Heat & Power Cogeneration Potential in Estonia

1. Heat & Power Cogeneration Potential in Estonia February 8th, 2007 Prof. Andres Siirde Tallinn University of Tehcnology

2. GOOD ENOUGH OR NOT? Current Situation

3. 10...30 MW +100 MW Existing CHP’s in Estonia 2007 <10 MW 17 CHPs in operation CHP generate electricity 1000 GWh/y 11 % of total generation

4. Majority of Estonian CHP’s use steam cycle therefore low power to heat ratio • CHP’s produce 11 % of electricity • Total number of CHP 17 • 30 % of heat is produced in CHPs • Heat to Power 1:3 Source: Tallinn Technical Univercity, Peeter Raesaar “Latest Development on RES policy, implementation and planning in Estonia”

5. More than half of the heat is produced from local fuels • 56% of the heat is produced from local fuels; A B C • Overall efficiency of heat production is 82%, D • District heating network losses 15% • Share of natural gas is 41%. 100% of the gas imported from Russia (Gazprom) • 49% of the heat is produced in small-scale boilerhouse (less than 5 MWth); • There is on-going process to reconstruct boilerhouses for wood and other biofuels due to increase of oil and gas prices

6. Majority of investments of power plants have to be made by 2016 • Over 90% of the electricity is produced from local fuels A B • Existing power production efficiency is 34%; Major imporovement potentential with implementation of CHP’s C • Network losses losses 17% due to export, concentrated production, old network equipment;Potential positive impact from distributed generation • Current electricity production is dominated by oil-shale power plants, 80% of existing capacity is out of operation by 2016 (LCPD); • Opportunity to restructure whole generation structure towards more energy efficient system Source: Statistics Estonia

7. EVOLUTION or REVOLUTRION? Potential of efficient heat & power co-generation in Estonia existing heat load availability of fuels potential techonogies

8. There is potential to double amount of co-gen power by 2015 in Estonia Potential for CHPs 2000...4000 GWh • Potential for CHP capacity is 2000...4000 GWh of heat load, mostly small-scale local boilerhouses; • Potential electricity output from RES approx. 600...750 GWh; with natural gas 2000...4000 GWh; • Additional potential from local microCHP approx ??? GWhel Source: Statistics Estonia

9. 10...30 MW +100 MW Existing CHP’s in Estonia 2007 <10 MW 17 CHPs in operation Power generation 1000 GWh in CHPs 11 % of total generation

10. 10...30 MW +100 MW Potential CHP’s in Estonia 2015 <10 MW +30 CHPs in operation Installed capacity ____ MW Potential for +2000 GWh in CHPs +20 % of total generation

11. Choice of fuels depends on environmental, security of supply and economic priorities Natural Gas Availability Strength Weakness • CO2 neutral • Local fuel • Development and employment in rural areas • Limited availability • High price due to exports compared to regulated power prices • CO2 neutral • Local fuel • Development and employment in rural areas RES • 20% of Estonia is covered with peat • Available resource in existing fields enough for 150 years • Annual growth +1TWh • Local fuel • Large resources • Competitive price • Development and employment in rural areas • Production seasonality • High CO2 content • Environmentally sensitive Peat • Wide range of available technologies • Standard solutions and easy maintance • High efficiency, good power to heat ratio • Imported fuel with monopoly supplier • Fossile fuel • Gas is available in all major towns • 100% imported from Russia • Possible to import 8-10 mln m3 per day

12. There are substantial potential of economic and environmental benefits from wider use of CHP’s • Use of local RES and peat is limited by availability of resources (up to 2 TWh per year) • Natural gas provides potentially higher power to heat ration than local fuels and has considerable environmental benefit but security of gas supply must be carefully considered before wider use;

13. Functioning power market is key to CHP development Market opening Current Situation Impact on Investment • Independent power producers have very limited access to end-customers and not able to build customer portfolio • 35% of Estonian power market is opened 01/09; 100% - 01/13 • Regulated price-cap does not support investments into new capacity, support scheme needed for all investments; • Investments delayed or only done with help of state support schemes • Regulated Price Cap level is lower than full-cost of a new power plant Price regulation • No transparent reference price available; • Not possible to sell excess or buy energy in independent and transparent market place Power Exchange • Power market in Baltics is dominated by national, no functioning spot market Proper deregulation and development of functioning power market in the Baltics would give potential investors required confidence for investments with smaller need for state support schemes

14. Thank you for your attention! Prof. Andres Siirde asiirde@staff.ttu.ee + 372 55 166 19

15. Appendices

16. Heating season lasts approximately 5000 h per year • Heating season lasts approximately 5000 h per year; • Base-load CHP capacity is limited to bigger cities (hot-water) and heat intense industry;, • Due to mild summers requirement for cooling capacity is minimal. Demand is slowly growing but unimportant on national level Source: Statistics Estonia

17. 49% of the heat is produced in boilers less than 5 MW Source: ???

18. Source: ????

19. Scarcity of wood based fuels my delay development of RES CHP’s Source: Tallinn Technical Univercity, Estonian Univercity of Life Sciences