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THE PRODUCER, THE CONSUMER AND
THE REGULATORY PERSPECTIVE
RECENT TRENDS IN THE
DEBATE ON CORPORATE
RENEWABLES SOURCING
26 OCTOBER 2017
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TABLE OF CONTENTS
Introduction (and recap of RES sourcing options)
Recent market developments
Recent regulatory developments
Other pressing issues
Conclusions and outlook
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AT A GLANCE: ECOFYS, A NAVIGANT COMPANY
Global consulting company founded in 1984 with the mission to enable sustainable
energy for everyone – since 2016, Ecofys has been part of Navigant’s global Energy
practice
We have over 600 experts skilled in energy, climate, environment, economy,
communication, law, and psychology – in 2007, 11 of our experts supporting the
Intergovernmental Panel on Climate Change were awarded the Nobel Prize together with
Al Gore
More than 30 years of experience in developing and evaluating policies, sustainability
strategies, and scenarios for companies and sectors provides us with deep knowledge of
markets and consumer behaviour
Our strength lies in our strategic understanding of complex energy and climate transition
issues: Ecofys connects the dots within the triangle between governments, energy
players, and energy-intensive end-users
Ecofys has five offices in four countries: Utrecht, the Netherlands; Cologne & Berlin,
Germany; Brussels, Belgium; London, United Kingdom – as part of Navigant, our experts
are based in more than 20 offices in the US and Canada, Hong Kong, and the Middle
East
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RENEWABLE ELECTRICITY SOURCING METHODS
Self-generation
(on-site or near-site)
Power Purchase
Agreements
Guarantees of Origin
(grey electricity offsetting)
Self-generation with
direct self-consumption
(microgrid)
Self-generation with grid
feed-in and extraction
(net-metering)
PPA with real-time
matching of generation
and consumption
PPA with balanced
consumption over time
Bundled green
power product
Redemption of
unbundled GOs
GO
GO
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RENEWABLE ELECTRICITY SOURCING METHODS:
WIDE RANGE OF OWNERSHIP AND LOCATION
Location/
Proximity
Ownership
On-siteNear-siteOff-site,
same country
Off-site,
neighbouring
country
Self-owned
Leased
3rd-party owned
(contracted)
3rd-party owned
(retailed)
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RENEWABLE ELECTRICITY SOURCING METHODS:
WIDE RANGE OF OWNERSHIP AND LOCATION
Location/
Proximity
Ownership
On-siteNear-siteOff-site,
same country
Off-site,
neighbouring
country
Self-owned
Leased
3rd-party owned
(contracted)
3rd-party owned
(retailed)
Self-
generation
Power
Purchase
Agreements
Guarantees
of Origin
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CREDIBILITY CRITERIA
ELIGIBLE TECHNOLOGIES
ADDITIONALITY
MARKET BOUNDARIES
FACILITY AGE
VINTAGE
CLAIMING INSTRUMENT
The credibility of a green energy sourcing option is an indicator for
its quality and accountability, its contribution to the energy
transition, and the buyer’s level of ambition.
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CREDIBILITY ASSESSMENT (INDICATIVE)
Microgrid
Net-metering
Real-time PPA
Balanced PPA
Green power product
Unbundled GOs
++ depends ++ ++depends
(++) ++
+ depends ++ +depends
(+) +
+ dependsdepends
(+)
depends
(+)
depends
(+) ++
+ dependsdepends
(+)
depends
(o)
depends
(+) +
+ dependsdepends
(-)
depends
(-)
depends
(o)
depends
(o)
+ dependsdepends
(-)
depends
(-)
depends
(-)
depends
(-)
The credibility of a green
energy sourcing option should be
an indicator for its quality and
accountability, its contribution to
the energy transition, and the
buyer’s level of ambition.
Note that most criteria depend on the particular configuration of the green energy supply and on the country.
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PRICE VS. CREDIBILITY (INDICATIVE)
Price
CredibilityThe credibility of a green energy sourcing option should be an indicator for its quality and
accountability, its contribution to the energy transition, and the buyer’s level of ambition.
Self-
generationPower
Purchase
Agreements
Guarantees
of Origin
Microgrid
Net-metering
Balanced
PPA
Real-time
PPA
Unbundled
GOsGreen power
products
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WEBINAR ARCHIVE
Introduction to green energy sourcing for
industrial consumers14 September 2017
https://www.youtube.com/watch?v=yKzZfqFKOjM
http://www.leonardo-energy.org/resources/1185/corporate-green-energy-
sourcing-5980337e48524
Speaker: Benjamin Munzel (Ecofys, a Navigant company)
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TABLE OF CONTENTS
Recent market developments
Recent regulatory developments
Other pressing issues
Conclusions
Introduction (and recap of RES sourcing options)
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07/2017Google:
10-year PPA with
Eneco, largest PV
plant in Sunport
Delfzijl, to power data
centre in 20 km
distance.
CORPORATE PPAS INCLUDE DIFFERENT SETUPS AND CAN BE
TAILORED TO DIFFERENT OBJECTIVES
10/2016Philips, AkzoNobel,
DSM and Google:
Club PPA with two
cooperatives in
Zeeland on wind park
in Krammer, “cutting
out the middle man.”
They “significantly
contribute to deliver
on the Dutch
renewable energy
target of 14% in 2020.”
05/2017CocaCola:
PPA with EDF and its
5MW PV ground
mounted plant 1.5
miles away from its
factory in in Wakefield,
covering 15% of the
factory’s electricity
demand.
10/2017Microsoft:
15-year PPA with GE, 100
percent of 37 MW
Tullahennel wind farm in
County Kerry, including
agreement with Dublin-
based energy trading
company ElectroRoute
(for energy trading
services).
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MARKET FUNDAMENTALS IMPROVE THE BUSINESS CASE FOR
CORPORATE PPAS: AUCTION RESULTS IN EUROPE
0
50
100
150
200
250
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Aucti
on r
esult
in E
UR
/MW
h
commissioining date
Auction outcomes for offshore wind in Europe
Source own representation based on Kitzing and Wenndring 2016, Prognos & Fichtner 2017
*
* 2012 real prices corrected for inflation;
including grid connection costs
Disclaimer: Auction results are not adjusted for the length of support
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MARKET FUNDAMENTALS IMPROVE THE BUSINESS CASE FOR
CORPORATE PPAS: GLOBAL AUCTION RESULTS
Sourc
e: IE
A 2
017
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COST FOR RES-E AND WHOLESALE MARKET PRICES WILL
POTENTIALLY MEET BETWEEN 2018 AND 2024 (GERMANY)
Access to subsidies for
RES-E production
Exemptions from levies,
fees and taxes for self-
consumption
Balancing costs
(forecast deviations)
Available options for
demand response
In addition, business case
depends on
Fees for third parties
(e.g. trading entities)
Match of production
and consumption
patterns (e.g. additional
energy purchase)
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THE BUSINESS CASE FOR A CORPORATE RES PPA DEPENDS
ON SEVERAL FACTORS: A SIMPLIFIED OVERVIEW
RES producer
LCOE
Additional costs
for balancing
measures
Contractor premium
Demand
response
Balancing
costs
Consumer
SubsidiesExemptions for
RES self-
consumption
Consumers´
standard
choice
Regular retail
price of grey
electricity
Balancing
costs
LCOE
Revenues
from excess
electricity
production
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SEVERAL STRONG RES MARKETS IN EU ARE NOT YET
JOINING THE TREND
4%4%
4%
5%
14%
16%22%
31%
Location of corporate PPAs in EU (Q3 2017) (Source: BNEF)
Other Denmark Finland Ireland
Norway Netherlands Sweden United Kingdom
• Most corporate RES PPAs in
UK and Sweden
• No green corporate PPAs
known in large markets like
Germany, France, Spain, Italy
• Germany: PPAs are allowed,
but GOs are not given out for
installations that receive
subsidies
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… for consumers when
• Actual cost of RES decrease below market prices
• Subsidies are paid for RES production
• Additional transaction costs (e.g. balancing requirements, licensing
requirements as trader) are covered by producer or third party
CORPORATE PPAS ARE SPECIFICALLY ATTRACTIVE…
… for RES producers when
• Support scheme implies strong revenue risk (e.g. fixed premium or
quota schemes)
• Pressure on lowering subsidy payments increases (e.g. through
auctions)
• Support schemes are phased out
• Support payments end for an installation and O&M costs are
sensitive to market price risks
While stable and reliable support schemes (incl. predictable revenue streams) are
crucial for cost-effective RES deployment, they reduce the need for corporate PPAs
Where the investment environment is difficult, PPAs can provide the necessary
price risk mitigation.
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TABLE OF CONTENTS
Recent regulatory developments
Recent market developments
Other pressing issues
Conclusions
Introduction (and recap of RES sourcing options)
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UPCOMING REDII WILL IMPACT CORPORATE RES SOURCING
Provision in EC REDII proposal (Art 15)
Member States shall remove administrative barriers to corporate long-term power purchase agreements to
finance renewables and facilitate their uptake.
Which barriers extactly shall MS remove? (e.g. licensing
requirements for offtakers)
Other provisions will influence corporate RES sourcing
options in the EU beyond 2020…
Provisions on
Guarantees of origin
Provisions on self-
consumption
“Clean energy
for all”
proposal by
EC
Positioning in
council and EP
Entry into force
and
implementation
Trialogue
procedure /
adoption of
proposal
2016 2017 2018 / 2019 2021
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• Problem of overcompensation
not solved
• Problem of GO oversupply
not solved
• No direct statistical
connection between RES
production and consumption
UPCOMING REDII WILL IMPACT CORPORATE RES SOURCING:
GUARANTEES OF ORIGIN
Current GO regulation (Art.
15, RED I):
[…] guarantee of origin is
issued in response to a
request from a producer of
electricity from renewable
energy sources.
Member States may provide
that no support be granted
to a producer when that
producer receives a
guarantee of origin for the
same production.
EP draft report (Art. 19):
…in the case of new renewable energy
installations no guarantees of origin are issued to
a producer that receives financial support from a
support scheme […] unless double
compensation is avoided (e.g. RES auctions).
All GOs not issued to a RES producers to be
transferred “to the market by auctioning them”
EC proposal (Art 19):
[…] no guarantees of origin are issued to a
producer receives financial support from a
support scheme […]. Member States shall issue
such guarantees of origin and transfer them to the
market by auctioning them. The revenues raised
as a result of the auctioning shall be used to
offset the costs of renewables support.
Alternative proposals
• Include all sources and full disclosure (con:
administrative burden)
• EU Label for non-supported RES plants (not
change in disclosure but label)
How about
overcompensation?
MS have conflicting
practices…
• Problem of GO oversupply
not solved
• Lack of transparency for final
consumer
Current practice is mixed:
some MS issue GO for
supported plants, some
don‘t.
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UPCOMING REDII WILL IMPACT CORPORATE RES SOURCING:
SELF-CONSUMPTION
No explicit self-consumption
regulation in RED I EP draft report (Art. 21): Member States shall
ensure that renewable self-consumers:
• are entitled to consume their self-generated
renewable electricity without it being subject
to any charge, fee or tax;
• MS shall carry out an assessment of existing
barriers and potential of development of self-
consumption […] to put in place an enabling
framework […]
EC proposal (Art 21): Member States shall ensure
that renewable self-consumers:
• are entitled to carry out self-consumption […]
without being subject to disproportionate
procedures and charges that are not cost-
reflective;
• maintain their rights as consumers and are not
considered as energy suppliers.
How about the
benefits of self-
consumption?
Removal of some barriers in
some MS… but sufficiently?
Current practice is mixed.
Some MS support self-
consumption…
• … for households, some
for industry.
• … for conventional
technologies, CHP,
and/or RES.
• … through explicit
payments or through
exemptions from levies,
fees and taxes.
• … not at all.
Alternative proposals:
• Actively remove barriers
• Allow MS to design exemptions from levies,
fees and taxes according to their context (while
avoiding disproportionate procedures and
excessive charges)
Self-consumption has different
effects in each MS (e.g.
distribution of costs for levies
and fees)…
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TABLE OF CONTENTS
Other pressing issues
Recent market developments
Recent regulatory developments
Conclusions
Introduction (and recap)
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OTHER ELEMENTS NECESSARY FOR THE MARKET TO
FURTHER DEVELOP
Knowledge
dissemination
Exchange of
preferences
Match making Standardization
On the
advantages of
RES sourcing
On the available
options
Balance between
wide range of
options (= tailor
made) and
reduced
complexity
Producers want
revenue
stabilization
Consumers want
low prices,
statistical clarity,
secure supply,
and low
transaction costs
Matching specific
needs of
consumers with
project pipeline
and market
contexts
Market is just
starting, no
platforms
available yet
Standardized
approach to
identify options
for specific
consumer
interests
Standardizing
PPA contracts
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3-PHASE APPROACH TO IMPLEMENT GREEN ENERGY
SOURCING
Phase I:
Analysis
Phase II:
Strategy
Phase III:
Execution
Step 1: Analyse energy
consumption and future
demand.
Step 2: Analyse potential for
flexibility (e.g. load
management).
Step 1: Develop a corporate
energy strategy in line with
overall CSR objectives.
Step 2: Evaluate options for
green energy supply (potential
costs, risks, benefits).
Step 3: Draft RFPs for green
energy supply under defined
conditions.
Step 1: Market RFPs and
evaluate bids from green
energy suppliers (long list).
Step 2: Perform legal, financial
and technical assessment of
potential suppliers (short list).
Step 3: Analyse potential for
on-site or near-site self-
generation.
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TABLE OF CONTENTS
Conclusions
Recent market developments
Recent regulatory developments
Other pressing issues
Introduction (and recap of RES sourcing options)
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CONCLUSIONS
• Current trends show: look at PPA options now
- Increasing RES sourcing activities
- Improving case for corporate RES sourcing (decreasing RES costs, increasing wholesale
market prices expected, cost pressure in RES support schemes)
• Regulatory framework for period after 2020 not yet clear but heavily impacting the
Corporate RES sourcing market
- General provisions to remove barriers for corporate PPAs
- Provision on Guarantees of Origin
- Provision on self-consumption
• Important to implement RES sourcing solutions that are
- Cost-effective
- Feasible
- Robust against external scrutiny (regarding quality criteria)
- Well-informed on potentially changing regulatory environments
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MALTE GEPHARTManaging Consultant
+49 (0) 30 29 77 35 79 – 22
BENJAMIN MUNZELSenior Consultant
+31 (0)30 662-3023
CORINNA KLESSMANNDirector
+49-30-29773579-21
ROLPH SPAAS Associate Director
+31 (0) 30 6632-3689
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ECOFYS NETHERLANDSKanaalweg 15-G
3526 KL Utrecht – The Netherlands
ECOFYS GERMANY (COLOGNE)Am Wassermann 36
50829 Cologne – Germany
ECOFYS GERMANY (BERLIN)Albrechtstraße 10 c
10117 Berlin – Germany
ECOFYS UKWoolgate Exchange – 25 Basinghall Street
London EC2V 5HA – United Kingdom
ECOFYS BELGIUMAvenue Marnix 28
1000 Brussels – Belgium
Find the full set of offices here.