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Overview of Economic, policy and regulatory constrains for DER integration in EU

Overview of Economic, policy and regulatory constrains for DER integration in EU. Miroslav Maly (Enviros) , Michael ten Donkelaar (ECN) SOLID-DER National Seminar Vilnius March 6 , 2007. Contents of the presentation. Ma rket presence of DER in NMS DER support in NMS DER regulatory issues

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Overview of Economic, policy and regulatory constrains for DER integration in EU

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  1. Overview of Economic, policy and regulatory constrains for DER integration in EU Miroslav Maly (Enviros), Michael ten Donkelaar (ECN) SOLID-DER National Seminar Vilnius March 6, 2007

  2. Contents of the presentation • Market presence of DER in NMS • DER support in NMS • DER regulatory issues • Main barriers to DERincrease • Conclusions

  3. Market presence of RES / CHPin the new EU10+ • Current status - major part of RES-E production in large hydro-power stations (e.g. Latvia, Romania, Slovakia, Slovenia): • Wind energy developing since 2004: Baltic States, Czech Republic, Poland • Some wind energy projects realised, many more are planned • RES-E targets for 2010 - very ambitious • For some countries perhaps too ambitious (e.g. Czech Republic, Slovakia)  above expected economic potential in short-term • Main potential for RES-E up to 2010 – biomass / biogas applications, wind energy and small hydro • CHP has major share in all new MS, 10-20% of E-production from CHP but large part is not DER • CHP connected to industry, district heating • Little small-scale applications (e.g. gas engines, RES-CHP)

  4. Market presence of RES / CHPin the new EU10+

  5. Market presence of DER in Europe Source:DG-GRID / SOLID-DER

  6. RES / CHPsupport in the new EU10+ • DER support mechanisms developed during the last 5 years: • Predominantly feed-in tariff systems for RES-E • Green (feed-in) Premium System – bonus to market price (e.g. Czech Republic, Hungary) • Tradable green certificates introduced in Poland and Romania • TGC combined with quota system and fines • Some countries provide additional support through investment subsidies, soft loans or tax exemptions • Future (investment) support expected from EU Structural Funding • Support to CHP in 6 out of 10 countries • Bulgaria, Czech Republic, Hungary, Latvia, Poland (from 2007), Slovenia • Feed-in tariffs or premiums, usually lower rates than for RES-E, mostly for small- to medium-scale CHP

  7. RES / CHP support in the new EU10+

  8. Overview of RES-Esupport schemes in Europe

  9. Is RES-E / CHP support effective? • Support existing for only a few years, no conclusion possible yet about effectiveness of FIT or TGC • Strong growth of RES-E not yet noticed with exception of Hungary (growth in biomass co-firing and small CHP) • But, many new RES-E projects are under implementation orplanned • Support mechanisms can overcome economic barriers such as large upfront investments, depending on tariff level • Tariff level is not sufficient in every country • Little differentiation benefits some technologies too little, other perhaps too much (e.g. co-firing of biomass in Hungary)

  10. DER regulatory issues – Market Access Regulated purchase obligation most common Also access to wholesale market in most new Member States RPO = Regulated Purchase Obligation GC = Green Certificates

  11. DER regulatory issues – Balancing conditions • No common balancing conditions • Obligatory notification of DER generation amounts in some countries • DER is not active part of generation reserve

  12. DER regulatory issues – Network access • No uniform connection charging method • Large differences in charging approaches • Use-of-System charges for DER operators not common in NMS

  13. Main barriers to DERincrease – short-term • Policy barriers: • Frequently changing policies and priorities • Regulatory barriers: • Long procedures for spatial planning, construction permissions • Network (regulatory) barriers: • Complicated (non-standardised) connection procedures • Prices sometimes discriminatory to small-scale generators • Dominant position of DSOs • Financial barriers: • Large initial investments and credit availability • Availability of support (schemes are often unstable) • Feed-in tariff schemes not cost-effective in the long term • Technical barriers: • DER connected in less populated areas means higher connection costs or network upgrades •  Preferential wind power locations often in remote areas

  14. Main barriers to DERincrease – long-term • Long-term barriers • No long-term RES-E / CHP targets and policies • What targets to be expected after 2010? • Are long-term policy plans in line with increased DER shares? • Costs for network upgrades when not taking DER into account in planning • Threat of higher costs of electricity with more DER connected • Fragmented and also often changing support for DER (both in EU15 as in NMS • Soon no overcapacity but shortage of capacity (e.g. due to nuclear phase-out in Lithuania, Slovakia, Bulgaria) • Questions • What countries have structural generation overcapacity (still in 2010 or 2020), perhaps Czech Republic, Poland? • What kind of power capacity will replace nuclear power plants? • Are most efficient technologies supported with existing support schemes, what about CHP? • What is the opinion of major stakeholders?

  15. Preliminary conclusions • DER plays an increasing role in the new MS • In the form of CHP and recently new RES-E capacity • DER support schemes introduced (to meet RES-E targets) • Mainly in the form of FIT combined with RPO • Support levels in some countries comparable to that in EU15 • Slow but steady uptake of RES-E capacity • Participation of DER in energy markets still limited • But some countries provide access to wholesale and/or balancing market • DER regulatory framework shows large differences between countries: • System of connection charging • Balancing conditions (obligations and access)

  16. Short- and medium term policy and regulatory recommendations • Complete the unbundling process, within the legal framework as well as in practise • Simplify authorisation procedures for spatial planning and construction permits through a “one-stop shop system” for project authorisation • Introduce transparent and non-discriminatory grid connection, grid use conditions as well as cost allocation between DER operators and network operators • Ensure market access for DER operators through simplified procedures to wholesale, balancing and ancillary services markets • In the development of support schemes, take into account their cost-effectiveness in the long-term and the stability it has to create for investors

  17. Thank you for your attention ! SOLID-DER project website: http://www.solid-der.org/ miroslav.maly@enviros.cz tendonkelaar@ecn.nl

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