The German Renewable Energy Sources ActObjectives, Design & Achievements

Dr. Volker Oschmann

Energy Policy in Germany

Ministry of Economics: fossil energies

Ministry for the Environment: renewable and nuclear energies

Outline

Overview of the Renewable Energy Sources Act (RE Act)

Objectives

Mechanism

Achievements

Feed-in tariffs in the EU Member States

Outline

Overview of the Renewable Energy Sources Act (RE Act)

Objectives

Mechanism

Achievements

Feed-in tariffs in the EU Member States

Renewable Energy Sources Act –What’s that?

“Feed-in law”:= fixes prices for electricity from renewable energies (RE)-> gives planning and investment security-> encourages private action and investments

Main instrument for promotion of RE electricity in Germany

Most successful German instrument to reduce CO2(52 million t in 2004)

Outline

Overview of the Renewable Energy Sources Act (RE Act)

Objectives

Mechanism

Achievements

Feed-in tariffs in the EU Member States

Objectives of the RE ActLong term: sustainable electricity system based on REShort term:

- develop RE- create an innovative RE industry- facilitate economies of scale- cost reduction

Specific targets for the share of RE electricity:- 2010: > 12.5 %- 2020: > 20 %- 2050: ~ 70%

Electricity Scenario up to 2050

0

100

200

300

400

500

600

700

2000 2010 2020 2030 2040 2050

[TW

h/a]

Nuclear energy Coal/gasCombined heat/power generation BiomassWater WindGeothermal energy PhotovoltaicsImported ren. energy

Quelle: Fischedick, Nitsch u.a

Hydropower

Outline

Overview of the Renewable Energies Act (RE Act)

Objectives

Mechanism

Achievements

Feed-in tariffs in the EU Member States

Main Features of the RE ActThe RE Act

Gives RE priority access to the electricity grid

Obliges grid operators to purchase the RE electricity

Fixes the price (tariff) for RE electricity

How does the RE Act work?

2. RE producer feeds electricity into the grid

1. RE Act sets tariffs and pay period

3. Grid operator pays remuneration (no state aid involved!)

4. Transfer of RE electricity and costs to the consumers

RE Act: Transfer Mechanism

Renewable Electricity

Payment

RE Power Plant

TransmissionGrid

Operators

DistributionDistributionGridGrid OperatorOperator

SupplyCompanies

Consumers

Feed-in tariffs in Germany

2.06.19-9.10Wind energy (offshore)

2.05.39-8.53Wind energy (onshore)

5.043.42-59.53Solar energy

1.07.16-15.00Geothermal energy (<20MW)

1.58.27-17.33Biomass (<20MW)

06.65-9.67Hydropower

Degression

(%/a)

2005 (Cent/kWh)

Degression: The tariff remains constant for commissioned installations, but depends on the year of the initial operation. The later an RE installation is commissioned, the lower the tariff

Why different tariffs?All types of RE are needed to reach the RE targets

Costs for RE electricity depend on different factors, e.g. kind of RE or size of plant

Consequences:tariffs need to be differentiated by source and size of planttariffs for new plants need to decrease every year to further technological development and to bring costs down

How do we calculate the tariff ?

Scientific studies investigate specific cost per kWh.

Payback period: 16 to 20 years

Internal rate of return: e.g. wind power: ~10%

E.g.: Wind PowerCalculation basis for tariffs:

Price of power plant (€ 895/MW)

Costs for infrastructure etc. (30% of price of power plant)

Operating costs year 1-10 (4.8% of price of power plant)

Operating costs year 11-20 (6% of price of power plant)

Expected rate of inflation for 20 years (2%)

Imputed interest (7.45%)- On borrowed capital (70%) : 5.5%- On own capital (30%): 12%

Outline

Overview of the Renewable Energy Sources Act (RE Act)

Objectives

Mechanism

Achievements

Feed-in tariffs in the EU Member States

Achievements of the REA (2005)

Rapid growth of RE (about 10 % per year since 1999)

Share of RE electricity about 11% by the end of 2005 [1999: 4.6 %]

150,000 jobs

11.5 billion euro turnover per year

6 billion euro investment per year

52 million tonnes of CO2 reduction

RE Electricity Generation in Germany

0,0005,000

10,00015,00020,00025,00030,00035,00040,00045,00050,00055,00060,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

[GW

h/a]

PhotovoltaicsBiomassWind energyHydropower

Electricity from:

Wind Energy in Germany

0,000

5,000

10,000

15,000

20,000

25,000

30,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

[GW

h/a]

0,000

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

[MW

]

Electricity generation Capacity

Photovoltaics in Germany

0

50

100

150

200

250

300

350

400

450

500

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

[GW

h/a]

0

100

200

300

400

500

600

700

800

[MW

]

Capacity Electricity generation

Share of RE Electricity Generation 2005

89%

11%

RenewableEnergiesOther Sources

Expected Development[b

illion

kWh/

a]

0

25

50

75

100

125

150

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Hydro Power Wind Onshore Wind Offshore Biomass

Photovoltaics Geothermal Energy RE not included in REA Additional Costs for RE

Erzeugte Strommenge in Mrd. kWh je Jahrab 2003: erwartete EntwicklungElectricity produced (billion kWh p.a.)

Cost for the Promotion of RE just 3%

Share of costs for one kilowatt hour(18 Ct)

VAT14%

EEG3%

Electricity tax (Ecological Tax

Reform)11%

Production, transport and marketing of

electricity60%

CHP Act2%

Concession levy10%

Outline

Overview of the Renewable Energy Sources Act (RE Act)

Objectives

Mechanism

Achievements

Feed-in tariffs in the EU Member States

RE Electricity Policy in the EU:

Cert if icate Systems

BE

UKIT

SE

Quota

IE

Tender

FI

UK

NL

Tax measures

AT

DK

FR

DEESPT

LU

GR

Feed-in Tarif f

NL

PL

SKCYLVCZ

LT

HUEE

BG SIRO

SLMT

Cert if icate Systems

BE

UKIT

SE

Quota

IE

Tender

FI

UK

NL

Tax measures

AT

DK

FR

DEESPT

LU

GR

Feed-in Tarif f

NL

PL

SKCYLVCZ

LT

HUEE

BG SIRO

SLMT

Additional RE Generation 1997-2003

-5

0

5

10

15

20

25

30

AT BE FI FR DE IE IT ES SE UK

Cha

nges

of R

ES-E

gen

erat

ion

pote

ntia

l (2

003

vers

us 1

997)

[TW

h/ye

ar]

Gaseous biomass Solid biomass BiowasteGeothermal electricity Photovoltaics Wind on-shoreWind off-shore Hydro small-scale Hydro large-scale

Effectiveness wind onshore 1997-2004

0%

2%

4%

6%

8%

10%

AT BE FI FR DE IE IT ES SE UK EU 15

aver

age

annu

al e

ffect

iven

ess

indi

cato

r [%

]

Feed-in tariffsTender Quota/tradable green certificates

Tax incentives/rebates

Level of support for wind onshore

0

2

4

6

8

10

12

14

16

18

AT BE DE DK ES FI FR GR IE IT LU NL PT SE UKSup

port

win

d po

wer

ons

hore

(€c

t/kW

h)

Feed-in tariffs

Tender Quota/Tradable green certificates

Tax Incentives/Rebates

2004

Effectiveness vs. annuity (wind onshore)

BE-Flandern

BE-WallonienFR

DE IE

IT

ES-Marktoption

ES-Festpreis

SEUK

AT

0%

5%

10%

15%

20%

0 2 4 6 8 10 12 14Normalised support level [€ Cent/kWh]

Effe

ctiv

enes

s in

dica

tor

Feed-in system Tender system Quota / TGC 2004

Conclusions:European Commisison (12/2005):

„feed-in tariffs are currently in general cheaper and moreeffective than so called quota systems“, because

- they give high planning and investment security- involve lower risks for the investor- are easy to handle- cause low transaction costs

But: Success depends highly on details of regulation -> design carefully and properly!

Thank you for your attention!

www.erneuerbare-energien.de

Comparison of main RE instruments

Feed-in laws: price fixed, quantity determined by market

Quota obligation/tender: quantity fixed, price determined bymarket

LawMarketQuota/Tender

MarketLawFeed-in law

QuantityPrice

=> In both cases markets are regulated