Renewable Energy Target Setting

1. Renewable Energy Target Setting

2. Targets in the global renewable energy landscape – 2005 In 2005, 43 countries had renewable energy targets – mostly OECD countries

3. Targets in the global renewable energy landscape – 2015 Today, 164 countries have at least one type of renewable energy target – including 131 are emerging and developing countries

4. Evolution of global RE targets by sector – 2005-2015 While renewable electricity targets are the most widespread type, heating/cooling and transport sector targets have increased significantly over the last decade

5. What are “renewable energy targets”? The great diversity of renewable energy targets calls for definition and context Renewable energy targets are numerical goals established by governments to achieve a specific amount of renewable energy production or consumption.

6. In Focus: Renewable electricity targets

7. Key functions of RE targetsthroughout the policy-making cycle • RE targets in the policy formulation stage • Develop the information base by gathering key data • Complement/validate information through consultation • Reveal gaps in knowledge • Increase the transparency of policy making • Stimulate debate, raises awareness and acceptance

8. Before consultation process After consultation process Consultation enhances transparency& feasibility of targets: South Africa’s IRP Source: Modise, 2013.

9. Key functions of RE targetsthroughout the policy-making cycle 2. RE targets in the policy implementation stage • Improve planning • Provide clear direction of policy to stakeholders • Signal political commitment • Encourage alignment of public policies • Motivate stakeholders to take action • Anchor strategic priorities and scenarios • Foster accountability

10. Targets indicate policy direction and potential market size: India India scales up its solar targets from 22 GW to 100 GW Source: CEEW, 2014 Note: CAGR - Compound annual growth rate

11. Key functions of RE targetsthroughout the policy-making cycle 3. RE targets in the policy evaluation stage • Supply concrete milestones for evaluation and adjustments • Show deficiencies in current operations • Provide opportunities to take action to correct deviations • Expose data needs and discrepancies

12. Monitoring renewable energy targets in EU Member States Share of renewables in gross final energy consumption in 2005, 2012 and 2020 target Source: IEA, 2014

13. Effective targets are connected to high-level national priorities and backed by strong political commitment • Stakeholder engagement strengthens ownership and feasibility of targets • Targets ideally combine a long-term vision anchored in short-term concrete milestones to maintain momentum • Making targets mandatory matters – whois obligated and how also matter • Striking the right balance between ambition and realism is vital to the success of targets • Targets alone are not enough. They need to be accompanied by a clear strategy and backed by specific policies and measures. Key lessons for setting effective RE targets

14. Questions?

15. Adapting Renewable Energy Policies to Dynamic Market Conditions

16. Electricity generation costs

17. Keeping pace with Rapidly Decreasing Costs Innovative adaptation measures are emerging to adapt to the changing cost landscape of renewables – but policy design features vary Feed-in tariffs for PV PV FiT degression mechanism in Germany, the U.K. and France (IRENA, 2014)

18. Keeping pace with Rapidly Decreasing Costs Auctions have increasingly been adopted to support renewable energy deployment PV Auctions - India

19. RE Integration Flexible resources will be essential to meet the net load demand curve Wind & solar profiles - Sample winter day Load Profile - Sample winter day Integration is the key challenge

20. RE Integration Variable renewables and system flexibility

21. RE Integration Wind forecasting error evolution in Spain Source: REE

22. Integrating renewables: Centralized solutions Average unscheduled cross-border power flows from Germany (MW) • Solutions include: • Infrastructure improvement (both national grids and interconnections) • More efficient use of interconnection • Storage systems and resource complementarity

23. Integrating renewables: Decentralized solutions Sample daily self-consumption profile in a plastics-manufacturing facility Solutions include: Demand management & aggregation Smart grid and technologies Better coordination between TSOs and DSOs Regulatory measures to integrate small scale storage

24. Integrating renewables: Decentralized solutions Storage can mitigate the impact of PV penetration on distribution costs

25. Impact on markets • Important to assess the system-wide effects of integrating variable renewables to ensure long-term reliability of supply Average daily summer spot price profile in Germany, 2010 and 2013 (EUR/MWh) (IRENA, 2014)

26. Impact on markets 1 June 2010 71.93 GW Merit order effect: pushing fossil fuel-based flexible generation out of the market • Flexible resources are essential on both the generation and the demand sides • Market design needs to evolve (e.g. intraday, balancing, reserve) Solar and wind 70.12 GW 1 June 2012

27. Conclusions and future analyses • The ongoing energy transition requires innovative solutions, both a technology and policy level • Rise in decentralized generation present a need for revisiting the market design and the business models of traditional utilities • Upcoming publication: • Adapting renewable energy policies and regulators to the changing ownership structure in the electricity sector

28. Thank you!

29. Renewable Energy Auctions:A Guide to Design

30. Renewable Energy Auctions Auctions have increasingly been adopted to support renewable energy deployment Based on REN21 Global Status Report (2005 to 2015) 2014 2015 2013

31. Strengths and weaknesses of Auctions Strengths Weaknesses

32. Auction design elements

33. Key considerations in designing and implementing auctions Increasing competition for cost-efficiency • Increased participation of bidders • Prevention of collusion and price manipulation Limiting participation to bidders who can meet goals • Project delivery • Deployment goals Ensuring global socio-economic development goals • Qualification requirements • Multi-criteria selection

34. Increasing competition for cost-efficiency Diversity of technology • Implementing a technology-neutral auction can enable the development of least-cost technologies • Implementing a technology-specific auction can fulfil deployment goals Volume auctioned • Auctioning a large volume at once allows for rapid capacity addition but might result in lack of competition

35. Increasing competition for cost-efficiency Level of participation of bidders • Reducing entry barriers: • Requirements and compliance rules commensurate with market conditions • Resource assessments, feasibility studies and permits provided to bidders • Streamlined administrative procedure and one-stop-shop • Fair and transparent rules • Reducing the perception of risk • Demand-side responsibilities • Increased certainty and regularity of auction rounds • Mitigated financial risk Prevention of collusion and price manipulation • Selecting an appropriate bidding procedure may prevent collusion • Introducing a ceiling price can limit the price

36. Limiting participation to bidders who can deliver the project Reputation requirements • Proof that bidders have the financial, technical and legal capability to develop the project to prevent speculative bidding • Proof that bidders have the past experience and proven track record to help ensure successful delivery Compliance rules • Bid bonds and project completion bonds to help ensure successful and timely delivery • Penalties for delay and underbuilding to help ensure successful and timely delivery • Penalties for under (or over) performance to help prevent under (or over) producing

37. Limiting participation to bidders who can meet deployment goals Technological requirements • Technologies that can compete to align with national energy policy • Equipment specifications to ensure quality Project size requirements • Minimum size to enable economies of scale and reduce transaction costs • Maximum size to encourage small and/or new players Location constraints • Achieve geographic diversification and avoid competition with other sectors • Ensure proximity to the grid Grid access requirements • Ensure feasibility of integrating renewable electricity into the grid • Avoid delays due to grid expansion

38. Ensuring global development goals Socio-economic impacts • Qualification requirements • Multi criteria selection Employment in Selected Countries

39. Conclusion • While designing auctions, policy makers may want to consider the following recommendations: • Account for the trade-offs between different design elements • Different policy options to support deployment are not mutually exclusive. • Tailor the design of auctions to the specific context

40. Questions?

41. Socio-economic benefits of renewable energy

42. Benefits of Renewable Energy

43. IRENA’s efforts to bridge the knowledge gap • Specific analytical work and empirical evidence remain relatively limited. • IRENA has been leading the work on jobs since 2011, recently adding analysis of broader socio-economic benefits. Launch Tomorrow! …and others coming Jobs Sidebar in the Global Status Report 2014 2016 2013 2015 2011 2012 43

44. Renewable Energy Jobs Employment in Selected Countries

45. Renewable Energy Jobs Employment by technology

46. Renewable Energy Jobs – Large Hydro

47. Socio-economic benefits from renewable energy deployment 29 million $31 bn 7.7 million € 9.1bn 29 million people utilize off-grid solar lighting solutions to meet basic electricity needs In 2014, 7.7 million people worked in renewables (excl. large-hydro) worldwide Germany avoided € 9.1 billion in fossil fuel imports in 2013 In China, solar PV manufacturing output reached $ 31 billion in Q1 2015

48. Renewable energy benefits globally

49. Renewable Energy Benefits: Measuring the Economics • Limited knowledge on macro-economic impacts of accelerated renewable energy development to 2030. • IRENA has undertaken an assessment of the impacts of different scenarios for renewable energy growth to 2030. Preliminary results: • The renewable energy sector could support more than 24 million jobs in 2030. • Overall impact on global GDP is … % by 2030. • Welfare would change by … % in 2030 • The effects on trade will be …. Launch tomorrow, January 16th! Join us!

50. Upcoming reports Renewable Energy Benefits: Decentralised Solutions in Agriculture • Renewable Energy and Jobs: Annual Review 2016 – will update estimates and further improve coverage and data quality • Renewable Energy Benefits: Decentralised Solutions in Agriculture analyses how off-grid applications for heating/cooling and motive power can improve the livelihood of people that lack access to modern energy services. • Renewable Energy Benefits: Solar Pumping in Agriculture examines best practices and lessons learnt in deploying solar pumping solutions and maximizing benefits across sectors. • Renewable Energy Benefits: Leveraging Local Industriesidentifies the potential values of localising different segments of the value chain • Renewable Energy Benefits: Measuring the Economics assesses the economy-wide impacts on GDP, trade, employment and welfare. Renewable Energy Benefits: Leveraging Local Industries Renewable Energy Benefits: Solar Pumping in Agriculture Launch tomorrow!