PROSPECTS FOR RENEWABLES IN THE NEW MEMBER STATES
MSC Anca-Diana Barbu (Carl von Ossietkzy University)
Martine Uyterlinde (ECN), Hage de Vries (ECN)
World Renewable Energy Congress VIII
Denver, 29 August-3September, 2004
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Presentation outline
• Implementation of the RES Directive in Europe: lessons learnt from the EU-15;
• Key factors likely to influence RES development in CEE countries: energy issues, economic and social issues;
• Admire Rebus model: key features, assumptions and scenarios;
• Risk factors and their implementation in the model;
• Model results: technology mix,green electricity trading;
• Conclusions
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Implementation of RES Directive: lessons from EU-15
• Policies and measures currently in place are not sufficient to meet the RES target in 2010;
• The main risk in achieving the target is the significant imbalance between the level of commitments among Member States;
• Main culprits: production of electricity from biomass and sluggish developments in heating and cooling sectors;
• Fragmentation of European market;• Complicated administrative procedures, inadequate local
energy planning to include a larger share of RES and opaque grid connection conditions;
• Implementation of the GOs;
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New Member StatesEnergy related issues I
• Ambitious indicative RES targets;Country RES-E (%) 1999 RES-E (%) 2010Czech Republic 3.8% 8.0%Estonia 0.2% 5.1%Hungary 0.7% 3.6%Latvia 42.4% 49.3%Lithuania 3.3% 7.0%Poland 1.6% 7.5%Slovenia 29.9% 33.6%Slovakia 17.9% 31.0%European Community 12.9% 21.0%
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New Member StatesEnergy related issues II
• Need to diversify primary energy sources
Electricity gross generation in CEE
0%10%20%30%40%50%60%70%80%90%
100%
% o
f tot
al 3
27.9
2 TW
H Others
Gas
Oil
Coal
Biomass
Wind
Geothermal
Hydro
Pumping
Nuclear
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New Member StatesEnergy issues III
• Need to increased security of supply
Import dependency in 2000 (%)Source: EC(2003)
Countries/
fuels
All fuels Solid fuels Oil Nat.Gas
EU-15 49.3 51.2 75 45.2
NMS 29.9 -17.4 95 84.3
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New Member StatesEnergy and environmental issues
• The issue of overcapacity;
• The issue of energy efficiency;
• Climate change commitments;
Surplus installed capacity as of 2002Source: CEU (2003)
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New Member StatesOther issues
Economic issues• High GDP growth rates compared with EU-15;• Scarce public budgets;• Uncertainty about inflation and exchange rates; Social issues• In 1998, one in 5 people lived with under USD2.15
/day in CEE and CIS countries (WB 2002);• Inequality (income distribution) and fuel poverty
increased over the last decade;• The share of energy bill from households
disposable income increased;• Job losses as a result of economic reforms;
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Market simulation Market simulation
Policy-based demand for renewable electricity
Supply curves based on technology
costs & potentials
•Risk•Transaction costs•Lead times
years
•TGC Price(s)•Technology mix•Trade flows
scenarios
The ADMIRE REBUS model
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TWh
€ct/kWh
0
Supply- and demand curveBidprice: Feed-in tariffDemand size: potential
Bidprice: penaltyDemand size: quota
Ask price: ‘required green price’ after supply supportSize: realisable potential
Discrimination by country/ technology
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Calculations of RES potentials
Technical feasibility
Technical potential
Realistic potential
Realisable potential
Theoretical potential
Acceptability& Planning
Land availability
World-wide industryproduction rate
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AssumptionsProjections for energy consumption: based on EU Energy
Outlook to 2030 Electricity prices: assumed to gradually increase from over
3€¢/kWh in 2002 to over 5 €¢/kWh in 2010 thus accounting also for the effect of emissions trading;
Technology costs: are assumed to be similar to the ones in the EU-15; decrease over time;
Interest rate: 5%Corporate taxation: KPMG corporate tax survey January
2004; for countries not mentioned in the report a rate of 30% has been considered;
Debt to equity ratio: 80/20For quota-based systems: we have assumed a 7€¢/kWh
penalty
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ScenariosAmbition high
(EU targets mandatory 2010)
Ambition low(EU targets achieved later)
Fragmentation Co-operation
ambition level differs per country
Present policies
ClusteringTGC-countries
EU targets / trade 2010
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Risk factors• Political risks (changes in support policies, planning,
changes in tax regime, changes in legal framework , state aid rules, relationships with local authorities12 and public opinion, the performance (and mission) of environmental and energy efficiency funds, future fine tuning of climate policies;
• Market risks (electricity price, increased competition, input fuel price, interest and exchange rates, consider the evolution of gas prices, the continuous change in market structure, SMEs and the performance of financial markets, local banks;
• Technological risks Impact on project development:• Extended project lead times;• Higher transaction costs and• Fluctuations in project revenue.
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Possible technology mix by 2010
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
EU-15 NMS Total
Other
Wind onshore
Small & medium hydro(<10MW)
Large hydro (>10 MW)
Biomass
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Green electricity trade
-10,000
-5,000
0
5,000
10,000
15,000
20,000
25,000
Cyprus CzechRepublic
Estonia Hungary Latvia Lithuania Malta Poland SlovakRepublic
Slovenia
Domestic production Import or export Target
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Minimum required green price in 2010 for small-hydro
RGP 2010- SHPP (<10MW)
-2.04.06.08.0
10.012.014.016.018.020.0
Countries
Eu
ro c
ents
/kW
h
Band 2
Band 3
Band 4
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RGP2010-CHP
RGP 2010-CHP
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Countries
Eu
ro c
ents
/kW
h
EnergycropsForestry
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Conclusions
In the short to medium run, investments in developing RES projects in the
new member states are likely to depend on the following:
• Clarity and coherence of various policies (e.g support mechanisms for RES, agriculture, climate change, labour market.); targeted policies will be needed for a wider range of RES technologies;
• The pace in building capacity on the local level in energy planning, transposing national RES targets into local ones, project financing and technology (including promoting local manufacturing of RES technologies);
• The soundness of fiscal and monetary policies and the ability of CEE governments to maintain a stable economic and political environment;
• The availability of innovative financing schemes to allow low income communities to access new technology and energy services.
• Support to allow SMEs to fill in the technology gap including access to seed, working and development capital and business services;
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Thank you for your attention
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