Price- and Quantity-based Promotion of Renewables The European Experience

Transcription

1 Price- and Quantity-based Promotion of Renewables The European Experience Prof. Dr. rer. soc. oec. Reinhard Madlener Chair for Energy Economics and Management Director, Institute for Future Energy Consumer Needs and Behavior (FCN) / School of Business and Economics / E.ON ERC Director JARA-Energy, President Swiss Association for Energy Economics REENFOR International Forum on Renewable Energy 2013 Towards Raising Economic and Energy Efficiencies Russian Academy of Sciences, Moscow October 22-23, 2013

2 Presentation Outline 1. Introduction 2. Promotion of Renewables in Europe (overview, selected countries) 1. Germany 2. France 3. Italy 4. Spain 5. United Kingdom 3. Conclusions REENFOR 2013, October 21, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 2

3 1. Introduction Finite resources, lack of sustainability, and growing energy needs call for optimal resource allocation (i.e. efficiency) and renewables Increasing CO 2 emissions from fossil fuel use have a major long-run impact on the global climate and the quality of life ( winners & losers) Kyoto Protocol triggered EU targets and Action Plan: EU Directive 2001/77/EC (RES-E), replaced by 2009/28/EC (RES-E, heating, cooling) Key objectives: 20% reduction in greenhouse gases emissions (compared to 1990 levels) 20% share of renewable energy production (in final energy consumption) 20% improvement in energy efficiency (hope for energy savings, but ignoring rebound) EU Emissions Trading Scheme (EU ETS) for mitigating CO 2 emissions A set of legally binding national targets, to be achieved until 2020 National implementation: National Renewable Energy Action Plans (NREAP) Penalties for non-compliance (NREAP, EU ETS) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 3

4 1. Introduction: Impact of Major Economic Crises on Global CO 2 Emissions, Rise of Emissions vs. Decreasing Carbon Intensity Quelle: Global Carbon Project (Carbon Budget, 2010) 15. April 2010, E.ON ERC/RWTH Aachen University 4

5 1. Introduction: Global CO 2 Emissions from Fossil Fuel Use, by Production and Consumption (Developing/Industrial. Countries) Gt C/a Source: Global Carbon Project (Carbon Budget, 2010); übernommen von Peters et al. (2011), Nature CC 15. April 2010, E.ON ERC/RWTH Aachen University 5

6 2. Promotion of Renewable Energies in Europe (Overview) Julien / Lamla (2011) Some important policy questions: - Which technologies / renewable energy sources to promote? - Promote large-scale and/or small-scale systems? - Which (combinations of) policy instruments to use? - How to value technological diversity? REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 6

7 2. Promotion of Renewable Energies in Europe (Overview) Instruments used, RES contribution, 2020 target FIT European Commission (2011) Bonuses Quota obligation Investment grants Fiscal and other incentives %age of Renewable Energies (2005) %age of Renewable Energies (2010) 2020 Target Austria X X X 23,3 30,1 34 Belgium X X X X 2,2 5,4 13 Bulgaria X X 9,4 13,8 16 Cyprus X X 2,9 5,7 13 Czech Republic X X X 6,1 9,4 13 Denmark X 17 22,2 30 Estonia X X X 18 24,3 25 Finland X X 28, France X 10,3 13,5 23 Germany X X X 5, Greece X X X 6,9 9,7 18 Ireland X 3,1 5,8 16 Italy X X 5,2 10,4 17 Latvia X X X 32,6 32,6 40 Lithuania X X 15 19,7 23 Luxembourg X X 0, Malta X X X 0 0,4 10 Netherlands X X 2,4 3,8 14 Poland X 7,2 9,5 15 Romania X 17,8 23,6 24 Sweden X X 39,8 49,1 49 Slovakia X X 6,7 9,8 14 Slovenia X X X 16 19,9 25 Spain X X X 8,7 13,8 20 Hungary X X 4,3 8,8 13 United Kingdom X X X 1,3 3,3 15 REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 7

8 2. Promotion of Renewable Energies in Europe (Overview) 2020: 37% renewable electricity (expected) Source: Julien / Lamla (2011) [in GW] REENFOR 2013, October 22, 2013 Prof. R. Madlener. FCN, E.ON ERC/RWTH Aachen University 8

9 2. Promotion of Renewable Energies in Europe (Overview) Current situation Renewables energy technologies are still mostly not cost-competitive relative to most conventional ones Development of renewable energies based on publicly funded financial support schemes Directive 2009/28/EC: also specifies planning procedures, (pan-european) infrastructure development needs Climate and Energy Package EU Emissions Trading System (EU ETS), launched in 2005 Promotion of renewables became distinct element of climate policy in 2009 EU member states were asked to develop / introduce national support schemes Incentive schemes can take various forms (left to member states, subsidiarity) Source: Julien / Lamla (2011), Marcantonini / Ellerman (2013) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 9

10 2. Promotion of Renewable Energies in Europe (Overview) Challenge: Finding the appropriate promotion scheme, e.g. Feed-in tariff (FIT) system (e.g. in Germany, France, Spain) Guaranteed fixed prices and priority dispatch, quantity market-determined Quota-based tradable green certificate (TGC) system (e.g. in Italy, UK) Fixed quantity target, TGC price determined by supply and demand Balancing off, e.g. Sufficient financial incentives (to achieve set targets) Minimization of free-rider problem (windfall profits) Speed of decrease in construction and operating & maintenance cost (learning curve effects, economies of scale) Limitation of the policy-imposed financial burden (caps for funding) Julien / Lamla (2011) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 10

11 Installed Capacity [MW] 2.1 Germany EEG 2000 EEG 2004 EEG 2009 EEG StrEG Years Biomass Photovoltaic Wind Source: BMU 2013 (Federal Ministry for the Environment, Nature Conservation and Nuclear Safety) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 11

12 [MW p ] 2.1 Germany Entwicklung Diffusion of der photovoltaics Strombereitstellung in Germany: und electricity installierten Leistung production von Photovoltaikanlagen and installed capacity in Deutschland Energiebereitstellung [GWh] Electricity production [GWh] Installed installierte capacity Leistung [MWp] 2011: MW p [GWh] Quelle: BMU-KI III 1 nach Arbeitsgruppe Erneuerbare Energien-Statistik (AGEE-Stat); 1 GWh = 1 Mio. kwh; 1 MW = 1 Mio. Watt; Hintergrundbild: BMU / Bernd Müller; Stand: Juli 2012; Angaben vorläufig REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 12

13 2.1 Germany Julien / Lamla (2011) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 13

14 2.1 Germany Support scheme: Feed-in tariffs (FITs) Renewable Energies Act ( Erneuerbare Energien Gesetz ) Grid operator has to pay to the producer of electricity from renewable energy sources a fixed fee that depends on the type of plant Guaranteed price typically granted for 20 years Scheme allows grid operators and utilities to pass balancing costs on to the final consumer (external costs caused by renewable power producers!) EEG amendments every couple of years (2000, 2004, 2009, 2012) Tariffs adjusted by the federal network agency (BNetzA) according to clearly specified rules, depending on the year of commissioning Julien / Lamla (2011) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 14

15 2.1 Germany Erneuerbare-Energien-Gesetz (EEG) One of the most effective policies to promote renewables FIT: higher cost efficiency, higher applicability, and higher diversity of actors than quota and bonus systems Why was there a need for reform? Increasing share of EEG power in the generation portfolio Increasing amounts of fluctuating power generation Growing European integration of power markets governed by competition Rapidly decreasing electricity spot market (wholesale) price Increasing number of privileged companies being exempted Sources: Mendonça (2007), Langniß et al. (2009), Butler / Neuhoff (2004), BEE (2013) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 15

16 2.1 Germany Oct. 15: Announcement of new levy by TSOs (2014: 6.24 ct/kwh, up from 5.27 ct/kwh) Four major reasons for increase: 1. Markedly lower spot market price of electricity (2008: ca. 7 ct/kwh; 2013: ca. 3.7 ct/kwh) CO 2 certificate price down (2008: 24 /t; 2013: ca. 4.5 /t) Merit-order effect 2. Increase in the no. of privileged industrial enterprises (2011: 603; 2014: ca ) 3. Market premium (capacity shares involved: 90% wind, 40% bioenergy, 10% PV) 4. Compensation of forecast error ( closing the gap ) (spot market price decreased faster than expected) Merit-order effect D Shares in growth of EEG levy, % 13% 3% 2% 32% 30% REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 16 Promotion costs Decrease electr. price Industry privilege Market premium

17 2.1 Germany Development of the levy and other influencing factors, * (actually: 6.24 ct/kwh Promotion costs Forecasting error compensation (previous year) Decrease in electricity price Liquidity reserve Industry privilege (exemption) Market premium BEE (2013); * projected value for 2014 REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 17

18 2.1 Germany Exemptions for electricity-intensive industries (EEG 2012): 1 GWh p.a., share in electricity cost of gross value added of 14% No levy if self-generated electricity (exemption for ca. 50% of all electricity used by industry) Industry: ca. 240 TWh / Private HH: ca. 140 TWh / Service sector: ca. 140 TWh 2006: 282 enterprises were granted exemption (= 70 TWh electricity consumption), amounting to 410 million 2012: 734 enterprises (2.36 billion) 2013: 1691 enterprises 2014: 2300 enterprises? 15. April 2010, E.ON ERC/RWTH Aachen University 18

19 2.1 Germany Erneuerbare-Energien-Gesetz 2012 Revisions to FIT: FIT rates paid to generators have been revised downward in order to reflect market conditions and place downward price pressure on developers and manufactures Revision of FIT degression rates (new plants): German government decided to increase degression rates for biomass, on-/offshore wind, geothermal, and solar PV, thus imposing additional downward pressure on prices Market premium payments: encouraging direct sale of renewable electricity on the spot marked by introducing a market premium increasing participation of renewable energy generators in the wholesale market (2013: ca. 90% for wind, 40% for bioenergy, 10% for PV) BMU (2012) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 19

20 2.1 Germany Substantial burden put on electricity consumers: 20 billion p.a. Private households: 7.2 bn Industry: 6.1 bn Industry: 6. 1 bn bn Industry, commerce, trade, service, traffic, agriculture: 12.5 bn Public service: 2.4 bn Agriculture: 2.4 bn Commerce, trade, service: 4.0 bn Traffic: 0.2 bn BDEW (1/2013) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 20

21 2.1 Germany Most of the burden arises for PV, wind and biomass Hydro Biomass Monitoring Report 2012 REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 21

22 2.1 Germany Average electricity prices in in ct/kwh 3-person-households for a in ofct/kwh three persons Yearly Annual consumption of of 3500 kwh kwh Electricity Taxes Electricity Concession fee EEG KWK 19 Offshore Tax BDEW (4/2013 ) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 22

23 2.2 France Support schemes: feed-in tariff, tax incentives Loi n EDF & and private distributers are obliged to pay for the production of renewable energy Additionally, there are a tender process Pass through of FIT to consumers by a dedicated tax Solar power generation is exempted from land tax 2011 possibility to deduct a given percentage for renewable energy installation from income tax Julien / Lamla (2011) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 23

24 2.2 France Julien / Lamla (2011) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 24

25 2.3 Italy Support schemes: feed-in tariff, tax incentives, premium, quota system Quota system with green certificates ( certificate verdi ) evidence that a certain percentage (2012: 7.55%) of provided electricity needs to be renewable, even imported Alternatively, FIT for small capacity power plants operating after December 2007 Solar energy exclusively promoted by premium tariff, regulated under Conto Energia (I IV) Additional costs paid by electricity customers via higher market price Scheme periodically under review (status 2011) Renewable energy certificates for 15 years Julien / Lamla (2011) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 25

26 2.3 Italy Julien / Lamla (2011) Wind and solar plants promoted through reduced VAT rate on deliveries and services (10% instead of 20%) Renewables have priority access to the grid, financial compensation in the case of delay and priority dispatch. Net metering for small-scale producers. REENFOR 2013, October 22, 2013 Prof. R. Madlener. FCN, E.ON ERC/RWTH Aachen University 26

27 2.4 Spain Support schemes: feed-in tariff, tax incentives, premium Spain is global leader for solar production (32% of world production, 2009) Electricity producers of renewables can decide Selling production at a regulated tariff Selling to energy market (market price plus complementary premium) Additional costs are not passed through to the customers, resulting in electricity tariff deficit (ca billion) Changes in PV sector to reduce the electricity tariff deficit: limitation of period benefiting from the regulated tariff (30 years), decrease of regulated PV-tariffs (cuts by 45% to 5% percent, depending on the type of PV plant) Julien / Lamla (2011) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 27

28 2.4 Spain Changes in Concentrating Solar Power (CSP): Operators are imposed to sell electricity produced at the regulated tariff during first year of operation Limitation of the no. of equivalent hours of operation entitled to the premium Priority connection to and usage of the grid, toll for grid access and electricity transport and distribution (0.5 /MWh) Julien / Lamla (2011) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 28

29 2.5 United Kingdom Support schemes: feed-in tariff, tax incentives, quota system Quota system is main support scheme Electricity suppliers have to present green certificates: Renewables Obligation Certificates (ROCs) Additional costs are passed through to final consumers by adding it to their electricity bill Suppliers showing a deficit on e-roc Can buy ROCs, which are tradable Or pay a penalty to OFGEM Julien / Lamla (2011) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 29

30 2.5 United Kingdom Feed-in tariffs for small-scale installations (< 5 MW) Suppliers pay generation tariff to micro-generators plus export tariff (if exported to grid) PV: 29.3 p/kwh, granted for 25 years Wind: 4.5 p/kwh, granted for 20 years Electricity Market Reform (expected for 2013) Transition from a quota system to a FIT system FIT system to guarantee the level of revenue for developers: contract for difference with variable payments based on average market prices Nuclear energy would also benefit from the new feed-in tariff system (carbon-free technology) Renewable energy sources do not benefit from any priority connection to the grid Julien / Lamla (2011) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 30

31 Conclusions 1/2 Long-term commitment of the European Union to targets (and beyond) creates credibility and planning security for investors Renewable electricity dominates the scene, heating/cooling and transport lagging behind; decentralized generation requires new ( smart ) grid infrastructure and thus large infrastructure investment also on distribution level A great variety of RES promotion schemes exists in Europe; harmonization of schemes unlikely in the near future (+ no clearly dominant scheme) Economic benefits of promoting according to (geographically optimized) cost efficiency and environmental considerations Various goals to be balanced off (efficiency, effectiveness, ), regional preferences and potentials (sometimes in conflict with efficiency!) EU ETS revision ( backloading ) after 3 rd trading period due to malfunc-tioning caused by excess supply of certificates and low C prices (4-5 /t) may help renewables promotion REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 31

32 Conclusions 2/2 Energiewende (Energy Transformation) and RES promotion in Germany: Rising sensitivity of the public concerning the rapidly increasing EEG levy and total burden (ca. 20 bn) Several reasons of rising levy: Exemption of energy-intensive industries, Low CO 2 price, Merit order effect, Market premium, Forecast error Merit Order Effect causes conventional plant owners to struggle with lower load factors and lower wholesale electricity prices (investment payback difficult!) Dash for PV causes boom/bust cycles and problems for PV industry and TSOs (overstress of system never designed for the Energiewende ; slow grid adjustment; NIMBYism!) TSOs are challenged by increasing imbalances between supply and demand (both in a temporal and geographical sense) 15. April 2010, E.ON ERC/RWTH Aachen University 32

33 Many thanks for your kind attention! Большое спасибо за Ваше внимание! (Vielen Dank für Ihre Aufmerksamkeit! - Bolshoe spasiba sa vashe vnimanie!) До свидáния! (Auf Wiedersehen Doswiedanja ) REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 33

34 References Butler L., Neuhoff K. (2004): Comparison of Feed in Tariff, Quota and Auction Mechanisms to Support Wind Power Development. Cambridge Working Papers on Economics CWPE BMU (Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit) (2012). Erneuerbare-Energien- Gesetz (EEG) 2012, Berlin Juni 2012 (accessed Sep 29, 2012). CEC (2011): Renewable Energies: Progress on the Pathway to the 2020 Target, COM(2011) 31 final. Commission of the European Communities, Brussels, 31 Jan Julien F., Lamla M. (2011). Competitiveness of Renewable Energies - Comparison of Major European Countries, 2011, European University Viadrina, Frankfurt/Oder. Marcantonini C., Ellerman A.D. (2013). The cost of abating CO 2 emissions by renewable energy incentives in Germany. Mendonça M. (2007). Feed-In Tariffs: Accelerating the Deployment of Renewable Energy. Earthscan, London. Langniß O., Diekmann J., Lehr U. (2009): Advanced mechanisms for the promotion of renewable energy Models for the future evolution of the German Renewable Energy Act. Energy Policy, 37(4), Butler L., Neuhoff K. (2004): Comparison of Feed in Tariff, Quota and Auction Mechanisms to Support Wind Power Development. Cambridge Working Papers on Economics CWPE BEE (2013), Hintergrundpapier zur EEG-Umlage 2014, Bundesverband Erneuerbare Energie, Berlin. Monitoring Report 2012, BNetzA EEG total volume of feed-in tariff 2011 distributed over energy carriers (2010 values in brackets). BDEW (01/2013). Erneuerbare Energien und das EEG: Zahlen, Fakten, Graphiken. REENFOR 2013, October 22, 2013 Prof. R. Madlener, FCN, E.ON ERC/RWTH Aachen University 34