Feed-in Legislation

1. Feed-in Legislation The world’s most effective environmental policy? World Future Council Nairobi 2006 Miguel Mendonca miguel@worldfuturecouncil.org

2. What’s the problem? Increasing energy consumption Increasing CO2 and temperature levels Increasing volatility of energy prices Increasing fossil fuel prices

3. Increasing Energy demand Energy costs CO2 emissions and pollution Sea levels Health costs Climate instability Decreasing Fossil fuel reserves Biodiversity Natural resources Rural populations Faith in governments Time left for action Costs of present energy system

4. Déjà Vu We have always used nature’s energy for our needs

5. ‘Free’ Energy! • Solar • Wind • Geothermal • Hydro • Wave • Tidal • Biomass • Biogas

6. Barriers to Market Entry for RES • Costs and pricing: distortion from subsidies for competing fuels; fluctuation of oil and gas prices; high initial capital costs; environmental externalities • Legal and regulatory: Lack of legal framework for independent power producers; planning restrictions; grid access; liability insurance requirements (net metering) • Market performance: lack of access to credit; Perceived technology performance uncertainty and risk; Lack of technical or commercial skills and information Q:How can these be overcome?

7. German EEG (Erneuerbare-energien-gesetz) – Renewable Energy Sources Act • Gives RE priority access to the grid • Obliges grid operators to purchase electricity from RES • Sets the price for RE electricity for fixed periods • Sets no limit to amount of RE feeding into the grid • Differential tariffs for technologies and equalisation scheme

8. How the EEG Works

9. Costs • Connection to the grid: paid by the plant operator • Essential grid upgrades: paid by the grid system operator • Metering devices: paid by the plant operator • RE contribution: paid by consumer (only 3% of bill)

10. Advantages of the Feed-in Tariff (FIT) system • Overcomes barriers: guarantees grid access; premium price guarantees support for the technology; 20-year tariff periods allow full investor confidence. • Supports installations of different sizes and technologies: In addition to large RE projects for wind, solar etc, householders can now get a guaranteed payback on a solar roof in just a few years, rather than 20-30 years. The 100,000 solar roof programme helped meet costs with subsidies. • Promotes innovation: Annual reduction of tariffs for new installations drives technological efficiency. • Drives economies of scale: investment and demand are rising, and manufacturing expansion is taking place globally in response, lowering costs further. • Promotes stability: Change of government does not affect system, as it does not cost taxpayers anything through taxes, and so cannot be cut from national budget. • Promotes public support: Through public participation in the scheme, no direct taxpayer costs, support for the nuclear phase-out, and awareness levels being very high in general. • All possible when implemented properly!

11. Top 5 countries in RE Source: Global Status Report 2006

12. German RE achievements in figures • 170,000 jobs created • 33 million tonnes of CO2 saved directly from EEG in 2004 • 83 million tonnes of CO2 saved overall in Germany 2005 • 10.2% share of final electricity consumption from RES achieved • €16.4bn turnover in 2005 for German RE companies • €8.7bn investment per year • Reduction of around €5.40 worth of environmental damage per household per month • All this, at a cost of only around €1 per household per month!

13. Solar installations in Germany European PV Association 2005

14. Quotes on FITs “Renewable Tariffs have proven the most successful mechanism for stimulating investment in renewable electricity generation worldwide. Renewable Tariffs have resulted in more installed generating capacity and more robust competition among manufacturers and have stimulated more renewable technology development than any other policy mechanism.” - Paul Gipe, Renewable Energy Policy Mechanisms. “To date, feed-in or pricing systems have been responsible for most of the additions in renewable energy capacity and generation, while also driving down costs through technology advancement and economies of scale, and developing domestic industries and jobs. Pricing systems, where well-implemented, have provided increased predictability and consistency in markets, which in turn has encouraged banks and other financial institutions to provide the capital required for investment, and has attracted private investment for R&D.” - Janet L. Sawin, National Policy Instruments: Policy Lessons for the Advancement & Diffusion of Renewable Energy Technologies Around the World. “…until now so called renewable energy feed-in tariffs (REFITs) have shown the best effectiveness concerning the creation of new RES installations. - Mischa Bechberger and Danyel Reiche, Good Environmental Governance for Renewable Energies – The Example of Germany – Lessons for China? “…only a model based on guaranteed feed-in tariffs enables a quick and broad implementation of renewable energy, better supports its technological development, as well as more efficiently promotes cost reduction.” - Hermann Scheer, On the future of national support for renewable energy in Europe.

15. Comparison of support schemes Tradable certificates vs FITs Source: Haas et al 2006

16. Countries, States and Provinces with FITs Source: Global Status Report 2006

17. Growing RE investment Source: REN21 Global Status Report 2006

18. Global RE expansion Source: Global Status Report 2006

19. The Future • Ongoing environmental damage from CO2 already released • Ongoing, unpredictable price rises for conventional energy • Threats to livelihoods and national productivity from energy shortfalls through high prices and poor grid investment • Technological advances will make RE cost-competitive with conventional fuels within a decade. • Huge global markets for exports • Increasing public support for RE as climate change accelerates • Global cooperation over clean energies • New emissions reduction protocol • Switch to renewables - inevitable

20. Thank you for your kind attention www.worldfuturecouncil.org