RES in SEERMAP

- key inputs

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 1

Authors: Gustav Resch, Lukas Liebmann,

Albert Hiesl – all Energy Economics Group, TU Wien

Contact … Web: http://eeg.tuwien.ac.at

Email: resch@eeg.tuwien.ac.at

RES in SEERMAP

… some key inputs to

the analysis

… developed initially in the period 2002 to 2004

within the research project

Green-X (5th framework programme of

the European Commission, DG RESEARCH)

www.green-x.at

RES in SEERMAP

- key inputs

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 2

Content

1. Background: 27% RES by 2030 at EU level

… thesis on the way forward

2. Key assumptions in our modelling exercise

on SEE countries

… potentials of renewables

… financing conditions

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 3

Background: 27% RES by 2030 at EU level

The EU Energy Roadmap 2050 gave first signals of renewable energy development pathways beyond the year 2020 and identified renewables as a “no-regrets” option.

Subsequently, Europe’s way forward towards 2030 has been discussed intensively and at the Council meeting of this October (2014) the next step was taken: A binding EU-wide RES target of achieving at least 27% as RES share in gross final energy demand was adopted.

This part of the presentations aims for an outlook to 2030, discussing possible RES developments within the EU in the light of the new Council agreement on 27% RES by 2030.

Furthermore, next steps in defining the framework for RES post 2020 will be identified and possible solutions presented.

Few theses will be introduced, aiming for identifying required next steps to be taken…

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 4

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Incr

eas

e o

f R

ES g

ener

atio

n b

y d

ecad

e [T

Wh

/a]

Net increase

Gross increase

2010 to 2020 2020 to 20300

100

200

300

400

500

600

700

800

Incr

ease

of

RES

-E g

ener

atio

n b

y d

ecad

e [T

Wh

/a]

Net increase

Gross increase

2010 to 2020 2020 to 2030

The ambition level of 27% renewables by 2030 should not be underestimated, specifically in the power sector

Energy efficiency (and related demand developments) is a key determinant

RES developments at EU-level up to 2030: Net and gross increase of RES generationat EU level by decade (2010-2020 vs. 2020-2030) in accordance with 27% RES by 2030 …

… across all energy sectors (left) and in the electricity sector (right)

… Efforts required for meeting 27% RES by 2030

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 5

Future development of remuneration levels and corresponding market values of renewable energy technologies (on average) at EU level according to a Green-X scenario

of meeting 27% renewables by 2030 helps to identify the required net support (i.e. remuneration minus market revenues)

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lised

(1

5 y

ears

) w

eigh

ted

ave

rage

rem

un

erat

ion

fo

r ye

arly

new

RES

-E in

stal

lati

on

s an

d c

orr

esp

on

din

g m

arke

t va

lues

[€

/MW

hR

ES]

Averageremuneration ofRES-E

Average marketvalue of RES-E

Wholesaleelectricity price

Net

sup

po

rt

for

RES

-E (

on

ave

rage

)

Ran

ge o

f re

mu

ner

atio

n

of

RES

-E a

cro

ss M

Ss

Ran

ge o

f m

arke

t va

lues

o

f R

ES-E

acr

oss

MSs

(Thesis 1) Dedicated support for renewables is required to reach the 2030 target of 27% renewables.

… Efforts required for meeting 27% RES by 2030

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 6

… top-down vs. bottom-up approaches …

It is currently not clear how individual EU member states can or should contribute to the EU-wide 2030 target for renewables.

In principle, the EU-wide target can be allocated to smaller regional entities either via a top-down or bottom-up approach:

‐ In the top-down case, the European Commission would follow a predetermined allocation formula and set individual national targets accordingly.

‐ In the bottom-up case, EU member states would pledge their planned contribution.

Sharing the effort: How to break down the EU-wide target?

Pros & cons:Whilst in the case of a top-down allocation individual targets typically sum up to the overall target of 27% …

individual (bottom-up) pledges may fall short of the overall EU-target. this would require to close the gap accrued:

- either by a separate financing mechanism or - by an iteration of pledges until the gap is closed.

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 7

Benchmarks as a way forward To better guide the pledging procedure, the European

Commission should provide a first benchmark on regional or national targets.

EU member states or regions could then put pledges forward specifying a higher or a lower target than proposed in the benchmark.

Major benefits of combining national or regional pledges with an initial top-down benchmark include a first quantitative indication for a potential national or regional target than can help structuring the pledging process.

In addition, extremely low pledges may be avoided by publicly comparing the pledged target with the benchmarking.

For these reasons, we encourage

combining national or regional pledges

with a top-down benchmark.

Sharing the effort: How to break down the EU-wide target?

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 8

27% renewables by 2030

as a binding EU-target: implications“Doing nothing” as a way forward?

If EU member states are reluctant in providing sufficient pledges …

… the European Commission has to act: establishing a separate financing mechanism to ensure target achievement.

Sharing the effort: How to break down the EU-wide target?

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 9

Example: Improving financing conditions for onshore wind across the EU

“Calculations based on the Green X model show that if all countries had the same renewable energy policy risk profile as the best in class, the EU Member States could reduce the policy costs for wind onshore by more than 15%.”

Financing is a (the) decisive element

WACC real WACC real

EU28 (average) 8.3% 5.9% 8.3% 5.9%

[Unit] %* %*

Impact on wind onshore

2020 TWh 319.0 324.9 5.9 1.9% 353.7 362.6 8.9 2.5%

2030 TWh 560.1 576.6 16.5 2.9% 674.5 680.7 6.2 0.9%

2016 to 2020 bill ion € 8.8 8.6 -0.2 -2.1% 8.7 8.4 -0.4 -4.2%

2016 to 2030 bill ion € 7.8 7.5 -0.2 -3.1% 8.4 7.1 -1.3 -15.6%

Note: * … deviation to default (WACC real), expressed in percentage terms (compared to default)

Electricity generation from wind onshore

Support expenditures for wind onshore, yearly average

Impacts of improvements in

risk performance (WACC)

at EU level (EU28)

Scenario:Business-As-Usual (BAU) Strengthened National Policies (SNP)

WACC ideal WACC ideal

Change to

WACC real

Change to

WACC real

Source: Green-X modelling, DIA-CORE project

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 10

Governments can play an important role in mitigating risks, for instance by implementing long-term stable policy schemes that are less liable to regulatory interventions.

Financing is a (the) decisive element

Source: DIA-CORE project

(Thesis 3) Improving financing conditions: the next step could be to equalise cost of capital in EU member states through a risk sharing facility.

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 11

Thanks for your attention!Interested in further background information?

www.towards2030.eu

Interested in the dialogue process?

http://platform.towards2030.eu

Issue Paper No. 2*: Implementing the EU 2030 Climate and Energy Framework – a closer look at renewables and opportunities for an Energy Union

Issue Paper No. 4 on benchmarks to facilitate sharing the renewables effort

(Thesis 2) Benchmarks of how to break down the EU-wide target to member states should be provided in order to encourage sufficiently ambitious pledges.

Conclusions / Policy recommendations

(Thesis 1) Moderate dedicated support for renewables is required to reach the 2030 target of 27% renewables.

(Thesis 4) The concept of an Energy Union can be developed further by supporting regional targets for renewables and grid infrastructure.

(Thesis 3) Improving financing conditions: the next step could be to equalise cost of capital in EU member states through a risk sharing facility.

RES in SEERMAP

- key inputs

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 12

► Key assumptions

Main input sources for

scenario parameters

Based on PRIMES* Defined for this study

Energy demand by sector RES policy framework

Primary energy prices Reference electricity prices

Conventional supply portfolio and conversion efficiencies

RES cost & learning rates(Green-X database, incl.biomass)

CO2 intensity of sectors RES potential (Green-X database)Biomass trade specification

Technology diffusion

Financing conditions

*Primes scenario used subsequently: Reference case (as of 2015/2016)

To ensure maximum consistency with existing EU scenarios and projections the key input parameters of the Green-X scenarios are (as default) based on PRIMES modelling and the (updates of the) Green-X database.

(2) RES in SEERMAP:

Key inputs to the modelling exercise

RES in SEERMAP

- key inputs

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 13

► Key assumptions

Main input sources for

scenario parameters

Based on PRIMES* Defined for this study

Energy demand by sector RES policy framework

Primary energy prices Reference electricity prices

Conventional supply portfolio and conversion efficiencies

RES cost & learning rates(Green-X database, incl.biomass)

CO2 intensity of sectors RES potential (Green-X database)Biomass trade specification

Technology diffusion

Financing conditions

*Primes scenario used subsequently: Reference case (as of 2015/2016)

To ensure maximum consistency with existing EU scenarios and projections the key input parameters of the Green-X scenarios are (as default) based on PRIMES modelling and the (updates of the) Green-X database.

(2) RES in SEERMAP:

Key inputs to the modelling exercise

RES in SEERMAP

- key inputs

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 14

Definition of potential terms

Theoretical potential ... based on the

determination of the energy flow.

Technical potential … based on technical

boundary conditions (i.e. efficiencies of

conversion technologies, overall technical

limitations as e.g. the available land area to

install wind turbines)

Achieved

potential (2005)

Definition of the (additional) realisable

mid-term potential (up to 2020/2030/2050)

Short-term

potential

(2020)

Maximal

time-path for

penetration

(Realisable

Potential)

Barriers

(non-economic)Additional

realisable

long-term

potential (up to 2050)

2000 2010 2020

Historical

deployment

Theoretical potential

Energ

y g

enera

tion

Economic Potential

(without additional support)

Technical potential R&D

2030

Policy,

Society

Long-term

potential

2040 2050

(2) RES in SEERMAP:

Key inputs to the modelling exercise

RES in SEERMAP

- key inputs

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 15

Green-X database on RES potentials

(2) RES in SEERMAP:

Key inputs to the modelling exercise

0

200

400

600

800

1000

AT

BE

BG

HR CY

CZ

DK EE FI FR DE

GR

HU IE IT LV LT LU MT

NL

PL

PT

RO SK SI ES SE UK

RES

-E -

Elec

tric

ity

gen

erat

ion

po

ten

tial

[TW

h]

Additional long-term (2050) potential

Achieved potential 2005

Long-term (2050) potentials for RES-electricity in EU28 countries(in absolute terms [TWh])

RES in SEERMAP

- key inputs

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 16

Green-X database on RES potentials

(2) RES in SEERMAP:

Key inputs to the modelling exercise

Long-term (2050) potentials for RES-electricity in EU28 countries(in absolute terms [TWh] by technology)

0 500 1000 1500 2000

Biogas

(Solid) Biomass

Biowaste

Geothermal electricity

Hydro large-scale

Hydro small-scale

Photovoltaics

Solar thermal electricity

Tide & Wave

Wind onshore

Wind offshore

RES-E - Electricity generation potential [TWh]

Achieved potential 2005

Additional long-term (2050) potential

RES in SEERMAP

- key inputs

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 17

Green-X database on RES potentials

(2) RES in SEERMAP:

Key inputs to the modelling exercise

0%

100%

200%

300%

400%

500%

600%

AT

BE

BG

HR CY

CZ

DK EE FI FR DE

GR

HU IE IT LV LT LU MT

NL

PL

PT

RO SK SI ES SE UK

EU2

8

RES

-E -

Elec

tric

ity

gen

erat

ion

po

ten

tial

[%

of

gro

ss e

lect

rici

ty d

em

and

]

RES long-term (2050) potential - share on current (2005) demand RES share 2005

Long-term (2050) potentials for RES-electricity in EU28 countries(in relative terms [% - share of gross electricity demand])

RES in SEERMAP

- key inputs

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 18

Green-X database on RES potentials

(2) RES in SEERMAP:

Key inputs to the modelling exercise

Long-term (2050) potentials for RES-electricity in Western Balkan countries(in absolute & relative terms)

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KO

MK

ME

SR

RES

-E -

Ele

ctri

city

ge

ner

atio

n p

ote

nti

al [

TWh

/yr.]

Additional long-term (2050) potential Achieved potential 2005

0

10

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60

Bio

gas

(So

lid)

Bio

mas

s

Bio

was

te

Ge

oth

erm

al e

lect

rici

ty

Hyd

ro la

rge

-sca

le

Hyd

ro s

mal

l-sc

ale

Ph

oto

volt

aics

Sola

r th

erm

al e

lect

rici

ty

Tid

e &

Wav

e

Win

d o

nsh

ore

Win

d o

ffsh

ore

0%

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100%

150%

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250%

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450%

AL

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KO

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ME

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RES

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[%

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lect

rici

ty d

eman

d (

20

05

)]

RES in SEERMAP

- key inputs

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 19

Green-X database on

RES potentials:

Background info,

wind onshore

(2) RES in SEERMAP:

Key inputs to the modelling exercise

Illustration of our GIS-based analysis …Wind map Europe

RES in SEERMAP

- key inputs

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 20

Long-term (2050) potentials for Wind Onshore in SEE countries

Green-X database on

RES potentials:

Background info,

wind onshore

RESTRICTED POTENTIALwith land use restrictions,with default power system constraints(Capacity potential) [MW]

36,976 10,110 17,922 2,423 4,243 2,023 1,064 1,587 7,293

GR BG RO AL BA KO ME MK SR

Gre

ece

Bu

lgar

ia

Ro

man

ia

Alb

ania

Bo

snia

H.

Koso

vo*

Mo

nte

neg

ro

FYR

of

Mac

edo

nia

Serb

ia

TOTAL POTENTIAL with land use restrictions, without power system constraints(Capacity potential) [MW]

54,754 16,412 57,427 9,707 15,983 2,114 6,242 5,386 31,593

Artifical surfaces 0%

Arable land 25.0%

Permanent crops 15.0%

Pastures 20.0%

Heterogeneous agricultural areas 1 10.0%

Heterogeneous agricultural areas 2 10.0%

Heterogeneous agricultural areas 3

(agro-forestry) 5.0%

Forests 5.0%

Natural grasslands, moors 22.5%

Sclerophyllous vegetation &

Transitional woodland-shrub 22.5%

Beaches, dunes, sands 10.0%

Bare rocks 0.0%

Sparsely vegetated areas 30.0%

Burnt areas & glaciers 0.0%

Inland wetlands 5.0%

Maritime wetlands 5.0%

Inland waters 0%Marine waters 0%

AppliedLand useconstraints:Suitability forwind power plants

RES in SEERMAP

- key inputs

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 21

► Key assumptions

Main input sources for

scenario parameters

Based on PRIMES* Defined for this study

Energy demand by sector RES policy framework

Primary energy prices Reference electricity prices

Conventional supply portfolio and conversion efficiencies

RES cost & learning rates(Green-X database, incl.biomass)

CO2 intensity of sectors RES potential (Green-X database)Biomass trade specification

Technology diffusion

Financing conditions

*Primes scenario used subsequently: Reference case (as of 2015/2016)

To ensure maximum consistency with existing EU scenarios and projections the key input parameters of the Green-X scenarios are (as default) based on PRIMES modelling and the (updates of the) Green-X database.

(2) RES in SEERMAP:

Key inputs to the modelling exercise

RES in SEERMAP

- key inputs

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 22

WACC assumptions and the impact of risk (policy, technology, country)

WACC – risk elements

Policy risk: Instrument-specific risk factor

(i.e. multiplier of default WACC)

FIT (feed-in tariff) 1.00

FIP (feed-in premium) 1.10

QUO (quota system with uniform tradable green

certificates (TGC)) 1.20

ETS only (Emission Trading Scheme only - no dedicated RES

support) 1.30

TEN (tenders for selected RES-E technologies) 1.15

Technology-specific risk factor

(i.e. multiplier of default WACC)

RES-electricity

Biogas 1.00-1.05

Solid biomass 1.05

Biowaste 1.05

Geothermal electricity 1.1

Hydro large-scale 0.95

Hydro small-scale 0.95

Photovoltaics 0.85-0.90

Solar thermal electricity 1.1 (1.0)

Tide & wave 1.4 (1.2)

Wind onshore 0.95

Wind offshore 1.4 (1.15)Note: Numbers in brackets refer to the period post 2020.

WACCc,t,p = WACCdefault * fc * ft * fp

Default assumptions concerning energy technologies in Austria

Note: Through complementary measures the investor risk can be reduced, from „real“ to „ideal“(according to an assessment conducted in the DIA-CORE project)

Source: Dia-Core project (www.diacore.eu)

WACC(in Austria)

default(real) ideal

posttax (nominal) 6.5% 4.9%

pretax (nominal) 8.7% 6.5%

pretax (real) 7.4% 5.3%

RES in SEERMAP

- key inputs

SEERMAP Workshop Belgrade, 23 September 2016 … Slide 23

The impact of country specific risk

WACC – risk elements

MS

Austria

Belgium

Bulgaria

Croatia

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latvia

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal

Romania

Slovakia

Slovenia

Spain

Sw eden

UK

WACC

pretax

(real)

WACC

pretax

(real)

Intervie

w

Triple A

policies

Real case

Ideal

situation

7.4% 5.3%

7.1% 5.8%

9.9% 6.7%

13.8% 7.7%

10.2% 6.0%

8.6% 6.4%

6.4% 5.2%

11.0% 4.8%

6.9% 4.4%

7.3% 6.1%

4.4% 3.7%

15.0% 9.1%

12.7% 7.8%

9.0% 6.2%

10.4% 8.3%

8.8% 5.6%

9.7% 5.6%

7.2% 6.0%

9.6% 7.4%

7.2% 5.6%

10.3% 6.5%

9.1% 5.9%

12.0% 7.4%

9.1% 6.3%

12.0% 7.8%

10.5% 8.6%

11.6% 5.3%

7.0% 5.3%

9.4% 6.3%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Austr

ia

Belg

ium

Bulg

aria

Cro

atia

Cypru

s

Czech R

epublic

Denm

ark

Esto

nia

Fin

land

Fra

nce

Germ

any

Gre

ece

Hungary

Irela

nd

Italy

Latv

ia

Lithuania

Luxem

bourg

Malta

Neth

erlands

Pola

nd

Port

ugal

Rom

ania

Slo

vakia

Slo

venia

Spain

Sw

eden

UK

Countr

y-s

pecific

WACC -

devia

tion

to E

U a

vera

ge [

%]

Default data (current situation)

50% smoothening

- Represents the status quo

- For future trends: link to GDP per capita trends?