PERCH. Production of Electricity with RES and CHP for Homeowners. Work package 2 EU national interconnection procedures, codes and incentives

Transcription

1 PERCH Production of Electricity with RES and CHP for Homeowners Work package 2 EU national interconnection procedures, codes and incentives Luxembourg ISQ, Instituto de Soldadura e Qualidade, Av. Prof. Cavaco Silva 33, Tagus Park, Phone: , fax: njpereira@isq.pt, 1

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3 CONTENTS 1 INTRODUCTION NATIONAL ENERGY POLICY ENVIRONMENTAL AND ENERGY EFFICIENCY ELECTRICITY MARKET INSTITUTIONAL AND LEGAL FRAMEWORK ELECTRICITY SECTOR STRUCTURE INTERCONNECTION AND NATIONAL REGULATIONS RENEWABLES ENERGIES IN LUXEMBOURG The Réglement grand-ducal du 8 Février Main characteristics of the new legislation Tariffs EXAMPLES OF TECHNOLOGIES FOR MICROGENERATION INFORMATION SOURCES

4 1. INTRODUCTION Luxembourg is the smallest IEA country, but its population of 430,000 inhabitants in 1998 is the richest of all International Energy Agency countries (IEA). Energy consumption per inhabitant is high because of the country s iron and steel industry, the large sales of transport fuel and the overall wealth of the country. Domestic energy resources are limited to renewable energies. Therefore, Luxembourg has the highest dependence on imported energy (more than 99% of total energy in 1998) of all IEA countries. Also, because of its small size and lack of indigenous sources, Luxembourg s energy market is greatly influenced by the energy policies and energy markets in surrounding countries. Electricity generation from renewable energy and co-generation has expanded rapidly because of the generous buy-back tariffs and direct subsidies. The government should ensure that support for renewable energy does not put too heavy a burden on electricity consumers. This could be achieved by improving the cost-effectiveness of support schemes. The best way to ensure that energy production from renewable forms of energy is sustainable in the long term is to ensure that their cost decreases to a level which makes them competitive. The Luxembourg is totally dependent on oil products imports. Its oil sector is strictly retail. The government sets price ceilings on the most important oil products to avoid inflation. This system may also prevent abuses of dominant position if competition does not work properly. Since effective competition encourages companies to decrease costs of supply, allowing them to reduce sale prices, the government should rely on market forces to keep oil product prices low. Energy efficiency policy in Luxembourg received a welcome boost in 1993, when a new framework law on energy efficiency was adopted. Several Grand Ducal regulations (decrees) have been issued to implement this law and the government needs to start assessing their cost-effectiveness. Implementation of the energy tax will also encourage energy savings. 2. NATIONAL ENERGY POLICY The Energy Efficiency Law of 5 August 1993 established a legal framework to adopt a wide range of regulations focused mainly on energy efficiency measures and also on the promotion of renewable energy. The 1993 law has five targets (see box) and at the end of 1999, several Grand Ducal regulations described below were issued to implement the law. In 1998, the National Plan for Sustainable Development, setup a strategy for sustainable development in Luxembourg s different economic areas as described bellow: To achieve significant energy savings. To introduce the best available technology. To balance environmental protection and economic growth in choosing the most costefficient solutions. To promote human behaviour compatible with the above objectives. To work for the adoption of these objectives at international level. To promote balanced development of the territory. To optimise the environmental management of the land. The National Plan sets objectives and proposes measures as guidelines in meeting the following objectives: To ensure security of energy supply. 4

5 To diversify energy supplies. To develop highly efficient co-generation. To improve energy efficiency in all consumption sectors. To increase the use of renewable energy. ISQ, Instituto de Soldadura e Qualidade, 3. ENVIRONMENT AND ENERGY EFFICIENCY In keeping with the Kyoto Protocol of December 1997 and the Burden-Sharing Agreement of the EU of June 1998, Luxembourg is committed to reducing its total GHG emissions by 28% between 1990 and Energy-related CO2 emissions have decreased and were 23% under the 1990 figure in 2000, although the commissioning of a new combined cycle gas turbine (CCGT) in 2002 will increase the energy-related CO2 emissions; the government forecasts them to be 18.4% under the 1990 figure in 2005 and 21.6% in The key areas of action to reduce GHG emissions are improvement of energy efficiency in buildings, information dissemination for households, and promotion of renewable energy sources and the use of natural gas. Luxembourg intends to rely on the flexible mechanisms allowed by the Kyoto Protocol. Energy demand per capita in Luxembourg continues to be among the highest in the IEA; in 1999 it was 7.88 toe (8.2 toe in 2000) compared to the 5.1 toe IEA average. The legal framework for energy efficiency is defined in the 1993 Energy Efficiency Law. The National Plan for Sustainable Development of 1998 set an objective to reduce energy intensity by 20% between 1993 and It also introduced several measures in each sector to achieve the target. 4. ELECTRICITY MARKET 4.1 INSTITUTIONAL AND LEGAL FRAMEWORK The Grand Duchy of Luxembourg is a constitutional monarchy, being the Grand Duch the Chief of State and the legislative power is detained by the people s representative in the Government. The Grand Ducal regulation of 11 August 1996 establishes the Conseil National de l Energie as an advisory board to the Government on energy issues. The key institutional players are the Minister of Economic Affairs, the Government Commissioner of Energy and the Luxembourg Regulatory Authority (ILR). The Minister of Economic Affairs provides authorisation for energy undertakings and system operators approves electricity transmission and distribution tariffs. A regulator is set up to deal with abuses of dominant position. The regulator looks inter alia into complaints from eligible consumers about supply contracts, negotiations and access to the grid. Decisions are subject to appeal to the administrative court. The regulatory body is the Institut Luxembourgeois de Régulation. The regulator is headed by seven members nominated by the government. Renewable energy policy is managed by the Government s Energy Agency created in The Energy Agency, set up as a company under private law whose shareholders are the Government (50%), CEGEDEL (40%) and SEO (10%), is focusing its renewable energy activities on the modernisation of small hydro power plants, the use of solar thermal energy in swimming pools, 5

6 sports installations and camping sites and the evaluation of the potential for wind power use in Luxembourg. The legal framework for the sector is set out by the Electricity Law of 2007 which implements the Second Electricity Directive and Directive2005/89/EC on security of Energy Supply. Other relevant legislation are: The Law of 5 August 1993, on the rational use of energy. The Grand-Ducal Regulation of 30 May 1994, on the production of electricity from cogeneration; The Grand-Ducal Regulation of 22 May 2001, on the introduction of a compensation fund in the framework of the organisation of the electricity market; The Grand-Ducal Regulation of 14 October 2005, on the production of electricity from renewables energies. 4.2 ELECTRICITY SECTOR STRUCTURE The state has shares in Luxembourg s main energy companies: 31% of the Société de Transport de Gaz (SOTEG), the gas transport company; 42% of the Compagnie Grand-Ducale de l Électricité (CEGEDEL), the largest electricity import and distribution company; and 40% of the Société Électrique de l Our (SEO). When the companies were created (such as SOTEG in 1974), the state held shares which it has gradually released. Four municipalities are directly involved in gas distribution and eight in electricity distribution. There are also cross-shareholdings between companies. Since the beginning of the 1990s, CEGEDEL became involved in gas, renewable energy and co-generation through CEGEDEL-Participations. In the 1990s, SOTEL (Société de Transport de l Électricité) and SOTEG s capital was opened to foreign shareholders. ARBED, the iron and steel industry owned 29.7% by the state is a shareholder of SOTEG (20%) and owns 77% of SOTEL, the electricity company which imports and supplies electricity to its steel mills and the national railways company. Most of Luxembourg s domestic electricity production comes from hydropower station which does not cover the domestic consumption. Luxembourg is almost dependent on energy imports and its energy policies aims to reach energy security through diversification, energy efficiency and environmental protection. The majority of electricity production of Luxembourg is ensured by German and Belgian companies, which is complemented by local utilities (CEGEDEL, SOTEG and SEO). In Luxembourg there are two different grids that belong to CEGEDEL and SOTEG. Although not connected, they share a backup line that allows power changes, both limited in time and quantity. Access to transport and distribution networks is based on regulated tariffs set by network operators that are approved by Ministry of Economy, after consultation with the Institute Luxembourgeois de Regulation (ILR). The Directives on Electricity and Gas In 2007 the energy sector in Luxembourg has been marked by the adoption of two essential laws, 6

7 which have implemented the 2 nd Electricity and Gas Directives: the Law on the organisation of electricity market and the Law on the organisation of gas market. Despite the delay in the implementation of both Directives, the Institute Luxembourgeois de Regulation confirmed that the electricity market is actually open to competition and the development of gas market is making progresses. In this context, domestic consumers can choose freely their energy supplier. The Luxembourg Government has specifically underlined the importance of security of supply and seeks to maintain a competitive internal market for the benefit of the national economy. Thus, the Government authorised the Minister of Economic Affairs to launch a detailed market analysis and has proposed that ultimately, the state should control the transmission and distribution networks. Liberalisation of electricity market Following liberalisation, a new utility (EIDA) has entered in the electricity market offering electricity produced exclusively from renewable sources of energy. The liberalisation of Luxembourg electricity market was an incentive for new players, being some of them importers that do not only import electricity for final consumption but are also profiting from the opportunities opened by the price arbitration. A national wholesale electricity market has thus continued to develop in 2007, where imported electricity is no longer just for domestic consumption but also for export. Electricity production Until 1990, CEGEDEL imported nearly all the electricity consumed in its network from a German utility. Nevertheless, in 2007, 37% of the electricity supplied to CEGEDEL customers is generated from plants located in Luxembourg. As a result of that increase of electricity generation, all residential customers and low-voltage non-residential clients are supplied 100% with electricity produced in Luxembourg. Unbundling The electricity Law 2007 aims to guarantee non-discriminatory grid access and requires separation of grid transmission networks from the production and supply side. The TSO CEGEDEL and SOTEL had already created separate companies that are in charge of transport and distribution. In the other hand, pursuant to article 32.4 of the Electricity Law of 1 August 2007, other Luxembourg electricity companies which do not manage a transmission network and have less than 100,000 clients will continue to be exempt from the legal unbundling obligations. 4.3 INTERCONNECTION AND NATIONAL REGULATIONS Neither the Law of 24 July 2000 relative to the organization of the electricity market, nor the Grand- Ducal Regulation of 30 may 1994 concerning the production of electrical energy based on renewable energy sources and cogeneration deal with the issue of interconnection standards. For small generation units (rated up to 1000 kva), the distribution network operators active in the Grand-Duchy, together with the SEE, have developed specific technical prescriptions. On August 2003, the dispositions of the Règlement ministeriel concernant les prescriptions de raccordement aux réseaux de distribution de l énergie électrique B.T. au Luxembourg of 8 August 1989 were replaced by the Prescriptions de raccordement pour les installations à courant fort 7

8 disposant d une tension nominale inférieure ou égale à 1000V au Grand-Duché de Luxembourg. These prescriptions are to be followed together with the rules set in the Distribution Code and the requirements of the German VDEW. Section 13 of the document states that: The developer, installer, owner of the connection and the (network) operator negotiate with the VNB (utility) the technical elements of the connection and the installation on a case-by-case basis for the following installations: Auto-producing installations operating in parallel to the VNB s low voltage network. Back-up emergency stand-alone generators for electricity supply during public network breakdowns. In February, the launch by ERGEG of the Regional Electricity Initiatives with the aim of speeding up market integration at a regional level so as to end up with a single European Union market. France belongs to four of the seven regions defined by the European Commission and ERGEG: o Central-West (with Germany, Belgium, Luxembourg and the Netherlands); o Central-South (with Germany, Austria, Greece, Italy and Slovenia); o South-West (with Spain and Portugal); o United Kingdom and Ireland. In December, the entry into force of the new guidelines for Regulation (EC) No 1228/ While the Regulation set out the general principles for congestion management, the new guidelines explain precisely the improvements to be made to the current mechanisms. In particular, they require a coordinated approach at regional level for the calculation and allocation of interconnection capacities. 5 RENEWABLE ENERGIES IN LUXEMBOURG The National Plan for Sustainable Development of 1998 sets the following targets: To increase the share of renewable energy in the public system (electricity distributed by CEGEDEL) from 2.5% in 1997 to 5% in To increase the share of co-generation in electricity consumption from 7% in 1997 to 15% in To increase the share of electricity auto production in total electricity consumption in the public system from 10% in 1997 to 45% in To double the share of wood in final energy consumption from 0.5% to 1% in In 1994, a ministerial regulation provided support for co-generation and renewable energy and a grant to non-industrial co-generators of LUF 6,000 per KW for the installation of the first 5,000 kw. This ended in 1997, when the ceiling was reached. Industrial co-generators are eligible for special depreciation allowances in the framework of the 1997 law. Wind turbines with a capacity of less than 50 kw have received a direct subsidy of 25% of the investment cost. There is a limitation of LUF 60,000 per turbine. For wind turbines with a capacity above 50 kw, a subsidy of LUF 3,000 per kw with a maximum of LUF 6 million was granted to the first five projects. Projects involving solar energy, biomass, biogas and heat pumps in the residential sector have received a subsidy of 25% of the investment cost with a ceiling of LUF 60,000 per house. In the non-residential sector, projects have received 25% of the investment cost with a ceiling of LUF 8

9 1.5 million for each installation. ISQ, Instituto de Soldadura e Qualidade, Until the end of 1999, a ministerial regulation of 1997 provided a subsidy of 25% to the costs of the connection of existing houses to the heat grid. In addition to these direct subsidies, the Grand Ducal regulation of 1994 sets the buy-back tariff for electricity from non-industrial co-generation and renewable sources. CEGEDEL (but not SOTEL) has a purchase obligation. The buy-back tariff for co-generators with a capacity of 1 to 150 kw averages LUF 2.95 per kwh; from 151 to 1,500 kw, the tariff averages LUF 2.3 per kwh for day supplies and LUF 1.2 per kwh for night supplies. There is an annual subsidy of LUF 4,500 per kw installed if electricity is supplied during peak load. Electricity plants using renewable sources receive the same payments as co-generators. Electricity from wind energy and solar PV receives an extra bonus of LUF 1 per kwh. CEGEDEL purchases hydro-electricity from SEO at a price which allows SEO to cover its costs of production and to make a profit. Electricity from state and private micro power plants is purchased at a price set by the Grand Ducal regulation of 1994, which also allows the plants to recover their costs. The production of renewable energy remained a major political issue. The Minister of Economic Affairs and the Minister of Environment jointly presented a study on national renewable energy production, identifying a potential up to 8.9% of energy consumption. Further on, were presented new draft regulations on the rational use of energy and measures to for the promotion of renewable sources. Accordingly environmental organisations, only two companies, CEGEDEL and EIDA, are offering electricity generated from renewable energy sources. 5.1 The Réglement grand-ducal du 8 Février 2008 The Decree Law Grand Duchy of Luxembourg of 8 February 2008 defines a set of long term objectives and tariff rules to be applied to related to the electricity production from renewables. Accordingly the studies carried out by the Ministry of Economy and External Trade the production 9

10 and targets of electricity production from RES in Luxembourg is as indicated din the table bellow. Electricity production from RES in Luxembourg Technology 1997 (GWh) 2005 (GWh) Biogas 0 27 Biomassa 0 0 Biocombustíveis Small hydro Photovoltaic 0 19 Wind energy 3 53 Total RES share 2,0 % 3,45% The commitment of Luxembourg in framework of EU Directive 2001/77/CE is to reach a RES share of 5,7 % in Main characteristics of the new legislation Definition of all feed-in tariffs; Differentiation at technologies and power levels; Definition of 15 years duration period for plants installed after 1 January 2008; Regression of the established tariff; Introduction of bonus for the heat; Limitation to a 15 years period during which the installations can benefit from a extra remuneration; Introduction of a guarantee system. 5.3 Tariffs Wind energy Technology Power Investment Tariff Wind parks 20 25% 82,7 /MWh 10

11 Solar photovoltaic energy Technology Power Investment Tariff Photovoltaic 0 30 kw 30% ISQ, Instituto de Soldadura e Qualidade, 420 /MWh 31 1,000 kw 30% 370 /MWh Small hydro energy Technology Power Investment Tariff Hydroelectricity 0 1 MW 20% 105 /MWh 1 6 MW 20% 85 /MWh Biogas Technology Power Investment Tariff Biogas kw 50% 150 /MWh kw 50% 140 /MWh kw 50% 130 /MWh % 120 /MWh kw Biomass Technology Power Investment Tariff Solid biomass 0 1 MW 20% 145 /MWh 1 5 MW 20% 125 /MWh 11

12 6. EXAMPLES OF TECHNOLOGIES FOR MICROGENERATION ISQ, Instituto de Soldadura e Qualidade, 12

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15 7. INFORMATION SOURCES ISQ, Instituto de Soldadura e Qualidade, [1] Ministère de l Economie eu du Commerce Exterieur [2] Rapport Annuel de L institut Luxembourgeois de Regulation 2006 [3] Agence de l Energie (website) [4] European Energy Review 2008 [4] Energy Policy of IEA Countries 1