Design options and critical issues of European GO Trade

Transcription

1 Design options and critical issues of European GO Trade Corinna Kleßmann Ecofys Germany International Feed-in Cooperation October 18, 2007

2 Background RE trade based on Guarantees of Origin (GOs) as proposed by the EC is a controversial issue. Ecofys, Fraunhofer ISI and TU Vienna examined concepts, critical issues and design options of European GO trade in a briefing paper for BMU.

3 Rationale of European GO trade Renewable energy potentials are distributed unevenly across Europe. A trading option could help MS with low RE potential to achieve their targets at lower societal cost. Potentially, this could lead to lower overall costs for reaching the European 2020 targets. Using standardised GOs for trade and disclosure may avoid double counting and double selling of RE.

4 General design options under discussion Mandatory or voluntary trade? Trade by Member States or private parties? Restricted or unrestricted trade? Restriction to a certain percentage? Restriction of import or also export? GO trade of RES-E, or also RES-H? Further specifications?

5 Example: unrestricted trade by private parties Critical issues of GO trade are discussed for the case of mandatory, unrestricted trade by private parties, i.e. Member States are not allowed to block or restrict trade RES-E producers can choose to sell their RES-E domestically or to governments and utilities in other MS RES-E producers can participate in the support scheme of another MS, if they have not received support in their own country No further specification Note: This is the most extreme case; alternative trade designs may limit the critical effects.

6 Critical issues (1): Time frame for trade Cherry-picking between support schemes If producers can choose the support system which pays the highest support every year, they undermine the long term concept of most European support systems. Problem for target compliance: RES-E production of the same plant could count to the target of one MS in one year and another MS in the next year. Long term arrangement needed

7 Critical issues (2): Technology unspecific GO trade A uniform European GO price for all RES-E would be set by the marginal price of the most expensive technology sold. Generation Cost [ /MWh ele ] Marginal cost for RES-E Producer Surplus Cost-resource curve (RES-E in the EU27) Power price Required RES-E deployment Additional (up to 2020) realisable potential for RES-E [TWh]

8 Consequences of technology unspecific GO trade General Technology unspecific trade would lead to windfall profits for producers of low-cost RES-E. These windfall profits could offset the potential efficiency gains of trade. No promotion of innovative high-cost technologies Feed-in tariff systems Technology unspecific trade would conflict with feed-in tariff systems and increase their costs

9 Export dynamics under technology unspecific GO trade Country with FIT/premium system Country with quota system Incentive for import High incentive for export Medium incentive for export Premium agricultural biogas Premium wind Market price European GO Domestic certificate price

10 Critical issues (3): Cost efficiency for European consumers Cost decreasing factors: new potentials, increased competition Cost increasing factors: windfall profits, risk premiums From OPTRES calculations, it can be derived that unrestricted, technology unspecific trade would significantly increase the overall costs for European consumers to achieve the European 2020 targets.

11 Critical issues (4): Cost balance Net exporting countries would lose their low-cost RE potential. Their cost for achieving their RE target would increase. The cost for net importing countries would decrease. Net exporting countries would crosssubsidize net importing countries. But: benefits for their local industries

12 Critical issues (5): Physical integration The generated electricity still needs to be integrated into the power system of the exporting country. Restriction of export capacity Integration costs have to be borne by the exporting country.

13 Critical issues: Conclusions Short term trade would undermine the long term concept of national support schemes Unrestricted, technology unspecific trade would undermine feed-in tariff systems and increase their costs, lead to windfall profits and increase the overall consumer costs to reach the European 2020 targets. In general Trade would increase the cost for net exporting countries to reach their 2020 targets, but also create local benefits (e.g. jobs). Physical integration costs are not reflected by the GO. If GO trade shall be introduced, alternative design features are needed.

14 Recommended design features for GO trade Make trade voluntary Restrict maximum import and export Introduce long term contracts, e.g. for the full support period Introduce technology specification (e.g. technology banding or technology specific import/export rights) Start with regional trade in common power markets Reflect system integration costs, e.g. introduce a system integration premium

15 Further issues to investigate Technical implementation (design of GOs, import/export rights, auction design etc.) Quantitative analysis of costs and benefits Public acceptance (local burden and benefits are separated from financial support) Specific challenges of integrating decentralized RES-H Etc.

16 Thank you for your attention! Corinna Klessmann