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POLICIES TO SHAPE AN ALTERNATIVE ENERGY FUTURE Measures to move towards a sustainable energy future by

POLICIES TO SHAPE AN ALTERNATIVE ENERGY FUTURE Measures to move towards a sustainable energy future by Oliver Schäfer, Policy Advisor of the European Renewable Energy Council - EREC Edinburgh, 6th Interparliamentary Forum on Renewable Energy and Energy Efficiency, Thursday 07 October 2005.

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POLICIES TO SHAPE AN ALTERNATIVE ENERGY FUTURE Measures to move towards a sustainable energy future by

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  1. POLICIES TO SHAPE AN ALTERNATIVE ENERGY FUTURE Measures to move towards a sustainable energy future by Oliver Schäfer, Policy Advisor of the European Renewable Energy Council - EREC Edinburgh, 6th Interparliamentary Forum on Renewable Energy and Energy Efficiency, Thursday 07 October 2005

  2. EREC – European Renewable Energy Council Umbrella organisation representing all RES sectors: • AEBIOM European Biomass Association • EGEC European Geothermal Energy Council • EPIA European Photovoltaic Industry Association • ESHA European Small Hydropower Association • ESTIF European Solar Thermal Industry Federation • EUBIA European Biomass Industry Association • EWEA European Wind Energy Association • EURECAgency European Renewable Energy Research Centres Agency

  3. Please keep two things in mind: • Investments in energy infrastructure are always long term investments and therefore we rely on forecasts (and visions – including the „unthinkable“ of a change in energy supply) • Your decissions influence future generations

  4. The Reality Today Market Development in Wind and PV

  5. Cumulative Wind Energy Installed Capacity 1994-1999 : 31.2% 1999-2004 : 28.3% Source: EWEA Growth rates

  6. The Top-10 Markets in the World Source: EWEA

  7. The Top 10 Suppliers in the World Source: BTM Consult

  8. Cumulative Photovoltaic Installed Capacity (MWp) 1994-1999 : 18.0% 1999-2004 : 30.5% Growth rates Source: Eurec Agency, EPIA, Observ‘ER

  9. The Top PV Markets in the World Source: EPIA, Observ‘ER, IEA-PVPS

  10. The Top PV Manufactures in the World Source: EPIA, Observ‘ER, IEA-PVPS

  11. Policy Works!

  12. Main policy issue: Create a level playing field • Energy prices do not reflect the true social costs of generation - a market failure: • The social and environmental costs of polluting energy are not internalised • There are still massive subsidies to ‘conventional’ energy sources • To achieve the benefits of Renewable Energy, support frameworks should be established • They should be viewed as compensation mechanisms for correcting these market failures. Renewables would not need special provisions if markets were not distorted by the fact that it is still virtually free for energy producers to pollute.

  13. EU Power Production Mix 2003

  14. Competition in the internal electricity market ? “Much work still has to be done to deal with the dominant and even monopolistic positions of the incumbent operators and investments will be needed to guarantee the interoperability of grids and networks, interconnection and an adequate level of capabilities and infrastructure” Loyola de Palacio, 13 October 2004 “The current level of competition is not encouraging. (…) In most national markets, customer switching rates are modest, substantial barriers remain for new entrants, market structures are highly concentrated and, last but not least a single European energy market has not been achieved.” Mario Monti, 21 September 2004

  15. Distortions in the internal electricity market • 4 Commission benchmarking reports: Endless distortions • National and regional monopolies / oligopolies • No real consumer choice • Lack of interconnectors • Little separation of production and transmission • Power companies acting on both demand and supply side in the wholesale market • 75% of electricity subsidies goes to conventional power • Euratom shields nuclear (33% of total EU production) from internal market rules (since 1958!) • Complete absence of any meaningful internalisation of environmental costs

  16. Liberalised Markets? • 95% of the EU power market is still affected by huge market distortions • Electricity prices do not reflect full costs as long as polluter pays principle is missing • Subsidies -direct and indirect- to conventional power production is still massive • National and regional monopolies / oligopolies Competition not effective, but precondition for competition on RES market

  17. Let´s be honest • A liberalised market is not existing • No support mechanism is market oriented • Any support mechanism relies on the political will No electricity generating technology in history has ever been developed, introduced and become competitive without initial support.

  18. National Policy Measures Establish a successful framework for the development of renewable energy A successful framework requires political effort in four vital fields : • Well designed support scheme ensuring investor confidence • Appropriate administrative procedures • Fair grid access and strategic grid planning • Public acceptance and support If one or more of these key components are missing, little progress will happen.

  19. National Policy Measures • Establish legally binding targets for renewable energy National targets for the share of renewable energy are vital for maintaining and further stimulate investor confidence • Establish incentive mechanisms which provide defined and stable returns for investors • The price for renewable power must allow for risk return profiles that are competitive with other investment options. • The duration of a project must allow investors to recoup their investment. Available options: • Capital Grants • Price-based Mechanisms • feed-in price • fixed premium • Quantity-based Mechanisms • quotas with tendering • quotas with trading- green certificates

  20. National Policy Measures The Reforms Needed to Address Market Barriers to Renewables : • Streamlined and uniform planning procedures and permitting systems and integrated least cost network planning; • Fair access to the grid at fair, transparent prices and removal of discriminatory access and transmission tariffs; • Fair and transparent pricing for power throughout a network, with recognition and remuneration for the benefits of embedded generation; • Unbundling of utilities into separate generation and distribution companies; • The costs of grid infrastructure development and reinforcement must be carried by the grid management authority rather than individual renewable energy projects;

  21. Policy Measures – International Level • Establishment of legally binding RES targets • More emphasis on RES projects in development policy • Support from International Financial Institutions, Export Credit Agencies and Multi-lateral Development Banks • A defined and increasing percentage of overall energy sector lending directed to RES projects • A rapid phase out of support for conventional, polluting energy projects • Increased research and development • Increase awareness of RES • Substantial measures beyond Kyoto

  22. Conclusion • RE has the technological potential to replace fossil fuels as mainstream energy source. • RE is integral part of the energy supply in many countries today. • RE has tangible economic, ecological and social benefit. • BUT: RE market development depends on a coherent, predictable, supportive political & legal framework.

  23. Thanks for your attention For more information please visit www.erec-renewables.org Or write me on schaefer@erec-renewables.org

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