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Energy security is one of the critical priorities of energy policy in the European Union and particularly in the Baltic region that is currently transforming itself from an isolated energy island to a highly interconnected area. In this paper, a comprehensive analysis of energy security in Estonia, Finland, Latvia, and Lithuania in the context of the energy transition is presented. The paper explores regional implications of two paths of carbon price (gradual and delayed carbon price increase). The analysis is performed by linking an energy system optimisation model with a probabilistic model of energy security. This modelling suite is used to assess the resilience of the planned energy system to possible disruptions. The results demonstrate that carbon price paths have a modest impact on energy security in Baltic countries if energy security measures are implemented in an optimal way. The research is based on the case study conducted in the framework of the European Union's Horizon 2020 project REEEM.
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Energy Strategy Reviews 30 (2020) 100509
2211-467X/© 2020 Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (
Implications of carbon price paths on energy security in four Baltic
region countries
Arvydas Galinis
, Linas Marti
, Jaakko J
, Ville Olkkonen
, Sanna Syri
Georgios Avgerinopoulos
, Vidas Lekavi
Lithuanian Energy Institute, Breslaujos str. 3, LT-44403, Kaunas, Lithuania
Aalto University, School of Engineering, Department of Mechanical Engineering, P.O. Box 14100, FIN-00076, Aalto, Finland
Division of Energy Systems Analysis, Royal Institute of Technology KTH, Brinellv
agen 68, 10044, Stockholm, Sweden
Energy transition
Energy security
Carbon price
Reserve services
Baltic region
Energy security is one of the critical priorities of energy policy in the European Union and particularly in the
Baltic region that is currently transforming itself from an isolated energy island to a highly interconnected area.
In this paper, a comprehensive analysis of energy security in Estonia, Finland, Latvia, and Lithuania in the
context of the energy transition is presented. The paper explores regional implications of two paths of carbon
price (gradual and delayed carbon price increase). The analysis is performed by linking an energy system
optimisation model with a probabilistic model of energy security. This modelling suite is used to assess the
resilience of the planned energy system to possible disruptions. The results demonstrate that carbon price paths
have a modest impact on energy security in Baltic countries if energy security measures are implemented in an
optimal way. The research is based on the case study conducted in the framework of the European Unions
Horizon 2020 project REEEM.
1. Introduction
Along with sustainability, affordability and efciency, energy secu-
rity is considered as one of the key issues in provision of energy services.
Energy security is also one of the most important priorities of energy
policy in the European Union (EU): European strategic long-term vision
for a prosperous, modern, competitive and climate neutral economy
highlights energy security among overriding priorities [1]. Energy se-
curity is a crucial issue particularly in the Baltic region that is trans-
forming itself from an isolated energy island to a highly interconnected
area. The peculiarities of this region cover dependence on natural gas
imports from Russia in Finland, power system synchronous operation
with the area of the former Soviet Union in the case of Estonia, Latvia,
and Lithuania (often referred to as the Baltic countries).
The development of energy systems in the region thus covers
sometimes contradicting tasks to ensure cost-effectiveness, increase
share of renewables, reduce greenhouse gas (GHG) emissions, maintain
competitiveness of local industries, and increase energy security.
Although providing many decarbonisation opportunities, the expansion
of variable renewables causes certain technical challenges to the energy
system [2]. High proportions of variable generation have considerable
impacts on ancillary services required in a power system [3] but this
aspect is often overlooked in both market design [4] and long-term
energy planning models [5].
There is a wide variety of denitions of energy security [6] empha-
sising low vulnerability of vital energy systems[7], availability,
affordability, reliability, efciency, little environmental impact, proac-
tive governance, and social acceptability of energy services provided to
end-users [8] and other aspects. The multidimensional and complex
nature of energy security imposes difculties in measuring energy se-
curity, and the number of proposed indicators is continually increasing.
Moreover, a money-metric translation of changes in energy security
indicators that could make these amenable for a rigorous economic
cost-effectiveness assessment is also missing [9]. An essential part of
such economic analysis is modelling of energy system development as it
denes how the energy system adapts to the changing conditions, such
as decarbonisation targets and increasing carbon prices. Moreover,
single models are often unable to cover all the important dimensions of
the changes and thus model linking and multi-model approaches are
* Corresponding author.
E-mail addresses: (A. Galinis), (L. Marti
sauskas), jaakko.j.jaaskelainen@aalto. (J. J
ainen), ville.olkkonen@
aalto. (V. Olkkonen), sanna.syri@aalto. (S. Syri), (G. Avgerinopoulos), (V. Lekavi
Contents lists available at ScienceDirect
Energy Strategy Reviews
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Received 29 July 2019; Received in revised form 30 April 2020; Accepted 1 June 2020
Energy Strategy Reviews 30 (2020) 100509
used to provide new insights on the development of energy [10] and
related systems [11]. In this research, energy security is dened as
ability of the energy system to uninterruptedly supply energy to con-
sumers under acceptable prices and to resist potential disruptions arising
due to technical, natural, economic, socio-political and geopolitical
reasons [12]. Such denition is in line with the approaches proposed by
Cherp and Jewell [7] as well as Valentine [13] who distinguishes
availability, affordability and resilience criteria.
Previous energy security-related research covering Baltic region
countries paid primary attention to generation adequacy, the roles
played by cogeneration and imports, energy security evaluation
applying various methodologies, and sustainability of energy develop-
ment. Generation adequacy topics cover modelling the resilience of the
system in case one or more major power system components fail at the
peak time [14], evaluating the impacts of a severe drought [15] and
Monte-Carlo simulations in adequacy assessments [16]. Due to climatic
conditions and existing district heating infrastructure, cogeneration
technologies are particularly attractive power production option in the
cities of the region [17]. On the contrary, possible decommissioning of
cogeneration plants might have negative energy security impacts that
need to be neutralised by new generation capacities and in-
terconnections [18]. Biomass-based cogeneration is seen as a replace-
ment of fossil fuels in electricity production [19], but certain limits on
biomass quantity are imposed by sustainability and ecosystem impacts
To ensure generation adequacy, continuous investments to genera-
tion sources are needed, but the current market conditions are not
favourable for new investments as electricity import is more attractive
than majority of local generation sources [21]. For instance, most of
electricity consumed in Lithuania is imported from neighbouring
countries [22]. The dependence on energy imports is a widely discussed
topic in energy security literature. Bompard et al. developed a frame-
work with methodologies to assess the electricity independence of the
Baltic countries [23], J
ainen et al. analysed energy trade between
Finland and Russia and whether Finlands notable dependence is an
energy security threat [24]. The studies of Lithuanian case concluded
that maintaining installed capacities are preferred as an energy security
measure [21] while an economically unjustied increase of domestic
electricity generation would have negative economy-wide impacts [25].
Indicator approach which is based on various energy security indexes
is the most common when evaluating energy security in general. Indexes
particularly for the Baltic countries are evaluated across different di-
mensions by Zeng et al. [26], Augutis et al. [27], World Energy Council
[28], World Economic Forum [29], Wang and Zhou [30], Radovanovi
et al. [31], Erahman et al. [32], Le Coq et al. [33], Badea et al. [34] and
other. Although energy security evaluation based on historical data
dominates in the energy security literature, there is a clear need to
foresee measures that ensure energy security at the planning stage to be
able timely put them into practice. Also, the selection and imple-
mentation of energy security measures need to be carried out following
the real conditions of the functioning of the energy system. Environ-
mental restrictions associated with climate change mitigation as well as
country-specic and international policy trends shall also be considered.
Therefore, research on energy security implications of increasing carbon
prices within different paths is especially relevant from the practical
point of view.
Practical relevance is further strengthened by the diverse current
situation in four inter-connected Baltic countries under consideration.
The Finnish energy system is very dependent on imports from Russia:
Finland imported 64.0% of its primary energy in 2016 and 63.0% of this
amount originated in Russia [24]. There are two important high-voltage
direct current (HVDC) connections between Finland and Estonia, and in
recent years, electricity imports from Finland to the Baltic region have
been signicant. Finland is also growingly dependent on electricity
imports: in 2018 23% all consumed electricity was imported, about 13
TWh from Sweden and about 8 TWh from Russia. In 2018, the total
production of electricity in Lithuania amounted to 3.2 TWh while the
total consumption for electricity was 12.1 TWh. Thus, 73% of consumed
electricity was imported, the largest import share being from Russia (4.6
TWh) [35]. In Latvia, total consumption of electricity in 2018 was 7.4
TWh, electricity import constituted 12% [36]. In 2018, Estonias elec-
tricity production was 18% higher than consumption and it was a net
electricity exporter [36].
In this paper, a comprehensive analysis of energy security in the
Baltic region (Estonia, Latvia, and Lithuania) and Finland in the context
of energy transition and carbon price paths is presented. Energy security
analysis in this study is based on the enhanced mathematical model of
prospective energy sector development and functioning linked with a
simplied probabilistic model used to assess resilience of the planned
energy system to possible disruptions. The usage of the simplied
probabilistic model is considered as a solution to overcome computa-
tional limitations that could appear in case if a detailed model is used to
reect a broad variety of possible energy security threats.
The research is based on Baltic energy security case study conducted
in the framework of the EU Horizon 2020 project REEEM [37]. As shown
by literature review, energy security in the region is in most cases
considered either as additional argument in the analysis of energy sys-
tem development or as a phenomenon that is analysed separately from
the development of energy sector. In the present study, we focus on
energy security in Finland and the Baltic countries as an important
determinant of energy development and analyse it in line with the
modelling of energy development scenarios. The analysis mainly focuses
on electricity system that is the most vulnerable in the region; however,
it takes into account district heating and fuel supply systems as they are
tightly coupled with electricity. Such approach allows not only ana-
lysing energy security under certain energy development paths but also
integrating energy security measures to energy development scenarios.
For this, the models used in the analysis are employed with additional
features that allow both the assessment of changes in the system and
foreseeing necessary energy security measures. The major enhance-
ments presented in this paper are related to the modelling of reserve
provision in the system (the need and supply of frequency containment
reserves, frequency restoration reserves and replacement reserves are
modelled in detail), balancing of intermittent electricity generation from
renewable energy sources (modelling is based on renewable energy
generation probability curves), as well as to detailed representation of
CHP Combined Heat and Power
ESC Energy Security Coefcient
ETS Emission Trading Sector
EU European Union
FCR Frequency Containment Reserve
FIBEM Finnish-Baltic Energy Model
FRR Frequency Restoration Reserve
GHG Greenhouse Gas
HVDC High-Voltage Direct Current
IPS/UPS Integrated Power System/United Power System
MESCA Model for Energy Security Coefcient Assessment
MESSAGE Model for Energy Supply Strategy Alternatives and
their General Environmental Impact
OSeMOSYS Open Source Energy Modelling System
REEEM Role of technologies in an energy efcient economy
model based analysis policy measures and
transformation pathways to a sustainable energy system
RES Renewable Energy Sources
RR Replacement Reserve
TIMES The Integrated MARKAL-EFOM System
A. Galinis et al.
Energy Strategy Reviews 30 (2020) 100509
energy system operation regimes. Different carbon price paths are
analysed and the impact on energy security is discussed as well.
The remaining part of the paper is structured as follows: Section 2
discusses the research methodology and two models used; Section 3
presents scenarios analysed and relation of the present study with Eu-
ropean energy development scenarios; the modelling results are dis-
cussed in Section 4. Conclusions in Section 5 summarize the main
ndings of the conducted study.
2. Methodology for energy security analysis
Study of energy security is based on mathematical modelling of the
development and operation of energy systems in Finland, Estonia, Latvia
and Lithuania, and subsequent testing of energy systems to determine
their resilience to various disruptions using the probabilistic model.
Resilience in the methodology is dened as the ability of energy system
to absorb, limit or defeat the impact of the disruption. The technical-
economic analysis of the development and operation of energy sys-
tems (see Fig. 1, where solid lines represent direct links, while dashed
lines show indirect and soft relations) is performed by the Finnish-Baltic
Energy Model (FIBEM) created in the environment of the MESSAGE
software package [38,39]. It provides detailed results of energy systems
performance in the long-term perspective. In order to supplement case
study results with energy security measure (indicator), the energy sys-
tem resilience to various disruptions is examined by the Model for En-
ergy Security Coefcient Assessment (MESCA) mainly built in the Open
Source Energy Modelling System (OSeMOSYS) modelling generator [40,
41]. The MESCA is the probabilistic model of energy security, which
using Monte Carlo simulations in many runs determines the ability of
energy system to resist disruptions, generated in a probabilistic way.
This regional modelling activity, performed with FIBEM and MESCA
models, is harmonized with modelling of energy system development
and functioning conducted in the REEEM project [42] on the EU level
using the TIMES PanEU model [43]. It should be noted that modelling
with TIMES PanEU is not done in this energy security study but only
assumptions from the modelling results are taken as input parameters to
the FIBEM and MESCA models (Fig. 1). Harmonization (see Section 3) is
accomplished by iterative adjustments of model input parameters ac-
cording to the results of other models.
Technical-economic analysis of the development and operation of
energy systems carried out with the FIBEM is a key activity in energy
security analysis. The mathematical model of technical-economic anal-
ysis of the development and operation of energy systems FIBEM does not
differ in essence from other mathematical models used for this purpose
and built in an environment of MESSAGE, TIMES or MARKAL pro-
gramming packages. However, much more attention is paid to more
detailed representation of operation regimes of the energy system,
reserve provision needs and means, diversication of energy supply
chains, electricity trade between countries, balancing of intermittent
electricity generation from the renewable energy sources (RES), energy
security ensuring measures, etc. The links with the TIMES PanEU model
is made by using similar technical-economic parameters for energy
technologies, as well as using RES targets and CO2 prices from
mentioned model as an input parameter in FIBEM and MESCA. Addi-
tionally, MESCA probabilistic model enables to determine the energy
security quantitively, which directly refers to the energy system resil-
ience measure.
2.1. The structure of the energy system model FIBEM
Principal structure of regional mathematical model for technical-
economic analysis of the energy sector development and operation
FIBEM is shown in Fig. 2.
The model covers electricity, district heating and fuel supply systems
in three Baltic countries (i.e. Estonia, Latvia and Lithuania) and Finland.
The supply of different fuels to each country is modelled taking into
account country peculiarities of fuel supply infrastructures and other
country-specic factors. All existing and new power plants, electricity
transmission and distribution grids, energy accumulation options (hydro
pumped storage plants, electric batteries) are included into the elec-
tricity system. The main technical-economic parameters of all elements
of the model as well as modelling outputs are stored in the database of
Open Energy Platform [44]. Electricity system links between countries
in the region as well as links with energy systems of the third countries
are represented by throughput capacities of the power lines. They
change in time due to reorientation of the Baltic power systems from
synchronous operation with IPS/UPS towards synchronous operation
with power systems of the Continental Europe. The IPS/UPS is a wide
area synchronous transmission grid consisting of Independent Power
Systems of 12 countries bordering Russia and the Unied Power System
of Russia. Throughput capacities can also be extended if corresponding
investments are made. Correct representation of international lines is
very important not only for modelling electricity ows between coun-
tries, but also for proper assessment of reserve provision options of large
generating and transmitting units that already exist or may be intro-
duced into the relatively small system of the Baltic countries. In this
Fig. 1. Involvement of mathematical models into energy security analysis.
A. Galinis et al.
Energy Strategy Reviews 30 (2020) 100509
relation, reserve provision options of large units were analysed in detail
by putting into mathematical model special approaches designed for
explicit modelling of reserves, which in more detailed is discussed in
Subsection 4.3.
District heating systems in the analysed countries are tightly coupled
with the electricity system. Combined heat and power (CHP) plants
supply or can supply a large share of the required district heat in the
largest towns. At the same time, they may supply corresponding amount
of electricity to the national electricity grid. In this relation, the analysis
of power system development cannot be done separately from analysis
of CHP contribution to the future district heat supply. Therefore,
modelling of development of district heating systems was analysed in
parallel with analysis of electricity system development. The close
integration of these systems makes it possible to assess their potential
interoperability in real-time and to provide rational solutions at State
level. Taking into account the local character of district heating systems
(individual district heating systems of particular towns do not have
physical connections) supply of district heat is modelled explicitly for
each larger town within the analysed countries, while district heating
systems of smaller towns were aggregated into one equivalent system of
particular country. District heating systems contain all existing and
possible new heat production technologies, CHP plants, heat accumu-
lation means and heat transmission-distribution networks. The devel-
opment of these heat generating technologies is selected taking into
account the costs of heat production, and the cases of cogeneration
plants are additionally evaluated for their competitiveness in the elec-
tricity system.
2.2. Reserve modelling in FIBEM
In order to avoid disruptions in generation and consumption balance
and to guarantee stable operation of the energy system, reserve capac-
ities are necessary to compensate those, who go out of order. Most of
existing scientic literature dealing with power reserves focus on
operating reserves and balancing of renewable generation. It has been
shown that operating reserves are important cost determinants of re-
newables integration [45] which has to be considered at the planning
stage to avoid sub-optimal solutions and shortages of exible resources
Fluctuations of electricity production from renewables can be rep-
resented by increasing time granularity in long-term energy planning
models (it allows getting realistic capacity and generation structures).
More specic case is the provision of reserves against extraordinary
disturbances that is especially relevant in case of large units (big thermal
plants, wind parks, transmission lines). Large energy units inevitably
cause reserve problems: the larger unit fails, the more reserve capacity
must start operating to replace it.
Power reserve provision principle and requirement of reserve ca-
pacities are shown in Fig. 3.
Disturbance n-1in Fig. 3 indicates the possible outage of the largest
unit (power plant or interconnector) that operates in the system at a
given moment of time. Similarly, disturbance n-2 indicates the
possible outage of the second-largest unit that operates in the same
moment of time. If for some reason, the largest unit suddenly stops
working, its power has to be immediately (maximum within 30 s) [47]
replaced by power from other units, which can offer frequency
containment reserve (FCR). These power plants, for a short time period,
can increase the output of electrical power. Reserve requirement is of the
same size as the unit, which went out of order. In this case, the FCR
equals the power of the largest unit (power plant or interconnector
depending on which of them stopped working).
The FCR within 15 min has to be replaced by a frequency restoration
reserve (FRR), and then released to be able to respond to another
possible disturbance. Thus, the size of the FRR is also equal to the size of
the largest unit. After (in 12 h) activation of the replacement reserve
(RR) the FRR has to be also released to be able to respond to the possible
“n-2disturbance. Therefore, the total size of the reserve power should
be approximately three times the power of the largest unit (more pre-
cisely, it has to be equal to the power of n-1disturbance plus 2*power
of the n-2disturbance). If the system operates isolated, all this reserve
has to be deployed inside the system. Hence, the total installed capacity
of power plants in isolated system has to exceed the consumers
maximum demand by approximately three times the largest unit ca-
pacity. If the system is connected with neighbouring power systems,
reserve provision services (by contract) can be obtained via cross-border
lines. Of course, in this case, the required reserve must exist in neigh-
bouring countries and the cross-border lines have to be able to transmit
the required reserve capacity.
Currently, the biggest possible n-1 disturbance in the Baltic
countries may occur due to the outage of fully loaded Lithuania-Sweden
interconnector (700 MW). The higher n-1disturbance in the future
can happen due to possible construction of large nuclear unit or due to
commissioning of larger interconnector. In Finland, the biggest n-1
disturbance can happen due to the outage of Olkiluoto NPP (1600 MW),
operation of which is planned to start soon. Currently, the biggest n-2
disturbance in the Baltic countries can be related to the outage of the
Estonia-Finland interconnector (650 MW). In Finland, the biggest n-2
disturbance can happen due to outage of fully loaded 880 MW nuclear
Introduction of reserve provision to long-term energy planning
models is a challenging task not only due to their temporal aggregation
as it is the case with intermittent renewables [48,49] but also because of
the lack of prevailing market design for ancillary services [50,51].
Despite of their importance on for both development and operation of
Fig. 2. Structure of the FIBEM used in the energy security analysis.
A. Galinis et al.
Energy Strategy Reviews 30 (2020) 100509
energy systems, reservation issues are still neglected in the most of en-
ergy planning models. A specic modelling approach [52] was used in
this energy security study in order to implement the above-described
reserve provision principle into the mathematical model. In contrast
to other studies that assume certain reserve margins based on yearly
averages or extreme days [53], FIBEM determines reserve requirements
dynamically for each time-slice modelled. To model reserve provision,
all power plants, which usually are represented in energy system plan-
ning models as having only one main output electricity, have three
additional outputs to represent reserve supply in FIBEM: FCR, FRR and
RR. Reserve provision options reect technology peculiarities and
ability to provide reserves [54]. Interconnectors are also considered for
reserve provision. To analyse the benets and possibilities of
cross-border reserve procurement [55], it was assumed that all kinds of
reserves can be provided by HVAC. The maximum value of each type of
reserve size, in this case, was limited by the line throughput capacity
unused for commercial electricity import. Similarly, the maximum value
of each type of reserve size was limited by the value of exported power if
electricity is exported through the line. For HVDC lines additional lim-
itations were assumed the value of each type of reserve was limited by
10% from commercial power ow thorough the line. This assumed
limitation is based on the operational practice of power companies. In
addition, in 2025 synchronization of Estonian, Latvian and Lithuanian
power systems with the European Continental Network (ECN) is fore-
seen. It was assumed that status of some interconnectors linking power
systems of Baltic States with the power system of Continental Europe
and former IPS/UPS is changing in 2025 due to planned
resynchronisation process.
2.3. Energy security coefcient
The methodology for quantitative assessment of energy security aims
to expand capabilities of conventional energy system modelling tools in
order to assess energy security comprehensively and proposes an energy
security metric in terms of energy system resilience. In this step, the
scenario results of the FIBEM are checked in terms of energy security by
an uni-directional soft link with the MESCA probabilistic model, intro-
duced in Section 2.
The methodology is based on the analysis of various emerging
threats, disruptions arising from threats and associated consequences to
energy system in the case of potential disruptions. It seeks to quantita-
tively estimate energy security for future development scenarios. Energy
system modelling is employed to determine the ability of the energy
system to overcome or resist the emerging disruptions. An integral
characteristic of disruption consequences is represented by energy se-
curity coefcient (ESC), which is a quantitative metric of energy security
derived from the cost of energy generation and unserved energy.
Detailed description of the methodology used in the MESCA model and
quantitative justication of ESC is provided in the study [12], therefore,
will not be discussed in detail further in this paper.
The ESC aims to evaluate the ability of the energy system to over-
come resulting disruptions and indicates the level of energy system
resilience to these disruptions. The ESC is calculated from the conse-
quences of disruptions, which directly reveals vulnerability of the
Fig. 3. Reserve requirements for large units in power systems.
A. Galinis et al.
Energy Strategy Reviews 30 (2020) 100509
energy system:
ESC ¼exp(– w
exp(t) – w
where w
and w
indicate weights of each consequence, c
and c
cate disruption consequences (unserved energy and energy cost increase
respectively), t refers to OSeMOSYS parameter YearSplit.
Values of the ESC are estimated within the range from 0 to 1. If the
ESC is equal to 1 (maximum ESC), then the energy system is considered
as resilient to disruptions with high energy security level. If the ESC is
equal to 0 (minimum ESC), then the energy system is considered as not
resilient (vulnerable) to disruptions with low energy security level. In
short, higher ESC value indicates higher energy security level. The ESC
enables the comparison of energy system development scenarios from
energy security perspective taking into account energy system resilience
3. Assumptions and scenarios
To reect the European energy development trends, the assumptions
about carbon prices and renewable energy targets were synchronised
with the outputs of TIMES PanEU [43] model runs. Data harmonization
in this study was done for both FIBEM and MESCA models (Fig. 1). It
should be noted that in this study no modelling is carried out using
TIMES PanEU model. As indicated in Fig. 1, the energy security analysis
was carried out using FIBEM and MESCA models. However, the initial
assumptions concerning carbon prices and RES targets from the TIMES
PanEU model results are used as input parameters to FIBEM and MESCA
The main factors dening energy sector development pathways in
the TIMES PanEU model are emissions of greenhouse gases (GHG) and
use of RES. The emission reduction target for the emission trading sector
(ETS) was set for the entire EU. It was assumed that GHG emissions in
the ETS should be reduced by 21% in 2020, by 43% in 2030, and by 83%
in 2050. All reduction rates are compared to the 2005 emission level.
The GHG emission targets for non ETS were slightly different among
Member States. The highest GHG emission target for 2050 is set for
Finland (80% reduction), while for all the Baltic countries it stands at
60%. Regarding the RES targets, by 2050, the share of RES in nal
electricity consumption should reach 85% in Finland and 75% in the
Baltic countries.
Two initial pathways are considered in the TIMES PanEU model:
Base, which represents current trends, and High RES that assumes higher
RES generation targets [43]. Following the results and assumptions of
the abovementioned pathways, it was assumed in this study that a
common target for RES based energy generation will be used for the
entire region, i.e., common target for Finland and the Baltic countries. In
addition, for simplicity reasons this target was converted into RES share
in total use of primary energy sources for electricity and district heat
production. Therefore, for the purpose of harmonization of the energy
security research with the research carried out using TIME PanEU the
RES target shares given in Table 1 were considered.
The CO
prices taken from the TIMES PanEU model results, are also
harmonized across the two studies and are presented in Table 2.
As it is presented in Table 2, TIMES PanEU Base and TIMES PanEU
High RES scenarios result in very similar carbon prices, having a
considerable jump in 2050. Therefore, it was decided that faster carbon
price growth will be represented by additional BaseCO2Lin scenario.
To sum up, further analysis includes the Base scenario, which has the
same CO
price and RES targets as the Base used in TIMES PanEU model,
and the BaseCO2Lin, which assumes linear growth from 10 EUR/t in
2020 up to value estimated in TIMES PanEU High RES scenario for 2050.
4. Results and discussion
In order to illustrate the situation in the Finnish and Baltic energy
sectors corresponding to the scenarios under consideration, this section
will rst review the dynamics of installed capacities in the analysed
countries, the modelling results showing expected changes in power
generation and reserve provision while Subsection 4.4 will provide en-
ergy security assessment for the scenarios considered. The results of
installed capacity, electricity generation and provision of reserve ser-
vices are presented for Finland and Baltic countries (all together) while
results of energy security coefcient are presented for each analysed
country separately.
4.1. Installed capacity
Installed capacities of power plants and interconnectors in Finland
are presented in Fig. 4.
Presented results show a substantial drop in installed capacity of
power plants in the time period until 2035. This is related to the
decommissioning of existing capacities after the end of their technical
lifetime and expected low electricity price in the market, which does not
guarantee enough return on investments for new power plants. In such
circumstances, new investments are postponed. The absence of other
instruments that could encourage new investments may lead to a situ-
ation where energy security may decrease (see Subsection 4.4 for more
information). In such situation, existing fossil fuel power plants that
currently are not competitive in the electricity market might still be a
cost-effective option for reserve provision and ensuring energy security.
It is necessary to keep this in mind when a decision about the decom-
missioning of existing plants is made. The changing role of existing
technologies can be considered as an important aspect of exibility that
increases energy security. Such cost-effective solutions may accelerate a
real energy transition by ensuring energy security at a lower cost.
Shrinking diversity of fuels used by power plants is observed with
decommissioning of old plants. At the beginning of the study period,
power plants were running on nuclear fuel, coal, peat, biomass, fuel oil,
hydro and wind energy. By the end of the study period, the most
polluting fuels like coal and peat disappeared from the list of fuels.
Nevertheless, even at the end of the study period electricity production
is based on four major primary energy forms nuclear fuel, fuel oil, wind
and hydro energy. In addition, a smaller contribution comes from
biomass and solar energy.
Growth of installed capacity in Finland is expected with rapid
development of wind power plants followed by fast penetration of
manoeuvrable gas turbine CHP. Gas turbine CHPs are used for the
balancing of variable wind generation.
It is also necessary to mention that dynamics of available power in
the system will signicantly differ from the installed capacity shown in
Fig. 4, especially after 2035. The difference between available power
and installed capacity will appear because available power of wind
power plants and balancing power plants cannot be added together
arithmetically while installed capacities can be summed.
Another important factor is increasing throughput capacity of in-
ternational lines. This is linked to growing capacity of wind power plants
and increasing demand for balancing services in the system. Study
Table 1
RES target shares in primary energy consumption for electricity and district heat production.
Scenario 2015 2020 2025 2030 2035 2040 2045 2050
TIMES PanEU Base 0.326 0.329 0.432 0.594 0.672 0.697 0.742 0.758
TIMES PanEU High RES 0.327 0.329 0.430 0.581 0.672 0.742 0.819 0.852
A. Galinis et al.
Energy Strategy Reviews 30 (2020) 100509
Table 2
prices, EUR/t.
Scenario 2015 2020 2025 2030 2035 2040 2045 2050
TIMES PanEU Base 0 0 1.6 28.9 32.2 27.6 52.8 501.1
TIMES PanEU High RES 0 0 0 25.1 29.7 24.1 30.1 489.1
Additional (BaseCO2Lin) 0 10 89.8 169.7 249.6 329.4 409.3 489.1
Fig. 4. Installed capacity of electricity generation sources in Finland in analysed scenarios.
Fig. 5. Installed capacity of electricity generation sources in the Baltic countries.
A. Galinis et al.
Energy Strategy Reviews 30 (2020) 100509
results show that total throughput capacity of international links in 2040
is already ~14% higher than in 2015 and in the future, it will be growing
up to ~21% in 2045 and later years.
Dynamics of installed capacity of power plants and interconnectors
providing electricity to the Baltic countries are shown in Fig. 5.
Modelling results demonstrate high diversication among power
plant types but lower diversity among primary energy forms used for
electricity generation. Major part of installed capacity of power plants,
especially at the end of the study period, comes from wind power plants
and plants which run on natural gas. Hydropower plants and power
plants running on various types of biomass also make a notable contri-
bution. It is also expected that total installed capacity of power plants in
the Baltic countries will start growing from the period 20252030.
Major contribution is expected from wind power plants, CHP using
natural gas and CHP running on biomass.
The analysis also revealed that increased throughput capacity on
international lines and lines linking the Baltic countries with each other
would be benecial. This growth is especially important for provision of
sufcient reserves and balancing intermittent wind generation.
4.2. Electricity generation
Electricity generation in Finland for the Base and the BaseCO2Lin
scenarios is presented in Fig. 6. Due to high utilization of installed ca-
pacity electricity generation in nuclear power plants makes about 30%
from total electricity requirement in 2015. After commissioning of the
Olkiluoto NPP this share increases to 3637%. The peak of electricity
generation from nuclear plants is expected during the period
20202035. In later years, with decommissioning of existing nuclear
units, the share of electricity generation from nuclear fuel will start
declining and at the end of the study period will make only about 15%
from total electricity requirement.
Electricity generation from hydropower plants is expected to remain
stable contributing about 1319% to the total electricity requirement.
Some generation decline occurs in the middle of the study period due to
the rehabilitation of existing plants, which according to the results of the
analysis is an economically attractive option for all countries in the re-
gion under analysis. In addition, higher CO
prices (BaseCO2Lin
scenario) result in earlier retrotting of some hydroelectric plants and
increasing their efciency, which results in earlier increase of electricity
production in these plants.
Increasing requirements for climate change mitigation will stipulate
the growth of electricity generation in wind power plants. This gener-
ation is expected to exceed 15 TWh per annum by 2050 and will cover
nearly 18% of the total electricity requirements in Finland. It is also
expected that signicant increase of electricity generation from wind
power plants will occur in line with the declining electricity generation
from nuclear plants. As in the case of hydropower, higher CO
(BaseCO2Lin scenario) lead to faster development of wind power plants
over the period 20302050, which allows for more than 20% increase in
power generation in these plants, compared to the Base scenario.
Electricity generation by manoeuvrable gas turbine CHP will be
growing in parallel with growing electricity generation from wind
power plants. This phenomenon can be explained by necessity for
balancing intermittent electricity generation from wind power plants.
Manoeuvrable gas turbine CHP will make a signicant contribution to
balancing of intermittent generation after exploiting the balancing ca-
pabilities provided by the grid. Electrical batteries will also contribute to
balancing of variable electricity generation at wind power plants. Their
annual electricity output will wary in a range of 2.95.9 TWh. This will
cover ~3.87.5% of the total electricity requirements in Finland. The
utilization of these technologies is very similar for both scenarios
Growing electricity import to Finland will contribute to the
balancing of variable wind generation. It also will substitute the
declining electricity generation from power plants running on fossil fuel,
as well as declining generation from nuclear plants. Thus, the electricity
import/export balance is expected to increase from about 19% in 2015
to about 32% in 2050. However, electricity import after 2030 in the
BaseCO2Lin scenario is 1218% lower than in the Base scenario. This is
explained by the increased electricity production in hydro and wind
power plants, as well as the reduced utilization of installed capacities of
interconnectors due to their higher utilization for reserve provision
services and balancing of variable wind power generation.
Summarising, electricity supply in Finland is and will remain suf-
ciently diversied both in terms of primary energy sources and supply
Fig. 6. Electricity production in Finland in analysed scenarios.
A. Galinis et al.
Energy Strategy Reviews 30 (2020) 100509
channels. Nuclear fuel, hydro, wind resources, gas and biomass can be
mentioned in case of primary energy sources are concerned. Electricity
import is also possible from different countries-suppliers (Sweden,
Norway, Estonia and Russia). This makes a good basis for energy secu-
rity, whose quantitative characteristics are discussed in Subsection 4.4.
Electricity generation in the Baltic countries for analysed scenarios is
summarized in Fig. 7. Electricity import and generation from oil shale
are dominant in the Baltic countries at the beginning of the study period.
The share of imported electricity covers ~29% of the total electricity
requirements in the Baltic countries. Electricity generation from oil
shale is valued at ~26% level. It is expected in the future electricity
import and electricity generation from oil shale will be declining to ~7%
and less than 1% by 2050, correspondingly. Electricity import will be
mainly declining due to expressed energy policy, while electricity gen-
eration from oil shale will decline due to environmental concerns.
Therefore, a much faster decline is observed in the BaseCO2Lin scenario
in which CO
prices are signicantly higher in the middle of the study
period, if compared with the price in the Base scenario. On the opposite
side, electricity generation from wind and gas will be growing in order to
compensate these reductions. Thus, depending on scenario, electricity
generation from wind power plants is expected to be reaching ~2.87.5
TWh in 2030 and about 19 TWh in 2050. This will cover ~7.520% and
~40% of the total electricity requirements in the region
Electricity generation from gas will grow from ~20% in 2015 to
~3233% in 2050. As it is the case in Finland, these power plants will
signicantly contribute to the balancing of variable electricity genera-
tion from wind power plants. However, electricity grid (i.e. varying
electricity import/export from/to neighbouring countries) will make
major contribution to balancing of variable wind generation in the Baltic
countries. Use of hydro pumped storage power plant in comparison to
the aforementioned options is an economically less attractive option
used for balancing electricity supply and demand due to comparatively
big losses.
As far as individual Baltic countries are concerned, oil shale-based
electricity production is typical for Estonia. In the Base scenario, elec-
tricity generation from oil shale is dominant in Estonia, almost during
the entire study period. Only at the end of the period, this is substituted
by electricity generated from wind. In the BaseCO2Lin scenario, this
electricity generation source practically disappears already in 2030. The
growing environmental burdens (CO
price, in particular) are the main
cause of this rapid change. Reduced electricity generation from Estonian
oil shale power plants has only a minor impact on electricity generation
in Finland, as well as to net electricity imports to the Baltic countries.
Energy policy target can explain the fact that the impact on electricity
imports/exports is minor in this case for decreasing electricity imports to
the Baltic countries which is common for both scenarios analysed.
Three main types of power plants are used for electricity generation
in Latvia: CHP running on gas, CHPs running on biomass and hydro-
power plants. The remaining part of electricity requirement is covered
by electricity imports. Higher CO
prices (BaseCO2Lin scenario) would
lead to higher electricity generation from biomass burning power plants.
This increase is mainly observed in period 20202025. Additionally,
produced electricity is partly exported to Estonia.
The electricity requirements in Lithuania to a large extent are met by
electricity imports at the beginning of the study period. Local generation
is deeply diversied both in terms of power plants and primary energy
resources, including gas, wind, biomass and municipal waste as the main
ones. Over time, electricity generation from gas and wind will be
growing in order to help implement the agreed energy policy provisions
on the reduction of electricity imports. Signicant increase in electricity
generation from wind is expected after 2030. Higher CO
price (Base-
CO2Lin scenario) has the biggest impact on electricity generation from
CCGT CHP in Lithuania. Higher electricity generation at these power
plants is observed since 2030. Part of this additionally produced elec-
tricity is exported to Estonia which has electricity supply shortage due to
the earlier closure of oil shale power plants.
Climate change mitigation associated with growing CO
prices re-
sults in the transition from fossil fuel-based to carbon-free electricity
generation that comes from domestic resources (wind, solar, domesti-
cally produced biomass). Growing share of domestic energy resources in
total primary energy consumption has a positive impact on energy se-
curity. In addition, existing fossil fuel power plants that currently are not
competitive in the electricity market often are a cost-effective option for
reserve provision. Thus, energy security can be also increased by keep-
ing these power plants for reserve provision purposes instead of building
Fig. 7. Electricity production in Baltic countries in analysed scenarios.
A. Galinis et al.
Energy Strategy Reviews 30 (2020) 100509
new ones.
4.3. Provision of reserve services
Reserve provision services play an important role in energy security.
Modelling results regarding possible reserve provision in Finland and
the Baltic countries for the Base scenario are summarized in Table 3 and
Table 4 respectively.
Reserve provision amount expressed in GWh (ordered reserve ca-
pacity multiplied by order time) does not mean actually activated re-
serves. This shows the ability of plants for provision of the reserves if
such would be required or, in other words, the readiness of plants and
international lines for reserve provision. Total reserves of particular type
provided by power plants and interconnectors together, according
methodology applied, are always greater or equal to the utilized power
of the largest unit. Therefore, the neutralisation of n-1 disturbance is
always guaranteed.
The results clearly show that major part of FCR is provided by
interconnectors, especially AC lines. Depending on the year, even in
Finland, where the contribution of power plants plays bigger role, FCR
provided by interconnectors cover 8087% of the total requirements of
FCR. This implies that certain throughput capacity of lines should be
always available for reserve provision services and that not full capacity
can be used for commercial electricity trade. Modelling results show that
on average only 56%72% of installed throughput capacity of inter-
connectors is used for commercial electricity ows.
Provision of FRR is much more diversied and can be obtained from
majority of power plants. In Finland, the contribution of interconnectors
varies in a range of up to 32% of the total FRR requirements. This is also
the case with the provision of RR in Finland, where power plants are the
main contributors to this kind of reserve.
Regarding the provision of reserves, Baltic countries, in principle,
give similar results as it does for Finland. Practically all FCR is provided
by interconnectors, and all the requirements for FRR and RR are fullled
by power plants, located within the region. As implied by the modelling
methodology (see Subsection 2.2), if all capacity expansion options (see
Subsection 4.1) are implemented, the electricity systems of Finland and
the Baltic countries will have sufcient reserves in order to withstand n-
1disturbance and be ready to overcome disturbance n-2. There is no
single time slice within the long time period analysed in which there
would be not enough reserve capacities in the system. Thus, in theory,
the power systems should not encounter any serious disruptions. How-
ever, in practice, certain elements that ensure the provision of reserve
services may not be implemented or their functioning may not corre-
spond to the real threats. Therefore, the disruption of the operation of an
important element (line or generator) may cause a major disturbance to
the entire power system, especially in the case where throughput ca-
pacity of interconnectors was reduced due to various reasons.
4.4. Energy security coefcient
This subsection highlights main results obtained from the modelling
exercise performed with the probabilistic model MESCA (Fig. 1). The
ESC dynamics during the modelling period, for each country are pre-
sented with insights and interpretation of the impact on energy security.
Having analysed the results, major energy security assurance measures
were determined within different scenarios. The modelling results are
presented for each of the analysed countries separately, comparing the
ESC within different scenarios. Fig. 8 demonstrates the yearly average
ESC in the analysed scenarios during the modelling period in the ana-
lysed countries. Since Base and High RES scenarios give practically the
same results in terms of energy security, the ESC results only for Base
and BaseCO2Lin scenarios are presented in this Subsection.
4.4.1. Finland
Until 2025, the ESC is at the same level as at the start of the study
period, quite stable and relatively high in both analysed scenarios. The
installed capacity of energy generation does not differ until 2025 be-
tween the scenarios. The capacity of fossil fuel red PPs is gradually
been reduced in both cases; however, nuclear power (also new unit of
Olkiluoto NPP from 2020) allows the system to maintain the ESC at the
same level.
From 2025 to 2030, in the Base case, loss of capacity is observed,
while in the BaseCO2Lin scenario, lost capacity is replaced mostly by
biomass and wind technologies. Thus, a difference in the ESC is also
recorded. However, a unique situation is observed in the Base scenario
from 2030 to 2035 when a signicant amount of capacity is faced out
and practically none is installed to compensate in this period. As a result,
in 2035, total installed capacity of energy generation technologies is
even 27% lower than nal capacity demand. This signicantly decreases
the ESC in the Base case since the energy system becomes vulnerable to
various disruptions mainly due to lack of generation capacity. In the
BaseCo2Lin scenario, loss of capacity is also recorded, but not to such
large extent. Also, signicantly increased capacity of power connection
lines with Sweden allows to partially compensate generation capacity
losses. From 2035, mostly wind power is installed in the energy system,
which stabilizes the ESC to 2040 and increases from 2040 to the end of
the modelling period in the Base scenario. From 2040, new wind PPs
also appear in the BaseCO2Lin scenario and performance of the ESC is
relatively higher in comparison with the Base scenario (Fig. 8. (a)).
4.4.2. Estonia
The ESC in the Base scenario is quite stable until 2025, since no
major events appear in the Estonian energy system: electricity genera-
tion from oil shale dominates with some additions from RES. Also, total
installed capacity (mostly of fossil fuel PPs) gradually decreases. How-
ever, in the BaseCO2Lin scenario the ESC is lower since high CO
lead to a sudden decrease of oil shale PP capacity. In addition, this lost
capacity is not suddenly replaced by other alternatives of the same type
but rather by wind and biomass CHP plants. For a country that has a high
share of power generation from a local fuel source, switching to other
alternatives in a short-term period under market conditions is
One of the most characteristic years in the analysed period is 2025,
where signicant increase in the ESC is observed (Fig. 8. (b)). This is
related to synchronization of Estonian, Latvian and Lithuanian power
systems with the ECN. This measure ensures higher energy security since
this would prevent from a possible total black-outof power network of
the Baltic countries or unreliable work of the network and would remove
possible geopolitical threats from the Eastern countries. Fig. 8.
Table 3
Reserve provision in Finland for the Base scenario (GWh).
Type of reserve Reserve provided by 2020 2025 2030 2035 2040 2045 2050
FCR Power plants 1547 1387 897 1059 913 684 652
Interconnectors 9864 9864 11652 11976 12302 12967 13702
FRR Power plants 10565 27860 13772 15024 11636 12819 11541
Interconnectors 2985 0 0 0 2753 5101 5462
RR Power plants 10678 18772 12903 13379 10504 7977 8037
Interconnectors 2757 516 0 0 4051 7839 7233
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Energy Strategy Reviews 30 (2020) 100509
From 2025 to 2045, the ESC in the Base scenario remains similar
with relatively slight uctuations due to various minor factors, e.g.
relatively small loss of capacity is replaced by new. Nevertheless, from
2045, the ESC is improved due to additional RES (mostly wind power)
capacity installed, which ensures more diversied electricity generation
during the period 20452050.
In the BaseCO2Lin scenario, the ESC during 20252035 slightly de-
creases due to loss of capacity and in 2035 reaches its lowest point when
there is no oil shale capacity left at all and total installed capacity of
energy generation technologies is only 6% higher than nal capacity
demand, while in the Base scenario this ratio is 35% at the same time.
From 2035 to 2045, the ESC in the BaseCO2Lin scenario performs much
better when energy system starts to install new wind power capacity.
However, in 20452050, wind power is dominant in total installed ca-
pacity which cannot ensure stable power generation and diversity, while
in the Base scenario the energy mix is more diversied and ensures
slightly higher ESC in the end of the study period.
4.4.3. Latvia
Only minor differences between the scenarios are observed when
analysing the ESC of Latvian energy system (Fig. 8. (c)). The ESC is quite
stable until 2025 since no major events appear: electricity generation is
mainly based on hydro power complemented by natural gas red plants
and electricity imports. Increased CO
price in the BaseCO2Lin scenario
does not drastically change the mix of energy system; only some addi-
tional capacity of hydro and biomass CHP technologies is observed
during the study period.
As in the case of Estonia, 2025 is the year in which synchronization of
the Baltic power system with the ECN is implemented and energy se-
curity is improved. The justication for this matter is detailed in the case
of Estonia. The ESC during the period 20252050 remains almost at the
same level with a slight increasing trend. The total installed capacity of
energy generation technologies is on average 114% higher (more than
twice) than the nal capacity demand during the modelling period in the
Base case. When taking into account capacity of power lines with other
countries, this ratio increases to approximately 400% on average. For
the BaseCO2Lin scenario, these numbers are even slightly higher.
4.4.4. Lithuania
The ESC in both scenarios for Lithuania is increased in 2016 by
introducing new power connections with Sweden and Poland (Fig. 8.
(d)). Interconnectors have exerted a positive impact upon the ESC,
mainly due to improved resilience of energy system in the case of
electricity supply disruptions. In addition, diversication of electricity
Table 4
Reserve provision in the Baltic States for the Base scenario (GWh).
Type of reserve Reserve provided by 2020 2025 2030 2035 2040 2045 2050
FCR Power plants 34 29 23 22 24 25 22
Interconnectors 762 971 1121 1094 1081 1094 1059
FRR Power plants 796 1001 1128 1109 1086 1107 1082
Interconnectors 0 0 0 0 0 0 0
RR Power plants 1070 1034 1153 1151 1132 1156 1139
Interconnectors 0 0 0 0 0 0 0
Fig. 8. Energy security coefcient in the analysed scenarios.
A. Galinis et al.
Energy Strategy Reviews 30 (2020) 100509
import routes and electricity market was improved.
Until 2025, the BaseCO2Lin scenario performs better in terms of
energy security in comparison to the Base scenario, since loss of capacity
is observed in the Base case while this capacity is replaced mainly by
biomass CHP and wind PPs and remains stable in the BaseCO2Lin case.
However, in 2020 and 2021, both scenarios show a slight increase in the
ESC due to increased capacity of power lines with Poland; also, Gas
Interconnection Poland-Lithuania starts its operation.
Signicant increase of the ESC is observed in 2025 when synchro-
nization of power systems of the Baltic countries with the ECN is
implemented and related to that, the capacity of the power connection
lines in Lithuania with Poland is signicantly increased. Aspects of the
impact of synchronization on energy security are explained in the case of
From 2025 onwards, in both scenarios installed capacity (mainly
wind PP and gas CHP due to balancing) increases, however, at a
different level, which allows to ensure a stable ESC. In the Base case,
starting from 2030, more rapid development of wind PPs is observed,
which increases the ESC to a certain level and maintains it till the end of
the study period. In the BaseCO2Lin scenario from 2034, the ESC has a
minor decrease until 2042 mainly due to the slight loss of capacity
during this period. However, the ESC in both scenarios equalizes due to a
similar energy mix at the end of the modelling period.
The total installed capacity of energy generation technologies is on
average 155% higher than the nal capacity demand during the study
period in the Base case, while in the BaseCO2Lin scenario is 200%. The
Lithuanian energy system in this modelling exercise in both scenarios
has a quite stable and increasing capacity of energy generation in the
whole study period. In addition, the system remains diversied and not
dependent only on a single energy source or supply.
The modelling exercise on the evaluation of ESC for the Baltic
countries and Finland revealed that the ESC performance is highly
dependent on generation adequacy in the country. Since old generation
technologies are facing decommissioning during the study period, in
order to ensure energy security, new technologies need to be installed.
Lack of capacity might lead the energy system to face some failures and
renders it insufcient to cope with technical and other disruptions.
However, not always the emergence of these technologies under market
conditions is feasible without promotion. In fact, too large penetration of
new capacity in a short-term period might also lead to problems since
there is a huge economic burden for the energy system to cope with
severe consequences of economic risks due to over-investment risk.
Diversication of energy supply sources is also a signicant measure
to increase energy security. This measure might also be implemented
through power interconnectors with other countries by increasing the
capacity of power lines. It also enables higher power market integration
and diversication of supply routes, which helps to further enhance
energy security.
5. Conclusions
The research presented in this paper demonstrates that coupling
detailed energy system model with the probabilistic model allows not
only to foresee energy security measures depending on the de-
velopments of carbon price paths and other relevant factors but also to
evaluate the energy systems resilience to various disruptions and
compare different energy system scenarios in terms of the energy se-
curity quantitative measure.
The obtained results indicate that faster increase of carbon price
(BaseCO2Lin carbon price path) has the most signicant impact on the
development of Estonian energy system due to the phase-out of existing
oil shale power plants. Refurbishment of existing hydro power plants,
construction of wind power plants, CHPs running on biomass and
municipal waste, CHPs running on natural gas and biogas are the most
attractive electricity generation options in the Baltic countries and
Finland regardless of the carbon price path. Biomass boilers and heat
pumps are economically preferable for heat production. The develop-
ment of other technologies in the nearest future is economically less
justiable, due to electricity import driven by relatively low electricity
market prices and environmental limitations.
Energy security issues in the Baltic countries are mainly related to
electricity system. Although positive from the diversication point of
view, a signicant share of intermittent electricity generation (in
particular from wind) also imposes additional energy security chal-
lenges as it requires the power system to maintain sufcient balancing
The most economically attractive balancing options in the Baltic
countries and Finland are: a) generation compensation obtained via
interconnectors from available sources in neighbouring countries; b) gas
turbine CHPs; c) gas turbine power plants and plants with internal
combustion engines; d) electricity storages (hydro pumped storage
power plant, electric batteries).
The Baltic countries have powerful electrical connections with
neighbouring power systems from which they import large amount of
required electricity. The capacity of a separate power line may exceed
3050% of each countrys total power demand. Possible malfunctions of
such line may cause signicant energy security problems if required
reserve capacities are not available.
In theory, the power system should not face any serious disruptions.
However, in practice, certain elements that ensure the provision of
reserve services may not be implemented or their functioning may not
correspond to the real threats that can appear due to failure of powerful
line, especially in the case where throughput capacity of interconnectors
could be reduced due to various reasons. Looking at the current situa-
tion, the biggest problems are related to the provision of frequency
containment and replacement reserves.
Climate change mitigation targets associated with higher CO
result in earlier decommissioning of power plants using oil shale, coal
and oil, faster growth of installed capacities and electricity production of
wind power plants, earlier upgrade of hydropower plants and increased
their efciency, increased installed capacity of interconnectors and
more intensive their use for balancing intermittent generation in RES
Existing fossil fuel power plants that currently are not competitive in
the electricity market often are a cost-effective option for reserve pro-
vision and ensuring energy security. The changing role of such existing
technologies is an important aspect of exibility that increases energy
security and accelerate the transition from fossil fuel-based to carbon-
free electricity generation.
When comparing the performance of energy security coefcient
between countries within analysed carbon price paths, it was observed
that the highest average (in terms of modelling period) ESC is recorded
in the BaseCO2Lin scenario for Finland and Lithuania (0.74) while the
lowest average (in terms of modelling period) ESC is observed in the
BaseCO2Lin scenario for Estonia (0.66). In addition, all analysed sce-
narios in this case study demonstrate that the average ESC is higher than
0.65. The results demonstrate that carbon price paths have modest
impact on energy security in Baltic countries if energy security measures
are implemented in optimal way. An acceptable energy security level
can be maintained despite the carbon price path.
The choice of energy security measures is a challenging task due to
both broad variety of threats to be addressed and the need to ensure that
the costs of energy security measures are exceeded by the benets for
national economy due to increased energy security. Moreover, the
implementation of energy security measures is a challenge itself, since
some measures require additional policy measures or market mecha-
nisms to be implemented. In this relation policy and market mechanisms
have to be looked through in order to nd a way for implementation of
foreseen energy security measures in practice.
A. Galinis et al.
Energy Strategy Reviews 30 (2020) 100509
Declaration of competing interest
The authors declare that they have no known competing nancial
interests or personal relationships that could have appeared to inuence
the work reported in this paper.
CRediT authorship contribution statement
Arvydas Galinis: Conceptualization, Methodology, Software,
Investigation, Data curation, Writing - original draft, Writing - review &
editing, Visualization. Linas Marti
sauskas: Conceptualization, Meth-
odology, Software, Investigation, Data curation, Writing - original draft,
Writing - review & editing, Visualization, Project administration.
Jaakko J
ainen: Data curation, Writing - original draft. Ville
Olkkonen: Data curation, Writing - original draft. Sanna Syri:
Conceptualization, Data curation, Writing - original draft, Writing - re-
view & editing. Georgios Avgerinopoulos: Writing - original draft,
Writing - review & editing. Vidas Lekavi
cius: Conceptualization,
Methodology, Investigation, Writing - original draft, Writing - review &
editing, Supervision, Project administration.
This research has received funding through REEEM project from the
European Unions Horizon 2020 research and innovation programme
under Grant Agreement No. 691739.
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A. Galinis et al.
... To address these problems and ensure the attainment of optimal energy efficiency, many advanced economies formulate energy policies. Energy policies, mainly formulated at national level, are deliberate efforts put in place to strategically influence the elements of energy security such as hydrocarbon prices, energy efficiency and environmental sustainability, to ensure efficient energy supply and utilisation (Lucas, Francés, and González 2016;Galinis et al. 2020). In this regard, Winzer (2012) enumerates efficiency, sustainability and energy prices as the principal pillars of the European Union's energy policy. ...
... The authors specifically derive seven key energy security themes 1 from 83 energy security definitions. In this regard, Galinis et al. (2020) highlight four principal elements in the provision of energy services, namely, affordability (price), efficiency, energy security and sustainability. Technically, the other three elements have a strong connection to energy security as their absence or weakness signals a concern for energy security. ...
... From the foregoing discussion, a closer look at the relevant literature shows that oil and gas prices, energy efficiency and environmental sustainability have been variously recognised as important elements of energy security (Yergins 2006;Abdo and Kouhy 2016;Ang, Choong, and Ng 2015;Le and Nguyen 2019;Zaman and Kalirajan 2019;Galinis et al. 2020). In addition, these elements have been identified as parts of the critical factors studied, analysed and shaped to inform the formulation of energy policies in facilitating the provision of the needed energy supplies and services in an economy (Winzer 2012). ...
Concerns for fossil fuel price volatility, environmental pollution and energy inefficiency drive the formulation of energy policies aimed at attaining energy security. We use a theoretical framework which integrates key elements of energy security into the context of natural capital theory to investigate the causal relationship between Nasdaq clean energy stock price and a range of variables including oil price, natural gas prices, carbon price and energy efficiency. Our autoregressive distributed lag (ARDL) results reveal that clean energy stock price is jointly and individually explained by the variables representing some elements of energy security. Carbon price and energy efficiency emerged as the most important elements of energy security driving the ongoing transition from conventional to clean energy sources. Consequently, governments should take environmental sustainability and energy efficiency very seriously when formulating energy policies in the pursuit of energy security and the way they stimulate substitutions between clean energy sources and hydrocarbons. ARTICLE HISTORY
... Considering the complexity and key areas involved, assessing the energy security is not a trivial issue, which renders any attempt to develop a unique methodology with standardised key performance indicators challenging [7]. Generally all indicators developed and used to measure energy security are focused on specific aspects of the supply chain, e.g., supply diversity and dependence [8], economy and markets [9,10], investments [11], socio-political aspects [12], infrastructure and technologies [13,14], environmental issues [15], resilience [16], etc. Esfahani et al. [17] developed a comprehensive knowledge map of energy security in order to detect the main dimensions related to energy security that researchers and scientists have explored over recent decades. The authors reviewed more than 130 papers, from conceptual analysis to qualitative and quantitative assessments, and highlighted that more research activities should be focused on a broader understanding of the different dimensions, problems and methods, while also links between energy supply security and renewable energy security should be explored further. ...
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Energy security assessment quantifies the energy supply to a population and the likelihood, or risk, of an energy disruption or shortage and represents an important aspect of national security, economic stability and prosperity. The quantification of the state of energy supply is context-dependent and involves multiple perspectives: infrastructural, technological, environmental, market, social and geopolitical. Among all the different and relevant aspects involved, diversity and dependence of the energy fuel mix are two of the main energy security dimensions. The present paper investigates the diversification of the energy supply in Europe, by analysing import dependence, market concentration and renewable energy resource deployment in the European Union over the last decade. The analysis utilises a set of indicators aimed at measuring the fuel mix diversity, market concentration, geopolitical stability, renewable energy share and stochasticity - both at single country and at aggregated European levels. Results show a stable evolution of the diversity of the fuel mix and a relatively low market concentration of the period examined. However, the import dependency reduces the energy security by approximately 30% due to the high proportion of imports from a limited number of countries. Moreover, an increasing trend in renewable electricity production share is evident over the last decade, albeit with differences between member states, as a result of the decarbonisation policies implemented by the European Union.
... Later on, Gaigalis and Katinas [183] reported that, in 2015-2020, energy consumption increased around 1.3 times, whilst wind energy production increased 2.5 times, biogas energy 2.8 times, and the total emissions of greenhouse gasses decreased by 3% and air pollutants by 23% in Lithuania. Galinis et al. [184] examined the implications of gradual and delayed carbon price increases in the four Baltic Sea region countries in the context of energy security. The latter study noted that the Lithuanian local generation is deeply diversified both in terms of power plants and primary energy resources, including gas, wind, biomass and municipal waste as the main ones. ...
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Energy policy affects the functioning of the economic and financial systems of countries worldwide. This paper provides a theoretical overview of the economy-energy nexus and discusses the particular cases of the energy policy dynamics amid the sustainability goals. This paper integrates multiple perspectives on the energy-economy nexus, with a particular focus on the energy trilemma, 4As of energy security and PESTEL approach. This allows the development of a comprehensive framework for the analysis of energy security and the sustainability interaction. A review of manifestations of the different dimensions of energy security and sustainability is carried out to identify the most topical facets of the issue. Then, the cases of the selected European Union countries (Ireland, Greece, Denmark and Lithuania) are presented to highlight the effects and features of the recent energy policy changes there. Indeed, these countries apply a PSO levy mechanism on electricity tariffs and are diverse in their geopolitical situation, economic development, geographical situation and energy dependency level. The analysis of the situations of such different countries applying the PSO levy mechanism makes it possible to perform a broader and more in-depth assessment and comparison of electricity tariff regulations. Thus, the developed theoretical model is applied to identify the major outcomes of the energy policy regimes (with a focus on tariff regulation) in the selected countries.
... They argue that policy actions are needed for the social side of this transition, such as social acceptance of wind power construction. To determine the effect of carbon price on energy security in Finland and the Baltic countries, Galinis et al. [26] studied two price paths by the Finnish-Baltic Energy Model (FIBEM). They showed that in both scenarios, the energy security level in the context of energy transition is not affected by the carbon price path. ...
... Among the methods of producing the energy, one may distinguish conventional ones (based on the combustible fuels, in other words, non-renewable energy sources such as hard coal, brown coal, oil, natural gas) being unfortunately the very reason for extensive environmental pollution; nuclear ones-based on the use of uranium; and methods of producing energy from renewable energy sources (RES) such as water, wind and the sun. Obtaining national energy security to be understood as the ability to provide the energy of the agreeable price while constantly accessed to indispensable energy sources [1,2], is the rudimentary duty of governments, but considering the aspects of balanced development and environmental protection, it has proved to be the priority of the EU energy strategy [3]. Taking it into consideration, it is to be noted that the quantity of RES-produced energy is systematically growing in all European countries. ...
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Appropriate management of energy sources is one of the basic undertakings in the energy sector. Climate policy changes and the development of technologies enabling the acquisition of energy in a way to reduce the negative impact on the natural environment lead to diversity in the structure of the energy sources being used. Therefore, it is important to assess the impact of these changes on the development of energy sectors by particular countries. The article contains the analysis of various energy sources utilization by European Union (EU) countries and the assessment of the energy production sector potential, and the development of this potential in relation to changes in the energy sources structure. For this purpose, a multidimensional comparative analysis was used. The data for the analysis are derived from the Eurostat database for the years 2017 and 2019 for 28 EU countries and they concern the use of energy sources such as combustible fuels, coal and manufactured gases, natural gas, oil and petroleum products (excluding biofuel portion), hydro/hydropower, wind power, solar photovoltaic, nuclear fuels and other fuels n.e.c. As a result of the research, it was proved that in most EU countries the changes introduced in the structure of the use of various energy sources, according to EU climate policy, have a positive impact on the development of particular energy sectors.
With the publication of the European Green Deal, the European Union has committed to reaching carbon neutrality by 2050. The envisaged reductions of direct greenhouse gases emissions are seen as technically feasible, but if a wrong path is pursued, significant unintended impacts across borders, sectors, societies and ecosystems may follow. Without the insights gained from an impact assessment framework reaching beyond the techno-economic perspective, the pursuit of direct emission reductions may lead to counterproductive outcomes in the long run. We discuss the opportunities and challenges related to the creation and use of an integrated assessment framework built to inform the European Commission on the path to decarbonisation. The framework is peculiar in that it goes beyond existing ones in its scope, depth and cross-scale coverage, by use of numerous specialised models and case studies. We find challenges of consistency that can be overcome by linking modelling tools iteratively in some cases, harmonising modelling assumptions in others, comparing model outputs in others. We find the highest added value of the framework in additional insights it provides on the technical feasibility of decarbonisation pathways, on vulnerability aspects and on unintended environmental and health impacts on national and sub-national scale.
This study uses the time-varying parameter/stochastic volatility vector autoregression (TVP-SV-VAR) model to explore the impact of uncertainty risk on oil prices. Economic policy uncertainty and geopolitical risk were used as proxy variables for economic and political uncertainty risk. The study results indicate that oil price is driven jointly by two uncertain risk factors, where the impact of economic policy uncertainty is significantly greater than that of geopolitical risks. However, with the use of oil futures hedging tools and the improvement of the oil market mechanism, the relationship between oil supply and demand is relatively stable, and their impact on oil prices is gradually weakening. We also investigated the influence of severe political and economic uncertainty event shocks on oil price. The differences in oil prices due to economic or political events are mainly reflected through oil demand channels. The global financial crisis and 9/11 terrorist attacks had higher negative impacts on oil demand and prices than other events. This study discusses the impact of uncertain risk on oil prices and can aid market participants and government decision-makers in accurately predicting the trend of oil price and improving risk response abilities to cope with oil emergencies.
Ensuring energy security is one of the main objectives of the economic policy of the European Union (EU) and individual member states. This particularly concerns the new EU members, which, apart from Austria, form the Three Seas Initiative. One of the primary goals of this Initiative is to achieve energy independence while achieving climate neutrality. In order to diagnose the state of energy security of the Three-Seas Initiative countries and how it changed between 2009 and 2019, a study in this area was conducted using the Grey Relational Analysis (GRA) method. The research is based on 17 selected indicators that characterize energy security in energy, economic, environmental, and social dimensions. Indicators were selected based on the priorities of energy policy of the EU. The weights of the indicators were specified as average values with the following methods: CRITIC, entropy and standard deviation. Based on the values of the Grey Relational Grade (GRG) index in the GRA method and its standard deviation, the level of energy security in these countries was evaluated. In addition, for each country, basic descriptive statistics regarding the indicators in question and the coefficients of dynamics of change in the studied years were also delineated. The results unambiguously showed the current state of energy security in these countries and show its changes over the study period. Austria was found to rank highest in terms of energy security in the analyzed period, and Poland and Bulgaria were found to rank lowest. In addition to the discussion on the results and conclusions of the study, recommendations were formulated on how to ensure energy security in the countries of the Three Seas Initiative, which can also be applied to other EU countries.
This paper takes Sichuan Province (China) as an example to improve the design of energy use rights trading policy (ERTP) with the goal of reducing regional energy vulnerability. The following contributions are made to improve the ERTP: (1) The first step in designing the ERTP is to set the total energy consumption target, and this paper formulates the total energy consumption of Sichuan Province in 2025 with reference to China's 14th Five-Year Plan. (2) This paper adopts the historical egalitarianism, economic egalitarianism, efficiency allocation model and the Game-Equity Fixed Cost Allocation Model (Game-EFCAM) to allocate energy use quotas at the sectoral level. Therein, Game-EFCAM is an allocation model which considers both equity and efficiency. (3) In designing the trading mechanism, this paper exogenizes the price of energy use rights within the quotas and endogenizes (determined by the market) the price of energy use rights outside the quotas. Moreover, this paper adopts a recursive dynamic computable general equilibrium (CGE) model to simulate the effects of different allocation schemes and economic development levels on energy vulnerability. The results show that regional energy vulnerability is minimized under the allocation results of Game-EFCAM. This paper not only improves the ERTP, but also provides a reference for other countries in energy dilemmas.
We summarise carbon reduction co-benefits into six categories of (1) air quality, (2) health and wellbeing, (3) energy conservation, (4) energy efficiency, (5) biodiversity, and (6) resource efficiency (Figure 1.8). In doing so, we recognise the central aspect of decarbonisation processes , which also suggest environmental co-benefits, sector-based carbon reduction cases, and improvements towards low carbon pathways or even low carbon transitions . To follow up, we scrutinise these six categories and demonstrate their importance in the main argument of healthier people and the planet. The following six sub-sections include what we believe are the core carbon reduction co-benefits, especially in dealing with the decarbonisation of the built environments.
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The paper provides a comparative analysis of economic growth in Estonia, Latvia and Lithuania and discusses differences in development of the main sectors during the period 2000–2016. Based on detailed analysis of energy sector development, the driving factors influencing changes in primary energy consumption in each country and in the Baltic region are discovered. Increase of renewable energy sources (RES) consumption in the Baltic region over this period by 73.6% is emphasized. The paper presents valuable insights from analysis of trends in final energy consumption by sectors of the national economies, branches of the manufacturing sector, and by energy carriers. Long-term relationships between economic growth and final energy consumption are established. An econometric model was applied to predict final energy demand in the Baltic States for the 2020 horizon. It is emphasized that growing activities in the manufacturing and transport sectors will cause increase of final energy demand in all three countries. Based on detailed analysis of greenhouse gas (GHG) emissions trends some positive shifts are shown and the necessity of new policies in the transport sector and agriculture is identified. Changes of emission intensity indicators are examined and a potential for decoupling of carbon dioxide (CO2) emissions from economic growth in Estonia is indicated.
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Studies on energy security in the context of relations between European Union (EU) and Russia tend to focus on cases, with an open conflict related to supply, such as “hard” energy weapons, or on only one fuel, often natural gas. However, there is a need to understand the long-term impacts that energy relations have politically, economically and physically, and their linkages between resilience, sustainability and security. We analyse the Finnish-Russian energy relations as a case study, as they are characterised by a non-conflictual relationship. To assess this complex relationship, we apply the interdependence framework to analyse both the energy systems and energy strategies of Finland and Russia, and the energy security issues related to the notable import dependence on one supplier. Moreover, we analyse the plausible development of the energy trade between the countries in three different energy policy scenarios until 2040. The findings of the article shed light on how the trends in energy markets, climate change mitigation and broader societal and political trends could influence Russia’s energy trade relations with countries, such as Finland. Our analysis shows that Finland’s dependence on primary energy imports does not pose an acute energy security threat in terms of sheer supply, and the dependence is unlikely to worsen in the future. However, due to the difficulty in anticipating societal, political, and economic trends, there are possible developments that could affect Finland.
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In this paper, district heating scenarios towards carbon neutral district heat production in 2050 were formed for Helsinki region, Warsaw and Kaunas based on the plans and goals of the studied cities and the companies supplying district heat in these regions. It was found that increased use of biomass and waste as well as utilization of geothermal and waste heat could be expected in the studied regions in the future. Increased energy efficiency and carbon capture and storage technologies could also be utilized. According to the results, the annual emissions in Helsinki region could be cut by 90% by 2050 compared to the reference case and the average heat production costs increase only by 16%. In Warsaw, emissions were cut by 75% by 2050 but the heat production costs increased by 40%. In Kaunas, emissions can be cut from 0.102 to 0.087 million tonnes of carbon dioxide by 2050 with modest cost increase (29%). Yet, if the emissions are cut to zero, the marginal heat production costs increase by 55%. The cost increase thus depends strongly on the case and in order to limit the increase of heating costs and energy poverty, diversified use of different technologies should be considered.
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Britain and Germany saw unprecedented growth of variable renewable energy (VRE) in the last decade. Many studies suggest this will significantly raise short-term power system operation costs for balancing and congestion management. We review the actual development of these costs, their allocation and policy implications in both countries. Since 2010, system operation costs have increased by 62% in Britain (with a five-fold increase in VRE capacity) and remained comparable in Germany (with capacity doubling). Within this, balancing costs stayed level in Britain (-4%) and decreased substantially in Germany (-72%), whilst congestion management costs have grown 74% in Britain and 14-fold in Germany. Curtailment costs vary widely from year to year, and should fall strongly when ongoing and planned grid upgrades are completed. Curtailment rates for wind farms have risen to 4-5% in Germany and 5-6% in Britain (0-1% for offshore and 15-16% for onshore Scottish farms). Policy debates regarding the balancing system are similar in both countries, focussing on strengthening imbalance price signals and the extent that VRE generators bear the integration costs they cause. Both countries can learn from each other's balancing market and imbalance settlement designs. Britain should reform its balancing markets to be more transparent, competitive and open to new providers (especially VRE generators). Shorter trading intervals and gate closure would both require and enable market participants (including VRE) to take more responsibility for balancing. Germany should consider a reserve energy market and move to marginal imbalance pricing.
This paper investigates different reserve issues inspired by the European situation, focusing on both the moment when reserves are procured and the degree of coordination among Transmission System Operators (TSOs) in that procurement. We present three scheduling models formulated as stochastic programs that represent the day-ahead energy market, the reserve procurement, and the real-time balancing market in a renewable-dominated power system. Two of the proposed models are inspired by reserve procurement mechanisms currently applied in Europe, where reserves are committed either before (Model 1) or after (Model 2) the clearing of the day-ahead energy market. Then, we use as benchmark a third model in which energy and reserve capacity are co-optimized (Model 3). In all models, we consider the procurement of both conventional and upward/downward reserves. We also assess the impact of these organizations on market participants’ remuneration and test the impact of cross-border constraints as those applying in the European power system. The case study is based on the IEEE 24-node RTS, considering the uncertainty in renewable power production and demand. Our results show that Model 1 is the least efficient market design as it leads to a misallocation of the available capacity, while Model 2 becomes as efficient as Model 3 when the TSOs procure reserve in a coordinated way. Finally, a coordinated procurement of reserves reduces the system operating costs in all models.
The integration of variable generation challenges electricity systems globally. Using Ireland's electricity sector as a case study, we highlight multiple challenges in reconciling ambition for variable renewable integration with market economics and system operation. Ireland has the highest share of non-synchronous variable renewable electricity on a single synchronous power system. This case study examines the strategy being implemented to optimally balance between efficiency, flexibility and adequacy while maintaining a fully functional system that strives to adapt to evolving conditions. The transition that the Single Electricity Market underwent to comply with the EU Target Market was a major overhaul of what made the all-island market a success. Volume-based reliability options have distinct advantages over capacity payments. System services are critical for system stability and 14 separate system services are being developed. These actions, when taken together, provide an insight into the lengths to which this electricity market must go to transform from its cost-based nature to a value-based alternative that rewards flexible and reliable capacity with the ability to evolve with market conditions of the future. Keywords: Target model, I-SEM, Electricity market transformation, System services, Capacity remuneration mechanism
The Generation Expansion Planning (GEP) stands as one as one of the most discussed topics within the academia and decision makers in the energy sector, especially related to meeting deep emission reduction targets. Every country, aiming at decarbonizing its economy, focuses on the application of policies that could enhance the penetration of Renewable Energy Sources (RES) in its power capacity mix. GEP is a complex task, combining techno-economic, financial, spatial and environmental characteristics. Several models are developed to model GEP, applying different methodological approaches. The underlying theory is very important as it might inherit bias in the resulted outcomes. The debate on the appropriateness of each methodology is increased, especially as projected outlooks deviate from reality. The paper aims to provide a review of the models employed to integrate RES in the GEP. The paper classifies models in three generic categories: optimisation models, general/partial equilibrium models and alternative models, not adopting the optimum integration of RES in the GEP. It provides insights on the characteristics, advantages and disadvantages of the theoretical approaches implemented, as well on their suitability for different aspects of the problem, contributing in the better understanding on the expected outcomes of each methodology.
The provision of reserve generation is an essential part of maintaining a reliable electricity system and has become an increasingly difficult task with the growing contribution from variable energy sources. Ensuring the cost of balancing supply and demand is minimised is an important aspect, requiring an understanding of how generator costs vary depending on their operation. This paper considers the cost of part loading different generator types, providing a cost breakdown and description of the Levelised Cost of Electricity method of analysing generator costs. This delivers cost-loading level curves for the generator types with the largest contribution to the UK generation portfolio which can be used to perform economic optimisations for generator scheduling. The holding payment for provision of frequency response, an aspect of maintaining balance between generation and demand, is separated by generator type and compared with the calculated part loading costs. To demonstrate the effect on system costs the Winter peak and Summer trough in 2016 and the Future Energy Scenarios in 2020 are considered with maximum and minimum generator numbers connected. Provision of sufficient generation to meet demand and reserves are optimised to reduce costs in each scenario.
Finland updated its Energy and Climate Strategy in late 2016 with the aim of increasing the share of renewable energy sources, increasing energy self-sufficiency and reducing greenhouse gas emissions. Concurrently, the issue of generation adequacy has grown more topical, especially since the record-high demand peak in Finland in January 2016. This paper analyses the Finnish energy system in years 2020 and 2030 by using the EnergyPLAN simulation tool to model whether different energy policy scenarios result in a plausible generation inadequacy. Moreover, as the Nordic energy system is so heavily dependent on hydropower production, we model and analyse the impacts of a severe drought on the Finnish energy system. We simulate hydropower availability according to the weather of the worst drought of the last century (in 1939-1942) with Finnish Environment Institute's Watershed Simulation and Forecasting System and we analyse the indirect impacts via reduced availability of electricity imports based on recent realised dry periods. Moreover, we analyse the environmental impacts of hydropower production during the drought and peak demand period and the impacts of climate change on generation adequacy in Finland. The results show that the scenarios of the new Energy and Climate Strategy result in an improved generation adequacy comparing to the current situation. However, a severe drought similar to that experienced in 1940s could cause a serious energy security threat.