Market Reforms and Renewable Energy Quotas "Views of the Energy Industry"

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Market Reforms and Renewable Energy Quotas"Views
of the Energy Industry"

• By Flemming Nissen
• Head of Development
• Elsam A/S

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Contents

• Extra costs for renewable energy
• Overall framework for implementing renewable
  energy in the electricity system

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Extra costs for renewable energy
Power production costs
60
50
40
øre/KWh
30
20
10
0
Coal
Natural gas
Wind
Biomass
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Extra costs for renewable energy
Power production costs with internalized CO2-
costs
60
150 kr./t CO2
100 kr./t CO2
50
40 kr./t CO2
40
øre/KWh
30
20
10
0
Coal
Natural gas
Wind
Biomass
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Extra costs for back-up and transmission

• Example The western part of Denmark
• Condensing part of central power plants 1.800
  MW
• Co-generation part of central power plants 1.200
  MW
• Local co-generation plants 1.500 MW
• Wind 2.200 MW
• Consumption of power 1.800-3.500 MW

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Conclusion on costs

• RE-production is more expensive than production
  on fossile fuels.
• The value of RE is strongly dependent on the
  infrastructure (transmission lines, back-up
  technologies etc.)
• The Danish energy policy - practiced over the
  last 10 years - is strongly dependent on an
  international electricity market.

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Overall framework for RE
Sustainable development
Economy without externalities
Social responsibility
Environmental responsibility
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Overall framework for RE

• The cost for internalizing externalities can be
  reduced through technological development

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Important questions
Overall framework for RE

• Who is evaluating the externalities?
• Who is deciding the part of the externalities to
  be internalized?
• Who decides the way the externalities are
  internalized?(Taxes, subsidies, standards etc.)?
• Who?
• Politicians, governments, administrations,
  industry, consumers?
• Level?
• UN, EU, independent states?

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Casting between government, industry and customers
Overall framework for RE

• PlayGovernmental decisions Energy
  plansGovernmental actions Tenders of new
  capacityIndustry Offers for building and
  operating new capacityConsumers Electing
  the politicians
• PlayGovernmental decisions Long term
  targetsGovernmental actions Market
  framework (taxes, subsidies, standards
  etc.)Industry Fulfilment of
  targets (business plans)Consumers Choice
  of suppliers

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Who is responsible for the long term
visions?Who is responsible for investments in
the long term RD?
Overall framework for RE

• Answers
• Play The government
• Play The industry

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The final conclusion

• EU makes a vision for the long term extension of
  the energy infrastructure in Europe, and EU
  earmarks the money to fulfil the vision.
  
• The industry makes a vision for the development
  of production capacity in Europe.
• The visions are coordinated.
• EU decides the standards, which the power
  producers have to fulfil in the future (2010,
  2020---).
• The market actors fill in the frameworks