Transcript The struggle over support schemes for wind power in the

The struggle over support
schemes for wind power
in the European Union
Volkmar Lauber
Where next for wind?
University of Bath ESRC Research Seminar
Series, 9 May 2008
Lauber - Bath May 2008
1
Nature of the struggle
From the beginning, this was a struggle
between incumbents (big utilities) and new
entrants if the latter benefited from
• a modicum of political support (for RES-E,
for a green industrial policy)
• a background ideology which attributed
importance to SMEs for innovation,
competition and the prevention of
excessive market concentration
Lauber - Bath May 2008
2
Why no such struggle in the UK?
• Very small RES-E sector, dependent on utilities
for contracts
• RES-E not supported by strong popular
movement as in Germany (anti-nuclear
movement, acid rain, Chernobyl, climate)
• Not supported by development of a promising
renewables industry
• Thatcherite neo-liberalism stresses short-term
market competitiveness and thus incumbents
Lauber - Bath May 2008
3
Where did the struggle originate?
In 1990, the German Bundestag – responding to a
strong movement - adopted feed-in law against
the preference of government & Bundestag
leaders and big utilities (private member‘s bill)
The big utilities (based on coal and nuclear) did
not like RES-E („no subsidisation of inefficient
technologies“), much less a FIT
After unsuccessful efforts court challenges to the
law (German ordo-liberalism is favourable to
new entrants), the utilities turned to the EU (DG
Competition) for help, arguing illicit state aid
Lauber - Bath May 2008
4
Commission action and rationale
• DG Competition took up this cause
gradually, also influenced DG Energy
(Papoutsis) which was following a line of
deregulation/liberalisation (first electricity
directive of 1996)
• Commission challenged FIT in courts
(joined PreussenElektra case) and in
drafts of RES-E directive proposals:
„illegal state aid, against internal market“
Lauber - Bath May 2008
5
On RES-E directive, Commission
draws on UK and Eurelectric
• In developing RES-E draft directive, the
Commission strove for harmonisaton on the
basis of what it called ‚market-based‘ models
‚compatible with Electricty Directive‘
• Favoured tenders, later on quota/ tradable
certificate schemes (QTC): ‚direct competition‘.
Viewed NFFO as particularly successful.
• Big utilities also approved of those schemes (to
keep RES-E down)
Lauber - Bath May 2008
6
Commission rationale in favouring
quota/certificate schemes in 1999
• Greater static efficiency than FIT (RES-E
prices would come down faster, profits
become less excessive)
• Greater effectiveness: lower prices would
lead to more rapid deployment
• Greater dynamic efficiency: direct
competition would foster more innovation
In retrospect: off the mark on all counts
Lauber - Bath May 2008
7
Actors in favour of QTC (19992001)
Interest group level
• Eurelectric, esp. big German utilities (but not
Spanish utilities)
• BWEA, to some extent EWEA
European Union level
• DG Energy until early 2000, then compromise
• DG Competition
Member States
• UK, Belgium, Italy, Sweden, Denmark
Lauber - Bath May 2008
8
Actors in favour of FIT (1999-2001)
Interest group and NGO level
• German and Spanish renewables assn.
• Greenpeace, WWF
European Union level
• Parliament
Member states
• Germany, Spain (have most of the renewable
energy deployment, their claim of subsidiarity
meets with sympathy in Council)
Lauber - Bath May 2008
9
Situation in 2000
• de Palacio replaces Papoutsis as energy
commissioner 1999 (DG TREN)
• sensitive to Spanish interests (both utilities
and RES-E industry for FIT/premium sys.)
• more pragmatic, not as ideologically neoliberal as Papoutsis
• confronted with strong opposition against
QTC harmonisation
Lauber - Bath May 2008
10
Directive 2001/77/EC
• Leaves choice of support system to member
states
• Subjects these to discipline of state aid
regulations (DG Comp. in 2000 initiated state aid
proceedings also against new German EEG).
Lawsuit and provision became irrelevant after
Preussen Elektra case upholds German FIT
• Provides for report on performance of national
support systems and for possible harmonisation
proposal in 2005; also for long transition period
Lauber - Bath May 2008
11
New developments after 2001
• UK, Belgium, Italy, Sweden, Poland and
Romania introduce TQC schemes in 2002
or later
• 18 member states adopt FIT (by 2008)
• In 2004, European Parliament rejects
Kovacs as energy commissioner because
of his uncritical support for QTC. Instead,
Piebalgs takes this place
Lauber - Bath May 2008
12
Piebalgs position
• Strongly empirical, not ideological
• In 2005: „It is too early to decide which
support scheme is best“
• Commission report in 2005 and 2008
clearly shows that FIT are superior to QTC
• Until 2007, Piebalgs resists demands from
Eurelectric and some DGs (Enterprise and
Industry - Verheugen) for QTC
Lauber - Bath May 2008
13
Actors in favour of harmonised
QTC scheme (2007-2008)
Interest group level
• Eurelectric, esp. big German (but not Spanish)
utilities, RECs, Europ Fed En Traders EFET
• No renewables associations
European Union level
• DG Enterprise and Industry
Member States
• UK (most strongly), other QTC states to some
extent
Lauber - Bath May 2008
14
Actors opposed to harmonised
QTC scheme (2007-2008)
Interest group and NGO level
• EREC, EREF, EPIA. EWEA … (this industry is
much stronger now than in 1999-2000)
• Greenpeace, WWF
European Union level
• Parliament
Member states
• Germany, Spain (have most of the renewable
energy deployment), Slovenia and Latvia are
most strongly opposed
Lauber - Bath May 2008
15
Legitimacy of QTC regime?
• 2005 and 2008 Commission reports on performance of support systems (CEC 2008, 25-26
and 34) showed dismal results for QTC,
particularly for wind (see next slides)
• Least efficient in terms of pricing
• Highest profits
• Lowest deployment (effectiveness)
This is in addition to their limited capacity for
innovation (PV, marine energy)
Lauber - Bath May 2008
16
Price ranges (average to minimum support) for direct support of
onshore wind in EU27 (average tariffs are indicative) compared to
long-term marginal costs (minimum to average costs). Support
schemes are normalised to 15 years. CEC: SEC(2008)57, 25- 26)
Lauber - Bath May 2008
17
Historically observed efficiency of support for onshore wind:
Effectiveness indicator compared to expected profit in 2006
Lauber - Bath May 2008
18
2007 coup with GOs
• In summer 2007 new Commission approch to
virtual trade in RES-E becomes public:
Guarantees of origin (GOs, introduced in 2001)
can be traded, supposedly leave national
support systems in place
• Various models are discussed, a December draft
provided for unchecked EU-wide trading of GOs
• Would have destroyed FIT schemes
Compromise at last moment January 2008: „Trade
may be controlled under certain conditions by
national systems of prior authorisation“
Lauber - Bath May 2008
19
Directive proposal 23 Jan 2008, art. 9:
MS may control GO transfer if it
is likely that the transfer will
• impair MS ability to ensure a secure and
balanced energy supply
• undermine achievement of environmental
objectives underlying MS support scheme
• impair MS ability to meet targets or indicative
trajectory interim targets
Commission may propose to modify these rules in
2014 (no medium-term security for investors!)
Lauber - Bath May 2008
20
What drives efforts for internal
market for TC/GOs?
1. Neoliberal ideology/regulatory capitalist practice
(deregulation in name of free market and
reregulation friendly to large corporations)
2. Interest
• Perspective of tremendous windfall profits for
generators (reaching about 30bn Euro per year
in 2020 in estimate by Ragwitz/Schleich/Resch,
Fraunhofer 2008)
• Perspective of concentrating those windfall
profits on the big utilities (better able to take the
risk posed by trading schemes and to extract
higher returns for such risks)
Lauber - Bath May 2008
21
What drives efforts for internal
market for TCs/GOs? (2nd)
• Perspective that utilities will be able to contain
RES-E development (check on innovation) and
deployment (check on market entry) unless they
are overcompensated (also for retired fossil
plant)
3. Power (veto power? As in case of ETS?)
• Clout of power sector. This is the sector that is
able to secure windfall profits of about 20-48 bn
(at prices of Euro 21-32/t of CO2) just in
Germany and the UK (cumulative, 2008-2012
(See Point Carbon Advisory Services, 2008)
Lauber - Bath May 2008
22
RES-E deployment by big utilities
under QTC/TO scheme means
slower development of RES-E
• Diversion of resources towards higher internal
rates of return (compensation for „risk“), windfall
profits and rents of incumbents
• Reduced availability of resources for innovation
coming mostly from new market entrants
• Incumbent utilities able to check „disruptive“
innovation Utilities will attempt to adapt RES-E
to their centralised structure
• Higher cost to consumer
Lauber - Bath May 2008
23
Bibliography
•
•
•
Commission of the European Communities (2008) Proposal for a Directive of the
European Parliament and of the Council on the promotion of the use of energy from
renewable sources, COM(2008)19 final, 23 Jan. 2008
Commission of the European Communities (2008) Commission staff working
document: The support of electricity from renewable energy sources, SEC(2008)17,
23 Jan. 2008
Lauber, Volkmar (2007) The Politics of European Union Policy on Support Schemes
for Electricity from Renewable Energy Sources, in Lutz Mez (ed.), Green Power
Markets (Brentwood: Multi-Science) 9-29
Lauber - Bath May 2008
24