How to ensure the transition of territories towards a low-carbon economy ?

1. Howtoensurethetransitionofterritoriestowards a low-carboneconomy? Dr. Doerte FouquetEREF asbl – European RenwableEnergiesFederation Workshop SustainableTerritories Pescara October 8 2010

2. 100 % Renewable is the objective for 2050 in Europe • Requires massive energy system change • Investment decision outside RES and outside Energy Efficiency will jeopardize to reach 95 % GHG reduction which is needed by 2050 • “Renewable Energy and Efficiency Impact Assessment (REEI)” looking in systems boundaries needed for the design of all major policy sectors • Increasing binding minimum targets for RES • Structured sectoral roadmap on demand side management bases • 50 % plus share for RES in 2030 in Europe

3. Costs for restructuring • Restructuring of the global electricity sector requires investment of $14.7 trillion up to 2030 (Energy [R]evolution ). • This compares with $11.3 trillion under a Reference Scenario based on International Energy Agency projections. • While the average annual investment required to implement the EREC/Greenpeace Energy [R]evolution Scenario would need just under 1% of global GDP, it would lower fuel costs by 25% - saving an annual amount in the range of $750 billion

4. Putting a Price on Global Environmental Damage • UNEP reportreleased in October 2010  bythe UN-backedPrinciplesforResponsible Investment (PRI) and UNEP FI: • Global environmental damagecausedby human activity in 2008 represented a monetaryvalueof$ 6.6 trillion, equivalentto 11% of global GDP. • Those global costsare 20% larger thanthe $ 5.4 trilliondecline in thevalueofpensionfunds in developed countries causedbythe global financialcrisis in 2007/8. • The study, an initialefforttoquantify in monetarytermsthe environmental harmcausedbybusiness and thepossiblefutureconsequencesforinvestorportfolios, fundreturns and companyearnings, estimatesthat in 2008 theworld's top 3,000 publiccompanieswereresponsiblefor a thirdof all global environmental damage. • The studywarnsthatas environmental damage and resourcedepletionincreases, and governmentsstartapplying a "polluterpays" principle, thevalueof large portfolios will beaffectedthroughhigherinsurancepremiums on companies, taxes, inflatedinputprices and theprice tags for clean-ups. <Author> ; <Event>

5. European Renewable Directive 2009/28/EC • Sets mandatory national targets for renewable energy shares, including 10% biofuels share in transport, in 2020 • Requires National Action Plans, • Gives flexibility for Member States to reach part of their target through • Statistical transfer • Joint projects between Member States and third countries with existing or planned interconnector capacity (under certain conditions and provided RES energy reaches the EU) ) • Encourages joint Support mechanisms between MS • Sets clear rules fordisclosure qualityof Guarantees of origin • Requires reduction of administrative and regulatory barriers, improvements in provision of information and training and improves renewables’ access to the electricity grid • Creates a sustainability regime for biofuels

6. Mandatory EU RE TargetsSource JRC

7. Support mechanisms for RES on National Level RE support mechanisms may be grouped into two major categories, Quota and certificate/tradable green certificates (TGC) and feed-in-tariffs (FiT). Various possible structures: Uniform quota, quota with technology banding, fixed feed-in tariff mechanisms, feed-in premium Experiences from a number of countries in Europe suggest that FiT deliver larger and faster penetration of RE than TGC, at lower or comparable cost.

8. Current overall RES support Mechanisms in EU In TGC a defined member of the national electricity supply chain, be it consumer, generator or supplier, has to present a fixed minimum quantity of certificates each year, as set by a public authority. The certificates originate per MWh of RE electricity generated. An obligated party thus may generate himself or purchase certificates on a certificate market. The obligated party may pass on the cost of certificates to the consumer. The target of RE under the TGC system is set by the government and the certificate price is determined by the market In FiTsystems the basic principle is that any national generator of renewable electricity (RES) can sell its electricity at a fixed tariff for a specified time period under specific conditions depending on location, technology etc. The price remains constant for the defined period but for new connections in following years a lower price level is offered. The main elements in FiT systems are often combined with priority grid access The costs of FiT payments are in general passed on to the electricity consumers. Majority in EU is FiT

9. Achievement of Support – Systems Cap and Trade mechanisms tend to ensure the basic energy industry structure and market power to remain unchanged. The power of decision is kept with the incumbent energy industry. The tradable quota systems introduces a negative feedback, in a way punishing success. May not be intelligent in a situation where goal is fast deployment of new renewable energy technologies. Cap and trade introduce new transaction costs to renewable energy, while not to the polluters. Transaction costs are in the same order of magnitude as the extra support the systems give the producers. Thus a waste of public resources. The extra market risks and price fluctuations introduced is a benefit to the large power companies who have enough capital to handle price fluctuations while small independent producers are vulnerable in such a process. Run for so-called best places with big installations under TGC inherent.

10. Achievement • Fit Mechanisms tend to be more welcoming towards new market players /IPP • Share of RES in German power production: • about 12.5 % in 2007 [1998: 4.7%] • indicative target for 2010 already reached in 2007 • 235,000 jobs in German RE industries (2006) (170.000 in ’05), - 350,000 EU wide (2006) • 21.6 Billion Euro turnover (2006) • So far over 90 % of new RES in the responsibility of IPPs in Germany • 10 Years of Cap and Trade Mechanism in the United Kingdom: • RES share below 2% in 2006 • Only restricted technology spread (wind, co-firing) • UK will not be able to reach indicative target in 2010 • Result is a lost decade for RES, green jobs

11. Price ExperienceSource: JRC 2009

12. World Bank Analysis on RES and IPP The traditional integrated utility monopoly often may not invest in renewable energy technologies that are not yet economical. Therefore, a positive impact of electricity market deregulation is the creation of independent power producers (IPPs), which increases opportunities for the development of renewable energy projects and expands the use of renewable technologies that are economically viable. Generally, legal framework allowing independent power suppliers using renewable resources the right to access to the electricity grid is contained in the legislation authorizing specific policies, such as price or quantity mandates. The legal and regulatory right to generate and sell electricity is a necessary but not sufficient step in the promotion of renewable energy. Many technical, financial and business risk barriers will still remain to be confronted by hopeful project developers. Source: REToolkit: A Resource for Renewable Energy Development; World Bank, June 30 2008

13. Estimates by Bankers Good policy instruments encourage solid expectation for Return of Investment leading to security of financing leading to fast deployment. FiT systems are labelled the “venture capital investor’s best friend”, - “risk-minimizing market-pull policies such as feed-in tariffs for renewable energy over CO2 emissions trading and certificate trading systems”. Source: Dr. Rolf Wüstenhagen, St. Gallern 2007; “Investing in solar is equivalent to investing in a government bond. We believe the government incentives in the form of feed-in tariffs act as an annuity stream for project investors, similar to interest earned on a government bond. Consequently, we expect project investors to add leverage and increase returns. “ (Barclays 2010)

14. Some scenarios for RES are not focusing on the beauty of decentralized RES • Number of scenarios: Climate Foundation, SRU (Advisory Council for the German Government), German Federal Agency for th Environment (UBA), Greenpeace, EREC came up with RES projections and scenarios for 2050, including 100 % RES scenarios • Climate Foundation and SRU have some good views, both show 100 % is possible but fail to encourage Onshore development in all EU 27 rather focusing on big utility view (Offshore wind, Desertec), - UBA so far most comprehensive and regional focused approach • European Commission is working on own roadmap • Public consultation on Commission roadmap 2030-2050 foreseen to come online October 2010 Peter Danielsson Vice President EREF September 2010

15. Scenario for Germany - UBA “For Germany, the technological change towards an electricity supply system completely based on renewable energies by 2050 is possible. By doing so, Germany’s status as a highly industrialised country can be maintained, as can its subsequent ways of living, patterns of consumption and behaviour. It is not only necessary to accelerate the expansion of renewable energies but also to substantially convert the existing energy system to make it fit for an exclusive use of renewables in the future. It is important to define intermediate goals, particularly for the period after 2020. Generally, it can be said: The earlier we start decisive actions the more time we will have to tackle the upcoming challenges of necessary technological and societal adaptation!”

16. Commission’s New EU energy trends to 2030 – not encouraging for RES EUROPEAN COMMISSION Directorate-General of Energy in collaboration with Climate Action DG and Mobility and Transport DG update 2009, published September 2010 ; prepared by the Institute of Communication and Computer Systems of the National Technical University of Athens (ICCS-NTUA), E3M-Lab, Greece

17. Good mechanisms create good frontrunner 2010 Renewables comprised fully one-quarter of global power capacity from all sources and delivered 18 percent of global electricity supply in 2009. In a number of countries, renewables represent a rapidly growing share of total energy supply—including heat and transport. Investment in new renewable power capacity in both 2008 and 2009 represented over half of total global investment in new power generation. The share of renewable energies in the German gross electricity consumption alone has increased in the past 15 years from less then 5% to 16% in 2009.

18. ConnectionsSource: Thomas B. Johansson 2010

19. Net Increase/Decrease of capacity in electricity in EU 2000-2007 (in MW) Source: Prioritising Wind Energy Research Strategic Agenda, EWEA; Platts

20. Promotion of RES because of imbalance in the overall energy market The Energy market as such is still a myth, hampered especially by ever increasing oligopolies and harmful subsidies to the fossil and nuclear sector. Each of the European Commission's evaluation reports of the electricity market so far underlines that obstacles still prevail. Market opening in principle created chance for Independent Power producers to enter with RES energies in heating, cooling, electricity and transport but centralised incumbent structure is opponent to change, in unhealthy coalition with harmful subsidies especially to coal and nuclear sector

21. Barriers and Harmful subsidies EC Commission attests “serious malfunctions in EU energy markets” (EC Commission MEMO/06/78 from February 2006 ) Harmful subsidies to the traditional fossil and nuclear sector amount to 250 billion US$ worldwide per year, representing “a substantial market distortion, discourage new entrants into the market, and undermine the pursuit of energy efficiency”. (José Goldemberg, Thomas.B.Johansson, World Energy assessment, Overview 2004 Update (UNDP,2004, page 72)) Barrier market - fails to focus and internalise all negative effects of conventional energy use into the price for electricity, so that the price for electricity on these markets are not cost related prices.(Goldemberg, Johansson) It is not the renewable energy which is too expensive but the traditional energy which is made to be too cheap.

22. Pre-Conditions for Change • Change in Paradigm: individual responsibility for own energy supply, as local and decentralised as possible • Households and private sector in general should primarily produce their own heat and electricity from RES sources in an efficient environment • Combination with drastic change in consumption pattern and increase in efficiency • Political commitment beyond ideologies and beyound short term thinking to go for strong national efficiency and RES policies • Clear instruments, targets for rapid uptake and enforcement • Change from primarily energy generating companies to energy service providing companies • High level of market penetration by Independent RES Power Production • Swift abatement of open and hidden harmful subsidies to incumbent industry • As long as these conditions are not really met – counterbalance through state policies is necessity Dr. Doerte Fouquet, Director EREF, April 2010

23. Renewable is distributed and decentralized – the ideal partner for territories and localities <Author> ; <Event>

24. Renewable = qualified sustainable jobs <Author> ; <Event>

25. RE is growing- if tools are good <Author> ; <Event>

26. We are confident that we can make it <Author> ; <Event>

27. <Author> ; <Event>

28. Heating and Cooling from RES – a typical local challenge Account for more the 45 % of the overall final energy demand in the EU <Author> ; <Event>

29. Added Value for regions <Author> ; <Event>

30. Work, Work, Work <Author> ; <Event>

31. Industry forecast: >500,000 jobs in 2020 Development of renewable energy sources in Germany in 2009

32. Planning, Vision and Tenacity • Example, Town and regionof Bamberg in UpperFranconia in Germany. Target 100% Renewable in 2035 (210.000 inhabitants) • Bridging all politicalgroups, • Strong focus on publiccommunalservice , • The city and regionas final energyconsumer and producer <Author> ; <Event>

33. Success stories • Decentralised deployment of RES has generated in German towns and communities alone so far an added value of approx 6.8 Bn Euro during the last decade • Information exchange - Congress 100% RES –Regions in Germany in September 2010, focussing on strategies for change <Author> ; <Event>

34. Re-Communalisation of supply • If RE is local and distributed it should be in the hands of the local civic sovereign rather than of oligopolies • „Any abuse of economic power is illegal. In particular all monopoly organisations aimed at the domination of production and market constitute an abuse of economic power and are forbidden.” • (Article 24 of the Berlin Constitution) <Author> ; <Event>

35. Example Hamburg: from Thatcherism to sustainable responsibility • 2009 Hamburg re-introdcued a communal power supplier, offering communal electricity to its citizens • Trend in Germany: to regain formerly privatised supply companies, to take back licenses for electriiy, gas and water supply and to go back to own structures and marketing. <Author> ; <Event>

36. Communal Added Value with RES and EE •  December 2007, the European Commission approved the “Renewable Energy and Energy Efficiency” multi-regional Operational Programme for the Italian regions of Apulia, Campania, Calabria and Sicily for the period 2007-13. The Programme falls within the framework laid out for the Convergence Objective and has a total budget of around €1.6 billion. Community funding through the European Regional Development Fund (ERDF) amounts to some €803 million, which represents approximately 2.8% of the total EU investment earmarked for Italy under the Cohesion Policy for 2007-13. • Roncoferraro, Lombardia, Italy -Amall town in the Po Valley has switched to 100% renewable energy for its municipal energy users. A mix of different technologies provides all the heat and air conditioning it requires during traditionally cold winters and hot summers • EU contribution€ 455,910 <Author> ; <Event>

37. Spread the news: Awards may helpThe Goteborg Award for Sustainable Development • 2009: Winner: • SörenHermansen is the primus motor and focal point of the so-called Samsö Project, in which Samsö, with its some 4,000 inhabitants, won the competition between Danish islands on which one would first become self-sufficient through renewable energy within ten years.Under civic-minded Hermansen's enthusiastic leadership - founded on a grass roots perspective - the work has resulted so far in eleven land-based, and ten ocean-based, wind generators as well as a number of district heating power plants driven by burning hay or wood chips. Replacing fossil fuelled cars and tractors with biogas, raps oil and electric car technology is already in the pipeline. • SörenHermansen was named one of Time Magazine's 2008 "Heroes of the Environment", and is now in the process of spreading his ideas around the world. <Author> ; <Event>

38. Midi-Pyrénées Region and EIB launched EUR 700 million subsidised loan facility together with CréditAgricole and BPCE Group (BanquePopulaire et Caissed’Epargne de Midi-Pyrénées) – September 2010 • These loans directed at public and private companies, farms and local authorities and target the following types of scheme: • The installation in the region of renewable energy generation facilities (photovoltaic, wind, “on-farm” and “centralised” methanisation); • The energy improvement of public and private buildings in the region with the aim of reducing energy consumption by at least 20%. • This programme of the Midi-Pyrénées Region is being partly financed by the European Investment Bank with a EUR 350 million credit line made available to two partner banks: CréditAgricole and the BPCE Group (BanquePopulaire et Caissed’Epargne de Midi-Pyrénées). These two banking groups will jointly provide an additional EUR 350 million to co-finance this major regional renewable energy programme. They will manage a total package of EUR 700 million and be responsible for appraising loan applications throughout the region. The Midi-Pyrénées Region has undertaken to guarantee 25% of the total amount of loans granted to very small, small and medium-sized businesses and farms for renewable energy generation projects, making it possible to improve the terms offered. • The EIB loan will serve to leverage the partner banks’ lending capacity. It forms part of the EIB’s ongoing priority action in France and throughout the EU in support of sustainable, competitive and secure energy – an objective for which the EIB lent EUR 1.3 billion in France in 2009 alone. <Author> ; <Event>

39. Clever Energy management is key • The grid integration of huge percentages of fluctuating sources such as wind and solar photovoltaic needs : • Grid development and interconnection planning • Further scientific and technical research. • Excellent regional meteorological data • Storage and balancing capacity on all levels of energy path (batteries, pump storage, hydro and biogas as storage, cavern use, transport means and buildings as storage hubs, rapid balancing)

40. ENTSO-E- the European TSO association Created to ensure a high standard of operability, reliability and security of the European electricity transmission systems within the framework of liberalised energy markets. ENTSO E under the 3rd liberalisation package obliged to work on policy issues related to renewable energy support and cost assignment questions, cross-border markets under conditions of network congestion and differently structured power markets or exchanges

41. ENTSO-E Roadmap RES drafting and harmonisation planning ENTSO-E: Shaping a pragmatic approach towards the offshore and onshore “Supergrid” concept for offshore cables should be based on the necessary returns on investment under the given regulatory regimes. Taking into account the different national legal frameworks. With a longer-term view, analyzing and commenting the current support schemes, methods, models and practices on incentivizing the development of renewable energy sources , connections to the transmission grids in Europe; at later stage recommendations for possible harmonized regulation related to renewable energy sources. Future operational needs analysis with substantially more wind power The future scenario sets new requirements for forecasting, load flow management, balancing and real-time tools.

42. European Coordinators for infrastructure at least one is missing Action Plan on Energy adopted by the European Council on 9 March 2007 mentions specifically the nomination of European Coordinators. In November 2008 the mandate of a European coordinator was extend to the planned 380kV-Salzburgleitung.  The French-Spanish connection (Mr. Mario Monti) Baltic and North Sea off-shore wind connections (Mr. Adamowitsch) The "Salzburgleitung": Austrian Power link Salzachneu - Tauern (Mr. Adamowitsch) The axis linking Caspian Sea countries and the Middle East to the European Union, including the Nabucco pipeline (Mr. van Aartsen) The northern European power-link (Mr. Mielczarski) We need a Coordinator for EU Energy System Change and for Interests of decentralized and distributed RES supply

43. Recommendations Accept and welcome RES as primary energy source for various reasons including security of supply, Climate ( Leitmotiv) and work from there Stability and longterm view of support mechanisms needed Abatement policies on barriers with clear enforcement and timeline Acceptance of the obvious: As long as the energy market is a myth, support mechanisms for RES need to be applied and ensured Plan for 100 % RES in your region Design the steps towards the target Create strong alliances Recognize the industry and economic factor of RES Be responsible for your own supply and demand Define and promote exit strategies for incumbent coal and nuclear No new nuclear and no new coal

44. Strong policy and clear steering is needed for change Fatih Birol, Chief Economist atthe International Energy Agency (IEA) World Energy Congress in Montreal, September 2010: „Dogmaticfaith in energymarkets will not beenough.“