The German Market Promotion Initiatives for Renewable Energies

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The German Market Promotion Initiatives for Renewable Energies Dipl. Ing. Johannes Lackmann President German Renewable Energy Association (Bundesverband Erneuerbare Energie e.v.) BEE

Renewable energy - market development 400 hydro Biomass solid 2,5% Primary energy (PJ) 300 200 100 Biogas Wind power Photovoltaic share of PEC Biofuels Solar thermal Geothermal Power 2,0% 1,5% 1,0% 0,5% Share of primary energy consumption 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 0,0% Development of renewable energy and share of the primary energy consumption in Germany. Quelle: F. Staiß, Jahrbuch Erneuerbare Energie 2001

Development of renewable electricity 45 40 35 30 25 Generation of renewable electricity TWh Photovoltaics TWh Biomass TWh Wind TWh Hydropower 20 15 10 5 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002* Source: F. Staiß, Jahrbuch Erneuerbare Energie 2001/ Kurdziel. *Prediction

Wind energy - market development 18 16 14 12 10 8 6 4 2 0 Power (GW), Generation of electricity (TWh)* cumulated installed power GW annual energy yield TWh 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002* Source: German Wind Energy Association e.v., F. Staiß, Jahrbuch Erneuerbare Energie 2001. *Prediction

Photovoltaics cumulated installed power (MW) 250 200 150 100 50 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002* Development of the cumulated installed power of photovoltaics. Source: F. Staiß, Jahrbuch Erneuerbare Energie 2001/ Kurdziel. *Prediction

Solar thermal 700 3,5 yearly installations (1000 m³) 600 500 400 300 200 100 swimming pool absorber glazed collectors cumulated installations 3 2,5 2 1,5 1 0,5 cumulated installations (Mio. m³) 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 0 Development of the thermal solar installations. Source: F. Staiß, Jahrbuch Erneuerbare Energie 2001

Biodiesel Development of Biodiesel [t] 700000 600000 500000 400000 300000 200000 100000 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Development of Biodiesel in Germany; Source: F. Staiß, Jahrbuch Erneuerbare Energie 2001

Biogas 2000 1600 total number of biogas plants 1650 1200 850 1050 800 400 139 159 186 274 370 450 617 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001* Development of biogas plants in Germany, * 2001 estimated; Source: Fachverband Biogas e.v.

Biomass electricity production electricity production (grid) TWh 2 1,5 1 0,5 Gas of disposal sites 62,1 % Gas of sewageworks 4,2 % Biogas 8,4 % other 3,9 % Rape oil and RME 0,3 Wood, bark, sawrests 21% 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Electricity production of biomass (without private consumption) and structure in 1999; Quelle: F. Staiß, Jahrbuch Erneuerbare Energie 2001

Support schemes for renewable energies 1. Budgetary dependent support schemes (unstable) - Market incentive programme - 100 000 Roofs Programme - ERP, DTA, REN - Tax incentives, environmental tax 2. Budgetary independent support schemes (stable) - Payment regulation systems (Feed in law) (EEG) - quantity regulation system (Quota/ bidding system) - voluntary trade with Green electricity

Support schemes for renewable energies Market Incentive Programme Amount 2001: 150 Mill. EUR, 2002: 200 Mill. EUR Start of construction is possible with the application not cumulative to other public funds financed by the eco-tax revenue 100 000 Roofs Programme Amount 500 Mill. EUR, investments total 1,25 Mrd. EUR effective interest 1,91 % 10-year term < 5 kwp credit to 6412,50 EUR/kW > 5 kwp 50 % of 6412,50 EUR/kW

Support schemes for renewable energies ERP/DTA credit resources interest rate 5,35 eff. (at the moment) for all renewable energy projects available REN NRW 50 Mio. DM mainly for solar energy and biomass Tax incentive allowance for home-owners: solar thermal 8 years max. 250 EUR Eco-tax: advantage for renewable energy in the Heat market 0,18 Pf/kWh Fuels: mineral oil and eco-tax exemption 0,56 EUR/l (5,6 ct/kwh)

Support schemes for renewable energies Feed in law (EEG) advantages: high efficiency allows price differentiation and reduces costs high reliability and certainty of planning low expense of administration no burden to the government budget, no subsidies of the energy prices disadvantages: lack of acceptance by followers of neo-liberal ideology balancing scheme of the EEG only works in the power market

Support schemes for renewable energies Quota system and certificate trading advantages: high acceptance by followers of neo-liberal ideology works both in the power market and the heat market disadvantages: low efficiency low reliability and certainty of planning high expense of administration hinder decentralised medium-sized structures nearly unlimited possibilities of abuse Green electricity trading electricity consumers low willingness to change entails a low market share of under 0,1 %

Wind energy in Europe Payment regulating versus quantity regulation system Country Installed Power End 2000 (MW) Installed Power End 2001 (MW) Countries with Germany 6.113 8.754 a payment Spain 2.235 3.337 regulating system (Feed in Denmark * 2.300 2.534 law) total 10.648 14.625 Countries with UK 406 474 a quantity Ireland 118 125 regulation system (Quota/ France* 66 116 bidding system) total 590 715 * Denmark has announced a new quota system. France has established a minimum price remuneration system Source: Bundesverband WindEnergie e.v.

German Renewable Energy Act (EEG) On 25 February 2000 the German Parliament has adopted the Renewable Energy Act (EEG - Law for the priority access of electricity from renewable energy sources) The EEG replaces the former German Feed-In Law from 1990 Objectives of the EEG: Doubling the share of renewable electricity within 10 years

Definition of renewable energies to be granted by EEG Hydropower up to plant capacities Biomass up to plant capacities of 20 MW including gas from landfills, sewage treatment plants and mines An additional ordinance specifies the substances and technical processes which are included in the application of the EEG (only extremely contaminated wood (PCB) is excluded by this ordinance which was released in June 2001) Electricity from geothermal plants Wind power including off-shore windfarms outside an area of 3 nautical miles from the coast Electricity produced from solar radiation energy up to 5 MW on roofs or 100 kw elsewhere

Obligation to purchase and pay for electricity from renewable plants The grid operators are obliged to connect renewable power plants to their grid at the point where a connection is technically and economically suitable. The suitability of the grid includes a reasonable upgrade if required. The grid operators have to purchase the electricity at the fixed tariffs of EEG

Grid costs The costs caused by connecting the plants to the most suitable point of the grid have to be paid by the plant operator The costs for upgrading of the grid for public power supply have to be settled by the grid operator

Nation-wide balancing schemes Step 1. A renewable energy generator is entitled to feed his electricity into the next appropriate electricity system (usually a local network). He receives a payment for his electricity by the (local) transmission system operator, differing for each renewable energy technology based on their real costs. Step 2. The regional transmission system operator is obliged to purchase electricity from renewable energy sources from the local transmission system operator. Step 3. All regional transmission system operators are obliged to exchange their electricity from renewable energy sources, resulting in an equal share among all regional transmission system operator in Germany (flexible quota on the transmission system level)

Nation-wide balancing schemes Step 4. All electricity suppliers are obliged to purchase from their regional transmission system operator an equal share of electricity from renewable energy (flexible quota on electricity supplier level). Step 5. The electricity supplier delivers electricity to the electricity consumers. The supplier may or may not rise prices to compensate for his extra costs due to the purchase of electricity from renewable energy sources. He may also offer special green tariffs in order to sell his green electricity for an appropriate price

EEG Feed-In Tariffs (per kwh electricity) 2002 2003 2004 2005 2006 2007 2008 2009 2010 Solar power 48,1 45,7 43,4 41,2 39,1 37,1 35,2 33,4 31,7 Wind power initial tariffs/ prolongation* 9 8,9 8,8 8,7 8,6 8,5 8,4 8,3 8,2 Wind power final tariffs 6,1 6 5,9 5,8 5,7 5,6 5,5 5,4 5,3 Biomass < 500 kw 10,1 10 9,9 9,8 9,7 9,6 9,5 9,4 9,3 Biomass 500 kw - 5 MW 9,1 9 8,9 8,8 8,7 8,6 8,5 8,4 8,3 Biomass 5 MW - 20 MW 8,6 8,5 8,4 8,3 8,2 8,1 8 7,9 7,8 Hydropower and Gas (from landfills, mines, sewage plants) < 500 kw 7,65 7,65 7,65 7,65 7,65 7,65 7,65 7,65 7,65 Hydropower and Gas < 5 MW 6,63 6,63 6,63 6,63 6,63 6,63 6,63 6,63 6,63 Geothermal power < 20 MW 8,93 8,93 8,93 8,93 8,93 8,93 8,93 8,93 8,93 Geothermal power more than 20 MW 7,14 7,14 7,14 7,14 7,14 7,14 7,14 7,14 7,14 *windpower: initial tariffs: first 5 years (onshore), first 9 years (offshore, if installed till 2006), Prolongation 0-15 years depending on site quality, Feed-In tariff duration 20 years

Results of the German renewable energy policy Increased dynamic in market growth in all sectors of RES (electricity) Compliance with EU-regulations (EEG is no state aid according to EUcourt 13, 2001) Reduction in production costs (wind energy: 50 % reduction within 10 years) due to: strong competition among the manufacturers of plants large scale effect by serial production enormous technological development different feed in tariffs for each sector and for different sites Negligible impact on consumer prices for energy (New BET-Study proofs: Price increase for electricity consumers prices caused by EEG is only 0.11 EuroCent per kwh in 2000 and will be 0.19 EuroCent under the presumption of doubling the percentage of RES within the next 10 years.) High acceptance of RES projects due the decentralised structure with many local participants

Electricity feed (EEG) and electricity prices 40.000 0,8 35.000 0,7 Electricity feed (EEG) 30.000 0,6 GWh 25.000 20.000 0,5 0,4 Euro ct/kwh Additional costs + external benefit* 15.000 0,3 Additional costs (market price) 10.000 0,2 5.000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0,1 0 Additional costs (avoided generation costs of new power stations) -5.000-0,1 Source: BET, *R. Bischof/ External benefit 5 ct/kwh Article 6 of the EC Treaty Community guidelines on state aid for environmental protection BEE. e.v.

EEG - Evaluation report EEG has caused big growth of renewable energy objectives for 2010 (doubling the share of renewable electricity to 12 %) can be reached earlier if the growth will continue turnover: more than 8 billions EUR/a jobs: 120.000 Availability of budgetary funds limits the development of renewable energy plants, which need additional support besides the EEG 3 Obligation to purchase and pay for electricity from renewable plants Obligation to purchase and pay for electricity from renewable plants is a very important aspect of the EEG: enable medium-sized economy entry into the market although the grid operators are obliged to connect renewable power plants to their grid, many problems exist in this field BEE. e.v.

EEG - Evaluation report Double commercialisation of electricity from renewable energy: lack of transparency of the nation-wide balancing scheme of the EEG ( 11): control of the double commercialisation not possible (EEG + trade with Green electricity or EEG + foreign certificates of Green electricity ) BEE. e.v.

EEG - Evaluation report heat market The development of the heat market is considerably slowlier in contrast to the EEG (power market), as this sector (solar thermal, heat of biomass and geothermal) is mainly dependent on public support fuel market the mineral oil exemption for biofuels is probably also a reliable support scheme BEE. e.v.