The Case for FeedIn Tariffs

1
The Case for Renewable Feed-In Tariffs EUEC
Energy Environment Conference Tucson,
Arizona January 28, 2008 Jeffrey H. Michel,
MSc. Ing.-Büro Michel Community of
Heuersdorf 04565 Regis-Breitingen
Germany jeffrey.michel_at_gmx.net
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Renewable energy investment potential does not
uniformly reflect implementation.

• Aggregate long-term investment prospects for
  wind, solar, and biomass power generation
• Ernst Young Global Limited
• Renewable Energy Country Attractiveness Indices,
  Third-Quarter 2007
• United States (highest overall renewables
  potential)
• Germany (upgraded due to proposed increased
  target of 45 of renewable power generation by
  2030)
• India (high wind index, subsidies and tax
  benefits)
• Spain (renewables legislation modeled after
  Germany)
• United Kingdom (downgraded due unlikelihood of
  10 renewable power generation by 2010)

3
Renewable power generation constitutes an
economic response to certain forseeable events.
4
Persistent impediments in the USA inhibit full
realization of renewable energy potential.

• No long-term national renewables policy
  inadequate planning and investment security
• Dependence on publicly funded incentives
  intricate application procedures and frequent
  budget limitations
• Net metering for grid power feed-in only
  partial recovery of equipment costs from energy
  production
• Highly population mobility (40 million address
  changes annually) home installations often
  impractical
• Anticipation of future price reductions
  renewable investments deferred
• Absence of greenhouse gas reduction targets no
  economic motivation for lowering emissions with
  renewables

5
Renewable energy implementation in the USA (e.g.
California) lags signficantly behind Germany.
California has set the goal to create 3000
megawatts of new, solar-produced energy by 2017.
www.gosolarcalifornia.ca.gov
California Energy Commission Between 1996 and
December 31, 2006, Californians placed 198
megawatts of PV systems on the roofs of their
homes, businesses, government, and schools.
In the same period, Germany had already realized
2700 megawatts of photovoltaic capacity using
enhanced tariffs for grid power feed-in.
6
Germany employs renewable energies to reduce
dependency on nuclear power and fossil fuels.

• Phase-out by 2021 of all nuclear power plants
  (30 of current generation) has been legislated
  to avoid another Chernobyl.
• 75 of Germanys energy supplies are imported.

Landscape devastation equivalent to excavation of
Suez Canal every 25 days results from mining 180
million tons of lignite per year for generation
of one quarter of Germanys electricity (150
TWh/a).
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Lignite covers 12 of German energy usage but
produces one fourth of national CO2 emissions.
8
Kyoto fulfillment in Germany is impossible
without additional reductions of carbon
emissions.
CO2 constitutes 87 of all German greenhouse gas
emissions. Five new lignite power plants entered
service in eastern Germany in 1997 2000,
ushering in an era of new coal plant construction
that must be reversed or offset.
9
Grid feed-in of renewable power supersedes CO2
emissions from fossil fuel generation.
German grid operators have been required since
2000 to buy electricity from renewable energy
generation on a priority basis at tariffs
prescribed by the EEG
German English Erneuerbare
Renewable Energien Energies Gesetz Act
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German grid feed-in legislation provides low-risk
investment coverage of renewable generation.

• EEG (Erneuerbare Energien-Gesetz)
• The Renewable Energy Sources Act revised in
  2004 www.erneuerbare-energien.de/inhalt/40066/363
  56/

The EEG insures fixed tariffs for unlimited
feed-in of electrical power into the national
grid from all types of renewable generation. The
tariffs, graduated according to technology and
placement, are guaranteed over a sufficient
period (usually 20 years) to insure cost
recovery. Feed-in payments are shared
equitably by all grid customers irrespective of
their own participation in renewable energy
production.
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Renewable Energy Grid Feed-In Tariffs guaranteed
for 20 years (except for hydro)
The degression factor reduces the feed-in tariffs
each year for new installations to stimulate
technological innovation and manufacturing
efficiency.
12
Solar power is made profitable by assured
investment payback.
13
Incceased feed-in tariffs compensate for higher
specific realization costs in smaller systems.
14
Guaranteed feed-in tariffs impose negligible
financial burdens on the ratepayer.

• The feed-in compensation paid to producers
  constitutes 3 of total power expenses invoiced
  to private German households (2006).
• Ongoing power rate increases are reducing the
  effective burden of the EEG.

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German feed-in tariffs are not subsidies, but
instead legally guaranteed prices for producers.

• Fixed feed-in tariffs consist of regular grid
  power charges enhanced by mandatory utility price
  supports. No government funding is employed.
• Price fixing (Preisbindung) likewise applies in
  Germany to books, sheet music, maps, tobacco
  products, taxi services, and prescription
  medicines to prevent commercial corporations from
  undercutting small retailers.
• Fixed prices provide enduring economic and social
  benefits detached from volatile market prices.

16
Renewable feed-in payments enable higher costs to
be avoided.
The emissions of fossil fuel power plants impose
a three to eightfold greater environmental burden
than renewable energy generation.
17
Grid feed-in power from renewable energies has
increased by 37 in only two years.
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The German feed-in law has become indispensible
to energy security.

• Wind and biomass generation now supply more
  electricity that hydropower due to the EEG.

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Solar power provides enduring cost and stability
benefits for the grid supply.
PV Daily Output Curve

• Solar power is delivered at the same time that
  power trading prices are highest, reducing
  outlays for power purchased from third parties.

Power Trading Prices Leipzig EEX
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Feed-in tariffs have made Germany the world
leader in solar power.
Photovoltaic Factories

55 of all solar power capacity worldwide is
located in Germany.
15 additional solar production facilities will
have been erected in 2007 2008.
The renewables industry employs over 235,000
people and uses more steel than shipbuilding.
21
Solar will have increased more than fourfold
between 2005 and 2010.
22
Large-scale photovoltaic systems in Germany are
growing in size and number.
23
Small-scale systems comprise over 90 of German
solar generation capacity.
Decentralized solar generation minimizes
transmission losses.
24
Feed-in tariffs in Europe are accelerating cost
convergence with conventional generation.
18 European countries and Turkey have adopted
renewable energy feed-in legislation.
Cost convergence once predicted for 2025 is
made more imminent by rising oil prices, CO2
trading, and the EEG.
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Reduced risk feed-in tariffs deliver lower prices
compared with renewable energy certificates.
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High numbers and diversity of EEG systems are
beginning to provide dispatchable power.

• In the German pilot Combined Power Plant project,
  1/10,000th of the national renewable power
  potential is currently being supplied by
  interlinked generation and storage installations.
  
• Initiator Renewable Energy Campaign Germany
• www.kombikraftwerk.de www.unendlich-viel-energie
  .de

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Renewable energies can replace all coal and
nuclear grid power in Germany.

• Current non-hydro renewable generation provides
  nearly one fifth of the power necessary to
  supersede coal and nuclear power in Germany.
• Existing hydropower and combined heat and power
  generation must not be substituted.

www.unendlich-viel-energie.de
Total substitution requirement 411.3 TWh/a
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Prerequisites and urgency for a national
renewable energy feed-in law in the United States
The USA has the highest investment attractiveness
rating worldwide for renewable energies. Dependenc
y on imported oil may rise from 52 (2000) to 64
by 2020. A 50 increase of domestic gas
production might not meet demand. Greenhouse gas
emissions could increase by over 40 within two
decades. The most optimistic scenario (advanced
technology targets) of the Electric Power
Research Institute predicts 11.3 renewable power
by 2030, less than what Germany has already
achieved. Conventional generation may have
increased by 36 during the same period.
National feed-in tariffs are justified for
interstate trade in renewable energy, which must
consider future storage capabilities of plug-in
hybrid automobiles.
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Components of effective feed-in legislation for
renewable energies
Feed-in income must permit full payback of
equipment costs, rendering public subsidies for
renewables generation superfluous. A separate
power meter is essential for measuring feed-in
power (and income) independent of consumption.
Special tariffs will be required in the future
for plug-in hybrid automobiles to distinguish
between three modes of grid interaction battery
charging, withdrawal of battery energy by the
grid operator, and onboard motor generation for
supplying additional grid power. Grid storage
invoicing may be integrated into the metering
concept to account for shifts between generation
and consumption. The use of smart feed-in meters
with Internet connection will allow tracking the
geographic distrubution of renewable generation
for incorporation into national supply
strategies.
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Website for designing Feed-In Tariff (FIT)
legislation

• http//onlinepact.org
• PACT Policy Action on Climate Toolkit

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EEG policy brochure from the German
Environmental Ministry

• www.bmu.de/english/renewable_energy/downloads/doc/
  40066.php

EEG The Renewable Energy Sources Act
You too can use the potential of the EEG and
start producing your own, climate-friendly
energy. Sigmar Gabriel Federal Minister for
the Environment, Nature Conservation and Nuclear
Safety