Transcript Renewable Electricity What you need to know

An Industry Perspective
Oliver Schaefer, Policy Director,
European Renewable Energy Council
EUFORES, Interparliamentary Meeting, Berlin, 5-5th of October 2007
EREC – European Renewable Energy Council
Umbrella organisation representing all RES sectors:
AEBIOM
EGEC
EPIA
ESHA
European Biomass Association
European Geothermal Energy Council
European Photovoltaic Industry Association
European Small Hydropower Association
ESTIF
EUBIA
EWEA
EUREC Agency
European Solar Thermal Industry Federation
European Biomass Industry Association
European Wind Energy Association
European Renewable Energy Research Centres Agency
EU-OEA
EBIO
EREF
European Ocean Energy Association
European Bioethanol Industry Association
European Renewable Energy Federation
Associate members:
Representation of European RES industry, trade & research
The Root of the Energy Problem for
the EU
• We are going to import an ever growing share of our
energy at unpredictable (but most likely higher)
prices in competition with the rest of the world and
at unbelievable environmental cost.
• Regardless of whether we are successful in energy
diplomacy or not, we have no idea about the future
cost of energy we will be paying to maintain current
supply
Each dollar we spend on securing oil fields, borrowing
money to pay for oil imports, or cleaning up an oil spill is
an opportunity missed to invest in a sustainable energy
future
Richard G. Lugar
Chairman, U.S Senate Committee on Foreign Relations, 30th
of March 2006
We are already paying for inaction
• For every $20 increase in the price of oil, the cost of
Europe’s gas imports rises by €15 bn annually, given
the unfortunate link between oil and gas prices
• The increase of oil prices over the past few years
from $20 to $80 thus adds €45 bn. to EUs annual
gas import bill
• For comparison, EU invested €9 bn. in wind energy
in 2006
The forgotten COST: The REAL PRICE of our energy supply
Who is paying the real price?
Electricity/Energy Price
External Costs
The Electricity/Energy custome
The general population
Indirect burden via taxes,
insurances and social
contributions
The State
Increasing environmental costs,
„political“ costs
Global Loss of quality of life
RES 2020 Target and
Climate Change Package
Three targets on renewable energy, energy
efficiency and greenhouse gases have been
agreed for 2020.
None of these targets has primacy over the
others.
The Framework Directive must be
adopted as soon as possible.
The 20% by 2020 EU target will only be met if
legislation is adopted timely.
The Directive should be in force as soon as
possible in order not to cause market instability
around 2010 (ending of RES-E & Biofuels
Directives)
Division of the target
Division of the 20% target
among Member States
How to best avoid lengthy negotiations ?
Each Member State increases its renewable
energy share by 13 percentage points from
today’s 7% to 20% in 2020.
Pre-Conditions for RES uptake
• Change in Paradigm: individual responsibility for own energy supply, as
local and decentralised as possible
• Households and private sector in general should primarily produce their
own heat and electricity from RES sources in an efficient environment
• Combination with drastic change in consumption pattern and increase in
efficiency
• Political commitment beyond ideologies and short term thinking to go for
strong national RES
• Clear instruments, targets for rapid uptake and enforcement
• High level of market penetration by Independent RES Power Production
• Swift abatement of open and hidden harmful subsidies to incumbent
industry
• As long as one or more of these conditions are not met – counterbalance
is necessity
Precondition for reaching the targets
• Renewable Action Plans with sectoral targets for
– RES-electricity,
– RES heating & cooling
– Biofuels
• Interim targets every second year to check whether
development is on track
• Penalities in case of not reaching the target
• Ensuring: development of ALL renewable energy
technologies
Sectoral approach
• On Electricity: Provisions on grid issues and administration
procedures must be maintained or strenghened.
• On Heating/Cooling: Proper definition, reliable statistics,
renewable heat obligation
• On Transport: ensuring sustainability. Promote R&D for
second generation biofuels.
Support Schemes in the RESElectricity sector
• Harmonisation is premature at this stage.
• Nevertheless, a list of criteria applying to all
national support mechanisms should be set to
ensure successful deployment of renewable
energy.
Strong Sustainability Criteria
- Sustainability criteria should cover not only biofuels
but also biomass whatever its final use (biofuels,
food, construction, electricity...)
- Criteria such as greenhouse gas reductions could be
covered by the cross compliance rules.
- No biomass outside these sustainability criteria
should be counted towards the target.
Ensuring sustainability
on global level
• Imported products should comply with similar
standards as the cross compliance rules to
avoid competition distortion.
• If these existing schemes meet the defined
European criteria, they should be recognised
as eligible for certification.
EU-wide trading mechanism
• Such a trading mechanism requires sellers and
buyers.
• So far Member States calling for an EU-wide
trading mechanism only expressed an interest
in buying, not in selling.
EU wide Trading Mechanism
There is no reason to introduce such an artificial
mechanism if it is meant to:
• produce disincentives for domestic
investment
• endanger prosperous support schemes
• provide additional bureaucratic mechanisms.
Market Based System:
• It is not more “market oriented” to regulate prices rather
than regulating quantities. The important thing is whether
the regulation is effective.
• OPEC is not “market oriented” just because it uses quotas to
regulate – it’s a cartel.
• WTO accepts price regulation not quantitative measures.
What does the investor in new
capacity need
A stable mechanism that replicates a bankable long-term Power
Purchasing Agreements!
•The longer the contracts…
• … the lower the risk to investor
• … the lower the cost to consumers
• … the lower price/kWh required
•1 year contracts (spot market): Very expensive / kWh
• 20 year contracts (Germany): Cheap / kWh
• 10 year contracts: Certainty in investment period
Uncertainty will make it very expensive to meet the target
The Main Question to ask
Will the introduction of trade make it easier for MS to
meet their targets cost effectively?
Will trade attract investors and increase their
confidence?
What impact will trade have on existing successful
mechanisms?
(NB: Trade is a tool, not an end-goal in itself)
Trading RE vs Trading
Emissions
ETS:
• When introduced there was nothing, i.e. trade
could only improve the situation
• Emission allowances does not require physical
infrastructure
RE
• We are seeing the concrete results of the
successful RES-E Directive, i.e. something can be
”disturbed”
• The product needs physical infrastructure (grids)
Our Main Concern
How will trading impact national frameworks
with regards to?
•
•
•
•
National support schemes
Grid access and strategic grid planning
Planning and administrative procedures
Public acceptance
Adverse incentives
Disincentive to develop national frameworks, including
planning procedures and strategic grid planning
Importing countries leaves the ”tricky” planning parts to
exporting countries. Exporting countries bear grid operation,
balancing and grid extension costs
Public acceptance could be reduced if a MS – via GC trading –
is funding employment abroad, paying for foreign CO2
reductions while getting no benefit in terms of diversification,
reduced imports, increased security of supply and lower prices
from zero-fuel RE sources
What would be the
competition element?
There is no incentive in the system to produce renewable
energy most effectively
”Virtual trading” will create strategic gaming excersises where
MS will adjust the national systems constantly to ensure
payment is high enough to maintain domestic action (CO2
benefits, employment, economic activity) but not high enough
to catch the attention of foreign exporters
Result: Initial high payments. After that an avalanche towards
the lowes common denominator with a price reflecting the cost
of producing the marginal kWh
Effect on existing national
mechanisms
In MS with quota system:
Producers will sell GC to UK / Italy. Existing investors
experiance an immediate fall in ROCs prices the day
the proposal is tabled
In MS with price system (feed-in or premium):
Could become very costly as producers sell GC abroad
at highest price possible, while the governement will
have to buy back GC from abroad
“the issues relating to compatibility of support
mechanisms and the desirability of not distorting
cross border trade are concerns which are
secondary to the main objective of ensuring a
certain level RES production in each Member State
on the basis of individual national targets”..
European Commission’s Strategy Paper “Medium term vision for the
Internal Electricity Market” (1 March 2004)
Renewables Market
Development in the EU
Cumulative Wind Energy
Installed Capacity
80
70
60
GW
50
40
30
20
10
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Europe
4,8
World
7,6
Average Annual
Growth Rates
6,5
9,7
12,9 17,3 23,2 28,72 34,64 40,89 48,54
10,2 13,6 17,4 23,9 31,1 39,43 47,62 59,09 74,22
Europe
1995-2000 38.8%,
2000-2005 25.7%
World
1995-2000 29.4%,
2000-2005 27.8%
Source: EWEA,GWEC
•
Relative Wind Energy Capacity in Germany and Spain
with respect to the rest of EU (% MW)
100%
90%
20%
27%
80%
30%
42%
70%
50%
60%
50%
40%
80%
73%
30%
70%
58%
20%
50%
10%
0%
2002
2003
Germany & Spain
2004
2005
2006
Rest of EU-25
Source: EWEA
Cumulative Installed PV Capacities
7000
6000
PV
5000
MWp
4000
EU
GLOBAL
3000
2000
1000
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
1994
1995
1996
1997
EU
GLOBAL
502
580
669
795
1998
1999
2000
2001
2002
2003
2004
2005
2006
90
128
188
266
373
543
1089
1881
2730
948
1150
1428
1762
2201
2795
3847
5152
6627
Source: EPIA
Annual Installed Global Capacity –
Nuclear vs Wind
12
10
8
GW
6
4
2
0
1999
2000
2001
2002
2003
2004
2005
Nuclear
2,7
3,1
2,7
4,8
1,6
4,8
3,8
Wind
3,4
3,8
6,5
7,3
8,2
8,2
11,8
Geothermal Electricity
9000
8000
7000
6000
5000
European Union
4000
World
3000
2000
in MWe
1000
0
1990
1995
2000
2005
Small Hydro Power
14,0
12,0
10,0
8,0
GW
6,0
4,0
2,0
0,0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
0,66 0,72 0,77
EU-10
EU-15
4,0
5,0
7,9
8,9
9,2
9,4
9,7
9,8
9,8
9,8
9,4
9,9
10,5 10,6 10,8
Biomass
Source: Aebiom 2007 statistics report
Major barriers to be removed
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Failure of Governments to deliver:
Consequent action planning
Administrative capability and coherence
Public Information on RES
Sticking to promises given
Ability to agree to new, decentralised market
structure
• Flexibility
• Market incentives
• Market Fairness
Further information
EREC
European Renewable Energy Council
Renewable Energy House
63-67 Rue d’Arlon,
1040 Brussels, Belgium
www.erec.org
Thank you very much for your attention!
Global Energy [R]evolution Results:
•
•
•
•
Why Scenarios?
images of alternative futures
neither predictions nor forecasts
image of how the future could unfold
useful tools for investigating alternative future developments and their
implications
Scenarios help us understand the limitations of our ‘mental
maps’ of the world – to think the unthinkable, anticipate
the unknowable and utilise both to make better strategic
decisions
Scenarios can create a vision for the future
and guide decision makers
Objective of the study:
Provide an outline of a global energy supply system that complies with key sustainability
criteria
Key Targets:.
A) climate change:
Limit global mean temperature rise to below 2° C
(-> “2 °C Scenario”)
B) Technology
Only proven technologies
phasing out of nuclear energy on a global level
C) incentives for sustainable economic development
Approach
●
development of a 10-region model (based on IEA regions)
●
implementation of energy balances in MESAP/PlaNet, model calibration with IEA 2003 statistics
●
economic development and population development according to IEA World Energy Outlook
2004 (extrapolated to 2050)
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Reference Scenario: based on IEA World Energy Outlook 2004 (extrapolated to 2050)
●
Alternative Scenarios:
demand scenarios: Ecofys
supply scenarios: DLR
●
Review process:
regional counterparts (academia, NGO)
EREC / Greenpeace
CO2-reduction target:
- Limit global mean temperature rise to < 2° C
- Reduce energy related CO2-emissions from 23 Gt/a today to
~ 11 GtCO2/a in 2050
- Per-capita emission rights in 2050: ~ 1 tCO2/a
World
OECD
Germany
China
Africa
0
5
10
15
The Logic of “energy (r)evolution scenario”
From principles to practice - Use the current “time window”
for
Step 1: Energy Efficiency
Step 2: Structural Changes
● Decentralised energy and large scale renewables
● Cogeneration
Step 3: Energy Efficiency and Transport
● Efficient Public Transport Systems
● Efficient Cars, Trucks etc.
● sustainable Biofuels
Scenario principles in a nutshell
● Smart consumption, generation and distribution
● Energy production moves closer to the consumer
● Maximum use of locally available, environmentally friendly fuels
Energy Consumption and Economic
Development in China (1980-2004)
Key facts:
●
REF: CO2-emissions double till 2050 -> Climate Chaos
●
Energy [R]evolution: CO2-emissions cut by half till 2050 -> Avoids dangerous climate change
~ 2015 onwards:
Energy [R]evolution cheaper
Further information
EREC
European Renewable Energy Council
Renewable Energy House
63-67 Rue d’Arlon,
1040 Brussels, Belgium
www.erec.org
Thank you very much for your attention!