Bundesverband Solarwirtschaft e.V. (BSW-Solar)
Renewable Energies and PV in Germany and
other countries
Critical factors for building up sustainable
markets
Buenos Aires, 15. Dec. 2015
Jan Knaack
International Affairs
Market deployment barriers for
renewable energy sector: structures
Energy market is dominated by very large actors,
small and medium RES actors are disadvantaged
– Investment risks has to be reduced for RES actors
– Grid access for RES has to be regulated
The conventional energy system is centralized
and discriminates decentralized power generation
– Change of the energy system must be actively supported
– New players (independent power producer) must become the
chance to enter the energy market
Need to create a “Level playing field”
=> Policy support necessary to open opportunities for PV and RES
– Priority grid access
– Financial incentives to kick-start market development
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Market deployment barrier: costs
• Especially in the case of PV, initial investment has to be financed
upfront
– High upfront investment, low running costs
– Comparison of costs is difficult
• External costs of conventional energy generation are not
included in the retail price
– higher investments cost require high trust in PV technology
– Cost of capital (financing) becomes important
• RES becoming increasingly cheaper by technological development
and economy of scale effects
• Conventional energy massively receives state subsidies in many
countries
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RES/PV support policies aims…
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… to reduce barriers for RES deployment
… to provide for a level playing field
… to kick start a RES industry development
… to build up RES market capacities
… to make RES cost competitive
… to mitigate climate change
… to increase energy independency
1. Producer-oriented support policies
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Target group Investors in power systems
Aim: Generate profits
Utilities
Aim: Comply with law
Electricity Consumers
Aim: Reduce consumption /
Savings
Concept Investment in PV becomes
financially attractive
Obligations to purchase a
certain share of RES-E
Create incentives to produce
electricity for own
consumption an reduce the
Scheme Feed-in-Tariff, PPA Quotas / certificates Grants and tax incentives, Net
Metering
Funding Cost-redistribution,
Earnings by sale of electricity
State – Budget / all taxpayers
Producer-oriented support: FIT / PPA
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Policy FIT (Feed-in-tariff) PPA (Power purchase agreement)
Popularity Dominant policy for many years
For RES since a few years more and more popular
Risk Depends on rating of off-taker (usually national institution – rather high)
Off-takers are often private
Tariff level / duration
Set by legislator for 15 – 25 years
Set by legislator or negotiated for 15 – 25 years
Off-taker Public or private utility Public or Private (utilityy)
Financing Levy / Surcharge Energy sales to off-taker
Public costs
Dep. on setting of FIT Usually privately covered
Positive Highly accepted by banks
Price is set by negociation – both parties can win
Negative Difficulty to set tariff Negotiation increases costs
FIT/PPA – schematic flowchart
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Regulation / Law / neg. process
Utility
Electricity consumer
RES-E Producer
+ FIT surcharge
Electricity rates
renewable electricity
Feed-in tariff
Provides for grid access, sets Tariff
conventional electricity
Money
Power
free market
Government
Off-taker
Negociates PPA
FIT / PPA success factors
• Priority connection for all PV systems must be granted by the
Government
• Each solar kWh must be purchased by the utility
• Fixed (feed-in tariff) payments have to be guaranteed
(generally) for 15 - 25 years
• FIT: Annual reduction of the feed-in tariff for newly installed
PV systems (Degression) / PPA: Negotiations per project
• If costs are redistributed to the rate payer, Feed-in tariffs are
not a state subsidy /
• PPA usually only realized if the RES is a competitive form of
energy production
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Current FIT & adaption mechanism in
Germany
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Target group Investors in power systems
Aim: Generate profits
Utilities
Aim: Comply with law
Electricity Consumers
Aim: Reduce consumption /
Savings
Concept Investment in PV becomes
financially attractive
Obligations to purchase a
certain share of RES-E
Create incentives to produce
electricity for own
consumption an reduce the
Scheme Feed-in-Tariff, PPA, Net-
Metering
Quotas / certificates Grants and tax incentives
Funding Cost-redistribution,
Earnings by sale of electricity
State – Budget / all taxpayers
2. Utility-oriented support policies
17/01/2010
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Quota & certificate systems (e.g. RPS)
• Quotas are set by the government in order to reach certain RES-E
targets (22 states in the US have an RPS with solar energy)
– Specific carve-outs for solar may exist
– many states in the US have such carve-outs (16)
• Utilities (consumers) are obliged to proof a certain percentage of RES-
E production (consumption)
• Quotas can be met either by trading or producing green certificates
– whatever is more economic to the obligor
• Electricity produced by RE producers is traded at the spot market
• Penalty payments for non-compliance are transferred to the
government or RE R&D funds
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Quota/certificates – schematic flowchart
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free market
Certificate & power payments
Regulation / Law
Utility
Electricity consumer
RES-E Producer
+ Quota surcharge
Electricity rates
conventional electricity
Money
Power
sets quota
allocates Certificates
renewable electricity
Government Certificates
Renewable Portfolio Standards (RPS) with Solar or Distributed Generation Provisions
Renewable Portfolio Standard with solar/distributed
generation (DG) provision
Renewable Portfolio Goal with solar/DG provision
www.dsireusa.org / August 2015
WA: 2 MW
DG (M)
OR: 20 MW PV
x 2020
2 for PV (M)
NV: 1.5% (E)
x 2025 2.4 +
for PV (M)
UT: 2.4 (M)
for (E)
AZ: 4.5%
DG x 2025 NM: 4% (E)
x 2020
0.6% DG x
2020
CO: 3.0% DG
x 2020
1.5% CST x
2020 (M)
MN: 1.5%
(E) x 2020
0.15% PV
DG x 2020 MI: 3.2
+ (M)
for (E)
MO:
0.3% (E)
x 2021
IL: 1.5%
PV x 2026
0.25% DG
x 2026
OH: 0.5%
(E) x
2027
SC: 0.25%
DG x 2021
Solar water heating counts toward
solar/DG provision
22 States + DC
have an RPS with
solar or DG
provisions
DC NC: 0.2% (E) x 2018
NH: 0.3% (E) x 2014
MA: 400 MW PV x 2020
NY: 0.58% customer -
sited x 2015
PA: 0.5% PV x 2021
NJ: 4.1% (E) x 2028
DE: 3.5% PV x 2026
3.0 (M) for PV
MD: 2% (E) x 2020
DC: 2.5% (E) x 2023
Delaware allows certain fuel cell systems
to qualify for the PV carve-out (E): Solar Electric
PV: Solar Photovoltaic
DG: Distributed Generation
(M): Multipliers
(CST): Customer - Sited
VT: 1% DG X 2017 + 3/5ths of
1%/year until 10% X 2032
3. Consumer-oriented support policies
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Target group Investors in power systems
Aim: Generate profits
Utilities
Aim: Comply with law
Electricity Consumers
Aim: Reduce consumption /
Savings
Concept Investment in PV becomes
financially attractive,
Obligations to purchase a
certain share of RES-E
Create incentives to produce
electricity for own
consumption an reduce the
Scheme Feed-in-Tariff, PPA, Quotas / certificates Grants and tax incentives,
Net-Metering
Funding Cost-redistribution,
Earnings by sale of electricity
State – Budget / all taxpayers
Consumer-oriented measures
• Aim at providing an incentive to produce electricity for own
consumption
– whereas the end-user is either a private individual or a commercial
user of the plant
• Policies reduce the burden of the investments for the consumers of
self-generated RES-E
• Eventually, the incentiviced investment reduce the electricity
consumption of the consumer
• Policy measures comprise
– Investment aids
• fiscal (tax) incentives
• grants and interest reduced loans
• Tax incentives
– Net-metering
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Customer support –flowchart
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Regulation / Law
Government
Utility
Electricity consumer
RES-E Producer
renewable electricity
conventional electricity
Money
Power
Incentivices
Provides for grid access
Electricity rates
Fiscal (tax) incentives
• Fiscal incentives, such as tax exemptions or
reductions, do mostly supplement other support
schemes
• RE producers are exempted from certain taxes (e.g.
carbon taxes) or tax credits are applied to reduce the
average tax load (very prominently in the US)
• Effectiveness of such fiscal incentives depends on
the applicable tax rate
• In those countries, which apply high energy taxes,
exemptions may be sufficient to stimulate the use of
RES, in countries with different tax structures, this
measure alone might not suffice
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Investment aids (grants and loans)
• Grants are a classical means to reduce the investments load
for an investor in a PV system, ( provides up-front clarity)
• Grant programs are usually taken from the state budget
(classical subsidy)
• Such programs are usually capped to specify the amount of
money to be available ( cost control, selection of projects)
• Especially in the very first market phase of young RE
technologies grants have proven to be an effective means to
create first demand
• Attractive conditions for loans provide an incentive for investors
to specifically use available equity to finance PV systems
• Low interest loans that are offered by governments or state
bank are usually combined with other support instruments
• Usually, different conditions for private and commercial users
exist
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A good strategy is crucial…
• RES support policies are an instrument to provide for a
more level playing field in the energy sector
• However, support policies need to be embedded in more
comprehensive strategies in order to be successful
• Even if well-designed policies are in place, bureaucratic
procedures and administrative hurdles, as well as difficult
access to the electricity grid can prevent a rapid market
development
• Not only solar, all RE technologies should be considered
in such a strategy
• Therefore, continuous and comprehensive National
Renewable Energy Strategies should be established
and budgets for the market introduction of RES must be
defined
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Market development strategy
1. PV (RES) targets determine the strategy
– Setting (mandatory) goals/targets establishes investment security
(political, technical, industrial)
2. Trigger first demand, support R&D activities
– Stimulating demand via grants and tax incentives, legal security
– R&D budgets to be defined to provide and maintain excellence
3. Establish support policies, training and awareness
– Grid-connection rules and adequate long-term support policies
need to be defined
– Installation capacities (HR) need to be build up (qualified)
– Awareness raising campaigns (aiming at general public)
4. Monitoring and improvements
– Continuous monitoring and evaluation and adaptation of tools -
where necessary – guarantee cost-efficient functioning of support
policies
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Conclusion
• Successful and effective PV support policies must provide
stable long-term investment security
• Key precondition for renewables to develop is guaranteed (or
priority) grid access
• Stop-and-go approaches must be avoided to maintain the
credibility of the program
• Feed-in tariffs have proven to be an economically efficient way
to promote RES, however, tariffs need to be set correctly
(Germany)
• A combination of support policies (tax credits, net-metering,
RPS) in combination with PPA’s have produced considerable
results in the US
• Today, financing is the most pressing issue, since many RES
are cost competitive
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Source: Solarmarkt
Thank you for your attention…
Jan Knaack International Affairs
German Solar Association
