Technology Policy: Empirical Evidence for Successful Renewables Policies

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Robert Knight
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de Content What policies are currently implemented to support renewable energy in Europe? What are the success stories?

1 Technology Policy: Empirical Evidence for Successful Renewables Policies CCAP Dialogue on Future International Actions to Address Global Climate Change Stockholm, Sweden, May 2004 Niklas Höhne, Ecofys Content What policies are currently implemented to support renewable energy in Europe? What are the success stories? Wind in Germany Wind in Denmark Photovoltaics in Germany Biomass district heating in Austria Biomass CH in Finland Solar thermal in Greece

2 Policies for renewable electricity in Europe Each EU member state adopts its own unique set of instruments Feed-in tariffs RES-E obligation DK FR LU AT GE PT SE UK GR ES IT AT NL BE Certificate systems UK NL IE FI Tenders Fiscal incentive Feed-in tariff Guaranteed revenues for each kwh produced for a defined period (e.g. 20 years) Advantages Stability, long-term certainty: low investment risk, opportunities for new entrants Disadvantages Not enough incentive to bring the costs down, only through economy of scale

3 Renewable obligations Impose a minimum share of renewables on consumer, suppliers or producers If not met, a penalty is due Advantages Market based solution Incentives for cost reduction Disadvantages Complexity of the system Risk of supporting only the low-cost technologies Uncertainty in the long term Tradable certificate system Physical electricity and its green value are sold separately Often combined with renewable obligations, but also with other policies Advantages Market based solution Opportunity of cross-boarder trade Coherence with the market liberalisation process Disadvantages Administratively complex to handle! transaction costs Uncertainty in the long term: Price volatility! investment risk

4 Fiscal and financial incentives Deduction of the investments from income tax or carry over against future tax payments Direct subsidies Low-interest loans Advantages Guaranteed and direct payment Disadvantages Not enough incentive to bring the costs down, only through economy of scale Uncertainty in the long term Tendering scheme Government tenders for a specific amount of renewable energy Lowest cost bid wins the contract Advantages Generates attention for renewables investments Competitive Disadvantages In practice only a low amount of project really have been implemented

5 Policies for renewable electricity in Europe Each EU member state adopts its own unique set of instruments Feed-in tariffs RES-E obligation DK FR LU AT GE PT SE UK GR ES IT AT NL BE Certificate systems UK NL IE FI Tenders Fiscal incentive Content What policies are currently implemented to support renewable energy in Europe? What are the success stories? Wind in Germany Wind in Denmark Photovoltaics in Germany Biomass district heating in Austria Biomass CH in Finland Solar thermal in Greece

Feed-in law in Germany Since 1990, updated in 2001 and 2004 Preferred grid-access Guaranteed revenues for each kwh produced for 20 years Wind onshore: 8.7 /kwh; PV: <59.

6 Feed-in law in Germany Since 1990, updated in 2001 and 2004 Preferred grid-access Guaranteed revenues for each kwh produced for 20 years Wind onshore: 8.7 /kwh; PV: <59.3 /kwh; Biomass: <19,5 /kwh Financed through price increase of normal electricity Source: BMU Energiepolitik in Zahlen, November 2003 Wind in Germany Instruments Feed-in law: fixed price guaranteed for 20 years (first 8.7, then 5.5 /kwh) Fiscal incentives: Investments offset against income tax (not wind specific) Government financed low-interest loans Administration: Decisions on open and restricted areas of wind development beforehand Results Leading in wind turbine production More wind installed on coast than wind-rich Netherlands

7 Wind in Germany Development of renewable electricity in Germany Biomass Wind Hydro

Wind in Denmark Instruments Strong R&D support in the late 80s, now research fund Subsidies up to 30% for installation until 1989 Feed-in law since 1992 differentiated between private producers and

8 Wind in Denmark Instruments Strong R&D support in the late 80s, now research fund Subsidies up to 30% for installation until 1989 Feed-in law since 1992 differentiated between private producers and utilities Reimbursement of CO 2 tax No income tax on dividends Results World leader in wind turbine production Development of wind technology Development of wind turbines Learning curve for wind energy in Germany Cost [ /kw] Installed capacity [MW]

Photovoltaics in Germany Instruments Feed-in law: <57 /kwh guaranteed for 20 years Government financed low-interest loans Direct subsidies Results Germany is more than half of the world market for

9 Photovoltaics in Germany Instruments Feed-in law: <57 /kwh guaranteed for 20 years Government financed low-interest loans Direct subsidies Results Germany is more than half of the world market for photovoltaics: Stagnation before renewal of the feed-in law and now boom has created shortage of PV modules on global market More than half of the European PV production is located in Germany Photovoltaics in Germany

10 Photovoltaics in Germany Recent discussions on the renewal of the feed-in law in Germany Arguments Unnecessary high support, subsidies, tax credits If when profits are made, taxes will be paid Positive employment effect due to local industry The claimed positive employment effects are overcompensated by less consumption in other areas due to subsidies Wind and Solar do not replace conventional power plants, since their output cannot be adjusted Capacity of wind and solar is far below the emergency power that has to be available regulation More immediate adjustment electricity has to be provided Not more, since not only production but also consumption varies

Biomass district heating in Austria Instruments: Exemption of tax on use of gas and electricity Subsidies For investments up to 30% For connection of households to district heating For Farmers to

11 Biomass district heating in Austria Instruments: Exemption of tax on use of gas and electricity Subsidies For investments up to 30% For connection of households to district heating For Farmers to invest in biomass plants Administration: Decentralised heat production from biomass is accepted and promoted by the local and regional authorities Results: Strong Austrian bioenergy industry Most developed market in central Europe Development of bioenergy systems in Austria Additional capacity in MW Source: Niederösterreichsche Landwirtschaftskammer 2002

12 Biomass CHP in Finland Instruments: Exemption of tax on CO 2, energy or electricity Reduction of value added tax for small scale plants Subsidies for investments up to 30% High level R&D support for domestic biomass technology industry Results: Leading in use of renewable energy (21% of primary energy) Exporter of Biomass technology (combustion technology, boilers and emissions control) Utilisation of biomass for energy in Finland Utilisation of biomass [PJ/a] (Plan)

13 Solar thermal in Greece Instruments: R&D support in the late 70s early 80s for local industry Subsidies for investments from the late 70s (up to 55%) Fiscal incentives: investment can be deducted from income tax Results: Greece has the highest per capita use of solar thermal technologies in the EU Technology mostly produced and installed by local companies Conclusions Factors of success Usually first R&D and direct subsidies Breakthrough with implementation: A combination of measures (e.g. feed-in laws, financial instruments and administrative arrangements) leads to business opportunities, implementation, technology development and cost reduction Long-term predictability very important for success Implementation does not solely depend on renewable potential of the country

14 Backup slides Goals renewable energy in EU Doubling share RES from 6% to 12% and RES-E from 11 to 22% (period ) Electricity Directive: indicative country targets for 2010 from 6% in Belgium to 78% in Austria Biofuels directive: target at EU level 5% by 2005 and 5.75% by 2010; Full tax exemption allowed Discussions started on specifying 2020 targets

15 Renewable electricity in EU 2002 Share of renewable primary energy in EU 2002

UK renewable electricity market Two main supporting instruments for RES-E: Renewables obligation for suppliers combined with a certificate system (ROCs market) Renewables get exemption for Climate

16 UK renewable electricity market Two main supporting instruments for RES-E: Renewables obligation for suppliers combined with a certificate system (ROCs market) Renewables get exemption for Climate Change Levy (LECs market) What happened last 1½ year? Growth RES behind target => shortage of ROCs System design: Penalties are reallocated to redeemed certs => Prices of ROCs higher than penalty Favourable prices => very large growth new RES-E capacity in last year Employment in renewable energy in Germany 2002

Photovoltaics in Germany Increased sales bring down the price Price per Wp Yearly sales www.greenprices.

GreenPrices supplies information about green energy and provides actual news about all energy suppliers and their

17 Photovoltaics in Germany Increased sales bring down the price Price per Wp Yearly sales GreenPrices aims to stimulate the demand for green energy. GreenPrices supplies information about green energy and provides actual news about all energy suppliers and their prices on the green energy market. Greenprices is deeply involved in the consumer site of the green energy market and provides a tool to switch between green energy supplier

ERMInE Database. Presentation by Nils Flatabø SINTEF Energy Research. ERMInE Workshop 2 - Northern Europe Oslo, 1. November 2006

ERMInE Database. Presentation by Nils Flatabø SINTEF Energy Research. ERMInE Workshop 2 - Northern Europe Oslo, 1. November 2006 ERMInE Database Presentation by Nils Flatabø SINTEF Energy Research ERMInE Workshop 2 - Northern Europe Oslo, 1. November 26 Overview Content of the Ermine Database Electronic Questionnaire RTD&D Data