péter kaderják director, rekk alternate member of the board of appeal, acer
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Moving away from the present fuel mix: regulatory tasks and dilemmas in supporting renewable electricity penetration. Péter Kaderják Director, REKK Alternate member of the Board of Appeal, ACER World Forum on Energy Regulation V Québec, May 15, 2012. Coal is still here. - PowerPoint PPT PresentationTRANSCRIPT
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Moving away from the present fuel mix:
regulatory tasks and dilemmas in supporting renewable electricity
penetration
Péter KaderjákDirector, REKK
Alternate member of the Board of Appeal, ACER
World Forum on Energy Regulation VQuébec, May 15, 2012
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Coal is still here
Global primary energy demand growth between 2000 and 2010
Major role played by power generation in non-OECD countries
Source: IEA WEO 2011
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Where do we go with the present fuel mix?
3Source: Varró L., IEA, 2012
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Is CCS deployment on track?
Source: Varró L., IEA, 2012
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To reach its projected contribution to the 450 ppm policy, 100 projects would need to be under construction at any time until 2035And one year project time overrun wipes out 30% of NPV
Nuclear: the dream that failed? (The Economist, March 2012)
Source: Varró L., IEA, 2012
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The rest of presentation
• Major RES-E regulatory principles and tasks
• Five RES-E related regulatory dilemmas
• Transparency and support level: which is the more important promoter of RES-E?
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Questions
• The regulatory environment is decisive for RES-E investments and growth
• 3 recent studies by REKK‣ ‚Principles of Regulation to promote the development of
Renewable Energy Sources (RES)’, the Black Sea Regional Regulatory Initiative, with NARUC
‣ ‚Support Schemes for Electricity Produced from Renewable Energy Sources’ with ERRA
‣ ‚Clean Energy Finance Solutions: Central & Eastern Europe’, with Cambridge Programme for Sustainability Leadership
• What are the main regulatory principles, tasks and dilemmas with regard to RES-E regulation?
• What do we know about the impact of regulatory characteristics on RES-E penetration?
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There are just a few general regulatory principles to follow
• Effectiveness – to meet policy objectives• Cost efficiency – to provide least cost
solutions for end customers• Transparency, consistency, credibility - to
promote a proper RES-E investment climate and prevent corruption
• A certain level of flexibility – to reserve regulatory ability to adjust support levels to changing technology costs
• Easy and inexpensive authorisation – to promote easy entry
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Prominent RES-E related regulatory tasks
• Contributing to the design of RES-E support schemes (production price support or quota obligation schemes)
• Regulating grid access and integration for RES-E (balancing and settlement regime, grid connection rules, cost allocation rules for grid upgrade, remuneration for additional reserve needs, etc)
• Licensing and monitoring of the RES-E market• RES-E certification • Promoting cross-border cooperation in RES-E
utilization
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1. Poor RES-E support design might create undesirable investment cycles
• Stress on support budget
• Excess demand for grid connection licenses
• Might prompt an unplanned change of regulation that undermines credibility
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Capacity over 0,5 MW Capacity under 0,5 MW Generation (GWh)
„Gold rush”: effectiveness without cost-efficiency
Growth of installed PV capacities in the Czech Republic
Source: REKK analysis
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Smart design is needed: e.g. learning curves and adjustment of feed-in tariffs
Total installed geo, MW
Market price of electricity
FIT2
MC geothermal
Q3
FIT in period 1
FIT1
Cost, prices
t1
FIT3
Q1
FIT in period 3
t2
t3
Total installed wind MW
MC wind
Q3
t1
Q1
t2t3
Total installed solar, MW
MC solar
Q3
t1
Q1
t2
t3 FIT in period 3
FIT in period 3
FIT in period 1
FIT in period 1
Transparency and flexibility: rate adjustmentonly for new projects
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2. Asymmetric incentives for RES-E generation versus network to be balanced
• RES-E generation: fast; sexy; simple incentives
• Network upgrade: slow; complicated; counter-incentives
• Queue management• Integrated resource and
network planning• Sufficient incentives for
transmission and distribution upgrade is key
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3. Licensing: how to make it simple and cheap?
• Limit on the time and cost of administrative procedures (e.g. Moldova)
• One-stop-shop licensing (e.g. Germany, Denmark)
• Reduced number of authorities involved in RES-E licensing (e.g. Georgia)
‣ Reduction of corruption opportunities
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4. Electricity market integration process can boost RES-E
• Electricity market integration promotes RES-E growth‣ Better spatial distribution of weather-dependent
RES-E production
‣ Common pool of reserves and storage capacities
• RES-E should get a role when electricity market coupling rules are created
• Harmonized green certification regimes might promote cross border trade in RES-E and thus promote investment
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5. Regulatory governance, capacity building and policy feedback is needed
• The promotion of RES-E is a relatively new competence for energy regulators
• Considerable regulatory knowledge and human resources are still to be developed
• A requisite organizational solution can also help the Regulator meet the new expectations in this regard‣ RES certification, licensing and market monitoring
• Fast feedback of market information into the rulemaking process‣ Regular consultations with ministry and stakeholders
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6. Is transparency or support level the more important promoter of RES-E?
16Survey results from ERRA
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Hypotheses
• Hypothesis 1: Higher RES-E production support levels lead to higher RES-E penetration
• Hypothesis 2: Good regulatory practices, including transparent, consistent and flexible regulation are preconditions for a faster RES-E penetration
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Production support levels, 2011
- German PV FIT level 2012
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Typical pattern: RES-E capacity shares versus support level - wind
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RES-E capacity shares versus support level – solar PV
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Indicators involved in regulatory characteristics analysis
Licensing/target setting Grid Tariff and GC
Transparency
Consistency /credibility/ stability
Easy entry and flexibility
capacity threshold for RES-E licensing
connection rules
allocation of connection capacities
technical standards
balancing responsibility
capacity allocation
FIT/premium/GC setting mandate
eligibility period
non-planned revisions
regular tariff review
priority network access
RES-E target
legal remedy
GO certification
lead time
technical standards
tariff level
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Transparency
-0,02
0
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0,1
0,12
-1 -0,8 -0,6 -0,4 -0,2 0 0,2 0,4 0,6 0,8
TR
BG EE
BiH
AL
HU PL
SK UA
LT LV AM RO
RS AE MK
CR
Transparency Index
RES-E Capacity growth 2007 - 2010
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Integrated effects – Regression analysis
Dependent Variable: LOG(CAP_GR) Method: Least Squares Sample (adjusted): 1 16 Included observations: 14 after adjustments1 Variable Coefficient Std. Error t-Statistic Prob. C -7.333706 3.377328 -2.171452 0.0550 TRANS 1.097044 0.513469 2.136536 0.0584 LOG(PRODPR) 1.405245 0.296314 4.742422 0.0008 LOG(FIT_WEIGHT) -0.286652 0.585180 -0.489853 0.6348 R-squared 0.800302 Mean dependent var -3.991196 Adjusted R-squared 0.740393 S.D. dependent var 1.279444 S.E. of regression 0.651898 Akaike info criterion 2.217100 Sum squared resid 4.249713 Schwarz criterion 2.399688 Log likelihood -11.51970 F-statistic 13.35854 Durbin-Watson stat 1.947352 Prob(F-statistic) 0.000785
1 Bosnia (Federation BiH), Macedonia and United Arab Emirates were left out by the program due to missing data.
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Lessons
• ‚Good regulation’ (transparency, consistency and easy entry) and healthy general investment environment are important pre-conditions to RES-E capacity growth
• No such a relationship can be detected between RES-E growth rate and the nominal level of support (FIT)
• The main regulatory message here is that countries aiming to increase their RES-E shares should as first step design their regulatory environment carefully, while the level of Feed-in tariff or premium is less determining in achieving higher RES-E penetration levels
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