1. Overview of Economic, policy and regulatory constrains for DER integration in EU
Miroslav Maly (Enviros), Michael ten Donkelaar (ECN)
SOLID-DER National Seminar Vilnius
March 6, 2007

2. Contents of the presentation
Market presence of DER in NMS
DER support in NMS
DER regulatory issues
Main barriers to DER increase
Conclusions

3. Market presence of RES / CHP in the new EU10+
Current status - major part of RES-E production in large hydro-power stations (e.g. Latvia, Romania, Slovakia, Slovenia):
Wind energy developing since 2004: Baltic States, Czech Republic, Poland
Some wind energy projects realised, many more are planned
RES-E targets for very ambitious
For some countries perhaps too ambitious (e.g. Czech Republic, Slovakia)  above expected economic potential in short-term
Main potential for RES-E up to 2010 – biomass / biogas applications, wind energy and small hydro
CHP has major share in all new MS, 10-20% of E-production from CHP but large part is not DER
CHP connected to industry, district heating
Little small-scale applications (e.g. gas engines, RES-CHP)

4. Market presence of RES / CHP in the new EU10+
RES-E share (% E-prod. in 2004)
RES-E share (excl. large hydro)
CHP share
(% E-prod. in 2004)
Small CHP share
DER share
RES-E target 2010
(% cons.)
Bulgaria
7.9
1.4
11.8
2.8
4.2 11
Czech Rep.
4.1
2.4
14.0
5.3
7.7
8.0
Estonia
0.4
10.4
0.1
0.5
5.1
Hungary
20.0
7.4
9.8
3.6
Latvia
47.4
4.9
21.5
3.5
8.4
49.3
Lithuania
0.6
22.4
4.6
5.2 7
Poland
2.2
14.3
4.3
4.8
7.5
Romania
23.3
1.1
< 20
2.0
3.1 33
Slovakia
11.5
16.0
8.6
9.1 31
Slovenia
27.7
3.7
< 10
3.0
6.7
33.6

5. Market presence of DER in Europe
Source:DG-GRID / SOLID-DER

6. RES / CHP support in the new EU10+
DER support mechanisms developed during the last 5 years:
Predominantly feed-in tariff systems for RES-E
Green (feed-in) Premium System – bonus to market price (e.g. Czech Republic, Hungary)
Tradable green certificates introduced in Poland and Romania
TGC combined with quota system and fines
Some countries provide additional support through investment subsidies, soft loans or tax exemptions
Future (investment) support expected from EU Structural Funding
Support to CHP in 6 out of 10 countries
Bulgaria, Czech Republic, Hungary, Latvia, Poland (from 2007), Slovenia
Feed-in tariffs or premiums, usually lower rates than for RES-E, mostly for small- to medium-scale CHP

7. RES / CHP support in the new EU10+
Support for RES / CHP
Support category
Support
(€ct/kWh)
% of market price
No. of years
of support
Additional support
Bulgaria
RES/CHP
FIT
4 – 8.5
12 yrs -
Czech Republic
6 – 10
200 – 300
15 yrs
Investment subsidies
Estonia
RES
7 – 12 yrs
Hungary
6 – 6.8
~ 200
Until return
is yielded
Latvia
200
8 yrs
Lithuania
5.8 – 6.4
Until 2020
Soft loans, tax exemption
Poland
TGC
Depending on market price
Up to 233
No limit
RES exempted from excise tax
Romania
Minimum 2.4 – 4.2
Slovakia
6 - 20
Until 2010
Slovenia
5 - 7
140 – 200
10 yrs
Tax exemption

8. Overview of RES-E support schemes in Europe

9. Is RES-E / CHP support effective?
Support existing for only a few years, no conclusion possible yet about effectiveness of FIT or TGC
Strong growth of RES-E not yet noticed with exception of Hungary (growth in biomass co-firing and small CHP)
But, many new RES-E projects are under implementation or planned
Support mechanisms can overcome economic barriers such as large upfront investments, depending on tariff level
Tariff level is not sufficient in every country
Little differentiation benefits some technologies too little, other perhaps too much (e.g. co-firing of biomass in Hungary)

10. DER regulatory issues – Market Access
Sale of DER-E
Access to wholesale market
Bulgaria
RPO
Yes
Czech Rep.
Estonia
Hungary No
Latvia
Lithuania
Poland
Romania GC
Slovakia
Slovenia
Regulated purchase
obligation most common
Also access to wholesale
market in most
new Member States
RPO = Regulated
Purchase Obligation
GC = Green Certificates

11. DER regulatory issues – Balancing conditions
No common balancing conditions
Obligatory notification of DER generation amounts in some countries
DER is not active part of generation reserve

12. DER regulatory issues – Network access
No uniform connection charging method
Large differences in charging approaches
Use-of-System charges for DER operators not common in NMS

13. Main barriers to DER increase – short-term
Policy barriers:
Frequently changing policies and priorities
Regulatory barriers:
Long procedures for spatial planning, construction permissions
Network (regulatory) barriers:
Complicated (non-standardised) connection procedures
Prices sometimes discriminatory to small-scale generators
Dominant position of DSOs
Financial barriers:
Large initial investments and credit availability
Availability of support (schemes are often unstable)
Feed-in tariff schemes not cost-effective in the long term
Technical barriers:
DER connected in less populated areas means higher connection costs or network upgrades
 Preferential wind power locations often in remote areas

14. Main barriers to DER increase – long-term
Long-term barriers
No long-term RES-E / CHP targets and policies
What targets to be expected after 2010?
Are long-term policy plans in line with increased DER shares?
Costs for network upgrades when not taking DER into account in planning
Threat of higher costs of electricity with more DER connected
Fragmented and also often changing support for DER (both in EU15 as in NMS
Soon no overcapacity but shortage of capacity (e.g. due to nuclear phase-out in Lithuania, Slovakia, Bulgaria)
Questions
What countries have structural generation overcapacity (still in 2010 or 2020), perhaps Czech Republic, Poland?
What kind of power capacity will replace nuclear power plants?
Are most efficient technologies supported with existing support schemes, what about CHP?
What is the opinion of major stakeholders?

15. Preliminary conclusions
DER plays an increasing role in the new MS
In the form of CHP and recently new RES-E capacity
DER support schemes introduced (to meet RES-E targets)
Mainly in the form of FIT combined with RPO
Support levels in some countries comparable to that in EU15
Slow but steady uptake of RES-E capacity
Participation of DER in energy markets still limited
But some countries provide access to wholesale and/or balancing market
DER regulatory framework shows large differences between countries:
System of connection charging
Balancing conditions (obligations and access)

16. Short- and medium term policy and regulatory recommendations
Complete the unbundling process, within the legal framework as well as in practise
Simplify authorisation procedures for spatial planning and construction permits through a “one-stop shop system” for project authorisation
Introduce transparent and non-discriminatory grid connection, grid use conditions as well as cost allocation between DER operators and network operators
Ensure market access for DER operators through simplified procedures to wholesale, balancing and ancillary services markets
In the development of support schemes, take into account their cost-effectiveness in the long-term and the stability it has to create for investors

17. Thank you for your attention !
SOLID-DER project website: