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Converging support schemes in Europe? Best practice design criteria for effective and efficient future RES-E support. Structure of the presentation. Lessons on RES-E support schemes in Europe Status of RES-E support schemes in Europe Progress of MS achieving the RES targets

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  1. Converging support schemes in Europe?Best practice design criteria for effective and efficient future RES-E support Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

  2. Structure of the presentation Lessons on RES-E support schemes in Europe • Status of RES-E support schemes in Europe • Progress of MS achieving the RES targets • Lessons learnt and best practices in designing RES-E support schemes Routes towards convergence • Recapitulation of the European debate on convergence • Benefits and challenges of convergence • Options for convergence • Conclusions 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) Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

  3. Still diversity of support schemes in Europe but with some converging trends Source: Ecofys based on Ragwitz et al. (2012). RE-Shaping Ecofys et al. (2012). RE progress and biofuels sustainability. Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

  4. 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) Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

  5. Lessons from MS experience tell us how to design effective and efficient RES-E support schemes Lessons learnt Best practice design criteria • 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 Provide reliable framework: frequent and unexpected policy changes undermine investor confidence Reflect and limit investment risks: risk-conscious (triple-A) policies increase growth and reduce support costs by up to 50% Adjust level of support to technology and market conditions • 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) • 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 Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

  6. With RES-E becoming mainstream, growing opposition against RES-E (from incumbent electricity actors and the public) Supporting RES-E is and will remain challenging. How can convergence help? Impact of high RES-E deployment rates on the electricity system and markets Challenges Potential role of convergence 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 • Trans-European grid development • Integration of European electricity markets • Coordinated reforms of electricity market regulations Coordinated EU-wide effort on transparent and fair communication on the short and long term benefits & costs of RES-E growth Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

  7. Structure of the presentation Lessons on RES-E support schemes in Europe • Status of RES-E support schemes in Europe • Progress of MS achieving the RES targets • Lessons learnt and best practices in designing RES-E support schemes Routes towards convergence • Recapitulation of the European debate on convergence • Benefits and challenges of convergence • Options for convergence • Conclusions Isabelle de Lovinfosse Corinna Klessmann Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

  8. The focus of the European RE policy debate has moved from harmonisation to coordination and cooperation Aim of convergence: creating an internal market for electricity 1996 2014 2003 2009 RES Directive 2009/28/EC: national support schemes + cooperation mechs 2014: Evaluation of RES Directive and cooperation mechanisms RES-E Directive 2001/77/EC: national support schemes; evaluation 2005 Beyond 2020? COM (1998) 167 on harmonisation requirements: propose common rules for RES-E COM(2012) 271: Guidance on best practice support and on increased cooperation Proposal RES directive COM(2008) 19: Harmonised GO trade COM(2005) 627: Too early to harmonise; optimisation and coordination Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

  9. Converging national support schemes holds many benefits but also some risks and challenges Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

  10. European cooperation can reduce the support costs for reaching European RE targets but uniform harmonisation would increase costs Changes in supportcostsforreachingthe 2020 target (averageyearlyconsumerexpendituresfornew RES installations) Sources: Resch et al. (2009). futures-e. Ecofys et al. (2011). Financing RE in the European Energy Market. € bn/year Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

  11. Convergence of RES-E support needs to build on converging electricity markets Support framework Common (best) practice Cooperation Coordination Harmonisation Convergence of RES-E market conditions Electricity market framework Coordination Cooperation Common (best) practice Harmonisation Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

  12. Current steps for converging support frameworks mainly focus on best practice exchange. Steps towards implementing joint principles/design elements. Support framework Common (best) practice Cooperation Coordination Harmonisation Member States exchange (Concerted Action, IFIC, etc.) Some MS discuss coop mechs Joint support scheme SE-NO; Italy... EC: Guidelines to facilitate trade Future: Minimum design standards for RES-E support? EC: Best practice guidance Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

  13. The integration of European electricity markets is ongoing but not yet completed. Market adjustments for integrating large shares of variable RES-E. Future: Increase “readiness” for RES-E through alignment of electricity market regulations (gate closure, balancing markets, etc.); incentives for flexibility options? Transmission network development RES-E priority or guaranteed grid access & priority dispatch Multi-country market coupling Cooperation of regulators (ACER) Electricity market framework Harmonisation Coordination Cooperation Common (best) practice Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

  14. There are multiple support elements that benefit from joint principles and coordination Joint ambitions & growth pathways Common calculation methodology for LCOE & reference electricity prices Common risk mitigation & allocation rules (e.g. for policy adjustments) Support scheme Support level & underlying methodology Level/limitation of investment risk (market revenue risk, policy risk, etc.) Alignment to institutional, regulatory and market framework Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

  15. 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. How can we create public acceptance for joint RES-E policy efforts and cost sharing in Europe? Dr. Corinna Klessmann, Dr. Isabelle de Lovinfosse

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