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Rules of the game

Rules of the game. National ,  EU and global regulations, and their possible effects on the wood energy and district heating sector . Daniel Friberg Swedish Energy Agency. Wood Energy and Cleantech , Linköping, 24 August 2011. Purpose and scope of presentation.

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Rules of the game

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  1. Rules of the game National,  EU and global regulations, and their possible effects on the wood energy and district heating sector. Daniel Friberg Swedish Energy Agency Wood Energy and Cleantech, Linköping, 24 August 2011

  2. Purposeand scopeof presentation • Overviewof the Swedish districtheating market. • Howdistrictheating and woodfuelsareaffected by: - Politicalgoals, directives and policy instruments.

  3. Energy usage in the residentialsectors, TWh Source: SCB and Swedish Energy Agency • Oilusage is down with 90 per cent since 1990 • Electricityused for heating is down with 30 per cent since 1990 • Districtheating is upwith 40 per cent!

  4. Actual commercial energy prices in Sweden (taxes included) 1970–2010, öre/kWh • Electricitypriceshavedoubled in 10 years! • Wood chips havealmostdoubled in 10 years. • Districtheatingpricesincreasingmoresharplysince 1996 (deregulation) Source: SCB and Swedish Energy Agency

  5. Usage of district heating, TWh • Usageprimarily in the housingsector • Shareoflosses has diminished from around 19 per cent in the 1980s toaround 11-12 per cent today. Source: SCB and Swedish Energy Agency

  6. Share ofrenewableenergyincreasing in districtheating, TWh • Year 1980 oil = 90 percentofdistrictheatingproduction , year 2009 oil = 4 percent! • Year 2009 biomass, refuse, peat and wasteheat = 66 percent. (2010 = 73 percent) • Electricityconsumptionin the districtheatingsectoris declining Source: SCB and Swedish Energy Agency

  7. Wood fuels and refuse on the increase • 2009 woodfuels= 55 procent! • Refuse (Waste) = 22 procent!

  8. Policy measures and incentives behind the development Energy taxation the most important - Energy, CO2 and SOx • Introduction of CO2 tax in 1991 • Major tax increases on fossil fuels (heating, motor fuels) • Increased energy tax rates, but focus on gradually increased CO2 tax rate • Two levels of taxation for heating fuels, per ton CO2 • high for households and service (24 € in 1991; 113 € in 2011) • low for industry, forestry and CHP (in 1991: 6 €; in 2011: 34 € outside EU ETS, 0/ 8 € within EU ETS) Source: Proposition 2009/10:41

  9. …EU-ETS - European Emission Trading Scheme(Cap and trade, 2009/29/EC) Purposeofreducing green house gas emissions (in synchwith Kyoto/UN) Ca. 730 Swedish facilitieswithinenergyand industry Ca. 13 000 facilities on EU-level = 40 % CO2 emissions Most DH-production in Sweden included • 2005-2007 • 2008-2012 • 2013-2020 - National allocation plans arereplaced by EU-wideallocations: Emission reductions (within EU-ETS) with 21 percent by year 2020 comparedto 2005 - Electricityproductionhave to buy emission rights (mainly by auction) - Heat and industry allocated free allowences (specifics under discussion) - Product benchmarking for most installations - Allowances decreasing from 80% yearly to 30% of product benchmark by 2020 - Carbon leakage get 100% allowances based on product benchmark until International agreement Majorityof emission allowencesallocated for free Source: Swedish Energy Agency and Swedish EnvironmentalProtection Agency

  10. …The Electric Certificate System 2003-2035 • a market-based system to support the expansion of electricity production in Sweden from renewable energy sources and peat. • Increase by 25 TWh “green” electricity by 2020 (relative to 6,5 TWh 2002) • Current level (2010)18TWh • Entitled: Wind, Solar, Geothermal, Wave, Bio, Peat, small scale hydro Quotasto be fulfilled by electricitysuppliers Source: Swedish Energy Agency

  11. Politicalgoals and directives EU strategy for climate and energy 2020: 20-20-20 • 20 % increase in energyefficiency(comparedtoprojections) • 20 % less green house gas emissions (comparedto1990) • 20 % renewableenergy Source: http://ec.europa.eu/europe2020/targets/eu-targets/index_en.htm

  12. Renewable Energy Directive - RED (2009/28/EC) • EU target, 20% renewable energy in 2020 • 20% renewable energy of the total final energy consumption • 10% renewable energy of the total final energy consumption in the transport sector Memberstateshave different bindingtargets Source: Eurostat

  13. The RED 2020 target for Sweden is 50% (49%) How do wereach the target? Business as usual! • The increasesince 1990 is largelyduetoincreasedusageofbiomass for heat and electricityproduction. • Increasedusageof heat pumps is anotherfactor.

  14. …and moredirectives • Energy performanceofbuildingsdirective(2010/31/EU) Energy efficientbuildings – less demand for DH (and electricity) • Ecodesign directive(2009/125/EC) Moreefficientproducts – less demand for electricity (ca. 2 TWh in Sweden) • Cogeneration (CHP) (2004/8/EC) Promotion ofhigh-efficientcogeneration – Moreefficientuseofprimaryenergy • Proposal - Merging of Energy of services directive (2006/32)and CHP directive Turning power plants (combustion installations) in to CHP-plants - Increasedsupplyof DH on EU-level (in Sweden verylittleeffect) • Proposal – New directivefor the taxation of energy products and electricity (2003/96/EC) No CO2 tax within the EU-ETS? – removed CO2 tax on DH? Swedish position?

  15. Development of the EU energy- and environmental policies • Renewable Directive (RED) - Sustainability criteria for biofuels for transportation – already in progress - Sustainability criteria for solid biofuels – a recommendation is already presented Purpose? • Reduction of greenhouse gas emissions • 35% by time of introduction (60% 2018) • Protection of high biodiversity areas • Natural forests (Primary forest and other wooded land) • Protected areas (Reserves etc.) • Grasslands (Natural and non natural) • Protection of high carbon stock areas • Wetlands • Peatlands • Continuously forested areas • Effects on woodenergy? • (could have big effect) • Swedish responsetocriteria for solid biofuels: ”Sustainabilitycriteria for biomassshould be set nationally, ratherthanbeingEU-wide.” (Supported by the Baltic States, Finland, Slovenia, Austria)

  16. Some further explanations to the development concerning biofuels and renewables: • Large Forest Industry • Continuous supply of domestic biofuels, logistical benefits etc. (forest residues) • Large potentials • Incentives for Combined Heat and Power production (CHP) • the Electric Certificate system • High electricity prices 35 new plants planned 2009-2015 • Favourable taxation • Availability of district heating networks • District heating is highly versatile in using different fuels • Prerequisite for producing heat in CHP production Source: Fjärrvärmen 2015, branschprognos

  17. Other international aspectsaffecting the market • Price development of fossil fuels (peak oil?) • Price development of electricity (EU-ETS, input fuels etc.) • International agreements about environment and emissions – e.g. Kyoto • Increased biomass trade • Energy crises etc.

  18. Challenges and opportunities District heating market • A market with low profitability and increasing prices • Decreasing demand prognosis by ca 10-13 TWh 2007-2025 in houses with DH 2007 (Energy Performance of Buildings Directive, heat pumps, climate). -Svenskfjärrvärme Rapport 2009:21 - A decreasing heat demand can negatively affect the electricity production and hence supply (CHP) TPA (Third Party Access) • Increased competition between DH-actors • Increased possibility of marketing bio/renewable-DH (wood energy demand) • Increased DH-prices? • Effects on investments in DH? • Waste heat instead of biofuel/wood energy? Wood fuels • Wood vs. Refuse/Waste • Increased wood energy prices due to increased bio fuel demand District Cooling • Increasing market

  19. Thanks for Your Attention Email: Daniel.friberg@energimyndigheten.se Swedish Energy Agency Eskilstuna, Sweden http://www.energimyndigheten.se

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