1

Reinhard Haas

Vienna University of Technology

Promotion systems for

electricity from

renewable energy sources –

Lessons learned from EU

countries

2

SURVEY

1. Introduction

2. Historical developments

3. Success of strategies

6. Conclusions

5. Effects on electricity markets

4. The success story of PV

3

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)

4

0

100

200

300

400

500

600

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Ele

ctr

icity g

enera

tion [T

Wh/a

]

Large-scale hydro Small-scale hydro 'New' RES-E excl. hydro

RES-E EU-27 1997:

12%

2009:

17%

2. HISTORY

5

0

50

100

150

200

250

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Str

om

erz

eug

un

g [

TW

h/a

]

Geothermie

Photovoltaik

Biomüll

Biogas

Biomasse (fest)

Wind (Offshore)

Wind (Onshore)

ELECTRICITY GENERATION

FROM „NEW“ RENEWABLES

IN EUROPE

1997: 1 %

2009: 7 %

6

• Since about 1997 triggered by EU-

directives and EU initiatives

REMARK ON RES – DEPLOYMENT

IN THE EU-COUNTRIES

• Yet, specific country success stories very

strongly related to national policies design!

7

3. SUCCESS OF

STRATEGIES

8

SUCCESS CRITERIA

FOR STRATEGIES

MW /Number of plants

(=effectiveness)

Co

sts

(E

UR

/ kW

)

(=e

ffic

ien

cy)

Major objectives:

• increase the

amount of

electricity from

renewables and

• reduce costs!

10

0

2

4

6

8

10

12

14

2002 2003 2004 2005 2006 2007 2008 2009 2010

Va

lue

of

ce

rtif

ica

te (

c/k

Wh

)

Sweden UK Belgium (average) Italy Poland Romania

PRICES OF

CERTIFICATES

Italy, UK; Belgium: Continuous high level!

Sweden: Shortage in banked certificates!

11

0

1

2

3

4

5

6

7

8

9

2002 2003 2004 2005 2006 2007 2008 2009 2010

ce

nt/

kW

h

AT DE ES

LEVEL OF

FEED-IN TARIFFS

12

0

2

4

6

8

10

12

14

2002 2003 2004 2005 2006 2007 2008 2009 2010

Valu

e o

f cert

ific

ate

(c/k

Wh

)

Sw eden UK Belgium (average) Italy Poland Romania

0

2

4

6

8

10

12

14

2002 2003 2004 2005 2006 2007 2008 2009 2010

ce

nt/

kW

h

AT DE ES

SUPPORT LEVELS:

COMPARISON TRADABLE

CERTIFICATES FEED-IN TARIFFS

13

EFFECTIVENESS VS COSTS

14

METHOD OF APPROACH:

STATIC COST RESOURCE CURVES

cheapest capacities

more expensive

capacities

kWh

EUR/

kWh Predicted

Uncertainty

e.g small Hydro

e. g. Wind

e.g. biomass cofiring

15

EURO/

kWh

kWh

PFix

QOut

Costs

?

HOW FEED-IN

TARIFFS WORK

16

Total costs for customersTotal costs for customers

EURO/

kWh

kWh

Market

price

PF

IT_A

Target

Producer surplus

Cost curve

(PREMIUM) FEED-IN TARIFFS

PF

IT_B

PF

IT_C

C

A

B

Total costs =

Additional

generation

costs

+

17

EURO/

kWh

kWh

PZert

Costs

?

QUOTA

HOW QUOTA-BASED

TRADABLE G O -

CERTIFICATES WORK

18

EURO/

kWh

kWh

Market

price

Target

Producer surplus

Cost curve

TRADABLE G O CERTIFICATES

PC

ER

T

C

A

B

Additional

generation

costs

Total costs for customersTotal costs for customers

Total costs =

+

19

EURO/

kWh

kWh

Market

price

Quota/ Target

Extra generation costs

risk premium!!!

Total

costs

Minimal

Monetary

generation

costs

TRADABLE GREEN

CERTIFICATES

Producer surplus

20

0

20

40

60

80

100

120

140

160

0 200 400 600 800 1000

Additional (up to 2020) realisable

potential for RES-E [TWh]

Ge

nera

tio

n C

ost

[€/M

Wh

ele]

Cost-resource curve (RES-E in the EU27)

Power price

Required

RES-E

deployment

Marginal cost for RES-E

Producer Surplus

THE SHAPE OF THE

COST CURVE E U - 27

Required

RES-E

deployment

Electricity market price

Additional

generation

costs

Producer surplus

Total

costs

21

THE CASE OF SWEDEN

22

CONCLUSIONS CONCLUSIONS (1)(1)

• To ensure significant RES-E deployment in the

long-term, it is essential to promote a broad

portfolio of different technologies

• A well-designed FIT provides RES-E-deployment

fastest and at lowest costs;

• Strategies with lower (financial) risk -> less profit

requirements -> lower costs for society.

IMPROVE/OPTIMIZE THE

CURRENT SYSTEMS

BEFORE HARMONISING

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!

23

4. THE SUCCESS STORY OF

PHOTOVOLTAIC DEPLOYMENT

(IN GERMANY)

24

PV increases in recent years in PV increases in recent years in

EuropeEurope

Spain Czech

Republic

Germany

Italy

25

Source: EPIA (2012) Source: EPIA (2012)

Total installed capacity 2011: 27.7 GW Total installed capacity 2011: 27.7 GW

(compared to 16.6 GW in 2010)(compared to 16.6 GW in 2010)

26

FIT Germany

Costs

Costs of and FIT for PV

27

PV: cumulative development PV: cumulative development

in Central Europein Central Europe

In Germany in 2011/2012: PV contributes

at peak production times to

about 25% of load!

28

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Insta

llie

rte L

eis

tun

g (

MW

)

Thermisch Atomkraft Wassser Wind PV

SINCE 2000: INVESTMENTS

MAINLY IN RENEWABLES!

PV

WIND

2020: ca.

25000

MW

PV

29

5. EFFECTS OF PROMOTING

RES-E ON ELECTRICITY MARKETS

30

LONG-TERM MARGINAL

COSTS C

osts

(E

UR

/MW

h)

Capital costs Operation/Fuel costs CO2 costs

Nat. Gas Nuclear

Wind

Cheapest: 1. 2. 3.

31

SHORT-TERM MARGINAL

COSTS C

osts

(E

UR

/MW

h)

Operation/Fuel costs CO2 costs

Nat. gas

Nuclear

Wind

Cheapest: 3. 2. 1.

32

Long-term vs short-

term marginal costs

35

Co

sts

,Price

(E

UR

/MW

h)

MW

Supply

curve

Demand Dt

ON-PEAK NICE SUMMER DAY:

PRICE = SHORT-TERM

MARGINAL COSTS

Price = „System“-marginal costs

Hydro

e.g. Coal old

Nuclear pt2

PV Wind

e.g. Natural

gas new

What happens, if PV capacity will double?

36

IMPACT OF PV ON THE

ELECTRICITY MARKET

PRICE IN GERMANY

Spot market price electricity Germany

Photovoltaics On-peak time: Low

electricity prices!

37

Supply and DemandSupply and Demand

Demand

RES Production

> Demand

Electricity price = 0

(or negative)

RES Production

< Demand Electricity price

= high !

38

„Upper“

and „lower“

corridor!

PV costs PV costs vsvs household household

electricity price in Germanyelectricity price in Germany

Grid

parity ?

39

Profits of companies

Electricity prices of households

Fuel costs

Capital costs

Operation&

Labour costs

Share on household

electricity prices

1983 2006

[c/k

Wh

]

40

Capital costs

increase

Fuel costs

decrease

Structure household

electricity prices

41

Regulated share

Electricity prices of households

Share on household

electricity prices

1983 2006 2030

[c/k

Wh

]

Non-regulated share

42

(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

6. Conclusions

(vi) New pricing mechanisms for end users

(vii) Regulated share on electricity prices will

increase

43

Download reports from:

www . eeg . tuwien . ac . at

E-Mail to:

Reinhard.Haas @ tuwien. ac.at

INTERESTED IN

FURTHER INFORMATION?

44

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!

45

[GWh/year]

[ce

nt/

kW

h]

Biomass

Wind

Loc. A Wind Loc. B

Quota

SWEDEN: IMPACT OF

INVESTMENT SUBSIDIES

Pcert_th

Costs

(Supply curve)

Invest. Subsidies

for wind

Pcert_act

46

PRICES OF CERTIFICATES

IN SWEDEN

47

0

1000

2000

3000

4000

5000

6000

7000

2000 2002 2004 2006 2008 2010 2012

Costs of PV in next years

(EUR/kWp)

Over capacities

Increased competition

due to modules from China

Market

clearing