular form due to the stark differences in magnitude of contribution amongst sources. Specific source ktoe Wood direct from forestry 702 1,361 Wood by-product from industry 27 Crops direct from agriculture 68, ,000 Agricultural by-products and residues 202 1,200 1,500 MSW (biodegradable fraction) and 23.3 landfill gas Sewage sludge 9.6 Table 3 Supply of bioenergy in sample years by source 3.3 Comparison with biomass futures supply curves for 2010 and The Biomass Futures project within the framework of the Intelligent Energy Europe Programme has combined modelling efforts and data across leading bioenergy research institutions (see Figure 5 Present biomass supply curve for Greece 11

12 Amongst other objectives it assessed the potential supply of biomass for bioenergy across Europe. By condensing cost and availability data it generated a supply curve for each member state. Examination of figure 5, depicting the supply curve for Greece under 2010 conditions, shows that the largest increase in the curve is at the point of 8.84/GJ, at which 1,228 ktoe of additional harvestable round wood could become available for bioenergy applications. This result exhibits good agreement with data from the NREAP for the trend up to 2015 as shown in table 3. As a summary of the most important feedstocks for bioenergy applications along the Greek supply curve under 2010 conditions is presented in table 4. Cost point [ /GJ] Biomass feedstock Contribution [ktoe] 1.11 Municipal solid waste (MSW) and 540 landfill 2.84 Agricultural by-products Additional harvestable round wood 1,228 Table 4 Key biomass feedstocks under the present Greek supply curve MSW data for 2015 were not given in the NREAP although it stated that efforts were afoot to divert increasing amounts of waste from landfill and that landfill gas yields were decreasing accordingly. As for agricultural by-products, it is interesting to highlight that the Biomass Futures result seems to be near the mid-point between the quantities stated for 2006 and 2015, implying also a reasonable confirmation of trends drawing from the most comprehensive databases and models in Europe. The 2020 projections produced by the Biomass Futures modelling work are reflected in the Greek supply curves depicted in figure 6. Figure 6 Greek biomass fuels cost ( /GJ) and supply (MtOE) for 2020 for the two scenarios RED & RED+ As can be observed from figure 6 the four steepest segments of the curve and therefore the feedstocks able to significantly add to biomass availability are spread across the cost 12

13 values between 1.5 and 12 /GJ. Table 5 summarises the cost and energy contribution of these feedstocks. Cost point [ /GJ] Biomass feedstock Contribution [ktoe] 1.82 Municipal solid waste (MSW) and 540 landfill 2.84 Agricultural by-products Additional harvestable round wood 1,228 Table 5 Key biomass feedstocks under the 2020 Greek supply curve 4. Market segment analysis This section provides analysis of key influencing factors on market segments. Key factors within technical, economic and organisational categories were extensively described in Biomass Futures Report D2.2 and were used to analyse the EU27 bioenergy market segments and described in Biomass Futures Report D2.3. This section uses the same influencing factors and the same methodology at the national level. Finally this section presents the results of the quantitative assessment under different scenarios. The main market segments for biomass in Greece are currently heat in rural domestic and small/medium scale agro-industrial applications as well as electricity from sludges and MSW from landfill. Within the Biomass Futures project, more detailed market segmentation has been discussed and validated with the assistance of national stakeholders under qualitative and quantitative terms. The key findings of this work are presented below; grouped for the heat, electricity and CHP sectors as well as transport. 4.1 Heat and electricity/ CHP Key influencing factors and potential market volume of the heat, electricity- CHP sector In order to visualise the level of influence of relevant factors on the studied market segments, columns have been set up for the segments and rows for the factors in Annex I. The scores in the intersecting cells denote whether the factor is a driver, a barrier or neutral for the corresponding segment as follows: 3 very strong driver; 2 strong driver; 1 weak driver; 0 neutral; -1 weak barrier; -2 strong barrier; -3 very strong barrier; NA not applicable. Percentage scores for the technical, economic and organisational categories of factors are shown below. Scores are based on the maximum attainable score, making an allowance for factors that are not applicable to any particular segment. Finally, the results are described graphically showing the overall percentage score. 13

14 Table 6 presents the resulting percentage scores that show how each factor category influences each segment relative to the maximum possible point score of influence per category. Rural households, stoves Rural households, district heat Rural services, boilers Rural services, district heat Industry, CHP Industry, power generation Utilities, power generation Technical 95% 67% 81% 93% 81% 71% 81% Economic 17% -4% 21% 13% 38% 25% 63% Organisational 21% 18% 21% 18% 61% 61% 73% Table 6 Summary percentage scores for influencing factors by segment Figure 7 depicts total point scores for each segment as a percentage of the maximum possible point score across all categories. 80% 70% 60% 50% 40% 30% 20% 10% 0% Rural households, stoves Rural households, district heat Rural ser-vices, boilers Rural ser-vices, district heat Industry, CHP Industry, power gene-ration Utilities, power gene-ration Figure 7 Overall percentage scores by segment Power generation within utilities is the segment with the highest scores across all factor categories. This choice emerged mainly because lignite dominates the national electricity generation and biomass is regarded as a low-risk alternative for co-firing applications in these power plants as well as being able to contribute towards EU ETS targets. In the heat sector, at present there are no RES district heating networks in Greece however, within the NREAP there is provision for biomass utilisation in the existing natural gas district heating networks including an attractive feed-in-tariff (mainly for future biomass CHP plants). Therefore, for the 2020 timeframe, the respective segments were ranked with low implementation potential compared to the single applications in domestic and 14

15 commercial segments. The latter were ranked high as they represent low risk and fuel demand options to increase the biomass shares in the 2020 timeframe. Their significant potential is also enriched by the dynamic presence of the newly developed biomass pellet market (with an installed annual capacity of 124,000 tonnes from five pellet producing plants; source: Agricultural University of Athens, 2010). There is also interest in local, small scale pellet plants with a capacity from 1,000-2,000 tonnes that will serve local markets in rural areas (source: CRES, 2011) Quantitative assessment of the heat, electricity and CHP sectors in Greece for 2020 Based on the selection of sub segments that are promising for biomass applications in the 2020 timeframe, a quantitative assessment has been undertaken by evaluating the most promising applications in each sub- segment in the following two scenarios: a reference scenario based on the initial market segment selection from the Biomass Futures qualitative assessment and the figures stated in the Greek NREAP, and a RED based scenario based on results from the Biomass Futures qualitative assessment and the cost supply curves estimated within the project for Greece in the timeframe of 2020 (section 3.2). a RED plus scenario based on results from the Biomass Futures qualitative assessment and the cost supply curves estimated within the project for Greece in the timeframe of 2020, extending the sustainability criteria to all feedstocks. Reference RED RED+ Supply NREAP Biomass Futures supply with RED criteria on liquid biofuels related feedstocks Biomass Futures supply with RED criteria on all feedstocks only Demand Biomass Futures/ NREAP Biomass Futures Biomass Futures Technical potential Based on feedstock and plant scales Economic Potential Strictly limited for applications where the cost of producing 1KWh heat/ electricity is to the respective selling price in the country (accounting for subsidies and FITs) Table 7 Scenario assumptions for Greece by

16 Feedstock type Wood direct from forestry Wood byproduct from industry Crops direct from agriculture Agriculture byproducts / residues MSW (biodegradable fraction) and landfill gas Industrial waste (biodegradable fraction) Sewage sludge Rural households, stoves (TWh) Heat (TWh) Rural services, boilers Industry, CHP Electricity (TWh) Industry, power generation Utilities, co-firing Totals per segment Total heat & electricity Table 8 Reference scenario for Greece by 2020 (based on national figures from NREAP) This scenario uses the biomass potentials estimations that are projected by the Greek NREAP and performs economic modelling for a set of promising applications per segment. The economic modelling allows an analysis of which market segments are potentially the most profitable under the current policy and price level conditions, and based on the economic parameters and assumptions in Annex II. Rural households, stoves (TWh) Heat (TWh) Rural services, boilers Industry, CHP Electricity (TWh) Industry, power generation Utilities, co-firing Feedstock type Post consumer wood Landscape care wood (2010) Perennial woody Sawmill by-products (excl saw dust) Other industrial wood residues Primary Forestry Residues Common sludges Animal waste MSW (landfil) Totals per segment Total heat & electricity 4.5 Table 9 RED scenario (based on sustainable biomass supply curves from Biomass Futures project) 16

17 This scenario uses the sustainable supply curves based on RED criteria for biofuels only estimated in this project and performs economic modelling for a set of promising applications per segment. Under this scenario a total of 4.5 TWh of energy demand can be met by biomass in the different sectors by 2020, with heat accounting for 0.4 TWh and electricity for 4.1 TWh. The following scenario (RED+) uses the sustainable supply curves based on RED criteria for all bioenergy carriers plus a mitigation potential of 70% for the bioenergy value chains estimated in this project and performs economic modelling for a set of promising applications per segment. Under this scenario a total of 3.6 TWh of energy demand can be met by biomass in the different sectors by 2020, with heat accounting for 0.4 TWh and electricity for 3.2 TWh. Feedstock type Rural households, stoves (TWh) Heat (TWh) Rural ser-vices, district heat Industry, CHP Electricity (TWh) Industry, power gene-ration Utilities, co-firing Post consumer wood Landscape care wood (2010) Perennial woody Sawmill by-products (excl saw dust) Other industrial wood residues Primary Forestry Residues Common sludges Animal waste MSW (landfil) Totals per segment Total heat & electricity 3.6 Table 10 RED+ scenario for Greece by 2020 (based on sustainable biomass supply curves from Biomass Futures project) All data presented in the tables are aligned with the modelling and scenario work within the Biomass Futures project. 17

18 4.2 Transport The next section of analysis corresponds to the evaluation of the potentially most promising segments within the transport sector. They are further explained by discerning between categories of influencing factors that will determine a substantial participation of bioenergy Key influencing factors and potential market volume of the transport sector Taking the same methodological steps as explained in section the most promising segments have been identified and are presented in table 10. The assessment of their potential according to categories of influencing factors is shown as the partial score for technical, economic and organisational factors. Road bus private Public/ private fleet Road cars private Road Motorcycle private Aviation Rail Marine Technical 76% 67% 71% 48% 62% 24% 24% Economic 58% 17% 58% 33% -33% -11% -20% Organisational 83% 11% 44% 67% 72% 39% 33% Table 11 Summary scores for influencing factors by transport segment Considering the overall market penetration potential by segment across all categories of factors produces the profiles depicted in figure 8 as a proportion of the maximum attainable score. 80% 70% 60% 50% 40% 30% 20% 10% 0% Road bus private Public/ private fleet Road cars private Road Motorcycle private Aviation Rail Marine Figure 8 Overall percentage scores by segment 18

19 It is interesting to remark that the two highest scoring segments achieved barely over or under half of the maximum score and all segments except for the highest-scoring one achieved relatively low scores and mostly approximately a third of the maximum attainable score. This is in stark contrast with stationary sectors in section % Technical Economic Organisational 80% 60% 40% 20% 0% Road bus private Public/ private fleet Road cars private Road Motorcycle private Aviation Rail Marine -20% -40% Figure 9 Technical, economic & organisational percentage scores by segment The use of biofuels in private vehicles (buses, cars, motorbikes) is considered a much more attractive option as biofuels are sold as common low- blends to the public in the current fuel market. While the case of public/privately owned fleets (cars/ buses) in companies, that may be able to use higher blends would require a higher capital investment and currently the national market is under recession and the access to capital is restricted. Aviation seems a good option under technical and organisational issues but is not yet considered cost- effective. Use of biofuels in the rail & marine sectors has been lowly ranked in both technical & organisational factor sand is considered uneconomic in the 2020 timeframe Quantitative assessment of biofuels for transport in Greece for 2020 The Greek NREAP projects that the biofuel market will comprise of 203 ktoe from indigenously produced biodiesel (based on both indigenous and imported oilseeds/ vegetable oils) & 414 ktoe imported bioethanol. No indigenous bioethanol production within the country is foreseen till However, some national sources indicate an increased investment interest in bioethanol production due to EU targets 19

20 Imports are mentioned in the NREAP but not quantified. In the case of biodiesel these are likely to be seeds of oil crops or vegetable oils at the quantities required to meet the national 2020 targets. Currently imported oils comprise about 70-80% of the raw materials used while domestically produced oils account for almost 20%. There are ongoing attempts to increase indigenous feedstock production. Biodiesel may also be imported from neighbouring countries if it is cost efficient. In order to proceed to the quantitative assessment, the three scenarios have been framed by the following assumptions: Reference RED RED+ Supply NREAP Biomass Futures supply with RED criteria on liquid biofuels related Biomass Futures supply with RED criteria on all feedstocks feedstocks only Demand Biomass Futures/ Biomass Futures Biomass Futures NREAP Technical potential Based on feedstock and plant scales (e.g. straw & perennial grassy crops are being considered for 2G bioethanol production for 2020) Economic Potential Strictly limited for applications where the cost of producing1lt of biofuel is to the respective prices for oil in the country. Table 12 Scenario assumptions for Greece by 2020 Three different cases for the interpretation of the above mentioned scenarios have been considered, taking into consideration the present biofuel market conditions and the projected for Greece; i) the combination of biodiesel and bioethanol in the total fuel mix, as projected by NREAP ii) the use of only indigenous biodiesel, and iii) the use of only indigenous bioethanol (1 st & 2 nd generation). As indicated in the qualitative assessment the major share of indigenously produced biofuels consumption is expected from road transport private fleets, accounting for 617 ktoe in the NREAP/ reference scenario; for 113 ktoe in the RED and 113 ktoe in the RED+. The major share in the reference scenario is expected from rape and used fried oils biodiesel while indigenous bioethanol will be cereal based first generation. In the other two scenarios, bioethanol has the major share, based on the assumption that one third of the indigenous potential for straw could be potentially exploited in Greece for the production of second generation ethanol. From the above figures it can be estimated that the NREAP reference scenario for the indigenous biofuel production would cost approximately 765 million and result in CO 2 savings in the range of 1 million t/year. Assuming that the total amount would be first generation biofuels (from oilseeds- sunflower, rapeseed, cereals) if their production was indigenous this would require almost 1.3 million ha of cultivated land. The RED scenario, based on the Biomass Futures estimations for sustainable indigenous supply, can only reach up to 113 ktoe for the 2020 timeframe. The fuel mix would be again first generation biodiesel from oilseeds & used oils as well as 2G bioethanol from straw. The respective figures for land requirements are 0.3 million ha while the cost rises up to 132 million and the CO 2 savings are in the range of 0.18 million t/year. The RED+ scenario has the same values with the RED one, as the feedstock types both for biodiesel (used oils) and for 2G bioethanol (straw) are not affected by the stricter sustainability 20

21 100% bioethanol 100 % biodiesel Biofuels mix criteria & the high mitigation targets. The respective figures for cost remain as the ones in RED scenario 132 million and the CO 2 savings are in the range of 0,18 million t/year. Table 13. Impacts from the use of indigenous biofuels in transport in Greece under the various scenarios Scenario for year 2020 Biofuel (ktoe) Investment required (million ) Land required (million ha) CO 2 (million tco 2/m 2 ) Reference RED RED Reference RED RED Reference RED RED Based on the results of the RED & RED+ scenarios, indigenous biofuels can meet a much lower demand than the one projected in the first NREAP report for Greece, even when 2G bioethanol is taken into account (in the analysis it is assumed that one third of the indigenous biomass supply for straw could potentially be used for 2G ethanol production in Greece). 21

22 5. Analysis and recommendations This section provides an analysis of the market segments, taking into consideration current status, predicted growth, available feedstock, the role of influencing factors and hurdles to development. The aim is to assess whether or not government expectations, as stated in the NREAP, are realistic. This section then sets out recommendations for policy makers and industry. Heat For the 2020 timeframe, the district heating exhibits low implementation potential compared to the single applications in domestic and commercial segments. The latter were ranked high as they represent low risk and fuel demand options to increase the biomass shares in the 2020 timeframe. Their significant potential is also enriched by the dynamic presence of the newly developed biomass pellet market and according to national stakeholders there is also interest in local, small scale pellet plants with a capacity from 1,000-2,000 tonnes that will serve local markets in rural areas. Policy should focus on providing well structured incentives for small/ medium scale heat applications as well as prepare the ground for district heating beyond Electricity/ CHP Electricity generation from biomass/ biogas has recently received very strong political support with high FITs and applications in the agro & forest industries (in the scale of 1-5 MWe) are considered highly possible within the next few years. The good potential, low investment required, and the emphasis on integrating energy crops in the national agricultural system form a favourable environment for investments in the field. It is highly likely that the plants will be CHP and not electricity only as the scale is relatively small and it can sufficiently cover the space & process requirements of the industry itself. Large scale plants (20-50 MW) are also considered as likely within the 2020 timeframe, but in very limited numbers (< 5). Their location is expected to be in close vicinity to the large plains of central & northern Greece as well as in the Peloponese and they will have multi- feedstock supply. Finally, as lignite dominates the energy landscape of Greece, and is likely to have the major shares in the 2020 energy map, the decision for cofiring in Western Macedonia & Peloponese would be of great strategic importance. Hindering factors remain the logistics infrastructure and the fact that Greece has no previous experience it the setup of such applications. Biofuels The Greek NREAP projects that the biofuel market will comprise of 203 ktoe from indigenously produced biodiesel (based on both indigenous and imported oilseeds/ vegetable oils) & 414 ktoe imported bioethanol. No indigenous bioethanol production within the country is foreseen till However, some national sources indicate an increased investment interest in bioethanol production due to EU targets. 22

23 Based on the results of the RED & RED+ scenarios, indigenous supply biofuels can meet a much lower demand than the one projected in the first NREAP report for Greece, even when 2G bioethanol is taken into account (in the analysis it is assumed that one third of the indigenous biomass supply for straw could potentially be used for ethanol production in Greece). 23

24 Annexes 24

25 Annex I Heat; Electricity/ CHP Technical 1 Proven, reliable technology 2 Technology / energy demand match 3 Demand proximity 4 Fuel supply logistics 5 Fuel quality 6 Space requirement 7 Conversion efficiency Rural households, stoves Rural households, district heat Rural ser-vices, boilers Rural ser-vices, district heat Industry, CHP Industry, power generation Utilities, power generation NA NA SUBTOTAL Economic 9 Capital cost 10 Operation and maintenance cost 11 Fuel cost versus fossil fuel 12 Heat sales revenue 13 Electricity sales revenue 14 Capital grants 15 Emissions trading incentives 16 Access to capital / cost of capital 17 Eligibility for favourable loans 18 Other adminstrative costs NA NA NA NA 3 NA NA NA NA NA NA NA NA NA NA -1 NA NA -2 NA -2 NA NA NA SUBTOTAL

26 Organisational 19 Potential for carbon displacement 20 Employment creation 21 Social acceptability 22 Educational policy instruments 23 Amenity issues 24 Organisational capacity 25 Fuel infrastructure availability 26 Security of fuel supply 27 Fuel price stability 28 Regulatory frameworks 29 Admistrative issues Rural households, stoves Rural households, district heat Rural ser-vices, boilers Rural ser-vices, district heat Industry, CHP Industry, power generation Utilities, power generation NA 2 NA NA -1 NA NA NA NA NA NA -1 NA SUBTOTAL GRAND TOTAL

27 Transport Technical Road bus private Public/ private fleet Road cars private Road Motorcycle private Aviation Rail Marine Reliable technology Biofuel content in mass market GHG savings from full chain Extensive refuelling infrastructure requirements Safety and standardization Ensure compatibility of new engines in higher blends Labelling SUBTOTAL Economic Financing new technology Capital costs Variable subsidies and grants na na na na Oil and gas price increases na Operating and maintenance costs na na na na Access to loans-cost of capital SUBTOTAL Organisational Variable reliability of incentives Lack of joined-up Government policy across different ministries Security of feedstock supply Good organizational capability Administrative issues and planning Challenge of balancing short-term interests and environmental agenda SUBTOTAL GRAND TOTAL

28 Annex II Cases modelled in the heat, electricity/ CHP sectors CASES MODELLED HEAT Rural households stoves/ boilers Scale (in kw) 10; 30 Conversion efficiency (in %) 80 Biomass Fuel woody biomass (saw mill by products/ incl residues); agro residues (fruit tree prunings) Fossil Fuel Alternative Heating oil; Capex /kW Opex (excluding feedstock costs) /kW Rural services boilers Scale (in kw) 50; 200 Conversion efficiency (in %) 80 Biomass Fuel woody biomass (saw mill by products/ incl residues); agro residues (fruit tree prunings) Fossil Fuel Alternative Heating oil; Capex /kW Opex (excluding feedstock costs) /kW ELECTRICITY/ CHP Solid biomass > 1MW 5MW Scale (in MW) 1; 5 Conversion efficiency to electricity (in %) 30 Biomass Fuel woody biomass; straw; energy crops Fossil Fuel Alternative Lignite; Oil; Capex 2,300-2, /kW Opex (excluding feedstock costs) /kW Biogas > 1MW 5MW Scale (in MW) 1; 5 Conversion efficiency to electricity (in %) 30 Biomass Fuel Sludges; MSW (landfill) Fossil Fuel Alternative Lignite; Oil; Capex /kW Opex (excluding feedstock costs) /kW Solid biomass > 5MW Scale (in kw) 10; 30;50 Conversion efficiency to electricity (in %) 35 Biomass Fuel woody biomass; straw; energy crops Fossil Fuel Alternative Lignite; Oil; Capex 2,100-2, /kW Opex (excluding feedstock costs) /kW Biogas > 5MW Scale (in kw) 10; 30; 50 Conversion efficiency to electricity (in %) 35 Biomass Fuel Sludges; MSW (landfill) Fossil Fuel Alternative Lignite; Oil; Capex /kW Opex (excluding feedstock costs) /kW Utilities power generation/ cofiring Scale (in kw) 10; 30; 50 Conversion efficiency (in %) 35 Biomass Fuel woody biomass; straw; energy crops Fossil Fuel Alternative Lignite Capex /kW Opex (excluding feedstock costs) /kW 28

29 1 st generation Annex III Key figures of selected biofuels chains Biofuel Biodiesel Bioethanol Feedstock LHV 1 (MJ/kg) Density (kg/l) Biofuel Costs at filling station ( 2002/ GJ) 2 CO 2 Savings with respect to fossil fuels emissions t CO 2eq/m 3 % Average Biofuel Yield (t/ha) Land requirements for the production of 1 tonne biofuel (ha) Rapeseed % Sunflower % Sugar beets % Wheat % Maize % Lower Heating Value Energy Content 2 Source: Varela et al., Source: EU, Source: Panoutsou, et al., Source: BFIN, Reduction of 7% because although process costs will be reduced about 20%, feedstocks are expected to increase by 15% 7 Reduction of 25% is due to process & feedstock costs reductions of 5% & 17% respectively BUT mainly due to incresed efficiencies by 25% 29