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Deploying Renewables: Principles for Effective Policies

This report explores the principles for effective renewable energy policies, highlighting the need for renewables to play a significant role in the power sector. It discusses the comparative assessment of renewables support policies and shares best policy practices and main challenges encountered. The report emphasizes the importance of learning from both success stories and failures.

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Deploying Renewables: Principles for Effective Policies

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  1. Deploying Renewables: Principles for Effective Policies Dr. Paolo Frankl Head, Renewable Energy Unit International Energy Agency Press Conference, OECD Berlin, 29 September 2008

  2. Global Power Generation MixScenarios 46.5% Renewables [Source: ETP 2008] Renewables would have to play a particularly significant role in the power sector, increasing from 18% today to nearly 50% by 2050. Non-hydro renewables show the highest growth rate.

  3. Global Renewable Energy Markets and Policies Programme (GREMPP) • Comparative assessment of effectiveness and efficiency of renewables support policies (market deployment and RD&D policies) • OECD countries plus Brazil, Russia, India, China, South Africa • Electricity, Heat and Transport Fuel sectors • Distillation of the best policy practices and of main challenges encountered • ‘Learn from successstories but also from failures’ • Co-funded by German BMU, Japanese NEDO, and Enel

  4. Quantitative Analysis • Chosen policy effectivenessindicator on a yearly basis: Incremental RE generation in a given yearRemaining additional realisable potential (by 2020)

  5. Achieved (by 2005) and Additional realisable mid-term potential (by 2020) for RES-Electricity Achieved (2005) and additional realisable mid-term (up to 2020) potential for RES-Electricity by country (OECD+BRICS) – in absolute terms (TWh) Source: IEA & EEG, 2008

  6. Effectiveness & EfficiencyWind On-shore 2005 (OECD & BRICS) Long-term predictable incentives(FIT or FIP)+Appropriate framework  Effectiveness Higher risk (TGC)+Non-economic barriers  Efficiency Source: IEA & Fh-ISI, 2008

  7. Effectiveness & EfficiencySolid biomass el. 2005 (OECD+BRICS) TGC FIT/FIP Source: IEA & Fh-ISI, 2008

  8. Effectiveness & EfficiencySolar PV 2005 (OECD & BRICS) FIT Source: IEA & Fh-ISI, 2008

  9. Main Lessons Learntand Conclusions

  10. Effective policies only in a limited set of countries Sometimes depending on specific technology Perceived risk, more than profit, is key to policy effectiveness & efficiency Price support can not be adequately addressed in isolation; non-economic barriers must be addressed concurrently Grid barriers Administrative barriers Social acceptance issues Other barriers (e.g. training, information, financial, etc.) Effective systems have, in practice, frequently been the most cost efficient Technology-specific support is key for both effectiveness and cost-efficiency Main Lessons Learnt (1)

  11. Main Lessons Learnt (2) Move beyond ‘Feed-In Tariff vs. Quota Obligation System/ Tradable Green Certificate’ debate Both systems show success and failures depending on specific country and technology Precise design criteria and fine-tuning are key Signs of convergence: Feed-In Tariff: Premium tariff option, time digression Quota System/Tradable Green Certificate: Technology banding

  12. Remove non-economic barriers to improve market functioning Establish predictable support framework - to attract investments Set up transitional incentives decreasing over time – to foster and monitor technological innovation and move towards market competitiveness Ensure specific support in function of technology maturity to exploit potential of large RET range With increasing mass-scale RET penetration impact on overall energy system must be taken into account Key Principles for Effective Renewable Energy Policies Continuity Certainty

  13. Fostering RE’s transition towards mass market integration 4. Technology-neutral competitionTGC, Carbon trading (e.g. EU ETS) Mature tech (e.g. hydro) 3. Shared/imposed market risk, guaranteed minimum but declining supportFIP, TGC (technology banding) Market Deployment Low cost-gap (e.g. wind onshore) 1. Development RD&D financing, capital cost support, investment tax credits, rebates, loan guarantees 2. Stable, low-risk, shelteredFIT, FIP, Tenders High cost-gap (e.g. PV) Prototype & demo stage (e.g. 2nd gen biofuels) Time Development Niche markets Mass market

  14. Realise urgency to implement effective policies to exploit majorpotential of RETs in terms of energy security and climate change mitigation Remove and overcome non-economic barriers first Exploit substantial potential for improvement of policy effectiveness and efficiency: learn from good practice Focus on rigorous and coherent implementation of key policy design principles with regard to long-term cost efficiency and national circumstances Create level playing field by pricing in GHG emissions and other externalities Allow a combination framework of incentive schemes in function of technology maturity level Recommendations Urgent action for Energy Technology Revolution

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