Analyses of Energy Supply Options and Security of Energy Supply in the Baltic States
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IAEA-TECDOC-1541 Analyses of Energy Supply Options and Security of Energy Supply in the Baltic States February 2007 IAEA-TECDOC-1541 Analyses of Energy Supply Options and Security of Energy Supply in the Baltic States February 2007 The originating Section of this publication in the IAEA was: Planning and Economic Studies Section International Atomic Energy Agency Wagramer Strasse 5 P.O. Box 100 A-1400 Vienna, Austria ANALYSES OF ENERGY SUPPLY OPTIONS AND SECURITY OF ENERGY SUPPLY IN THE BALTIC STATES IAEA, VIENNA, 2007 IAEA-TECDOC-1541 ISBN 92–0–101107–5 ISSN 1011–4289 © IAEA, 2007 Printed by the IAEA in Austria February 2007 FOREWORD In its broadest meaning “energy security” is the ability of a nation to muster the energy resources needed to ensure its welfare. In a narrower meaning it refers to territorial energy autonomy. Consequently, energy supply security is a matter of both domestic policy and international relations. Perceived and real threats may be economic or logistic, politically motivated or the result of war or natural causes. They may be source, technology or transport related, specific to a facility or a function of system structure, due to sabotage or to inadequate investment or maintenance, or result from pricing or regulatory policies. Energy security has become a growing concern in the Baltic States of Estonia, Latvia and Lithuania since regaining independence in 1991. As their national energy systems depend on essentially one single foreign supplier for most of their oil and all of their natural gas supplies, a comprehensive analysis of potential measures to improve security including alternative supply options becomes vital. Such an analysis needs to consider, for example, the availability of domestic energy reserves and resources, the vintage of existing energy infrastructures (including regional and interregional interconnections), storage facilities, as well as future technology and energy trade options. However, the Baltic States' accession to the European Union in 2004 has added further responsibilities with regard to energy security. Robust future energy development strategies, for each individual country and the region as a whole, will also require compliance with EU regulations, as well as with special stipulations formulated in the accession agreements. Robust energy strategies need to strike a balance between the potentially conflicting dimensions of energy security, economic efficiency and environmental protection. For example, supply security is likely to incur an “insurance premium”, while environmental protection may well raise the cost of providing energy services. An analysis of medium term energy demand and supply strategies that simultaneously accounts for all these dimensions is a methodologically demanding and complex task. The IAEA has developed a systematic approach, along with a set of computer based models for elaborating national and regional energy strategies vis-à-vis energy security, environmental impacts and costs. Under its Technical Cooperation Programme, the IAEA provides assistance to its Member States to help strengthen national capabilities for conducting energy demand and supply analyses by transferring the analytical tools, as well as providing training and expert advice. This report is the outcome of such a technical cooperation programme and describes the results of the study on Analysis of Energy Supply Options and Security of Energy Supply in the Baltic States, conducted in cooperation with several national organizations. This study demonstrates the application of the IAEA's energy planning tools for comprehensive national analyses involving: (i) energy and electricity demand and their projections, (ii) least-cost electricity system expansion, (iii) energy resource allocation to power and non-power sectors, and (iv) environmental impacts. For medium term energy planning the study presented in this report provides insights into the following issues: • Identifying cost-optimal energy system development trajectories for each of the Baltic countries individually based on maximum national energy self-sufficiency, while complying with EU obligations (e.g. environmental protection, Directive on the promotion of electricity produced from renewable energy etc.). • Determining and quantifying the benefits and costs of a regional integration of the energy systems of the three Baltic countries for different levels of energy security (e.g. sharing of infrastructures and generating capacities, access to resources and storage facilities and utilizing interconnections, etc). Benefits and costs include the economics of energy supply, changes in the emission of atmospheric pollutants, variation in energy import dependence, etc. • Formulating a set policy options for actions that are targeted at improving energy security in the Baltic region. This study is uncharacteristic for several reasons. Firstly, similar to other East European countries the Baltic States share a process of re-organization; moving from a centrally planned economy towards market liberalisation. Secondly, the closure of Unit 1 of the Ignalina Nuclear Power Plant in 2004 and the scheduled shutdown of Unit 2 in 2009, in accordance with the EU accession agreement, raises crucial supply security questions not only for Lithuania but for the region as a whole. In this regard, this study provided the opportunity to analyse the economic competitiveness and energy security aspects of a wide range of energy supply options, including the construction of a new nuclear power plant. Energy planning is a continuous process. Due to the substantial changes in the energy sector of the Baltic States in recent year, it might be worth considering to start a follow-up study and perform new calculations on the basis of changing conditions. The collaborative study was managed and carried out by a senior expert-level working group involving members from ministries, utilities, academic and research institutions of the three Baltic countries. The IAEA provided training to the members of the national teams in the use of its energy analysis and planning tools and assisted in linking the national models into an integrated regional Baltic model. A steering committee consisting of the working group and representatives from the IAEA and NATO provided overall coordination and guidance throughout the course of the study, i.e. assisted the working group in defining energy policies and measures to be analyzed, harmonizing scenario assumptions and reviewing study results. The working group was fully responsible for implementing the study, including the preparation of this report. The IAEA officer responsible for the production of this publication was F.L. Toth of the Department of Nuclear Energy. EDITORIAL NOTE The use of particular designations of countries or territories does not imply any judgement by the publisher, the IAEA, as to the legal status of such countries or territories, of their authorities and institutions or of the delimitation of their boundaries. The mention of names of specific companies or products (whether or not indicated as registered) does not imply any intention to infringe proprietary rights, nor should it be construed as an endorsement or recommendation on the part of the IAEA. CONTENTS SUMMARY ............................................................................................................................... 1 1. INTRODUCTION .......................................................................................................... 21 1.1. Background....................................................................................................... 21 1.2. Objectives of the study ..................................................................................... 22 1.3. Study organisation ............................................................................................ 23 1.4. Methodological description .............................................................................. 25 1.5. Organisation of this report................................................................................ 26 2. COUNTRY PROFILES.................................................................................................. 29 2.1. Estonia .............................................................................................................. 29 2.1.1. Geography, location and climate .......................................................... 29 2.1.2. Demographic situation.......................................................................... 29 2.1.3. Macroeconomic situation...................................................................... 30 2.1.4. Energy sector ........................................................................................ 32 2.2. Latvia ................................................................................................................ 40 2.2.1. Geography, location and climate .......................................................... 40 2.2.2. Demographic situation.......................................................................... 40 2.2.3. Macroeconomic situation...................................................................... 41 2.2.4. Energy sector ........................................................................................ 43 2.3. Lithuania........................................................................................................... 56 2.3.1. Geography, location and climate .........................................................