Dr. Nevenka Hrovatin, Professor of Economics at University of Ljubljana's Faculty of Economics, reveals the main challenges in energy markets and highlights the best practices from both Slovenia and the region while emphasizing that Slovenia should increase its ambition in the heating and cooling sector.

Which energy challenges will be addressed at the 16th International Association for Energy Economics (IAEE), the European Conference on the 25th-28th of August in Ljubljana?

The conference plenary sessions will address challenges and disruptions of the energy sector in the next decade. Among the main subjects are the future of electricity market design, the economics and geopolitics of oil and gas, use of energy in transport (electrification), energy efficiency, and consumer behavior. In addition, the event will address the increasing role of prosumers; digitalization, smart meters, and prospects of block chain technologies accompanied by new business models. We will discuss climate change and energy transition, the European energy sector in the global perspective and differences in national policies. Plenary sessions will be accompanied by seven concurrent sessions running over the three days of the conference, where academics and professionals will present their research findings and discuss them with colleagues in the field.

As the general conference chair, what can you say about its main speakers?

The conference will host 24 prominent speakers in eight dual plenary sessions chaired by distinguished experts, all from the energy industry, institutions and academia. To name just a few: Laurent Schmitt, secretary general of ENTSO-E, professor Pantelis Capros, author of the EU PRIMES model Edward C. Chow, international energy expert, CSIS USA, Alberto Pototschnig, Director of ACER, Markus Graebig, project director of WindNODE consortium, Germany and several other leading academics and professionals. The Slovenian Minister of infrastructure Alenka Bratušek will open the conference. Christophe Bonnery, President of the IAEE and of the French Association for Energy Economics (FAEE) and Marjan Eberlinc, President of the Energy Industry Chamber of Slovenia and general sponsor of the event, will make addresses. The event will conclude with the post conference seminar on Energy Transition and Power Markets delivered by Professor Richard Green from Imperial College in London.

According to the World Energy Outlook 2018 from the International Energy Agency, the electricity sector is experiencing the most dramatic transformation since its creation more than a century ago-its share of global final consumption is approaching 20 percent and is set to rise. The investment requirement is, however, still huge. How will the future investment in renewables be driven and what will the power sector look like?

Future investments in renewables are a must, which are dictated by the EU 2030 and 2050 targets. They are expected to rise 32 percent by 2030. The discretion of member states is in which types of renewables. Some countries, like Germany, rely on the mix of wind and solar, while Slovenia decided to prioritize solar, which is also driven by difficulties in getting environmental approval for wind mills and less suitable conditions for wind farms. The prices of renewables have been steadily decreasing and have already become competitive with traditional energy sources, which gradually eliminates the need for the FIT support schemes. These distributed energy sources (intermittent sources) with volatile production that does not correspond to the load curve (demand) will however require the market for flexibility (DRM- demand response management with critical dynamic tariffs enabled by the smart meter technologies, battery storage, aggregators and prosumers in the market, smart grids, micro grids, and local energy communities). The energy user will become a central agent in the system playing an active role. This involves a major shift from the former monopoly utility markets to the democratization of the system.

Which practices would you highlight at the regional level from the energy efficiency perspective that combine digital technologies and the low-carbon economy?

In Slovenia several activities are already happening in local communities, smart grids, projects on demand response, and active consumer engagement. In the field of smart grids I would mention NEDO and SINCRO.GRID projects. NEDO is ran by Slovenian TSO -ELES with Japanese partners and several Slovenian stakeholders, which is very different comparing to other countries because the implementation of the smart grid project goes on at the national level while projects in other countries are more localized. DSOs are also involved in automatic detection of defects, coordinated voltage control, and testing the results of demand side reduction as a part of ancillary services or local optimization service use to reduce peak loads. SINCRO.GRID is a project of European significance, carried out in the regions of Slovenia and Croatia, where electricity TSOs and DSOs from both countries participate, and it involves among others the introduction of the virtual cross-border control center. It will enable appropriate data exchange, voltage control, loss optimization, and better integration of RES in both transmission systems.

Then we have consumer-oriented EU Horizon 2020 projects; one on critical dynamic tariffs, so -called Flex4Grid involving Elektro Celje and the use of Pilot Critical Peak to shift the demand from peak to off peak. I would also like to mention the Active consumer project run by GEN_I involving ELES and Elektro Ljubljana. The projects aims to develop the system and enable the participation of minor active consumers in electricity and ancillary services markets, where the aggregator will calculate the total available capacity and make decisions on its activation.

Another Horizon 2020 consumer behavior project is CONSEED (Consumer Energy Efficiency Decision making), led by Trinity College in Dublin, where the Faculty of Electrical Engineering at the University of Ljubljana participates. They are seeing if and how European consumers pay attention to energy labels.

Then, to look a little bit broader, in Austria several smart city projects are going on in Vienna, Salzburg, and Graz, where they are implementing the concepts of sustainable urban mobility, zero emission areas, and electric micro-grids to demand response using smart metering and integrating active consumers. There are also other good practices of localized sustainable energy communities in Murau.

Germany has 20-30 projects, where they test technologies ranging fromo power to gas to try to make them commercially viable by series production. The German and Austrian governments have also financed several research projects developing new RES technologies, which involve various stakeholders, numerous research institutes, universities, and private companies to develop commercially viable solutions and become leaders in Europe and globally.

Many district heating systems (DHS) in Slovenia are highly energy inefficient (mostly fueled by fossil sources) and need to be modernized. How would you approach that challenge? Could using local renewable be a solution as well?

First, a short comment is needed here regarding the energy efficiency. In fact, it is just the opposite. According to the Energy Agency data 86.6 percent of the heat produced for the district heating systems in Slovenia comes from the combined heat and power co-generation plants with energy efficiency up to 80 percent. Heat produced in this way is much more energy efficient compared to conventional thermal power plants where heat is wasted and energy efficiency is at most 50 percent. Heat losses in the Slovenian district heating systems are, on average, comparable with the average losses in the EU, or even lower.

Another issue is the use of RES in the Slovenian district heating system, which is a concern becaause it is mostly fuelled by fossil fuels. The two biggest district heating systems in Slovenia, Ljubljana and Velenje, use call in their cogenerations, contributing to the 56 percent of the heat produced for district heating. The share of natural gas is 26.5 percent, oil 1 percent, and renewables 12.8 percent.

Indeed fossil fuels should be displayed by RES, which is also dictated by the revised RES directive in the winter package, which requires 1 percent increase of RES annually in the district heating sector. The solution could be found in building the new district heating systems on wood biomass, many new smaller systems in Slovenia have already been built in this way. There is also potential in geothermal energy and waste heat. For Slovenia this is particularly important since the increase of RES in other sectors (transport and to a certain extent power) would be difficult to achieve. The Slovenian target recommended by the EU for 2030 is 37 percent compared to the EU average of 32 percent. The increase in heating should offset the lack of potential in other sectors. In fact, this has just been emphasized in the recent EU commission comments to the Slovenian Energy and Climate Plan. This would, however, require a stimulating framework that would also phase out the current practice of individual heating by burning wood in houses. A good example of stimulating RES in district heating is the Netherlands. Tariffs for heat are based on the principle that the costs for a household with district heating should not be higher than the costs of heating by an individual condensing gas boiler. For larger customers, the price of heat is free.