REmap 2030 Analysis for Ukraine

REmap 2030 Analysis for Ukraine Kiev,12 March, 2015

REmap Ukraine background Ukraine is part of the first volume of IRENA s global renewable energy roadmap (REmap) Ukraine is among the largest 26 energy markets that joined the REmap initiative Focus on the potential, cost and benefits of renewables that can realistically be deployed beyond Ukraine s plans to 2020, with focus on sectors and technologies In close collaboration with the SAEE Part of the International Climate Initiative (IKI) project, supported by Germany s BMUB Background paper for the analysis issued 2

REmap methodology Base year 2010 Reference Case current policies and under consideration REmap 2030 addition of REmap Options on top of Reference Case for an accelerated RE deployment (in 2020 & 2030) Data sources for Ukraine REmap analysis 2010, data from State Statistics Service of Ukraine & IEA Reference Case: National Renewable Energy Action Plan 2020 Energy Strategy of Ukraine to 2030 Input from the SAEE REmap Options, based on review of literature and government papers Costs of RE and energy prices, literature, IEA & IRENA estimates REmap focus is TFEC, not GFEC 3

Methodology at a glance Reference FF/Nuclear technologies Fuel prices, taxes, subsidies, capital cost IRENA Costing studies External effects Substitution cost Learning curves/cost reduction assessments REMAP Options IRENA technology database Cost curves Sectoral/technology studies Potentials Country Reference Scenarios 4

REmap Option substitution and costs Indicators REmap Option energy contribution of selected RE technology Substitution costs (in USD/GJ of final renewable energy) Substitution of equivalent energy consumption from conventional technology Annualized incremental cost (or saving) to substitute conventional technology with a RE technology equivalent LCOE RE LCOE conventional = Substitution costs/savings

REMAP UKRAINE ANALYSIS 6

Drivers for renewables Cost-competitiveness of renewables compared to fossil fuels Socio-economic benefits (jobs, energy supply security) Short-term and long-term supply security Natural gas is mainly used for the heating sector (residential, district heat producers, industry) 65-70% of total consumption is imports (USD 500/tcm, May 2014 import price) Storage important for short-term, 32 bcm capacity today, majority in West Renewables are in particular important for the long-term Renewables are part of a package of measures, with energy efficiency, increased own natural gas production, storage, diversification of supply There are important questions about: How to proceed with district heating upgrade or reduce use How to deal with energy subsidies and affordability 7

Key findings 2009: 3.3% RE share in TFEC, 67% bioenergy, 32% hydro, 1% others 2030 Reference Case: 11.8%; 82% bioenergy, 7% hydro, 4% wind REmap 2030: 21.5% Total RE use grows ten times from 87 PJ to 870 PJ, substituting natural gas for heat and coal/ng for power generation, oil in transportation Total RE use is about a quarter power, three-quarters end-use Biomass key technology for all sectors 77% bioenergy, representing 17% of TFEC in 2030 Between 2010 and 2030, 24.9 GW RE power capacity Wind and solar PV (+20 GW), biomass (+3.5 GW) Total savings in energy system costs of USD 110 million per year REmap 2030 reduces Ukraine s total natural gas demand by 16% in 2030 compared with current policies 8

CURRENT SITUATION & REFERENCE CASE 9

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 TFEC (Mtoe/yr) Base year 2009 & current situation (1/4) Ukraine s TFEC has been decreasing since the early 1990s Since 2000 remains flat, around 77 Mtoe/yr in 2012 Industry: 45%, Buildings: 37%, Transport 15%, Other: 3% 120 100 80 60 40 20 0 Industry Transport Buildings Other 10 Source: IEA (2014)

Base year 2009 & current situation (2/4) Natural gas 36% of Ukraine s total primary energy supply, Consumption is around 40 Mtoe/yr 65-70% of total consumption is imports District heat 16% Industry 29% Power 15% Agriculture / forestry / fishing 2% Buildings 22% Transport 16% 11 Source: SSSU & IEA (2012; 2014)

Power consumption (TWh/yr) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Base year 2009 & current situation (3/4) Electricity demand has been decreasing, but started to increase slowly since 2001: 145 TWh/yr (1995) to 139 TWh/yr (2012) Share in end-use sector demand also increasing (2012): Industry: 22%, Buildings: 18%, Transport: 7% Most power plants reached end of life; low capacity factor and efficiencies 160 140 120 100 80 60 40 20 0 Industry Transport Buildings Other Total 12 Source: IEA (2014)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 District heat consumption (ktoe/yr) Base year 2009 & current situation (4/4) District heat demand remains important: 12 Mtoe/yr (2012) Share in end-use sectors: 15% (2012) Efficiency of DH system is low, up to 60% of total production lost in production and distribution 12000 10000 8000 6000 4000 2000 0 Industry Buildings Source: Radeke and Kosse (2013); IEA (2014) 13

Total final energy consumption (Mtoe/yr) Total power consumption (TWh/yr) Reference Case 2010-2030 (1/2) TFEC grows at 1.2%/yr, 2010-2030 TFEC reaches 96 Mtoe/yr in 2030 Industry by 26%, buildings/transport 30% NG demand increases to 44 Mtoe/yr 100 Total power generation in 2030 280 TWh/yr Consumption: 205 TWh/yr Share of power demand in TFEC, at 18% 300 80 60 40 20 0 2010 2020 2030 Industry Transport Buildings 250 200 150 100 50 0 2010 2020 2030 Industry Transport Buildings Total generation 14

Reference Case 2010-2030 (2/2) 2010 2030 Industry Only fuels 0.2% 9.2% Including RE power & DH 1.5% 9.9% Buildings Only fuels 6.8% 13.7% Including RE power & DH 5.4% 15.9% Transport Only fuels 0.0% 6.7% Including RE power 0.5% 7.2% Electricity Generation 7.1% 11.5% District heat Generation 1.8% 11.2% TFEC Including RE power & DH 3.3% 11.8% RE share in TFEC increases from 3.6% in 2010 to 11.8% in 2030 (RE power & DH included) RE share increases in all sectors +8.5 GW RE power generation capacity (mix of hydro, wind, biomass and solar PV) Share of natural gas use in the TPES decreases to 29% but continues to dominate the fuel mix of the heating sector 15

REMAP OPTIONS 16

Renewable energy use in TFEC (PJ/yr) RE consumption, 2009-2030 1000 800 Transport 7% Key developments: - Total RE use grows to 870 PJ (10x) - RE share reaches 21.5% in TFEC 600 400 Heating 72% Total RE use - Power sector 20% 200 0 Power generation 2009 Reference Case 2030 REmap 2030 Hydro Wind Solar PV Geothermal (electricity) Solid biomass (electricity) Biogas Solar thermal Geothermal (heat) Solid biomass (heat) Heat pumps 20% - Heating sector 72% (DH large growth) - Transport sector 7% - Biomass 77% - Wind 10% - Solar 7% - Others 6% 17

Installed power generation capacity (GW) Power generation capacity 2009-2030 30 20 Key developments: - Total RE capacity 29.6 GW - RE share in total generation 26.1% (73.1 TWh/yr, about half is wind) 10 0 2009 Reference Case 2030 Hydropower Biomass and biogas Geothermal REmap 2030 Wind onshore Solar PV Mainly non-biomass options - 6 GW hydro - Wind growth rate: 570 MW/yr (12 GW) - Solar PV growth rate: 380 MW/yr (8 GW) - Continuing increase in biomass-based power generation, mainly biomass CHP (3.5 GW) 18

Renewable energy use in TFEC (PJ/yr) End-use sectors 2009-2030 800 600 400 200 0 2009 Reference Case 2030 REmap 2030 Biogas Solar thermal Geothermal (heat) Solid biomass (heat) Heat pumps Bioethanol & biodiesel Key developments: - Mainly heating - 90% biomass, potential of other options limited - Total 34.2 GW th biomass heating (of which 10.7 GW th CHP) Industry: - 25% share biomass/waste clinker - 5% share iron/steel - 15-25% share other processes - 6.3 GW th industrial CHP Buildings: - 11 GW th heating/cooking capacity - 20% of total fuel demand biomass - 5% other renewables Transport: - Ethanol (1.7 billion liters) - Biodiesel (0.8 billion liters) - 20% share 19

Breakdown of fuel use for heating Power generation by fuel type Fuel mix for heat & power generation 100% 54 Mtoe 60 Mtoe 68 Mtoe 68 Mtoe 100% 189 TWh 219 TWh 280 TWh 280 TWh 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 20% 58% 55% 50% 41% 30% 20% 10% 0% 2010 Reference CaseReference Case 2020 2030 REmap 2030 10% 0% 8% 7% 6% 4% 2010 Reference CaseReference Case 2020 2030 REmap 2030 NG Biomass Other fuels NG Renewables Other non-renewables 20

Bioenergy use breakdown Key developments in bioenergy demand : - Accounts for 77% of total RE use - 78% for heating - Its use nearly doubles compared to 2030 Reference Case - Total demand in REmap 2030: 900 PJ/yr Bioenergy supply potential in 2030: IRENA estimates: 1.1 1.8 EJ/yr - Forestry products: 125-485 PJ/yr - Agr. residues & waste : 645-950 PJ/yr - Energy crops: 345 PJ/yr Demand / supply: 50%-80% Transport 14% Industry, commercial & agriculture heating 47% Total biomass demand REmap 2030 (900 PJ/yr) Power generation DH 8% generation, CHP 10% DH generation, heat only 7% Residential heating 14% 21

Average substitution cost (USD 2010 /GJ TFEC) Cost-supply curve, 2030 (business perspective) 20 Solar thermal heat (buildings) 20 15 Biomass pellet heat (buildings) 15 10 Biomass heat (buildings) 10 5 0-5 Average weighted cost of substitution (1.8 USD/GJ) 3% Reference Case developments 3%-12% Solar thermal heat (industry) Biogas heat (buildings) Bioethanol (conventional) Biomass heat CHP (industry) Solar PV (utility) Wind onshore Biodiesel Bioethanol (advanced) Biomass power CHP (industry) Biomass district heat Geothermal heat (industry) Biomass heat (industry) -10 10. 12. 14. 16. 18. 20. 5 0-5 -10 Renewable energy share in total final energy consumption (%) Discount rate: 10%, Coal price in 2030: USD 2.7/GJ, NG price: USD 4.6-13.8/GJ 22

Average substitution cost (USD 2010 /GJ TFEC) Cost-supply curve, 2030 (government perspective) 8 Biomass heat CHP (industry) Solar thermal heat (industry) Solar PV (utility) 8 3-2 -7 Average weighted cost of substitution (-0.3 USD/GJ) 3% Bioethanol (advanced) Reference Case Geothermal heat (industry) developments Biomass heat (buildings) 3%-13% Biodiesel Biomass district heat Biomass heat (industry) Biomass pellet heat (buildings) Wind onshore Biomass power CHP (industry) Solar thermal heat (buildings) Bioethanol (conventional) 3-2 -7-12 Biogas heat (buildings) 10. 12. 14. 16. 18. 20. -12 Renewable energy share in total final energy consumption (%) Discount rate: 10%, Coal price in 2030: USD 2/GJ, NG price: USD 11-22/GJ 23

Comparison of costs and benefits, 2030 Costs of renewables Average substitution costs of 2020/2030 options (USD/GJ) -0.3 Total system costs in 2030 (billion USD/yr) -0.1 Total investment needs between 2010-2030 (billion USD/yr) 4.9 Benefits from avoided externalities CO 2 emission reduction potential (Mt CO 2 /yr) 59 Benefits from human health externality (billion USD/yr) -0.1 - -0.3 Benefits from CO 2 emission externality (billion USD/yr) -1.0 - -5.0 Total benefits from externalities in 2030 (billion USD/yr) -1.1 - -5.3 Net system costs in 2030-1.2 - -5.4 Fossil fuel saving benefits (compared to Reference Case) Reduction in fossil fuel costs (billion USD/yr) 5.0 Additional costs from biomass use (billion USD/yr) 2.2 Net savings in energy costs (billion USD/yr) 2.8 24

How to accelerate renewables uptake to 2030 Planning transition pathways Develop a national T&D grid plan that considers 15% generation from wind and solar Modernise and improve efficiency of existing power & heat generation capacity with energy efficiency and renewables Complement and improve energy efficiency and supply security by diversifying NG imports and increasing domestic production of natural gas Creating an enabling business environment Utilise local manufacturing capacity to create an affordable market for RE equipment Increase in investments in both domestic/foreign in new capacity by easing GT tariffs, and by developing incentives for small-scale investors Ensuring smooth integration Develop collection systems for agricultural residues, and invest in infrastructure for sustainable recovery of forestry biomass Creating and managing knowledge Add knowledge on resource potential and cost and benefits of renewables, and develop norms, rules, standards and definitions 25

THANK YOU Dolf Gielen dgielen@irena.org Deger Saygin dsaygin@irena.org