Developing renewable energy cost effectively

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Developing renewable energy cost effectively


Tom Howes European Commission
03/08/2016
EUROPEANCOMMISSION
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Progress to date
Eurostat
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(No Transcript)
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Technology breakdown - electricity
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Cost estimations

• Total investments in renewables are currently at
  a level of approximately 35 bn/y
• Most analysis predict this has to double to reach
  our 2020 targets
• Unit cost of renewables, contrary to other forms
  of energy, are declining for certain
  technologies sharply
• PV module costs around 500/kW
• Producing (and generating) renewables where most
  cost-efficient offers significant potential for
  lowering overall cost

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Merit order effect

• Denmark 2005 saving of 0.3 to 0.5 cents per kWh
  consumed.
• Spain 2005 a reduction of about 0.5 cents/kWh
  at peak hour for each additional GWh
• Germany 2006 5bn electricity price saving CO2
  exp. cost of EEG
• Ireland 2011 neutral impact
• EWEA EU 2020 estimate (265GW wind) 41.7bn/year
  savings (gross)

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(No Transcript)
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Feed in tariffs, Feed in Premiums Quotas
TGC revenues
RES-support
Market price
FIT FIPs
Quota
stability of revenues and their composition
(TGCtradable green certificate)

• Quota
• Gov fixes quantity, market decides price
• Obligation for suppliers
• Minimum RES-E share
• Increasing over time
• Penalty
• Tradable certificates for RES-E production
  (market price)
• Obligation is met by submission of certificates
  to competent authority
• Power sold on conventional markets

• Fixed feed-in tariff (FIT)
• Gov fixes price, market decides quantity
• Fixed tariff (/MWh)
• Guaranteed during lifetime or x years
• Purchase obligation
• (Grid (access use) priority)
• Feed-in premium (FIP)
• Fixed premium (/MWh)
• Guaranteed during lifetime or x years
• Power sold on conventional markets

Source RE Shaping project
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Points for reflection on support schemes
(electricity)

• Provide policy stability (for FIT / FIP /
  Quota)
• Retroactive / sudden changes should be avoided.
• Move away from annual budgeting (creates stop and
  go)
• Reduce revenue risk
• Long term contracts are most relevant (15-25
  years)
• Priority dispatch/curtailment compensation
• Apply automatic degression formulae for tariffs
  and premiums.
• New tariffs (or premiums) fall according to
  learning curve of technology.
• Other reductions in FIT/FIP require well planned,
  public tariff adjustment cycles or mechanisms
  (e.g. DE tariff falls if capacity grows by more
  than 3.5 GW...)
• Small scale development is a different market
• Many quota countries offer separate incentives
  BE minimum prices for PV, IT FIP for PV, UK FIT
  for small-scale applications. Technology-banding
  within the quota as applied in UK can help to
  support cost-intensive technologies like wind
  offshore, but is less suitable for small-scale
  projects.

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The other elements of European energy policy

• EU policies working in tandem to provide a stable
  long term framework
• The creation of competition and the single market
  in energy
• The development of European infrastructure
  (_at_1c/kWh)
• Europe's RD programme for new technologies
• Energy Efficiency proposal to reduce consumption
  and transform the market
• 2050 decarbonisation 2030 milestones?...
• Impact of costs is clearly important
• Explore net impact (merit order effect)
• Recall the whole 2008 energy and climate package
  price estimate was up to 10
• Operating costs of non renewable energy rising
  (again)
• 2050 energy scenarios explore cost consequences
  of decarbonisation
• RES costs driven by capital costs, driven by
  risk, driven partly by regulatory framework

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2020/2050 Key Challenges
?

• Increasing importance of RES increases
  requirements on
• Capacity and flexibility
• of electricity grids,
• of power plants,
• of energy storage
• of demand side management (smart)
• Energy Roadmap 2050 due December
• Renewable energy Communication on post 2020 -
  due 2012
• (public consultation imminent)
• Update on state of internal market - due 2012

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Thank you for your attentionhttp//e
c.europa.eu/energy/renewables/index_en.htm