What changes to the present law does the renewable energy sector expect? 7 th March 2012 Seminar of...

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What changes to the present law does the What changes to the present law does the renewable energy sector expect?renewable energy sector expect?

7th March 2012Seminar of Clifford Chance “Renewable energy

development”

Michal CwilPolish Economic Chamber of Renewable energy

ul. Gotarda 9, 02-683 WarszawaTel. +48 22 548 49 99, Fax +48 22 548 49 00

pigeo@pigeo.pl www.pigeo.org.pl

Polish Economic Chamber of Renewable Energy

2

Why do we develop renewable sources?

3

growing energy needs population grows fossil fuels are reducing rising costs of energy production from fossil fuels we want to reduce dependence on energy

imports from outside the EU and Poland we want to realize EU energy policies based on

low-or zero emissions.

The increase in global energy consumption, 1900-2002in million tons of oil equivalent, Mtoe

4 source: International Energy Agency (IEA)

0

2,000

4,000

6,000

8,000

10,000

12,000

1900 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002

1 TWh = 11,63 * 1 Mtoe

Global population, 1950 – 2100in billion persons

5 source: L. David Roper

The estimated increase in energy consumption, 1975-230010^15 british thermal unit, PBTU

6 source: L. David Roper

1.000 m3 of natural gas = 1 MBtu

Current energy consumption per capitain million british termal unit per capita per year, MBTU/per capita/year

7

USA: 350

Industrialized countries: 200

Developing countries: 35

World: 75

UE27: 162

POLAND: 103

Non-renewable resources - the peak of yieldoil production in thousands. ek barrels / day. The price of oil rose from $ 11 a (1998) to $ 147 (2008)

8

Peak production is over

Romania Italy Denmark Norway United Kingdom

Why is the law on renewable energy sources?

9

2009/28/WE Directive=>

National Renewable Energy Action Planaccording to Art. 4 of the Directive each

member member prepare a plan. On its basis the target in 2020 is realized.

The Polish Government provided to the EC the strategy on 9th of Dec 2010 and announced that the targets for renewable energy sources will be achieved based on the new regulations which are adopted in the new law on renewable energy sources.

Timetable for the adoption of the Directive10

25 June2009: Directive entered into force 30 June2009: Publication by the EC a template for

Action plans Dec. 2009: Commission reports on biomass

sustainability criteria and aspects of biofuels sustainability criteria

Dec. 2009: Member States “forecast documents” of scope for making or receiving transfers of renewable energy under the cooperation mechanisms

30 June 2010: Member States present National Action Plans – Poland „filled” just by 9 of Dec. 2010.

5 Dec. 2010: Full implementation of the Directive on a national level with all Acts, regulations

The scope of the legal changes requested

11

The regulations of administrative procedures, regulations and codes (art.

13) information and training(art. 14) access to and operation of the grids(art. 16) sustainability scheme of biofuels (art. 17-21)

Support schemes for renewables in electricity, heating and cooling and transport

Specific measures concerning biomass and its mobilisation Planned use of cooperation mechanisms – statistical transfers and joint projects

Preparation and follow-up of the implementation of the action plan

12

It is needed to provide proper obligations  for the steady increase of RES in energy production in the years 2012 - 2020 to achieve the objectives

Responsibilities should be made to ensure the continued growth of the shares of energy from renewable sources in all sectors. At the same time achieving the goals should be based on new and efficient sources. Such an approach would greatly facilitate the implementation of new targets drawn by the EU for 2030 and 2050. ensuring the development of all technologies

investor interest in new investments to promote the fulfillment of the objectives

lack of ”transfer" of biomass markets across sectors

avoid the phenomenon of saturation of green energy market in the mid-term achievement of the target

What is the share of energy from renewable sources in gross final consumption?

Source: PIGEO13

6%

12.0%

7% (ca. 10.6 TWh)

electricity

heat & cooling

transport

In Total 9.5%

2010 2020

10%

17%

19% (ca. 32.4 TWh)

In Total 15.5%

investments

23%

57%

20%

21%

50%

29%

Final consumtion: ca. 65 000 ktoe (750 TWh), (2700 PJ)

Which RES are working for the target?

Source: PIGEO14

6%

12.0%

7%

Green certificates supported

from biomassoff-grid

95%

100%1st generation

of biofuels

co-firing

large hydro50%

25%

In Total 9.5%

2010

electricity

heat & cooling

transport

15 dane: PIGEO na podstawie MG, KPD, REN21

%

RES EN

RES-electr EN

The scenarios of RES Poland vs UE 2010 vs 2020 RES (all sectors) vs RES electricity

16 dane: PIGEO na podstawie MG, KPD, REN21

%

RES PL

RES-electr PL

The scenarios of RES Poland vs UE 2010 vs 2020 RES (all sectors) vs RES electricity

The scenarios of RES Poland vs UE 2010 vs 2020 RES (all sectors) vs RES electricity

17 Source: PIGEO based on MG, NREAP, REN21

%

An example of wrong design of obligations in the draft regulation - here are the net values

18

There is a different methodology for calculating the share in comparison to

the Directive and NREAP

In regulation we have: RES gross / Total net

In Directive we have: RES gross / Total gross

That is why the 19 from NREAP corresponds to 25% and not to 20% !!!

The level of obligation in each year for energy companies, below:

19

Can Poland develop renewables in electricity sector without any significant impact on consumer

energy bills?

20 Source: PIGEO based on bill for G11 from PGE company

What is the level of subsidizes to the development of RES in Poland at present? What final customer of energy pays for?Typical household, G11 tariff in 2011, annual consumption 3000 kWh

Electricity net = 250 PLN/MWh (40.9%)

Excise tax = 20 PLN/MWh (3.3%)Qualitative component = 7 PLN/MWh (1.1%)

Network fee = 186 PLN / MWh (30.3%)

Interim payment fee = 18 PLN/MWh (3%)Fixed fee for the transmission = 12 PLN/MWh (2%)Subscription fee = 4 PLN/MWh (0.7%)

VAT = 115 PLN/MWh (18.7%)

In total: 153 PLN / month 612 PLN / MWh

Green certificates = 28 PLN/MWh (4.5%)7 PLN/month

All fees and taxes

91 PLN/month

Product

62 PLN/mo

nth

21 Source: PIGEO based on bill for G11 from PGE company

What is real impact of new RES for such a consumer?

28 PLN/MWh

4,5% of the bill

7 PLN per month

7 PLN/MWh

1,1% of the bill

1,75 PLN per month

if the following RES are excluded form support:

•biomass cofired

•large hydro

The increase of electricity price in the period of 2005-2010the maximum possible due to RES vs real average done by energy

companies22

Green certificates do not represent the main reason of increase the electricity prices for end users!

source: PIGEO based on ARE & URE

gr / kWh

2.8 gr / kWh

10% of energy price in 2010

50% of energy price in 2010

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Recommendation To introduce in the Law on Renewables a stable support schemes

Green certificates with poorly designed sizes of reference do not provide the level of income replacement fee.

Support should be fixed for a specified period from the day the unit to be used (typically 15-20 years), which for the implementation of the Directive is to support the functioning of at least 2035 to 2040

The introduction of support for all sectors to increase the competitiveness of the renewable energy market.

Any changes to the support system can not change the terms of the generators operating on the market.

Is it possible to predict income based on renewable energy draft Act?

24

(Ozj

-Oze

)*k

+ O

ze

Un

itary

re

ven

ue

(P

LN

/MW

h)

Oze, average annual market price of electricity (PLN/MWh)

wind, k=0.75

‘old’ hydro, k=0 (no support)

hydro, k=1.05

PV, k=2

biogas, k=1.4

There should not be certificates with negative prices

Source: PIGEO based on draft Act on RES

Summary

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Investors expect the introduction of regulations that reflect the energy strategies that are adopted: • Polish Energy Policy• National Renewable Energy Action Plan

Thank you for your attention

26

Polish Economic Chamber of Renewable Energy

ul. Gotarda 9,

02-683 Warszawa

Tel. +48 22 548 49 99,

Fax +48 22 548 49 00

pigeo@pigeo.pl

www.pigeo.org.pl