Assessment of Regional Employment Effects of RES Integration

in the Energy Sector of Latvia .

International Conference “NEW SOCIO-ECONOMIC CHALLENGES OF DEVELOPMENT

IN EUROPE 2008Labour Market Issues”

Riga, University of Latvia, 2-4 October 2008

Ivars Kudrenickis, Department of Environmental Management,

Faculty of Economics and Management, University of Latvia

Gaidis Klavs, Institute of Physical Energetics, Latvia

Plan of presentation

I: Renewable energy in Latvia energy supply

II: Assessment of employment creation effect: the challenges

III: The structure of production chain analysis (PCA) model

IV: Employment assessment by PCA: overall results for Latvia and their regionalisation

Part I: Renewable energy in Latvia energy supply

Primary energy supply in Latvia (2000-2007)

28

29,231,331,4

2929,130,229,5

0

40

80

120

160

200

2000 2001 2002 2003 2004 2005 2006 2007

PJ

0

10

20

30

40

50

60

70

80

90

100%

electricity

biomas

natural gas

oil products

coal & peat

renewables

RES in electricity and DHS supply in Latvia

47,1 46,7

39,2

48,4

36,5

43,9

33,231,9

44,7

52,8

29,3

68,2

45,5 47,746,1

35,1

47,1

37,7

14,813,8

14,6

14,212,511,7

11,312,4

11,411,68,9

84,8

3,11,81,20,7

0

5

10

15

20

25

30

35

40

45

50

55

60

65

70

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

% RES-E share in total supply RES-DH share

Structure of RES-E supply in Latvia (2006)

1 %

2 %

3 %

2 %

95 %

Large HPP Small HPP Wind Biogas+biomas

Part II: Assessment of Employment Creation Effect: the challenges

Background statement

Energy supply systems based on RES compared to fossil energy systems are more labour intensive in delivering the same energy output

Crucial differences among various RES technologies exist: employment in bioenergy projects is significantly different than that of the wind, hydro and solar energy projects.

MITRE PROJECT, 2003

Advanced renewable energy policy in 2020: 16% (262 Mtoe) of primary energy, 27.6% (963 TWh) of electricity supply, 7.8% (22 Mtoe) of transport fuels supply

Implementation of advanced renewable energy policy may reach 2.4 million new workplaces in old EU member states

General principles of workplaces assessment

direct and indirect (induced) workplaces, taking into consideration the complementary

principle, short-term workplaces (e.g., construction of

plant) are generally related to technical life time of the production unit

Possible approach – use of standard factors

To assess the employment effect, the specific number of direct workplaces, related to the construction and operation of the energy production unit, is associated with so called standard factors, like:

1 MW of installed capacity, 100 GWh of annually produced electricity, 1 million units of investments

Job places per 100 GWh annually produced electricity

Fossil technologies 1-6

Wind 15-20

Solar PV 50-54

Solar thermal 25-27

Small hydro 8-9

Biomass, forestry waste 18-19

Biomass, energy plantations 64

Biogas, agriculture waste 58

Source: R.E.H.Sims, “Biomass and Agriculture: Sustainability, Markets and Policies”, OECD Publication, Paris, September 2004, pp.91-103

Weak point of applying standard factors

Applying the country non-specific standard factors does not take into account regional or local conditions.

Evidently, the standard factors depend on the cost structure of a given country and vary from country to country, and might even vary from region to region.

Part III: The structure of production chain analysis (PCA) model

Production chain analysis model

Facilitycost

OMcost

Fuelcost

Technologyvalue chain

O & Mvalue chain

Fuelvalue chain

End-user

All costs RE

energy

30%

70%

80%

20%

Totalandperunit

Estimation of the wages part of the value chain

Wages

Equipment

Income ofthe supplier

Fuel cost at the facility

=

Localization of the employment

Localregional

Nacional

Transnational

Employment

Source:

Tyge Kjær,Roskilde University

Production chain analysis

The Background

Identifying of the wages share in the value chain of a given energy production installation

Three Different Starting Points of PCA Model

(i) potential of RES,

(ii) capacity of energy production unit that will be installed, or

(iii) demand for energy.

Production Chain Assessment MethodologyExample: Biomass CHPs, steam turbines,

Efficiency Electricity

Total

25%

85%

Target for electricity production, GWh/year

Annual operating hours

Total electricity capacity (calculated), MWel

280

5600

50

Specific investments, mill.EUR / 1MW

Technical lifetime, years

Operation & Maintenance costs (% of investments per year)

Biomass fuel cost, EUR/GJ

5.7

20

4

3.1

Wages share of total investments

(comprising Latvian local share)

8%

(20%)

Wages share of O&M costs

(comprising Latvian local share)

50%

(80%)

Wages share of fuel costs

(comprising Latvian local share)

45%

(100%)

Part IV: Employment assessment by PCA: overall results for Latvia and their regionalisation

New capacities assessed

Wind: onland 225 MW

Biomass (Wood) CHP - 100 MWel

Biogas – 36 MWel

Resulting in:

+ 1300 GWh RES-electricity annually

Employment Effect of Renewable Electricity

Production (1)On-

shore Wind

Solid Biomasssmall scale CHP Biogas

CHPSteam turbine

Gasifiers

Total new electricity capacity, MWel

225 50 50 36

Part A. Workplaces assessed without taking into account the complementary principle

Investment related workplaces 14.7 13.3 12.5 9.6

O&M related workplaces 147.4 266.7 364.9 374.4

Biomass fuel supply related workplaces

328.9 274 51.4

Total 162.1 608.9 651.4 435.4

Employment Effect of Renewable Electricity

Production (2)On-

shore Wind

Solid Biomasssmall scale CHP Biogas

CHPSteam turbine

Gasifiers

Total new electricity capacity, MWel

225 50 50 36

Part B. Workplaces assessed taking into account the complementary principle

Investment related workplaces 14.7 13.3 12.5 9.6

O&M related workplaces 147.4 200 273.7 374.4

Biomass fuel supply related workplaces

164.5 137 51.4

Total 162 378 423 435

Employment Effect of Renewable Electricity Production and related tax revenues

New capacities

(MW)

New direct jobs

New indirect

jobs

Tax revenues in state

social budget

(thsd EUR)

Tax revenues –income tax

(thsd EUR)

TOTAL 361 1398 2097 18 677 8218

Wind 225 162 243 2164 952

Solid Biomass (Wood) CHP

100 801 1202 10 704 4710

Biogas CHP 36 453 652 5809 2556

Assumptions for distribution of workplaces among Latvia regions

1. Direct workplaces:wind – according recommendation to establish zones for the

location of wind power plants,solid biomass CHP - close to current consumption of wood fuel

in district heating and industry sector. biogas CHP – comparatively similar, except Latgale (taking

into account unutilised agriculture land)

2. Indirect workplaces:Taking into account dominating role of the Riga in national

economy, it is assumed that 50% of indirect workplaces will be created in regions, but the others in Riga and its surroundings (Riga planning region).

Distribution of Employment Effect among Latvia planning regions

46

17

19

711

Riga

Kurzeme

Vidzeme

Zemgale

Latgale

Thank You !

Gaidis Klāvs: energy@edi.lvIvars Kudreņickis: ivars.kudrenickis@lu.lv