Portfolio-Based Electricity Generation Planning

The Role of Renewables in Enhancing Energy Diversity and Security

April 26th - 27th,  2005, Tunis, Tunisia

ABOUT THE SEMINAR

On April 26th and 27th, 2005 around 50 participants from Renewable energy agencies, electricity companies, ministries, private companies, finance institutions, universities and research centres attended the Seminar on Portfolio-Based Electricity Generation Planning: The Role of Renewables in Enhancing Energy Diversity and Security.

The objective of the seminar was to introduce and explain the application of portfolio theory for developing efficient generation mixes in the countries, and to assess the impact of large grid connected renewable energy capacity additions with case studies in the North African Region. The final goal was to discuss the portfolio-based planning principles (Day 1) and explain how to access and use the portfolio ?on-line? tool (Day 2).

The seminar was organised within the framework of the Mediterranean Renewable Energy Programme and with the support of the Italian Ministry for the Environment and Territory (IMET), the United Nations Environment Programme (UNEP), the Mediterranean Renewable Energy Centre (MEDREC), The Renewable Energy and Energy Efficiency Partnership (REEEP) and the National Agency for Energy Conservation (ANME) in Tunis.

The seminar was hosted by the ANME (Agence Nationale pour la Maîtrise de l?Energie), with the support of OME (Observatoire Méditerranéen de l?Energie) in Hotel Africa in Tunis.

Day one was largely devoted to explaining the portfolio-based planning principles and was thus targeted at a large audience (around 50 participants). The figure below shows the origin of the participants, illustrating a good representation of major stakeholders and also an important participation of renewable energy agencies, electricity utilities and ministries, which allowed gathering perspectives from different institutions and a lively discussion.

Renewable Energy Prospects in the North African Region

Presentations included the general context of renewable energy and prospects in the Maghreb region as well as specific situations in Algeria, Egypt and Tunisia. A large part of the Seminar was devoted to the explanation of portfolio-based planning concepts, with preliminary results on the Tunisian case and also discussion on the portfolio approach and its application.

The seminar underlined the existence of a vast potential for development of renewable energy in the North African region in particular, and in the Southern Mediterranean region in general, due to the important renewable energy resources the region is endowed with (especially solar and wind). Nevertheless, the present share of renewable energy in primary energy consumption in the North African region is rather low (1.2%, including large hydro). New and renewable energy represents 0.5% of electricity generation in the region (8.5% large hydro including). This is due to the existence of barriers such as institutional, regulatory, economic and financing ones.

In order to address the increasing energy demand in the coming years in a sustainable manner, all the North African countries are considering 3 main pillars in their energy policies: diversification of energy sources, promotion of energy efficiency and enhancing the share of renewable energy in their energy mix. As for renewables, the priorities concern in particular solar thermal applications and wind power energy. These efforts are supported, among others, by the Mediterranean Renewable Energy Programme (MEDREP), a type II Initiative launched in Johannesburg by the Italian government in partnership with international institutions and local agencies.

Portfolio-Based Electricity Generation Planning

As for portfolio-based electricity generation planning, the idea is to abandon the traditional stand-alone kWh generating cost measures and instead evaluate conventional and renewable energy sources on the basis of their portfolio cost i.e. their cost relative to the risk they bring to a portfolio of generating assets. Not putting all the eggs in one basket (asset diversification) can improve portfolio risk at a given portfolio return level.

A user-friendly online tool (online Portfolio Analysis - PAN) has been developed by Energy Centre for the Netherlands in close association with Dr S. Awerbuch (University of Sussex, UK). This expository tool has been developed to enable analysis of the deployment portfolio of power generating technologies at country/region level. It enables to highlight the role of renewables to keep electricity more affordable during the planning horizon and to reduce the impact of energy supply security risk on the national/regional electricity supply system. It can be accessed in developing countries through the internet.

The preliminary results of the application on the Tunisian case have been also presented and discussed. This case study illustrated how electricity-generating mixes can benefit from additional shares of wind, PV and other renewables. Many scenarios have been presented illustrating that compared to the existing, fossil-dominated mix, efficient portfolios reduce generating costs in Tunisia while including greater renewables shares in the mix. The Tunis case study, which covered electricity generation and water heating, indicated that relative to the projected 2010 target mix, wind shares could be increased four-fold (from 8% to 34%) while generating costs could be simultaneously reduced by 20%.

Day two was an informal seminar and technical session, held at the Mediterranean Renewable Energy Centre (MEDREC) head office in Tunis.  MEDREC is a centre for training, information, dissemination, networking and development of pilot projects, and the reference point for MEDREP activities in the Maghreb region. The aim of the technical session was learning by doing: application of the portfolio-based electricity generation planning approach and the PAN tool for three case studies: Algeria, Egypt and Tunisia.  

During this seminar, presentations demonstrated essential features of the portfolio application for minimisation of system electricity generation cost at country or regional level in a target year. Emphasis was put on the unique feature of the portfolio effect.

Participants from Maghreb countries explained how power system supply planning was done in their respective countries. Typically, detailed planning is done for a 5-year forward period and indicative planning for up to 30 years forward planning. Several participants indicated that WASP (the Wind Atlas Analysis and Application Program)  is being used in their country.

A detailed overview of the interactive web-based portfolio analysis tool using 3 technology case studies was also presented. It was emphasised that this workshop was the first occasion for testing the online model. Participants made a lot of valuable suggestions for improvement. Many well-conceived questions were raised on the interpretation of outputs and suggestions were made on improving the website.

SEMINAR CONCLUSION & FOLLOW-UP

At the seminar?s conclusion, participants underlined the large renewable energy potential the Maghreb region is endowed with and the barriers that hindered their large scale development. However, energy, development and environment concerns are leading all the countries to give more and more importance to renewables. At present, the priorities in the region relate to solar thermal and wind energy. The national efforts to achieve sustainable energy development in the countries can be supported by regional cooperation and partnerships.

The seminar allowed participants to learn about an innovative approach for renewable energy integration in the electricity generation mix. The portfolio theory applied to energy planning considers energy security and demonstrates that renewable energy, despite being more costly than conventional technology for electricity generation can provide important benefits without increasing overall costs. In this respect, the portfolio approach may be used as a tool to support decision-making process and allow better aligning of projects in sustainable development.

The portfolio ?on-line? tool is now available at: http://www.ecn.nl/pan.

Next steps relate to the country-specific case-study preparation by the national focal points from Algeria, Egypt and Tunisia. These include: gathering, compilation and analysis of requested data on the electricity mix; evaluation of the national generating costs of electricity and evaluation of the accompanying risk factors; use of the online Portfolio Analysis Model PAN for optimising the national electricity mix and preparation of a short document describing the national inputs and the outputs of the analysis.

A manual for using the online model will be provided for country-specific case studies to be tested and performed.