INTERNATIONALENERGY AGENCY© OECD/IEA - 2008

Deploying Renewables: Principles for Effective

Policies

Press Conference, OECDBerlin, 29 September 2008

Dr. Paolo FranklHead, Renewable Energy

UnitInternational Energy

Agency

© O

EC

D/IEA

- 2

00

8Global Power Generation MixScenarios

46.5%

Renewables

[Source: ETP 2008]Renewables would have to play a particularly significant role in the power sector, increasing from 18% today to nearly 50% by 2050. Non-hydro renewables show the

highest growth rate.

© O

EC

D/IEA

- 2

00

8

Comparative assessment of effectiveness and efficiency of renewables support policies (market deployment and RD&D policies)

OECD countries plus Brazil, Russia, India, China, South Africa

Electricity, Heat and Transport Fuel sectors

Distillation of the best policy practices and of main challenges encountered

‘Learn from success stories but also from failures’

Co-funded by German BMU, Japanese NEDO, and Enel

Global Renewable Energy Markets and Policies Programme (GREMPP)

© O

EC

D/IEA

- 2

00

8

Incremental RE generation in a given year

Remaining additional realisable potential (by

2020)

Quantitative Analysis

Chosen policy effectiveness indicator on a yearly basis:

© O

EC

D/IEA

- 2

00

8

Achieved (by 2005) and Additional realisable mid-term potential (by 2020) for RES-Electricity

Achieved (2005) and additional realisable mid-term (up to 2020) potential for RES-Electricity by country (OECD+BRICS) – in absolute

terms (TWh)

0

500

1000

1500

2000

US

A

Can

ada

Mex

ico

Japa

n

Kor

ea

Aus

tral

ia

New

Zea

land

Icel

and

Nor

way

Sw

itzer

land

Tur

key

Rus

sia

Chi

na

Indi

a

Bra

zil

Sou

th A

fric

a

EU

27

Rea

lisab

le R

ES

-Ele

ctri

city

_ g

ener

atio

n p

ote

nti

al u

p t

o 2

020

[TW

h/y

ear] Additional potential

up to 2020

Achieved potential2005

Source: IEA & EEG, 2008

© O

EC

D/IEA

- 2

00

8Effectiveness & EfficiencyWind On-shore 2005 (OECD & BRICS)

Source: IEA & Fh-ISI, 2008

DEU

ESP

IRL

PRT

NLD

AUT

LUX

JPN

KOR

ITAGBRIND

BELUSA

AUSSWE

NZL

POLFRANOR

CHN

BRA FINTURRUS ZAF MEX

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00

Eff

ect

ive

ne

ss in

dic

ato

r 20

04

/20

05

Annualised remuneration in [US cent / kWh]

u OECD - EU Other OECD p BRICS

Long-term predictable incentives(FIT or FIP)

+Appropriate framework

Higher risk (TGC)+

Non-economic barriers

Efficiency

© O

EC

D/IEA

- 2

00

8

NLD

SWE

DNK

BEL

GBRHUN

JPNDEU

ITANZL PRTPOL

BRA

AUT

RUSESP

INDCHN AUS MEXUSACAN CHECZE

IRL GRCISL LUXNORSVK

FRAZAF KOR TURFIN

-5%

0%

5%

10%

15%

20%

25%

30%

0 2 4 6 8 10 12 14 16 18

Eff

ect

iven

ess

ind

ica

tor 2

00

4/2

005

Annualised remuneration in [US cent / kWh]

u EU Countries Non EU OECD p BRICS

Effectiveness & EfficiencySolid biomass el. 2005 (OECD+BRICS)

Source: IEA & Fh-ISI, 2008

TGC

FIT/FIP

© O

EC

D/IEA

- 2

00

8

LUX

DEU

JPNCHE

NLDAUS AUT USAIND ESPCANZAF ITAMEX KORDNKBELFINCHN GBR FRAPRT GRCSWERUSNORBRA CZEHUNIRLISLNZL POLSVKTUR0%

1%

2%

3%

4%

5%

6%

7%

0 10 20 30 40 50 60 70 80

Eff

ect

iven

ess

ind

ica

tor 2

00

4/2

005

Annualised remuneration in [US cent / kWh]

u OECD - EU Other OECD p BRICS

Effectiveness & EfficiencySolar PV 2005 (OECD & BRICS)

Source: IEA & Fh-ISI, 2008

FIT

© O

EC

D/IEA

- 2

00

8

Main Lessons Learntand

Conclusions

© O

EC

D/IEA

- 2

00

8

Effective policies only in a limited set of countries Sometimes depending on specific technology

Perceived risk, more than profit, is key to policy effectiveness & efficiency

Price support can not be adequately addressed in isolation; non-economic barriers must be addressed concurrently Grid barriers Administrative barriers Social acceptance issues Other barriers (e.g. training, information, financial, etc.)

Effective systems have, in practice, frequently been the most cost efficient Technology-specific support is key for both effectiveness

and cost-efficiency

Main Lessons Learnt (1)

© O

EC

D/IEA

- 2

00

8

Main Lessons Learnt (2)

Move beyond ‘Feed-In Tariff vs. Quota Obligation System/ Tradable Green Certificate’ debate Both systems show success and failures depending

on specific country and technology

Precise design criteria and fine-tuning are key

Signs of convergence: Feed-In Tariff: Premium tariff option, time

digression Quota System/Tradable Green Certificate:

Technology banding

© O

EC

D/IEA

- 2

00

8

1. Remove non-economic barriers to improve market functioning

2. Establish predictable support framework - to attract investments

3. Set up transitional incentives decreasing over time – to foster and monitor technological innovation and move towards market competitiveness

4. Ensure specific support in function of technology maturity to exploit potential of large RET range

5. With increasing mass-scale RET penetration impact on overall energy system must be taken into account

Continuity

Certainty

Key Principles for Effective Renewable Energy Policies

© O

EC

D/IEA

- 2

00

8Fostering RE’s transition towards mass market integration

Niche markets Mass market

Low cost-gap

(e.g. wind onshore)

High cost-gap

(e.g. PV)

Mature tech

(e.g. hydro)

Prototype & demo stage

(e.g. 2nd gen biofuels)

Time

Mar

ket D

eplo

ymen

t

Development

1. Development

RD&D financing,

capital cost support,

investment tax credits, rebates,

loan guarantees

4. Technology-neutral competition TGC, Carbon trading (e.g. EU ETS)

© O

EC

D/IEA

- 2

00

8

1. Realise urgency to implement effective policies to exploit major potential of RETs in terms of energy security and climate change mitigation

2. Remove and overcome non-economic barriers first

3. Exploit substantial potential for improvement of policy effectiveness and efficiency: learn from good practice

4. Focus on rigorous and coherent implementation of key policy design principles with regard to long-term cost efficiency and national circumstances

5. Create level playing field by pricing in GHG emissions and other externalities

6. Allow a combination framework of incentive schemes in function of technology maturity level

Urgent action for Energy Technology Revolution

Recommendations