harmonising renewable support mechanisms dr david toke: senior lecturer in environmental policy,...
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Harmonising renewable support mechanisms
Dr David Toke: Senior Lecturer in Environmental Policy, University of
Birmingham and also Energy Expert, World Future Council
What is a REFIT?
• Guaranteed minimum price for electricity sales
• Long term contract for power purchase (15-20 years)
• Different to NFFO and RO
What is a renewable electricity certificate scheme (RECS)
• Electricity suppliers given renewable obligation
• RE projects sell certificates (and energy)
• Electricity suppliers buy certificates or pay penalty
Use of systems
• REFIT dominant in Europe (over 80 per cent of EU wind power installed under REFIT)• Less than 10 per cent of EU wind power
installed under RECs• RECs used in USA, but underpinned by ‘rich
man’s REFIT, the Federal ‘Production Tax Credit’
Why a REFIT?
Less income uncertainty, higher project IRR for a given income level
Costs (£/MWh) of offshore and onshore windfarms at
different internal rates of return (IRR)
02040
6080
5% IRR 11%IRR
£/MWh offshore
onshore
Country Tariff in p/KWh 2004
Average capacity factor (%)
Annual Return per installed MW (£) 2004
Germany (REFIT)
5.5 18 87,000
United Kingdom
(RECS)
5.2 28 128,000
Spain(REFIT)
4.5 28 110,000
2005-2006
Country Tariff
in p/KWh
Average
capacity
factor (%)
Annual Return per
installed MW (£)
Germany
(REFIT)
5.6
(declining)
18 88,000
United Kingdom
(RECS)
7.3 28 179,000
Spain
(REFIT)
5.9 28 145,000
UK RO confusion?
• Uncertainty over future price of renewable obligation certificates (ROCs)
• Uncertainty over future value of electricity• Banks use low estimates of future income• In practice projects earn much more than
what they would if income stream was secure• RO not cost effective• But local investors deterred by insecurity
REFIT = transparency for local and small investors
• Local investors often need lower returns
• Local investors have better networks to gain planning consent
• REFIT better for higher cost renewables such as solar power
Advantages of harmonisation
Theoretical advantages of harmonisation
• Investment would flow to where it is most efficient
• All countries would be forced to participate
Harmonised EU-wide RPS?
• Great uncertainty over certificate value• Lack of competition in several countries (eg
France, Germany)• Bottlenecks in some countries (eg UK)• Loss of local investment• Some countries would refuse to participate
A single REFIT?
• Local conditions (esp wind speeds) differ
• Some countries would object
Harmonised transferability
• UK RO de-stabilised
• Germans would pay for Danish etc renewables
• No efficiency advantages
Contacts
• ‘Making Renewables FITTER’ report available at http://www.worldfuturecouncil.org/
• Dr David Toke: [email protected]
• Miguel Mendonca (WFC): [email protected]