D 4. The French feed-in tariffs to support electricity from renewable energy sources. 2nd Workshop of the International Feed-in Cooperation

Transcription

1 2nd Workshop of the International Feed-in Cooperation The French feed-in tariffs to support electricity from renewable energy sources Christophe Lesieur In charge of Energy questions French Ministry of ecology and sustainable development 1

2 Summary I. Presentation of the supply in France II. Method for the determination of tariffs III. Lessons from the feed-in system IV. The new «Energy Law» 2

3 Supply for electricity Power at the end of 2004 installed GW Net Supply at the end of 2004 In TWh 3

4 RES for electricity, except hydro Power from renewables, except hydro (Gwh/y) 4

5 The French Programmation Pluriannual Programmation for electric investments (2005) For France: increase from 15 % to 21 % (including large hydro: 66 TWh) - Requires a minimum increase of 40 TWh/year of new RE (excluding large hydro) - Requires a minimum of 10 GW of wind power in 2010 (versus 0.5 GW in 2004) - Wind power should contribute to 73 % of new renewable energy increase (81% of new RE power increase) Source: Pluriannual Programmation for electric investments (2005) 5

6 The French system to support electricity from renewable energy sources < 12 MW: feed-in tariffs > 12 MW: calls for tender 6

7 The "Profitability Index" (PI) method Profitability index PI = Net Present Value / Investment Gives both kwh manufacturing cost and selling price: Tariff T = ((1 + PI)Kd + Kom) Iu / Nh + Cvu (Euro/kWh) CRF = Capital recovery factor (based on actual discount rate = t = AWCC = Average Weighted Cost of Capital, and n): CRF= t / (1-(1+t)^-n) Kom = O&M ratio = yearly O&M expenses / Investment (wind: Kom = 0.04) Iu = investment cost ratio = I / P (EURO/kW) Nh = Ey / P = kwh / kw = number of hours per year at rated power Cvu : variable cost (fuel cost part: Cvu = Fuel Cost / (Efficiency.LHV) If PI=0, Tariff =ODC (Overall Discounted Cost), Margin = 0 Direct link PI <==> IRR or DPBT (disc. PB time) CRF (IRR, n) = (1+PI).CRF (t, n) CRF (t, DPBT) = (1+PI).CRF (t, n) 7

8 Links PI / IRR for n = 15 years Ex: t = 6 %: 100 % PI variation from 0.15 à 0.3 : IRR vary only from 8 to 10.3 % TRI = f(tec, t) pour n = 15 ans t = 15 % 12 % 10 % TRI (%) % 1 % 0 % 0 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 TEC = VAN/I 8

9 Method (2) Universal linear model PI = f(tariff T) PI = at - b = (Nh / CRF.Iu)(T - Cvu) - (1 + Kom / Kd) where Iu = I / P, Nh = Ea / P, Kom = Dom / I, CRF = t / (1 - (1+t)exp-n) Cvu = part of cost due to the fuel (Zero for wind/solar/hydro systems) Com = part of the cost due to O&M costs = Kom.Iu / Nh Ci = part of the cost due to the investment cost = CRF.Iu / Nh From Thales of Milet: PI = {(T-Cost)/Cost} / (ci/cost) PI Margin On Cost (MOC) /% inv. In cost Golden rule: PI > 0.3 PIr Cvu Com Ci -1 -(1+Kom/CRF) M Cost Tr Tariff T 9

10 Method (3) Margin on cost, MOC MOC =(Price-Cost)/Cost MOC of Fossil versus Renewable Energy Sources - Introducing Kfuel Kfuel = cost per kwh without fuel cost / cost per kwh Kfuel = 1,0 for Wind; 0,5 for Coal; 0,33 for CCGT MOC =PI*Kfuel*(Kd/(Kd+Kom)) At equal kwh cost, if PI Renewables = PI Fossil, then: MOC R / MOC F > 1 / KFUEL F A Renewable energy investment commands a higher margin to reach the same profitability than a Fossil energy investment!! 10

11 Method (4) The «zero fuel cost RETs paradox» (wind, hydro, solar, geothermal based power plants) : - (MOCwind / MOCfossil) = (cost / non fuel cost part)fossil - MOC wind = 2 times MOC coal = 3 times MOC nat. gas! - Minimum 10 % MOC from coal plants ==> PI = 0,3 Implies minimum PI value of 0.3 for wind projects (project IRR = 10% for t = 6 % and n = 15 years) Wind: 120 Coal: 110 Nat.gas: Fuel cost part Non-Fuel cost part Different selling prices for the same profitability (PI = 0.3) Same kwh cost 11

12 Example 1: comparing coal & CHP from biomass Differences: costs: 1.7 c /kwh Tariffs 2,6 c (+50%) Efficient Tariffs 6,8 c versus 4,2 (+62%) Tariffs Chp G: 8.7 to 10.2 c DK: bonus 1.3 to 4.6 ce/kwhe Sp: 3 ce/kwhe 1,0 Différentiel de rentabilité centrales à charbon et cogénération ex-biomasse (paille, DK, 1999, 6 Mwe) TEC = VAN/ I 0,5 Charbon Cogen paille 0,0 0,03 0,04 0,05 0,06 0,07 0,08 TVe (Euro/kW he) 12

13 Example 2: Advanced tariffs for Wind Power Taking into account return of experience and context: - Competitive calls for tenders Not enough efficient for new French Wind Energy goals: 10 GW Feb French electric law: the only solution for projects > 12 MW - Green certificates: not proven, not sufficient for 5 to 11 GW - Fixed Tariffs : past and ongoing successes (Dk, G, Sp...) Basis: fair profitability for private investors: - Minimum profitability for strong market growth, including on low quality sites largely available (from Nh = h/y) - No undue profits on high quality sites: tariffs adapted to potential energy yields - Simple system, easy to define, to control and to adapt - Not state aid: charging the cost on all electricity consumers 13

14 Principles for Tariffs Definition and Calculation Two successive tariffs levels (F: only for P < 12 MW): T1 fixed for all projects from years 1 to 5 (= German idea!) T2 variable for projects from years 6 to 15 (diff. From Ger.) T1 and T2 define a constant equivalent tariff, Teq Ref. Nhmin : PI=PImin => Teqmax=T2max =>T1= T2max Ref. Nhmax : PI = PImax > PImin => T2min For a specific project (P < 12 MW): Nh from average values years 1 to 5 T2: linear calculation Teq from (T1, T2, t) Tariffs PI from Teq, Nh, Iu Reference values: T1 Iu=1067 EURO/kW Kom = 4%, t=6.5% Teq T Years 14

15 Results: June 8th 2001 Arrêté, 2001 Tariffs 2001 Rates(Mainland France, P < 1500 MW ) Reference values for 2001 tariffs Mainland France, projects < 12 MW T1 T2 Teq P (MW) P (MW) ceuro / kwh Nh: <1500 >1500 T1 T2 Teq Nhmin: ,38 8,38 8,38 Nhint: ,38 5,95 7, ,38 7,02 8,38 Nhmax: ,38 3,05 5,41 Corsica & Overseas Depart. projects <12 MW P (MW) P (MW) ceuro / kwh Nh: <1500 >1500 T1 T2 Teq Nhmin: ,15 9,15 9,15 Nhint: ,15 7,47 8,21 ceur / kwh ,95 5,41 3,05 Nhmax: ,15 4,57 6,59 1 Hypothesis for Teq: Real discount rate t = 6.5% n = 15 years Nh (hours/year at rated power)

16 Results: June 8th 2001 Arrêté, 2001 Tariffs Filière Biomass Methanisation Geothermie PV Animal wastes Small installations Biogaz Domestic waste CHP Small hydraulic Wind on-shore arrêtés (*) 16 avril avril mars mars mars mars octobr e octobr e juillet juin juin 2001 Durée des contrats 15 years 15 years 15 years Fourchette de tarifs pour les nouvelles installations (métropole) 4,9 c /kwh (32,1 cf/kwh) + prime à l efficacité énergétique comprise entre 0 et de 1,2 c /kwh (7,8 cf/kwh) 4,6 c /kwh (30,2 cf/kwh) + prime à l efficacité énergétique comprise entre 0 et 1,2 c /kwh (7,8 cf/kwh) 7,62 c /kwh (50 cf/kwh) + prime à l efficacité énergétique comprise entre 0 et 0,3 c /kwh (2 cf/kwh) 20 years 15,25 c /kwh en France continentale et 30,5 en Corse et Dom (1F/kWh et 2F/kWh) 15 years 4,5 à 5 c /kwh (29,5 à 32,8 cf/kwh) énergétique comprise entre 0 et 0,3 c /kwh 15 years 7,87 à 9,60 c /kwh (51,6 à 63 cf/kwh)issu du tarif «bleu» aux clients domestiques 15 years 15 years 12 years 20 years 4,5 à 5,72 c /kwh (29,5 à 37,5 cf/kwh)selon la puissance + prime à l efficacité énergétique comprise entre 0 et 0,3 c /kwh (2 cf/kwh) 4,5 à 5 c /kwh (29,5 à 32,8 cf/kwh) + prime à l efficacité énergétique comprise entre 0 et 0,3 c /kwh (2 cf/kwh) 6,1 à 9,15 c /kwh (40 et 60 cf/kwh) environ en fonction du prix du gaz, de la durée de fonctionnement et de la puissance 5,49 à 6,1 c /kwh (36 à 40 cf/kwh) selon la puissance + prime comprise entre 0 et 1,52 c /kwh (10 cf/kwh)en hiver selon régularité de la production 8,38 c /kwh (55 cf/kwh) pendant 5 ans, puis 3,05 à 8,38 c /kwh (20 à 55 cf/kwh) 15 years pendant 10 ans selon les sites 16 Source: DGEMP-Dideme. Februar 2005.

17 Lessons from French Tariffs Price ranges (average to maximum support) for direct support of wind onshore in EU-15 Member States (average tariffs are indicative) compared to the long-term marginal generation costs (minimum to average costs). Support schemes are normalised to 15 years. Average effectiveness indicator Wind on-shore - 17

18 Lessons from French Tariffs Effectiveness indicator for wind onshore electricity in the period The relevant policy schemes during this period are shown in different colour codes. 18

19 Lessons from French Tariffs Administrative barriers Large number of authorities involved and lack of coordination between them Long lead times needed to obtain necessary permits RES insufficiently taken into account in spatial planning 12 MW threshold Many projects were cut sheating on Nh on years 1-5 was profitable! Some installations was volontary stopped during the first years 19

20 The energy Law (13th july 2005) FEED- IN TARIFF = APC + BONUS APC = avoided private costs 2. Bonus = contribution to the 4 objectives of the energy law: The energy Law suppress the threshold of 12 MW 20

21 The energy Law (13th july 2005) 1. Avoided private costs = avoided investment costs + avoided exploitation costs We must take into account: structure of the supply: - In what measure wind energy (or solar energy) susbstitute to nuclear plant, gaz plant? - What are the possible cost of gaz in mid term? Intermittence and lack of predictability: - In what measure wind energy (or solar energy)permit to avoid investments in installation supplying the peak period- load? Cost of intermittence = [2 /MWh 4 /MWh] 21

22 The energy Law (13th july 2005) Bonus = contribution to the 4 objectives of the energy law: - Independance External costs of Energy - Low costs of energy ExternE - NEEDS - Environnement - Social cohesion and energy for all We must quantify these elements! 22

23 Conclusions Defining a fair and efficient tariff system is possible - Taking into account other success stories (Dk, G, Sp) - Within a deregulated electricity market ("advanced tariffs") The Profitability Index Method gives: - A rational basis for minimum values of profitability - Simple formulas to define, monitor, adapt the tariff system Lessons from France - Administrative barriers - threshold of 12 MW 23