EU policy for renewable energy: The European context

Daniel BeckerEcofys, Berlin Office28 April 2006, Ankara

Outline of the presentation

• Principles of EU RES Directive

• Current situation

• Perspectives for reaching the targets

RES-E share in EU25 – current situation

0

10

20

30

40

50

60

70

80

90

EU25EU15 BE CZ

DK DE EE EL ES FR IE IT CY LV LT LU HU MT NL AT PL PT SI

SK FI SE UK

RE

S-E

sh

are

in %

of

gro

ss

ele

ctr

icit

y

co

ns

um

pti

on

1997/1999 2002 Total Share 2010 TARGET

Sources: - Data 2002: Energy and Transport in figures, European Commission in cooperation with Eurostat, 2004- Annex to the Directive 2001/77/EC

Principles of the Directive 2001/77/EC•Quantified national targets for consumption of electricity from renewable sources of energy

•National support schemes plus, if necessary, a harmonised support system

•Simplification of national administrative procedures for authorisation

•Guaranteed access to transmission and distribution of electricity from renewable energy sources

Adoption of national targets in the EU •All EU-15 Member States have adopted national targets, in line

with the reference values listed in Annex I of Directive 2001/77/EC.

•The 10 New Member States of the EU have set up national targets published in the Accession Treaty in April 2003.

•2010 Targets have been agreed with Bulgaria and Romania.

If EU-15 Member States meet these national targets, the 2010 target of about 20% (21% at EU25) will be achieved.

The Commission assessment report May 2004

•Commission has approved the communication COM(2004) 366 final: “The share of renewable energy in the EU”.

•Commission Staff Working Document SEC(2004) 547: EU-25 country reports

Main conclusion: An important first step has been done, but extra efforts are still needed

Will the EU achieve its 2010 RES-E target?•Extrapolation scenarios set out in the Commission Staff Working

Document show that Europe is in its half way related to the 2010 target under current policies and measures.

•This is even true if reductions in total electricity demand as a result of new energy efficiency measures is taken into account.

Currently implemented policies will probably result in a share of between 18% and 19%

Will the EU achieve its 2010 RES-E target?

EU-15 Policy Scenario - Electricity 2010Biogas

Solid biomass

Biowaste

Geothermal electricity

Hydro large-scale

Hydro small-scale

Photovoltaics

Solar thermal electricity

Tide & wave

Wind onshore

Wind offshore

22,1%

EU-15 national policies - Electricity 2010

Biogas

Solid biomass

Biowaste

Geothermal electricity

Hydro large-scale

Hydro small-scale

Photovoltaics

Solar thermal electricity

Tide & wave

Wind onshore

Wind offshore

18,3%

Source: Communication from the Commission to the Council and the European Parliament – The share of renewable energy in the EU (SEC(2004) 547), p 13

RES-E share in 2010 – practicable scenario vs. current national policies

Explanations

•Progress in achieving the national targets differ strongly between the Member States.

•Not all Member States have adopted complementary proactive measures geared to national conditions.

•Success of wind energy is not outweighing the slow growth of biomass electricity.

•Biomass is lagging behind.

Wind – the success story• Installed wind energy capacity in EU15 grew 20% in the last 6

years. 34 GW total installed capacity at the end of 2004.• In an average wind year this capacity can produce 74 TWh (=

around 2.4% of EU electricity consumption)•Germany, Spain and Denmark contribute 80% of total EU15

wind power capacity:

0

5000

10000

15000

20000

25000

30000

1997 1998 1999 2000 2001 2002 2003

Luxembourg

BelgiumFinland

Ireland

Portugal

AustriaFrance

Greece

Sweden

United KingdomItaly

The Netherlands

Denmark

SpainGermany

Source: Communication from the Commission to the Council and the European Parliament – The share of renewable energy in the EU (SEC(2004) 547), p 13

Biomass electricity

•2010 target will only be achieved if biomass contributes 40% to it.

•Biomass electricity will need to grow by 18%/year compared to 7% during the past 7 years.

•Additional need of around 32 Mtoe – indicative figure on the biomass availability for energy purposes at EU15 level is 150 Mtoe (additional 32 Mtoe for EU10).

Estimation of the Biomass electricity trend and comparison with the 22% objective (TWh)

162

91

4342

0

20

40

60

80

100

120

140

160

180

1997 1998 1999 2000 2001 2002 2010

22% objectivefulfilled

Current trend

New initiatives – action at European level•Strengthening of the future Community Programme

“Intelligent Energy Europe”•A Community action plan for biomass•Developing renewable energy actions in heating & cooling•Offshore wind policy•Research and technological development•Future Financial Perspectives•Using major Community financing instruments

Structural and cohesion funds, second pillar of the CAP•Placing biofuels on the market

Source: Communication from the Commission to the Council and the European Parliament – The share of renewable energy in the EU (SEC(2004) 547)

Next steps by the European Commission

•The Commission acknowledges the importance of providing a longer term perspective.

•The Commission will carry out regular reviews of progress in the development of renewable energy sources.

• In 2007 the Commission will set targets for the period after 2010.

•Studying the national measures taken to implement the RES-E Directive in the 25 countries of the EU and to take, if necessary, legal actions.

A closer look at the EU Member States – EU 15•Assessment of progress at the national level by the

European Commission:

On track:

DK, DE, ES, FI

About to be on track:

NL, UK, SE, AUT, BE, IE, FR

Not on track:

GR, PT

Source: Communication from the Commission to the Council and the European Parliament – The share of renewable energy in the EU (SEC(2004) 547)

No information available: LU, IT

On track

•DK: – likely to achieve 2010 target in 2005

•DE:– increased the share of RES-E from 4.5% in 1997 to >9% in

2004•ES:

– second largest European country for wind power•FI:

– impressive evolution of the biomass sector

Driving force: attractive support system in a stable and long-term framework

About to be on track•UK, NL:

– activity in a new policy; full results still have to materialize

• IE:– support system through tendering; difficulties of grid connection of

wind farms

•BE:– Green certificate system since 2002; no visible results yet

•FR:– attractive tariff system in place; too soon for a review

•SWE:– green certificate system since May 2003; RES-E production rose

hardly

• AU: – good perspective for growth

Not on track

•GR:– High administrative barriers prevent considerable

exploitation of RES

•PT:– High administrative and grid barriers

Feed-in systems and Green Certificates

Daniel BeckerEcofys, Berlin Office28 April 2006, Ankara

Inhibitory forces ti increase RES-E share

Inhibitory forces

Weak supportinstruments

Structural barriers

Financialrestrictions

Technical

Administrative

Grants

Amountof tariffs

Weak domestic financial power

Access to capital

Socio-economic

Design of instruments

Elements to launch RE-S successfully

political support

support schemes

administrative structures

public supporttake-off barrier

EEG: Legal Foundations

Sou

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200

4(S

uppl

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ecur

ity in

the

Eur

opea

n In

tegr

ated

Grid

Sys

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, 20

04)

Of which EEG levy 1.88%

• Federal law (further development of the Power Feed-In Law of 1991)

• Priority for feed-in of RE• Extensive regulation for grid access • legally regulated payment rates

– Long-term perspective and investment security (15–30 years)

– Incentive for the opening up new potentials and technologies (esp. biomass and geothermal energy)

– Strong incentive for efficiency boost, by degression of payment rates

Cost of electric power for households

Features of EEG and its incentives for success

Sales at fixed rate are guaranteed for 20 years

Produced electricity must be purchased

Balances competitive advantage of conventional energy sources

Legal certainty (20 years amortisation period)

Attractive rate of return for investors

Does not put a burden on public funds

Renewable Energy Sources Act (EEG)

Grid operator

Transmission grid operatorTransmission grid operator

Grid operator

Supply company

Supply company

€EEG – how does it work?

Feed-in tariffs

Implications of EEG

RE power supply increased from 4.7% (1998) to 10% (2004)

more than 8 million Germans are supplied solely with RE power

Additional costs for private households are low (0.4 cent/kWh) i.e. € 14 per household / year = 2% of annual electricity budget

Some 120,000 people now working in RE sector – twice as many as in 1998

Renewable Energy Sources Act (EEG)

Feed-in and Green Certificates

• Feed-in Systems should have an integrated GoO-component

• What happens with gererated RE-kWh:1. With remuneration by feed-in tarriff, GoO is generated

and used at once2. If not remunerated (e.g. biomass-cofiring, bilateral

agreements, amortised hydropower), GoO can be traded

• Advantages: – avoids abuse (double selling of green electricity)– Transparency for customers („Greenness“ is

purchased)

Green Certificates and ETS

•Green Certificates can not be integrated into ETS and, because no additionality is given (as RES-target exists)

•CDM can not be counted as GoO•Qualitative distinction: CDM is counting CO2-Reduction, while GoO certifies produced kWh