Development of RES-E generation 2004-2020 within EU 15 in the BAU scenario (B1)
Figure 2. Portfolio of RES-E technology on RES-E generation in 2020 among the Member States under BAU conditions (B1)
Total amount of RES-E generation within the EU 15 was around 449 TWh/a in 2004.[1] Without any changes in the support scheme the electricity production will rise to about 581 TWh/a in 2010 (19,0%) and 848 TWh/a in 2020 (24,3%). This amount is ‑ following the BAU demand projection from Mantzos et. al. (2003a) – around 93 TWh/a or 2% less than the EU target as described in the ‘RES-E Directive’ (01/77/EC).[2] Remaining the current policy schemes, the EU target 2010 can be reached with a delay of around 3 years (efficiency demand according to Mantzos et. al (2003)) and 5 years (BAU demand according to Mantzos et. al (2003)), respectively.
The dynamic development of RES-E generation for the BAU case is depicted in Figure 6.3. On country level large differences in the future RES-E deployment exists. Three countries would reach the indicative RES-E targets without any adaptation of their current strategy in 2010; namely Germany, the Netherlands and UK (assuming a binding penalty). Substantial additional RES-E development can be expected in most countries after 2010.
Due to less public support and acceptance, the amount of large scale hydro power plants will increase only marginally in absolute terms.[3] In relative terms the share drops significantly from around 60% in 2004 to 33% in 2020. The ‘winner’ among the considered technologies is wind energy, both onshore and offshore. It can be expected that around 45% (30%) of the RES-E production of plants installed after 2004 in 2020 is coming from wind onshore (offshore), leading to a share of around 30% wind onshore and 15% wind offshore on total RES-E generation in 2020, respectively. Other significant increases can be expected for solid biomass (+ 8%) and biogas (+ 6%). The portfolio of RES-E technologies significantly differs among the Member States as can be seen from Figure 2.
It can be expected that the highest amount of ‘new’ RES-E will be produced in the UK and Germany following by France, Spain and Italy. In general, actual generation depends on the applied policy and partly varies significantly.
High investments are necessary to be able to build up the new capacity. Figure 3 shows the total investment needs for RES-E over time assuming BAU policy up to 2020. While necessary investments into wind onshore and biogas plants are relative stable over time, investments into solid biomass plants (including biowaste) mainly occur in the first years (2005-2015) and for wind offshore and photovoltaic mainly after 2010. The investments (within the EU and worldwide) stimulate technological learning, leading to lower generation costs in the future.
Next, the necessary financial incentive for the promotion of RES-E is discussed. Figure 4 compares the average financial support for new RES-E capacity for the four investigated cases B1 to B4. The amount represents the additional premium costs for society compared to the power market price.[4]
With respect to the BAU policy (B1) it can be conclude that the average premium costs remains constant up to 2012 and decreases thereafter. The reduction, however, is lower than introducing a harmonised well designed technology specific feed-in tariff scheme (B2). Again, the necessary support nearly drops continuously over time.[5] In contrast to this scheme the entity of both a national and international TGC system is to promote currently least cost generation options (only).[6] Hence, in the first year(s) premium costs are low but increase over time as cheap production options are already used.[7]
It can be observed that premium costs for society are higher applying a national TGC scheme compared to an international one. In addition, considering the higher risk associated with a TGC scheme for the investors the necessary support is higher than applying a technology specific well designed feed-in system.[8]
The application of current policies leads to a high spread of the granted financial premium costs among the countries as depicted in Figure 5a.
The necessary premium support per MWh new RES-E generation can be mainly harmonised between the countries by applying harmonised feed-in tariff schemes, see Figure 5b, or fully by applying an international TGC scheme, see Figure 5c.[9] In contrast to this two schemes national TGC systems do not (automatically) lead to similar or the same financial incentives for new RES-E production in all countries as illustrated in Figure 5d.[10] The premium depends on the national RES-E target setting. Assuming that the same national RES-E deployment as under the BAU policy should be reached, high distortions between the countries occur.[11]
Summing up, it can be concluded that the application of a harmonised approach leads to a uniform support per MWh of RES-E technologies in the countries. This means that distortions of the technological development of each RES-E technology among the Member States can be avoided.
Figure 3. Total investment needs in the period 2005-2020 within the EU-15 in the BAU scenario (B1)
Figure 4. Comparison of financial support (average premium to power price) for new RES-E generation on EU 15 level in the period 2005-2020 for the cases (B1-B4)
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(a) current RES-E policy schemes (case B1) |
(c) international TGC scheme after 2012 (case B3) |
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(b) internationally harmonised feed-in tariff scheme after 2012 (case B2) |
(d) national TGC schemes after 2012 (case B4) |
Figure 5. Country specific financial support (average premium to power price) for new RES-E generation in the period 2005-2020 for the cases (B1-B4):
(a) applying current RES-E policy schemes (B1) … (top-left)
(b) applying an internationally harmonised feed-in tariff scheme after 2012 (B2) … (bottom-left)
(c) applying an international TGC scheme after 2012 (B3) … (top-right)
(d) applying national TGC schemes after 2012 (B4) … (bottom-right)
Figure 6. Comparison of necessary transfer costs for consumer reaching the BAU target 2020 for the cases (B1–B4)
The yearly necessary transfer costs for consumer on EU level reaching the BAU target over time are depicted for the four investigated cases in Figure 6. The yearly burden is highest remaining the current policy schemes. In this case transfer costs for society rise continuously over time. Costs are relative stable applying a technology specific feed-in tariff from 2013 on. In the case of a TGC scheme burden in the first years drop compared to the 2012 level, but increases over time
Harmonisation reduces the distortion with respect to the required transfer costs for the societies in the countries. The same promotion of one unit of new RES-E for each technology in the different Member States (harmonisation of the schemes), however, does not automatically results in a uniform burden for the consumer per MWh electricity consumption.[12]
In the case of a feed-in tariff or tender scheme the transfer costs (premium costs) for society depends on the actual national RES-E deployment. This means that the burden for the consumer is high in countries with a relative high potential as a high total electricity generation from RES-E occur. In addition, the costs rise if the share of relative ‘expensive’ RES-E technologies is high too. In the case of an international TGC scheme the burden depends on the agreed national RES-E target, i.e. the costs are independent from the actual national RES-E production; the different to the quota level can be sold at or must be purchased from the international TGC market.[13] Applying a national TGC scheme the transfer costs for consumer depends on the agreed TGC target too, however, without the opportunity to use all efficient RES-E generation options if the target setting among the countries is inappropriate.
In addition, the yearly transfer costs for consumer depend on the historical promotion of RES-E. These costs are independent from the actual RES-E policy as it is assumed that existing capacity remains in their old promotion scheme – the new schemes are applied to new capacity only.
Note that the yearly transfer costs represent the actually yearly imposed costs for society and are not fully comparable among each other with respect to the total burden for the consumer[14]. For example in the case of the BAU scenario some countries are granting investment incentives, leading to a high yearly costs for the new RES-E capacity but lower costs in the years thereafter. As the time horizon ends by 2020 in the Figure 6 the total burden for the consumer seams to be ‘too high’ in the BAU scenario compared to the other cases as a higher share of the costs are already paid up to 2020.[15] The yearly burden can be influenced by changing the guaranteed duration of the support. For example the yearly amount increases by guaranteeing a tariff for 10 years instead of 15 years. In this case, however, premium costs must be paid only 10 years so total burden remains approximately constant.
A comparison of the full transfer costs for the consumer is given in Figure 7. Total transfer costs for society after 2020 (dotted area) are higher under a TGC scheme than under a feed-in system as the TGC price is high in 2020. Total transfer costs for society are lowest applying technology specific support, followed by an international and a national TGC scheme and are highest retaining the current policy up to 2020.
Figure 7. Comparison of necessary cumulated total transfer costs for consumer due to RES-E policy up to 2020 reaching the BAU target 2020 (B1 – B4).
Note: In the case of a TGC scheme total transfer costs paid after 2020 are estimated assuming that the TGC price in the year 2020 is constant up to the phase out of the support
[1] Note: RES-E generation in 2004 refers to available potential of RES-E times normal (average) full load hours of the technologies. This means actual generation can differ from this value due to (i) variation of generation from average conditions (e.g. for hydropower or wind) and (ii) new capacity build in 2004 is not fully available for the whole period 2004.
[2] Assuming an electricity demand projected according to the efficiency scenario (Mantzos et. al., 2003b), the share of RES-E amounts 20% in 2010 and 26.9% in 2020.
[3] Considering the effects of the Water Framework directive (EC, 2000b) the total electricity generation from (large scale) hydro can even be lower in 2020 compared to the current level.
[4] Note: At this stage a power price reduction due to the promotion of RES-E is neglected. Hence, premium costs are (slightly) overestimated.
[5] Note: The incentive compatible feed-in tariff is designed that the necessary amount dynamically drops. The slight increase in 2014 results as a higher share of more expensive technologies is exploited.
[6] By using technology-cluster specific quotas or granting additional support for less mature technologies a different dynamic support development can be reached
[7] The development of the premium costs depends on the mid term target, the available potential and the cost reduction due to technological learning. This means the necessary support can increase or decrease over time.
[8] For comparison purpose, the ‘necessary’ premium for the case of no risk premium is depicted in Figure 4 too (dotted lines).
[9] The remaining differences occur due to the different technology mix. In the case that for each technology the same tariff level – which of course is inefficient with respect to the costs for society – is grated the premium support would be equal in each countries too.
[10] Note: Harmonisation in the case of a feed-in scheme means that the same tariffs for the different technologies are granted. As the RES-E portfolio, however, differs within the countries (slightly) variations in the average support occur.
[11] This fact confirms the existence of large variations in the current RES-E support.
[12] One approach how to harmonise the burden for the consumer among the countries is discussed in detail in chapter 7.2.6.of the "Action plan for deriving dynamic RES-E policies".
[13] In this investigation it is assumed that each country is imposed by the same RES-E target for new plants. This means that the burden for RES-E policy after 2012 is equal among the consumer in the Member States (uniform quota for new RES-E generation).
[14] However, they are fully comparable regarding the yearly burden for the consumer.
[15] For the harmonised cases a guaranteed duration of 15 years is assumed. This means that a capacity, which is built in 2019 will receive a public support up to 2034. In Figure 6.8, however, only the costs for the years 2019 and 2020 are depicted, neglecting the full ‘sunk costs’ up to 2034 in the period after 2020.
