Renewable energies (RE) generate value from the technological innovations, which allow increasing efficiency, lower investments costs, favoring the reduction of the final energy bill and energy dependence. Additionally, generates other social and economic benefits, generally not properly assessed. Domestic energy policy needs to assess them so as to shape this, enabling environmental benefits by maximizing its local social doles based on the development, production, installation and maintenance of RE technologies, increasing access to energy, reducing energy costs and resource conflicts, allowing to improve environmental quality. This research assesses the impact of new investments in solar and wind electricity generation capacity on the emission of greenhouse gases (GHG) and other harmful toxic gases such as SO2 or NOx, for the Central Region of Portugal. The main contribution is a global impact assessment, not only from the traditional perspective of the power generation planning, but also considering costs and benefits of economic and social aspects of the most relevant externalities.

The first phase of the project assesses the impact of new solar and wind generation capacity investments on the GHG and other harmful emissions in the Central Region of Portugal, using a centralized planning model to be developed, based on the operation and investment costs of the generation units. The recent Portuguese National Plan for Energy and Climate (NPEC) objectives will be considered. This region has been chosen due to its relevance in the national energy sector and positive contribution to Europe's energy

efficiency and RE commitments. For example, 70% of its final electricity consumption is based on renewable generation, while the national average is 59.1%.

The second phase assesses the local effects of its most relevant externalities such as decreasing emissions, lowering electricity prices, decreasing energy dependence, new business model’s creation (such as RE communities), jobs creation, etc. Negative impacts (e.g. visual pollution) will also be considered. When applicable, standard economic criteria will be used to perform this assessment. When not, for more intangible impacts, willingness-to-pay (WTP) and willingness-to-accept (WTA) concepts will be used, obtained by designing and conducting surveys.

Although this type of analysis is not particularly demanding in methodological terms, there will be a clear challenge and contribution in data collection and their particularization to the specificities of the Centro Region. Hourly profiles are needed since wind and solar generation are not dispatchable technologies, with very different generation profiles, and their impact in substituting conventional generation is significantly different, which can only be properly addressed with hourly resolution models. Indeed, wind generation usually shows more constant generation profiles, while solar generation concentrates on day hours and correlates much better with the demand. Besides, RE generation has capacity factors much lower than those of conventional generation technologies, implying a much larger RE capacity increase than the thermal power plants decommissioned.

Based on existing reports and EU energy strategic plans for the upcoming years (NECP), several evolution scenarios will be designed to account for different demand evolutions, including COVID impact, the impact of the increasing electrification of the country’s energy consumption, or the estimation of expected future efficiencies, among others. Different RE penetration levels, fuel costs, and systems reserves needs will also be considered to account for the uncertainty of such kind of analysis. The focus will be on the assessment of the substitution of thermal generation by renewable generation for the Central Region. To do so, the CEVESA Iberian Electricity Market model will be calibrated and adapted to determine the product mix and per technology, emissions, costs, and electricity prices for each scenario. This will provide the final total cost of each scenario from the traditional power system perspective, including the relationship between the costs of investing in wind and solar generation and the corresponding emissions reductions, the cost decrement in the generation mix and carbon emission market, etc. These data will be input into the second phase.

The externalities assessment, in the second phase, will be combined with the results from the first phase to compute a more accurate cost-benefit analysis (CBA) of additional investments in wind and solar generation. Although the focus is on the Centro Region, the methodology developed and many of the results will be potentially extrapolated to a national level. Indeed, informed decisions based on comprehensive CBA are essential for this complex decision process. In this sense, the project results will help both, regional and national policymakers, to design or tune their RE policies. Adjustments of instruments such as incentives, capacity remuneration mechanisms, RE auctions, will be supported by the overall RE assessed net benefits considering the social, environmental, and health perspectives (fossil fuel energy independency issues, environment impact, harmful pollutants, SDGs objectives, social welfare and health of households in the region) and the NPEC decarbonization objectives.

This project proposes an in-depth cost-benefit analysis (CBA), from a social perspective, of the installation of new wind and solar electricity production capacity in the Central Region of Portugal. It contributes to the state of the art by carrying out a new CBA in a little studied but very relevant region of Portugal, with a large share of renewable generation (GR) and thermal generation.

The CBA combines a generation dispatch impact on the penetration of new wind and solar generation, with a detailed analysis of externalities and their assessment.

The project is structured in two phases.

The first phase consists of the analysis of the impact of additional investments on solar and wind generation capacity on the emissions of GHG, SO2, and NOx gases in the Centro Region of Portugal. Several sets of relevant data will be collected: existing generation units of the National and Centro Regions (OMIE), maximum generation capacity (OMIE), ramps, minimum stable power, specific emissions of output gases (JCR-PPDB), fuels and emissions costs (Aleasoft reports), investment costs in new technologies (Lazard reports), wind farms repowering (IRENA and NREL reports), potential microgeneration expansion (strategic NECP plans), hourly production profiles wind and solar generation (REN DB).

The second phase is the analysis of the externalities and its economic assessment to complement the results of the first phase, to obtain a more comprehensive and realistic economic assessment of the new renewable capacity investments from the perspective of the social optimum. To do so, a comprehensive analysis of the externalities associated with the new wind or solar capacity generation investments will be performed, including, among others, environmental benefits (such as health benefits) or costs (such as visual impact, noise, and negative impact in ecosystems, etc) and labor market impacts (such as employment). Then the economic assessment of the identified externalities will be performed based on a comprehensive literature and reports revision, and project team expertise. For those externalities with no existing or systematic assessment methodology, surveys will be designed to quantify their costs or benefits based on the WTP and WTA methodology, using stated preference methods such as the Contingent Valuation Method and the Discrete Choice Experiments to determine the value of externalities related to each energy source. The analysis may be extended to the application of revealed preference methods for estimating the value associated with externalities that cannot be quantified through declared preference methods and/or to complement those already quantified, with estimates obtained by alternative methods, increasing in this way the robustness of the results.

Primary data will be collected at this stage, mainly for those externalities whose quantitative assessment is complex, and an alternative qualitative assessment based on the concepts of willingness-to-pay and willingness-to-accept is probably preferred. Among the most important externalities pointed out in the literature that this team intends to estimate are: (i) positive socio-economic externalities and (ii) environmental externalities.

Assessment of environmental, social and health impacts associated with investments in wind and solar electricity production in the Central Region of Mainland Portugal. Among these impacts, the most notable are the obtaining of local revenues from land leasing contracts directly allocated to wind and photovoltaic parks; creation of jobs for operation and maintenance of wind and photovoltaic parks; generation of electrical energy from renewable energy sources, without pollutant emissions; greater accessibility; source of educational and tourist interest, enabling additional revenue for the local economy; greater regional and national energy independence and diversification and security of energy supply; other social benefits.

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With the objective to increase the research activity directed towards the achievement of the United Nations 2030 Sustainable Development Goals, the possibility of associating scientific projects with the Sustainable Development Goals is now available in Ciência-IUL. These are the Sustainable Development Goals identified for this project. For more detailed information on the Sustainable Development Goals, click here.