EU experience on policy and financing mechanisms related to renewable EnergyFocus on small scale projects

Rechtsanwältin / lawyer Dr. Dörte Fouquet

Tunis, 04.10.2012

Az/Dok.-Nr.Seminarkürzel19.04.23

About us

BBH has been operating as a law firm since 1991 Today, BBH is one of the leading law firms for the energy and infrastructure

industry BBH is particularly known as „the“ law firm of public utilities Among BBH clients are decentralized utilities, the industry, investors,

intermediaries and political bodies, like the European Commission, the Federal Government, the Federal States and public corporations

Since 1999: Brussels: Secretariat General for EREF, the European voice for independent Power producers from renewable sources, representing more than 47.000 MW installed in the EU

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Dr. Dörte Fouquet, Rechtsanwältin / lawyer

Born in Recklinghausen in 1957 Married, 1 child Studies of Law at the Universities of Marburg and Hamburg 1982 Academic and Research Associate, Junior Lecturer at the University

of Hamburg, Law Faculty 1988 Civil servant of the State of Hamburg, Ministry for the Environ-

ment and Energy 1991 Civil servant in liason office of Hamburg and Schleswig-Holstein to

the European Commission in Brussels 1993 Partner in law firm Kuhbier, Brussels, specialising in European and

International law and consulting on European affairs in the fields of competition, energy, transport, environment

Since 2011 Partner in law firm BBH and head of the Brussels office of BBH

Memberships: Admittance to the German Bar of Berlin and to the Brussels Bar Green Budget Europe, FÖS Eurosolar BWE (German Wind Energy Association) Deutscher Juristinnenbund (German Female Lawyer‘s Association)

Practice areas: infrastructure, energy, environmental and competition law

Dr. Dörte FouquetRechtsanwältin

Partner (since 2011)

Contact:doerte.fouquet@bbh-online.beTel.: +32 2 204 44-12

Dr. Dörte FouquetRechtsanwältin

Partner (since 2011)

Contact:doerte.fouquet@bbh-online.beTel.: +32 2 204 44-12

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Table of Content

I. IntroductionII. Small-scale renewables and self-consumptionIII. Examples of support tools

I. Feed-In Tariffs and Feed-In Premiums II. QuotasIII. Net-MeteringIV. The very focused funding – grants, loans and other

programmesIV. Conclusion

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Introduction

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Some golden rules

Longevity and political dedication – cross partisan Binding targets- holisitc planning Socio-economic and environmental planning hand in hand with system change; Clarity of roles, authorities and limits of agencies involved ( who does what) ;

Regional cooperation and experience exchange on insitutionalised bases Clear budget function (no (respectively clear phasing-out) of cross subsidising of

the social needs from the energy bill) Immediate kick-off of green housing codes and programmes ( if your state is a

house, you would not put PV Panels on a leaking roof with inadequate walls and windows)

No international funding for RE electricity for countries who do not have green builidng programmes and laws established and functioning, especially also for existing building stock)

RE Electricity market starts on the local, regional and thus DSO level; TSO, Financing,... all have to learn the new world of this shift

Cooling/heating, efficiency and housing refurbishment have to go hand in hand with renewable electricity off-take

Mineraloil fuel replacement programme Storage and balancing system development Training, research and development, (especially in financing, project planning,

installation, engineering; storage capability)

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Introduction – EU Progress in RE target achievement

Only 3 out of the 27 Member States may reach or overachieve their binding national renewable energy target until 2020 (i.e. Sweden, Austria and Estonia), without any further policies or measures implemented.

Denmark, Germany and others probably able to reach or even overshoot their targets

But rather than stepping up their efforts, some Member States seem to draw back from renewables support!

Moratoria in 3 Member States and significant uncertainty about the future of support in 2 others

Report by the Commission expected in December 2012

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Introduction - Progress in RE target achievement

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Moratoria and uncertainty

Moratoria on support to new renewable energy plants: Latvia – no tender held since May 2011 and until (it is said) January

2013 Portugal – and significant cuts in support to existing plants Spain - and new tax proposed that would de facto reduce the Feed-In

support to existing plants

Uncertainty about the future of renewable energy support in general: Bulgaria –new legislation adopted in 2011: tariffs can be reduced

without involvement of the national parliament and regulator says that no new renewables capacity can be connected to the grid until June 2013

Czech Republic – new legislation adopted in 2011 and will apply for new plants starting 2013 – but implementing legislation still lacking and regulator has remarked that interruption of support may be possible

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Small-scale renewables and self-consumption

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Self-consumption

Small scale renewable energy projects can make an important contribution to energy change often they are run by „self-consumers“, meaning producing for own

consumption first „Self-consumers“ = natural or legal persons who primarily generate for

their own consumption, either to supplement or to entirely replace electricity bought on the market.

However, for small plants it is often particularly difficult to get financing and as they do not sell significant amounts of electricity, they might lack the incentives to install such a system Still: Self-consumption can significantly lower the electricity costs one

has to pay (including grid tariffs, taxes etc.) which can be an incentive by itself – epseically with falling technology prices and increasing electricity tariffs

However, additional incentives to promote self-consumption exist E.g. the premium for self-consumption in Germany or Italy

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Self-consumption

Self-consuming PV production is natural:

It corresponds to the PV production that a « prosumer » consumes in REAL TIME

Two main types of policy incentives:

•Direct: Self-consumption premium

•Indirect: German market integration model (Germany)

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Self-consumption

Source: EPIA

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Self-consumption – Case Study Italy

Conto Energia V (2012)

Self-consumption premium for 20 years

Premium between 0.05 ct/kWh and 0.18 ct/kWh

Excess generation fed into the grid and compensated at FiT level

Source: EPIA

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Examples of support tools

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Feed-In Tariffs and Feed-In Premiums

Feed-In Tariffs are the most frequently used support schemes in the EU 18 countries have them

Idea: Electricity generated from renewable energy sources will get a fixed

price when fed into the grid, independent from the market price and – normally – rather in function to the maturity of the respective technology

The price is set for a longer period of time (normally about 20 years) either by law or in long-term contracts

Incentive: As the price is set for a long time, investors have great security and will

know exactly what profits they can expect from the project

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Feed-In Tariffs and Feed-In Premiums

Feed-In Premiums are a variation of the Feed-In Tariff that was developed more recently in order to expose renewables to some market risks 8 EU Member States have such a system – sometimes in

combination/alternative with other support measures

Idea: Electricity generated from renewables have to sell on the market and

will get the market price – however, a certain premium is added to this, which constitutes the support

Incentive: In addition to the flexible market price a certain fixed premium is

guaranteed

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Quotas

Quota systems use tradable green certificates which develop their own market price and thus subject renewables producers to market fluctuations 6 EU Member States have them (sometimes in combination or as

alternative)

Idea: For a certain amount of renewable energy generated, the producer gets a certain amount of certificates Energy suppliers have to buy those certificates, as they have to meet a

certain renewable energy quota If they do not meet their obligation – they have to pay a fine

That way the certificates get a market value

Incentive: Market value may vary and certificates can loose almost all value –

high risk exposure Sometimes thus minimum prices are set, e.g. in Flanders, Belgium

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Net-Metering

Concept originally came from the United States, where almost all States have it Slower and only quite recently uptake in the EU

Netherlands, Belgium, Denmark, discussion also in Spain

Idea: „Two-ways“ meter that counts forwards, when the consumer is taking

electricity out of the grid, and backwards when he is feeding electricity into the grid

By the end of the month/year, the electricity fed in and taken out will be netted

Incentive The consumer has to pay less on his electricity bill:

Will not have to pay during the time he is directly using the electricity he is producing himself

Will get the amount of excess electricity he has produced and fed into the grid brought into reduction of his overall electricity bill

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Net Metering – How it works

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Net-Metering – How it works in Denmark

Since 1998 already for small PV plants Nowadays all technologies but geothermal are eligible

However: depending on the technology different capacity limits and requirements for eligibility

Procedure: small systems need not apply but are automatically registered all others need to apply for net-metering

net-metering then on hourly basis

Extra-Incentive: Exemption from the „Public Service Obligation“ of 18,2 øre/kWh

either from the entire PSO for small systems or from the part of the PSO that is for the support of renewable energy for all plants participating in net-metering (= reduced PSO of only 1,2 øre/kWh )

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Net Metering – Case Study Denmark

Net Metering for unlimited time

Compensation (= „netting“) period

< 6kW = yearly

> 6kW = hourly

Excess generation compensated at small FiT level

Full compensation (= netting of the electricity fed in against the electricity taken out) including grid costs, taxes etc.

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The very focussed funding – loans, grants and other programmes

In most EU Member States some form of direct investment aid is – additionally – available

Though there are various different designs

Idea: Investment aid

through either making financing available to „better than market“ conditions (loans);

often lower interest rates and/or for longer periods or through a direct contribution to the renewables project

(grants) normally a percentage of the eligible costs (e.g. the PV

Modules) or a fixed amount per installation

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Germany and its direct support programmes- small scale

Most ambitious energy-saving program in Europe, aiming for a 30 percent reduction in energy usage by 2020, and a 30-percent renewable energy share, consisting mainly of biomass, wind, and solar - Three pillars:

Legal framework and tight regulation at the national level, requiring energy efficiency upgrades to buildings and increased use of renewable energy sources among electricity providers;

Strong financial incentives through subsidies and loans to reduce energy consumption in the built environment

Information, promotion, and behavior change, working through regional and local bodies,

Since 2006, Germany has created nearly half a million new jobs in renewables, and over four years, around nearly 900,000 jobs in retrofitting homes and public buildings

By having taken these steps,on track to meet aggressive greenhouse gas reduction targets by 2020 and 2050.

(see e.g. Anne Power, Monika Zulauf; Cutting Carbon Costs: Learning from Germany’s Energy Saving Program, 2011)

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Three pillars as graph

Source: Anne Power, Monika Zulauf

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Examples of other funding in Germany

Further support is in general granted on regional or even municipal level.

So there are differences in efforts and results.

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Case Study: Brandenburg

German states play a vital role in the promotion of renewable energies due to the fact that implementation of EU and national policies takes place on state (and local) level

Example: Brandenburg Brandenburg has one of the top positions in the production of

renewable energies over the last years Despite the fact that it is one of the poorer German states (compared

to, e.g., Baden-Württemberg) Support instruments include co-financing of RD&D projects in the field

of renewable energies Up to 50% of the total investment Maximum of EUR 3 million per project

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Small glimpse in a very big world of local initiatives: Cooperative Starkenburg

Prize-winning Cooperative Starkenburg (State of Hessen) Achieves a regional energy system change by

operating six PV installations and one windturbine Serves 1.250 households Close cooperation with the local energy utility

(„Stadtwerk“) Citizens of the municipality hold share capital (no

financial support by the State) Citizen RE parks in combination with municipal

supplier and local bank are gaining a very strong momentum

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The content of the average household price for energy in Germany in 2012 . - biggest share is price for oil

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Need for Solar/RE imports?

Germany has more installed solar-energy capacity that any other country in the world , with some 25,000 megawatts of installed photovoltaic panels. In 2011, those panels produced 18 terawatt-hours of electricity.

Germany has an average need of 60 TWh, on week-ends down to around 45 TWh

Germany produces now more than 70 TWh, increasingly from RE, in a few years with further RE increase, numbers of around 120 TWh could be reached

Phasing out of the whole nuclear plants until 2021 will lower some of the increase, but it reamins above the needs

BUT: Certainly no need for a long time to import solar electrcitiy form the MENA region

And if: bottleneck France keeps Spain and Portugal as ENERGY islands, whereas both have strong electricity excess, due also to financial crises

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Conclusions

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Conclusions

Small renewable energy plants can make an important contribution to the energy system change Take off „pressure“ from the grid Raise awareness of actual energy consumption at the consumer side Help saving costs for infrastructure

Thus: many different ways developed on how to encourage private individuals, SMEs etc to become „self-consumers“ Information campaigns - Explaining to them that they will save money

on their electricity bill General renewable energy support systems – wherein small scale

plants get often higher support levels Extra incentives – self-consumption premiums, net metering , access

to funding and direct grants

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Conclusions

Important for all support: Clear and stable policy framework and dedication and commitment to

promote renewables

Therein a well-tailored support scheme, responding to the needs of the respective technologies and the specifics of the market Can have different components, combine e.g. Feed-In Tariffs with

loans, or offer alternatives between which producers can choose

Facilitation in the permitting and licensing processes for renewables and clear site allocations Planning security and no unnecessary administrative burdens

Thank you for your attention!

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Contact partner: Rechtsanwältin / lawyer Dr. Dörte Fouquet