RES in the EEP V Filip Černoch černoch @,mail.muni. cz center for energy studies Environmental (climate) 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 center for energy studies What are RES? • Renewable energy is energy derived from natural processes that is replenished at a higher rate than it is consumed. • Solar, wind, geothermal, hydropower, bioenergy, ocean power. • Variable/non-dispatchable (wind, solar) vs. dispatchable (hydro, biomass/biogas) RES. center for energy studies Deployment of RES • Why should RES be part of any energy mix? • Why should RES be supported (subsidized)? center for energy studies Drivers for deployment Energy security — RES are spread globally, in contrast to the conventional (fossil) fuels that are more geographically concentrated. (Import savings €16bn in 2015, expected to be €58bn in 2030). Environmental concerns - low environmental impact (vary according technology) — GHG emissions (expected savings of 600-900 million tons of C02), local pollutants. Strategic economic development (rural development, agriculture sector, high-tech manufacturing — 30% of RES patents in the EU). Energy access through distributed or off-grid sollutions —> decentralized energy system. Diversification of energy sources. center for energy studies Development of the targets 1997 — indicative target of 12% of energy consumption by 2010. 2001 — indicative target of 21% for the electricity sector by 2010. 2020 aims (Energy and climate package, 2009) • To reduce greenhouse gases by at least 20%. • To increase the share of renewable energy (!) in the EU's energy mix from 5% in 2005 to at least 20% of consumption in 2020. (Broken down to binding national targets). With indicative targets for 2013 and 10% in transport sector goal (later limited on biofuels from energy crops grown on agricultural land limited to 7%). = RED 2009/28/EC. • To improve energy efficiency by at least 20%. energy studies Nationa targets Source: thinkcarbon.wordpres.com Member Stale Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta The Netherlands Poland Portugal Romania Slovak Republic Slovenia Spain Sweden United Kingdom Share of renewables in 2005 Share required 23 3% 34% 22% 13% 94% 16% 29% 13% 6.1% 13% 17% 30% 18% 25% 285% 38% 103% 23% 5.8% 18% 6.9% 18% 4 3% 13% 31% 16% 5.2% 17% 32 6% 40% 15% 23% 0.9% 11% 0% 10% 24% 14% 7.2% 15% 20 5% 31% 17 8% 24% 6.7% 14% 16% 25% 87% 20% 39.8% 49% 13% 15% Trade in renewables • Cross-border trading —> trading of RES certificates (Certificates of origin). Suggested in 2001, 2007 (and again in 2015 as a part of Energy Union plan). • For economy of scale • For both technical and economical efficiency • Failed due to different support schemes with different level of support (esp. in FiT countries) in EU MS and political concerns of losing control. • Statistical swaps between MS allowed • Two or more MS may combine targets, or support schemes (Sweden+Norway). center for energy studies Feed in Tariffs • Majority of the 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). Government sets 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. center for energy studies Feed in Tarrifs • 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. center for energy studies 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. center for energy studies 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. center for energy studies 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. center for energy studies Subsidy schemes Renewable support schemes in the European Union, 2013 feHJ %» Feed-in tariff Premium Quota Source: EU submission, 2013. center for energy studies Costs of RES support ,A solar RES case" — Spain, Italy, the Czech Republic... 1 Generous FiT tariffs in place, volumes of deployment not controlled or capped and support mechanisms not sufficiendy responsive to rapidly falling costs. * PV developers earn high rates of return on their capital — overheated markets and rapid rises in support costs. 1 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. center for energy studies Czech Republic - Installed PV capacity Source: ERU 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 center for energy studies Final Energy Consumption in the EU28 (2015) RES electricity grew by 1.4 percentage points per year between 2004 - 2014, RES heating and cooling by 0.8 percentage points and transport 0.5 percentage points. ENERGY STUDIES Actual and approximated RES shares in the EU-28 60 50 - 40 -H ■ 30 - 20 10 - SE Fl LV AT DK HR PT EE LT RO SI BG IT ES EL FR CZ DE HU SK PL IE BE CY UK MT N L LU 2005 2015 •Proxy 2016 RED target 2020 Mtoe RES-E 350 300 250 - 200 150 100 50 0 Electricity generation from all sources l l I l l l l l l l l l I I l l 2005 2006 2007 2003 2009 2010 2011 2012 2013 2014 2015 Proxy 2017 2013 2019 2020 2016 • •• ELI-28 NREAP ■ Solid bio mass Solar photovoltaic ■ Onshore wind (normalised) Offshore wind (normalised) Hydropowerexcl. pumping (normalised) Geothermal Concentrated solar power Bio liquids (certified) Biogas Tidal, wave and ocean energy EU-28 renewable heating and cooling by source Mtoe 700 -. 600 - 500 - 400 - 300 - 200 '00 - All fuel consumed for heating and cooling -1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Proxy 2017 2018 2019 2020 2016 EU-28 NREAP Bioliquid5 (certified) Geothermal Solar thermal Biogas Renewable energy from heat pumps Solid biomass Renewable transportation by source Mtoe 350 - 300 250 A 200 150 A 100 50 A Fuel used in transport i-1-1-1-1-1-1-1-1-1-1-1-1-r i-1 2005 2006 2007 2003 2009 2010 2011 2012 2013 2014 2015 Proxy 2017 2018 2019 2020 2016 «« EU-28 NREAP ■ Other biofueIs (certified] ■ Biogasoline (certified] Biodisels Biofuels in transportation Biodiesel • Vegetable or animal fat-based oil, produced by transesterification. Used in diesel engines (also for heating). • Rapeseeds, soybeam, palm oil, sunflower, peanut, hemp; waste vegetable oil; animal fats; Bioethanol • Ethanol produced by fermentation. • Sugar and starch based feedstock (corn-maize, sugarcane). center for energy studies Biofuels in transportation • Global production of conventional biofuels at 136,5 bn. litres — around 4% of energy used in transportation. • Double digit global output prior to 2010 slowed to about 4% y-o-y over 2010-2016 (economic and structural challenges, policy uncertainty in key markets). Growth of around 3% a year anticipated over the next five years. • Ethanol production concentrated in a handful of countries (USA, Brazil, EU, China, Canada, Thailand, Argentina, India), biodiesel production more evenly distributed (US, Brazil, Germany, Argentina, Indonesia, France, Thailand, China, Canada...). • Growth expected in China (10% blend goal), Latin America, Asia. center for energy studies Global biofuels production and share of world road transport fuel demand 180 ........................................................ 5% 1 2006 2008 2010 2012 2014 2016 ■ United States ■ Brazil ■ Europe RoW % biofuels share center for energy studies Biofuels production, consumption, and share of RES in transport energy use in selected regions, 2017 5% 10% 15% 20% 25% United States Indonesia Other Southeast Asia 15 30 Ethanol ■ Use Supply Biodiesel ■ Use Supply Share of renewables (top axis) 45 60 75 Billion litres per year center for energy studies Biofuels in transportation Demand driven by • Exemption from excise duty on fuels. • Mandates stipulating blending. • Agriculture support. Biofuels in transportation Controversy due to the • environmental impact - The other conventional biofuels deliver savings under 40% compared to fossil fuel alternative (plus land use - soil acidification, fertilizer use, biodiversity loss, toxicity of agricultural pesticides). Also growing global trade. • impact on food prices — crisis in 2005-2008. Corn prices almost tripled, wheat increased by 130%, rice 170%. Traditional biofuels compete with food for the same arable land. Peak probably combination of high prices of oil, poor harvests, speculations and biofuels. center for energy studies Impact on environment Advanced bjofuels 1,1. i-1-r .a o LA E ■5 a; CD O tyl Ü Demonstration Conventional biofuels I I T-r I =5 si ě ^ It! Z] "P. o £ Commercial iA o m Gasoline replacement Diesel replacement Natural gas replacement center for energy studies World biomass shipping today Source: Based on Bradley et at., 2009. center for energy studies Future of biofuels Dependent of successful development of advanced biofuels -fuels produced from non-food crop feedstocks, with significant life-cycle GHG emissions savings compared with fossil fuel alternatives, and which do not direcdy compete with food and feed crops for agricultural land or cause adverse sustainability impacts. Bioethanol Diesel-type biofuels Other fuels and additives Biomethane Hydrogen Advanced biofuels Basic and applied R&D Demonstration Early commercial Conventional biofuels Commercial Cellulosic ethanol I Biodiesel from microalgae; BtL'-diesel Hydrotreated Sugar-based hydrocarbons (from gasification + FTJ) vegetable oil Novel fuels (e.g. furanics) Biobutanol; DMEJ; Pyrolysis-based fuels Methanol Ethanol from sugar and starch crops Biodiesel (by transesterification) All other Gasification novel routes with reforming _I_ Biogas (anaerobic digestion) Biogas reforming Liquid biofuel Caseous biofuel 1, Biomass-to-liquids; 2. Fischer-Tropsch; 3. Dimethylether; 4. Bio-synthetic gas. CENTER FOR bNtRGY STUDIES Biofuels - imports and move to the 2nd generation • In 2014, up to 10% of bioethanol (wheat, maize, sugar beet) and around 26% of biodiesel (rapeseed, waste oils, palm oil) consumed in the EU was imported — Malaysia for biodiesel, Guatemala, Bolivia, Pakistan, Russia, Peru for bioethanol. • Non-EU feedstock - bioethanol (up to 10%) from Ukraine (maize, wheat), Canada (wheat), Russia and Moldova (barley, ray), Serbia (sugar beet). Biodiesel (up to 40%) Indonesia and Malaysia (palm oil), Brazil and the US (soybean). • Share of biofuels from wastes, residues, ligno-cellulosic and non-food cellulosic material in the EU's bio fuel mix has increased from 1% in 2009 to 23% in 2015. (Sweden, the United Kingdom, Germany). center for energy studies Biofuel targets • 14% share of renewable energy in the transport sector by 2030 • A non-food based biofuels blending target of 3.5% by 2030 (according to the list of second-generation biofuels that are eligible to receive subsidies). • Implementation of additional sustainability criteria for biofuels limiting imports of feedstock with risk of deforestation. • Conventional biofuels in transport at maximal level of 3.8% in 2030. (7% in 2021). • Low emissions fuels (RES electricity, advanced biouels) in transport 6.8%. center for energy studies Estimated effect on fossil fuel consumption in the EU 28 Mtoe 1 600 1 400 1 200 1 000 800 600 400 200 1 325 1 336 1 321 1 317 1 325 1 329 1 304 1 290 1 198 1 234 1177 1156 ! 065 1 084 1 053 -1-1-1-1-1-1-1-1-1-1-1-1 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Proxy 2016 Fossil fuel consumption Fossil fuel consumption [renewables frozen at 2005 levels) Estimated the EU 28 gross effect on GHG emissions in MtCO.e 5 600 5 400 5 200 5 000 4 800 4 600 4 400 4 200 5 345 5 362 5 351 5 345 5 333 5 266 A £>6' 4 910 4 304 4 759 4 693 4 599 4 g99 4 906 4 424 4 452 4 423 4 000 1-1-1-1-1-1-r 2005 2006 2007 2003 2009 2010 2011 1-1-1-1-1-1 2012 2013 2014 2015 Proxy 2016 Total greenhouse gas emissions [renewable energy frozen at 2005 levels) Total greenhouse gas emissions [including international aviation) Integration of RES to the system Electricity generation evercapacity in Europe, downward pressure on wholesale power prices. Capacity mechanisms for sources providing stability and reliability (back-up). Different support schemes distort the competition on the markets (subsidies national + related to production). Missing infrastructure — grids, back-up capacities. Priority dispatch. Increasing public costs - In 2012, more than €40bn, in 2013 €50bn. center for energy studies Integration of RES to the system RES gradually considered 'mature technology' with significant level of penetration. • 2014 - Guidelines on State aid for environmental protection and energy 2014-2020. • From 2016, in new RES schemes, FiT should be replaced by market premiums for the new projects. • From 2016, new RES need to be responsible for selling their electricity into the market (instead of TSO, DSO to do that). They should be responsible for balancing (to encourage them to predict their production). • From 2017 developers should compete for new subsidy money at auction. •Winter package 2016 - Priority dispatch only for installations up to 500 kW (250 kW after 2026), existing generators, and innovative technologies. They are to be responsible for their imbalances. center for ■ energy studies S Tendering procedures for RES in Europe Integration of RES to the system Example of Germany: •PV from 9.2 to 5.7cts/kWh between 2015-2017. Bid bonds (deposit, €25-50/kW - 50 000 for 1 MW project); pre-qualification (local municipality's consent etc.); flexibility. —> 100% of bids realized. • 900 MW wind farm 'He Dreiht' in the Nord Sea without subsidies (EnBW). center for energy studies 2030 aims 2014-2016 — A policy framework for climate and energy in the period from 2020 to 2030. • A binding target of 40% reduction of emission (below the 1990 baseline) — fully domestic reduction. • A binding target for an average renewable share of total energy consumption of 27%, for the whole EU. No national targets. • An Indicative target of a 27% increase in the EU energy efficiency, no national targets. • + reforms of EU ETS • + interconnection of isolated energy markets of the Baltic states, Spain, Portugal. center for energy studies Sources IEA (2014): Energy Policies of IEA Countries — The European Union Yeo, S.(2017): EU energy package: What it means for coal, renewables and efficiency EC (2017): Renewable Energy Process Report CEER (2018): Tendering procedures for RES in Europe: State of play and first lessons learnt. IEA: World Energy Oudook 2018 center for energy studies