Energy Saving Policies and Energy Efficiency Obligation Scheme

Cost of EEO schemes and cost-recovery mechanisms

Webinar 13th July 2017

Vlasis Oikonomou, Project Coordinator

Cost recovery mechanisms

For obligated energy providers in competitive energy markets, there are two possible cost recovery paths: •  Option 1: the costs of meeting energy savings

targets are treated as a cost of doing business and energy providers adjust their prices to recover these costs; or

•  Option 2: the costs of meeting energy savings targets are either funded by the government through direct budgetary appropriations, or price surcharges are imposed on regulated “wires and pipes” energy providers.

EU MS Cost Recovery options Country   Cost  recovery  (or  funding)  mechanism  Explana:ons   are  obligated  par-es  allowed  to  recover  their  expenses  due  to  the  scheme?  (and  how?)  

Austria    

Energy  markets  are  open,  therefore  the  energy  suppliers  can  recover  their  costs  through  the  energy  prices  (a  possible  increase  in  energy  prices  is  indeed  a  fear  of  many  stakeholders,  including  consumer  associa-ons)  

Bulgaria   not  defined  yet,  which  is  likely  one  of  the  main  reasons  of  the  low  achievements  so  far  

Croa:a  

Yes,  through  regulated  price  of  energy  distribu-on  which  will  take  into  account  addi-onal  costs  due  to  the  scheme  (process  supervised  by  the  regulator  HERA  ;  op-on  to  avoid  increased  energy  prices  for  industries  is  under  discussion)  

Denmark  

Individual  companies  have  their  actual  costs  of  mee-ng  the  obliga-on  covered  by  supplement  to  revenue  cap  (power,  gas)  or  by  inclusion  in  tariff  (district  hea-ng).  No  law  allowing  oil  companies  to  demand  specific  contribu-ons  from  customers  to  cover  the  costs.    The  surcharge  on  the  energy  prices  has  been  es-mated  by  the  DEA  for  2013-­‐2015  as  (in  c€/kWh)  0.23  for  electricity,  0.17  for  gas,  0.2  for  district  hea-ng  and  0.04  for  oil.  

Estonia  not  defined  yet  (would  likely  be  through  energy  tariffs,  under  supervision  of  the  Compe--on  Authority  that  regulates  the  energy  markets)  

France    

The  energy  suppliers  opera-ng  within  open  energy  markets  can  recover  their  costs  through  their  energy  prices.  Special  rules  applied  for  the  energy  suppliers  with  regulated  energy  prices.  

Ireland  

As  energy  markets  are  open,  the  obligated  par:es  may  recover  their  costs  via  the  energy  prices.  No  specific  rule  is  defined.  The  compe::on  between  energy  suppliers  is  expected  to  prevent  from  high  increases  in  energy  prices.  

Italy  

Tariff  reimbursement  for  obligated  par-es  depends  on  previous  years  market  values  (since  2013,  previously  on  standard  fuel  price  mix  trend);  range  has  been  about  87-­‐110  €  /toe.  Cost  for  savings  measures  in  electricity/gas  can  be  included  in  regulated  operator’s  tariff,  whereas  this  is  not  possible  for  transport  measures    Adjustment  under  discussion  to  allow  inclusion  in  gas  tariff,  or  to  recycle  costs  into  the  transport  sector.  

Latvia  

The  dra[  Energy  Efficiency  law  includes  the  possibility  to  account  for  the  expenses  related  to  the  obliga-on  scheme,  when  defining  the  energy  tariffs.  The  fear  of  increasing  energy  prices  is  likely  the  main  cause  of  opposi-on  to  the  implementa-on  of  the  obliga-on  scheme.  

Lithuania   to  be  defined  by  the  Ministry  

Luxembourg  

The  obligated  par-es  may  recover  their  costs  on  energy  prices.  To  avoid  distorsion  between  energy  types,  non-­‐obligated  suppliers  may  have  to  pay  a  special  tax.  The  obliga-on  is  defined  as  a  mission  of  public  service.  This  allows  the  scheme  to  be  partly  funded  by  the  public  budget.  

Malta   costs  are  assumed  to  be  recoved  through  the  electricity  tariffs  

Poland  Costs  of  the  obliga-on  scheme  are  passed  through  to  consumers  via  tariffs  for  electricity,  heat,  and  natural  gas.  

Slovenia   The  obligated  par-es  will  likely  recover  their  costs  on  the  energy  prices  (liberalised  market)  Spain   Costs  will  likely  be  recoved  on  energy  prices  (liberalised  markets).  

UK   Obligated  par-es  may  recover  their  costs  through  the  energy  prices  (liberalised  market)  

EU MS Cost Recovery options

Source:  Broc  2015  hap://atee.fr/c2e/third-­‐european-­‐workshop-­‐mee-ng-­‐white-­‐cer-ficates-­‐club  

Outside the EU? Country   Cost  recovery  Canada/Ontario   Collected  from  all  ratepayers  based  on  energy  use  or  contribu-on  to  peak  demand  China   City  u-lity  surcharge,  revenue  from  differen-al  electricity  prices,  and  other  funding  

sources  US  MinesoPa   Energy  efficiency  cost-­‐recovery  charge  determined  in  rate  cases  US  New  York   System  benefits  charges,  and  funding  from  carbon  market  US  Texas   Obligated  u-li-es  recover  program  costs  through  base  rates  or  cost  recovery  tariffs  Australia  NSW   Obligated  par-es’  costs  are  treated  as  a  cost  of  doing  business  Australia  South  A   Per-­‐customer  amount  included  in  regulated  price  determina-on  Australia  Victoria   Obligated  par-es’  costs  are  treated  as  a  cost  of  doing  business  Korea   Through  a  customer  charge  for  electricity  and  from  energy  u-lity  revenues  for  gas  and  

district  hea-ng  US  California   Public  goods  charge  and  natural  gas  DSM  charge;  addi-onal  funding  through  rate  cases  

US  Connec:cut   System  benefits  charges,  funding  from  carbon  and  capacity  markets,  plus  other  funding  sources  

US  Massachusets   System  benefits  charges,  funding  from  carbon  and  capacity  markets,  plus  other  funding  sources  

US  Vermont   Volumetric  wires  charge  to  customers  and  funding  from  carbon  market  India   Cer-ficate  trading  and  carrying  over  prices  to  consumers  Source:  RAP  2012,  ENSPOL  2015,  ACEEE  

Cost of EEO schemes

Figures out of early evaluation (capital and administrative costs).. •  France: 0.4 Eurocent / kWh •  Denmark: 0.45 Eurocent / kWh •  Italy: 1.7 Eurocent / kWh •  UK: 0.7 Eurocent / kWh (Lees 2012, Rosenow and Galvin 2013) BELOW energy price so highly cost effective!

Some issues?

•  Transparency (some countries need to report their costs)

•  What type of costs (administrative, transaction, investment, marketing?)

•  What is the incentive to report accurately costs (it unveils strategy and is a negotiation point for target setting)

Contact Details

Project Coordinator Dr. Vlasios Oikonomou E-mail: vlasis@jin.ngo Tel: +31 645380712

Dissemination Leader Assistant Prof. Alexandros Flamos

University of Piraeus Research Center (UPRC)

Website: http://www.kep.unipi.gr/ E-mail: aflamos@unipi.gr

Tel: +30 2104142460