J. Knápek, J. Vašíček

Transcription

1 1th IAEE European conference RISK INCLUSION IN FEED-IN TARIFFS AND GREEN BONUSES CALCULATION J. Knápek, J. Vašíček Czech Technical University in Prague Faculty of Electrical Engineering Czech Republic IAEE, Wien 29 1

2 RES-E DEVELOPMENT IN CR ,48 % 4,91 % 4,74 % 3 4,4 % 25 GWh Biogass Wind Biomass Mun. waste PV Small hydro Large hydro 28, preliminary figures: 5,14% National indication target to 21: 8 % meeting the target is highly uncertain IAEE, Wien 29 2

3 STRUCTURE OF RES POWER GENERATION 27 Wooden chips and pellets 13,7% Hydro over 1 MW 31,6% Small hydro from 1 1 MW 14,4% Pulp extract 13,9% Plant materi,8% Other 1,4% Small hydro < 1 M 15,3% 3,4 TWh total RES power generation Sewage plants 2,2% Landfill gas 2,9% Biogas - agricu 1,3% Solid mun. waste,4% Wind 3,7% PV,1% Source: MPO IAEE, Wien 29 3

4 INDIVIDUAL RES-E PROJECTS DEVELOPMENT MW Development of installed power in wind appl ,5 149, ,5 34, ,2 11,5 3,4 1/22 1/23 1/24 1/25 1/26 1/27 1/28 1/29 8/ /22 1/23 1/24 Development of installed power in PV 1/25 1/26 1/27 1/28 12/28 2/29 8/29 12/ Inst. power [MW] Number of plants Source: ERU Inst. power [MW] Number of plants Source: ERU MW ,9 Development of installed power in biogas and sewage gas appl ,5 11,3 1/22 1/23 1/24 1/25 1/26 1/27 1/28 1/29 8/29 Inst. power [MW] 17,3 31,7 Number of plants 51, Source: ERU Hydro (65%) and biomass burning (28%) are dominant Boom of PV: result of gap in support scheme MW Development of installed power in SH < 1 MW 15,1 11,5 114,8 115,2 122, ,6 1/22 1/23 1/24 1/25 1/26 1/27 1/28 1/29 Inst. power [MW] Number of plants Source: ERU IAEE, Wien 29 4

5 MAIN AIMS OF CZECH SUPPORT SCHEME Elimination of investor s risk creation of long stable conditions Creation of economic intensiveness to invest Application of rate of return approach Development of all kinds of RES The same rate of return expected Cost of support are transferred to the final power consumers IAEE, Wien 29 5

6 LOGIC OF CZECH RES-E SUPPORT SCHEME 1 Preferential access to the grid Obligation of distribution or transmission company to purchase electricity Feed-in tariff and green bonuses annual free choice (excluding co-firing) Feed-in tariffs guaranteed for 2 years (3 for small hydro) Feed-in tariffs derived from individual RES reference projects Green bonuses should reflect higher risk Intentionally planted biomass should be economically preferred IAEE, Wien 29 6

7 LOGIC OF CZECH RES-E SUPPORT SCHEME 2 Inflation inclusion in range 2 to 4 % based on PPI index Logic of time matrix is applied Reduction of new feed-in tariff is -5%/year at maximum FT and GB announced by ERO Time matrix start in year X i=2 to 4% start in year X+1... year X year X+1 year X+2 year X+21 FT and GB for new plants in 29 F.T. G.B. Wind 9 63 S. hydro Biogas AF Landfill gas Sewage gas Biomass 1% 173/133/99 113/74/4 Co-firing - 52/27/1.5 PV over 3 kw Geothermal IAEE, Wien 29 7

8 RATE OF RETURN APPROACH Feed-in tariffs as the minimum prices to get NPV= NPV T n = " CF t!(1 + r n ) t= 1 # t = T n # t = 1 = [ MinPrice T n # t = 1 biomass Expenditures " Q t t "(1 + r + Subsidy n )! t t ]"(1 + r n )! t = c min, = T n! t= 1 Expenditures T t! t= 1 # (1 + r n ) (1 + Inf ) " t t " T! t= 1 # (1 + r Subsidy n ) " t t # (1 + r n ) " t Rate of return is equal to discount rate Discount taken as WACC (7%) IAEE, Wien 29 8

9 DISCOUNT RATE FOR FEED-IN TARIFFS Discount has WACC meaning Return on equity capital derived with help of CAPM e & # = # ) = ) ' $ 1+ ( ( d) '! " f L ( r r ) r r + "! m f L U 1 % D E Assuming r f =4,2%, β L =.96, interest rate 6,5%, tax rate, E/D=4/6 (3/7) WACC=7,7% (6,53%) IAEE, Wien 29 9

10 WACC, feed-in tariff and rate of return WACC (discount) value significantly influences value of feed-in tariff see reference project of wind PP! Feed-in tariff [ce/kwh],1,95,9,85,8,75, Discount rate [%] Rate of return on equity capital differs among investors! Rate of return on equity [%] Cost of debt capital [%] E/D=1/9 E/D=2/8 E/D=3/7 E/D=4/6 What is the investors risk in Czech support scheme? IAEE, Wien 29 1

11 CHANGES OF WACC IN TIME WACC value is not constant in time model inputs changed between 25 and 28 income rate reduction to 19 % decrease of interest rate (situation before economic crisis): 3,5-4% risk reduction (guaranteed period extended to 2 years, guaranteed inclusion of inflation) WACC for 28 conditions: 5,98% Reflect in new feed-in tariffs? IAEE, Wien 29 11

12 GREEN BONUSES power is sold on free market, GB is extra revenue introduced in scheme to motivate towards rational behaviour according to the grid needs responsibility for power deviation higher business risk should be reflected in GB values GB are derived from FT assuming higher risk GB! i " c min* MP i WACC assuming that sell on power market is only revenue is 1% (similar approach as in FT case) IAEE, Wien 29 12

13 GREEN BONUSES 2 WACC* derived from 7% value (revenues are fully secured) and 1% value (revenues are not secured) depends share of green bonus on total revenues three categories of WACC*: 7,5/8/8,5 c min* calculated with higher WACC MP i estimation of market price of power (assuming diagram of delivery and known forward trades) GB! i " c min* MP i GB for co-firing defined differently no changes in business risk from biomass utilization IAEE, Wien 29 13

14 QUESTIONS ON RISK INCLUSION Used approach assumes the same level of risk for all kind of RES-E projects, is it true? significantly different conditions to get all permissions for plant construction different technological risk projects with fuel (biomass) inputs can face shortage of suitable biomass on biomass market projects with heat delivery can be negatively influenced by changes in local heat market Assumption of uniform risk leads to preference of some kinds of projects IAEE, Wien 29 14

15 OTHER PROBLEMS OF SUPPORT SCHEME WACC approach: different economic motivation for small and big investors (differ in access to capital) What is the main goal of the scheme? Parallel support of some projects investment support from structural funds Leads to the unequal position of different investors (no legal right for investment subsidy) Heat utilization is not solved. RES utilization for heat production is not solved. IAEE, Wien 29 15

16 OTHER PROBLEMS OF SUPPORT SCHEME 2 Possible back distortion of biomass market prices Expected prices of biomass can be easily derived from green bonuses values Limitation of feed-in tariffs decrease can results in inadequate extra return PV applications are the best and safe investment No roof for any kind of RES Impossibility to include state strategy Effectiveness of support is not taken into account IAEE, Wien 29 16

17 CONCLUSIONS RES-E support scheme in the Czech Republic creates good and stable conditions for the investors Some imperfections still exist: different impact of rate on return approach to different investors assumption of uniform risk utilization of heat is not solved possible parallel support impossibility to include state strategy and preferences IAEE, Wien 29 17