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Developing renewable energy cost effectively

This article discusses the progress, cost estimations, and potential savings of developing renewable energy in a cost-effective manner. It explores the importance of support schemes and provides points for reflection on support schemes in the electricity sector. The article also highlights the key challenges and milestones in achieving renewable energy goals by 2020 and 2050.

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Developing renewable energy cost effectively

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  1. Developing renewable energy cost effectively Tom Howes European Commission 19/12/2019 EUROPEANCOMMISSION

  2. Progress to date… Eurostat

  3. Technology breakdown - electricity

  4. Cost estimations • Total investments in renewables are currently at a level of approximately € 35 bn/y • Most analysis predict this has to double to reach our 2020 targets • Unit cost of renewables, contrary to other forms of energy, are declining; for certain technologies sharply • PV module costs around €500/kW • Producing (and generating) renewables where most cost-efficient offers significant potential for lowering overall cost

  5. Merit order effect • Denmark 2005: saving of 0.3 to 0.5 €cents per kWh consumed. • Spain 2005: a reduction of about 0.5 €cents/kWh at peak hour for each additional GWh • Germany 2006: €5bn electricity price saving + CO2 exp. = cost of EEG • Ireland 2011: neutral impact • EWEA EU 2020 estimate (265GW wind): €41.7bn/year savings (gross)

  6. Feed in tariffs, Feed in Premiums & Quotas TGC revenues RES-support Market price FIT FIPs Quota stability of revenues and their composition (TGC=tradable green certificate) Fixed feed-in tariff (FIT) Gov fixes price, market decides quantity • Fixed tariff (€/MWh) • Guaranteed during lifetime or x years • Purchase obligation • (Grid (access & use) priority) Feed-in premium (FIP) • Fixed premium (€/MWh) • Guaranteed during lifetime or x years • Power sold on conventional markets Quota Gov fixes quantity, market decides price • Obligation for suppliers: • Minimum RES-E share • Increasing over time • Penalty • Tradable certificates for RES-E production (‘market’ price) • Obligation is met by submission of certificates to competent authority • Power sold on conventional markets Source: RE Shaping project

  7. Points for reflection on support schemes (electricity) Provide policy stability (for FIT / FIP / Quota): Retroactive / sudden changes should be avoided. Move away from annual budgeting (creates stop and go) Reduce revenue risk: Long term contracts are most relevant (15-25 years) Priority dispatch/curtailment compensation Apply automatic degression formulae for tariffs and premiums. New tariffs (or premiums) fall according to learning curve of technology. Other reductions in FIT/FIP require well planned, public tariff adjustment cycles or mechanisms (e.g. DE tariff falls if capacity grows by more than 3.5 GW...) Small scale development is a different market: Many quota countries offer separate incentives: BE minimum prices for PV, IT FIP for PV, UK FIT for small-scale applications. Technology-banding within the quota as applied in UK can help to support cost-intensive technologies like wind offshore, but is less suitable for small-scale projects.

  8. The other elements of European energy policy: • EU policies working in tandem to provide a stable long term framework: • The creation of competition and the single market in energy • The development of European infrastructure (@1c/kWh) • Europe's R&D programme for new technologies • Energy Efficiency proposal to reduce consumption and transform the market • 2050 – decarbonisation… 2030 milestones?... • Impact of costs is clearly important: • Explore net impact (merit order effect) • Recall the whole 2008 energy and climate package price estimate was “up to 10%” • Operating costs of non renewable energy rising (again) • 2050 energy scenarios explore cost consequences of decarbonisation • RES costs driven by capital costs, driven by risk, driven partly by regulatory framework

  9. 2020/2050 Key Challenges • Increasing importance of RES increases requirements on: • Capacity and flexibility • of electricity grids, • of power plants, • of energy storage • of demand side management (~smart) • Energy Roadmap 2050 – due December • Renewable energy Communication on “post 2020” - due 2012 • (public consultation imminent) • Update on state of internal market - due 2012

  10. Thank you for your attentionhttp://ec.europa.eu/energy/renewables/index_en.htm

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