reinhardhaas-eu parliament potentials and prospects for ... · e.g. market growth rates, planning...

Authors: Reinhard Haas, Gustav Resch, Thomas Faber, Hans Auer, Lukas Weissensteiner– all Energy Economics Group, Vienna University of TechnologyContact … Web: http://eeg.tuwien.ac.atEmail: [email protected]

Potentials and prospects for Potentials and prospects for Renewable Electricity in EuropeRenewable Electricity in Europe

Results from theResults from the GreenGreen --XX modelmodel

… based on calculations .made with the help of the .computer model Green-X .

www.green-x.at

Funded by the EC(in various projects)

STOA workshop on future energy systems in Europe – Brussels, 20 November 2007

ContentContent

1. Potentials and cost for RES in Europe

2. Background information – investigated cases

… Method of approach / characterisation of the Green-X model

… Investigated cases

3. Results on the future deployment of RESin the EU25

… Results on RES deployment and investment needs

… National improvement versus harmonisation

4. Modelling different allocation policies of RES-E Integration Cost

5. Concluding remarks

1995 2000 2005 2010 2015

Historical deployment

Theoretical potential

Ele

ctric

ity g

ener

atio

n

Economic Potential

Technical potential R&D

2020

Definition of potential terms

Theoretical potential ... based on the determination of the

energy flow.

Technical potential … based on technical boundary conditions (i.e. efficiencies of conversion technologies, overall technical limitations as e.g. the available

land area to install wind turbines)

Policy, Society

additional additional realisablerealisablepotential potential for 2020for 2020

achieved achieved potential potential 20042004

Realisable potential … The realisable potential represents

the maximal achievable potential assuming that all existing

barriers can be overcome and all driving forces are active.

Thereby, general parameters as e.g. market growth rates,

planning constraints are taken into account in a dynamic

context – i.e. the realisable potential has to refer to a

certain year.

Maximal time-path for penetration (Realisable Potential)

Definition of the (additional) realisable Definition of the (additional) realisable midmid--term potential (up to 2020)term potential (up to 2020)

(1) Potentials and cost for RES(1) Potentials and cost for RES

MidMid--term realisable potentialterm realisable potentialfor RESfor RES--E in the EU25E in the EU25

0

50

100

150

200

250

AT

BE

DK FI

FR

DE

GR IE IT LU NL

PT

ES

SE

UK

RE

S-E

- E

lect

ricity

ge

nera

tion

pote

ntia

l [T

Wh/

yr.]

Additional potential 2020

Achieved potential 2004

0

50

100

150

200

250

300

Bio

gas

(Sol

id)

Bio

mas

s

Bio

was

te

Geo

ther

mal

ele

ctric

ity

Hyd

ro la

rge-

scal

e

Hyd

ro s

mal

l-sca

le

Pho

tovo

ltaic

s

Sol

ar th

erm

al e

lect

ricity

Tid

e &

Wav

e

Win

d on

shor

e

Win

d of

fsho

re

EU15 countries



New Member States

0

5

10

15

20

25

30

CY

CZ

EE

HU LA LT MT

PL

SK SI

RE

S-E

- E

lect

ricity

ge

nera

tion

pote

ntia

l [T

Wh/

yr.]

Additional potential 2020

Achieved potential 2004

0

5

10

15

20

25

Bio

gas

(Sol

id)

Bio

mas

s

Bio

was

te

Geo

ther

mal

ele

ctric

ity

Hyd

ro la

rge-

scal

e

Hyd

ro s

mal

l-sca

le

Pho

tovo

ltaic

s

Sol

ar th

erm

al e

lect

ricity

Tid

e &

Wav

e

Win

d on

shor

e

Win

d of

fsho

re



Total EU25

0

50

100

150

200

250

2010 2020

Sol

id b

iom

ass

- po

tent

ial i

n te

rms

of p

rimar

y en

ergy

[Mto

e/ye

ar]

Forestry imports

Biodegradable waste

Forestry residues

Forestry products

Agricultural residues

Agricultural products

… Biomass as a major contributor in all energy sectors!

� Approach: Starting with primary energy, competition well reflected …


Cost of electricity Cost of electricity by RESby RES--E optionE optionBandwithBandwith on European levelon European level

0 50 100 150 200

Biogas

(Solid) Biomass co-firing

(Solid) Biomass

Biowaste

Geothermal electricity

Hydro large-scale

Hydro small-scale

Photovoltaics

Solar thermal electricity

Tide & Wave

Wind onshore

Wind offshore

Costs of electricity (LRMC - Payback time: 15 years ) [€/MWh]

cost range (LRMC)

PV: 430 to 1640 €/MWh

0 50 100 150 200

Biogas

(Solid) Biomass co-firing

(Solid) Biomass

Biowaste


Hydro large-scale

Hydro small-scale

Photovoltaics


Tide & Wave

Wind onshore

Wind offshore

Costs of electricity (LRMC - Payback time: Lifetime ) [€/MWh]

cost range (LRMC)

PV: 340 to 1260 €/MWhCur

rent

mar

ket p

rice_

Cur

rent

mar

ket p

rice_

…based on default common payback time(15 years)

…based on technology-specific lifetime


Simulation model for energy policy instruments in the European energy market

•RES-E, RES-H, RES-T and CHP, conventional power•Based on the concept of dynamic cost-resource curves•Allowing forecasts up to 2020 on national / EU-27 level

The The GreenGreen--XX modelmodel

(2) Background(2) Background

Reference clients: European Commission (DG RESEARCH, DG TREN, DG ENV), Sustainable Energy Ireland, German Ministry for Environment, European Environmental Agency, Consultation to Ministries in Serbia, Luxembourg, Morocco, etc.

Base input information

Scenario Information

Power generation

(Access Database)

Policy strategies selection

Social behaviourInvestor/consumer

Externalities

Framework Conditions

(Access Database)

Results Costs and Benefits on a yearly basis (2005-2020 )

Country selection

Electricity demand reduction (Access Database)

Technology selection

Economicmarket and policy

assessmentpotential, costs,

offer prices

Simulation of market interactionsRES-E, CHP, DSM power market, EUAs

Base input information

Scenario Information

Power generation

(Access Database)

Policy strategies selection

Social behaviourInvestor/consumer

Externalities

Framework Conditions

(Access Database)

Results Costs and Benefits on a yearly basis (2005-2020 )

Country selection

Electricity demand reduction (Access Database)

Technology selection

Economicmarket and policy

assessmentpotential, costs,

offer prices

Simulation of market interactionsRES-E, CHP, DSM power market, EUAs

TheThe GreenGreen--XX approach: approach: TheThe GreenGreen--XX approach: approach: DynamicDynamic

Potentials•by RES-E technology (by band)•by country

Costs of electricity•by RES-E technology (by band)•by country

COST-RESOURCE CURVES•by RES-E technology•by country

costs

potential

Dynamic aspects•Costs: Dynamic cost assessment (technological change)•Potentials: Dynamic restrictions (technology diffusion)

DYNAMIC

•by year

costcost--resource curvesresource curves

(2) Background(2) Background

Green-X balanced scenario

0

200

400

600

800

1000

1200

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

RE

S-E

- e

nerg

y ou

tput

[TW

h/ye

ar]

Wind offshore

Wind onshore

Tide & wave


Photovoltaics

Hydro large-scale

Hydro small-scale


Biowaste

Solid biomass

Biogas

Historical development Future development

0

10

20

30

40

50

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

RE

S-T

- e

nerg

y ou

tput

[Mto

e/ye

ar]

Biofuels


0

20

40

60

80

100

120

140

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

RE

S-H

- e

nerg

y ou

tput

[Mto

e/ye

ar]

Solar thermalheat

Geothermal -heat pumps

Geothermal -non heat pumps

Biomass heat


Renewable Energy Renewable Energy Roadmap Roadmap (European (European Commission, Commission, January 2007)January 2007)European Union European Union

20% 20% Renewable Renewable Energies by Energies by 20202020

(2) Background (2) Background -- Reference ProjectsReference ProjectsPROGRESS … how to meet 20% RES by 2020PROGRESS … how to meet 20% RES by 2020

… currently updated within the IEE-project

to include GO-trade & other (more) promising flexible approaches in meeting national 2020 RES targets

0%

15%

20%

25%

30%

35%

1990 1995 2000 2005 2010 2015 2020

RE

S-E

dep

loym

ent

[%]

Historical development

BAU-forecast

Indicative RES-E Target (2010)

Strengthened national policies

951 TWh(BAU)

1156 TWh(improved national

Introduction of harmonised policies (2015)

Technology-specific harmonised FIT scheme

Non technology-specific harmonised TGC system

& harmonisedpolicies)

Investigated cases:

Business-as-usual(BAU)

Continuation of currentnational policies

up to 2020

Improvednationalpolicies

Efficient & effectivenational policies

NONO HARMONISATIONHARMONISATION HARMONISATION IN 2015

Technology-specificsupport

Feed-in tariffs- harmonised

Non technology-specificsupport

Quota obligation basedon TGCs - harmonised

“National policy “National policy optimisation versus optimisation versus harmonisation”harmonisation”

(2) Background (2) Background -- Reference ProjectsReference Projects

Support instruments have to be• effective for increasing the penetration of RES-E and

• efficient with respect to minimising the resulting public costs over time.Public costs or transfer cost for consumer / society (due to the promotion of RES-E) are defined as direct premium financial transfer costs from the consumer to the producer due to the RES-E policy compared to the case that consumers would purchase conventional electricity from the power market.

This means that these costs do not consider any indirect costs / benefits or externalities(environmental benefits, change of employment, etc.).

►►Core Objective Core Objective -- Method of approachMethod of approach

Example:

Feed-in tariff for a wind power plant(1 MW, 2000 MWh/year)Feed-in tariff = 90 €/MWhMarket price conventional electricity = 40 €/MWh

�Financial premium = = 90 – 40 = 50 €/MWh

�Yearly transfer cost = = Premium * Generation == 50*2000 = 100 k€/year

FIT:

90€/MWh

pcon:

40€/MWh

premium:

50€/MWh

2000MWh/year

Yearlytransfer cost:100,000€/year

(2) Background (2) Background –– Assessment criteriaAssessment criteria

►►Core Objective Core Objective -- Method of approachMethod of approach

quantity[GWh/year]

price, costs [€/MWh]

Market clearingprice = price for certificate

MC

Quota Q

pC

MC ... marginalgeneration costs

pC ... market price for(conventional)electricity

pMC ... marginal price for RES-E (due toquota obligation)

pMC

Generation Costs (GC)

Producer surplus (PS)

Transfer costs for consumer (additional costs for society)

= PS + GC – pC * Q

quantity[GWh/year]

price, costs [€/MWh]

Market clearingprice = price for certificate

MC

Quota Q

pC







pMC

Generation Costs (GC)

Producer surplus (PS)

Transfer costs for consumer (additional costs for society)

= PS + GC – pC * QTransfer costs for consumer (additional costs for society)

= PS + GC – pC * Q

The criteria used for the evaluation of various instrumentsare based on:

•Minimise generation costs

•Lower producer profits

Transfer costTransfer costfor consumer / societyfor consumer / society

(2) Background (2) Background –– Assessment criteriaAssessment criteria

BAU scenarioBAU scenario

Total electricity generation from RES (EU25)as share of gross electricity demand

(3) Results(3) Results

… the impact of an active DSM policy and conventional energy prices

27,0%

22,9%23,6%

18,2%

15%

17%

19%

21%

23%

25%

27%

29%

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

RE

S-E

dep

loym

ent -

in r

elat

ive

term

s (s

hare

on

gros

s el

ectr

icity

dem

and)

[%]

BAU withaccompanying DSM

BAU with low energyprices

BAU - continuationof current nationalRES-E policies

… how far will we come with current RES policies?

BAU BAU versus Improved national policesImproved national polices

Total electricity generation from RES (EU25)as share of gross electricity demand


… improving national RES support schemes accompanied by an active DSM policy

34,1%

20,9% 23,6%

18,2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

RE

S-E

dep

loym

ent -

in r

elat

ive

term

s (s

hare

on

gros

s el

ectr

icity

dem

and)

[%]

Improved nationalpolicies

BAU withaccompanying DSM

BAU with low energyprices

BAU - continuation ofcurrent national RES-E policies

BAU scenarioBAU scenarioImproved national Improved national policies scenariopolicies scenario

Total electricity generation from RES (EU25)


… both cases based on purely national support schemes

0

200

400

600

800

1000

1200

2005

2007

2009

2011

2013

2015

2017

2019

RE

S-E

- e

lect

ricity

gen

erat

ion

[TW

h/ye

ar]

Wind offshore

Wind onshore

Tide & wave


Photovoltaics

Hydro small-scale

Hydro large-scale


Biowaste

Solid biomass

Biogas

Total stock (end of 2004)0

200

400

600

800

1000

1200

2005

2007

2009

2011

2013

2015

2017

2019

Cost reduction within the BAU-scenariodue to technological learning


Resulting cost reduction for RES-E technologies

50%

60%

70%

80%

90%

100%

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Cos

t red

uctio

n -

shar

e of

initi

al

inve

stm

ent c

osts

(20

05)

[%]

HydropowerGeothermal electricityBiomass - cofiring & large-scale plant Solid biomass - small-scale CHPGaseous biomassGaseous biomass CHPWind energyTidal & waveSolar thermal electricityPhotovoltaics

Cost of electricity - at present (2005) & future expectations (2020)

0 50 100 150 200 250 300

Biogas

Biomass cofiring

(Solid) Biomass

Biowaste


Hydro large-scale

Hydro small-scale

Photovoltaics


Tide & Wave

Wind onshore

Wind offshore

(Long-run marginal) Cost of electricity [€/MWh]

Cur

rent

mar

ket p

rice

PV (2005): 400 to 690 €/MWhPV (2020): 237 to 342 €/MWh

present (2005) cost rangefuture (2020) cost range

(Average) financial support for new RES-E plantUnit: €/MWhRESThis indicator shows the dynamic development of necessary financial support for new RES-E installations (on average). … The amount represents from an investors point-of-view the average additional premium on top of the power price guaranteed (for a period of 15 years) for a new RES-E installation in a certain year, whilst from a consumer perspective it indicates the required additional expenditure per MWhRES-E for a new RES-E plant compared to a conventional option (characterised by the power price).


Improved Improved national national policiespolicies

versusversus

BAUBAU

0

10

20

30

40

50

60

70

2005

2007

2009

2011

2013

2015

2017

2019

Fin

anci

al s

uppo

rt (

prem

ium

to p

ower

pric

e) fo

r ne

w R

ES

-E p

lant

[€/M

Wh

R

ES]

Improved national policies

BAU - continuation of current nationalRES-E policies

51

48

37

15

38

40

32

28

54

48

41

28

4

21

59

29

46

77

47

0 50 100 150

Biogas

Solid biomass

Biowaste


Hydro large-scale

Hydro small-scale

Photovoltaics


Tide & wave

Wind onshore

Wind offshore

Weighted average (2005 to 2020) of financial suppor t (premium to power price) for new RES-E plant [€/MW h RES]…improving national policies:

higher RES deployment with less specific support!

Transfer costs for consumer(due to the promotion of RES-E)Unit: M€/year or €/MWhDEMANDTransfer costs for consumer / society (sometimes also called additional / premium costs for consumer / society) are defined as direct premium financial transfer costs from the consumer to the producer due to the RES-E policy compared to the case that consumers would purchase conventional electricity from the power market.


versusversus

BAUBAU

0

5

10

15

20

25

2005

2007

2009

2011

2013

2015

2017

2019

0

5

10

15

20

25

2005

2007

2009

2011

2013

2015

2017

2019

Yea

rly tr

ansf

er c

ost f

or s

ocie

ty

due

to R

ES

pol

icy

[Bill

ion

€/ye

ar]

Wind offshore

Wind onshore

Tide & wave


Photovoltaics

Hydro small-scale

Hydro large-scale


Biowaste

Solid biomass

Biogas

Total stock (end of 2004)…improving national policies: higher RES deployment requires higher transfer cost in absolute terms!


Transfer costs for consumer(due to the promotion of RES-E)Unit: M€/year or €/MWhDEMANDTransfer costs for consumer / society (sometimes also called additional / premium costs for consumer / society) are defined as direct premium financial transfer costs from the consumer to the producer due to the RES-E policy compared to the case that consumers would purchase conventional electricity from the power market.

0

1

2

3

4

5

6

7

8

9

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Yea

rly tr

ansf

er c

ost f

or s

ocie

ty

due

to R

ES

pol

icy

(pre

miu

m p

er

MW

h gr

oss

dem

and)

[€/M

Wh

DE

M]

Improvednational policies

BAU -continuation ofcurrent nationalRES-E policies


versusversus

BAUBAU



versusversus

BAUBAU

Remark: How can (national) support policies be strengthened / improved?

►Remove non-financial deficits– i.e. administrative barriers (planning, bureaucracy), technical barrier (grid connection / extension)

►Target new support schemes solely to new RES-E installations

►Guarantee, but strictly limit the duration of financial support

►Include the full basket of available RES-E options

►Set incentives to accelerate future cost reductions



Improved national policiesImproved national policies

versusversus

HarmonisationHarmonisation

(Average) financial support for new RES-E plantUnit: €/MWhRES



versusversus HarmonisationHarmonisation

Weighted average (2015 to 2020) of financial support (premium to power price) for

new RES-E plant [€/MWh RES]

0 50 100 150 200 250

Biogas

Solid biomass

Biowaste


Hydro large-scale

Hydro small-scale

Photovoltaics


Tide & wave

Wind onshore

Wind offshore

… represents the average additional premium on top of the power price guaranteed (for a period of 15 years) for a new RES-E installation in a certain year…

0

10

20

30

40

50

60

70

80

90

2014

2015

2016

2017

2018

2019

2020

Fin

anci

al s

uppo

rt (

prem

ium

to p

ower

pric

e) fo

r ne

w R

ES

-E p

lant

[€/M

Wh

RE

S]

Harmonised nontechnology-specificsupport (from 2015on)

Harmonisedtechnology-specificsupport with lessnovel technologies(from 2015 on)

Harmonisedtechnology-specificsupport (from 2015on)

Improved nationalpolicies

TOTAL transfer costs for consumer(due to the promotion of RES-E)Units: M€ or % (in comparison to a reference case)

Total or cumulated transfer costs for consumer in 2020 summarise both the cumulated consumer burden within the investigated period 2005 to 2020 as well as the residual costs for the years after 2020. Its calculation is done as follows: The required yearly consumer expenditure in the period 2005 to 2020 as well as the estimated residual expenditures for the following years after 2020 are translated into their present value in 2005.


32,6

21,8

20,4

36,6

25,8

0 5 10 15 20 25 30 35 40

BAU - continuation of current national RES-E policies

Improved national policies

Harmonised technology-specific support (from 2015 on)

Harmonised technology-specific support with less novel technologies(from 2015 on)

Harmonised non technology-specific support (from 2015 on)

Cumulated* transfer cost for society due to RES policy for new RES-E plant (installed 2005 to 2020) as premium per MWh corresponding RES-E generation [€/MWh RES]

*i.e. cumulated present value (2005) of yearly transfer cost


versusversus HarmonisationHarmonisation

� Expressed in specific terms, divided by their induced cumulative (15 years) RES-E generation

4. 4. ModellingModelling different different allocationallocation policiespolicies of RESof RES--E E integrationintegration costcost

Development of specific Development of specific gridgrid--related and systemrelated and system--related cost of related cost of wind integration in the EU27 up to 2020wind integration in the EU27 up to 2020

• Dominant cost element: grid connection cost

• Grid reinforce-ment cost are rather low

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Spe

cific

cos

t [€/

MW

hw

ind]

Grid connection costs Grid reinforcement costsBalancing cost System capacity cost

5. Concluding remarks5. Concluding remarks

The key criterion for achieving an enhanced future deployment of RES-E in an effective and economically efficientmanner, besides the continuity and long-term stability of any implemented policy, is the technology specification of the necessary support.

Implement Unbundling !• clear definition of interface between RES-E power plant and the grid necessary• (Super-)shallow RES-E integration approach (incl. transparent locational signals) preferable compared to deep integration

Don’t neglect grid operator’s point of view !• Large-scale RES integration cannot take place at the expense of grid operators• Ex-ante mechanism in the grid regulation for cost recovery provides incentives or grid operators to invest

Establish markets in system operation !• Support technological development (e.g. wind forecasting), improve regulatory

framework (e.g. shorter gate closure, continuous day-ahead markets) andimprove market mechanisms in system operation (with extended geographicalcoverage compared to status quo) caused by intermittent RES-E generation

Then start RES-E policy / integration discussion again !

5. Concluding remarks5. Concluding remarksGrid integration rGrid integration recommendationsecommendations

The results suggest that the most significant efficiency gains can be simply achieved through an optimisation of national RES-E support measures.

Further efficiency improvements at a considerably lower level are possible by an EU wide harmonisation of support schemes provided that a common European power market exists.

If a harmonised policy is pursued, a technology specific support (e.g. Feed-in tariffs, Premium systems) is superior to non-technology specific (e.g. common TGC-system) with respect to cost minimisation.

A premature EU-wide harmonisation can …– hamper the national optimisation process as well as …– the overcoming of non-economic barriers at Member State level and

can …– lead to significant market distortions if power markets are not fully

liberalised. In addition, there is additional benefit from the competition of non-

harmonised systems during some time as the promotion schemes can learn mutually from each other.

Concluding remarksConcluding remarks

Thanks for yourattention!

In case of questions / remarks …► Email: [email protected]► Phone: +43-1-58801-37352

► www.futures-e.org or http://eeg.tuwien.ac.at

reinhardhaas-eu parliament potentials and prospects for ... · e.g. market growth rates, planning...

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