Comment on Bruegel Policy Brief : Elements of Europe‘s Energy Union

1. Comment on BruegelPolicy Brief:Elements ofEurope‘sEnergy Union Daniel Fürstenwerth, Agora Energiewende • Brussels, 01.10.2014

2. Agora Energiewende – an Overview • Financed by Mercator Foundation and European Climate Foundation, 2012-2017 • Independent and non-partisan • Think Tank based in Berlin • Mission: How to make the Energiewendea success story?

3. Focus ofthiscomment:EU supportforlow-carbontechnologies • - Innovation vs. Deployment • -Targets andMarkets

4. Innovation vs. Deployment? ct/kWh Wind and PV arecostcompetitivetoday - withnewconventionalandnuclearpower plants Costof Power per Technology (LCOE 2014, newbuild, Germany) Future* *“Future Costof PV until 2050“, Agora Energiewende/Fraunhofer ISE, forthcoming

5. Other European countries havesimilar, someevenbetterconditionsfor Wind and PV power production Quality of Wind Quality of Solar Costcompetitivetechnologyisavailablefor Wind onshoreand PV Focus shouldbe on removalofmarketbarriersandappropiatemarket design

6. Technology-specificanalysisrequired: costvariesbetweenrenewabletechnologies Price andQuantityofyearlydeploymentofrenewables in Germany, 2015 (Objective) Focus on innovationappropiatefornewrenewableenergytechnologies (e.g. geothermal, tidal, wave) Biomass Wind offshore Wind onshore & PV Price (ct/kWh) Power Generation (TWh) ~11 TWh

7. Targets helppolicytofulfillitsrole:enablethemarketto find efficientsolutions Example: Investment in new fossil power plant Power Market, Germany% Non - Renewable 100% Targets enableinvestorstomakeefficientinvestmentdecisions Building Investmentdecision Investmentpayback Research Question:Whatarecostof suboptimal investmentdecisions? Renewable 25% 40-45% 55-60% Year 2014 2025 2035

8. Summary • Strongerdeploymentof Wind onshoreand PV does not increasecostofthe power systemuntil 2030 – removalofmarketbarriersiskey • Strongerfocus on innovationisappropiatefornewrenewabletechnologies (geothermal, tidal, etc) • Renewabletargetsallowmarketactorstomakeefficientinvestmentdecisions – forboth non-renewableandrenewableinvestments

9. Agora Energiewende Rosenstraße 2 10178 Berlin T +49 (0)30 284 49 01-00 F +49 (0)30 284 49 01-29www.agora-energiewende.de Comments andquestions: Daniel.fuerstenwerth@agora-energiewende.de

10. Innovation vsDeployment

11. 2009 - 2012: „Solar Years“ Success Story for Technology, Challenge forPolicyMakers Feed-in Tarif (EUR/MWh) Build-upofSolar(GW/a) Cost (EUR/MWh, illustrative) Increasedmarginleadsto massive investment in solar • „Race“ betweeninvestorsandpolicy: marketmovedfaster • ~ 30 GW solar build in 5 years • Costwas >2 timeshigherthantoday

12. Remuneration of new nuclear power in the UK, and large PV and wind onshore in Germany after accounting for inflation, in real Euro2013/MWh Note: Wind onshore remuneration in Germany is presented here in a simplified way by showing average payments. In reality, remuneration at the beginning differs from remuneration at the end. Source: EEG 2012, UK Government 2013a, calculations by Prognos AG.

13. Comparison of average remuneration for new nuclear power in the UK, and PV and wind in Germany, in Euro2013/MWh -15% -34% -50% Remuneration, in Euro 2013 /MWh * Hinkley Point C agreement ** Wind offshore 2013 without grid costs; in Germany, the regulatory approach excludes grid costs from being covered by the remuneration. Offshore grid costs are estimated to be between 25 and 35 EUR/MWh, depending on the distance to shore. Source: DECC 2013; ECB 2014a; EEG 2012; Prognos AG 2013; UK Government 2013a; calculations by Prognos AG.

14. Comparison of annual system costs, in million Euro2013 Annual systemcost, million Euro2013 -21% Source: ECB 2014a; EEG 2012; Prognos AG 2013; UK Government 2013a; calculations by Prognos AG.