options for future support mechanisms for renewables in ... · options for future support...
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Options for Future Support Mechanisms for Renewables in Finland
Anni Mikkonen Finnish Wind Power Associa3on 29.10.2015
Why the new support mechanism is needed? Low electricity market price
Current feed in tariff was considered to be too expensive Government decided to cut the current FIT
The law closing the current FIT stepped in force 26th of October, 2015. Quota reserva3ons will be accepted un3l the 2500 MVA quota is fully reserved.
If a project is cancelled or grows smaller, the quota once reserved is lost.
Quota reserva3on is requirement for entering the FIT system.
The applica3on to FIT system has to be filed in before 1st of November, 2017.
Governmental program (2015) Share of renewable energy is increased to over 50 % of energy consump3on in the 2020’s.
The government will design a new support mechanism for renewable energy. The support mechanism ◦ Should be in line with the EU guidelines ◦ It’s costs should be descending ◦ Should be technology neutral ◦ Should be based on cost efficiency
The 2030 target cannot be reached without wind power. It would be wise to design the new support mechanism asap
The current project pipeline could be u3lized The Finnish value chain could be u3lized The lessons learned could be u3lized
Support mechanisms in line with EU-guidelines AUCTIONING OF CFD OR PREMIUM
In Finland would be included in the governmental budged. Is this a poli3cal risk?
In use in over 60 countries worldwide.
EU guidelines seem to recommend technology neutral auc3oning. If there are good reasons for it, technology specific auc3oning may also be used (e.g. Germany).
Increases the risk of project development: developer cannot be sure if a project will be accepted to the system or not.
Too risky for small developers and projects?
If the result is CFD, decreases the financial costs as the income is guaranteed over several years.
Needs very good design: technology neutral auc3oning can be a transparent system with decreasing costs to the government.
Finnish Wind Power Associa3on sees technology neutral auc3oning as the best op3on in the current situa3on.
Included in the governmental budget. Poli3cal risk?
Is considered to be a very unreliable support mechanism in the current poli3cal situa3on. ◦ Was in use in Finland before the FIT. Resulted in
143 MW of onshore capacity → not very efficient
Increases the risk of project development: developer cannot be sure if subsidy is granted to the project or not.
Insecurity of the income (electricity price) increases the financial costs.
If the support is over 18 milj. € / company, according to EU guidelines the funding for the project needs to be no3fied ◦ With 30 % share of investment subsidy would
mean 12 turbines ◦ With 25 % share would mean approx. 14 turbines
Would this be an op3on to small projects?
INVESTMENT SUBSIDY GREEN CERTIFICATES Financing from the end-‐users, not in the governmental budged.
In use in Sweden, Norway and Belgium.
All the constructed (RE) projects are accepted to the system.
Consumers benefit from very low cost level to consumers = price too low to make investments economically feasible. ◦ Insecurity of the income increases the financial costs ◦ Price risk has led to market concentra3on, investments only
by big players (mainly u3li3es). Swedish electricity market was too small for the system to operate well – Finland is even smaller. Sweden and Norway together seem to be too small of a market for the system to operate. Finland joining their system might be an op3on, but ◦ It would take several years before Finland could join the
system ◦ It is highly likely that Finland would have a same role as
Norway has in the system: paying the costs but genng hardly any investments
Proposal of FWPA: Auctioning of CFD
Technology neutral auctioning: basics
Prequalifica:on for bidding: • Legally binding building permit • Legally binding spa3al plan (if needed for the project) • Binding grid connec3on offer → No separate bid bonds required
The system should be based on the current FIT-‐system (the authori3es in charge, the evalua3on, documenta3on etc.). The support level is determined by auc3oning.
Transparency and simplicity: All the indirect support of the produc3on methods should be taken into account in the auc3oning (e.g. wood plan3ng and harves3ng support of wood improving compe33veness of biomass projects).
Visibility on coming bidding rounds: Bidders should know three years beforehand the number of rounds for each year and amount of produc3on auc3oned in each round
Heat produc:on (if support is needed)
• Investments to new heat produc3on capacity
Technology neutral auctioning, Pots Mature electricity produc:on methods
• Wind onshore • PV • Biogas • Biomass
Immature electricity produc:on methods
• Wind offshore • Tidal • Etc.
The fuel switch in old CHP plans*
* Current FIT un3l April 2021
What is subsidized: Produc3on (in MWh). What is auc3oned: Support level (€/MWh). Dura3on of the support: 15 years/project. Payment type: Pay-‐as-‐cleared (same subsidy level for all projects).
Example
Technology neutral auc:oning
Bidders : Capacity Annual produc:on Bid
Wind onshore 8 66 MW 211,2 GWh 64 €/MWh Wind onshore 7 21 MW 67,2 GWh 65 €/MWh Biomass 2 25 MW 205 GWh 67 €/MWh Wind onshore 3 72 MW 230,4 GWh 69 €/MWh Wind onshore 1 25 MW 82,5 GWh 70 €/MWh Wind onshore 4 102 MW 326,4 GWh 72 €/MWh Biomass 3 27 MW 105,3 GWh 74 €/MWh Biomass 4 35 MW 287 GWh 77 €/MWh Wind onshore 5 132 MW 514,8 GWh 81 €/MWh Wind onshore 6 15 MW 45 GWh 86 €/MWh Biogas 1 2 MW 16,4 GWh 88 €/MWh PV 4 2 MW 2 GWh 120 €/MWh PV 2 3 MW 3 GWh 165 €/MWh PV 3 5 MW 5 GWh 180 €/MWh PV 1 2 MW 2 GWh 190 €/MWh Biogas 2 10 MW 10 GWh 195 €/MWh
Cumula3ve produc3on
800 GWh, support level 70 €/MWh
Target: 800 GWh of renewable electricity produc3on
Auctioning, details
At least two bidding rounds per year needed ◦ No need to wait for a full year if a project is ready for auc3oning just aper the first round ◦ The workload of the authori3es is distributed evenly throughout the year ◦ One round should be in May / June → the winning projects could be constructed following summer
Bid bonds are not needed as the projects have to be fully permired before auc3oning ◦ Makes it easier for the smaller developers to enter the auc3oning
The annual produc3on has to be es3mated in the auc3oning -‐> gives the Government to es3mate the budget needed for the support
Auctioning, details
Time to construct: 36 months ◦ First checkpoint aper 12 months: the turbines and grid connec3on must be ordered, construc3on works must be started on the site. In case these requirements are not fulfilled, the project cannot enter the auc3oning for the following 36 months.
◦ Aper 36 months, the support period starts. If the project is not ready, the support for the months that the wind farm is not producing is lost.
Market concentra3on to one produc3on method could be avoided by reserving certain amount (e.g. 10 %) of produc3on quota for different produc3on methods
Project is transferrable with the award
Support is not paid for nega3ve hours on electricity market
A pilot is needed
The new scheme should be piloted with 0,5–0,6 TWh of wind power produc3on in early 2016
• Authori3es and project developers would gain experience • The pilot would help to develop the scheme before full start • There will be 1000 -‐ 2000 MW of fully permired onshore wind projects by 2016 → big enough volume for the pilot round
It is also extremely important that the new support mechanism is in use already in 2017.
And what do we know about current situation?
The upda3ng of climate and energy strategy has been started -‐> ready by Dec 2016.
The new support mechanism is design as a part of the climate and energy strategy work.
The working group should start it’s work in November, but the working group has not been announced yet.
To our knowledge all three op3ons (auc3oning of CFD / premium, investment subsidy and green cer3ficates are s3ll on the table.
Thank you for visiting Wind Finland seminar – have a relaxing evening and safe journey home!