Promotion systems for electricity from renewable energy sources Lessons learned from EU countries Reinhard Haas Vienna University of Technology 1
SURVEY 1. Introduction 2. Historical developments 3. Success of strategies 4. The success story of PV 5. Effects on electricity markets 6. Conclusions 2
1 INTRODUCTION CORE MOTIVATION: Policy targets for an INCREASE of RES-E! e.g. 2020/20/20/20 targets RES-E directive: increase share of RES-E from 12% 1997 to 22% in 2010) 3
Electricity generation [TWh/a] 600 500 400 RES-E EU-27 1997: 12% 2. HISTORY 2009: 17% 300 200 100 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Large-scale hydro Small-scale hydro 'New' RES-E excl. hydro 4
Stromerzeugung [TWh/a] ELECTRICITY GENERATION FROM NEW RENEWABLES 250 IN EUROPE 200 150 100 Geothermie Photovoltaik Biomüll Biogas Biomasse (fest) Wind (Offshore) Wind (Onshore) 2009: 7 % 50 0 1990 1991 1997: 1 % 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 5
REMARK ON RES DEPLOYMENT IN THE EU-COUNTRIES Since about 1997 triggered by EUdirectives and EU initiatives Yet, specific country success stories very strongly related to national policies design! 6
3. SUCCESS OF STRATEGIES 7
Costs (EUR/ kw) (=efficiency) SUCCESS CRITERIA FOR STRATEGIES Major objectives: MW /Number of plants (=effectiveness) increase the amount of electricity from renewables and reduce costs! 8
Value of certificate (c/kwh) PRICES OF CERTIFICATES 14 12 Italy, UK; Belgium: Continuous high level! 10 8 6 4 Sweden: Shortage in banked certificates! 2 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sweden UK Belgium (average) Italy Poland Romania 10
cent/kwh LEVEL OF FEED-IN TARIFFS 9 8 7 6 5 4 3 2 AT DE ES 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 11
Value of certificate (c/kwh) cent/kwh 14 TRADABLE CERTIFICATES SUPPORT LEVELS: COMPARISON 14 FEED-IN TARIFFS 12 12 10 10 8 8 6 6 4 4 AT DE ES 2 2 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sw eden UK Belgium (average) Italy Poland Romania 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 12
EFFECTIVENESS VS COSTS 13
METHOD OF APPROACH: STATIC COST RESOURCE CURVES EUR/ kwh Predicted e.g small Hydro Uncertainty e. g. Wind e.g. biomass cofiring more expensive capacities cheapest capacities kwh 14
HOW FEED-IN TARIFFS WORK EURO/ kwh Costs P Fix kwh Q Out? 15
Total costs for customers EURO/ kwh (PREMIUM) FEED-IN TARIFFS Total costs = Producer surplus C + Additional generation costs P FIT_C P FIT_B P FIT_A A B Cost curve Market price Target kwh 16
HOW QUOTA-BASED TRADABLE G O - CERTIFICATES WORK EURO/ kwh Costs P Zert? kwh QUOTA 17
EURO/ kwh Total costs for customers TRADABLE G O CERTIFICATES Total costs = Producer surplus C + Additional generation costs P CERT B A Cost curve Market price Target kwh 18
TRADABLE GREEN CERTIFICATES EURO/ kwh Producer surplus Extra generation costs risk premium!!! Market price Minimal Monetary generation costs kwh Total costs Quota/ Target 19
Generation Cost [ /MWh ele ] 160 140 120 100 THE SHAPE OF THE COST CURVE E U - 27 Producer surplus Marginal cost for RES-E Producer Surplus Cost-resource curve (RES-E in the EU27) Additional generation costs 80 60 40 20 0 Total Electricity market price Power price Required RES-E deployment Required RES-E deployment 0 200 400 600 800 1000 costs Additional (up to 2020) realisable potential for RES-E [TWh] 20
THE CASE OF SWEDEN 21
CONCLUSIONS (1) To ensure significant RES-E deployment in the long-term, it is essential to promote a broad portfolio of different technologies IMPROVE/OPTIMIZE THE CURRENT SYSTEMS A well-designed FIT provides RES-E-deployment fastest and at lowest costs; BEFORE HARMONISING Strategies with lower (financial) risk -> less profit requirements -> lower costs for society. OR IMPLEMENTING MAJOR CHANGES! A European- wide trading system would lead to a much higher burden for European citizens than a comparable FIT for meeting the 2020/20%RES target! 22
4. THE SUCCESS STORY OF PHOTOVOLTAIC DEPLOYMENT (IN GERMANY) 23
PV increases in recent years in Europe Germany Spain Czech Republic Italy 24
25 Source: EPIA (2012) Total installed capacity 2011: 27.7 GW (compared to 16.6 GW in 2010)
Costs of and FIT for PV Costs FIT Germany 26
PV: cumulative development in Central Europe In Germany in 2011/2012: PV contributes at peak production times to about 25% of load! 27
Installierte Leistung (MW) SINCE 2000: INVESTMENTS MAINLY IN RENEWABLES! 200000 180000 160000 140000 120000 PV WIND 2020: ca. 25000 MW PV 100000 80000 60000 40000 20000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Thermisch Atomkraft Wassser Wind PV 28
5. EFFECTS OF PROMOTING RES-E ON ELECTRICITY MARKETS 29
Costs (EUR/MWh) LONG-TERM MARGINAL COSTS Cheapest: 1. 2. 3. Nat. Gas Nuclear Wind 30 Capital costs Operation/Fuel costs CO2 costs
Costs (EUR/MWh) SHORT-TERM MARGINAL COSTS Cheapest: 3. 2. 1. Nat. gas Nuclear Wind Operation/Fuel costs CO2 costs 31
Long-term vs shortterm marginal costs 32
Costs,Price (EUR/MWh) ON-PEAK NICE SUMMER DAY: PRICE = SHORT-TERM MARGINAL COSTS Demand D t e.g. Coal old What happens, if PV capacity will double? e.g. Natural gas new p t2 Price = System -marginal costs Nuclear Supply curve PV Wind Hydro 35 MW
IMPACT OF PV ON THE ELECTRICITY MARKET PRICE IN GERMANY Photovoltaics On-peak time: Low electricity prices! Spot market price electricity Germany 36
RES Production > Demand Supply and Demand Electricity price = high! Demand RES Production < Demand Electricity price = 0 (or negative) 37
PV costs vs household electricity price in Germany Upper and lower corridor! Grid parity? 38
[c/kwh] Share on household electricity prices Electricity prices of households Capital costs Operation& Labour costs Fuel costs Profits of companies 1983 2006 39
Structure household electricity prices Fuel costs decrease Capital costs increase 40
[c/kwh] Share on household electricity prices Electricity prices of households Non-regulated share Regulated share 1983 2006 2030 41
6. Conclusions (i) well-designed (dynamic) Feed-in tariff certain deployment of PV fastest and at lowest costs for society correct dynamic design! (ii) Overheating destroyed other markets (Czech Republic, Spain, Italy(?) ); (iii) Looming grid-parity for PV? change to investment subsidies? (v) New market design will emerge (vi) New pricing mechanisms for end users (vii) Regulated share on electricity prices will increase 42
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THE CASE OF SWEDEN Major characteristics: * since 2002: quota-based system of Tradable Certificates * also old capacity allowed to fulfill quota * additional investment subs. for wind! 44
[cent/kwh] SWEDEN: IMPACT OF INVESTMENT SUBSIDIES P cert_th Wind Loc. A Costs (Supply curve) Wind Loc. B Invest. Subsidies for wind cert_act Biomass Quota [GWh/year] 45
PRICES OF CERTIFICATES IN SWEDEN 46
Costs of PV in next years (EUR/kWp) 7000 6000 5000 4000 3000 Increased competition due to modules from China Market clearing 2000 1000 Over capacities 0 2000 2002 2004 2006 2008 2010 2012 47