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Renewable Energy policies in the EU Member States
Indicators assessing market status, policy effectiveness & efficiency
Mario Ragwitz, Fraunhofer ISI
Max Rathmann, ECOFYS
1
Main support policies for RES electricity
� Feed-in tariffs
� Feed-in premiums
� Quota obligations with tradable green certificates
� Loan guarantees
� Soft loans
� Investment grants
� Tax incentives
� Tendering schemes
Also very relevant:
� Permitting procedures
� Grid access & operation
� Power market design & structure
� R&D, industrial policy
2
Market price
RES-support
TGC revenues
FIT FIP Quota
fixed premium - cap & floor - sliding/Cfd
Quota
Gov fixes quantity, market decides price
� Obligation for suppliers:
� Minimum RES-E share
� Increasing over time
� Penalty
� Tradable certificates for RES-E production (‘market’ price)
� Obligation is met by submission of certificates to competent authority
� Power sold on conventional markets
Fixed feed-in tariff (FIT)
Gov fixes price, market decides quantity
� Fixed tariff (€/MWh)
� Guaranteed during lifetime or x years
� Purchase obligation
� (Grid (access & use) priority)
Feed-in premium (FIP)
� Fixed premium (€/MWh)
� Guaranteed during lifetime or x years
� Power sold on conventional markets
Key features FIT, FIP & Quota
3
Main RES-E support instruments in the EU-27Quota obligation
Feed-in tariff
Feed-in premium
Other instruments than the above
Notes:
1) The patterned colours represent a combination of instruments
2) Investments grants, tax exemptions and fiscal incentives
are not included in th is picture.
Spain
Fran ce
Portugal
United
Kingdom
Ireland
Italy
Netherlands
Belgium
Germany
Sweden
Finland
Poland
Czech
Repub lic
Austr ia
Slovakia
Hungary
Bulgaria
Greece
RomaniaSlovenia
Luxembourg
Estonia
Latvia
LithuaniaDenmark
Malta
Cyprus
Source: RE-SHAPING 2010
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1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
ATAll RES-E
technologies
All RES-E
technologies
All RES-E
technologies
All RES-E
technologies
SE
Bioenergy
PV
UK
IT
LU
NL
PT
MT
SI
LT
PL
ES
AT
BE
DK
FI
EE
All RES-E
technologies
Bioenergy
PV
All RES-E
technologies
All RES-E
technologies
All RES-E
technologies
All RES-E
technologies
Wind
GR
IE
BGAll RES-E
technologies
All RES-E
technologies
All RES-E
technologies
FR
DE
CY
All RES-E
technologies
All RES-E
technologies
All RES-E
technologies
All RES-E
technologies
Wind
All RES-E
technologies
Wind
Bioenergy
PV
CZAll RES-E
technologies
All RES-E
technologies
LV
HUAll RES-E
technologies
Wind
SKAll RES-E
technologies
All RES-E
technologies
Other RES-Etechnologies
ROAll RES-E
technologies
All RES-E
technologies
Quota / TGC
Tender
Tax incentives / Investment grants
Feed-in tarif f
Change of the system
v
Adaptation of the system
v
vv vv
v
v
v
v v
v
v
vv
v
v
v
v v
v
v
v
v
v
v
v
v
v
v
v
v v
v
Main support instrument RES-E & policy changes
1997-2010
5
Main support policies for RES heat
� Investment grants
� Tax exemptions and other fiscal incentives
� Use obligations
6
Overview of indicator set
Policy performance indicators
Policy effectiveness indicator
Support level vs generation cost
Profit range (efficiency)
Ex-post evaluation of policy performance
Market status indicators
Deployment status indicator
Electricity market preparedness indicator
Framework conditions for RE policy (RET market maturity, electricity market)
Used (e.g. by EC) since 2005 and constantly improved, updated, extended.
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Deployment Status Indicator
Deployment Status
Typical characteristics
Three sub-indicators expressing different aspects of RET deployment status
Production as % of sectorconsumption
Production as % of 2030 potential
Installed capacity >100MW
Advanced
Established players, fully mature technology, growth may slow down.
Shows relevancy & visibility on energy market
Higher share indicates that low-end barriers have been overcome;
high-end barriers may occur (e.g. integration electricity system)
Higher share indicates that low-end barriers have been overcome; high-end barriers may occur (e.g. competition resources)
Passing minimum threshold indicates that market players gained trust & experience.
Proof that barriers can be overcome.
Intermediate
Increasing market, strong growth. Growth related barriers (e.g. infrastructural and supply chain). Some countries stop at this level.
Immature
Small market, few players, low growth. Inexperienced administration & banks. Low or unreliable support.
� A rough characterisation of the status of 14 technologies in 27 Member States
� For differentiation in policy performance analysis
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AT
AT
AT
AT
AT
BE
BE
BE
BE BE
BG
BG
BG
BG
BG
CY
CY
CY CY
CY
CZ
CZ
CZ CZ
CZ
DE
DE
DE
DEDE
DKDK
DK
DK DK
EE
EE
EE
EE
EEES
ES
ES ES
ES
FI
FI
FI
FI
FI
FR
FR
FR
FRFR
GR
GR
GR GR
GR
HU
HU
HU
HU
HU
IE
IE
IE
IE
IE
IT
IT
IT
ITIT
LT
LT
LTLT LT
LU
LU
LU LU
LU
LV
LV
LV LVLV
MT MT MT
MTNL
NL
NL
NLNL
PL
PL
PL PL PL
PT
PT
PT PT
PT
RO
RO
RO
RO
RO
SE SE
SE
SE
SE
SI
SI
SI
SI
SI
SK
SK
SK
SK
SK
UK UK
UK UK
0
33
67
100
Dep
loym
en
t S
tatu
s i
nd
icato
rIm
matu
re
I
nte
rmedia
te
A
dvanced
Biomass grid SolarthermalGeothermalGround source
heat pumps
Biomass non-
grid
Other MS Other MS
DE, SI, PT, CZ,
ES, DK, NL, IT,
SE, SK, FR,
BE, IE, PL,
RO, UK, HU
Other MS
Other MS
Note: RET markets where the share of the potential in sector consumption is < 1% are not shown.
For example in case of biomass non-grid this applies to UK and MT.
AT
AT
AT
AT
AT
AT
BE
BE
BE
BE
BE
BE
BG
BG
BG
BG BG BGCY CYCY
CY
CY
CY
CZ
CZ
CZ
CZ
CZ
CZ
DE
DE
DE
DE
DE
DE
DK
DK
DK
DK
DK
DK
EE
EE EE
EE
EE
EE
ES
ES
ES ES
ES
ES
FI
FIFI
FI
FI
FI
FR
FR
FR
FRFR
FR
GR
GR
GR
GR
GR
GR
HU
HU HU
HU
HU
HU
IE
IE
IEIE
IE
IE
IT
IT
IT
IT
IT
IT
LT
LT LT
LT
LT
LT
LU
LU
LU
LU
LU
LU
LV
LV LVLV
LV
LVMT MT MT MT MT MT
NL
NL
NL
NL
NL
NL
PL
PL PL
PL
PL
PL
PT
PT
PT
PT
PT
PT
RO
RO RO
RO
RO RO
SE
SE
SE
SE
SE
SESI SI
SI
SI
SI
SISK
SK SK
SK
SK
SK
UK
UK
UK
UK
UK
UK0
33
67
100
De
plo
ym
en
t S
tatu
s I
nd
ica
tor
Imm
atu
re
In
term
ed
iate
A
dva
nce
d
Wind on-
shore
Wind off-
shore Photovoltaics
Geothermal
electricityBiogasSolid
biomass
Other MS
Note:
Not shown is hydro (Deployment Status in most MS advanced), solarthermal electricity and tide & wave (in
2008 Deployment Status in all MS still close to zero).
Solid biomass is a very heterogenous category as it comprises different technologies (pure biomass plants and
Other MS Other MS
Other MS Other MS Other MS Other MS
Deployment status
Electricity Heat���� ����
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Measuring the effectiveness of RES-E support
1. Relative or absolute growth rates are typically used to
demonstrate the achievements of countries, however both
measures are biased
2. Better measure to judge the performance is the absolute growth
as ratio of the additional potential
in
i1n
ini
nPOTADD
GGE
−
−
=−
inEinG
inPOTADD− Additional generation potential of RES technology i in year n until 2020
Existing electricity generation potential by RES technology i in year n
Effectiveness indicator for RES technology i for the year n
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Policy effectiveness - wind onshore
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%C
Y
MT SI
SK
RO LV
LU FI
CZ
BG PL
LT
FR
HU
BE
EE
SE
UK IT
GR
NL
AT IE
DK
PT
DE
ES
Eff
ectiveness in
dic
ato
r
Average effectiveness indicator 2003 - 2009
Effectiveness indicator 2009
Feed-in tariff Quota / TGC Tender Tax incentives / Investment grants
AdvancedIntermediateImmature
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Support level ranges - wind onshore
0
50
100
150
200
250
AT BE BG CY CZ DE DK EE ES FI FR GR HU IE IT LV LT LU MT NL PL PT RO SE SI SK UK
System services cost
Minimum to average generation cost [€/MWh]
Average to maximum support level [€/MWh]
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Potential profit ranges - wind onshore (=cost-effectiveness of policies)
AT
BE
BG
CYCZ
DE
DK
EE
ES
FI
FR
GR
HU
IE
IT
LT
LU
LVMT
NL
PL
PT
RO
SE
SISK
UK
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
-40 -20 0 20 40 60 80 100 120 140
Po
licy e
ffectiven
ess in
dic
ato
r 20
09
Potential profit range [€/MWh]
13
Electricity market preparedness for RES-E market integrationHigh score necessary but insufficient precondition for successful use of FIP/Quota?
0
10
20
30
40
50
60
70
80
90
100
*A
ust
ria
*B
elg
ium
*B
ulg
ari
a
*C
yp
rus
Cze
ch
Re
pu
bli
c
Ge
rma
ny
De
nm
ark
*E
sto
nia
Sp
ain
Fin
lan
d
Fra
nc
e
Gre
ec
e
*H
un
ga
ry
Ire
lan
d
Ita
ly
Lith
ua
nia
*Lu
xe
mb
ou
rg
*La
tvia
**
**
*M
alt
a
Ne
the
rla
nd
s
Po
lan
d
Po
rtu
ga
l
Ro
ma
nia
Sw
ed
en
*S
lov
en
ia
**
Slo
va
kia
*U
nit
ed
Kin
gd
om
Placehoder for missing data points (=10 points as default)E: Gate closure timeD: Share of electricity traded at exchange (spot)C: Number of companies with more than 5% share in the national retail marketB: Number of companies with more than 5% share in generation capacity / wholesale marketA: Share of TSOs that are ownership unbundled
Ele
ctri
city
ma
rke
t p
rep
are
dn
ess
fo
r R
ES-
E m
ark
et
inte
gra
tio
n
L
ow
H
igh
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Conclusions - General
1. Policy performance is rather heterogeneous depending on RET/MS
2. If support levels are below generation costs, little or no capacity growth can be observed
3. High support levels compared to generation costs do not in all cases lead to substantial capacity growth
� Growth can be allowed & support levels reduced by reducing barriers, applying best practice support system design and reducing risk -> Triple-A policy presentation
4. Markets with a higher deployment status tend to grow faster. However, examples show that markets can grow quickly without having a long track-record.
� Countries with low deployment status can benefit of other countries’experiences. Policy effectiveness can be rapidly increased by adopting best-practice support policy design and organisation of administrative processes. Can profit from spill-over effects from internationally available project development expertise and supply chain.
5. Support levels heat sector provide less profit than in electricity sector, despite the low generation costs of many RES-H technologies. On average, policy effectiveness in the heat sector is also lower than in the electricity sector.
� Ensure balance between developing higher cost technologies (progressing on learning curve) and fully utilizing low cost technology potentials (e.g. heat).
15
Conclusions – Heat sector
� Reconsider whether observed low profit levels in heat sector need to be increased
1. RES-H support usually depends on public budget, resulting stop- and go policies create stronger uncertainty for investors than common in RES-E
� Apply off-budget policies, e.g. via surcharge on heat (fuel) cost
2. AT, DK, FI, LV, SE effectively promoted biomass-based centralised heating. Success factors: Existing district heating networks in Northern Europe, biomass availability, sufficient heat demand
3. Support for decentralised biomass heating plants is on a higher level than that of centralised plants
4. BE, CZ, DE, RO most effectively supported decentralised biomass heating
5. Policy effectiveness solar thermal heat rather low (also due to a high remaining resource potential). AT, GR, CY leading countries
6. Ground-source heat pumps effectively promoted by using obligations in SE and investment grants and fiscal incentives HU & FI
7. Long reinvestment cycles limit the diffusion rate for the integration of renewable heating systems that are integrated in buildings
� Due to long reinvestment cycles it might be useful to already start now supporting especially those technologies that are likely needed in the future energy system. This might refer especially to technologies that are beneficial for system integration of fluctuating RES-E, like heat pumps or biomass CHP with heat storage.
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Conclusions – Electricity sector 1/2
1. Most effectively supporting wind onshore: IE, PT, ES, DE
2. Wind offshore just starting in UK, IE, DK, DE
3. Most effectively supporting PV: DE, CZ, IT
4. Most effectively supporting biogas: AT, DE, UK
5. BE, SE, NL, DK, AT, HU, DE and CZ show high policy effectiveness in Biomass
6. FIT-countries still show highest effectiveness but quota countries are catching up in particular with regard to low cost RET (e.g. wind onshore in UK, IT, BE, SE in 2009). In the same period e.g. in the UK quota system certificate revenue risk has been reduced substantially – from an investment risk perspective the system is close to a less risky FIP.
7. Remuneration in FIT tends to be lower (higher) for low (high) cost technologies than under a quota. In most quota systems support levels are insufficient for high cost technologies such as PV.
� Many quota countries offer separate incentives: BE minimum prices for PV, IT FIP for PV, UK FIT for small-scale applications. Technology-banding within the quota as applied in UK can help to support cost-intensive technologies like wind offshore, but is less suitable for small-scale projects than feed-in tariffs.
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Conclusions – Electricity sector 2/2
� Differentiate support instruments according to technology maturity (e.g. rather mature wind onshore or rather immature wind offshore), project size (rather kW-range, few MW, or several hundred MW), type of envisaged investor (utilities, new independent power producers, small-scale business, households or farmers), or lender.
1. Stimulated capacity growth may develop faster than envisaged causing high policy costs. Stop-and-go policies harm industry as a whole.
� FIT/FIP for RET with rapid cost reduction require frequent tariff adjustment cycles and good coordination of tariff levels with other relevant markets. (Frequent) tariff adjustments based on (automatic) adjustment formulae (related to market growth) at dates known tothe market sufficiently long beforehand can manage this policy cost risk without negatively affecting the investment climate
� EC could oblige MS to be more transparent in their RES-support. E.g. putting information on (the assumptions for calculating) average support and profit levels directly from the MS governments on a transparency platform. This should help MS to determine (technology-specific) support levels in such a way that they suit their (technology-specific) deployment target.
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Thank you for your attention!
2010 indicator report available on
www.reshaping-res-policy.eu
2011 indicator report available as of early summer