Environmental dimension of the EEP – Renewable sources of energy and energy efficiency Filip Černoch cernoch@mail.muni.cz Energy policy of the EU Environmental dimension of EEP Climate change – EU aims to develop a low-carbon economy • Measures primarily to reduce GHG emissions • EU ETS – covers 40% of EU emissions • individual targets of MS for the non-EU ETS sectors (housing, agriculture, transport, waste) – cover 60% of EU emissions • CCS • Measures to transform the energy sectors • RES • Energy Efficiency • Research and development, new technologies Deployment of RES • Why should RES be part of an any energy mix? • Why should RES be supported (subsidized)? Deployment of RES 1) Inception phase – creates a climate allowing investment in early projects 2) Take off phase - managing support policy costs 3) Consolidation phase – to integrate RES in the system (RES can no longer be considered in isolation due to their impacts across the whole electricity system that needs to acomodate them) Inception phase 1997 – indicative target of 12% RES in gross domestic consumption of the EU by 2010 2001 – Directive 2001/77/ES – indicative targets for individual states to 2010 2009 – Directive 2009/28/ES – aim 20% by 2020, 10% in transport sector (Energy and climate package). With indicative targets for 2013 2014 – A policy framework for climate and energy in the period from 2020 to 2030 - 27% target by 2030 Inception phase 8 Source: thinkcarbon.wordpres.com RES in final energy consumption Take off phase – Feed in Tariffs • 21 EU states, provides a fixed rate of subsidy for fixed period. Cover all producer’s costs and profit, essentially replace the market • Instrument of choice for big RES players (Germany, Spain). Government sets the price, market (investor response) sets the quantity. Many recent amendments to control costs • Very successful in triggering large deployment of RES, but at a high cost • Could be more cost-effective – greater security around income to investors, therefore reducing financial costs Take off phase • FiT could be tailored to different technologies. • But: • difficulty of setting the right price – too high and money is wasted, too low and no deployment. Once the price is set, it is hard to make radical changes without breaking contracts • they insulate the RES producer from the market (a limited compatibility with internal energy market) • Grid priority - the grid must take RES electricity first Take off phase: Quota obligations • Power plant operators receive certificates for their green energy to sell to the actors (distributors) obliged to fulfil the quota obligations • Selling the certificate provides an additional income on top of the market price of electricity • Quota obligations with tradeable certificates. Here government sets the quantity, the market the price • Compatibility with market principles, competitive price determination Take off phase: Quota obligations • High risk premium – increase policy costs • Technology neutral way – only the most cost-effective technologies supported (windfall profits for the lower cost technologies) = Quota systems with tradable certificates tend to be cheaper, but favour mature technologies like onshore wind and biomass Take off phase: Feed-in Premium • Plant operators have to sell the elektricity at the market • To receive a fixed payment for each unit of elektricity generated independent of the market price of elektricity • More market oriented, higher risk for producer (compensated by the level of the premium) • Used sporadically, as a second option to suplement FiTs Subsidy schemes Take off phase „A solar RES case“ – Spain, Italy, Czech Republic… • Generous FiT tariffs in place, volumes of deployment not controlled or capped and support mechanisms not sufficiently responsive to rapidly falling costs • PV developers earn high rates of return on their capital – overheated markets and rapid rises in support costs • Policy makers react by dramatically reducing tariffs and introducing retrospective measures to recouple some of the costs – detrimental impact on investor confidence in the government • Also impact on the other RES in given country Czech Republic – Installed PV capacity Source: ERÚ Year Installed capacity (in MWe) 2006 0,2 2007 3,4 2008 39,5 2009 464,6 2010 1959,1 2011 1971 2012 2086 Estimated costs in Czech Republic – 1,76 bn. euro in 2013 RES in the EU 18 Results so far… 19 Source: Ragwitz Consolidation phase - costs Consolidation phase - costs • Sigmar Gabriel, federal minister for economic affairs and energy: “we have reached the limit of what we can ask of our economy” • In 2013 German consumers paid €21,8 bn in RES subsidies • FiTs for new installations are to be reduced: from 17 to 12 cents/kWh (for onshore wind power to maximally 9 cents/kWh) • Practice of excluding large corporations from burden sharing is to be restricted to operations exposed to forein competition • But – first instalations (in favourable nature conditions and receptive business environment) in Europe and USA competitive without subsidies. Consolidation phase – grid expansion in Germany • To redistribute the renewable energy from the wind and solar farms in/at the Nord Sea, about 2600km (4600km) of grid expansion need to be realized • In the beginning of 2014 – 322km completed – protests from regions ensuing landscape degradation with no local economic benefits Consolidation phase – unreliability/intermitency of RES • Common interconnected internal market • Back-up capacities of conventional sources • Consolidation phase – impacts on wholesale prices Consolidation phase – impacts on wholesale prices Conflict with conventional sources – capacity market? • E.ON in France is to close a gigawatt of coal-fired capacity • GDF Suez to mothball three of its gas turbines • E.ON in Germany looses money in its gas turbine in Irsching • Norway´s Statkraft is closing its 510 MW gas turbine in Landesbergen • In Czech Republic a brand new gas power plant in Počerady is mothballed Environmental dimension of EEP Climate change – EU aim to develop a low-carbon economy • Measures primarily to reduce GHG emissions • EU ETS – covers 40% of EU emissions • individual targets of MS for the non-EU ETS sectors (housing, agriculture, transport, waste) – cover 60% of EU emissions • CCS • Measures to transform the energy sectors • RES • Energy Efficiency • Research and development, new technologies Energy efficiency (conservation?) • Energy supply per capita: 3,2 toe vs. 4,5 toe of the IEA average (-8,2% since 2002) • Energy intensity: 0,12 toe/USD 1000 vs. 0,14 toe/USD 1000 of the IEA average • TFC: 1139,2 Mtoe, -4,1% since 2002 • Energy and climate package 2009: an energy consumption is to be cut by 20% by 2020 relative to the BAU scenario, nonbinding target (cap of 1483 Mtoe in 2020) • Limited consumption of energy + increased energy efficiency • The only one that the EU is not on track to meet. (18-19% by 2020) Energy intensity in the EU and in selected IEA MS Energy efficiency intstruments • EU instruments • Products (energy labeling, eco-design) • Transport (measures to cut vehicle emissions) • Buildings (40% of all energy in the EU is consumed in building. Energy performance standards on new building). • Public procurement (energy efficiency a criteria when govts buy goods and services) • National instruments • National plans with national measures Energy efficiency in the EU • Limited achievements only due to: • Relatively cheap energy (IEM) • Limited impact of (sometimes expensive) measures • Rebound effect Energy Efficiency Directive 2012/27/EC • Developed to reach 20% target savings • Binding measures, not bindig targets • MS are required to: • Evaluate the situation in national heating and coolings systems, suggest some cost-effective measures to improve them • The same for gas and elektricity infrastructure • Oblige energy providers to achieve cumulative end-use energy savings by 2020 equivalent to 1,5% of annual energy sales over the period 2014-2020 Energy Efficiency Directive 2012/27/EC • Introduce the metering and billing of actual energy consumption in all sectors • Prepare public procurement rules ensuring that central governments purchase only high-efficiency producs • Large industry enterprises to carry out an energy audits at least every four years • Buildings – new buildings and buildings under renovation to be „nearly zero energy“ by the end of 2020. To improve the energy performance of 3% of the total floor area of heated and/or cooled buildings owned and occupied by the central govt every year Energy efficiency Sources • IEA (2014): Energy Policies of IEA Countries – The European Union