Cost-Efficient and Sustainable Deployment of Renewable ... · Cost-Efficient and Sustainable...

Cost-Efficient and Sustainable Deployment of Renewable Energy Sources towards the 20% Target

by 2020, and beyond

D5.3 Key recommendations from the RES4LESS roadmap

December 2012

D5.3 Key recommendations from the RES4LESS roadmap 2

Project no.:

IEE/09/999/SI2.558312

Deliverable number: D5.3

Deliverable title: Key recommendations of the RES4LESS roadmap

Work package: WP5: RES4LESS roadmap

Lead contractor: IT Power (ITP)

The sole responsibility for the content of this report lies with the authors. It does not

necessarily reflect the opinion of the European Communities. The European Commission

is not responsible for any use that may be made of the information contained therein.

Author(s)

Name Organisation E-mail

Francesco Dalla Longa ECN [email protected]

Claudia Raimundo ITP [email protected]

Dissemination Level

PU Public x

PP Restricted to other programme participants (including the Commission Services)

RE Restricted to a group specified by the consortium (including the Commission Services)

CO Confidential , only for members of the consortium (including the Commission Services)


PREFACE/ACKNOWLEDGMENTS

This document reports activities and results of Task 5.3 of the Intelligent Energy Europe supported

project RES4LESS.

Within the RES4LESS project team, the authors would like to thank: Kim Stutvoet-Mulder (ECN),

Karina Veum (ECN), Martine Uyterlinde (ECN), Paul van den Oosterkamp (ECN), Natalia Caldés

Gomez (Ciemat), Marta Santamaria Belda (Ciemat), Dierk Bauknecht (Oeko Institute), Christopher

Heinemann (Oeko Institute), Henrik Klinge Jacobsen (DTU), Lise-Lotte Pade Hansen (DTU), Cristian

Tantareanu (Enero), Luminta Badi (Enero), Michael ten Donkelaar (Enviros).

Outside the project consortium, a special acknowledgement goes to the RES4LESS Advisory Board

members, for the fruitful discussions and advices.


Table of Contents

1. Introduction 6

2. RES4LESS scenarios 7

2.1 Business as usual 8

2.2 Twin stars pilots 8

2.3 Twin stars scale-up 10

2.4 Full cooperation 11

3. Timing 13

3.1 2020 horizon 13

3.2 2030 horizon 14

4. Decision flowchart 16

4.1 How to use the flowchart for joint support schemes 17

5. Conclusions 20

References 21


Tables

Table 2.1 RES4LESS scenarios…………………….…………………….…………………….……...7

Figures

Figure 1.1: Where are the Valleys of Opportunities in Europe (…) ....................................................... 6 Figure 2.1: Estimated yearly support costs in 2020 in the RES4LESS scenarios. .................................. 8 Figure 2.2: Flow of RES credits in the Twin stars scenarios. ............................................................... 10 Figure 2.3: Results of the global VoO analysis (…). ............................................................................ 12 Figure 3.1: Time frame for implementation of the RES4LESS scenarios. ........................................... 13 Figure 4.1: The RES4LESS decision flowchart .................................................................................... 19 Figure 5.1: Overview of the RES4LESS decision flowchart. ............................................................... 20


1. Introduction

In its Directive 2009/28/EC the European Commission (EC) set an ambitious 20% target on the final

consumption of energy from renewable sources (RES) in 2020 (European Commission, 2009). This

EU-level target is divided into different domestic targets for each single Member State (MS). The MS-

level targets do not always reflect the domestic RES potentials, creating a situation where certain MSs

will have to deploy very expensive technologies in order to meet their target, while other countries are

expected to reach their target at lower costs and even produce a RES surplus. In order to promote a

more balanced distribution of costs, the Directive allows MSs to establish cooperation mechanisms.

Three types of cooperation mechanisms are defined: a MS could buy the RES-credits associated with

the surplus potential of other MSs via statistical transfers, could finance additional RES deployment

in other MSs by engaging in joint projects, or could share (part of) its RES potential with other MSs

by establishing joint support schemes.

Within the EU-funded RES4LESS project several aspects related to the implementation of cooperation

mechanisms were investigated:

analysis of RES potentials and costs in EU;

identification of Valleys of Opportunity (VoOs) for establishing cooperation mechanisms (a

map indicating the expectation as to where the VoOs are is presented in Figure 1.1);

design features, barriers and success factors for the implementation of cooperation

mechanisms;

three case studies focused on different technologies (wind offshore, biomass and concentrated

solar power);

analysis of the impact of cooperation mechanisms on the electricity grid.

All topics were investigated in close contact with different stakeholders at MS and EU-level. The final

results have been summarized and integrated in the RES4LESS Roadmap (Raimundo and Dalla

Longa, 2012a; Raimundo and Dalla Longa, 2012b). This document contains a high level synthesis of

the roadmap, and touches on all the main outcomes of the project. In chapter 2 an overview is given of

the four scenarios for the deployment of cooperation mechanisms that have been developed and

analyzed in the roadmap. In chapter 3 the implementation of these scenarios is analyzed within a

short- and a long-term horizon. In chapter 4 a flowchart is presented that has been designed to assist

member states in carrying out the necessary preparatory work before engaging in cooperation

mechanisms. Finally chapter 5 wraps up the roadmap with key findings and recommendations.

wind

biomass

sunFigure 1.1: Where are the Valleys of Opportunities

in Europe to deploy renewables at lower costs

through cooperation mechanisms?


2. RES4LESS scenarios

In order to exemplify possible development pathways for the deployment of RES in the EU via

cooperation mechanisms, and quantify the corresponding costs of achieving the RES targets, four

scenarios have been developed (Raimundo and Dalla Longa, 2012a). Table 2.1 summarizes the

scenarios, the key conditions for successful implementation, and the yearly savings in support costs at

EU level in 2020. The total estimated yearly support costs in 2020 in the four scenarios are presented

in Figure 2.1.

Scenario Degree of cooperation Key conditions for

implementation

Yearly savings

in support

costs in EU in

2020

Business as usual

bottom-up

Member states continue their

current policies and reach their

target mostly domestically. Besides

the already existing joint support

scheme between Sweden and

Norway, use of cooperation is

limited to small amounts of ex-post

statistical transfers.

n.a. n.a.

Twin stars pilots

bottom-up

A few pairs of countries (twin stars)

start up small, low risk joint

projects (typical project capacity

~200 MW).

Identifying suitable

partner; successful

negotiations.

1%

Twin stars scale-up

bottom-up

The joint projects of the Twin stars

pilots scenario are expanded to their

maximum achievable size.

Overcoming barriers

associated with large

scale cooperation;

putting in place

proper risk

mitigation measures.

5%

Full cooperation

top-down

RES deployment is planned at EU

level and surpluses are allocated in

an optimum manner to take

maximum advantage of the cost-

saving potential offered by

cooperation mechanisms. Use of

joint projects, joint support

schemes and statistical transfers is

assumed in this scenario.

EU-level planning of

RES deployment;

harmonized design

of support

instruments.

17%

Table 2.1: RES4LESS scenarios

The four scenarios reflect an increasing use of cooperation in its different forms, and highlight the

complementary character of bottom-up and top-down cooperation initiatives. Bottom-up initiatives are

quicker to set up and can provide very valuable empirical understanding of how to tackle risks and

barriers. However they can only lead to a relatively small impact on cost savings. A top-down

approach is needed in order to take maximum advantage of the potential for savings offered by

cooperation mechanisms. However much more time will be needed to set up such a centralized

cooperation framework because:

all 28 countries (EU27 + Norway) will have to agree on the terms;

major changes in support systems and legislations should take place;

major enhancements of the electricity network are needed.


2.1 Business as usual

In this scenario member states keep on following their current domestic policies to support RES

deployment. The use of cooperation mechanisms, besides the already existing joint support scheme

between Sweden and Norway, is then limited to statistical transfers. These are agreed on ex-post in

2020 to fill any eventual gaps. As highlighted by the analysis carried out in (Dalla Longa and Bole-

Rentel, 2011), and as confirmed by other studies (see e.g. Ragwitz et al., 2012), the availability of

surpluses for the transfers will be limited. It is therefore expected that the impact of statistical transfers

on cost savings to reach the 2020 targets will be minimal as

statistically transferred amounts will be small, and

supply of RES credits will be limited, hence their market price will be high.

2.2 Twin stars pilots

Within the RES4LESS case studies (Jacobsen, Pade Hansen and Jansen, 2012; Tantareanu, 2012;

Santamaria and Caldés, 2012), three possible joint projects were analyzed, focusing on different

technologies and geographical locations. The case studies highlighted the concrete possibility to

achieve cost savings and other direct and indirect benefits through cooperation, but also the presence

of barriers, risks, and direct and indirect costs which are difficult (yet critical) to quantify. Indirect

effects concern for example CO2 emissions, induced network system and balancing costs, industrial

development, job creation, security of supply, etc. The larger the project, the higher the impact of

barriers, risks and indirect effects. Therefore engaging in relatively small pilot joint projects (capacity

of the order of 200 MW) is seen as a practical solution to overcome barriers, minimize risk, building a

testing ground to empirically quantify indirect effects, and still realize some savings by 2020.

The reasoning behind the three case studies has been applied to other Valleys of Opportunity (VoO)

identified in (Dalla Longa and Bole-Rentel, 2011), and the results have been extended to form a

scenario that envisages the possibility of a number of pairs of countries (twin stars) establishing a

series of pilot joint projects (Raimundo and Dalla Longa, 2012a). The rationale behind this approach is

that by using properly designed joint projects of small size, the risks can be kept low, the negative

influence of barriers can be minimized, and grid-related issues such as curtailment can be completely

avoided.

The savings in support costs at the EU level are limited in this scenario: 1% in 2020, compared to the

BAU scenario. However, at member state level they may still make a significant difference in the total

0

10

20

30

40

50

BAU Twin stars pilots Twin stars scale-up Full cooperation

Ye

arly

su

pp

ort

co

sts

in E

U in

20

20

[b

il€

]

Figure 2.1: Estimated

yearly support costs in

2020 in the RES4LESS

scenarios.


direct costs needed to reach the domestic RES target. More importantly, the establishment of a series

of small pilot joint projects throughout Europe would lead to several benefits:

identification of the most suitable technologies and geographical areas for cooperation;

chance to empirically measure the impact of indirect effects;

understanding of how different kinds of barriers influence the deployment of cooperation;

providing a testing ground to implement different strategies for overcoming barriers;

building a bridge towards a more harmonized and cooperative RES deployment in the EU.

Who are the twin stars?

The pairs of countries in the Twin stars scenarios have been chosen based on the Valleys of

Opportunity analysis carried out in the RES4LESS project (Dalla Longa and Bole-Rentel, 2011).

The three RES4LESS case studies have been included in the selection. The other host countries

have been selected among the member states that presented the largest and cheapest surplus

potentials in 2020 according to the modelling projections, also taking into account the “reality

check” carried out in (Jacobsen, Pade Hansen, Bauknecht and Heinemann, 2012; Tantareanu et al.,

2012; Santamaría, Caldés and Rodríguez, 2012), and in some cases the actual ambitions (if known)

of the countries in relation to cooperation mechanisms. Similarly, user countries have been chosen,

based on the model projections, among the member states where RES deployment in 2020 was

most expensive, and taking into account domestic ambitions (if known). This resulted in the pairs of

countries and the corresponding technologies listed at the bottom of this text box. A graphical

representation is also offered in Figure 2.2.

While there has been a clear rationale in selecting the twin stars it is important to make it clear that:

the choice is still partly arbitrary;

many interesting combinations have inevitably been left out;

the aim of this selection is not to pin-point member states that definitely should (or should

not) engage in cooperation mechanisms, but rather to provide a “reasonable” set of pairs to

enable the analysis of the scenarios and the quantification of the corresponding savings;

given a pair of countries that together have enough potential to achieve both their 2020

targets, it is almost always possible to devise a cooperation agreement that can bring some

direct and/or indirect benefits to both countries.

MS Host MS User Technology

Spain Netherlands (Case Study), Poland CSP

Denmark Netherlands (Case Study), Belgium, UK Off-Shore Wind

Ireland UK Off-Shore Wind

Norway Belgium, Poland Off-Shore Wind

Latvia Luxemburg, Bulgaria, Malta Biomass

Romania Netherlands (Case Study), Bulgaria, Belgium Biomass

Sweden Belgium, Luxemburg, Poland Biomass

Austria Bulgaria On-Shore Wind

Finland Netherlands, Poland On-Shore Wind

Latvia Luxemburg, Malta On-Shore Wind

Norway Poland On-Shore Wind

Sweden Belgium, Poland On-Shore Wind


The twin stars, pioneering the implementation of joint projects, will have a clear strategic advantage in

the future RES market, which is set to be characterized by more cooperation and harmonization. All

other EU member states will also benefit from the experience built up during the deployment of the

joint pilot projects.

2.3 Twin stars scale-up

This scenario entails an extension of the previous one, where the twin stars decide to expand the joint

pilot projects to their maximum achievable size. The key enabling condition to realize such an

expansion is that all barriers and risks associated to large joint projects need to be properly addressed.

A detailed analysis of the barriers to cooperation has been carried out within the RES4LESS case

studies (Jacobsen, Pade Hansen and Jansen, 2012; Tantareanu, 2012; Santamaria and Caldés, 2012)

and in (Pade Hansen and Jacobsen, 2012). Barriers that are specifically related to the electricity grid

have been analyzed in (Pade Hansen and Jacobsen, 2012; Heinmann and Bauknecht, 2012; Heinmann,

Bauknecht and Dalla Longa, 2012; Heinmann, Bauknecht, Sachs and Dalla Longa, 2012). The

analyses highlight that the main barriers associated with a large cooperation project are those related to

the fact that the domestic energy demand in the member state hosting the project (host country1) may

not be able to absorb the RES surplus generated by the joint project. More specifically, in case the

surplus is meant to be consumed in the host country (with substitution of power from other in-lands

generating plants), two conditions need to be met for bringing about overall cost savings:

the electricity grid must be able to handle the electricity produced within the joint project (this

may pose a challenge as the energy may be coming from variable sources like wind or PV),

the most expensive conventional technologies need to be displaced.

If the grid is not adequately developed to handle the extra production, grid-enhancement may be

necessary, and the related costs must be suitably shared between the cooperating countries.

Conventional producers in the host country may oppose the expansion of the joint project if this

threatens their ability to maintain their share in the domestic electricity market or put downwards

pressure on wholesale power prices. Consequently there is a risk that the host country cannot

guarantee the production agreed upon in the joint project contract. Furthermore, even if resistance

from conventional producers can be avoided, the introduction of large amounts of RES from variable

sources in the energy mix may still lead to curtailment in case production largely exceeds demand.

1 Similarly, the term user country is used to identify the member state buying the electricity produced in the

cooperative project or the corresponding RES credits.

Offshore windOnshore windBiomassSolar

Figure 2.2: Flow of RES credits in the

Twin stars scenarios.


If it is not possible to guarantee that both conditions are met, the host country can still enable the up-

scaling of the pilot project by exporting the surplus electricity. If an interconnector can be installed (or

is already in place) between the cooperating countries, the electricity can be directly transferred to the

user country2. In this case the barriers related to a change in the energy mix discussed above apply to

the user country. Alternatively, the electricity can be sold to a third country, that already has an

interconnector with the host country. In this case it is up to the host country to guarantee that the

electricity can effectively be sold and the cooperating member states should agree on who will bear the

related risks. Finally, independently of where the electricity is consumed, the change in the energy mix

associated with the deployment of a large cooperation project may lead to fluctuations in the

electricity price, and possibly temporary revenue losses for producers. Also in this context, the ability

to physically transport the surplus electricity outside the domestic borders can be an important factor

to mitigate the eventual negative impact on wholesale electricity prices.

In this scenario, yearly savings at EU level in 2020 grow to 5% compared to the BAU. The lessons

learned in overcoming the barriers related to the scaling-up process represent very important indirect

benefits both at EU and at member state level.

2.4 Full cooperation

In this scenario EU member states agree on moving away from local planning and domestic support,

and choose instead for deploying RES by making maximum use of cooperation. The scenario is based

on the global VoO analysis3 carried out in (Dalla Longa and Bole-Rentel, 2011). In this exercise

cooperation mechanisms are used to replace the most expensive RES technologies in Europe with the

cheapest surplus potentials available. Figure 2.3 summarizes the results of the global VoO analysis for

the year 2020, indicating which surpluses from the group of Host Countries can be allocated to replace

the most expensive RES technologies in the group of User Countries.

In order to implement in practice this scenario two key conditions need to be met: RES deployment

must be planned in a centralized top-down manner at EU-level, and support instruments must be

designed in a harmonized fashion. This will provide transparency and ensure that support costs at EU-

level are minimized. These conditions are clearly in contrast with the actual situation of RES

deployment and support in EU, which is characterized by a fragmented national approach towards the

fulfillment of the 2020 targets. Therefore this scenario only makes sense in the long run, as specified

in the next chapter.

The main attractive element in this scenario is that it yields an optimum allocation of RES surpluses in

the EU, showing the maximum impact cooperation mechanisms can have on reducing the total support

costs. Savings at EU level in 2020 are 17% compared to the BAU. However, the centralized planning

underlying this scenario does not provide much flexibility to the member states to plot their own path

towards decarbonization of their energy systems. Moreover, the scenario does not reflect the actual

ambitions of single member states towards cooperation mechanisms. In particular, a country with a

large surplus potential may aim at hosting a joint project, even though the average costs of its surplus

are relatively high compared to those of other member states. In a bilateral agreement such a country

still has the possibility to find a cooperation partner, while in the case of top-down planning of

cooperation this is not possible because the surplus is simply not cost competitive.

2 In principle, even in absence of a direct interconnection, it is still possible to transfer the electricity from the

host to the user country by ensuring that whenever a certain amount of electricity from the joint project is

exported from the host country, the same amount enters the user country. However this appears to be a rather

cumbersome process, and additional costs will be incurred for monitoring the simultaneous export and import of

electricity.

3 The term global analysis in this case does not refer to world-level, but to EU-level analysis, since only EU

member states and Norway were included in the modelling exercise.


Finally, as already mentioned, a certain degree of harmonization is needed in order to realize this

scenario. However, harmonization is itself an instrument that can drive costs down. Therefore it will

become important to analyze the interactions between large scale cooperation and harmonization, in

order to ensure that the two instruments work in synergy.

Figure 2.3: Results of the global VoO analysis carried out in (Dalla Longa 2011) using the

RESolve-E model.


3. Timing

The four scenarios described above entail different degrees of cooperation. The key enabling factors

listed in Table 2.1 and discussed in the text of the previous chapter highlight that the barriers become

more and more difficult to overcome when moving from the BAU scenario to the two Twin stars

scenarios and finally to the Full cooperation scenario. The scenarios where the barriers are lower can

be realized on a relatively short time frame, while those presenting more demanding enabling

conditions are only realistic in the longer run.

In this chapter we analyze the four scenarios within two separate time horizons: a short term horizon

up to 2020 and a long term horizon up to 2030. The outcome of the analysis is summarized in Figure

3.1.

Figure 3.1: Time frame for implementation of the RES4LESS scenarios.

3.1 2020 horizon

The BAU scenario is the base case for the pathway toward the achievement of the 2020 targets. This

scenario foresees a very limited use of cooperation mechanisms: the joint support scheme between

Sweden and Norway, and a small amount of ex-post statistical transfers.

The Twin stars pilots scenario represents the most easily achievable deviation from the BAU scenario.

The analysis carried out in the RES4LESS case studies suggests that the pilots could be implemented

within the 2020 horizon. The first key condition for implementation is that interested member states

identify a suitable cooperation partner. It is expected that most member states have the means to assess

which other countries may be suitable for a partnership. Moreover, the RES4LESS decision flowchart

presented below can provide a valuable framework and guidance in carrying out the identification

process. The second step is to engage in successful negotiations with the identified partner. Due to the

small size of the joint projects in the Twin stars pilots scenario and to the flexibility provided by the

RES Directive in designing cooperation mechanisms, it is expected that successful negotiations can be

carried out within a relatively short time frame. Moreover, the Commission is planning to publish a

guidance document on cooperation mechanisms in 2013 that should provide further guidance on how

to carry out negotiations and design cooperation agreements.

Achieving the Twin stars scale-up scenario within 2020 presents a tough challenge. The conditions for

success are very demanding, as described above, as the barriers related to large joint projects may be

difficult to overcome. However it can be expected that for some of the Twin stars the right conditions

for scaling-up are met, and some expansion of the initial pilots can be achieved within the 2020

horizon.

2013

Twin stars pilots

Negotiations &

Implementation of pilot joint

projects

Twin stars scale-up Scaling up of pilot projects

Full cooperationGradual exploitation of

full cooperation potential

2020 2030


The Full cooperation scenario is not realistic in the short run. The key conditions for implementation,

EU-level planning and harmonized design of support, are clearly in contrast with the current situation,

and changes in this direction can only be realized on a longer time frame taking advantage of lessons

learnt from preceding cooperative actions.

3.2 2030 horizon

While in general it is expected that the deployment of renewables will continue to accelerate between

2020 and 2030, it is still unclear what pathway this growth will follow, both at EU and at member

states level. The development of RES will ultimately depend on the EU 2030 policy, i.e. whether there

will be a 2030 RES target and what type of target this will be. From the perspective of cooperation

mechanisms, the present uncertainty on the EU 2030 policy makes it difficult to assign a monetary

value to RES credits after 2020. Therefore cooperation agreements that foresee the financing of RES

in another country beyond 2020 inherently carry a certain amount of risk that the value of the RES

credits generated after 2020 will be very low. The greater the scope of the cooperative projects, the

higher the risk. It is therefore clear that member states will be very cautious in investing in large

cooperation projects that span into the 2020-2030 decade. However there are a couple of elements that

soften the barrier created by the uncertainty on the EU 2030 RES policy. Firstly, the Commission is

currently assessing a number of concrete options for the 2030 RES policy. Therefore member states

can expect that some clarity will be reached in the coming years, and more importantly at this stage

they can still influence the process. Secondly, it is expected that the electricity grid will be enhanced

and expanded, including more interconnectors between member states and more transmission

capacity.

Given this context, it seems reasonable to assume that the conditions for a successful implementation

of the Twin stars scale-up scenario can be met to a certain extent in the 2030 horizon. In particular, the

enhancements of the electricity network (both within and across member states’ borders) will provide

enough flexibility to accommodate the (surplus) electricity produced, and enable exports if necessary.

Furthermore the experience gained with the execution and partial expansion of (some of) the pilot

joint projects will provide concrete examples of how to mitigate the risks and overcome the barriers

related to scaling up.

Despite the potential for greater harmonization and market integration of RES in the member states’

support systems, achieving the Full cooperation scenario in the 2030 horizon still appears to have a

very low chance of materializing. However within this time frame a number of large scale cooperation

mechanisms can still be set up. More specifically, besides the scaling-up of joint projects, joint support

schemes might well play a large role. Joint support schemes are typically best suited for large scale

cooperation, and are inherently difficult to set up, as they involve a (partial) coordination of support

systems among the participating countries. Therefore negotiations, design and start-up process may be

time consuming , and it is expected that joint support schemes will start to play a larger role only after

2020. Some concrete possibilities for long term joint schemes can already be identified:

North Sea grid: Joint support scheme among countries bordering the North Sea, mainly

focussed on the development of offshore wind parks and involving physical transfer of

electricity by means of a dedicated grid connecting the wind parks to the participating

countries, and including a series of interconnectors between the countries. This joint scheme

can be implemented gradually, building on existing initiatives such as the joint support

scheme between Sweden and Norway and any eventual (pilot) joint projects between North

Sea countries based on offshore wind.

Additional member states entering the existing joint support scheme between Sweden and

Norway: Rather than starting the deployment of a new joint support scheme from scratch,

some countries may negotiate their entry into existing initiatives, the only available one

currently being the joint support scheme between Sweden and Norway.


Frameworks for projects exploiting distributed sources: Within the RES4LESS biomass case

study (Tantareanu, 2012), a framework for developing a large number of small distributed

biomass projects was envisioned, rather than one large project. This seemed to be a logical

solution when wanting to provide a flexible platform for biomass producers that may be

working with a range of different technologies and raw feedstocks. Such a framework can be

seen as a hybrid mechanism between a joint project and a joint support scheme. The same

logic can be applied to any cooperation agreement based on distributed sources (such as

biomass or PV).


4. Decision flowchart

Engaging in cooperation mechanisms can be seen as a complicated process because of the presence of

barriers and risks, the lack of practical experience, the difficulty in identifying the right partner, and in

designing a proper cooperation agreement. Many complex issues may need to be tackled and solved

before cooperation can be established. In order to assist member states in this process, a decision

flowchart was developed within the RES4LESS roadmap. The flowchart introduces a scheme to

systematically analyze a member state’s initial situation and possibilities with regards to cooperation

mechanisms, and to prepare for the negotiation phase. The approach underlying the flowchart is that a

member state should first focus on the most basic aspects of cooperation and then tackle the more

complex issues in a series of successive iterations. When carrying out an assessment using the

flowchart, it is important to come up with a range of possible options, rather than one single solution

to be brought to the negotiation table and discussed with potential cooperation partners.

Given that among the three types of cooperation mechanisms bilateral joint projects were identified as

the main instrument that can make an impact in the path towards the achievement of the 2020 RES

targets, the flowchart is especially focused on the preparatory work that is necessary to set up a joint

project between two member states. However many of the steps identified in the flowchart also apply

for statistical transfers (especially if these are agreed upon ex-ante). Joint support schemes are

discussed separately at the end of the chapter.

The flowchart is presented in Figure 4.1. The figure is mostly self-explanatory, however a few aspects

concerning the different steps are briefly discussed in the remainder of this section.

Step 0: Preliminary assessment

The flowchart starts with an assessment of the motivation and ambitions with regards to cooperation

mechanisms. The main issues to be addressed are summarized in the figure. These items do not

necessarily have to be analysed in a specific order, but the picture emerging from the analysis should

reflect a member state’s own priorities and strategies.

Step 1: Characterize marginal option at the target

Constructing a RES cost supply curve and studying how this will evolve till 2020 can give a good idea

on how a member state is going to reach its target. The cost and potential of the marginal technology

at the target4 are the basic elements a member state has to take into account when trying to identify

possible cooperation partners and to estimate direct costs and benefits of cooperation.

Step 2: Identify possible cooperation partners

In order to realize some savings, a member state that aims at importing RES credits through

cooperation mechanisms (user country) will look for partners among those member states that have

relatively low marginal costs at the target. Vice versa, a member state aiming at being a host country

will typically look for partners among the member states that have relatively high marginal costs.

Besides this economic condition, other criteria can be identified. A few of these are listed in the figure.

However the list can be expanded and, once again, it should reflect a member state’s strategic

priorities.

Step 3: Preliminary estimate of direct costs and benefits

Once a set of potential partners has been identified, a basic estimate of costs and benefits can be made.

As indicated in the figure, a user country can realize some savings in support costs by developing RES

4 The marginal technology at the target is the cheapest technology that a member state could deploy in its

territory after having reached its RES target.


abroad; for a host country the direct benefits consist in the opportunity to deploy additional RES at no

costs. The benefits can be calculated according to the formulas in the figure, by taking into account the

marginal costs at the target (from Step 1), the expected electricity price and eventually the grid

connection costs. All costs refer to the year 2020; however the analysis can be carried out for earlier or

later years as well.

Step 4: Preliminary assessment of indirect costs and benefits

Besides direct costs and benefits, member states engaging in cooperation mechanisms should be

careful to also consider possible indirect effects. In particular indirect benefits should be in line with

domestic strategies, and indirect costs should be kept as low as possible. The impact of these effects

will typically scale with the size of the cooperation agreement, and there is an intrinsic uncertainty that

makes it difficult to quantify them ex-ante. This can create some reluctance to engage in cooperation.

Once the main indirect costs and benefits have been identified, sensitivity analyses can be carried out

to ensure that the risks associated with indirect costs can be managed. Another practical way to

overcome this barrier is to start with small pilot projects to minimize risk and create a testing ground

for empirically quantifying indirect effects.

Feedback loop(s)

Upon reaching the end of Step 4 a member state should have developed a good basic idea of what can

be achieved with cooperation, who the interesting potential partners are, and how cooperation would

fit with other domestic strategic objectives. At this point it is good practice to go back and review the

four steps trying to identify the key benefits and the potential risks and barriers. Sensitivity and “what-

if” analyses can then be performed on these items. Once a certain degree of confidence has been

achieved that cooperation will bring the desired benefits and that risks can be mitigated, the more

complex issues can be tackled. Some of these issues are listed in the figure, but as usual the list should

be customized to reflect domestic strategic priorities.

One issue to be addressed at this stage is that of physical vs. virtual transfer of electricity, in the cases

where this makes sense (i.e. an interconnector is already present, or planned). It is important to remark

that this is considered a complex issue, while the base-case cooperation always entails non-physical

transfer.

4.1 How to use the flowchart for joint support schemes

The flowchart has been developed mainly for bilateral joint projects. However it can also be used to

provide a basic understanding of how to set up a joint support scheme. The main difference in this

case is that the assessment should be carried out per technology, rather than considering the whole

RES cost supply curve of the participating countries. The flowchart can be used to figure out how to

set up joint projects concerning different RES technologies in the cooperating member states. Based

on this exercise, a picture should then emerge of where it makes more sense (economically or

according to other criteria) to deploy certain technologies. The outcome of this analysis can then be

used as a starting point to draft a joint support scheme agreement.



Figure 4.1: The RES4LESS decision flowchart


5. Conclusions

The analysis carried out in the course of the RES4LESS project, summarized in this document,

highlights many opportunities for achieving cost savings in the deployment of renewables through

cooperation mechanisms in Europe. However the presence of barriers and risks is currently making

most member states be very cautious in seizing these opportunities. Therefore the most important

factor to stimulate the use of cooperation mechanisms is the ability to create confidence that barriers

can be overcome and risks can be managed. Given this context the key recommendations emerging

from the RES4LESS Roadmap can be summarized as:

1. Maximize the chance of realizing cost savings by engaging in early negotiations;

2. Reduce the impact of risks and uncertainties by starting with small size cooperation

agreements;

3. Ensure the possibility to scale-up in case the right conditions are met;

4. Reduce uncertainty by performing feasibility studies and sensitivity analyses.

The first item stems from the fact that if most countries continue with the current support instruments,

the availability of surplus potentials in 2020 will be limited, hence the prices of statistical transfers

will be relatively high and the chances for realizing cost savings minimal. Starting now to investigate

and plan possibilities to engage in cooperation mechanisms emerges as a very smart route to ensure

the possibility to realize some cost savings.

The second and the third items are linked with the analysis of the RES4LESS case studies, which

focused on bilateral joint projects. The logic behind the case studies has been generalized and

extended leading to the Twin stars scenarios developed in the RES4LESS roadmap. Properly

designed, scalable joint projects have been identified as the most effective manner for cooperation

mechanisms to make an impact on the costs for the achievement of the 2020 RES targets.

Finally, the fourth item highlights the importance of preparatory work to ensure a successful

deployment of cooperation. In order to assist member states in systematically assessing their

opportunities in relation to cooperation mechanisms, a decision flowchart has been developed as part

of the RES4LESS roadmap. As shown in Figure 5.1, the tool identifies a few simple steps to grasp the

basic aspects of cooperation given the current domestic situation of RES deployment in a member

state. Complex issues can be introduced and tackled by iteratively repeating and enriching these steps.

At the end of the process a member state should be able to engage in successful negotiations with the

identified partners(s).

Figure 5.1: Overview

of the RES4LESS

decision flowchart.


References

Dalla Longa F. and Bole-Rentel T. (2011), Methodology to identify possible valleys of opportunity for

cooperation among EU countries, ECN December 2011, Deliverable D2.2 of the RES4LESS project

European Commission (2009), RES Directive 2009/28/EC

Heinmann C. and Bauknecht D. (2012), Assessment of cooperation mechanisms from a grid

infrastructure perspective, Deliverable D4.2 of the RES4LESS project

Heinmann C., Bauknecht D. and Dalla Longa F. (2012), Overview on network requirements and

economic issues of exploiting the surplus potentials and cooperation between member states, as well

as analysis of barriers, including relevant insights from the case studies, Deliverable D4.1 of the

RES4LESS project

Heinmann C., Bauknecht D., Sachs A. and Dalla Longa F. (2012), Grid perspective on case studies,

Deliverable D4.3 of the RES4LESS project

Jacobsen H. K., Pade Hansen L., Bauknecht D. and Heinemann C. (2012), Offshore wind valleys of

opportunities, Deliverable D2.1 of the RES4LESS project

Jacobsen H. K., Pade Hansen L. and Jansen J. (2012), Off Shore wind energy – Case study of

cooperation mechanisms design, Deliverable D3.1 of the RES4LESS project

Pade Hansen L. and Jacobsen H. K. (2012), Barriers and Critical Success Factors for the

Implementation of Cooperation Mechanisms, Deliverable D3.1 of the RES4LESS project

Ragwitz M., Steinhilber S., Breitschopf B., Resch G., Panzer C., Ortner A. and Busch S. (2012), RE-

Shaping: Shaping an effective and efficient European renewable energy market, Final report

Raimundo C. and Dalla Longa F. (2012a), Review report RES4LESS versus BAU, December 2012,

deliverable D5.1 of the RES4LESS project

Raimundo C. and Dalla Longa F. (2012b), Roadmap for the Deployment of RES for the Time Periods

2010 to 2020 and 2020 to 2030, December 2012, deliverable D5.2 of the RES4LESS project

Santamaría M and Caldés N. (2012), CSP energy – Case study of cooperation mechanism design,

Deliverable D2.5 of the RES4LESS project

Santamaría M., Caldés N. and Rodríguez I. (2012), Analysis of Solar Valleys of Opportunity,

Deliverable 2.5 of the RES4LESS project

Tantareanu C. (2012), Biomass energy – Case study of cooperation mechanisms design, Deliverable

D3.4 of the RES4LESS project

Tantareanu C., Badi L., ten Donkelaar M. and Harnych J. (2012), Biomass valleys of opportunity in

Eastern Europe, Deliverable 2.4 of the RES4LESS project

Date post:	28-Jun-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

Cost-Efficient and Sustainable Deployment of Renewable ... · Cost-Efficient and Sustainable...

Documents