Renewable electricity support schemes in Europe
Trends and perspectives
Dr. Corinna Klessmann
12/11/2014
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EU developments relevant for
renewable electricity (RES-E)
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EU developments relevant for RES-E
1. National RE support schemes will be continued (ECJ decision on Ålands
Vindkraft)
2. RES-E ambitions are likely to diverge towards 2030 but potentially more
(regional) cooperation between Member States
3. The new State Aid Guidelines by the European Commission will have a
major impact on national support scheme design
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1. National RE support schemes will be continued
(ECJ decision on Ålands Vindkraft)
> So far national support schemes only support installations on domestic
territory (except joint support scheme Sweden-Norway)
> European Court of Justice (ECJ) ruling on Ålands Vindkraft case (1st July
2014): no violation of free movement of goods
> Member States are allowed to limit their support schemes to their own
territories; ECJ stresses opportunity to cooperate under the current regime
of the RES Directive
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2. RES-E ambitions are likely to diverge towards 2030 but
potentially more (regional) cooperation between Member States
> European Council Conclusions 23.10.2014:
– EU-level binding target of at least 27% RES in final energy
– Member States contributions, but no nationally binding targets
– Member States are free to set their own higher national targets
– Governance structure will still be developed, but it should facilitate
coordination and regional cooperation
> Likely that RES-E ambitions will further diverge compared to 2020
framework
> Possibly more incentives or pressure for cooperation between Member
States
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© European Union, 2004-2014
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3. The new State Aid Guidelines by the European Commission
will have a major impact on national support scheme design
Requirements that will apply to all new support schemes (for state aid
clearance):
> RES-E generators sell their electricity directly in the market; support is paid
as a premium in addition to the market price
> RES-E generators are subject to standard balancing responsibilities
> Measures are put in place to ensure that generators have no incentive to
generate electricity under negative prices
> Aid is granted in a competitive bidding process (=auction)
> Exceptions for small installations and special conditions
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Support scheme design trends in the Member States
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Support scheme design trends in the Member States
1. Increased use of sliding feed-in premiums/contracts for difference,
abandoning feed-in tariff and quota schemes
2. Increased use of tenders/auctions
3. Limited opening of support schemes
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• FIT
• (sliding)FIP/CfD
• Quota
• Tenders/Auctions
• Other
Source: Ecofys
1. Increased use of sliding feed-in premiums/contracts for
difference, abandoning feed-in tariff and quota schemes
Countries that have recently
introduced sliding FIP/CfDs (or
plan to do so)
Countries that (plan to) phase
out their quota scheme
Countries that recently phased
out FITs
Note: The map only shows the main support instruments per country.
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The main support schemes expose RES-E producers to
different levels of risk
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Market price
RES-support
Green
certificate
revenues
FIT FIP
sliding/
Cfd
cap &
floor
fixed
Quota
Volume basedPrice based support
Source: Ecofys
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The main support schemes expose RES-E producers to
different levels of risk
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Market price
RES-support
Green
certificate
revenues
FIT FIP
sliding/
Cfd
cap &
floor
fixed
Quota
Electricity market
price risk
Green certificate
market risk
No market price risk
Limited market price risk
Full electricity market price risk
Certificate market price
risk
RES-E producer sells directly to the market
Volume based
Market integration
through TSO
Price based support
Source: Ecofys
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• FIT
• (sliding)FIP/CfD
• Quota
• Tenders/Auctions
• Other
Source: Ecofys
2. Increased use of tenders/auctions
Countries that have recently
introduced or are planning to
introduce tenders/auctions
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Some background on RES-E tenders/auctions
> A tender/auction is not a support scheme by itself; it can be combined with
all other support schemes, most commonly with FITs or FIPs
> In traditional FIT/FIP schemes, the support level is determined
administratively, usually based on estimated production cost (LCOE)
> In a tender/auction, the FIT/FIP is determined in a competitive procedure
(requirement for auction: demand for support greater than auction volume)
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Volume (e.g. in MW)
Pri
ce (
su
pp
ort
level)
Successful bids Unsuccessful bids
Tendered
volume
Clearing price
© Ecofys
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> Not all winning projects will be
implemented risk of low
effectiveness/deployment
> Higher risk for RES-E producers than
administrative FIT/FIP, favouring
bigger market actors
– Uncertainty in the preparation phase
– Sunk cost for unsuccessful bidders
– Penalty risk for successful bidders
> Risk of underbidding or winner‘s
curse leading to prices below costs
> Risk of strategic behaviour
(collusion) leading to high prices and
producer rents
> Control of maximum volume and
support cost
> Support level is determined by the
market, not the administration
> Competition between RES-E
producers may lower prices
(compared to administrative
FIT/FIPs)
> Potential to discover real
production cost of RES-E
Opportunities Challenges
Specific opportunities and challenges of tenders/auctions
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3. Limited opening of national support schemes
> Germany, Netherlands and the UK announced that they might partially open
their support scheme to foreign RES-E installations in the future
> Use of tenders/auctions allows for limited opening of support scheme
> Additional requirements for supporting RES-E from other countries
mentioned
– Cooperation mechanism with host country in place
– Connection to the electricity system of the importing country (UK) or
equal physical effect on power system (DE)
> The European Commission urges some Member States to partially open their
support scheme as compensation for “discriminating” renewables levy (e.g.
Germany, Denmark, Estonia)
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© thinkstockphotos/visdia
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Conclusion
> RES-E support schemes will continue to be organised nationally; no binding
national targets, but open questions regarding the governance of EU 2030
target
> The EU State Aid Guidelines will force Member States to align their national
support schemes: RES-E generators need to sell their electricity directly in
the market (phase-out of FIT) and default use of competitive bidding
(auctions)
> Already today one can observe a trend towards sliding feed-in premiums/
CfDs and auctions (independent of the guidelines)
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Questions?
Ecofys Germany GmbH
Am Karlsbad 11
10785 Berlin
Germany
Dr. Corinna Klessmann
T: +49 (0)30 297 735 79-0
I: www.ecofys.com
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Recent reports on RES-E policy in the EU
> Held et al. (2014). Design features of support schemes for renewable electricity. http://www.ecofys.com/en/publication/renewable-electricity-support-schemes-and-cooperation-mechanisms-in-/
> Klessmann et al. (2014). Cooperation between EU Member States under the RES Directive. http://www.ecofys.com/en/publication/renewable-electricity-support-schemes-and-cooperation-mechanisms-in-/
> Resch et al. (2014). Beyond2020 – Design and impact of a harmonised policy for renewable electricity in Europe. http://www.res-policy-beyond2020.eu/downloads.html
> Klessmann et al. (2013). Policy options for reducing the costs of reaching the European renewables target. Renewable Energy 57(2013), 390-430
> Ragwitz et al. (2012). RE-Shaping: Shaping an effective and
> efficient European renewable energy market. http://www.reshaping-res-policy.eu/
> Klessmann (2012). Increasing the effectiveness and efficiency of renewable energy support policies in the European Union. http://dspace.library.uu.nl/handle/1874/218063
> Rathmann et al. (2011). Towards triple-A policies: More renewable energy at lower cost. http://www.reshaping-res-policy.eu/downloads/Towards-triple-A-policies_RE-ShapingD16.pdf
> de Jager et al. (2011). Financing Renewable Energy in the European Energy Market. http://ec.europa.eu/energy/renewables/studies/doc/renewables/2011_financing_renewable.pdf
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