Montenegro Renewable energy issues

Transcription

1 Western Balkans Sustainable Energy Direct Financing Facility: Institutional Capacity Building Montenegro Renewable energy issues Calculation of impacts of achieving national targets and Desirability of caps on investment Erin Boyd ECONOMIC CONSULTING ASSOCIATES LIMITED 41 Lonsdale Road London NW6 6RA UK tel +44 (0) / fax +44 (0) Workshop, 8 December 2010, Podgorica Project funded by EBRD 1 (C) 2010 Economic Consulting

2 Impact of meeting the national targets Outline of presentation The national targets How the impact will be measured Measuring the impact Conclusions and final thoughts on the impact What role for caps? 2 (C) 2009 Economic Consulting Associates Ltd

3 The national targets Directive 2009/28/EC: mandatory national targets consistent with a 20% share of energy from renewable sources in the European Union s energy consumption by consumption in Montenegro is currently just over 20% 2020 national target for Montenegro = 30% National targets determined through a mechanistic calculation that includes: A 5.5% flat increase of the renewable energy share of 2005 gross final energy consumption, and An adjustment for GDP per capita. Member states have targets different from 20%. 3 (C) 2009 Economic Consulting Associates Ltd

4 Measurin g the impact Impact = Change in final electricity tariffs Consumers can choose fuel source for heating and cooling Price affects choice; but so does Convenience Consumers cannot affect choice of fuel for electricity generation Driven by policy and generation costs Feed-in tariffs affect in generation 4 (C) 2009 Economic Consulting Associates Ltd

5 Impact of meeting the national targets Any measure of the impact must consider a number of questions What would the final electricity tariff be in 2020 if there was no national target? What is the final electricity tariff in 2020 given the national targets? How will final electricity bills change given the national target? How much will the poorest households have to spend to maintain the same level of electricity consumption? 5 (C) 2009 Economic Consulting Associates Ltd

6 What would the final electricity tariff be in 2020 if there was no We need national target? a base from which to measure. This big? This big? Business-as-usual outcome: New generation investments displace imports at a lower cost by 2020 HPP Morača, HPP Komarnica and TPP Pljevlja II No targets = no FIT for small-scale Demand growth trend continues No energy efficiency KAP consumption of 1,000 GWh per annum Benchmark Results Final electricity tariff, cents/ kwh 8.33 Lowest income Monthly electricity bill, decile % of total monthly expenditures 12.1% Highest income Monthly electricity bill, decile % of total monthly expenditures 5.7% 6 (C) 2009 Economic Consulting Associates Ltd

7 What is the final electricity tariff in 2020 given the national targets? 30% Although focus on final electricity tariffs, not just about the amount of FiT generation in the final capacity mix 377 ktoe 377 ktoe FiT 7 (C) 2009 Economic Consulting Associates Ltd

8 Meeting the national target Number of ways to meet the national target Energy efficiency Contributions from the transport sector and heating and cooling sector Commissioning of large-scale hydro All will impact the final electricity tariff 8 (C) 2009 Economic Consulting Associates Ltd

9 Meeting the national target: With energy efficiency, GFEC = 1,219 ktoe Without energy efficiency, GFEC = 1,256 ktoe - Energy efficiency - Contributions from the transport sector and heating and cooling sector - Commissioning of large scale hydro 30% of 1,219 ktoe = 366 ktoe < 30% of 1,256 ktoe = 377 ktoe Lower gross final energy consumption means a lower absolute value of required to meet the national target 9 (C) 2009 Economic Consulting Associates Ltd

10 Meeting the national target: More required from electricity sector = more FiT likely to be required GFEC Non- GFEC, Electricity Sector, Transport and Heating and Cooling Sector - Energy efficiency - Contributions from the transport sector and heating and cooling sector - Commissioning of large scale hydro Non- GFEC GFEC More contributed from the nonelectricity sector = the less FiT needed Electricity sector is default sector in which shortfalls in will be met given customer choice 10 (C) 2009 Economic Consulting

11 Meeting the national target:, Electricity Sector, Transport and Heating and Cooling Sector GFEC Non- GFEC - Energy efficiency - Contributions from the transport sector and heating and cooling sector - Commissioning of large scale hydro, Electricity Sector, FiT, Electricity Sector, large scale hydro, Transport and Heating and Cooling Sector The greater the contribution from large scale hydro, the lower the requirement for FiT Large scale hydro is lower in cost than FiT 11 (C) 2009 Economic Consulting

12 What is the final electricity tariff in 2020 given the national targets? Answer depends on contributions from: Energy efficiency, Transport sector, Heating and cooling sector, New conventional hydro 6 scenarios to test 12 (C) 2009 Economic Consulting 1 - Policy Success 2 - Delay in achieving energy efficiency 3 - No contribution from the transport sector 4 - No contribution from biomass in heating 5 - No contribution from solar 6 - No new conventional hydro 2020 GFEC EU 2020 target Of which met through Transport Heating and Cooling - Biomass Heating and Cooling - Solar Total - Transport, Heating and Cooling Remainder to be met through the Electricity Sector Assumed Electricity to be commissioned by Difference between assumed electricity to be commissioned by 2020 and required electricity sector contribution (Negative values will need to be met through as yet unplanned )

13 What is the final electricity tariff in given the 8.40 national 8.16 target? 8.20 Final electricity tariffs, Euro-cents/ kwh % 1.7% % -1.6% -2.1% % % 0.0% -5.0% -10.0% -15.0% -20.0% % change from benchmark Policy Success 2 - Delay in achieving energy efficiency Final electricity tariffs, cents/ kwh Change from Benchmark 3 - No contribution from the transport sector 4 - No contribution from biomass in heating 5 - No contribution from solar 6 - No new conventional hydro -25.0% Benchmark electricity tariff = 8.33 cents/ kwh 13 (C) 2009 Economic Consulting

14 How will final electricity bills change given the national target? Monthly Electricity Bill Policy Success Delay in achieving energy efficiency No contribution from the transport sector 4 - No contribution from biomass in heating No contribution from solar No new conventional hydro Lowest income decile Highest income decile Benchmark, Lowest income decile = Benchmark, highest income decile= (C) 2009 Economic Consulting

15 How much will the poorest households have to spend to maintain the same level of electricity 12.8% consumption? 12.6% 12.6% 12.4% 12.3% 12.2% 12.0% 11.8% 11.8% 11.8% 11.9% 11.8% 11.6% 11.4% 1 - Policy Success 2 - Delay in achieving energy efficiency 3 - No contribution from the transport sector 4 - No contribution from biomass in heating 5 - No contribution from solar 6 - No new conventional hydro Electricity expenditures as a percentage of total household expenditures, lowest income decile Benchmark, Lowest income decile = 12.1% 15 (C) 2009 Economic Consulting

16 Initial conclusio ns Policy success = Lower final electricity tariffs Expected decrease = 2.1% Energy efficiency and commissioning large scale hydro are more important to maintaining the rate decrease than other options: No energy efficiency = 1.7% increase in final tariffs No new large scale hydro = 4.4% increase in final tariffs but (C) 2009 Economic Consulting

17 Two game changer s 1 - Alternative market prices: -10% lower than baseline -Flat rather than seasonal Final electricity tariffs, Euro/ kwh Policy Success 2 - Delay in achieving energy efficiency No contribution from the transport sector No contribution 5 - No contribution from biomass in from solar heating No new conventional hydro Final tariffs, Alternative market prices Final tariffs, Baseline market prices 17 (C) 2009 Economic Consulting

18 Two game changer s 2 - Alternative levels of KAP consumption Final electricity tariffs, Euro/ kwh Policy Success 7 - Closure of KAP 8 - KAP operation at 50% 9 - Closure of KAP/ No new thermal Final tariffs, Alternative market prices Final tariffs, Baseline market prices 18 (C) 2009 Economic Consulting

19 Final conclusio ns on impact and summary % gross final energy consumption from Size and direction depend on: Contributions from transport sector and heating and cooling sector, although less influence than: Large scale hydro and energy efficiency: outcomes which minimise negative impacts Current plans for generation remove most of pressure on non-electrical sectors Risk over reliance on favourable export revenues Particularly given potential reductions in KAP consumption 19 (C) 2009 Economic Consulting

20 Closing thought on policy success Policy Success = no negative impact to consumers Policy goals: Energy efficiency savings Final electricity tariff without national target = 8.33 cents/kwh with national target = 8.16 cents/kwh Commissioning of large scale hydro on the Rivers Morača and Komarnica Development of in the heating and cooling sector and in the transport sector Commissioning of the undersea cable between Montenegro and Italy Reduction of 2.1% 20 (C) 2009 Economic Consulting

21 Desirabili ty of caps on investme nt What role for caps? 21 (C) 2009 Economic Consulting

22 Caps to be set such that: No capacity, specified in MWs, beyond the amount required to meet the national target is eligible to receive the FiT 22 (C) 2009 Economic Consulting

23 Caps on investme nt 1 - Policy Success 2 - Delay in achieving energy efficiency 3 - No contribution from the transport sector 4 - No contribution from biomass in heating 5 - No contribution from solar 6 - No new conventional hydro 7 - Closure of KAP 8 - KAP operation at 50% 9 - Closure of KAP/No new thermal 2020 GFEC EU 2020 target Of which met through Transport Heating and Cooling - Biomass Heating and Cooling - Solar Total - Transport, Heating and Cooling Remainder to be met through the Electricity Sector Assumed Electricity to be commissioned by Difference between assumed electricity to be commissioned by 2020 and required electricity sector contribution (Negative values will need to be met through as yet unplanned ) (C) 2009 Economic Consulting

24 1 - Policy Success 2 - Delay in achieving energy efficiency 3 - No contribution from the transport sector 4 - No contribution from biomass in heating 5 - No contribution from solar 6 - No new conventional hydro 7 - Closure of KAP 8 - KAP operation at 50% 9 - Closure of KAP/No new thermal Caps on investme nt Difference between assumed electricity to be commissioned by 2020 and required electricity sector contribution (Negative values will need to be met through as yet unplanned ) What to do when NO FiT is required to meet the national target? Cannot publish FiT and then not allow any investment to be paid 24 (C) 2009 Economic Consulting

25 Caps on investme nt Existing System Identified -E Energy Efficiency Commissioning of Large Scale Hydro from the Transport Sector from the Heating and Cooling Sector Scenario 1 Scenario 2 A more robust set of scenarios based on same elements for measuring the impact Scenario 3 Scenario 4 Scenario 5 Scenario 6 Scenario 7 25 (C) 2009 Economic Consulting

26 Scenario 1 Status quo Scenario 2 Energy efficiency only Scenario 3 New large-scale hydro only Scenario 4 Energy efficiency & large scale hydro Scenario 5 Energy efficiency, large scale hydro and Contributions from the Transport Sector Scenario 6 Energy efficiency and Contributions from Non- Electrical Sectors Scenario 7 - All available options How much FiT is required to meet the national target? EU 2020 Target, ktoe Known, ktoe Off which from the electricity sector, ktoe Of which from the transport and heating and cooling sector, ktoe Unidentified FiT -E, ktoe Unidentified FiT -E, GWh ,723 1, (C) 2009 Economic Consulting

27 Scenario 1 Status quo Scenario 2 Energy efficiency only Scenario 3 New large-scale hydro only Scenario 4 Energy efficiency & large scale hydro Scenario 5 Energy efficiency, large scale hydro and Contributions from the Transport Sector Scenario 6 Energy efficiency and Contributions from Non- Electrical Sectors Scenario 7 - All available options How much FiT is required to meet the national target? Not as simple as converting this to a MW capacity cap EU 2020 Target, ktoe Known, ktoe Off which from the electricity sector, ktoe Of which from the transport and heating and cooling sector, ktoe Unidentified FiT -E, ktoe Unidentified FiT -E, GWh ,723 1, (C) 2009 Economic Consulting

28 Not as simple as convertin g GWh required to a MW capacity A cap of 299 GWh or 1,723 GWh? 299 GWh of wind is not equal to 299 GWh of hydro given different capacity factor Unidentified FiT -E, GWh Scenario 1 Status quo 28 (C) 2009 Economic Consulting Scenario 2 Energy efficiency only Scenario 3 New large-scale hydro only Scenario 4 Energy efficiency & large scale hydro Scenario 5 Energy efficiency, large scale hydro and Contributions from the Transport Sector Scenario 6 Energy efficiency and Contributions from Non- Electrical Sectors Scenario 7 - All available options 1,723 1, Difficult to predict the exact amount of generation required to meet the EU 2020 target: 0 to 1,723 GWh Outcomes at top end of the range have a lower probability Only time will tell Even if exact amount could be identified, difficult to predict the distribution of generation among the FiT eligible technologies Without knowledge of the distribution among the various FiTeligible technologies, conversion of the GWh quantity into a MW limit is not possible.

29 Guiding Principle s for setting caps Technology-specific caps more generous for relatively less expensive technologies stricter for more expensive technologies recognise remaining resource potential Pursuit of policy goals may require these principles to be relaxed and alternative caps enforced Global caps set at the most expensive distribution for just meeting the EU 2020 target 29 (C) 2009 Economic Consulting

30 Scenario 1 Status quo Scenario 2 Energy efficiency only Scenario 3 New large-scale hydro only Scenario 4 Energy efficiency & large scale hydro Scenario 5 Energy efficiency, large scale hydro and Contributions from the Transport Sector Scenario 6 Energy efficiency and Contributions from Non- Electrical Sectors Scenario 7 - All available options Caps for the individual scenarios Unidentified FiT -E, GWh 1,723 1, Scenarios are categorised into three groups depending on the additional FiT required to meet the Significant Contribution: Caps must be generous for all technologies. Medium Contribution: Caps compatible with the achievement, or partial achievement, of a number of alternative non-fit options. national target 30 (C) 2009 Economic Consulting Low Contribution: Easier to consider alternative policy goals, such as pursuit of for its own sake. (Possible given the likelihood of cost reductions even if more is commissioned than is required, although source of the matters.)

31 Proposed Caps, MW Significant contribution required Medium contribution required Low contribution required On-shore wind Off-shore wind Hydro, Group I: <0.5 GWh p.a Hydro, Group II: 0.5 to 3.0 GWh p.a Hydro, Group III: 3.0 to 15.0 GWh p.a Hydro, Group IV: >15.0GWh Biomass: Wood-processing industry Biomass: Forestry and agriculture (C) 2009 Economic Consulting

32 Expected generation if cap met, GWh Significant contribution required Medium contribution required Low contribution required On-shore wind 1, Off-shore wind Hydro, Group I: <0.5 GWh p.a Hydro, Group II: 0.5 to 3.0 GWh p.a Hydro, Group III: 3.0 to 15.0 GWh p.a Hydro, Group IV: >15.0GWh Biomass: Wood-processing industry Biomass: Forestry and agriculture Total: 2,348 1,458 1, (C) 2009 Economic Consulting

33 Expected generation if cap met, GWh Significant contribution required Medium contribution required Low contribution required On-shore wind 1, Off-shore wind Hydro, Group I: <0.5 GWh p.a Hydro, Group II: 0.5 to 3.0 GWh p.a Hydro, Group III: 3.0 to 15.0 GWh p.a Hydro, Group IV: >15.0GWh Biomass: Wood-processing industry Biomass: Forestry and agriculture Total: 2,348 1,458 1, (C) 2009 Economic Consulting

34 Global caps Scenario Global Cap, MW 1 - Status quo Energy efficiency New large-scale hydro only Energy efficiency and large scale hydro Energy efficiency, large scale hydro and contributions from the transport sector 6 - Energy efficiency and contributions from the non-electricial sectors Flexible Flexible 7 - All available options Flexible 34 (C) 2009 Economic Consulting

35 Impact on consum ers Final electricity tariffs, cents/kwh % Increase from benchmark Electricity expenditures as a % of total household electricity expenditures, lowest income decile Benchmark % 1 - Status quo % 15.0% 2 - Energy efficiency % 14.8% Benchmark: Assumptions of status quo scenario, except without any additional FiT and with imports 3 - New large-scale hydro only % 14.0% 4 - Energy efficiency and large scale hydro % 13.6% 35 (C) 2009 Economic Consulting

36 Flexible caps when required is low Final electricity tariffs, cents/ kwh Commissioning of large scale conventional: rates still decrease no matter the cap -Set depending on desired capacity without large changes to tariffs Energy efficiency, large scale hydro and contributions from the transport sector 36 (C) 2009 Economic Consulting 6 - Energy efficiency and contributions from the nonelectricial sectors 7 - All available options Cap = 150M W Cap = 200 M W Benchmark = 9.73 cents/ kwh

37 Recomme nd-ations Technology-specific caps and global caps should be implemented Uncertainty in final outcomes means: Uncertainty on exact caps No static set of caps for all years to 2020 Enforced caps should: Start out at higher end of the range of proposed caps, Adjust down when information available. Adjustments can be part of the interim reports required as part of the EU Directive 37 (C) 2009 Economic Consulting

38 Thank you Erin Boyd Economic Consulting Associates 38 (C) 2009 Economic Consulting

39 Cost Risk The cost risk of caps at top end of the range and never reducing them regardless of non-fit options achievement is not substantial If: Technology-specific and global caps recommended for Scenario 1 (Status quo) are implemented All non-fit options are realised by 2020 The implemented caps are never reduced Then: Impact on final electricity tariffs is increase of 0.4% relative to benchmark This is despite 650 MW of additional generation being paid the FiT 39 (C) 2009 Economic Consulting