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Cost-Efficient and Sustainable Deployment of Renewable Energy Sources towards the 20% Target
by 2020, and beyond
D5.3 Key recommendations from the RES4LESS roadmap
December 2012
D5.3 Key recommendations from the RES4LESS roadmap 2
Project no.:
IEE/09/999/SI2.558312
Deliverable number: D5.3
Deliverable title: Key recommendations of the RES4LESS roadmap
Work package: WP5: RES4LESS roadmap
Lead contractor: IT Power (ITP)
The sole responsibility for the content of this report lies with the authors. It does not
necessarily reflect the opinion of the European Communities. The European Commission
is not responsible for any use that may be made of the information contained therein.
Author(s)
Name Organisation E-mail
Francesco Dalla Longa ECN [email protected]
Claudia Raimundo ITP [email protected]
Dissemination Level
PU Public x
PP Restricted to other programme participants (including the Commission Services)
RE Restricted to a group specified by the consortium (including the Commission Services)
CO Confidential , only for members of the consortium (including the Commission Services)
D5.3 Key recommendations from the RES4LESS roadmap 3
PREFACE/ACKNOWLEDGMENTS
This document reports activities and results of Task 5.3 of the Intelligent Energy Europe supported
project RES4LESS.
Within the RES4LESS project team, the authors would like to thank: Kim Stutvoet-Mulder (ECN),
Karina Veum (ECN), Martine Uyterlinde (ECN), Paul van den Oosterkamp (ECN), Natalia Caldés
Gomez (Ciemat), Marta Santamaria Belda (Ciemat), Dierk Bauknecht (Oeko Institute), Christopher
Heinemann (Oeko Institute), Henrik Klinge Jacobsen (DTU), Lise-Lotte Pade Hansen (DTU), Cristian
Tantareanu (Enero), Luminta Badi (Enero), Michael ten Donkelaar (Enviros).
Outside the project consortium, a special acknowledgement goes to the RES4LESS Advisory Board
members, for the fruitful discussions and advices.
D5.3 Key recommendations from the RES4LESS roadmap 4
Table of Contents
1. Introduction 6
2. RES4LESS scenarios 7
2.1 Business as usual 8
2.2 Twin stars pilots 8
2.3 Twin stars scale-up 10
2.4 Full cooperation 11
3. Timing 13
3.1 2020 horizon 13
3.2 2030 horizon 14
4. Decision flowchart 16
4.1 How to use the flowchart for joint support schemes 17
5. Conclusions 20
References 21
D5.3 Key recommendations from the RES4LESS roadmap 5
Tables
Table 2.1 RES4LESS scenarios…………………….…………………….…………………….……...7
Figures
Figure 1.1: Where are the Valleys of Opportunities in Europe (…) ....................................................... 6 Figure 2.1: Estimated yearly support costs in 2020 in the RES4LESS scenarios. .................................. 8 Figure 2.2: Flow of RES credits in the Twin stars scenarios. ............................................................... 10 Figure 2.3: Results of the global VoO analysis (…). ............................................................................ 12 Figure 3.1: Time frame for implementation of the RES4LESS scenarios. ........................................... 13 Figure 4.1: The RES4LESS decision flowchart .................................................................................... 19 Figure 5.1: Overview of the RES4LESS decision flowchart. ............................................................... 20
D5.3 Key recommendations from the RES4LESS roadmap 6
1. Introduction
In its Directive 2009/28/EC the European Commission (EC) set an ambitious 20% target on the final
consumption of energy from renewable sources (RES) in 2020 (European Commission, 2009). This
EU-level target is divided into different domestic targets for each single Member State (MS). The MS-
level targets do not always reflect the domestic RES potentials, creating a situation where certain MSs
will have to deploy very expensive technologies in order to meet their target, while other countries are
expected to reach their target at lower costs and even produce a RES surplus. In order to promote a
more balanced distribution of costs, the Directive allows MSs to establish cooperation mechanisms.
Three types of cooperation mechanisms are defined: a MS could buy the RES-credits associated with
the surplus potential of other MSs via statistical transfers, could finance additional RES deployment
in other MSs by engaging in joint projects, or could share (part of) its RES potential with other MSs
by establishing joint support schemes.
Within the EU-funded RES4LESS project several aspects related to the implementation of cooperation
mechanisms were investigated:
analysis of RES potentials and costs in EU;
identification of Valleys of Opportunity (VoOs) for establishing cooperation mechanisms (a
map indicating the expectation as to where the VoOs are is presented in Figure 1.1);
design features, barriers and success factors for the implementation of cooperation
mechanisms;
three case studies focused on different technologies (wind offshore, biomass and concentrated
solar power);
analysis of the impact of cooperation mechanisms on the electricity grid.
All topics were investigated in close contact with different stakeholders at MS and EU-level. The final
results have been summarized and integrated in the RES4LESS Roadmap (Raimundo and Dalla
Longa, 2012a; Raimundo and Dalla Longa, 2012b). This document contains a high level synthesis of
the roadmap, and touches on all the main outcomes of the project. In chapter 2 an overview is given of
the four scenarios for the deployment of cooperation mechanisms that have been developed and
analyzed in the roadmap. In chapter 3 the implementation of these scenarios is analyzed within a
short- and a long-term horizon. In chapter 4 a flowchart is presented that has been designed to assist
member states in carrying out the necessary preparatory work before engaging in cooperation
mechanisms. Finally chapter 5 wraps up the roadmap with key findings and recommendations.
wind
biomass
sunFigure 1.1: Where are the Valleys of Opportunities
in Europe to deploy renewables at lower costs
through cooperation mechanisms?
D5.3 Key recommendations from the RES4LESS roadmap 7
2. RES4LESS scenarios
In order to exemplify possible development pathways for the deployment of RES in the EU via
cooperation mechanisms, and quantify the corresponding costs of achieving the RES targets, four
scenarios have been developed (Raimundo and Dalla Longa, 2012a). Table 2.1 summarizes the
scenarios, the key conditions for successful implementation, and the yearly savings in support costs at
EU level in 2020. The total estimated yearly support costs in 2020 in the four scenarios are presented
in Figure 2.1.
Scenario Degree of cooperation Key conditions for
implementation
Yearly savings
in support
costs in EU in
2020
Business as usual
bottom-up
Member states continue their
current policies and reach their
target mostly domestically. Besides
the already existing joint support
scheme between Sweden and
Norway, use of cooperation is
limited to small amounts of ex-post
statistical transfers.
n.a. n.a.
Twin stars pilots
bottom-up
A few pairs of countries (twin stars)
start up small, low risk joint
projects (typical project capacity
~200 MW).
Identifying suitable
partner; successful
negotiations.
1%
Twin stars scale-up
bottom-up
The joint projects of the Twin stars
pilots scenario are expanded to their
maximum achievable size.
Overcoming barriers
associated with large
scale cooperation;
putting in place
proper risk
mitigation measures.
5%
Full cooperation
top-down
RES deployment is planned at EU
level and surpluses are allocated in
an optimum manner to take
maximum advantage of the cost-
saving potential offered by
cooperation mechanisms. Use of
joint projects, joint support
schemes and statistical transfers is
assumed in this scenario.
EU-level planning of
RES deployment;
harmonized design
of support
instruments.
17%
Table 2.1: RES4LESS scenarios
The four scenarios reflect an increasing use of cooperation in its different forms, and highlight the
complementary character of bottom-up and top-down cooperation initiatives. Bottom-up initiatives are
quicker to set up and can provide very valuable empirical understanding of how to tackle risks and
barriers. However they can only lead to a relatively small impact on cost savings. A top-down
approach is needed in order to take maximum advantage of the potential for savings offered by
cooperation mechanisms. However much more time will be needed to set up such a centralized
cooperation framework because:
all 28 countries (EU27 + Norway) will have to agree on the terms;
major changes in support systems and legislations should take place;
major enhancements of the electricity network are needed.
D5.3 Key recommendations from the RES4LESS roadmap 8
2.1 Business as usual
In this scenario member states keep on following their current domestic policies to support RES
deployment. The use of cooperation mechanisms, besides the already existing joint support scheme
between Sweden and Norway, is then limited to statistical transfers. These are agreed on ex-post in
2020 to fill any eventual gaps. As highlighted by the analysis carried out in (Dalla Longa and Bole-
Rentel, 2011), and as confirmed by other studies (see e.g. Ragwitz et al., 2012), the availability of
surpluses for the transfers will be limited. It is therefore expected that the impact of statistical transfers
on cost savings to reach the 2020 targets will be minimal as
statistically transferred amounts will be small, and
supply of RES credits will be limited, hence their market price will be high.
2.2 Twin stars pilots
Within the RES4LESS case studies (Jacobsen, Pade Hansen and Jansen, 2012; Tantareanu, 2012;
Santamaria and Caldés, 2012), three possible joint projects were analyzed, focusing on different
technologies and geographical locations. The case studies highlighted the concrete possibility to
achieve cost savings and other direct and indirect benefits through cooperation, but also the presence
of barriers, risks, and direct and indirect costs which are difficult (yet critical) to quantify. Indirect
effects concern for example CO2 emissions, induced network system and balancing costs, industrial
development, job creation, security of supply, etc. The larger the project, the higher the impact of
barriers, risks and indirect effects. Therefore engaging in relatively small pilot joint projects (capacity
of the order of 200 MW) is seen as a practical solution to overcome barriers, minimize risk, building a
testing ground to empirically quantify indirect effects, and still realize some savings by 2020.
The reasoning behind the three case studies has been applied to other Valleys of Opportunity (VoO)
identified in (Dalla Longa and Bole-Rentel, 2011), and the results have been extended to form a
scenario that envisages the possibility of a number of pairs of countries (twin stars) establishing a
series of pilot joint projects (Raimundo and Dalla Longa, 2012a). The rationale behind this approach is
that by using properly designed joint projects of small size, the risks can be kept low, the negative
influence of barriers can be minimized, and grid-related issues such as curtailment can be completely
avoided.
The savings in support costs at the EU level are limited in this scenario: 1% in 2020, compared to the
BAU scenario. However, at member state level they may still make a significant difference in the total
0
10
20
30
40
50
BAU Twin stars pilots Twin stars scale-up Full cooperation
Ye
arly
su
pp
ort
co
sts
in E
U in
20
20
[b
il€
]
Figure 2.1: Estimated
yearly support costs in
2020 in the RES4LESS
scenarios.
D5.3 Key recommendations from the RES4LESS roadmap 9
direct costs needed to reach the domestic RES target. More importantly, the establishment of a series
of small pilot joint projects throughout Europe would lead to several benefits:
identification of the most suitable technologies and geographical areas for cooperation;
chance to empirically measure the impact of indirect effects;
understanding of how different kinds of barriers influence the deployment of cooperation;
providing a testing ground to implement different strategies for overcoming barriers;
building a bridge towards a more harmonized and cooperative RES deployment in the EU.
Who are the twin stars?
The pairs of countries in the Twin stars scenarios have been chosen based on the Valleys of
Opportunity analysis carried out in the RES4LESS project (Dalla Longa and Bole-Rentel, 2011).
The three RES4LESS case studies have been included in the selection. The other host countries
have been selected among the member states that presented the largest and cheapest surplus
potentials in 2020 according to the modelling projections, also taking into account the “reality
check” carried out in (Jacobsen, Pade Hansen, Bauknecht and Heinemann, 2012; Tantareanu et al.,
2012; Santamaría, Caldés and Rodríguez, 2012), and in some cases the actual ambitions (if known)
of the countries in relation to cooperation mechanisms. Similarly, user countries have been chosen,
based on the model projections, among the member states where RES deployment in 2020 was
most expensive, and taking into account domestic ambitions (if known). This resulted in the pairs of
countries and the corresponding technologies listed at the bottom of this text box. A graphical
representation is also offered in Figure 2.2.
While there has been a clear rationale in selecting the twin stars it is important to make it clear that:
the choice is still partly arbitrary;
many interesting combinations have inevitably been left out;
the aim of this selection is not to pin-point member states that definitely should (or should
not) engage in cooperation mechanisms, but rather to provide a “reasonable” set of pairs to
enable the analysis of the scenarios and the quantification of the corresponding savings;
given a pair of countries that together have enough potential to achieve both their 2020
targets, it is almost always possible to devise a cooperation agreement that can bring some
direct and/or indirect benefits to both countries.
MS Host MS User Technology
Spain Netherlands (Case Study), Poland CSP
Denmark Netherlands (Case Study), Belgium, UK Off-Shore Wind
Ireland UK Off-Shore Wind
Norway Belgium, Poland Off-Shore Wind
Latvia Luxemburg, Bulgaria, Malta Biomass
Romania Netherlands (Case Study), Bulgaria, Belgium Biomass
Sweden Belgium, Luxemburg, Poland Biomass
Austria Bulgaria On-Shore Wind
Finland Netherlands, Poland On-Shore Wind
Latvia Luxemburg, Malta On-Shore Wind
Norway Poland On-Shore Wind
Sweden Belgium, Poland On-Shore Wind
D5.3 Key recommendations from the RES4LESS roadmap 10
The twin stars, pioneering the implementation of joint projects, will have a clear strategic advantage in
the future RES market, which is set to be characterized by more cooperation and harmonization. All
other EU member states will also benefit from the experience built up during the deployment of the
joint pilot projects.
2.3 Twin stars scale-up
This scenario entails an extension of the previous one, where the twin stars decide to expand the joint
pilot projects to their maximum achievable size. The key enabling condition to realize such an
expansion is that all barriers and risks associated to large joint projects need to be properly addressed.
A detailed analysis of the barriers to cooperation has been carried out within the RES4LESS case
studies (Jacobsen, Pade Hansen and Jansen, 2012; Tantareanu, 2012; Santamaria and Caldés, 2012)
and in (Pade Hansen and Jacobsen, 2012). Barriers that are specifically related to the electricity grid
have been analyzed in (Pade Hansen and Jacobsen, 2012; Heinmann and Bauknecht, 2012; Heinmann,
Bauknecht and Dalla Longa, 2012; Heinmann, Bauknecht, Sachs and Dalla Longa, 2012). The
analyses highlight that the main barriers associated with a large cooperation project are those related to
the fact that the domestic energy demand in the member state hosting the project (host country1) may
not be able to absorb the RES surplus generated by the joint project. More specifically, in case the
surplus is meant to be consumed in the host country (with substitution of power from other in-lands
generating plants), two conditions need to be met for bringing about overall cost savings:
the electricity grid must be able to handle the electricity produced within the joint project (this
may pose a challenge as the energy may be coming from variable sources like wind or PV),
the most expensive conventional technologies need to be displaced.
If the grid is not adequately developed to handle the extra production, grid-enhancement may be
necessary, and the related costs must be suitably shared between the cooperating countries.
Conventional producers in the host country may oppose the expansion of the joint project if this
threatens their ability to maintain their share in the domestic electricity market or put downwards
pressure on wholesale power prices. Consequently there is a risk that the host country cannot
guarantee the production agreed upon in the joint project contract. Furthermore, even if resistance
from conventional producers can be avoided, the introduction of large amounts of RES from variable
sources in the energy mix may still lead to curtailment in case production largely exceeds demand.
1 Similarly, the term user country is used to identify the member state buying the electricity produced in the
cooperative project or the corresponding RES credits.
Offshore windOnshore windBiomassSolar
Figure 2.2: Flow of RES credits in the
Twin stars scenarios.
D5.3 Key recommendations from the RES4LESS roadmap 11
If it is not possible to guarantee that both conditions are met, the host country can still enable the up-
scaling of the pilot project by exporting the surplus electricity. If an interconnector can be installed (or
is already in place) between the cooperating countries, the electricity can be directly transferred to the
user country2. In this case the barriers related to a change in the energy mix discussed above apply to
the user country. Alternatively, the electricity can be sold to a third country, that already has an
interconnector with the host country. In this case it is up to the host country to guarantee that the
electricity can effectively be sold and the cooperating member states should agree on who will bear the
related risks. Finally, independently of where the electricity is consumed, the change in the energy mix
associated with the deployment of a large cooperation project may lead to fluctuations in the
electricity price, and possibly temporary revenue losses for producers. Also in this context, the ability
to physically transport the surplus electricity outside the domestic borders can be an important factor
to mitigate the eventual negative impact on wholesale electricity prices.
In this scenario, yearly savings at EU level in 2020 grow to 5% compared to the BAU. The lessons
learned in overcoming the barriers related to the scaling-up process represent very important indirect
benefits both at EU and at member state level.
2.4 Full cooperation
In this scenario EU member states agree on moving away from local planning and domestic support,
and choose instead for deploying RES by making maximum use of cooperation. The scenario is based
on the global VoO analysis3 carried out in (Dalla Longa and Bole-Rentel, 2011). In this exercise
cooperation mechanisms are used to replace the most expensive RES technologies in Europe with the
cheapest surplus potentials available. Figure 2.3 summarizes the results of the global VoO analysis for
the year 2020, indicating which surpluses from the group of Host Countries can be allocated to replace
the most expensive RES technologies in the group of User Countries.
In order to implement in practice this scenario two key conditions need to be met: RES deployment
must be planned in a centralized top-down manner at EU-level, and support instruments must be
designed in a harmonized fashion. This will provide transparency and ensure that support costs at EU-
level are minimized. These conditions are clearly in contrast with the actual situation of RES
deployment and support in EU, which is characterized by a fragmented national approach towards the
fulfillment of the 2020 targets. Therefore this scenario only makes sense in the long run, as specified
in the next chapter.
The main attractive element in this scenario is that it yields an optimum allocation of RES surpluses in
the EU, showing the maximum impact cooperation mechanisms can have on reducing the total support
costs. Savings at EU level in 2020 are 17% compared to the BAU. However, the centralized planning
underlying this scenario does not provide much flexibility to the member states to plot their own path
towards decarbonization of their energy systems. Moreover, the scenario does not reflect the actual
ambitions of single member states towards cooperation mechanisms. In particular, a country with a
large surplus potential may aim at hosting a joint project, even though the average costs of its surplus
are relatively high compared to those of other member states. In a bilateral agreement such a country
still has the possibility to find a cooperation partner, while in the case of top-down planning of
cooperation this is not possible because the surplus is simply not cost competitive.
2 In principle, even in absence of a direct interconnection, it is still possible to transfer the electricity from the
host to the user country by ensuring that whenever a certain amount of electricity from the joint project is
exported from the host country, the same amount enters the user country. However this appears to be a rather
cumbersome process, and additional costs will be incurred for monitoring the simultaneous export and import of
electricity.
3 The term global analysis in this case does not refer to world-level, but to EU-level analysis, since only EU
member states and Norway were included in the modelling exercise.
D5.3 Key recommendations from the RES4LESS roadmap 12
Finally, as already mentioned, a certain degree of harmonization is needed in order to realize this
scenario. However, harmonization is itself an instrument that can drive costs down. Therefore it will
become important to analyze the interactions between large scale cooperation and harmonization, in
order to ensure that the two instruments work in synergy.
Figure 2.3: Results of the global VoO analysis carried out in (Dalla Longa 2011) using the
RESolve-E model.
D5.3 Key recommendations from the RES4LESS roadmap 13
3. Timing
The four scenarios described above entail different degrees of cooperation. The key enabling factors
listed in Table 2.1 and discussed in the text of the previous chapter highlight that the barriers become
more and more difficult to overcome when moving from the BAU scenario to the two Twin stars
scenarios and finally to the Full cooperation scenario. The scenarios where the barriers are lower can
be realized on a relatively short time frame, while those presenting more demanding enabling
conditions are only realistic in the longer run.
In this chapter we analyze the four scenarios within two separate time horizons: a short term horizon
up to 2020 and a long term horizon up to 2030. The outcome of the analysis is summarized in Figure
3.1.
Figure 3.1: Time frame for implementation of the RES4LESS scenarios.
3.1 2020 horizon
The BAU scenario is the base case for the pathway toward the achievement of the 2020 targets. This
scenario foresees a very limited use of cooperation mechanisms: the joint support scheme between
Sweden and Norway, and a small amount of ex-post statistical transfers.
The Twin stars pilots scenario represents the most easily achievable deviation from the BAU scenario.
The analysis carried out in the RES4LESS case studies suggests that the pilots could be implemented
within the 2020 horizon. The first key condition for implementation is that interested member states
identify a suitable cooperation partner. It is expected that most member states have the means to assess
which other countries may be suitable for a partnership. Moreover, the RES4LESS decision flowchart
presented below can provide a valuable framework and guidance in carrying out the identification
process. The second step is to engage in successful negotiations with the identified partner. Due to the
small size of the joint projects in the Twin stars pilots scenario and to the flexibility provided by the
RES Directive in designing cooperation mechanisms, it is expected that successful negotiations can be
carried out within a relatively short time frame. Moreover, the Commission is planning to publish a
guidance document on cooperation mechanisms in 2013 that should provide further guidance on how
to carry out negotiations and design cooperation agreements.
Achieving the Twin stars scale-up scenario within 2020 presents a tough challenge. The conditions for
success are very demanding, as described above, as the barriers related to large joint projects may be
difficult to overcome. However it can be expected that for some of the Twin stars the right conditions
for scaling-up are met, and some expansion of the initial pilots can be achieved within the 2020
horizon.
2013
Twin stars pilots
Negotiations &
Implementation of pilot joint
projects
Twin stars scale-up Scaling up of pilot projects
Full cooperationGradual exploitation of
full cooperation potential
2020 2030
D5.3 Key recommendations from the RES4LESS roadmap 14
The Full cooperation scenario is not realistic in the short run. The key conditions for implementation,
EU-level planning and harmonized design of support, are clearly in contrast with the current situation,
and changes in this direction can only be realized on a longer time frame taking advantage of lessons
learnt from preceding cooperative actions.
3.2 2030 horizon
While in general it is expected that the deployment of renewables will continue to accelerate between
2020 and 2030, it is still unclear what pathway this growth will follow, both at EU and at member
states level. The development of RES will ultimately depend on the EU 2030 policy, i.e. whether there
will be a 2030 RES target and what type of target this will be. From the perspective of cooperation
mechanisms, the present uncertainty on the EU 2030 policy makes it difficult to assign a monetary
value to RES credits after 2020. Therefore cooperation agreements that foresee the financing of RES
in another country beyond 2020 inherently carry a certain amount of risk that the value of the RES
credits generated after 2020 will be very low. The greater the scope of the cooperative projects, the
higher the risk. It is therefore clear that member states will be very cautious in investing in large
cooperation projects that span into the 2020-2030 decade. However there are a couple of elements that
soften the barrier created by the uncertainty on the EU 2030 RES policy. Firstly, the Commission is
currently assessing a number of concrete options for the 2030 RES policy. Therefore member states
can expect that some clarity will be reached in the coming years, and more importantly at this stage
they can still influence the process. Secondly, it is expected that the electricity grid will be enhanced
and expanded, including more interconnectors between member states and more transmission
capacity.
Given this context, it seems reasonable to assume that the conditions for a successful implementation
of the Twin stars scale-up scenario can be met to a certain extent in the 2030 horizon. In particular, the
enhancements of the electricity network (both within and across member states’ borders) will provide
enough flexibility to accommodate the (surplus) electricity produced, and enable exports if necessary.
Furthermore the experience gained with the execution and partial expansion of (some of) the pilot
joint projects will provide concrete examples of how to mitigate the risks and overcome the barriers
related to scaling up.
Despite the potential for greater harmonization and market integration of RES in the member states’
support systems, achieving the Full cooperation scenario in the 2030 horizon still appears to have a
very low chance of materializing. However within this time frame a number of large scale cooperation
mechanisms can still be set up. More specifically, besides the scaling-up of joint projects, joint support
schemes might well play a large role. Joint support schemes are typically best suited for large scale
cooperation, and are inherently difficult to set up, as they involve a (partial) coordination of support
systems among the participating countries. Therefore negotiations, design and start-up process may be
time consuming , and it is expected that joint support schemes will start to play a larger role only after
2020. Some concrete possibilities for long term joint schemes can already be identified:
North Sea grid: Joint support scheme among countries bordering the North Sea, mainly
focussed on the development of offshore wind parks and involving physical transfer of
electricity by means of a dedicated grid connecting the wind parks to the participating
countries, and including a series of interconnectors between the countries. This joint scheme
can be implemented gradually, building on existing initiatives such as the joint support
scheme between Sweden and Norway and any eventual (pilot) joint projects between North
Sea countries based on offshore wind.
Additional member states entering the existing joint support scheme between Sweden and
Norway: Rather than starting the deployment of a new joint support scheme from scratch,
some countries may negotiate their entry into existing initiatives, the only available one
currently being the joint support scheme between Sweden and Norway.
D5.3 Key recommendations from the RES4LESS roadmap 15
Frameworks for projects exploiting distributed sources: Within the RES4LESS biomass case
study (Tantareanu, 2012), a framework for developing a large number of small distributed
biomass projects was envisioned, rather than one large project. This seemed to be a logical
solution when wanting to provide a flexible platform for biomass producers that may be
working with a range of different technologies and raw feedstocks. Such a framework can be
seen as a hybrid mechanism between a joint project and a joint support scheme. The same
logic can be applied to any cooperation agreement based on distributed sources (such as
biomass or PV).
D5.3 Key recommendations from the RES4LESS roadmap 16
4. Decision flowchart
Engaging in cooperation mechanisms can be seen as a complicated process because of the presence of
barriers and risks, the lack of practical experience, the difficulty in identifying the right partner, and in
designing a proper cooperation agreement. Many complex issues may need to be tackled and solved
before cooperation can be established. In order to assist member states in this process, a decision
flowchart was developed within the RES4LESS roadmap. The flowchart introduces a scheme to
systematically analyze a member state’s initial situation and possibilities with regards to cooperation
mechanisms, and to prepare for the negotiation phase. The approach underlying the flowchart is that a
member state should first focus on the most basic aspects of cooperation and then tackle the more
complex issues in a series of successive iterations. When carrying out an assessment using the
flowchart, it is important to come up with a range of possible options, rather than one single solution
to be brought to the negotiation table and discussed with potential cooperation partners.
Given that among the three types of cooperation mechanisms bilateral joint projects were identified as
the main instrument that can make an impact in the path towards the achievement of the 2020 RES
targets, the flowchart is especially focused on the preparatory work that is necessary to set up a joint
project between two member states. However many of the steps identified in the flowchart also apply
for statistical transfers (especially if these are agreed upon ex-ante). Joint support schemes are
discussed separately at the end of the chapter.
The flowchart is presented in Figure 4.1. The figure is mostly self-explanatory, however a few aspects
concerning the different steps are briefly discussed in the remainder of this section.
Step 0: Preliminary assessment
The flowchart starts with an assessment of the motivation and ambitions with regards to cooperation
mechanisms. The main issues to be addressed are summarized in the figure. These items do not
necessarily have to be analysed in a specific order, but the picture emerging from the analysis should
reflect a member state’s own priorities and strategies.
Step 1: Characterize marginal option at the target
Constructing a RES cost supply curve and studying how this will evolve till 2020 can give a good idea
on how a member state is going to reach its target. The cost and potential of the marginal technology
at the target4 are the basic elements a member state has to take into account when trying to identify
possible cooperation partners and to estimate direct costs and benefits of cooperation.
Step 2: Identify possible cooperation partners
In order to realize some savings, a member state that aims at importing RES credits through
cooperation mechanisms (user country) will look for partners among those member states that have
relatively low marginal costs at the target. Vice versa, a member state aiming at being a host country
will typically look for partners among the member states that have relatively high marginal costs.
Besides this economic condition, other criteria can be identified. A few of these are listed in the figure.
However the list can be expanded and, once again, it should reflect a member state’s strategic
priorities.
Step 3: Preliminary estimate of direct costs and benefits
Once a set of potential partners has been identified, a basic estimate of costs and benefits can be made.
As indicated in the figure, a user country can realize some savings in support costs by developing RES
4 The marginal technology at the target is the cheapest technology that a member state could deploy in its
territory after having reached its RES target.
D5.3 Key recommendations from the RES4LESS roadmap 17
abroad; for a host country the direct benefits consist in the opportunity to deploy additional RES at no
costs. The benefits can be calculated according to the formulas in the figure, by taking into account the
marginal costs at the target (from Step 1), the expected electricity price and eventually the grid
connection costs. All costs refer to the year 2020; however the analysis can be carried out for earlier or
later years as well.
Step 4: Preliminary assessment of indirect costs and benefits
Besides direct costs and benefits, member states engaging in cooperation mechanisms should be
careful to also consider possible indirect effects. In particular indirect benefits should be in line with
domestic strategies, and indirect costs should be kept as low as possible. The impact of these effects
will typically scale with the size of the cooperation agreement, and there is an intrinsic uncertainty that
makes it difficult to quantify them ex-ante. This can create some reluctance to engage in cooperation.
Once the main indirect costs and benefits have been identified, sensitivity analyses can be carried out
to ensure that the risks associated with indirect costs can be managed. Another practical way to
overcome this barrier is to start with small pilot projects to minimize risk and create a testing ground
for empirically quantifying indirect effects.
Feedback loop(s)
Upon reaching the end of Step 4 a member state should have developed a good basic idea of what can
be achieved with cooperation, who the interesting potential partners are, and how cooperation would
fit with other domestic strategic objectives. At this point it is good practice to go back and review the
four steps trying to identify the key benefits and the potential risks and barriers. Sensitivity and “what-
if” analyses can then be performed on these items. Once a certain degree of confidence has been
achieved that cooperation will bring the desired benefits and that risks can be mitigated, the more
complex issues can be tackled. Some of these issues are listed in the figure, but as usual the list should
be customized to reflect domestic strategic priorities.
One issue to be addressed at this stage is that of physical vs. virtual transfer of electricity, in the cases
where this makes sense (i.e. an interconnector is already present, or planned). It is important to remark
that this is considered a complex issue, while the base-case cooperation always entails non-physical
transfer.
4.1 How to use the flowchart for joint support schemes
The flowchart has been developed mainly for bilateral joint projects. However it can also be used to
provide a basic understanding of how to set up a joint support scheme. The main difference in this
case is that the assessment should be carried out per technology, rather than considering the whole
RES cost supply curve of the participating countries. The flowchart can be used to figure out how to
set up joint projects concerning different RES technologies in the cooperating member states. Based
on this exercise, a picture should then emerge of where it makes more sense (economically or
according to other criteria) to deploy certain technologies. The outcome of this analysis can then be
used as a starting point to draft a joint support scheme agreement.
D5.3 Key recommendations from the RES4LESS roadmap 18
D5.3 Key recommendations from the RES4LESS roadmap 19
Figure 4.1: The RES4LESS decision flowchart
D5.3 Key recommendations from the RES4LESS roadmap 20
5. Conclusions
The analysis carried out in the course of the RES4LESS project, summarized in this document,
highlights many opportunities for achieving cost savings in the deployment of renewables through
cooperation mechanisms in Europe. However the presence of barriers and risks is currently making
most member states be very cautious in seizing these opportunities. Therefore the most important
factor to stimulate the use of cooperation mechanisms is the ability to create confidence that barriers
can be overcome and risks can be managed. Given this context the key recommendations emerging
from the RES4LESS Roadmap can be summarized as:
1. Maximize the chance of realizing cost savings by engaging in early negotiations;
2. Reduce the impact of risks and uncertainties by starting with small size cooperation
agreements;
3. Ensure the possibility to scale-up in case the right conditions are met;
4. Reduce uncertainty by performing feasibility studies and sensitivity analyses.
The first item stems from the fact that if most countries continue with the current support instruments,
the availability of surplus potentials in 2020 will be limited, hence the prices of statistical transfers
will be relatively high and the chances for realizing cost savings minimal. Starting now to investigate
and plan possibilities to engage in cooperation mechanisms emerges as a very smart route to ensure
the possibility to realize some cost savings.
The second and the third items are linked with the analysis of the RES4LESS case studies, which
focused on bilateral joint projects. The logic behind the case studies has been generalized and
extended leading to the Twin stars scenarios developed in the RES4LESS roadmap. Properly
designed, scalable joint projects have been identified as the most effective manner for cooperation
mechanisms to make an impact on the costs for the achievement of the 2020 RES targets.
Finally, the fourth item highlights the importance of preparatory work to ensure a successful
deployment of cooperation. In order to assist member states in systematically assessing their
opportunities in relation to cooperation mechanisms, a decision flowchart has been developed as part
of the RES4LESS roadmap. As shown in Figure 5.1, the tool identifies a few simple steps to grasp the
basic aspects of cooperation given the current domestic situation of RES deployment in a member
state. Complex issues can be introduced and tackled by iteratively repeating and enriching these steps.
At the end of the process a member state should be able to engage in successful negotiations with the
identified partners(s).
Figure 5.1: Overview
of the RES4LESS
decision flowchart.
D5.3 Key recommendations from the RES4LESS roadmap 21
References
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cooperation among EU countries, ECN December 2011, Deliverable D2.2 of the RES4LESS project
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