Transcript The Case for Feed-In Tariffs

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
[email protected]
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
1. United States (highest overall renewables potential)
2. Germany (upgraded due to proposed increased target of
45% of renewable power generation by 2030)
3. India (high wind index, subsidies and tax benefits)
4. Spain (renewables legislation modeled after Germany)
5. United Kingdom (downgraded due unlikelihood of 10%
renewable power generation by 2010)
Renewable power generation constitutes an
economic response to certain forseeable events.
Solar power
offsets midday air conditioning
load peaks and summertime
overheating of power plant cooling
water.
Wind and wave power
deliver peak output in stormy
weather when buildings cool out
faster.
Hydropower
exhibits greater availability during
periods of high municipal
rainwater pumping demand.
Biogas generation
varies in step with energyintensive livestock production.
Interlinked renewable generation
provides dispatchable power
decoupled from imports.
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
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.
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 Germany’s 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 Germany’s electricity
(150 TWh/a).
Lignite covers 12% of German energy usage but
produces one fourth of national CO2 emissions.
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.
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
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/40066/36356/
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.
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.
Solar power is made profitable by assured
investment payback.
Incceased feed-in tariffs compensate for higher
specific realization costs in smaller systems.
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.
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.
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.
Grid feed-in power from renewable energies
has increased by 37% in only two years.
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.
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
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.
Solar will have increased more than fourfold
between 2005 and 2010.
Large-scale photovoltaic systems in Germany are
growing in size and number.
Small-scale systems comprise over 90% of
German solar generation capacity.
Decentralized solar generation minimizes transmission losses.
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.
Reduced risk feed-in tariffs deliver lower prices
compared with renewable energy certificates.
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
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
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.
Dependency 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.
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.
Website for designing
Feed-In Tariff (FIT) legislation
http://onlinepact.org
PACT Policy Action on Climate Toolkit
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