Structure of the presentation
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Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse
19.09.2012
Converging support schemes in Europe?Best practice design criteria for effective and efficient future RES-E support
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Structure of the presentation
Lessons on RES-E support schemes in Europe
1. Status of RES-E support schemes in Europe
2. Progress of MS achieving the RES targets
3. Lessons learnt and best practices in designing RES-E support schemes
Routes towards convergence
4. Recapitulation of the European debate on convergence
5. Benefits and challenges of convergence
6. Options for convergence
7. Conclusions
21/04/23 Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse
Isabelle de Lovinfosse
Corinna Klessmann
Main sources:
• European projects: RE-Shaping (2009-2012), Financing RE in the European Energy Market (2010-2011),
Renewable energy progress and biofuels sustainability (2012), Beyond 2020 (ongoing)
• Projects for national governments: International Feed-in Cooperation (ongoing), Implementing
Cooperation Mechanisms (2009-2012), FIT tracker (2011)
• Dissertation Klessmann (2012)
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Still diversity of support schemes in Europe but with some converging trends
Source: Ecofys based onRagwitz et al. (2012). RE-Shaping Ecofys et al. (2012). RE progress and biofuels sustainability.
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Still diversity of support schemes in Europe but with some converging trends
Diversity of support schemes in Europe is shown by different colours and patterns, but some converging trends have been observed:
• Use of combination of instruments instead of one size fits all (e.g. FIT for small scale, auctions for offshore wind) – many patterns instead of plain
• Diffusion of feed-in premiums across Europe as compromise between revenue security of investors and RES-E exposure to market signals
• Moratoriums and uncertainties on the future of support schemes because of public deficits (e.g. Spain, Portugal, Latvia, Bulgaria, Czech Republic)
• Joint support schemes (e.g. Sweden and Norway)
21/04/23 Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse
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Lessons from MS experience tell us how to design effective and efficient RES-E support schemes
21/04/23 Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse
Provide reliable framework: frequent and unexpected policy changes undermine investor confidence
• Policy changes transparent and predictable (e.g. automatic degression, clear formula for quota setting, pre-set revision agenda)
• No retroactive changes• Long term political commitment• Guarantee support level for long term • Consultation with stakeholders
Lessons learnt Best practice design criteria
Reflect and limit investment risks: risk-conscious (triple-A) policies
increase growth and reduce support costs by up to 50%
• Tailor support scheme to RE market deployment status and electricity market readiness
• No abrupt or retroactive policy changes• Avoid rigid budget or capacity caps• Simple, transparent permitting process • Priority grid access and dispatch• Quota: long term horizon and serious penalties• Government facilitates access to capital (e.g.
participation, financial guarantees, loans)
Adjust level of support to technology and market conditions
• Apply technology specific support levels• Calculate level of support based on LCOE, so
support neither too low nor too high• Planned and transparent adjustments based on
technology and market changes
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Supporting RES-E is and will remain challenging. How can convergence help?
21/04/23 Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse
Financial and economic crisis in Europe puts pressure on government budgets, consumers’ bills and access
to finance
•Reducing RES-E support costs by streamlining best-practice criteria • Joint European effort to attract more investments
Challenges Potential role of convergence
Impact of high RES-E deployment rates on the electricity system and markets
•Trans-European grid development• Integration of European electricity markets•Coordinated reforms of electricity market regulations
With RES-E becoming mainstream, growing opposition against RES-E (from
incumbent electricity actors and the public)
Coordinated EU-wide effort on transparent and fair communication on the short and long term benefits & costs of RES-E growth
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Structure of the presentation
Lessons on RES-E support schemes in Europe
1. Status of RES-E support schemes in Europe
2. Progress of MS achieving the RES targets
3. Lessons learnt and best practices in designing RES-E support schemes
Routes towards convergence
4. Recapitulation of the European debate on convergence
5. Benefits and challenges of convergence
6. Options for convergence
7. Conclusions
21/04/23 Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse
Isabelle de Lovinfosse
Corinna Klessmann
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The focus of the European RE policy debate has moved from harmonisation to coordination and cooperation
21/04/23 Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse
COM (1998) 167
on harmonisation
requirements:
propose common
rules for RES-E
COM(2005) 627:
Too early to
harmonise;
optimisation and
coordination
Beyond
2020?
Proposal RES
directive
COM(2008) 19:
Harmonised GO
trade
COM(2012) 271:
Guidance on best
practice support
and on increased
cooperation
Aim of convergence: creating an internal market for electricity
1996 2003 2009 2014
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Converging national support schemes holds many benefits but also some risks and challenges
21/04/23 Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse
Potential benefits Potential challenges/risks
Support scheme design
Joint RES-E support methodology could lead to increased transparency and stability
RES-E investors could reduce their transaction costs and tap economies of scale; increased competition
Increased RE investments and reduced support costs per MWh
Reduced sovereignty of Member States needs to be accepted by national Parliaments
Support schemes could be less suited to overcome local market barriers
Windfall profits and increased support costs if cross-country support level is not well adjusted
RES allocatio
n
Tapping low-cost potentials
Greater flexibility and lower cost for reaching national RES targets
Increased efficiency of European RES target achievement
Decoupling of costs and benefits of RES-E; challenge of balancing costs and benefits between Member States
Negligence of domestic benefits could lead to loss of public acceptance and reduced willingness to pay for RES
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European cooperation can reduce the support costs for reaching European RE targets but uniform harmonisation would increase costs
21/04/23 Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse
Changes in support costs for reaching the 2020 target
(average yearly consumer expenditures for new RES installations)
Sources:Resch et al. (2009). futures-e.Ecofys et al. (2011). Financing RE in the European Energy Market.
€ b
n/y
ear
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Convergence of RES-E support needs to build on converging electricity markets
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Electricity market framework
Support framework
Common (best) practice
Cooperation Coordination Harmonisation
Common (best) practice
Cooperation Coordination Harmonisation
Convergence of RES-E market conditions
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Current steps for converging support frameworks mainly focus on best practice exchange. Steps towards implementing joint principles/design elements.
21/04/23 Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse
Support framework
Common (best) practice
Cooperation Coordination Harmonisation
Member States
exchange (Concerted Action, IFIC,
etc.)
EC: Best practice guidance
Future: Minimum design standards
for RES-E support?
EC: Guidelines to
facilitate trade
Some MS discuss coop
mechs
Joint support scheme SE-NO; Italy...
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The integration of European electricity markets is ongoing but not yet completed. Market adjustments for integrating large shares of variable RES-E.
21/04/23 Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse
Transmission network
development
Electricity market framework
Common (best) practice
Cooperation Coordination Harmonisation
Cooperation of regulators
(ACER)
RES-E priority or guaranteed grid access &
priority dispatch
Future: Increase “readiness” for RES-E through alignment of electricity market
regulations (gate closure, balancing markets, etc.); incentives for flexibility options?
Multi-country market
coupling
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There are multiple support elements that benefit from joint principles and coordination
21/04/23 Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse
Alignment to institutional, regulatory and market framework
Level/limitation of investment risk (market revenue risk, policy risk, etc.)
Support level & underlying
methodology
Supportscheme
Common calculation
methodology for LCOE
& reference electricity
pricesCommon risk
mitigation &
allocation rules
(e.g. for policy
adjustments)
Joint ambitions
& growth
pathways
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Conclusions
Applying best practice RES-E support principles is key for further RES-E growth in Europe. Increased exchange, cooperation and EC guidance can help streamline best practice principles across Europe.
Convergence of RES-E support is only part of the solution and bears some risks. Uniform harmonisation of RES-E support is not the solution: it would lead to higher support costs and loss of public support for RES-E.
21/04/23 Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse
How can we create public acceptance for joint RES-E policy efforts and cost sharing in Europe?