ENVIRONMENTAL
DIMENSION OF THE EEP III.
Filip Černoch
cernoch@mail.muni.cz
Energy policy of the EU
Environmental dimension of EEP
 Climate change – EU aim to develop a low-carbon economy
 Measures primarily to reduce GHG emissions
 EU ETS – covers 40% of EU emissions
 individual targets of MS for the non-EU ETS sectors (housing,
agriculture, transport, waste) – cover 60% of EU emissions
 CCS
 Measures to transform the energy sectors
 RES
 Energy Efficiency
 Research and development, new technologies
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Deployment of RES
 Why should RES be part of an any energy mix?
 Why should RES be supported (subsidized)?
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Deployment of RES
 Why should RES be supported (subsidized)?
 Experience curve
 LCOE
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Deployment of RES
 1) Inception phase – creates a climate allowing investment in early projects
 2) Take off phase - managing support policy costs
 3) Consolidation phase – to integrate RES in the system (RES can no longer be
considered in isolation due to their impacts across the whole electricity system
that needs to acomodate them).
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Inception phase
 1997 – indicative target of 12 % RES in gross domestic consumption of the EU by
2010
 2001 – Directive 2001/77/ES – indicative targets for individual states to 2010
 2009 – Directive 2009/28/ES – aim 20 % by 2020, 10 % in transport sector (Energy
and climate package). With indicative targets for 2013.
 = to save 600 – 900 million tons of CO2/y, 200-300 million tons of oil/y, lowering of
import dependency, industry….
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Inception
phase
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Source: thinkcarbon.wordpres.com
Take off phase: subsidies
Feed in tariff
 21 EU states, provides a fixed rate of subsidy for fixed
period. Cover all a producer’s costs and profit, essentially
replace the market.
 Instrument of choice for big RES players (Germany,
Spain). Basic rule is that government sets the price, market
(investor response) sets the quantity, but many recent
amendments to control costs.
 = Very successful in triggering large deployment of
RES, but at a high cost.
 Could be more cost-effective – greater security around
income to investors, therefore reducing financial costs.
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Take off phase: subsidies
Feed in tariff
 They could be tailored (and therefore support)
different technologies.
 But:
 difficulty of setting the right price – too high and
money is wasted, too low and no deployment. Once the
price is set, it is hard to make radical changes without
breaking contracts
 they insulate the RES producer from the market (a
limited compatibility with internal energy market)
 Grid priority - the grid must take RES electricity
first.
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Take off phase
 „A solar RES case“ – Spain, Italy, Czech Republic
 Generous FiT tariffs in place, volumes of deployment not
controlled or capped and support mechanisms not
sufficiently responsive to rapidly falling costs.
 PV developers earn high rates of return on their capital –
overheated markets and rapid rises in support costs.
 Policy makers react by dramatically reducing tariffs and
introducing retrospective measures to recouple some of
the costs – detrimental impact on investor confidence in
the government.
 Also impact on the other RES in given country.
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Czech Republic
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Source: ERÚ
Year Installed capacity (in MWe)
2006 0,2
2007 3,4
2008 39,5
2009 464,6
2010 1959,1
2011 1971
2012 2086
Installed capacity of PV
Estimated costs in Czech Republic – 1,76 bn. euro in 2013.
Take off phase: subsidies
Quota obligations
 Power plant operators receive certificates for their green
energy to sell to the actors (distributors) obliged to fulfil
the quota obligations.
 Selling the certificate provides an additional income on top
of the market price of elektricity.
 Quota obligations with tradeable certificates. Here
government sets the quantity, the market the price.
 Compatibility with market principles, competitive price
determination.
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Take off phase: subsidies
 High risk premiums – increase policy costs.
 Technology neutral way – only the most cost-effective
technologies supported (windfall profits for the lower cost
technologies).
= Quota systems with tradable certificates tend to be cheaper,
but favour mature technologies like onshore wind and
biomass.
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Take off phase
Feed-in-premium (green bonuses)
 Plant operators have to sell the elektricity at the market
 To receive a fixed payment for each unit of elektricity
generated independent of the market price of elektricity
 More market oriented, higher risk for producer
(compensated by the level of the premium)
 Used sporadically, as a second option to suplement FiTs
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Subsidy schemes
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RES in EU´s electricity generation
 Growth from 14,9% to 26,1% between 2005 and 2013. Due to the
increase in non-hydro RES (4,4% - 14,5%).
 17 MS producing more than 20% elektricity from RES, 6 MS more
than 50%.
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Results so far…
 Final consumption: elektricity 26,1%, heat 15,6%, transport 5,2%.
(eurostat). Overall final consumption 14,1% in 2012. (from 8,7% in
2005).
 Overal investments in RES around 40 bn. euro annualy.
 Employment in RES related sectors – 1,5 million in 2010.
 Reduction of costs of key PV and wind technology.
 2050 roadmap to a low-carbon economy edvisage a strong growth
in RES: 55% - 97% in 2050.
 2030 targets: common EU target of 27%, not individual targets.
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Results so far…
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Source: Ragwitz
Consolidation phase – example of Germany
 Die Energiewende – to limit the fossil fuels in favour of RES, later on the phase
out of nuclear energy added.

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Consolidation phase – example of Germany

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1st problem – cost of subsidies
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1st problem – cost of subsidies
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1st problem – cost of subsidies
 Sigmar Gabriel, federal minister for economic affairs and energy: “we have reached
the limit of what we can ask of our economy”.
 In 2013 German consumers paid €21,8 bn in RES subsidies.
 FiT for new installations are to be reduced: from 17 to 12 cents/kWh (for
onshore wind power to maximally 9 cents/kWh).
 Practice of excluding large corporations from burden sharign is to be restricted to
operations exposed to forein competition.
 But – first instalations (in favourable nature conditions and receptive business
environment) in Europe and USA competitive without subsidies.
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2nd problem – grid expansion
 To redistribute the renewable energy from the wind and solar farms in/at the
Nord Sea, about 2600km (4600km) of grid expansion need to be realized.
 In the beginning of 2014 – 322km completed – protests from regions ensuing
landscape degradation with no local economic benefits.

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2nd problem – grid expansion

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3rd problem – unreliability of RES
 Common interconnected internal market
 Back-up capacities of conventional sources

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