Learning from Feed-in Tariffs Dr. Axel Bree "Data Gathering on Renewable Energies for the New Member States and Candidate Countries" th November 2008, Prague

Structure of Presentation 1.Introduction 2.Design of Feed-in Tariffs –Tariff –Purchase Obligation –Burden Sharing –Grid Connection 3.Conclusion

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Performance, Targets and Potential of Selected Eastern European Countries Share of RE in total electricity generation

6 Market Barriers Source: BEE, Lackmann, 2005 distortion from subsidies for competing fuels (NEF Report 2004: US$ 235 bn/a); fluctuation of oil and gas prices; environmental externalities planning restrictions grid access new technologies RE support schemes are imperative

Pieces of the FIT Puzzle Purchase Obligation Grid Connecti on Burden sharing Tariff level

Calculation of Feed-in Tariff Generation Costs : investment cost + operating cost./. expected production over service life = compensation per kWh avoided external costs

Design of Tariff Levels – Stepped Tariffs All FIT tariffs differentiate between different technologies (high: PV; low: hydro) Other differentiation criteria: Location, wind yield, plant size, fuel type, repowering Ratio: - no overcompensation  stronger support for young technologies with potential  Balance of incentives to exploit all, but most favourable conditions first

Tariff Degression and Experience Curve Tariffs are guaranteed for long time periods Experience curve: price for power plants and installation decrease Ways to reflect decrease in compensation scheme: Tariff degression (D,F, I): Tariff level falls each year based on ex-ante progress ratios for technology + investment security, transparency, incentive to built early -Not flexible in case of structural changes Tariff revision (N, PT, CZ): Tariff is revised periodically (1-3 y.) or capacity-related within certain limits can apply to new or and old plants + avoid over- or under compensation - Less investment security

Premium Tariff vs. Fixed Tariff Premium on top of market price (ESP, CZ, SI, NL, DK) Higher oil & gas prices lead to higher cost per kWh RES-E + higher comparability with liberalised energy markets - Higher risk for producer (no purchase obligation) ->Compromise could be a top or bottom limit (as in DK)

Purchase Obligation Electricity grid operators, energy supply companies and consumers are obliged to buy RES electricity Integral part of fixed FIT-system Guarantees investment security No purchase obligation with premium tariff system

Burden Sharing Compensation for energy intensive industries: AU: households pay lump charge of 15 €/a, industries up to €/a + electricity traders have to pay fixed tariff DK: reduction of 37-39% for consumption >100 GWh/a DE: >10 GWh & energy costs >15% gross value added + track railways: tariff is limited to 0.05 €ct./kWh

Costs of Grid Connection ConnectionNetwork reinforcement Use of system charge Shallow connection charging GeneratorGrid operatorGenerator Deep connection charging Generator no

Conclusion Focus should be on long term planning and investment security, because it is best incentive to invest and keep costs low -> long term fixed tariff -> priority purchase obligation -> reviews only in a restricted frame Regulation must be well-balanced to give enough incentive but to avoid windfall gains -> stepped tariffs -> degressive tariffs -> shallow connection charging

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