Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments...

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Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15 th 2016 Berlin

Transcript of Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments...

Page 1: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Wind Onshore AuctionsCurrent Developments in Europe

AURES wind onshore

stakeholder workshop

March, 15th 2016

Berlin

Page 2: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Agenda

14:00 Welcome by the project coordinator and quick overview of the AURES project

14:10-15:30 International experiences with wind auctions

• Experiences from the Netherlands (Paul Noothout, Ecofys)

• Experiences from the UK (Bridget Woodman, University of Exeter)

• Experiences from Spain (Pablo del Rio, CSIC and Hugo Lucas, Factor CO2)

• Considerations in the planned German scheme (Fabian Wigand, Ecofys)

15:30-15:45 Coffee Break

15:45-16:50 Discussion: What lessons can be learnt for wind energy auction design?

16:50-17:00 Wrap-up and conclusion

Page 3: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

SHORTLY ABOUT THE PROJECT

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Page 4: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Background for AURES

AURES: AUctions for Renewable Energy Support

The new EC State Aid Guidelines1

From January 2017, Member States shall set up competitive auctions (also calledtenders) to grant support to all new installations (with only very few exceptions).

Limited experience with auctions in Europe Only some Member States have undertaken RES auctions (e.g. the UK, Ireland,

Portugal, France, Denmark and the Netherlands) – and with mixed results

Need for analysis and coordination Which auction types and designs are specifically applicable for RES-E support?

What effects (desired or undesired) do different design options have under differentmarket conditions?

What are lessons learnt and best practices for implementing auctions in Europe?

1Guidelines on State aid for environmental

protection and energy 2014-2020, C(2014)2322

Page 5: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Who we are

A coordination and support action under the EU Horizon2020

programme

Project runs from January 2015 to December 2017

Eight partners from seven EU countries

Cooperation with policy makers, market participants and other

stakeholders.

Page 6: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

AURES project at a glance

AURES combines

Target-oriented analysisempirical analysis

interviews with stakeholders

lessons from other industries

auction experiments

simulations in energy models

Capacity building activitiesworkshops

webinars

case cooperations

bi- and multilateral meetings

interactive website

…find more information on:

auresproject.eu

Page 7: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

ACHIEVEMENTS UNTIL NOW

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Page 8: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Project activities at a glance

Finalised: Framing and conceptual aspects

Identification of auction types and formats suitable for RES support

Description of appropriate design elements for RES support

Empirical analysis of past and ongoing auction implementations

Ongoing: Case cooperation with policy makers on auction implementations

Analysis on alternatives to auctions

Cash-flow type model for individual investors

Starting / Upcoming: Game theoretic, agent-based model for simulation of auctions in energy systems

Auction experiments in the lab

Online policy support tool for best practice auction design

Continuous: Dissemination and stakeholder contact in webinars, workshops, media actions

Page 9: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Empirical analysis of past and ongoing auction implementationsPAST AUCTION IMPLEMENTATIONS

Germany

Pilot auction for ground-mounted PV (2015)

California

Renewable Auction Mechanism (multi-technology)

(2011-2015)

Denmark

Single-site offshore wind auctions (2004-2015)

Italy

Lowest Bid Auctions* (2012-2015)

China

Onshore wind auctions* (2003-2007)

France

Small scale PV auctions* (2011-2014)

Plus three more cases upcoming*

ONGOING / FUTURE AUCTION IMPLEMENTATIONS

Spain

Wind and biomass auction (January 2016)

Poland

New RES Act auctions (multi-technology) (from

July 2016)

Slovakia

Case study on future implementation possibilities

Croatia

Auctions for RES and high efficiency Co-

generation (2016 / 2017 onwards)

Netherlands – Denmark

Hypothetical cooperation case for open onshore

wind auctions

*Publication on project homepage pending

Page 10: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Experiences from different European countries

• Experiences from the Netherlands (Paul Noothout, Ecofys)

• Experiences from the UK (Oscar Fitch Roy, University of

Exeter)

• Experiences from Spain (Pablo del Rio, CSIC and Hugo Lucas,

Factor CO2)

• Considerations in the planned German scheme (Fabian

Wigand, Ecofys)

Page 11: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

International Experienceswith wind auctions in theNetherlands

Paul Noothout

Ecofys

Page 12: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

The Netherlands – SDE+

SDE+ in a nutshell:

• Sliding feed-in premium scheme introduced in 2011;

• SDE+ is a reverse auctioning scheme, including a large variety of

technologies covering Electricity, Heat and Gas;

• SDE+ scheme is technology neutral aiming to deploy renewable energy

at the lowest possible cost;

• Since 2016, the SDE+ consists of two rounds (Mar-Apr and Oct) with four

phases each;

• Each phase the maximum premium for which SDE+ can be applied

increases;

• Each round has a budget of €4 billion;

Page 13: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Introduction of SDE+Basics and rules

• SDE+ in 2016:

• Two rounds, each with a budget of €4 billion;

• Each round consist of four phases;

• In each phase, the maximum premium increases up to 150 €/MWh.

• For each technology a maximum basisbedrag is determined, reflecting the

maximum premium for each technology:

• Technologies can never obtain a higher premium than the maximum basisbedrag;

• By applying in the “free category” project developers can apply for a lower premium;

• Since 2016, project developers are free to choose their premium in the “free category”.

• The maximum premium is determined annually:

• ECN publishes the calculations and draft premiums (SDE+ basisbedragen);

• After market consultation, ECN publishes their final advice;

• The Ministry of Economic Affairs decides on the final premiums.

Page 14: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Phase 1 Phase 2 Phase 3 Phase 4

SD

E+

basis

bedra

gIntroduction of SDE+Competitive feed-in premium

Four phases, each phase the maximum

basisbedrag increases

0.09

€/kWh

0.11

€/kWh

0.13

€/kWh

0.15

€/kWh

22 Mar 2016

29 Mar 2016

04 Apr 2016

11 Apr 2016

Page 15: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Phase 1 Phase 2 Phase 3 Phase 4

SD

E+

basis

bedra

g

Wind onshore >= 7.0 m/s

Geothermal

Various biomass options

Wind onshore <7.0 m/s

Solar thermal

Solar-PV

Wind in lake

Biomass co-firing

Ocean energy

Mono digestion

Introduction of SDE+Competitive feed-in premium

Depending on the remaining budget, project

developers will optimise their budget

claim or their chances of obtaining SDE+

Page 16: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Phase 1 Phase 2 Phase 3 Phase 4

SD

E+

basis

bedra

g

Premium for SDE+ application

Introduction of SDE+Example: Solar-PV project

Solar-PV project

Max basisbedrag: 128€/MWh

Page 17: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Phase 1 Phase 2 Phase 3 Phase 4

SD

E+

basis

bedra

g

Premium for SDE+ application

Introduction of SDE+Example: Solar-PV project

To increase chances of receiving SDE+,

project developers can apply for lower

basisbedrag in the ‘free category’

Page 18: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Phase 1 Phase 2 Phase 3 Phase 4

SD

E+

basis

bedra

g

Premium for SDE+ application

Introduction of SDE+Example: Solar-PV project

In the “free category”, project developers

can choose own basisbedrag

Page 19: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

EfficiencyResults 2012-2015

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2012 2012 2012 2013 2013 2013 2014 2014 2014 2015 2015 2015

Budget

cla

im (€

mln

)

Afvalverbranding Geothermie Waterkracht

Thermische conversie AWZI/RWZI thermische drukhydrolyse Wind op land

Allesvergisting Ketel biomassa Mest covergisting

Groen gas Bij- en meestook Mest monovergisting

Zon-PV Zonthermie

SDE+ budget claim

Awarded

Rejected

Page 20: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

EfficiencyResults 2012-2015

• Budget cap increases

competition between

categories;

• More expensive

options such as solar-

PV can obtain SDE+ in

free category;

• Expensive categories

(e.g. ocean energy) are

not applying for SDE+.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

0

500

1000

1500

2000

2500

3000

3500

4000

2012 2013 2014 2015

Cost

pri

ce r

ation (

M€/P

J)

SD

E+

aw

ard

ed (€

mln

)

Wind op land Afvalverbranding Bij- en meestook

Allesvergisting Mest covergisting Mest monovergisting

Thermische conversie Ketel biomassa AWZI/RWZI thermische drukhydrolyse

Groen gas Waterkracht Geothermie

Zon-PV Zonthermie Cost price ration (M€/PJ)

Page 21: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

EffectivenessResults 2012-2015: Realisation of awarded projects

SDE+ categoryProject realisation period

(based on SDE+)

Realisation rate

Wind 4 years 70%

Solar-PV 3 years 70%

Digestion 4 years 50%

Biomass boilers 4 years 70%

Thermal conversion 4 years 70%

Geothermal 4 years 30%

• For some categories realisation rates are low, because:

• Projects were not financially feasible with awarded SDE+;

• Projects were withdrawn.

• Penalties for not realising within realisation period:

• Exclusion from SDE+ for three years;

• Financial pernalty of 10% project value for projects >400M€.

Page 22: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

EffectivenessResults 2012-2015: Realisation of SDE+ budget

• Significant share of SDE+ budget has not been spent (on average 20%);

• Unused budget has been returned to SDE+ budget for future years, used

for instance to fund budget increases.

0

200

400

600

800

1000

1200

€m

illio

n

Source: Ecofys, Rijksjaarverslag 2014 xiii Economische Zaken

Utilised Not utilised

2009 2010 201320122011 2014

Page 23: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

EffectivenessSDE+ budget claim vs. spending

Cost-

pri

ce

Grey electricity

Renewable

electricity

Base energy price

SDE+ basisbedrag

Max SDE+ >> used for budget claim calculation

Page 24: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Cost-

pri

ce

SDE+

Grey electricity

Renewable

electricity

Base energy price

SDE+ basisbedrag

EffectivenessSDE+ budget claim vs. spending

Page 25: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Cost-

pri

ce

SDE+

Grey electricity

Renewable

electricity

Base energy price

SDE+ basisbedrag

EffectivenessSDE+ budget claim vs. spending

Page 26: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Cost-

pri

ce

SDE+

Grey electricity

Renewable

electricity

Base energy price

SDE+ basisbedrag

EffectivenessSDE+ budget claim vs. spending

Page 27: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Lessons learnt

• SDE+ is effective in bringing down cost for renewable energy;

• Important to ensure that projects remain financially feasible;

• Expensive technologies are hardly deployed under SDE+:

• Ocean energy;

• Wind offshore >> separate tender;

• About 20% of the budget is not being spend, because of:

• Awarded projects not being realised;

• SDE+ budgeting.

• SDE+ budgets have been increasing over the years

• €1.7 billion in 2011 to €8 billion in 2016.

• However…the Netherlands are lagging behind on achieving their 2020

targets and are likely not going to achieve it.

Page 28: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

AppendixCorrectiebedragen SDE+

SDE+ category Unit 2011 2012 2013 2014 2015 2016*

Wind onshore €/kWh 0.048 0.050 0.054 0.048 0.038 0.038

* Estimated correctiebedrag

More information:

https://zoek.officielebekendmakingen.nl/stcrt-2015-38490.html

Page 29: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

International Experiences with wind auctionsUK case study

Bridget Woodman and Oscar

Fitch-Roy

University of Exeter

Page 30: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

UK overview

• RED target: 15% by 2020, ~30% electricity

• 2014: 7% of final energy consumption, electricity 17.8%

• Erosion of broader renewables policy since the Conservative Government elected in May 2015

• Onshore wind and large (5MW) pv

• Offshore wind

-

5,000

10,000

15,000

20,000

25,000

30,000

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Renewables capacity (MW)

Onshore wind Offshore wind

Marine energy (wave and tidal stream) Solar photovoltaics

Small scale hydro Large scale hydro

Landfill gas Sewage sludge digestion

Energy from waste Animal Biomass (non-AD)

Anaerobic digestion Plant Biomass

Progress against the

RED

Page 31: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Key features: technology pots

• Technologies are divided into 3 Pots

• Established, less established and biomass conversion

• Maximum strike prices set for each of the technologies (Administrative Strike Prices – ASPs)

• Annual funds set out for the Pots• Maximum available funding for each

of the Pots in each of the delivery years

Administrative strike price (£/MWh) 2014/15 2015/16 2016/17 2017/18 2018/19

Pot 1 (established)

Onshore Wind (>5 MW) 95 95 95 90 90

Solar Photo-Voltaic (>5MW) 120 120 115 110 100

Energy from Waste (with CHP) 80 80 80 80 80

Hydro (>5 MW and <50MW) 100 100 100 100 100

Landfill Gas 55 55 55 55 55

Sewage Gas 75 75 75 75 75

Pot 2 (less established)

Offshore Wind 155 155 150 140 140

Tidal Stream 305 305 305 305 305

Wave 305 305 305 305 305

Advanced Conversion Technologies

(with or without CHP)

155 155 150 140 140

Anaerobic Digestion (with or without

CHP) (>5MW)

150 150 150 140 140

Dedicated Biomass (with CHP) 125 125 125 125 125

Geothermal (with or without CHP) 145 145 145 140 140

Pot 3

Biomass Conversion 105 105 105 105 105

Budget (£million)Delivery Year

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21

Pot 1 (established) 50 65 65 65 65 65

Pot 2 (less established) - 155 260 260 260 260

Total 50 230 325 325 325 325

Page 32: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Key features: auction process

• Bids are stacked according to price (rather than technology or delivery year)

• Cheapest strike price bid selected first

• Projects rejected if costs will exceed the budget in any of the relevant allocation years

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/302725/af_event__9_april_slides.pdf

Page 33: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Efficiency

= Cost-effective support through competition

• Final strike prices lower than ASPs

• But ... emphasis on offshore wind – the most expensive option

EfW with CHP, 94.75

Onshore wind, 688.55

Solar pv, 38.67ACT, 62

Offshore wind, 1162

CfD contracts signed (MW)

Pot 1 technologiesPot 2 technologies

0

20

40

60

80

100

120

140

160

On

sho

re w

ind

(p

ot

1)

Sola

r P

V (

po

t 1

)

On

sho

re W

ind

(p

ot

1)

AC

T (p

ot

2)

Off

sho

re w

ind

(p

ot

2)

EfW

wit

h C

HP

(p

ot

1)

On

sho

re w

ind

(p

ot

1)

AC

T (p

ot

2)

Off

sho

re w

ind

(p

ot

2)

2016-17 2017-18 2018-19

Strike price

ASP

Page 34: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Effectiveness

• Available budget underspent in all years

• PV suffered ... and following policy changes has no choice about participating in the CfD process (rather than the RO)

• Financial/contractual milestones at the end of March 2016 – will be able to judge progress towards delivery

• May be three more allocation rounds before 2020

• At least one for just Pot 2?

-£50,000,000

£-

£50,000,000

£100,000,000

£150,000,000

£200,000,000

£250,000,000

£300,000,000

£350,000,000

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21

Budget Total Spend

Page 35: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Lessons learnt

• The auction was at least as political as it was technical/economic

• ‘Effectiveness’ depends on allocation to pots

• ‘Success’ depends on who you ask:

• DECC pleased that there’s lots of capacity

• … so are offshore wind developers

• Small generators (especially pv) are not so happy

• Blue print …?

• Banding to reflect technology development, rather than pots?

• But a generic blue print is pretty meaningless?

Page 36: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

International Experiences with wind auctionsSpain

Pablo del Río

Consejo Superior de Investigaciones

Científicas (CSIC)

Page 37: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Spain

Quick overview

• Year of introduction: 2015.

• Key country specifics:

• Macroeconomics: deep recession, high unemployment rates.

• Particular features of the electricity system:

• Overcapacity

• Virtually an energy island (interconnection 6,300 MW, 5.8%).

• Tariff deficit.

• Retail prices for households above EU average (below average for industrial consumers). Both increased two-fold in the last decade.

• Decreasing wholesale prices.

• Diversified electricity generation mix: coal (16.6%), fuel (2.4%), CCGT (9.2%), nuclear (20.5%), wind (18.6%), solar (5%), hydro (12.8%), rest of renewables (4.5%), cogeneration (10.5%).

Page 38: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Spain

Quick overview

• 2020 target: 20% of gross final energy consumption.

• Compliance with Directive targets (on track):

• RES-share in 2013: 15.4%

• Interim target 2013/2014: 12.1%.

• Technology focus to achieve the RES target: wind, hydro, solar PV, CSP (NREAP, Plan for the Development of the Electricity Transport grid).

• Support policy

• 1998-2012: FIT, FIP.

• 2010: Cost containment regulations.

• 2012: Moratorium + generation tax

• 2013-2014: new regulatory package.

Page 39: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Spain

Quick overview

• New regulation:

• Abolishment of FITs and FIPs

• Replaced by a sum to be allocated based on the plant’s installed capacity to compensate for investment-related outlays.

• RES operators are guaranteed a reasonable rate of return (RRR): 7.5%. It can be revised every 6 years.

• Support for the difference between Pw and RRR

• Each installation receives the market price plus the specific remuneration of the plant type:

• Remuneration for the investment (Rinv): a payment per kW that allows installations to recover those investment costs which cannot be recovered by the sales of electricity in the market.

• The specific remuneration for the operation (Ro): a payment per kWh for those technologies whose operational costs are above the average wholesale electricity price.

Page 40: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

What are the most important functions and design elements of the scheme and what were the background considerations?

• What makes its design specific...

• Bidders bid on a discount on the standard value of the initial investment of the reference standard plant (RSP).

• No schedule on future auctions.

• Volume: 500 MW wind.

• Static, sealed bid, price-only, uniform pricing.

• Multi-item: No project-specific, no location-specific auctions.

• Price limits: 0-100% discounts.

• Lax prequalification criteria: economic guarantees (20€/kW)

• Deadline: 4 years.

• Administrative costs: covered by successful bidders (0.17€/kW).

• No actor, size or geographical diversity requirements.

Page 41: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Results of the auction

Page 42: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Results of the auction

Page 43: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Efficiency / support costs

• Support costs minimised.

• Low support levels likely lead to low-cost

projects.

Page 44: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Effectiveness

• All volume auctioned has been allocated.

• 2.5 GW submitted (10GW in the pipeline...).

• Too early to tell whether the auction will be effective.

• Very low bids leading to non-realisation of projects?

• Reasons for low bids: moratoria leading to many MWs

in the pipeline, Kamikazes?, expectations on non-zero

cut-off point.

• Concerns on concentration on outsiders.

• Will the auction scheme contribute to compliance with

Directive targets?

Page 45: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Other criteria

• Dynamic efficiency:

• Solar PV, CSP, small hydro and biomass not included in the scheme.

• Impact on innovation? small market creation, uncertainty (6-year revisions) and low profit

margins. High competition between equipment suppliers.

• Low impact on supply chain for the technologies?

• Actor diversity and social acceptability.

• Winners being mostly small actors, outsiders to the wind energy sector.

• Limited participation of foreign firms.

• Unknown geographical diversity.

• Social acceptibility: low support costs vs. low deployment??

• Compatibility with market principles and integration

• Winning bidders participate in the wholesale market.

• Distributional effects

• Winners and losers:

Page 46: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Lessons learnt

• Too early to tell on consequences??

• Context-specific conditions: large pipeline due to the

moratoria, overcapacity, tariff deficit, energy island…

• Participation of small actors.

• Low volumes being auctioned + lax prequalifiquation

requirements encouraged

• competition.

• the participation of outsiders. Kamikazes?

effectiveness at risk?

• Lack of an auction schedule: uncertainty for investors.

Page 47: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

International Experiences with wind auctionsGermany

Fabian Wigand

Senior Consultant

Ecofys

Page 48: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Germany: Considerations on the planned German wind auctions

Process overview

• Part of the overall reform process of the Renewable Energy Act

(EEG 2016)

• Design has been consulted in summer 2015 and subsequently

reworked; latest draft was published early 2016

• Law is planned to be ratified by summer 2016; first auction in

May 2017

Key design elements

• Technology-specific (separate auctions for PV and offshore

wind)

• Pay-as-bid pricing rule, multiple-item static auction

• Maximum price

• 3-4 auction rounds per year

Page 49: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

7 8+4

Realisierungsfrist

2 3

Permit

1 65

Payment 20 a

Effectiveness: auction late in planning process to ensure project realization

BImSchG

Award

Planning Constr. Operation

Realization deadline2 a

Prequalification

Source: Ecofys 2015 based on FA Wind 2014

Advantages Disadvantages

+ Few project risks after BImSchG

+ Credit-rating of bidder has smaller

impact than on bid-bonds

+ Easier to monitor target fulfillment

+ Accepted by industry

− High (sunk) costs for long and risky pre-

development

− Could be prohibitive and reduce the level

of competition

Year

High material prequalification criterion to ensure high realization rate &

target fulfillment: Permit notification under Immission Control Act (BImSchG)

Page 50: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Realization rate is increased through 30€/kW bid bond

Realization period

> Projects need to be realized within 24 months, otherwise gradual penalty

> After six months the full penalty needs to be paid; grace period can be

prolonged if delays are due to lawsuits against the BImSch permit

Expulsion from

auction

Return of bid-

bond

Return of bid-bond and

start of support payments

Partial penalty

Full penalty

Ensuring intention to realize Ensuring realization rate

Ensuring likeliness that projects are realized

Awarded

bid?

Realization on

time?

Delayed

realization

Bid-bond

submitted?

Page 51: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Wind auction volume set depending on build-up of other technologies

• Auctioned wind volume depends on EEG formula: onshore wind used as

a gap filler to reach target of 45% RES by 2025

• Wind volume will depend on build-up of other technologies

• In the first year ~ 2.900 MW (gross) / year might be auctioned

• Min. volume of 2 GW guaranteed to ensure investor security

Question for discussion: How can project developers react to seasonal

variations in auction volume and project development and adapt their

project pipeline?

Page 52: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Efficiency – effect of the reference yield model (REM, „Referenzertragsmodell“)

Aim of reference yield model

• Reduce windfall profits of

projects with better wind

conditions

• Ensure (to a limited extent) that

projects will be regionally

distributed over Germany to limit

transmission expansion needs

and ensure steady wind

production

Site quality in % of the reference yield

EEG tariff w/o

REM

Pro

duction

costs

ct/kW

h

80% 100% 130%

IRR EEG tariff with

REM

80% 100% 130%

The reference yield model in the EEG 2014

Page 53: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Efficiency - changed role of referenceyield model in auction

Adaptation of reference yield model for the auction scheme:

• Reference yield model defines minimum bid per yield class

• Bidders bid on 100% reference site, irrespective of their actual wind

conditions (so bids based on IRR expectations, development costs etc.)

• Final tariff is then determined with correction factor based on local wind

conditions

• Thereby competitive site locations with different wind conditions are

homogenized

Correction

factor

Reference yield based

on wind conditions

Page 54: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Actor diversity is a political goal in Germany, right balance is complex

Importance of actor diversity in Germany

• Actor diversity is a political goal for the acceptance of energy transition.

• Effectiveness and efficiency: avoiding market concentration to ensure

competition, easier pre-development of sites through local engagement

Difficulties for small actors in auctions

• Production costs are structurally different, but the result is comparable.

• Risk of not being successful and uncertainty on strike price problematic:

limited capacity to spread risks in small project portfolio.

Principles in auction design

• Tackling actor diversity through simple and transparent auction design

• Preferential treatment for small actors should be limited (no impact on

rest of auction design, avoid misuse)

Page 55: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Preferential treatment for citizen cooperatives

• In Germany preferential treatment in auction scheme (no exemption from

auction as in other countries)

• Pref. treatment only for citizen cooperatives1

• Pref. treatment with lower mat. prequalification req.: No BImSch

permit but proof of secured site, wind measurement. Split of bind bond2

• For other small actors new business models and cooperation may provide

alternatives for preferential treatments, e.g.

• Large and small project developers cooperate - large actors can

spread risk better over portfolio. small actors have access to sites

• Component manufacturers offer their creditworthiness for bid bonds

to smaller actors as a new service

• Project developers sell pre-developed project earlier, i.e. before

the participation in the auction

1. Citizen cooperatives = at least 10 local natural persons with together 51% of voting rights, max 1 project per year.

2. Bid-bond: 15 EUR/kW when submitting bid, 15EUR/kW two years after receiving permit)

Page 56: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Lessons learnt so far

• Finding the right balance btw. policy goals such as target fulfillment,

competitive setting of support tariffs, and actor diversity is complex

• High degree of stakeholder involvement from the beginning

• Constant learning between actors: during the debate, relative

importance of certain issues shifted (e.g. role of prequalification

requirements in comparison to pricing rule)

• Pilot scheme of ground-mounted PV helped prepare the Ministry, the

auctioning authority and associations for functioning of the new scheme

• Ongoing debate on actor diversity, regional quotas, and how to set the

auction volume

Page 57: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Back-up: Options for preferential treatment of particularactors

Supporting measures outside of the auction

Partial compensation for development costs in case

of lost bids

Consultation and quality control of bids before

submission

Preferential treatment within the auction

Different prequalification criteria

Quota or bonus

Different pricing rule (uniform pricing for small

actors)

Exception from the normal auction

Administrative support tariff

Non-competitive segment with access to the strike

price

Options for preferential treatment

Page 58: Wind Onshore Auctions Current Developments in Europe · Wind Onshore Auctions Current Developments in Europe AURES wind onshore stakeholder workshop March, 15th 2016 Berlin. Agenda

Thank you!

Communication and web:

Michael Minter

Head of Secretariat

Kattesundet 4, 3rd floor

DK-1458 København K

[email protected]

+ 45 26 16 64 14

Project coordination:

Lena Kitzing

Researcher

Frederiksborgvej 399

DK-4000 Roskilde

[email protected]

+45 24 65 90 64

Poul Erik Morthorst

Professor

Frederiksborgvej 399

DK-4000 Roskilde

[email protected]

+45 46 77 51 06

Visit our website:

www.auresproject.eu

Follow AURES on Twitter

@AURESproject