renewable electricity support schemes in europe
DESCRIPTION
This presentation provides an updated overview of state and trends in support schemes for electricity from renewable energy sources (RES-E) across Europe. It summarises the main EU developments relevant for renewable electricity, including the implications of the new EU State Aid Guidelines for Energy and Environment, and indicates the latest support scheme design trends in Member States. The presentation was given by Dr. Corinna Klessmann, Managing Consultant Policy Design and Evaluation at Ecofys, during the Axpo Nordic Forum in Copenhagen in November, 2014.TRANSCRIPT
Renewable electricity support schemes in Europe
Trends and perspectives
Dr. Corinna Klessmann
12/11/2014
© ECOFYS | |
EU developments relevant for
renewable electricity (RES-E)
12/11/2014 Dr. Corinna Klessmann2
© fotolia.com/treenabeena
© ECOFYS | |
EU developments relevant for RES-E
1. National RE support schemes will be continued (ECJ decision on Ålands
Vindkraft)
2. RES-E ambitions are likely to diverge towards 2030 but potentially more
(regional) cooperation between Member States
3. The new State Aid Guidelines by the European Commission will have a
major impact on national support scheme design
12/11/2014 Dr. Corinna Klessmann3
© fotolia.com/treenabeena
© ECOFYS | |
1. National RE support schemes will be continued
(ECJ decision on Ålands Vindkraft)
> So far national support schemes only support installations on domestic
territory (except joint support scheme Sweden-Norway)
> European Court of Justice (ECJ) ruling on Ålands Vindkraft case (1st July
2014): no violation of free movement of goods
> Member States are allowed to limit their support schemes to their own
territories; ECJ stresses opportunity to cooperate under the current regime
of the RES Directive
12/11/2014 Dr. Corinna Klessmann4
© ECOFYS | |
2. RES-E ambitions are likely to diverge towards 2030 but
potentially more (regional) cooperation between Member States
> European Council Conclusions 23.10.2014:
– EU-level binding target of at least 27% RES in final energy
– Member States contributions, but no nationally binding targets
– Member States are free to set their own higher national targets
– Governance structure will still be developed, but it should facilitate
coordination and regional cooperation
> Likely that RES-E ambitions will further diverge compared to 2020
framework
> Possibly more incentives or pressure for cooperation between Member
States
12/11/2014 Dr. Corinna Klessmann5
© European Union, 2004-2014
© ECOFYS | |
3. The new State Aid Guidelines by the European Commission
will have a major impact on national support scheme design
Requirements that will apply to all new support schemes (for state aid
clearance):
> RES-E generators sell their electricity directly in the market; support is paid
as a premium in addition to the market price
> RES-E generators are subject to standard balancing responsibilities
> Measures are put in place to ensure that generators have no incentive to
generate electricity under negative prices
> Aid is granted in a competitive bidding process (=auction)
> Exceptions for small installations and special conditions
12/11/2014 Dr. Corinna Klessmann6
© Ecofys
© ECOFYS | |
Support scheme design trends in the Member States
12/11/2014 Dr. Corinna Klessmann7
© ECOFYS | |
Support scheme design trends in the Member States
1. Increased use of sliding feed-in premiums/contracts for difference,
abandoning feed-in tariff and quota schemes
2. Increased use of tenders/auctions
3. Limited opening of support schemes
12/11/2014 Dr. Corinna Klessmann8
© ECOFYS | | 12/11/2014 Dr. Corinna Klessmann9
• FIT
• (sliding)FIP/CfD
• Quota
• Tenders/Auctions
• Other
Source: Ecofys
1. Increased use of sliding feed-in premiums/contracts for
difference, abandoning feed-in tariff and quota schemes
Countries that have recently
introduced sliding FIP/CfDs (or
plan to do so)
Countries that (plan to) phase
out their quota scheme
Countries that recently phased
out FITs
Note: The map only shows the main support instruments per country.
© ECOFYS | |
The main support schemes expose RES-E producers to
different levels of risk
12/11/2014 Dr. Corinna Klessmann10
Market price
RES-support
Green
certificate
revenues
FIT FIP
sliding/
Cfd
cap &
floor
fixed
Quota
Volume basedPrice based support
Source: Ecofys
© ECOFYS | |
The main support schemes expose RES-E producers to
different levels of risk
12/11/2014 Dr. Corinna Klessmann11
Market price
RES-support
Green
certificate
revenues
FIT FIP
sliding/
Cfd
cap &
floor
fixed
Quota
Electricity market
price risk
Green certificate
market risk
No market price risk
Limited market price risk
Full electricity market price risk
Certificate market price
risk
RES-E producer sells directly to the market
Volume based
Market integration
through TSO
Price based support
Source: Ecofys
© ECOFYS | | 12/11/2014 Dr. Corinna Klessmann12
• FIT
• (sliding)FIP/CfD
• Quota
• Tenders/Auctions
• Other
Source: Ecofys
2. Increased use of tenders/auctions
Countries that have recently
introduced or are planning to
introduce tenders/auctions
© ECOFYS | |
Some background on RES-E tenders/auctions
> A tender/auction is not a support scheme by itself; it can be combined with
all other support schemes, most commonly with FITs or FIPs
> In traditional FIT/FIP schemes, the support level is determined
administratively, usually based on estimated production cost (LCOE)
> In a tender/auction, the FIT/FIP is determined in a competitive procedure
(requirement for auction: demand for support greater than auction volume)
12/11/2014 Dr. Corinna Klessmann13
Volume (e.g. in MW)
Pri
ce (
su
pp
ort
level)
Successful bids Unsuccessful bids
Tendered
volume
Clearing price
© Ecofys
© ECOFYS | | 12/11/2014 Dr. Corinna Klessmann14
> Not all winning projects will be
implemented risk of low
effectiveness/deployment
> Higher risk for RES-E producers than
administrative FIT/FIP, favouring
bigger market actors
– Uncertainty in the preparation phase
– Sunk cost for unsuccessful bidders
– Penalty risk for successful bidders
> Risk of underbidding or winner‘s
curse leading to prices below costs
> Risk of strategic behaviour
(collusion) leading to high prices and
producer rents
> Control of maximum volume and
support cost
> Support level is determined by the
market, not the administration
> Competition between RES-E
producers may lower prices
(compared to administrative
FIT/FIPs)
> Potential to discover real
production cost of RES-E
Opportunities Challenges
Specific opportunities and challenges of tenders/auctions
© ECOFYS | |
3. Limited opening of national support schemes
> Germany, Netherlands and the UK announced that they might partially open
their support scheme to foreign RES-E installations in the future
> Use of tenders/auctions allows for limited opening of support scheme
> Additional requirements for supporting RES-E from other countries
mentioned
– Cooperation mechanism with host country in place
– Connection to the electricity system of the importing country (UK) or
equal physical effect on power system (DE)
> The European Commission urges some Member States to partially open their
support scheme as compensation for “discriminating” renewables levy (e.g.
Germany, Denmark, Estonia)
12/11/2014 Dr. Corinna Klessmann15
© thinkstockphotos/visdia
© ECOFYS | |
Conclusion
> RES-E support schemes will continue to be organised nationally; no binding
national targets, but open questions regarding the governance of EU 2030
target
> The EU State Aid Guidelines will force Member States to align their national
support schemes: RES-E generators need to sell their electricity directly in
the market (phase-out of FIT) and default use of competitive bidding
(auctions)
> Already today one can observe a trend towards sliding feed-in premiums/
CfDs and auctions (independent of the guidelines)
12/11/2014 Dr. Corinna Klessmann16
© fotolia.com/Harald Richter
© ECOFYS | |
Questions?
Ecofys Germany GmbH
Am Karlsbad 11
10785 Berlin
Germany
Dr. Corinna Klessmann
T: +49 (0)30 297 735 79-0
I: www.ecofys.com
12/11/2014 Dr. Corinna Klessmann17
© ECOFYS | |
Recent reports on RES-E policy in the EU
> Held et al. (2014). Design features of support schemes for renewable electricity. http://www.ecofys.com/en/publication/renewable-electricity-support-schemes-and-cooperation-mechanisms-in-/
> Klessmann et al. (2014). Cooperation between EU Member States under the RES Directive. http://www.ecofys.com/en/publication/renewable-electricity-support-schemes-and-cooperation-mechanisms-in-/
> Resch et al. (2014). Beyond2020 – Design and impact of a harmonised policy for renewable electricity in Europe. http://www.res-policy-beyond2020.eu/downloads.html
> Klessmann et al. (2013). Policy options for reducing the costs of reaching the European renewables target. Renewable Energy 57(2013), 390-430
> Ragwitz et al. (2012). RE-Shaping: Shaping an effective and
> efficient European renewable energy market. http://www.reshaping-res-policy.eu/
> Klessmann (2012). Increasing the effectiveness and efficiency of renewable energy support policies in the European Union. http://dspace.library.uu.nl/handle/1874/218063
> Rathmann et al. (2011). Towards triple-A policies: More renewable energy at lower cost. http://www.reshaping-res-policy.eu/downloads/Towards-triple-A-policies_RE-ShapingD16.pdf
> de Jager et al. (2011). Financing Renewable Energy in the European Energy Market. http://ec.europa.eu/energy/renewables/studies/doc/renewables/2011_financing_renewable.pdf
12/11/2014 Dr. Corinna Klessmann18