Prezentacija Volfganga Pospisčila, generalnog direktora Poyry Managament Consulting Austria GmbH, sa Prvom međunarodnog simpozijuma "Životna sredina i energetika - Šta čeka Srbiju" koji je održan u organizaciji NALED-a, Srpskog udruženja za energiju vetra (SEWEA) I Evropskog udruženja za energiju vetra (EWEA) - 2. mart 2012. godine.

1. "ENVIRONMENT AND ENERGY: WHAT LIES AHEAD FOR SERBIA”
SERBIAN WIND ENERGY ASSOCIATION (SEWEA) CONFERENCE
 Impact of EU Environmental Regulation on the Serbian Power Market
 2 March 2012, Belgrade

2. PÖYRY – A WIDE RANGE OF DEEP EXPERTISE
URBAN & MOBILITY  Sustainable land use WATER & ENVIRONMENT
 Urban planning  Flood management  Water supply and sanitation
 Urban ecology
 Real estate development  Water resources management
 Transport planning  Geosciences
 Rail infrastructure  Environmental services
 Road infrastructure  Environmental consulting
 Construction management
 Building design
 Eco-industrial zones  Desalination
 Intelligent transport  Water efficiency in energy
 Green buildings production
 Recycling  Tidal power
 Solar hydrogen
INDUSTRY ENERGY
 Pulp and paper  Hydropower
 Chemicals  Renewable energy
 Biorefining  Thermal power
 Metals & mining  Biofuels
 Oil and gas
 Energy efficiency  Nuclear energy
 Waste-to-Energy  Transmission & distribution
 Biochemicals
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3. A LOCAL OFFICE NETWORK IN ABOUT 50 COUNTRIES
ABOUT 7000 SPECIALISTS, OF WHICH 500 MGM CONSULTANTS
Eastern European
presence
Finland* Albania
Norway*
Sweden*
Bulgaria
Czech Republic*
Estonia
Hungary
Austria*
France* St. Petersburg Lithuania
Germany* Moscow Poland*
Hungary Romania
Vancouver
Montreal Italy* Slovakia
Oakville Poland* Turkey
Portland Appleton Spain
New York Switzerland* Ankara Beijing
Jinan Seoul
Atlanta United Kingdom*
Tunis
Tehran Shanghai
Riyadh Dubai New Delhi
Calcutta Taipei
Mexico City Abu Dhabi Muscat
Mumbai Hanoi Manila
Bangkok Pasig
Caracas City
Panama City Bogota Kuala Lumpur
Singapore
Lima Jakarta
Lusaka
Poços de Caldas
São Paulo
Curitiba
Auckland
Buenos Aires
Melbourne
* several offices across country (c) grafikdienst.com
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4. OVERVIEW PÖYRY MANAGEMENT CONSULTING
Pöyry combines strategy consulting with fundamental market insights and
technological competence on a global scale
Leading strategy and  Exclusively focussed on the international energy markets,
management Produc- Whole
Grid Retail expertise along the entire value chain
tion sale
consultancy for the  We support our clients with strategic, conceptional and
international energy Strategy, M&A, transformations, … organisational advice
markets  Appr. 250 consultants with energy background
 Close collaboration with the engineering business areas of the
Urban & Water &
Access to the Mobility Environment
technology Management
Pöyry Group
competence within the  Access to technological competence of approximately 6,500
Consulting
Pöyry group Industry Energy
engineering consultants
Profound and  Wide spread reputation of Pöyry‘s fundamental market models
fundamental market within the utility sector and amongst banks investing in and
insights based on lending to the sector
proprietary market  Profound understanding of the commodity markets (to 2035)
models  Publishing the renowned ILEX Market Reports
Covering the global  Extensive consulting expertise in all relevant energy markets
markets with a wide  Offices in about 50 countries
spread of local offices  Approx. 17,000 projects each year in over 100 countries
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5. PÖYRY MANAGEMENT CONSULTING
Europe’s leading specialist energy management consultancy
 Offering expert advice from strategy to
implementation on policy, regulation,
business operations, financing and
valuation and sustainability
 Providing in-depth market intelligence
across Europe
 Over 250 energy market experts in 14
offices across Europe:
– Düsseldorf – Oxford
– Helsinki – Stockholm
– London – Stavanger
– Madrid – Paris
– Milan – Vienna
– Moscow – Villach
Pöyry offices – Oslo – Zurich
(c) grafikdienst.com
Pöyry Management Consulting offices
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6. EU ENVIRONMENTAL REGULATION SUMMARY
Ever stricter EU regulation is being enforced in order to comply with
emission reduction targets outlined in the Kyoto Protocol
 Large Combustion Plant Directive (LCPD):
• Limits NOx, SO2 and fine dust particle emissions (stricter regulation effective starting 2016)
• Applies to plants with rated thermal input above 50 MW (mainly coal and oil fired plants)
• Resulted in reduction of coal fired plants across EU (substituted with other types of plant)
 Industrial Emissions Directive (IED):
• Permits must be obtained to show compliance with operators basic obligations and environmental
quality standards (pollution reduction, energy efficiency maximisation, correct waste disposal, etc.)
• Applies to all industries with major pollution potential (energy industries, production and processing
of metals, mineral industry, chemical industry, waste management, rearing of animals, etc.)
 EU Emissions Trading Scheme (ETS):
• Cap and trade total EU emissions to facilitate their reduction in accordance with Kyoto Protocol
• Phase III will see allowances reduced on a linear basis from 2013 – 2020 to meet 2020 EU targets
• The power sector in most new member states may originally receive allowances for free, but the
number of free allowances will be reduced to zero by 2020
 2020 EU renewable targets:
• 20% reduction of greenhouse gas emissions (compared with 1990 levels)
• 20% of total energy consumed to come from renewable sources
• 20% increase in energy efficiency
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7. EUROPEAN UNION
Environmental regulation will potentially incentivise more renewables to
be added to the Power generation capacity mix by 2035
GW
1.400
152 1‘230
1.200 30 10% Solar PV
373 -1 -55
2% Geothermal, CSP, Marine
1.000
889 -154 127 -53 25% Wind
32 -150
13 43 -10
-58 50 -22
61 -42
800 3% Biomass
14% Hydro
600
10% Nuclear
400
24% Gas
200 2% Oil
9% Coal
0
Capacity retirements
Capacity additions
Source: Pöyry, IEA2011
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8. PÖYRY’S ENERGY MARKET MODELS
Pöyry offers fundamental modelling capabilities based on a proprietary
platform of fundamental market models
Pöyry‘s energy market models Description of market models
 EurECa is used for projecting physical
(generator output, fuel use, country flows)
and economic behaviour (prices)
$ Cronos Olympus
$  Eureno analyses the impacts of the EU’s
Oil model Coal model 2020 renewables targets on the 27
(€) Member States
€ €
Pegasus Carbon Eureno  Cronos generates the future
Gas model model Renewables development of oil prices based on
fundamentals of supply/demand
Gas Gas CO2 CO2
 Pegasus looks at the development of the
prices demand prices emissions European gas market and generates
future gas prices under consideration of
the USA and Asia
EurECa  Olympus generates the future
€ development of hard coal prices based
Electricity model
on fundamentals of supply and demand
 The carbon model captures the EU-ETS
and computes carbon allowance prices
A unified approach of the different energy sectors allows based on abatement cost curves and
Pöyry to create internally consistent scenarios, where trading regimes
gas, carbon and electricity reach a stable equilibrium
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9. Modelling principles: recovery of fixed costs
The formation of our wholesale electricity price projections takes account
of the need to recover both variable and fixed cost components
Fuel and  One way or another, the market will
carbon costs recognise a value for both generating
VOWC capacity and electrical energy
 These values will be based on the
MOP
underlying economics of the generating
Start-up and
no load costs system at the time
 For the value of energy, this will entail the
SMP broad economic dispatch of the plants on
Fixed + capital the system
cost recovery
 Efficient wholesale markets will deliver an
Wholesale effective merit order
price
MOP – Merit Order Price
SMP – System Marginal Price
VOWC – Variable Other Works Costs
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10. IMPACTS ON SERBIA (1)
Status quo sees the country having environment regulation less stringent than
EU legislation, however, the country is on a harmonisation path with the EU
 Current environmental legislation in Serbia is less stringent than EU legislation, but there
are a significant number of directives influencing both the operation of power plants
within the industry and their effect on the environment, such as:
• Directive on reduction of the SO2 content of liquid fuels
• Directive on the limitation of emissions of certain pollutants into the air from large combustion
plants
• Directive on the conservation of wild birds
 However, as part of the Energy Community, Serbia is expected to harmonise its
legislation with that of the EU
• The Athens treaty entered into force on 1 July 2006, its purpose being the harmonisation of the
energy markets of the energy community with those of the EU
• The Athens treaty aims to, amongst other things, improve the environmental situation in relation to
Network Energy and related energy efficiency, foster the use of renewable energy, and set out the
conditions for energy trade in the single regulatory space
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11. IMPACTS ON SERBIA (2) – HIGH FOSSIL FUEL GENERATION
Generation Profile to 2035 (a potentially feasible conservative scenario)
Gas-fired electricity generation might replace some of the retiring lignite-fired power production units,
however, the latter‘s contribution to the generation mix could remain strong, despite more renewables
being added to the power system
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12. IMPACTS ON SERBIA (3) – STRONG RENEWABLES CONTRIBUTION
Generation Profile to 2035 (a potentially feasible scenario)
Gas-fired electricity generation might replace a larger part of further retiring lignite-fired power
production units, with the former‘s contribution to the generation mix relatively high, while stronger
renewable generation growth is seen in the power system
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13. SUPPLY CURVES
The Serbian power system will see an evolving merit order of power plants by 2030
Winter business day - 2015 Winter business day - 2030
200 Hydro
200 Hydro
Renewables Renewables
175 175
CHP CHP
Embedded Embedded
150 150
Nuclear Nuclear
€/MWh (real 2010 money)
€/MWh (real 2010 money)
125 Lignite 125 Lignite
€/MWh
€/MWh
Coal Coal
100 100
CCGT CCGT
Steam gas Steam gas
75 75
OCGT OCGT
50 Oil 50 Oil
25 Max Net demand 25 Max Net demand
Max National demand Max National demand
0 0
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 11 12
Capacity (GW) Capacity (GW)
Summer business day - 2015 Summer business day - 2030
200 200 Hydro
Hydro
Renewables Renewables
175 175
CHP CHP
Embedded Embedded
150 150
Nuclear Nuclear
€/MWh (real 2010 money)
€/MWh (real 2010 money)
125 Lignite
125 Lignite
€/MWh
€/MWh
Coal Coal
100 100
CCGT CCGT
Steam gas Steam gas
75 75
OCGT OCGT
Oil 50 Oil
50
25 25 Max Net demand
Max Net demand
Max National demand Max National demand
0 0
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 11 12
Capacity (GW)
Capacity (GW)
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14. CARBON PRICE AND CARBON PASS-THROUGH
The carbon price (and potential carbon pass-through) will have to be factored
into the wholesale electricity price in Serbia once the country joins the EU
Wholesale Electricity Price, €/MWh
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Electricity Price without carbon
Electricity Price with carbon (strong renewables contribution)
Electricity Price with carbon (high fossil fuel generation)
NB: Assumed hypothetical small nominal increases in electricity and carbon prices, Serbian EU-accession later this decade and a gradual carbon
pass-through rising to 100% over a 10-year period – exemplifying the influence of factoring the carbon price into the wholesale electricity price.
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15. PÖYRY MANAGEMENT CONSULTING INVESTIGATES THE EFFECTS IN
MORE DETAIL
Zephyr integrates historical weather patterns with hydro and thermal generation
into a market model to provide detailed long term market projections
Countries
Demand Intermittent New build of
Prices
module module generation
Value of
Availability
Capacity
module Load factors
module
External border
module
BID
(Hydro module) Zephyr Interconnection
Commodity
prices
Plant data Plant revenue
• 8760 hours per year
• 7 historical years
Zonal data • Plant dynamics
• Zonal analysis
• Hydro modelling
Constraints
Reserve data
CEE / SEE countries (and other
markets) as relevant and applicable
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16. CURRENTLY, THE SYSTEM REQUIRES LESS FLEXIBILITY AND HAS LOWER PRICE VOLATILITY
Example for GB for January 2010 (based on weather of Jan 2000)
50
Intermittent generation
Generation (GW)
40
30
20
10
Wind
0
70 Nuclear Biomass Coal CHP CCGT Other renewables Demand Peaking plants Imports
60
Generation (GW)
50
CCGT
40
30
20 Coal
10
0 Nuclear
70
01-Jan 04-JanBiomass Coal CHP CCGT16-Jan renewables Demand Peaking plants 31-Jan
Nuclear 07-Jan 10-Jan 13-Jan Other 19-Jan 22-Jan 25-Jan 28-Jan Imports
500
Electricity price (£/MWh)
60 Electricity Price
Generation (GW)
400
50
40
300
30
200
20
100
10
0
01-Jan 04-Jan 07-Jan 10-Jan 13-Jan 16-Jan 19-Jan 22-Jan 25-Jan 28-Jan 31-Jan
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17. BY 2030, THE ENTIRE SYSTEM WILL HAVE TO RESPOND TO WEATHER PATTERNS
In GB, prices may become much more volatile, with prices below zero due to wind
subsidies, and high spikes driven by the need to recover investment
Wind
50 Intermittent generation generation is
very variable,
Generation (GW)
40
leading to
30 periods of very
high
20 generation,
10 and periods of
very low
0 generation
70 Nuclear Biomass CCSCoal Coal CHP
CCGT Other renewables Demand Peaking plants Imports Thermal plant
60
Generation (GW)
will have to
50
operate in a
40 different
30 manner, with
20 lower load
factors and
10
higher risk
0
70
01-Jan 04-JanBiomass Coal CHP CCGT16-Jan renewables Demand Peaking plants31-Jan
Nuclear 07-Jan 10-Jan 13-Jan Other 19-Jan 22-Jan 25-Jan 28-Jan Imports Prices may
500
Electricity price (£/MWh)
60
ElectricityPrice become highly
Generation (GW)
Prices spike at £7700/MWh
400
50 SCHEMATIC EXAMPLE volatile, and
300
40 FOR DISPLAY ONLY driven
200
30
increasingly by
wind
100
20 generation
0
10
0
-100
01-Jan 04-Jan 07-Jan 10-Jan 13-Jan 16-Jan 19-Jan 22-Jan 25-Jan 28-Jan 31-Jan
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18. RENEWABLES TRENDS IN CEE/SEE MARKETS
Intermittency impact will increase dramatically in all CEE/SEE countries in
the coming years as more renewables generation capacities are added
 RES and climate change targets, driven by EU and national
RES and climate policy, change the future dynamics in the energy markets
change targets  renewable energy sector still presents many opportunities in
CEE and SEE Need to
understand
 Replacement of aging/inefficient generation assets in CEE
and, particularly, SEE intermittency
Supply will evolve
 Both “green” and “grey” power plants to be added to the power
system, but this process has to be planned well in advance
trends and
 Growing economies in many CEE / SEE countries will see a their impact
sustained growth in energy demand
Demand growth on the
 Growing power demand has to be met within the wider policy
framework, including RES
CEE/SEE
 Growth in RES will present new opportunities but also risks for
markets
Opportunities and market players in CEE/SEE
risks in CEE / SEE  Different market features from the supply-demand balance to
the market design will have to adapt
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19. CEE / SEE INTERMITTENCY STUDY SUMMARY
The study should be undertaken in 2012 – with a kick-off in early April 2012 – given
the urgency created by nuclear retirals, LCPD impact and lead time for new build
 The impact of renewables has turned out to be much more complicated than a
simple “Can the market deal with this?”
 Investors will face major challenges in developing appropriate investment strategies
in a market where the uncertainties are so great
 Equally, the challenge for policy makers and regulators is to create suitable market
designs without relying on ‘golden bullets’
 The study will draw on a deep understanding of the economic character of individual
markets, and will take realistic views on the outlook for current and future
investments and developments
 The study will look at a range of important issues, which could be developed and
modelled through different scenarios that consider the impact of reaching
renewables targets, the effects of increasing interconnection, capacity auctions,
lower renewables, etc.
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20. Pöyry Management Consulting
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21. Dr. Wolfgang Pospischil
Managing Director
Pöyry Management Consulting Austria GmbH
Mail: wolfgang.pospischil@poyry.com
Phone: +43 664 828 5001
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