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1 Renewable Energy policies in the EU Member States Indicators assessing market status, policy effectieness & efficiency Mario Ragwitz, Fraunhofer ISI Max Rathmann, ECOFYS 0

2 Main support policies for RES electricity Feed-in tariffs Feed-in premiums Quota obligations with tradable green certificates Loan guarantees Soft loans Inestment grants Tax incenties Tendering schemes Also ery releant: Permitting procedures Grid access & operation Power market design & structure R&D, industrial policy 1

3 Key features FIT, FIP & Quota TGC reenues RES-support Market price FIT FIP Quota Fixed feed-in tariff (FIT) Go fixes price, market decides quantity Fixed tariff ( /MWh) fixed premium - cap & floor - sliding/cfd Guaranteed during lifetime or x years Purchase obligation (Grid (access & use) priority) Feed-in premium (FIP) Fixed premium ( /MWh) Guaranteed during lifetime or x years Power sold on conentional markets Quota Go fixes quantity, market decides price Obligation for suppliers: Minimum RES-E share Increasing oer time Penalty Tradable certificates for RES-E production ( market price) Obligation is met by submission of certificates to competent authority Power sold on conentional markets 2

4 Main RES-E support instruments in the EU-27 Quota obligation Feed-in tariff Feed-in premium Other instruments than the aboe Notes: 1) The patterned colours represent a combination of instruments 2) Inestments grants, tax exemptions and fiscal incenties are not included in this picture. Source: RE-SHAPING 2010 Finland Sweden Estonia Latia Denmark Lith uania Ireland United King dom Neth erlan ds German y Poland Belgium Luxembo urg Czech Repub lic Slo akia Fran ce Austria Slo enia Hungary Ro mania Bulgaria Portu gal Italy Spain Greece Cyprus 3 Malta

5 BE BG CY CZ DK EE FI FR DE Wind Bioenergy PV Feed-in tariff Quota / TGC Tender Tax incenties / Inestment grants Change of the system Adaptation of the system Main support instrument RES-E & policy changes HU GR IE IT LT LU LV MT NL PL PT Wind Bioenergy PV Wind Other RES-E Wind Bioenergy PV RO ES SE SI SK UK 4

6 Main support policies for RES heat Inestment grants Tax exemptions and other fiscal incenties Use obligations 5

7 Oeriew of indicator set Policy performance indicators Policy effectieness indicator Support leel s generation cost Profit range (efficiency) Ex-post ealuation of policy performance Market status indicators Deployment status indicator Electricity market preparedness indicator Framework conditions for RE policy (RET market maturity, electricity market) Used (e.g. by EC) since 2005 and constantly improed, updated, extended. 6

8 Deployment Status Indicator A rough characterisation of the status of 14 in 27 Member States For differentiation in policy performance analysis Three sub-indicators expressing different aspects of RET deployment status Deployment Status Typical characteristics Production as % of sector consumption Production as % of 2030 potential Installed capacity >100MW Adanced Established players, fully mature technology, growth may slow down. Shows releancy & isibility on energy market Intermediate Increasing market, strong growth. Growth related barriers (e.g. infrastructural and supply chain). Some countries stop at this leel. Immature Small market, few players, low growth. Inexperienced administration & banks. Low or unreliable support. 7 Higher share indicates that low-end barriers hae been oercome; high-end barriers may occur (e.g. integration electricity system) Higher share indicates that low-end barriers hae been oercome; high-end barriers may occur (e.g. competition resources) Passing minimum threshold indicates that market players gained trust & experience. Proof that barriers can be oercome.

9 100 Wind onshore Wind offshore Photooltaics Solid biomass FI Biogas Geothermal electricity 100 Biomass grid SE DK FI Biomass nongrid Other CZ EE SE BG DK LT LV PT RO SI FI FR PL MS ES GR Geothermal Ground source heat pumps Solarthermal Deployment Status Indicator Immature Intermediate Adanced 67 ES DE PT DK IE NL GR IT DK SE BE DK PT NL HU DE CZ SK Deployment status Electricity Heat DE UK UK DE BE EE IT 33 HU SE FR UK NL 33 NL DE EE MT SI IT DK ES ES SI BECZ IT BG DE, DE SI, PT, CZ, BG LT PL PL LU SK PT FR PL IT IE DE SI CZ CZ DK NL ES, DK, NL, IT, BE FR ES GR FR ES DK PT CZ FI UK IT CZ PL LU PT FR SK PL DE BE PL IT SE, BE SK, FR FR, NL IT RO PL SE NL IE GRFR UK BE, UK HU IE, PL, LU RO, UK, HU IE NL UK HU LV LU HU SE SE BG SI LV SI FI LT PT CY SI HU LU EE FI BE RO DE SI LT RO IE RO LT LT FI BE BGDK CY IE SKEE SK SE LV Other BG MS CY ES IE GR EE LU CY DK LT LV ES FI FR GR IE Other BE CZ BG CY LV LU ES GR LV MT PT UK Other SE MT PT UK NL MS MT PT RO 0 SK MS CY ES EE BG CY CZ FI FR 0 MT LV IT LU LT FR HU GR MT HU MT SI LV LT IEE LU GR CY BG BG LU IE LT HU FI GR CY ES DK EE DE BG BE CZ CZ EE Other MS SI RO SK PL PT RO SK PL Other MS Other MS MT MT LV MT NL PL 8 Other MS Other ROMS Other UK SK RO SI SE MS Note: RET markets where the share of the potential in sector consumption is < 1% are not shown. Note: Not shown is hydro (Deployment Other MS Status in most MS adanced), solarthermal electricity and tide For & wae example (in in case of biomass non-grid this applies to UK and MT Deployment Status in all MS still close to zero). Deployment Status indicator Immature Intermediate Adanced IT 67 LT LV EE HU SK DE BE IT CY NL IE LU HU RO SE FI CY GR

10 Measuring the effectieness of RES-E support 1. Relatie or absolute growth rates are typically used to demonstrate the achieements of countries, howeer both measures are biased 2. Better measure to judge the performance is the absolute growth as ratio of the additional potential E i n = G i n ADD G i n 1 POT i n i E n i G n Effectieness indicator for RES technology i for the year n Existing electricity generation potential by RES technology i in year n i ADD POT n Additional generation potential of RES technology i in year n until

11 Policy effectieness - wind onshore Effectieness indicator 18% 16% 14% 12% 10% 8% 6% Immature Aerage effectieness indicator Effectieness indicator 2009 Intermediate Adanced 4% 2% 0% CY MT SI SK RO LV LU FI CZ BG PL LT FR HU BE EE SE UK IT GR NL IE DK PT DE ES Feed-in tariff Quota / TGC Tender Tax incenties / Inestment grants 10

12 Support leel ranges - wind onshore System serices cost Minimum to aerage generation cost [ /MWh] Aerage to maximum support leel [ /MWh] BE BG CY CZ DE DK EE ES FI FR GR HU IE IT LV LT LU MT NL PL PT RO SE SI SK UK 11

13 Potential profit ranges - wind onshore (=cost-effectieness of policies) Policy effectieness indicator % 16% 14% PT 12% 10% DE IE HU ES 8% SE 6% EE BE UK IT FR 4% NL LU BG PL 2% LT GR CZ FI SK SI MT LV RO CY 0% DK % Potential profit range [ /MWh] 12

14 Electricity market preparedness for RES-E market integration High score necessary but insufficient precondition for successful use of FIP/Quota? Electricity market preparedness for RES-E market integration Low High *Austria *Belgium *Bulgaria *Cyprus Czech Republic Germany Denmark *Estonia Spain Finland France Greece *Hungary Ireland Italy Lithuania *Luxembourg *Latia *****Malta Netherlands Poland Portugal Romania Sweden *Sloenia **Sloakia *United Kingdom 13 Placehoder for missing data points (=10 points as default) E: Gate closure time D: Share of electricity traded at exchange (spot) C: Number of companies with more than 5% share in the national retail market B: Number of companies with more than 5% share in generation capacity / wholesale market A: Share of TSOs that are ownership unbundled

15 Conclusions - General 1. Policy performance is rather heterogeneous depending on RET/MS 2. If support leels are below generation costs, little or no capacity growth can be obsered 3. High support leels compared to generation costs do not in all cases lead to substantial capacity growth Growth can be allowed & support leels reduced by reducing barriers, applying best practice support system design and reducing risk -> Triple-A policy presentation 4. Markets with a higher deployment status tend to grow faster. Howeer, examples show that markets can grow quickly without haing a long track-record. Countries with low deployment status can benefit of other countries experiences. Policy effectieness can be rapidly increased by adopting best-practice support policy design and organisation of administratie processes. Can profit from spill-oer effects from internationally aailable project deelopment expertise and supply chain. 5. Support leels heat sector proide less profit than in electricity sector, despite the low generation costs of many RES-H. On aerage, policy effectieness in the heat sector is also lower than in the electricity sector. Ensure balance between deeloping higher cost (progressing on learning cure) and fully utilizing low cost technology potentials (e.g. heat). 14

16 Conclusions Heat sector Reconsider whether obsered low profit leels in heat sector need to be increased 1. RES-H support usually depends on public budget, resulting stop- and go policies create stronger uncertainty for inestors than common in RES-E Apply off-budget policies, e.g. ia surcharge on heat (fuel) cost 2., DK, FI, LV, SE effectiely promoted biomass-based centralised heating. Success factors: Existing district heating networks in Northern Europe, biomass aailability, sufficient heat demand 3. Support for decentralised biomass heating plants is on a higher leel than that of centralised plants 4. BE, CZ, DE, RO most effectiely supported decentralised biomass heating 5. Policy effectieness solar thermal heat rather low (also due to a high remaining resource potential)., GR, CY leading countries 6. Ground-source heat pumps effectiely promoted by using obligations in SE and inestment grants and fiscal incenties HU & FI 7. Long reinestment cycles limit the diffusion rate for the integration of renewable heating systems that are integrated in buildings Due to long reinestment cycles it might be useful to already start now supporting especially those that are likely needed in the future energy system. This might refer especially to that are beneficial for system integration of fluctuating RES-E, like heat pumps or biomass CHP with heat storage. 15

17 Conclusions Electricity sector 1/2 1. Most effectiely supporting wind onshore: IE, PT, ES, DE 2. Wind offshore just starting in UK, IE, DK, DE 3. Most effectiely supporting PV: DE, CZ, IT 4. Most effectiely supporting biogas:, DE, UK 5. BE, SE, NL, DK,, HU, DE and CZ show high policy effectieness in Biomass 6. FIT-countries still show highest effectieness but quota countries are catching up in particular with regard to low cost RET (e.g. wind onshore in UK, IT, BE, SE in 2009). In the same period e.g. in the UK quota system certificate reenue risk has been reduced substantially from an inestment risk perspectie the system is close to a less risky FIP. 7. Remuneration in FIT tends to be lower (higher) for low (high) cost than under a quota. In most quota systems support leels are insufficient for high cost such as PV. Many quota countries offer separate incenties: BE minimum prices for PV, IT FIP for PV, UK FIT for small-scale applications. Technologybanding within the quota as applied in UK can help to support costintensie like wind offshore, but is less suitable for smallscale projects than feed-in tariffs. 16

18 Conclusions Electricity sector 2/2 Differentiate support instruments according to technology maturity (e.g. rather mature wind onshore or rather immature wind offshore), project size (rather kw-range, few MW, or seeral hundred MW), type of enisaged inestor (utilities, new independent power producers, smallscale business, households or farmers), or lender. 1. Stimulated capacity growth may deelop faster than enisaged causing high policy costs. Stop-and-go policies harm industry as a whole. FIT/FIP for RET with rapid cost reduction require frequent tariff adjustment cycles and good coordination of tariff leels with other releant markets. (Frequent) tariff adjustments based on (automatic) adjustment formulae (related to market growth) at dates known to the market sufficiently long beforehand can manage this policy cost risk without negatiely affecting the inestment climate EC could oblige MS to be more transparent in their RES-support. E.g. putting information on (the assumptions for calculating) aerage support and profit leels directly from the MS goernments on a transparency platform. This should help MS to determine (technology-specific) support leels in such a way that they suit their (technology-specific) deployment target. 17

19 Thank you for your attention! indicator report aailable on indicator report aailable as of early summer 18