Environmental dimension of the EEP – Renewable
sources of energy and energy efficiency
Filip Černoch
cernoch@mail.muni.cz
Energy policy of the EU
Environmental dimension of EEP
Climate change – EU aims 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
Deployment of RES
• Why should RES be part of any energy mix?
• Why should RES be supported (subsidized)?
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 to the system (RES
can no longer be considered in isolation due to their impacts
across the whole electricity system that needs to acomodate
them).
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.
(2014 – A policy framework for climate and energy in the
period from 2020 to 2030 - 27% target by 2030).
Inception
phase
8
Source: thinkcarbon.wordpres.com
RES in final energy consumption
Take off phase – Feed in Tariffs
• 21 EU states, provides a fixed rate of subsidy for fixed period.
Cover all producer’s costs and profit, essentially replacing the
market.
• Instrument of choice for big RES players (Germany, Spain).
Governmens set the price, market (investor response) sets the
quantity.
• Very successful in triggering large deployment of RES, but
at a high cost.
• Greater security around income to investors, therefore
reducing financial costs.
Take off phase
• FiT could be tailored to 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.
Take off phase: 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 electricity.
• Quota obligations with tradeable certificates. Here government
sets the quantity, the market the price.
• Compatibility with market principles, competitive price
determination.
Take off phase: Quota obligations
• High risk premium – increases policy costs.
• Technology neutral way – only the most cost-effective
technologies supported.
= Quota systems with tradable certificates tend to be
cheaper, but favour mature technologies like onshore
wind and biomass.
Take off phase: Feed-in Premium
• 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.
Subsidy schemes
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.
Czech Republic – Installed PV capacity
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
Estimated costs in Czech Republic – 1,76 bn. euro in 2013
RES in the EU
18
Results so far…
19
Source: Ragwitz
Consolidation phase - costs
Consolidation phase - costs
• Sigmar Gabriel, federal minister for economic affairs and energy
of Germany: “we have reached the limit of what we can ask of our
economy”.
• In 2013 German consumers paid €21,8 bn in RES subsidies.
• FiTs 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 sharing 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.
Consolidation phase – grid expansion in
Germany
• 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.
Consolidation phase –
unreliability/intermitency of RES
• Common interconnected internal market.
• Back-up capacities of conventional sources.
•
Consolidation phase – impacts on wholesale
prices
Consolidation phase – impacts on wholesale
prices
Conflict with conventional sources – capacity market?
• E.ON in France is to close a gigawatt of coal-fired capacity
• GDF Suez to mothball three of its gas turbines.
• E.ON in Germany looses money in its gas turbine in
Irsching.
• Norway´s Statkraft is closing its 510 MW gas turbine in
Landesbergen.
• In Czech Republic a brand new gas power plant in Počerady
is mothballed.
Latest developments
Guidelines on State aid for environmental protection and
energy 2014 – 2020.
• Positive impacts of the State aid (on environment) vs. effects
on trade and competition
• Effort to limit (phase-out) subsidies. In transitional period FiT
premium, balancing responsibility, auctioning.
• Vs. Germany (small sources).
Winter Package
• No priority access.
• Capacity markets.
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
Energy efficiency (conservation?)
• Energy supply per capita: 3,2 toe vs. 4,5 toe of the IEA average
(-8,2% since 2002).
• Energy intensity: 0,12 toe/USD 1000 vs. 0,14 toe/USD 1000
of the IEA average.
• TFC: 1139,2 Mtoe, -4,1% since 2002.
• Energy and climate package 2009: an energy consumption is to
be cut by 20% by 2020 relative to the BAU scenario, nonbinding
target (cap of 1483 Mtoe in 2020).
• Limited consumption of energy + increased energy
efficiency.
• The only one that the EU is not on track to meet. (18-19%
by 2020).
Energy intensity in the EU and in selected IEA
MS
Energy efficiency intstruments
• EU instruments.
• Products (energy labeling, eco-design).
• Transport (measures to cut vehicle emissions).
• Buildings (40% of all energy in the EU is consumed in
building. Energy performance standards on new building).
• Public procurement (energy efficiency a criteria when govts
buy goods and services).
• National instruments.
• National plans with national measures.
Energy efficiency in the EU
•Limited achievements only due to:
• Relatively cheap energy (IEM).
• Limited impact of (sometimes expensive) measures.
• Rebound effect.
Energy Efficiency Directive 2012/27/EC
• Developed to reach 20% target savings.
• Binding measures, not bindig targets.
• MS are required to:
• Evaluate the situation in national heating and coolings
systems, suggest some cost-effective measures to improve
them.
• The same for gas and elektricity infrastructure.
• Oblige energy providers to achieve cumulative end-use
energy savings by 2020 equivalent to 1,5% of annual energy
sales over the period 2014-2020.
Energy Efficiency Directive 2012/27/EC
• Introduce the metering and billing of actual energy
consumption in all sectors.
• Prepare public procurement rules ensuring that central
governments purchase only high-efficiency producs.
• Large industry enterprises to carry out an energy audits at
least every four years.
• Buildings – new buildings and buildings under renovation to
be „nearly zero energy“ by the end of 2020. To improve the
energy performance of 3% of the total floor area of heated
and/or cooled buildings owned and occupied by the central
govt every year.
Energy efficiency
Sources
• IEA (2014): Energy Policies of IEA Countries – The European
Union