Impact Assessment Of The Renewable Energy Policy Scenarios A Case Study Of Latvia

Environmental and Climate Technologies
2022, vol. 26, no. 1, pp. 998–1019
https://doi.org/10.2478/rtuect-2022-0075
https://content.sciendo.com
998
©2022 Author(s). This is an open access article licensed under the Creative Commons Attribution License
(http://creativecommons.org/licenses/by/4.0).
Impact Assessment of the Renewable Energy Policy
Scenarios – a Case Study of Latvia
Marika KACARE1*
, Ieva PAKERE2
, Armands GRAVELSINS3
, Andra BLUMBERGA4
1–4
Institute of Energy Systems and Environment, Riga Technical University, Azenes st. 12/1, Riga, LV-1048,
Latvia
Abstract – Even though the development of renewable energy technologies has been one of the
most discussed and research-rich fields of science, and there are many practical and
convincing technologies in the field of renewable energy, the path taken by society to shift
from the use of non-renewable energy sources to the use of renewable ones has often been
slow and unclear. Renewable energy technologies have undergone many improvements.
There are several successful and promising examples where installing renewable energy
technologies has paid off financially and improved the environment and quality of life.
Nevertheless, fossil fuel still dominates or makes up a large proportion of energy production.
The research simulates existing, planned, and potential policies to assess the best way to
integrate renewable and local energy resources into the energy system by 2030 and in the long
term. Policy analysis is carried out for several possible combinations of support measures to
assess if it is possible to achieve the set targets in the National and Climate plan by 2030 and
reach Climate neutrality by 2050. Such an approach makes it possible to assess the impact of
existing policies that create synergies or undesirable side effects and whether they maximize
the return on investment from a socio-economic and environmental point of view. In addition,
a risk analysis and impact assessment of the proposed policy scenarios are carried out using
multi-criteria analysis.
Keywords – Energy communities; environmental policy planning; local energy sources;
National Energy and Climate Plan; system dynamics
Nomenclature
RE Renewable energy –
RES Renewable energy sources –
NECP National Energy Climate Plan –
SD System Dynamics –
LPG Liquefied petroleum gas –
NRT Natural resources tax –
MCDM Multi-criteria decision-making method –
AHP Analytical hierarchy process –
* Corresponding author.
E-mail address: marikakacare@gmail.com

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1. INTRODUCTION
The European Union's Energy Roadmap concludes that decarbonization of the energy sector
is technically and economically feasible. However, reaching a political or economic
consensus with the energy supplier is difficult. These factors underline the importance of
increasing the use of local and renewable energy sources (RES) to meet energy demand
sustainable, economically viable, and secure.
RES that meets energy requirements can emit zero or almost zero pollutants and greenhouse
gases. The usage of renewable energy (RE) systems will enable countries to address some of
the most pressing issues, such as strengthening energy supply reliability, resolving energy
and water availability problems, raising the level of life and employment of the local
inhabitants, and providing sustainable development of regions. In rural areas, the
development of RE initiatives can help to provide jobs, reducing migration to cities. One of
the alternatives for meeting rural and small-scale energy needs in a dependable, economical,
and sustainable way is harvesting RE in a decentralized manner [1], [2].
Therefore, policy instruments for renewable and local energy resources are necessary
conditions for the transition to low-carbon energy sectors, but those must be sustainable and
justified. For example, support for RE is currently being reviewed in many countries, given
that its economic burden is above the allowable limit. In turn, reduced or suspended aid
creates instability in RE production [3]. However, a higher share of RES can bring
environmental and social benefits which are often not considered directly.
1.1. Barriers for the RES Implementation
Technical barriers to the implementation of RES technologies are the insufficient current
level of development of technologies and technical skills and the lack of infrastructure
required to support RES technologies. Additionally, the lack of competent staff to train,
maintain and operate RES technology structures, especially in regions and countries with a
low level of education, is an obstacle to the development of RES.
The lack of equipment and infrastructure in electricity transmission and distribution
networks and the lack of necessary equipment and services within local electricity companies
in many countries is a significant problem for RES implementation. The equipment needed
in these countries is usually not readily available. It needs to be imported that generally is
expensive, and RES generation becomes costly or unavailable.
Poor connectivity or inability to connect RES technology to the national grid is a particular
barrier to the wind energy sector. Significant transmission losses are often observed when
energy (whether electric or mechanical) is transported from production sites to consumption
sites. Wind farms are often far from populated areas, in some cases offshore. This is a
deterrent to several investors who do not want to invest in wind farms [4], [5].
Probably the most evident and widespread barrier to implementing RES technologies is
cost. In particular, capital costs or initial investments. As with most RES, the operating costs
of solar and wind energy technologies are low – this resource is “free,” and maintenance is
usually minimal. The price per kilowatt-hour of onshore and offshore wind turbines has
remained relatively stable from 2010 to 2023, but energy prices for both solar technologies
have fallen sharply. In 2010, 1 kWh of electricity produced by solar energy cost around 0.35–
0.40 EUR, but according to the data for 2021, it costs only around 0.05–0.10 EUR. For all
RES technologies, the price curve of 1 kWh is on a downward trend and is expected to remain
so in the future. The forecast for the price of 1 kWh produced by offshore wind generators in
2023 should be between 0.05 and 0.10 EUR/kWh [6].

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Often, local conflicts over the installation of RES technologies, especially for wind turbines
and solar energy installations, can delay or even stop the use of RES. However, over the past
decade, RES supporters and social justice, and environmental activists have organized a call
to address the issue of energy democracy [7]. RES offers several benefits compared to fossil
energy resources, including relatively free availability, facilitated access to technologies, and
modularity. Seeing the potential of RES technologies, especially solar and wind technologies,
energy democracy is focused on change in various aspects of this energy sector, including
generation, transmission, financing, technology, and knowledge to achieve levels of RES
use [8].
Another aspect that hinders the rapid increase in the capacity of RES technologies is the
time-consuming process of project coordination. For example, the installation of wind
turbines can take several years from the idea to the plant’s construction, as it is necessary to
carry out an environmental impact assessment and coordinate the technological solutions of
the project with various stakeholders [9]. Additionally, local RE contributes to energy
independence [10].
Despite the many benefits of wind energy technologies and their rapid popularity increase
in other countries in recent years, the implementation of wind energy technologies still faces
social barriers. Although these barriers vary from place to place, depending on local natural
and cultural characteristics, the most significant of these are the changes that wind turbines
bring to the landscape they transform. Other objections include allegations that the turbines
are noisy, that they reflect light as their blades rotate, that oil escapes from them and that the
presence of a wind farm reduces the value of the land [11], [12].
Developers have been forced to refine their project planning strategies, introduce new
regulatory requirements, conduct more in-depth environmental impact assessments, extend
project consultation periods, expand education and information software, and have been
forced to suspend projects in rare cases to reduce these barriers. These efforts on both sides
can be seen as necessary steps to accept RE Additional social barriers are also inevitable, with
RES technologies attracting more attention and a percentage of global energy [13].
Other important social aspects to evaluate the understanding of climate change and
knowledge of RES technologies, historical experience with the fairness of the decision-
making process related to the RES technology project, a comprehensive assessment of the
risks, costs, and benefits of the technology, trust in decision-makers and other stakeholders,
and local context [13]. For example, public disinterest and reluctance to engage in the
development of wind power generators were identified as significant social barriers to
developing energy technologies in a study in Saskatchewan, Canada [14].
Although the situation is improving, many people still do not understand the concept of RE,
especially in regions. The region’s geographical location and the site’s location and natural
conditions can be obstacles to developing RES technologies. The intensity of solar energy
varies significantly from place to place on Earth. It is one of the most critical factors in
installing solar energy technologies and the construction of solar parks. Therefore, it deters
people from installing solar energy technologies, realizing that the amount of energy they
produce will be very volatile [4].
Impacts on the environment, including the physical environment (for example, landscapes,
protected areas, increased traffic), biodiversity, wildlife, and greenhouse gas emissions, are
important factors for the technology to be socially acceptable. The impact of the development
of wind energy technologies on animal species and ecosystems has been the subject of several
studies, particularly the potential impact of wind turbines on birds and bats [15].
One of the arguments against installing wind turbines is the belief that they make a lot of
noise. They make a weak but characteristic noise mainly caused by the turbine blades

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breaking the air. Wind turbines must comply with noise level limits by the values specified
by law. Noise level limits apply to the total noise generated by all wind turbines and can be
set for both slow winds when turbine noise is considered the more disturbing and louder. If
the noise level does not exceed the specified limits, this does not mean that the noise is not
audible. Modern wind turbines make significantly less noise. The noise generated by gears
and the generator is reduced. The turbine engine block is soundproofed, and the blade design
is also developed to reduce noise [16].
Another ecological aspect is related to the use of wood, which in the future will be one of
the main drivers for the promotion of RES use in Latvia. The bioeconomy approach uses
bioresources sustainably and produces products and energy from bioresources through
biotechnology, which have high added value and can replace products and energy from fossil
resources. A dilemma arises between the demand for bioresources in energy and the
bioeconomy [17].
1.2. The Impact Evaluation of the RES Implementation
While RES technologies are widely researched and getting cheaper, the implementation
process is still moving slowly [4]. There are various obstacles to fully unsighted potential of
RES, both due to technologies and society. The previously listed barriers to RES
implementation can be characterized by different indicators to better reflect the possible
transition to carbon-neutral energy systems [18].
Various criteria and specific indicators were studied to develop sustainable local energy
systems in Finland [19]. From a technological point of view, compliance with consumption
needs, compatibility, return on investment, reliability, and renewability were used as
indicators to be analysed. From an economic point of view, the availability of resources and
job creation were examined. From a public point of view, the authors looked at health effects,
the use of local resources, and acceptance by society. Environmental factors are the most
represented in the study. They include indicators such as biodiversity, water use, greenhouse
gas intensity, required land areas, ozone depletion, generated solid waste, and water pollution.
Finally, institutional criteria were further divided into regulatory and political indicators.
Another study analysed technical, economic, environmental, and social aspects for
comparing RE systems [20]. Technical aspects include energy production, energy efficiency,
primary energy ratio, security, reliability, and development. The economic aspects analysed
in this study are capital expenditure, operating and maintenance costs, fuel and electricity
costs, net present value, payback time, and lifetime costs. The environmental aspects selected
were NOx emissions, CO2 emissions, CO emissions, SO2 emissions, particulate emissions,
volatile organic compounds, and land use. Finally, social factors included social acceptability,
job creation, and social benefits.
When analysing Lithuania’s electricity production technologies, five criteria groups have
been used to assess technologies: institutional political, economic, technological, socio-
ethical, and environmental protection [21]. Institutional political factors include respect for
international commitments, the legal framework for operations, technology autonomy,
government authorities' support, and impact on sustainable energy development. The
following economic factors were analysed: economic efficiency, the competitiveness of
technology, production costs, and the technological complex’s value. Socio-ethical criteria
include the impact on social welfare, impact on sustainable social development, and
acceptance by society. Technological factors include the nominal capacity of the technology,
technology reliability (casualty risk), technology innovation, and resilience. Environmental
criteria include an increase in the share of RES in the total energy balance, the impact on

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climate change and the reduction of pollution (SO2, NOx, NH3, NMVOC), the generation of
waste, and respect for local natural conditions.
A multi-criteria analyses method [22] was used to develop a model for ranking electricity
production technologies. Financial, technical, environmental, and socio-economic
perspectives were considered. Financial criteria included overnight costs, variable operating
and maintenance costs, fixed operating, and maintenance costs, as well as fuel costs.
Technical criteria included the heat tariff, production efficiency, and capacity utilization
factor. Environmental criteria were measured as externalities and reduction in a lifetime.
Socio-economic and political criteria were defined as available fuel reserves in years, job
creation, and net imports as a percentage of consumption.
The study on energy planning and the development of RES at the regional level in Greece
uses economic, environmental, social, and technical criteria [7]. Economic criteria included
investment costs, net present value, operating and maintenance costs, payback period, fuel
costs, and lifetime. GHG emissions reduction, land use, and visual impacts were included in
the environmental criteria. Social factors included social acceptability, job creation, and
social benefits. Finally, the technical criteria analysed in the study were efficiency, security,
accessibility, and reliability.
1.3. Aim and Scope of the Article
The article is mainly focused on the impact assessment of RES support policies and broader
implementation. The economic and technical optimization of the overall national energy
sector has been performed through a SD modelling approach, however, the modelling process
itself is considered only indirectly in this article, and the scenarios are presented in a
concentrated way rather than described in more detail. As it is a case study for Latvia
particularly, there is no focus on the international context instead it focuses on the influence
of the local specifics. While neighbouring countries have similar environmental and
economic conditions, the legislative differences create disparate perspectives. Comparison
with other countries must be performed taking this dimension fully into consideration, and it
must be noted that the results would not be directly applicable to other countries. However,
the model that is used, is adaptable to the specific conditions of any location. The developed
methodology and identified criteria can be considered when evaluating the power sector
transition to carbon neutrality in any country.
2. METHODOLOGY
The research process consists of several steps shown in Fig. 1. First of all, social,
environmental, technological, and economic barriers are identified based on the available
literature. Further, the possible policy instruments are defined as any actions on the national
or regional level that legislative or administrative authorities can implement to directly or
circumlocutorily decrease the barriers’ effect. The next step is the compilation of parameters
and their values that are necessary for the assessment and development of the system
dynamics (SD) simulation model for energy system optimisation. When the SD model has
been developed and validated, the scenario modelling process starts. The focus of this paper
is to analyze the additional impacts of the transition to climate neutrality; thus, the detailed
description of the SD model is excluded from this study. The results obtained from the
developed SD model are supplemented with additional impact criteria to provide additional
impact assessment using a multi-criteria analysis.

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Fig. 1. The algorithm of the research.
2.1. Development of SD Model
The developed SD model looks at both the economic potential of whether and how
economically viable the RES technology is and its potential to enter the market by competing
with existing and traditional technologies. Economic potential does not in itself mean the use
of technologies since the system is subject to resistance from existing market players who do
not want to give up their position or are not yet ready for change; nevertheless, as a parameter
in the model, the market potential also takes these factors into account. Mathematical
equations of the model are derived from the literature review as well as from model-building
group seminars with stakeholders and are based on expert opinions. The necessary data has
been collected from statistical sources, scientific literature, and publicly available reports. A
more detailed description of the developed SD model can be found in the authors’ previous
research [23]–[27]. The developed SD model is a comprehensive tool for the energy sector in
Latvia that interconnects modeling of the related systems into the consistent structure. The
model is used in studies regarding solar energy potential [28], gas infrastructure and storage
facilities [29], and even railroad electrification scenarios [30].
Using a model that is part of a larger-scale model provides extra reliability, since it is
additionally validated by the outcomes of other studies.
The structure of the model is built based on two large blocks – energy production and energy
consumption. Although energy resources are used directly in the part of energy production,
where they generate electrical, mechanical, or thermal energy, it is also important to consider
the share of consumers. It is consumers who determine how much and where energy is needed.
Given that energy users are expected to become energy efficient in the future, as well as new
solutions (smart grids, decentralization, aggregators, low-temperature district heating, etc.)
might enter the energy supply system in the future, and this will also have an impact on the
share of energy production. Hence, both the production and consumption share need to be
seen in order to model the potential for energy use [26], [27].
The SD model of the RE system has been verified to evaluate the relevance of the baseline
scenario to the real conditions. The model structure was validated through expert assessment
and scientific literature, identifying mutually affecting factors. Certain parts of the model
have been tested and published in scientific journals where their adequacy has been assessed
by the scientific community through the review process. To check whether the model structure
works in non-standard situations, extreme condition tests were carried out in the model’s

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stock and flow structures. This makes it clear that the model will be able to generate reliable
results also in extreme situations.
In addition, a comparison of the results of the model with historical statistics was carried
out to assess the behaviour of the SD model and its correspondence to the real conditions. As
the SD model aims to predict the trend in the share of RE sources, then it is important to
analyse the possibilities of modelling changes in the consumption of individual energy
sources. Fig. 2 shows the example of modelled amount of electricity produced by individual
energy sources that is comparable to historical statistical data. The historical amount of
electricity produced from wind energy shows a relatively large change over the years, which
is explained by aspects of the operation of wind turbines, but the SD model does not model
such changes. It is shown that the overall wind electricity growth trend matches. The analysis
of the amount of electricity produced from natural gas shows that the amount modelled in the
SD model is slightly lower, which is explained by the fixed ratio of heat to electricity
produced in cogeneration plants, but, cogeneration plants often also operate in condensation
mode thus producing more electricity.
(a) (b)
Fig. 2. Model verification through comparison with historical results of: a) wind power, and b) natural gas power
production rates.
Although the consumption of individual energy sources shows a slight difference from the
modelled amount, the overall trends in consumption of sources are the same. The results of
the different verification tests showed that the model structure developed and behaviour
accuracy are sufficient to analyse the impact of various policy instruments on increasing the
potential for the integration of RES in the future.
2.2. Defining the RES Development Scenarios
Policy planning documents of Latvia are setting long-term goals until 2050. Therefore, it is
proposed to analyse two different scenarios for the period up to 2050 and identify the values
that could be achieved by 2030. Therefore, the research compares the results of modelling
three different scenarios – the Baseline Scenario, the National Energy and Climate Plan
(NECP) Policy Instruments Scenario for 2030, and the Climate Neutrality Scenario for 2050.
The aim is to define the choice of the best RE policy in Latvia. Further, the multi-criteria
analysis method is used since it is a suitable tool for assessing impacts caused in the short-
term (until 2030) and the long-term (until 2050).
Modelled results
Historical production rates
Modelled results
Energy
produced,
GWh/year
Modelled results
Energy
produced,
GWh/year
Energy
produced,
GWh/year
Years Years

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The support policies and a suitable legal framework can be implemented to overcome the
barriers to RES integration described in Section 1.1. Table 1 summarizes potential policy
instruments for reducing specific barriers.
TABLE 1. OVERVIEW OF POLICY INSTRUMENTS FOR REDUCING BARRIERS
Barriers Policy instrument
Technical barriers
Support for science and additional research on the construction of offshore wind farms,
use of hydrogen
Promoting the integration of storage systems
Support for the implementation of power-to-heat and power-to-gas technologies
Sectoral alignment and consumer management
Development of electrical networks
Development of electric car charging infrastructure
Biomethane infrastructure development
Economic barriers
Mandatory procurement component
Subsidies for RES technologies
Support for connection costs
Reduced credit rates
Tax rebates
Raising fossil taxes
Political and
economic barriers
Setting long-term RES goals at the national and local government level
Support for local governments in developing energy plans
Additional income for local governments where RES capacities are installed
The simplified administrative process for project coordination
Social barriers
Educational campaigns
Environmental impact assessment A process facilitated
Building energy communities
Geographical and
ecological barriers
Identification of suitable sites for solar and wind technology deployment
Evaluation of spatial plans
Support for innovations to reduce environmental impact and increase technology
efficiency
Support for increasing the efficiency of the use of RES
Assessing the risks of RES implementation and adopting appropriate measures
Restrictions on the use of high-value biomass in the energy sector
Restrictions on the export of bioresources
2.2.1. Baseline Scenario
The Baseline scenario describes the current situation in the SD model without additional
policy tools. The base year is 2017, so the modelled scenarios can be compared to the current
situation. The fiscal policy remains unchanged by applying excise tax on natural gas
(differenced for heat supply, use as fuel and application for industrial processes), petrol,
diesel (differenced for use in agriculture) and liquefied petroleum gas (LPG). CO2 emission
costs are modelled either through an emission trading system and quota price or by applying
natural resource tax (NRT). In addition, vehicle registration tax and subsidized electricity
taxes are included in the approved tax levels without any increases in upcoming years. The
historical subsidies for energy efficiency in different sectors from the year 2017 to 2022 are
included within the Baseline scenario.

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2.2.2. NECP Development Scenario
The scenario envisages the inclusion of NECP policy instruments to analyse the long-term
impact of these policies until 2050. The achieved share of RES and other main indicators for
comparing scenarios were modelled. The policy measures included are:
− Support for biogas and biomethane production, use of biomethane;
− Support for research and development of RES technologies;
− Support for the use of RES and improvement of energy efficiency in district heating.;
− Support for the integration of RES technologies in the industrial sector, local and
individual heating, and agriculture sector;
− Support for the construction of high-capacity offshore wind farms and reduced
territorial restrictions for the construction of wind farms;
− Facilitated credit requirements for the use of solar energy for electricity generation;
− Extended net systems, extending it to remotely installed equipment owned by one
household;
− Gradual increase of the NRT on both emissions of air pollutants and CO2 emissions
into the air, as well as coal, coke, and lignite;
− Information campaigns on ways to reduce the use of resources used daily, on the
importance and necessity of RES and its contribution and benefits to the economy,
society, nature, and climate, on the principles of socially responsible use of RES;
− Information and education campaigns for local governments and planning regions,
informing the population about the transition to zero-emission and low-emission
vehicles.
These policy instruments are used to reduce inconvenience costs resulting from the use of
RES, prove public awareness, and realize the economic benefits of using RES. For example,
there are intentions to extend the net payment system to include enterprises and increase the
share of self-consumption electricity from installed RES power plants in individual power
supplies.
Table 2 summarizes the information on modelled changes in fiscal policy based on the
information specified in NECP. The share of tax increase is based on historical tax increases,
forecasting a higher rise in excise duties on natural gas and natural resources tax and a more
moderate increase of tax rates in the transport sector. In this scenario, tax rates increase until
2030.
TABLE 2. OVERVIEW OF TAX POLICY CHANGES IN THE NECP SCENARIO UNTIL 2030.
Excise tax rates
Starting value in
2021
Growth rate, %
per year
Natural gas in heating, EUR/MWh 1.65 10 %
Natural gas as fuel, EUR/MWh 1.91 10 %
Natural gas for use in manufacturing-related processes, EUR/MWh 0.55 10 %
Petrol, EUR/1000 L 509 3 %
Diesel, EUR/1000 L 414 3 %
Diesel for farmers, EUR/1000 L 62.1 3 %
LPG, EUR/1000 kg 285 3 %
Natural resources tax
CO2 emissions, EUR/tCO2 15 10 %
Price per CO2 emission allowance in the ETS sector 22 3 %

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To reduce final consumption, financial support for improving energy efficiency in the
household, public, and industry sectors is included in the number of financial resources
specified in NECP. In addition, a change in the mode of transport is being implemented
through measures indicated in NECP such as improving public transport use possibility in
large cities, developing the construction of car parks (Park&Ride) infrastructure, promoting
railway as the backbone of a modern and environmentally friendly public transport system,
etc.
2.2.3. Climate Neutrality Scenario
Its additional measures for the policy instruments identified in the NECP scenario aim to
move towards climate neutrality in 2050. It is assumed that the support for integrating RES
into centralized electricity production, including the construction of onshore wind parks, is
provided without additional support for offshore wind parks. The supported intensity is
maintained to the same extent as in the NECP scenario. In the Climate neutrality scenario,
tax policy is the same increase as in the NECP scenario, but the tax rate continues to increase
until 2050.
Funding additional to that specified in the NECP scenario is provided for increasing energy
efficiency – an extra 200 million EUR in the public sector, 225 million EUR in the industrial
sector, and 600 million EUR in the household sector.
In addition to the measures listed before, the following support instruments are
implemented in this simulation:
− The virtual netting system is also applied to legal persons.
− More effective information campaigns have been implemented, reaching a higher share
of the target audience.
− The use of renewable electricity surpluses for the production of hydrogen for the
transport sector is promoted.
− Restrictions on the purchase of new cars powered by fossil fuels.
− The number of customers with an aggregator service increase, which provides a
reduction in energy consumption.
− Increasing rates of passenger transport using electric trains.
2.3. Scenario Impact Assessment and Multi-Criteria Analysis
A comprehensive impact assessment has been conducted to evaluate the potential impacts
of higher RES shares in the overall energy balance. Social factors include employment and
changes in end tariffs. Environmental factors include the share of RES achieved, land use,
lifecycle emissions, water use, and externalities. Technological factors include energy
availability, the efficiency of energy production, and the power factor of the shares of RES
achieved. The economic factors derived from the SD model are total necessary investments,
the financial support provided, and the increased tax burden. Since not all the criteria listed
in the scientific literature are applicable to impact assessment at the national level, only part
of them is considered [12].
Employment is measured as created jobs per GWh produced, which shows how many jobs
are created throughout the lifecycle of the technology, including design, construction,
operation, and maintenance [22]. Environmental factors related to the broader deployment of
RES technologies include RES share in various sectors, land use which is defined as the area
needed for technology, including land use for resource extraction and other phases of the
lifecycle and the indirect environmental costs of the specific technology; water use [31].

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Energy availability is determined as the required amount of energy produced, divided by
the total period, and measured as a percentage [32]. The efficiency of energy production
shows how much energy is used effectively for the specific technology. The power factor is
the ratio of the electricity produced by a generating unit during the respective period, which
could have been produced in continuous full capacity mode during the same period [22].
The necessary investment costs, the costs of the financial support provided, and the tax
payments are used as the leading economic criteria. The total amount of funding provided in
the Baseline scenario is limited to the budget that has already been used in 2017–2021. In the
Climate neutrality scenario, additional funding is also allocated to the power supply and
individual sectors – households, industry, and commercial.
Table 3 shows the indicators contained in various studies that can be used to describe the
effect of the barrier and compare and model scenarios.
TABLE 3. CRITERIA USED IN THE SCIENTIFIC LITERATURE FOR IMPACT ESTIMATION [33]–[36]
Criteria Description Unit
Energy availability
Share of time within which the power plant can provide the
necessary capacity
%
Employment
Number of jobs created during the lifecycle, including
design, construction, operation, and maintenance
Jobs per year/GWh
Land use Required area m2
/MWh
Noise pollution Noise generated dB
Energy production
efficiency
Energy used efficiently %
Power factor Duration of use of installed capacity %
Economic division Share of RES contribution to GDP % (of EUR)
Payback schedule Technology payback Years
Costs of energy
production
Operating and maintenance costs EUR/kWh
Capital expenditure Equipment and technology costs EUR/kWh
Fuel costs Fee for fuel used EUR/kWh
Emissions (lifecycle) Emission generated throughout the lifecycle gCO2e/kWh
Delivery tariff Costs of electricity for final consumer EUR/kWh
Technological safety Number of casualties from the use of technology Injuries/hours worked
Ecosystem protection Bird, animal accidents
Number of
events/hours worked
Social acceptability Public opinion
% support / average
assessment
Economic lifetime Duration of use of technology Years
Biogenic emissions Emissions from biomass gCO2e
Pollutants
Carbon monoxide, solid particles, nitrogen oxide, sulfur
dioxide
Tons/MWh
Use of water Water consumption L/MWh
Availability of resources
to other industries
Consumption of resources m3
, tons or MWh
Hazardous materials,
waste
The volume of generated hazardous waste tons
Recycling Recycled amount after the use of technology %

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Continuity of
manufacturing
Consistent production throughout the year
Manufacturing
variations
Visual impact Landscape change Positive / negative
Externalities Costs caused by different impacts EUR/kWh
Loss of lifetime The expected loss of life is a degree Days
Fuel reserves years
Number of years until complete depletion of the respective
non-renewable source on earth
Years
Since the defined criteria include impacts that are not directly comparable, the multi-criteria
decision-making method (MCDM) has been used to assess the various aspects of the scenarios
evaluated. The analytic hierarchy process (AHP) is one of the most popular MCDM methods
because it is understandable and easy to implement [36]. AHP is a valuable tool for comparing
alternatives, using both quantitative and qualitative criteria that have contributed to its use to
address various problems around the world. In addition, the method is flexible and adaptable
to perform comparisons. It is also possible to conduct a consistency check [37]. It uses
hierarchical levels to structure the decision-making process [32].
Not all of the factors analysed have the same impact on sustainable development.
Therefore, the criteria examined have been prioritized using the AHP paired comparisons
method. Several experts from the Riga Technical University have carried out the evaluation
separately to provide a comprehensive assessment. Higher priority is given to the share of
RES achieved, the prices of heat, electricity, and RES fuels. The lower impact is applied to
land use, employment, water use, and fossil fuel price criteria (Fig. 3). While several of the
included factors lack the proven effect due to the current data availability and the antecedent
Latvia-specific research, they are not excluded. The reason behind that is that they are
admitted to be part of the crucial factors globally based on the literature review. Hence there
is a possibility that their significance will increase once more research is performed in this
direction. Additionally, leaving them allows easier adaptability of the methodology to
conditions of a different locations. The MCDM analyses are also carried out with equal
criteria weights to compare the obtained results.
Fig. 3. Weights used for different factors.
0.12 0.12 0.12 0.12
0.10 0.10
0.08
0.05
0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
Total
RES
proportion
Average
heat
energy
tariff
Average
power
tariff
Average
price
of
RES
fuels
External
enviromental
costs
Life
cycle
emissions
Energy
availability
Cumualtive
investments
Cumulative
support
Tax
payments
Average
price
of
fossil
fuels
Power
generation
efficiency
Capacity
factor
Land
use
Employment
Water
usage
Weight
of
criterion

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3. RESULTS
3.1. SD Model Results and the Values of the Assesses Parameters
When looking at the overall energy consumption by resources, a significant reduction in
natural gas and another fossil resource is seen. At the same time, an increase is observed in
the use of solar and other RES (Fig. 4). Natural gas consumption decreased by 50.4 % in the
NECP scenario and 92 % in the climate neutrality scenario compared to the baseline scenario.
Compared to the baseline scenario, the reduction in other fossil resources is significantly
smaller – 23.3 % and 44.3 % in the NECP and climate neutrality scenario. This is mainly due
to fossil resources in the transport sector, where the reduction is more difficult to achieve.
Policy scenarios show a negligible reduction in the use of biomass while the use of solar and
other RES increases significantly. The NECP scenario shows an increase of 14.1 % in the use
of solar energy against the baseline scenario, the increase in the climate neutrality scenario is
already 128.2 %. Solar energy includes solar energy from both the heating and electricity
supply sectors. There is also a significant increase in the use of other RES. Compared to the
baseline scenario, the NECP scenario shows that the growth of another RES reaches 44.1 %,
while in the climate neutrality scenario, it is already 100.1 %.
(a)
(b)
0
10000
20000
30000
40000
50000
60000
2017
2021
2025
2029
2033
2037
2041
2045
2049
Energy
consumption,
GWh/year
0
10000
20000
30000
40000
50000
60000
2017
2021
2025
2029
2033
2037
2041
2045
2049
Energy
consumption,
GWh/year

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(c)
Fig. 4. Total energy consumption in modelled scenarios by resources: a), b), and c) Climate neutrality scenario.
3.2. Scenario Impact Assessment
One of the critical environmental factors characterizing sustainable development of the
energy sector is the share of RES achieved, which is compared for the different modelled
scenarios in Fig. 5. This factor also represents if it is possible to achieve targets set by the
European Union.
In the Baseline scenario, the total share of RES reaches 47 % in 2030 and 58 % in 2050. In
the NECP scenario, the total RES percentage increased significantly to 56 % in 2030 and
70 % in 2050. In the Climate neutrality scenario, nearly 100 % share of RES is achieved in
power supply and district heating, and the total percentage of RES reaches 81 %. The lowest
share of RES in all scenarios is in the transport sector, going at 9 % in the Baseline scenario
and 21 % in the NECP and Climate neutrality scenarios in 2030. In 2050, the share of RES in
the transport sector will be 11 % in the Baseline scenario, 30 % in the NECP scenario, and
43 % in the Climate neutrality scenario.
Fig. 5. Share of RES achieved in different scenarios.
0
10000
20000
30000
40000
50000
60000
2017 2021 2025 2029 2033 2037 2041 2045 2049
Energy
consumption,
GWh/year
Natural gas Other fossil resources Biomass Sun Other RES
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2030 2050 2030 2050 2030 2050
Base scenario NECP scenario Climate neutrality scenario
Proportion
of
RES,%
Transport sector Service sector Household sector Industry sector Power supply Heat supply

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1012
The results of the SD model summarized in Fig. 6 allow for a comparison of average heat
and electricity tariffs in development scenarios. In the Baseline scenario, the average heat
tariff in 2030 and 2050 is around 60 EUR/MWh, while the average electricity tariff rises from
52 EUR/MWh in 2030 to 56 EUR/MWh in 2050. In the NECP policy scenario, the heat tariff
increases slightly to 62 EUR/MWh in 2030 but reduces to 54 EUR/MWh in 2050. Until 2030
there is also a similar trend in the Climate neutrality scenario, while until 2050, the heat tariff
in this scenario decreases to 50 EUR/MWh. In the NECP scenario, the average electricity
tariff reduces to 51 EUR/MWh but slightly rises to 54 EUR/MWh in 2050. This increase is
slightly higher in the climate neutrality scenario – to 53 EUR/MWh in 2030 and 58
EUR/MWh in 2050, but the average tariff is lower than in the Baseline scenario. In addition,
changes in fuel prices have been analysed by doing a separate analysis of fossil fuels (diesel,
petrol, compressed natural gas) and RES fuels (biofuels, biomethane, and hydrogen).
Fig. 6. Comparison of energy costs in different scenarios.
The working years indicate job creation, hence the opportunities to boost employment in
the region. Solar energy together with hydropower plants (HPP) creates the most employment
places in every scenario, especially huge the impact is in case of the climate neutrality
scenario. For HPP the number of workplaces is static, and those are jobs that are currently
available, most importantly – those are the ones that are located locally while the solar energy
usage creates jobs mostly in the country of the origin of the imported technologies. Similar it
is for the wind energy while biomass is another source that employs primarily locals.
Biomass is the source that requires the most land and water regardless of the scenario.
For both of those factors, biomass is the only RES where those factors are significant at all.
High amount of used water is also indicated by hydro-power plants. However, all used water
is included in consumption, the losses of the resource do not occur directly, and the impact
changes are not anticipated in any of the energy sector scenarios.
The external environmental costs (Fig. 7) are higher for the use of natural gas, so the rest
of the RES has a significant positive impact on ecological parameters. However, solar and
wind energy also entails external costs. Therefore, the total externalities in the NECP and
Climate neutrality scenarios in 2030 and 2050 are similar. The most significant lifecycle
emissions are caused using natural gas and biomass. In the Climate neutrality scenario,
lifecycle emissions from solar energy also increase slightly, as PV technologies need to be
produced. However, a significant reduction in lifecycle emissions is seen in the Climate
neutrality scenario.
0.0
50.0
100.0
150.0
200.0
250.0
2030 2050 2030 2050 2030 2050
Prices
of
energy,
EUR/MWh
Average heat energy tariff Average power tariff
Average price of RES fuels Average price of fossil fuels

____________________________________________________________________________ 2022 / 26
1013
(a) (b)
Fig. 7. Environmental costs and emissions: a) External environmental costs in different scenarios; b) Comparison of
lifecycle emissions.
The consumption of biomass resources is assessed as an additional factor applying it to the
expected availability of biomass resources in the energy sector. In the Baseline scenario, by
2050, around 65 % of available wood energy will be consumed, while the share of biomass
consumed in the NECP scenario by 2050 even slightly decreases due to other RES
technologies. In turn, in the Climate neutrality scenario until 2050, 82 % of the wood
available per year is consumed.
The comparison of the technical criteria for the various modelled scenarios is summarized
in Fig. 8.
Fig. 8. Technological capabilities, percentage.
0
10
20
30
40
50
60
70
80
2030 2050 2030 2050 2030 2050
Tehnological
criteria,
%
Power generation efficiency Energy availability, % Capacity factor
0
1000
2000
3000
4000
5000
6000
7000
8000
2030 2050 2030 2050 2030 2050
Base
scenario
NECP
scenario
Climate
neutrality
scenario
External
enviromental
costs,
thsd.
EUR
Natural gas
HPP
Biomass
Wind energy
Solar energy
0
20000
40000
60000
80000
100000
120000
140000
2030 2050 2030 2050 2030 2050
Base scenario NECP
scenario
Climate
neutrality
scenario

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1014
The financial aid granted to promote the implementation of RES technologies in the
different scenarios is summarized in Fig. 9(a). In the NECP scenario, the total support
provided for implementing the various policy support mechanisms amounts to 605 MEUR,
but the support granted in the Climate neutrality scenario amounts to 765 MEUR in 2030 and
1545 MEUR until 2050. Most of 44 % of the funding in the NECP scenario is allocated to the
heating sector and 37 % to the transport sector.
The results of the SD model for the total investment needed for the replacement of energy
production infrastructure in the various scenarios are shown in Fig. 9(b). It compares the total
investment required in the Baseline scenario with investment in the NECP and Climate
neutrality scenarios; an increase of around 46 % is observed compared to 2030. On the other
hand, the Climate neutrality scenario shows a 9 % increase in investment needed in 2050
compared to the NECP scenario amounting to 18.187 million EUR. The most significant
investment occurs in the transport sector in all scenarios. In the Climate neutrality scenario,
investment also increases for the electricity sector’s transition to RES technologies.
(a)
(b)
Fig. 9. The total funding and investment needed: a) Total funding; b) Investments.
0
200
400
600
800
1000
1200
1400
1600
1800
2030 2050 2030 2050 2030 2050
Base scenario NECP scenario Climate neutrality
scenario
Total
amount
of
subsidies,
MEUR
Transport sector
Individual sectors
Power supply
Heat supply
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
2030 2050 2030 2050 2030 2050
Total
investment,
MEUR

____________________________________________________________________________ 2022 / 26
1015
Table 4 summarizes the results obtained by the SD model on cumulative tax payments in
analysed scenarios.
TABLE 4. OVERVIEW OF CUMULATIVE TAX PAYMENTS IN EACH OF THE ANALYSED SCENARIOS
Tax payments, million EUR Baseline scenario NECP scenario Climate neutrality scenario
2030 2050 2030 2050 2030 2050
Natural gas excise duty 247 525 267 642 272 775
Natural resources tax 119 274 130 330 135 398
Transport fuel excise duty 6415 16 309 6494 20 579 6307 17 767
3.3. Multi-Criteria Analysis
For the multi-criteria analysis, the obtained values have been normalized to harmonize units
of measure and summarised in Table 5.
TABLE 5. NORMALISED DECISION-MAKING MATRIX FOR COMPARING DIFFERENT SCENARIOS
UNTIL 2050
Criterion Baseline scenario NECP scenario Climate neutrality scenario
Cumulative support 0.02 0.37 0.93
Cumulative investment 0.45 0.61 0.66
The total share of RES 0.48 0.57 0.67
Tax payment 0.51 0.65 0.57
Average heat tariff 0.63 0.57 0.53
Average electricity tariff 0.58 0.56 0.60
The average price of fossil fuels 0.56 0.58 0.58
The average price of RES fuels 0.70 0.52 0.49
Energy availability 0.65 0.58 0.50
Energy production efficiency 0.62 0.59 0.52
Capacity utilisation factor 0.65 0.58 0.50
Land use 0.55 0.57 0.61
Employment 0.43 0.51 0.75
Externalities 0.64 0.55 0.54
Lifecycle emissions 0.78 0.52 0.35
Use of water 0.57 0.58 0.59
The obtained MCDM results for 2030 and 2050 are summarized in Fig. 10, which shows
the comparison for different scenarios, applying prioritized and matching criteria values.

____________________________________________________________________________ 2022 / 26
1016
(a) (b)
Fig. 10. MCDM results: a) Assessment until 2030; b) Assessment until 2050.
The results obtained show that using equivalent weights for all the criteria analysed, the
Baseline scenario with the lowest investment, necessary subsidy support, heat tariff and price
of fossil fuels has been assessed as the best solution. On the other hand, if the criteria analysed
are prioritised, a higher assessment is reached for the climate neutrality scenario.
4. CONCLUSIONS AND DISCUSSION
Initial capital, transaction costs, the economic situation, and the availability of financial
incentives and subsidies are essential factors that can determine the speed of the
implementation of RES technologies. The initial capital costs of RES technologies are high
compared to fossil energy sources. As many energy producers choose to keep their initial
investment costs lower while maximizing profits, high investment costs are still a significant
barrier to implementing sustainable RES technologies. Higher construction costs may lead
financial institutions to perceive loans taken for the development of RES technologies as
risky, thus issuing loans at higher rates. In natural gas and other fossil fuel power plants, the
costs of raw materials can be passed on to the consumer, reducing the risk associated with the
initial investment. However, if the external costs and environmental benefits are considered
during the project’s life cycle, wind and solar power plants may be the cheapest sources of
energy production.
The transition to the use of RES is a political struggle, and efforts to move away from fossil
fuels and decarbonize society will not be possible without changing the current energy
system. Despite the growing sense of urgency in the fight against climate change, the
implementation of RES technologies seems to be hampered by democratic procedures. The
general public lacks trust in the RES. It slowed down the pace of RES technology
infrastructure, technological knowledge development, circulation, and use. For this reason,
there is a need to raise awareness of RE in communities and focus on the necessary good
socio-cultural practices. People in rural regions could be motivated by the created workplaces.
If the importance of solar energy increases in case of any scenario, the most significant
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
Base
scenario
NECP
scenario
Climate
neutrality
scenario
Closeness
to
ideal
solution
Prioritised criteria Equal criteria
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
Base
scenario
NECP
scenario
Climate
neutrality
scenario
Closeness
to
ideal
solution
Prioritised criteria Equal criteria

____________________________________________________________________________ 2022 / 26
1017
number of working years by 2050 will be created through this resource. In the case of wind
energy and biomass, these changes are lower.
Public education campaigns have been identified as the main policy instrument for reducing
social barriers, which would promote the understanding of all sectors about the
implementation, costs, and benefits of RES technologies. The environmental risk assessment
coordination process could be facilitated or standardized to shorten the installation time of
wind farms and reduce barriers. On the one hand, there would be a need for greater public
involvement and information on the construction of wind farms. Still, on the other hand, it
would be necessary to reduce the impact of unfounded public objections on the project
coordination process. Another policy measure that would reduce both social and technical
barriers would be financial and administrative support for the development of energy
communities.
A more appropriate and helpful approach would be to consider the development problems
of RES technology projects as mainly social problems with technical aspects and not the other
way around. Adopting this view means focusing on social barriers as a possible obstacle to
developing RES technologies.
The main policy instruments for reducing technical barriers are related to supporting the
development of innovative RES technologies. The alignment of consumption and energy
production loads has a crucial role. The integration of storage systems, the use of surplus RES
electricity in other sectors, the alignment of sectors, and the promotion of consumer
management should be encouraged. Support can be provided financially to reduce the cost of
these technologies and through research to raise awareness among energy producers of
innovative technological solutions.
A crucial technical barrier may be formed due to insufficient infrastructure. Therefore, the
development of infrastructure related to the use of RES should be promoted, such as
compliance with the electricity network capacities, installing electric car charging points, and
installing biogas treatment plants.
The main policy instrument is financial support to cover RES technologies' capital costs
and connections or a mandatory procurement component for RES electricity to reduce
economic barriers. In addition, financial aid can be provided to connect RES equipment to
the electricity grid, or credit interest rates can be reduced when purchasing RES technologies.
Economic barriers can also be reduced through various tax rebates, for example, a reduction
in value-added tax on RES technologies or a real estate tax rebate on locations where RES
technologies are installed. In turn, to increase the economic profitability of RES resources
about fossil resources, tax rates for fossil resources can be raised.
To reduce geographical and ecological barriers, it is necessary to promote the efficient use
of RES, for example, by promoting the increase of combustion efficiency in biomass boilers
or the installation of high-efficiency solar panels. It is possible to reduce the risks associated
with installing low-quality RES equipment by establishing an official list of specialists who
have confirmed the quality of the work or by performing inspections of RES equipment. An
essential role in reducing barriers is identifying appropriate areas suitable for the location of
wind farms and solar parks and marking these places in the territorial plans of local
governments. To promote the reduction of the environmental impact of RES technologies, it
is possible to provide support for the development of innovative solutions. It is also essential
to define the sustainable use of biomass at the national level and develop guidelines for using
bioresources in local governments and companies to reduce the export of biomass and the use
of quality wood in energy. In the case of the use of biomass energy, the required land area is
significantly above the potential needs of all other resources. In the Climate neutrality
scenario, the amount of land needed to produce solar energy increases slightly.
Considering that solar and wind technologies have lower energy availability, energy
production efficiency, and capacity utilization factors, in the Climate neutrality scenario until

____________________________________________________________________________ 2022 / 26
1018
2050, the technological criteria are lower than in the NECP or Baseline scenario. When
planning the energy sector transformation and supporting storage systems that increase
technical capabilities, this factor should be considered.
Increasing fossil taxes also significantly increases the cumulative tax costs that would need
to be covered by energy producers and merchants consuming fossil energy resources.
However, in the Climate neutrality scenario, the cumulative amount of excise duties on
transport fuels obtained in 2050 is lower than in the NECP scenario, as the consumption of
fuels not subject to excise duty increases significantly.
The results show that using equivalent weights for all the criteria analysed, the Baseline
scenario with the lowest investment, necessary subsidy support, heat tariff, and price of fossil
fuels has been assessed as the best solution. On the other hand, if the criteria analysed are
prioritized, a higher assessment is reached for the climate neutrality scenario.
The long-term assessment shows that when equivalent values of the criteria analysed are
used, the Baseline scenario gives the highest results in the multi-criteria analysis. In contrast,
the prioritization of impact factors shows that the Climate neutrality scenario provides an
assessment closer to an ideal solution or a more sustainable energy sector.
The research methodology suggests using additional social and environmental criteria for
a sustainable transition of the existing energy supply system. The future research steps should
include the identified set of criteria in the structure of the developed SD model for a more
accurate simulation of optimal resource balance in the future carbon-neutral system by
considering different perspectives.
ACKNOWLEDGEMENT
This work has been supported by the European Social Fund within the Project No 8.2.2.0/20/I/008, “Strengthening of
Ph.D. students and academic personnel of Riga Technical University and BA School of Business and Finance in the
strategic fields of specialization” of the Specific Objective 8.2.2 “To Strengthen Academic Staff of Higher Education
Institutions in Strategic Specialization Areas” of the Operational Program “Growth and Employment”.
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Impact Assessment Of The Renewable Energy Policy Scenarios A Case Study Of Latvia