ENSURING A COST-EFFECTIVE GROWTH OF SOLAR POWER IN EUROPE

Transcription

1 ENSURING A COST-EFFECTIVE GROWTH OF SOLAR POWER IN EUROPE

2 Main messages A market design reform is required to support the market-based growth of renewable energies. The new governance system underpinning the achievement of the agreed minimum 27% RES target by 2030 should be robust and reliable and should ensure comparability and consistency between Member States commitments. A new European legislative framework for renewable energies, building on the full implementation of the existing RES Directive, is needed to remove regulatory, administrative and technical barriers to renewable energy projects. Our main recommendations for such new legislation are as follows: 1. Reduce the cost of project development through fair permitting and grid connection rules: a. Make permitting and grid connection procedures truly streamlined b. Ensure transparency and fairness around the possible connection arrangements between RES investors and grid operators c. Put RES generators on an equal footing with conventional producers by spreading connection and communication infrastructure costs on consumers bills 2. Make the most out of renewable energies and reduce the operation cost of RES power plants: a. Maintain so-called priority access and dispatch rules to prevent massive RES curtailment as long as the system is not flexible enough b. Provide a clear and stringent interpretation of the situations in which grid operators are allowed to refuse the injection of electricity from RES power plants into the network, distinguishing between security-related curtailment and remunerated feedin management c. Adapt market rules and develop the necessary technologies to allow RES generators to cost-effectively reduce the difference between their forecast and their real production 3. Produce close to consumption. Tap into the potential of distributed renewable energies: a. Allow and support the consumption of one s own produced electricity b. When adapting the way how consumers pay the network costs via their electricity bills, make sure that distributed generators are not discriminated against c. Encourage community projects through dedicated legal, technical and financial measures d. Support RES solutions on buildings through adapted European legislation. 1

3 The need for a market design reform EPIA supports the transition towards an energy system based on large shares of variable renewable sources and complementary flexible technologies. However, today s market design is unable to provide investment signals to technologies which are capital intensive and have low marginal costs such as renewable energies. At the same time, current market rules are insufficient to boost the much needed flexibility and to encourage the decommissioning of inflexible and polluting generators. Hence, EPIA looks very much forward to the upcoming market design reform, which the European Commission has announced in the Energy Union package. We will contribute to this debate with a dedicated report. On the other hand, the recently approved European binding target of at least 27% renewable energies by 2030 has kicked-off discussions about how the renewable energy deployment can be made more cost-efficient via a new governance system and a new European legislative framework removing regulatory, administrative and technical barriers to renewable energy (RES) projects. A new governance system Today, the main driver for renewable energy investments in Europe is the binding 20% target by 2020, which is broken down into national obligations. In October 2014, the European Summit agreed to follow up on this objective with a binding European target of at least 27% by Its achievement should be driven by a so-called governance system, encompassing new planning and monitoring procedures. In order to provide the necessary certainty to investors, thereby reducing costs of renewable energy deployment, the system needs to be credible. Therefore, we believe that the new governance which will be built in the upcoming months should be robust and reliable and should ensure comparability and consistency between Member States efforts. A new European legislative framework for renewable energies Irrespective of the type of market rules driving investments in renewable energies, European legislation for renewable energies in the post-2020 period will be needed. It will ensure the removal of regulatory, administrative and technical barriers to new RES projects, thus driving their costs down and making the energy transition cheaper. This paper focuses on the key aspects that we suggest to address in the future European RES legislative framework. 2

4 1. Reduce the cost of project development through fair permitting and grid connection rules Before developing a renewable energy project, investors need to ask for the authorisation to (a number of) public bodies by providing the proof that the new installation complies with building codes, quality standards, safety and environmental rules, etc. Another step that needs to be undertaken by RES project developers is the introduction of a connection request to the relevant grid operator. The latter will then issue a bill to cover (part of) the cost of the connection works and of the necessary grid reinforcement and extension, where relevant. Rules governing authorisation and grid connection today diverge substantially across Europe. Against this background, the post-2020 RES framework should: Define time-limits for permitting procedures and oblige Member States to appoint a single permitting authority, similarly to the EU regulation on trans-european energy networks 1. In the spirit of art. 7.3 of Directive 2009/72/EC 2 and of article 13.1.f. of the current RES Directive 3, a notification instead of an authorisation request to the relevant authority should be possible for renewable energy systems the total production of which is consumed behind the connection with the public grid. Require national regulatory authorities to define and publish information on the allowed arrangements that grid operators and RES investors can agree on in order to speed up the connection of new power plants while limiting the associated grid costs. Only arrangements for which a positive cost-benefit analysis exists and which have been agreed through wide stakeholders consultations should be allowed. Arrangements could include, at distribution grid level, shorter connection times in exchange for remunerated services from RES power plants to Distribution System Operators (e.g. shaved PV production 4 ). Require Transmission System Operators/Distribution System Operators to provide replies to applicants within specific, stringent time frames. Absence of reply should be understood as positive reply. Facilitate the implementation of the already existing RES Directive provision (article 16.5) allowing RES investors to issue a call for tender for the connection works. Recommend the adoption in all European countries of so-called shallow grid connection regimes, whereby the cost of updating and extending the grid triggered by the new connectee is spread on all consumers bills. This will put renewable energy generators on equal footing with large, conventional energy producers, who have always paid only a minimum share of the cost of building the network to collect their energy and bring it to consumers. Similarly, recommend that the cost of new communication infrastructure, which would i.a. facilitate the system integration of renewable energy plants, be borne by all consumers. 1 Regulation (EU) No 347/2013 of the European Parliament and of the Council of 17 April 2013 on guidelines for trans-european energy infrastructure establishes the criteria for the identification of Projects of Common Interest in the area of energy infrastructure and defines streamlined permitting procedures for these projects. It sets a maximum duration for the authorisation process and requires Member States to appoint a single permitting authority. 2 Article 7.3 of Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity requires Member States to set up specific authorisation procedures for small decentralised generation, which take into account their limited size and potential impact. 3 Article 13.1.f. of Directive 2009/28/EC of the European Parliament and of the Council of 29 April 2009 on the promotion of the use of energy from renewable sources encourages Member States to set up simplified and less burdensome authorisation procedures, including through simple notification, for small and decentralised renewable energy generators. 4 The PV GRID project has issued recommendations on the boundary conditions for the use of remunerated PV curtailment at distribution grid level. 3

5 2. Make the most out of renewable energies and reduce the operation cost of RES power plants Improving the rules governing the uptake of electricity produced with renewable sources as well as the ones on the operation of RES power plants can contribute to a cost-effective energy transition. Rules enshrined in various European pieces of legislation today prescribe or encourage the full absorption by the network of electricity produced by plants fuelled by the sun or the wind (so-called priority access and dispatch ). This makes sense as electricity produced from renewable sources is both the cheapest and the greenest of all. At the same time, it can only be produced when the renewable sources are available (when the sun shines and the wind blows). These rules are intended to ensure that the electricity system becomes more flexible, complementing the variable production pattern of RES plants. As Europe s power system lacks the necessary flexibility, RES priority access and dispatch rules must be maintained to protect RES from massive curtailment. Priority dispatch itself leads to important signals for the system to become more flexible. Well ahead of 2020, in light of the scattered implementation of the existing rules across Europe, we recommend the European Commission to issue an interpretative note. The note should clarify that: As an overall principle all RES electricity should be taken up by the grid. The security risk situations, under which Transmission System Operators are allowed to curtail RES generators (directly or through Distribution System Operators) should be given a very specific and strict definition in accordance with the European Network Code on Emergency and Restoration. Security-related curtailment should be compensated. RES power can be regulated downwards to provide a remunerated service to Transmission System Operators and, in the future, to Distribution System Operators 5. Such services should be distinguished from security-related curtailment. As the system adapts to RES, RES adapt to the system, too. In line with the European Network Code on Requirements for Generators, RES power plants installed today, even if of small size, are technically able to support the grid when there is a risk of black-out and, in the framework of remunerated services, when there is a less serious network disturbance. Moreover, in accordance with EU rules 6, medium and large size RES power plants tend to decrease their production when overall supply largely exceeds overall demand and electricity prices become negative. Indeed, under these circumstances, they do not benefit from incentives. Finally, in conformity with the same EU rules 7, medium and large size RES power plants bear so-called balancing responsibility. This means that these plants must forecast their production and are subjected to penalty payments if real production levels are different from committed levels. However, balancing responsibilities represent a disproportionate economic burden for RES generators and do not lead to operational improvements. This is due to the inadequacy of market rules and the immaturity of auxiliary communication technologies. Hence, the post-2020 RES framework should require Member States to put RES in the condition to reduce their imbalances in short-term markets and to sell their own services on balancing markets. 5 Cf. the RESERVICES project findings 6 According to EU State Aid Guidelines for environmental protection and energy , measures must be put in place to ensure that RES power plants above 500 kw receiving operating aid have no incentive to generate electricity under negative prices. 7 According to EU State Aid Guidelines for environmental protection and energy , RES power plants above 500 kw receiving operating aid must be subject to standard balancing responsibilities, unless no liquid intra-day markets exist. 4

6 3. Produce close to consumption: tap into the potential of distributed renewable energies Many businesses and households across Europe want to produce their own clean and safe energy, decreasing their exposure to energy price volatility. But the progressive shift towards prosumer markets is today hindered by regulatory uncertainties. In some countries, technical requirements forbid residential consumers to make use of the energy they have produced. New, specific taxes on so called self-consumed electricity have also been set-up in different Member States. The post-2020 regulatory framework should ensure that: Every European consumer is allowed to produce and consume his/her own energy. Regulatory barriers at national level are lifted and self-consumed electricity is not exposed to specific taxes. When consuming his/her own produced electricity, a consumer reduces his/her electricity bill. As selfconsuming prosumers do not necessarily decrease the need to maintain or update the surrounding grid, a cash-flow issue may arise for Distribution System Operators. This may give rise to possible changes to the way grid tariffs are structured. While recognizing the importance to secure revenues for Distribution System Operators, we think a fair distribution of network costs among different consumer groups should be ensured. We recommend that grid costs in the electricity bills properly reflect the impact of a given consumer on the grid. A prosumer should be able to choose to use the grid as a buffer (for example in the form of so called net-metering ), thus paying more for grid services. On the other hand, a prosumer whose consumption profile better fits with the grid constraints should benefit from lower grid charges. When approving modifications to the grid tariff structure, regulators should also ensure that the return on already made investments in distributed generation is not jeopardised. Groups of consumers may wish to join forces and implement community RES projects. By pooling resources, they may be able to decrease the initial investment cost. If well designed, community projects can also smoothen grid integration: compared to the electricity produced by several individual projects, the electricity from some PV systems installed with complementary orientations and on buildings with complementary consumption patterns (e.g. residential buildings, offices and industries) could be less variable and will travel over shorter distances. In light of these manifold advantages, the future RES legislation should facilitate community RES projects by requiring Member States to: Provide a broad definition of renewable community projects to encompass a wide range of stakeholders, of project types and of financing schemes. Set-up mechanisms that provide technical assistance to these projects (e.g. local agencies). Ease the organisation of collective reverse auctions, whereby communities define the price they are ready to pay first and then they look for matching offers from the market. Set up dedicated financing mechanisms, which guarantee the risks associated with collective projects. Voluntary approaches should be promoted over compulsory ones. Buildings are a central part of the energy system, as they represent 40% of our energy consumption. Making the existing building stock more efficient is a key priority. Current EU legislation requires Member States to adopt stringent energy consumption standards for new buildings; but it contains loose provisions as regards the increase in the renovation rate of the existing building stock, representing 99% of all buildings. The future RES legislative framework should complement energy efficiency and building performance legislation to boost building renovation with on-site RES solutions. 5

7 Annex on priority access and dispatch We understand priority or guaranteed access as the right of RES generators to inject their electricity into the grid whenever this becomes available. We interpret priority dispatch as the RES generators right to inject their electricity into the grid following the results of market clearing. RES electricity is produced at almost zero costs because sun and wind are available for free. In theory, electricity produced from RES-based power plants should be the first one to be sold on the market and to be taken up by the grid. However, grid constraints may prevent this from happening. Some inflexible power generators (mostly nuclear and coal) can take hours or even days to lower their production. If network issues arise, it therefore appears much cheaper and simpler to scale down renewable energy generation than inflexible nuclear or coal power. In a way, one can affirm that inflexible power plants benefit from a natural priority dispatch. It is also worth noting that in some European countries coalfired power plants benefit from legal priority dispatch as much as renewable technologies do: this is allowed by article 25 of Directive 2009/72/EC. Grid constraints can be addressed by modifying the demand pattern rather than intervening on the production side. Yet, technical and market barriers today prevent consumers willing to decrease or shift their demand to support the power system from doing so. In this context, priority access and dispatch for renewable energies are crucial to encourage the update and extension of the grids on the one hand and to boost flexible power production technologies and elastic consumption behaviours on the other hand. When the options for upgrading the grid and for enhancing flexible technologies are almost fully exploited, the marginal cost of such measures becomes higher. At this stage, it may become economically interesting to tap into the flexibility opportunities offered by renewable energy generators. Rather than building a new grid segment that would only be used a few hours per year, it may be cost-effective to curtail minimum amounts of peak PV electricity or to equip PV systems with complementary storage systems. Such measures are fully consistent with priority dispatch rules. Already today, and within the framework of priority dispatch, renewable energy generators can decide to scale down their production as part of a voluntary connection arrangement. In this case, curtailment would represent a remunerated service to grid operators. It could also happen in response to market price variations. Both connection arrangements and the trade of services at distribution grid level require transparent and fair regulatory frameworks. Paper developed by the SolarPower Europe Strategy Committee: Chair: Simone Diodato Antonelli Vice-Chairs: Debora Coll-Mayor, Andreas Wade Contact in the SolarPower Europe team: Giorgia Concas g.concas@solarpowereurope.org Policy Advisor 6

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