1

Dr. Annette LoskeVIK Verband der Industriellen Energie- und Kraftwirtschaft

German Federation of Industrial Energy Consumers

Renewable Energy Sources in Germany and Renewable Energy Sources in Germany and the EUthe EU

Influence on Reliability of Transmission and Influence on Reliability of Transmission and on Electricity Priceon Electricity Price

Sept. 8, 2004AEM-SVSE Conference, Prague

2

Federation of intensive industrial energy consumers (member companies primarily from sectors, in which energy costs really matter like chemicals, steel, non-ferrous metalls, glass, paper, cement etc.)

VIK membership represents about 80 percent of the German industrial energy consumption

Representative for the interests of the members towards the policy, the administration, the economy and the legislation in Germany and the EU

Consultant for the member companies in all energy, environmental and water related issues

Member if IFIEC Europe – the European federation of industrial energy consumers

VIK Verband der Industriellen VIK Verband der Industriellen Energie- und Kraftwirtschaft e. V.Energie- und Kraftwirtschaft e. V.

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German Electricity Price in the EU-ContextGerman Electricity Price in the EU-Context

8,07

7,64

6,37

6,26

5,61

5,42

5,29

5,04

4,95

4,78

4,56

4,51

4,49

4,15

3,85

3,70

3,67

3,14

0 1 2 3 4 5 6 7 8 9(ct/kWh)

I

D

IRL

A

H

B

P

E

GR

FIN

L

S

LT

PL

CZ

LV

NOR

EW

Source: Eurostat, VIK

50 GWh / 5.000 h/a

No Data available for DK, F, NL, UK, SL and SLO.

The electricity price level is a major concern of the German industry!

4

4,0

5,0

6,0

7,0

8,0

9,0

10,0

Mär

z '9

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pril

'98

Mai

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Concession Fee

RES Support

CHP Support

Ecotax for production businesses (gross rate)

Electricity Price (without taxes and fees)

ct/

kW

h

VIK

- v

an P

lüer

200

4

Average development of the electricity price for producing companies in Germany

Elements of the German Electricity PriceElements of the German Electricity Price

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EU Policy on Renewable EnergiesEU Policy on Renewable Energies

Background: Climate Change Policy based on the Kyoto Protocol Obligation

EU-15: 8 percent CO2-reduction 1990 - 2010

Renewable Energies Directive (Sept. 27, 2001) as one of the instruments to meet this target

National targets for the share of electricity produced from renewable energy sources in 2010

Obligation for the EU-Member States to implement adequate promotion mechanisms to achieve the targets set

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The National TargetsThe National Targets

Source: IFIEC Study

7

4,5

3,8

2,6

44,3

7,5

26,4

4,9

34,4

26,1

5,4

16,0

0 5 10 15 20 25 30 35 40 45

TWh

A

B

CZ

D

DK

F

FIN

GB

I

NL

S

Total for EU-15: 353.3 TWh353.3 TWh (= about UK total consumption in 2000)

The National Targets –The National Targets –Additional required power volume from RESAdditional required power volume from RES

Source: IFIEC Study

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The Promotion SchemesThe Promotion Schemes

3 Types:1. Guaranteed Feed-in Tariffs (Buy-Back Regime)2. Certificates3. Taxes

Variaty thereof chosen in the different EU Member States ► No Common Policy

Country Buy Back Regime Certificates Regime

Taxes

Austria X

Belgium X X

Czech Republic X

Denmark X

Finland X

France X

Germany X

Italy X X

Netherlands X X

Sweden X

United Kingdom X X

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The Promotion SchemesThe Promotion SchemesFinancingFinancing

In most of the EU Member States financing through a surcharge on the electricity price

Tax / State Budget

Electricity Sector

Consumers

Private Industrial

Austria X X XBelgium X X XCzech Republic X X XDenmark X X XFinland X

France X X X

Germany X X X

Italy X X X

Netherlands X X

Sweden XUK X X X X

X = Final Source X = Intermediate Source Source: IFIEC Study

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Special focus on wind power in most EU Member States

Special characteristics of wind power to be considered:

Instability of wind power generationE.g. in Germany:

Wind Power Share of installed capacity: 15 percentWind Power Share in power consumption: 3 percent

Necessity for excessive back-up capacitiesFor each MW of wind power capacity 0.8 to 0.9 MW reserve capacity necessary as back-up.►less efficiently working regime of these power plants

Excessive grid extensions are neededPlanning figures for Germany: 1000 km additional 380 kV grid in the E.on area (investments of 550 mio €) plus 500 km in the Vattenfall area till 2016.

Significant uncertanties for security of supply and significant additional indirect costs resulting from wind power installations

The Promotion Schemes –The Promotion Schemes –Focus on WindFocus on Wind

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The German SystemThe German System

Different guaranteed Feed-in Tariffs for different RES for a period of 20 years

Financed by surcharges on the electricity price determined depending on the actual volume of RES power input

0,00

0,50

1,00

1,50

2,00

2,50

3,00

3,50

4,00

4,50

Q1

- 2

00

1

Q2

- 2

00

1

Q3

- 2

00

1

Q4

- 2

00

1

Q1

- 2

00

2

Q2

- 2

00

2

Q3

- 2

00

2

Q4

- 2

00

2

Q1

- 2

00

3

Q2

- 2

00

3

Q3

- 2

00

3

Q4

- 2

00

3

Q1

- 2

00

4

Q2

- 2

00

4

Q3

- 2

00

4

0,00

0,10

0,20

0,30

0,40

0,50

0,60

0,70

0,80

0,90

EEX Average Quarter Baseload Price

Calculated Additional Costs (VDN)

Surcharge for Consumers

ct/kWh ct/kWh

Total Amount of Support:

2003: 2.7 billion €

Estimate2010: 4.8 billion €

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The German SystemThe German SystemSpecial Regime for Industrial ConsumersSpecial Regime for Industrial Consumers

Capping of surcharge for a limited group of industrial consumers since 2004. From 2005 based on the following criteria:

Yearly consumption > 10 GWh Share of electricity cost ≥ 15 percent of gross added value (Bruttowertschöpfung)

►Reduced rate of probably 0.05 ct/kWh* for 90 percent of consumption

Yearly consumption > 100 GWh Share of electricity cost ≥ 20 percent of gross added value (Bruttowertschöpfung)

►Reduced rate of probably 0.05 ct/kWh* for whole consumption

*) Rate applies if resulting additional charge for other consumers ≤10 percent of whole surcharge, otherwise upwards correction

Regime based on Act on RES (2004) to be implemented 1.1.2005

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The German SystemThe German SystemNecessity of a Special RegimeNecessity of a Special Regime

419.04289.12

360.84

366.96

128.04

100.08

116.40

133.44

139.68

222.40

0

200

400

600

800

1000

1200

1400

Germany World Average

US

D/t

Power Aluminium Oxyd Labour Anodes Various

Cost Structure for Aluminium ProductionComparison: Germany – World Average

GermanyAverage Production Cost

1.164 USD/t

WorldAverage Production Cost

1.112 USD/t

Source: Study of ewi, Cologne

Plus 4.7 percent

in Germany

Mainly resulting

from power cost

Threat for the competitiveness of German Industry

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The financial burden throughout the EUThe financial burden throughout the EU

0

0,5

1

1,5

2

2,5

3

3,5

4

€/M

Wh

Belgium France Germany Italy UnitedKingdom

Austria

Surcharges on Electricity Price for RES Promotion in 2002

Unlevel playing field:

In Sweden the industrial large consumers are not burdened at all.

In the Netherlands the burden for this group is very low (maximum 62,090 €/a).

In Finland, the promotion measures are totally financed by the state budget resulting in no directly earmarked financial burden for consumers (however, energy tax applies).Source: IFIEC Study

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Renewable Energy Share of Electricity Production

0

10

20

30

40

50

60

70

80

1997 2002 2010 Target

Per

cen

t

Czech Rep.

Belgium

Czech Rep.

Germany

Denmark

France

Finland

United Kingdom

Italy

Netherlands

Sweden

Source: EU Commission

The Outlook – Still a hard way to go!The Outlook – Still a hard way to go!

Still an expensive way to go!Still an expensive way to go!

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Renewable energies may build an important option for the future. But their promotion is a costly political decision.

The financial burdens resulting from renewable energies promotion systems for industrial energy consumers are already currently significant, and are increasing quickly and intensively in the near future.

The resulting financial burden differs significantly. No European level playing field is in sight!

ConclusionsConclusions

The financing mechanism for renewable energy promotion measures must reflect the long term character of the programme and the overall societal interest in it.

It must not result in a disproportionate threat for the energy intensive industry and lead to de-industrialisation of the EU.

Renewable energies promotion systems should not jeopardize the competitiveness of the industry on the European as well as on the international level.

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For further questions:For further questions: Dr. Annette Loske

VIK Verband der Industriellen Energie- und Kraftwirtschaft e.V.

Richard-Wagner-Straße 41

D-45128 Essen

Tel.: ++49-201-810 84-22

FAX: ++49-201-810 84-30

E.Mail: a.loske@vik-online.de

Internet: www.vik.de