How To Improve The Environment In Northwest Europe

Transcription

1 Reflections on coordinating mechanisms to accomodate increasing amounts of wind and solar power Pieter Boot, 21 May

2 Focus on a future with 30% power share VRE in NW Europe Problem analysis Stimulating investments Grid generation Agenda for Northwest-Europe Pieter Boot 21 May

3 Problem 1 Due to merit-order and profile effects subsidies will not decline (Hirth, 2013) 3

4 Problem 2 Reliability at some moment in danger TSO has to intervene more frequently Capacity closes or in mothballs Reliability is public good, nobody is fully responsible Pieter Boot 21 May

5 Problem 3 System costs increase System costs by increasing shares of VRE, France, UK, Netherlands /MWh Wind Solar VRE-share 10-15% 15-25% >25% 10-15% 15-25% >25% Adequacy Balancing > >5 Network (EUR/MWh, order of magnitude, estimated costs for France, UK and the NL) Total > >30-65 Computed from: Crassous & Roques, 2013; Gross et al, 2006; NEA, 2012; Sijm, 2014 Pieter Boot 21 May

6 Two simultaneous functions of the wholesale market Daily operation(meritorder, dispatching based on SRMC) Coordination DrivingInvestments-in effect through LRMC approach x Wholesale market (incl. ETS) 6

7 Policy interventions remain necessary to stimulate low carbon investments Emission Trading System (ETS) Emission Performance Standards (EPS) Support for investments in wind and solar power Capacity Remuneration Mechanism (CRM) eventually with Regulated Asset Base (RAB) Pieter Boot 21 May

8 Improving the Emissions Trading System Implementation of EC proposals will marginally increaseprices(to15 EUR in 2020, in 2030) Carbon floor in one country does notchange the system (waterbed effect) Auction reserve price or price tunnel stimulates investors confidence and could be effective change But will itbe introducedsoon? Can pricesbe expectedthathave really effect on investment (more VRE, no coal) in next decade? Pieter Boot 21 May

9 Introduction of Emission Performance Standards Europe does notlikethemfor CO2 becauseof ETS UK introduces them for new coal-fired power plants (enforces biomass or CCS) Suggested to enforce closing of old coal-fired plants (needs to take existing rights into account) Could beintroduced in partsof EU, eventually regionally differentiated Particularattention tointeractionwith ETS, could be bridge towards higher CO2 prices Pieter Boot 21 May

10 Different types of low carbon investment schemes exist Feed-in-tariffs have had great merit and lead to low capital costs, but do not increase flexibility; EC reluctant Feed-in-premiums/auctions probably needed for longer time and need long-time focus Contracts-for-Differences used in the UK, not much experience; UK system tends to become complicated Pieter Boot 21 May

11 Capacity Remuneration Mechanisms (CRM) CRM has been suggested mainly to deal with adequacy issues But could be way to tackle high CAPEX/low OPEX problem; more long-term than short-term solution Difficult to see how innovation might be encouraged Will be presented as temporary, but could become self-fulfilling promise Pieter Boot 21 May

12 Regulated Asset Base (RAB) RAB makessense ifone acceptsthatcapitalcosts are main investment issue todeal with; has been proven cost-effective in grid regulation (but with existing assets) Twosteps: company investsif project has been acceptedby regulator/government; then transfers efficient numbers to asset base Difficulttoseehow innovation will be encouraged, altoughexperiments withgrid regulationare underway Pieter Boot 21 May

13 Manage grid generation interaction Search for smarter operation of grids (e.g. full program responsibility for all, DSI, more market elements) Improve flexibility power system including supportive gas system Reconsider grid follows generation paradigm; if more cost effective generation could follow grids Pieter Boot 21 May

14 Agenda for NW Europe discussion Solution for NL alonemeaningless; NW Europe relevant region to cooperate and experiment Schengen like policy option; for NL Pentalateral Forum and bilateral cooperation Agenda items: generation adequacy VRE integrationin the grids expanding balancing options, zones and markets coordinating VRE support schemes adequate roleof gas Pieter Boot 21 May

15 Final reflections Don t forget citizens; decentralgeneration, support for transition (affordability) The state is back, and thereis no alternative to frame conditions and incentives for investment in low carbon generation and grids Better grid generation interaction could decrease costs And also more market elementsin operations (grids and generation) Pieter Boot 21 May