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Different transition paths to low carbon power: Germany, UK, EU

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Different transition paths to low carbon power: Germany, UK, EU Volkmar.Lauber_at_sbg.ac.at University of Salzburg, Austria Carleton University, 1-2 October 2015 – PowerPoint PPT presentation

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Title: Different transition paths to low carbon power: Germany, UK, EU


1
Different transition paths to low carbon power
Germany, UK, EU
  • Volkmar.Lauber_at_sbg.ac.at
  • University of Salzburg, Austria
  • Carleton University, 1-2 October 2015

2
Clarifications on low/zero carbon
  • Only renewable power is carbon-free
  • German FIT only supports renewable power
  • UK FIT with CfD supports low carbon, i.e.
  • Renewable power (zero carbon)
  • Nuclear power is low carbon, not C-free
  • CCS (low carbon - a share of CO2 is emitted)
  • Current EU policy closer to that of UK

3
Different evolution of power mix in Germany and UK
  • In 1990, both had mostly coal plants,
    supplemented by nuclear power
  • UK started replacing sizeable part of coal by gas
    starting in 1990s, followed by contraction of gas
    in 2010s 65 TWh of renewable power by 2014
    (slide)
  • Germanydecline of hard coal nuclear from 2007
    onwards less gas steady growth of renewable
    power to 160 TWh in 2014 (slide)

4
Electricity generation in the United Kingdom by
fuel source/technology, 1980-2014
Source Department of Energy Climate Change
(2015) Digest of United Kingdom Energy
Statistics. Infographics, p.7, https//www.gov.uk/
government/uploads/system/uploads/attachment_data/
file/449434/DUKES_2015_Infographics.pdf.
5
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6
Table of contentsPolitics and policy of
transition
  • Germany 2000-2010
  • UK 2000-2008
  • Germany 2010-2015
  • UK 2008-2015
  • 5. EU late 1990s-2015

7
Part 1 Germany, 2000-2010
  • Intention and first implementation of the
    Renewable Energy Act of 2000

8
The origins of GermanysRenewable Energy Act of
2000
  • Precursor (Feed-In Law of 1990) designed by
    Conservative Party, pro-renewable power MPs
    responding to civil society pressure. In 2000
    with red-green MPs.
  • Rejecting/defeating support schemes pushed by
    Econ. Affairs Ministry and European Commission
  • Recurring battles with European Comm. until 2014

9
Purposes of Renewable Energy Act 2000 (by
red-green government)
  • Enable full transition from nuclear (phase-out by
    about 2022) and fossil to renewable power by
  • Creating steady demand for renewable power (RP)
    equipment by reducing risk for small and (unlike
    utilities) motivated investors
  • Supporting rise of RP equipment industry to drive
    down prices through steady innovation
  • Creating new industry, jobs, exports

10
Instruments of EEG 2000
  • Priority access for all renewable power tendered
    to utilities (solar PV only after 2003)
  • Principle of full cost payments to generators
    (all investment costs plus small profit for
    well-run facilities about 6 then)
  • Guaranteed 20 year payments, degressive and
    differentiated by technology
  • All technologies supported in parallel (unlike
    UK)

11
Implementation of EEG 2000
  • At first, resistance by European Commission (see
    below), but big success for about 10 ys
  • rapid deployment (beating minimum targets),
  • creation of equip. industry, jobs, exports,
  • big investments despite restive incumbents,
  • comparatively low cost (3 slides)
  • highly popular exc. with Liberal party leaders
    Conservative business leaders

12
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13
Minimum targets regularly over-achieved/ moved
upwards till 2010
  • EEG 2000 12 by 2010
  • achieved in 2005 (5 ys
    early)
  • EEG 2004 20 by 2020
  • achieved in 2011 (9 ys early)
  • EEG 2008 30 by 2020
  • probably achieved in 2015 (5 ys)
  • NREAP 2009 38.6 by 2020 ________________________
    ________
  • Energiekonzept2010/EEG 2011/EEG 2014 35-2020

14
Germany Renewable energy sector job growth,
1998-2011
Source Unendlich viel Energie (2012)
Arbeitsmarkt Erneuerbare Energien. Available on
http//www.unendlich-viel-energie.de/de/wirtschaft
/arbeitsplaetze-erneuerbare-karriere/arbeitsmarkt-
erneuerbare-energien.html, 08.01.2013.
15
Figure 1. Ownership structure in 2010 of
renewable electricity installations in Germany
(not including pumped storage) (Total installed
capacity 53,0 GW)
  • Adapted from trendresearch (2011) p.45.

16
Payment for Wind Energy in Europe 2011
17
Price ranges (average to minimum support) for
direct support of onshore wind in EU27 (average
tariffs are indicative) compared to long-term
marginal costs (minimum to average costs).
Support schemes are normalised to 15 years.
CECCommission Staff Working Paper SEC(2008)57,
The support of electricity from renewable energy
sources, pp. 25- 26
18
Historically observed efficiency of support for
onshore wind Effectiveness indicator compared to
expected profit in 2006.CECCommission Staff
Working Paper SEC(2008)57, The support of
electricity from renewable energy sources, p.32
19
Part 2 UK 2000-2008
  • Intentions and first implementation of Renewables
    Obligation (RO)

20
Origins and Purpose
  • Designed by Treasury (NFFO model) and DTI - with
    minimal role for UK Parliament (West-minster
    model) Thatcherist economics
  • Bring down price of renewable power by
    competition (DE also technological learning)
  • Supports market creation only for the currently
    cheapest technologies (not all simultaneously, as
    in Germany) windfalls if new tech. with higher
    prices is needed

21
The instruments of the RO
  • Requires utilities to hand in renewable energy
    certificates for a set (and annually increasing)
    percentage of their sales (quota), from own
    generation or bought from outside (traded)
  • Generators get market price certif. price
  • Certificates are traded -gt volatility (cliff?)
  • Volatility eliminates SME participation (high
    risk) and deters rise of equipment industry

22
Impact of RO
  • Purpose of RO 2002 was to drive down prices for
    renewable power -gt diffusion
  • In practice, RO (and similar schemes in Italy,
    Belgium, Poland) led to highest prices in EU
  • By excluding small investors, it also freed
    incumbents largely from competition and
    deployment pressures -gt slow deployment
  • Led to little technological learning, little
    participation in RP industry

23
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24
Part 3. Germany 2010-2014 Dismantling EEG?
  • By its old opponents Econ. Aff. Ministry, big
    incumbents, Liberal leaders, Business wing of
    Conservative Party
  • New opponents other Conservatives, since 2013
    also key Social Democratic leaders
  • Interestingly, this is hardly reflected in public
    support overwhelming approval rates for citizen
    Energiewende even in 2014 (EMNID)

25
Arguments for holding down renewable power growth
  • Excessive support due to lacking competition
  • Leads to market creation for technologies which
    are not yet market ready (PV?)
  • Excessive growth of RP means high consumer cost
    and danger to competitiveness of German industry
    deindustrialisation?

26
Arguments of Critics
  • Excessively rapid deployment of technologies
  • Excessive support for technologies which are not
    market ready (particularly PV, which surged in
    2009-2012)
  • Lack of direct price competition among generators
    (all get the FIT)
  • High consumer costs
  • Loss of competitiveness of German industry,
    deindustrialisation at end of the road

27
Background Acceleration of RP growth (Source
AGEB, 2015)
Year Total generation in TWh Annual increase in period
1990 19.7
Average 1 TWh/year
1999 29.1
Average 5.5 TWh/year
2004 56.6
Average 7.6 TWh/year
2009 94.9
Average 13 TWh/year
2014 160,6
28
Germany PV growth Installed capacity (in MW)
and energy supply (in GWh) from photovoltaic
installations, 1990-2011 (cumulative)
Adapted from Federal Ministry for the
Environment, Nature Conservation and Nuclear
Safety (2012).
29
Other reasons for changing attitudes among
political leaders
  • Perceived need to help the ailing big four
    electricity incumbents suffering from
  • problematic take-overs after liberalisation,
  • nuclear phase-out zig-zag (Con.-Lib. Govt)
  • neglecting renewable power investments
  • excessive new build of gas and coal plants at
    time of falling demand (since 2008)
  • Under the merit order, incumbents lose profitable
    peak load to PV and wind

30
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31
Weak government arguments
  • Cost to households grew also due to rapid growth
    of exemptions for big industry (4bn)
  • Also because merit-order savings (PV wind
    displace expensive fossil generation) were not
    passed on to householdsSMEs. ParadoxLower
    wholesale prices due to RP growth increase extra
    cost of RP to households, SMEs
  • Ignores external costs of and subsidies to
    conventional power (see next slide, also 2015 IMF
    study)

32
  • From Lauber and Jacobsson (2015)
  • PV 2015 8-12 1.18
    0.4 11.58

33
Figure 1 German PV FITs from January 2004 to
October 2013
Bernard Chabot (2013) Diversity in PV Systems
Sizes and Market Deployment Management from
Prices Two Strategic Lessons from the German PV
Policy and Measures. P. 1. Available at
http//cf01.erneuerbareenergien.schluetersche.de/f
iles/smfiledata/3/0/3/4/9/9/TwoStrategicLessons.pd
f, 09.09.2013.
34
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35
Instruments for slowing growth, reducing costs
and re-empowering corporate actors
  • EEG 2014 Reducing targets tariffs, setting
    caps for each technology (flexible for PV since
    2010 absolute by 2017 with tender system?)
  • By 2017 Change to new type of support system
    tendering/bidding system, as in European
    Commission (2014) guidelines
  • Favours incumbents, other corporate actors

36
Goals nearly unchanged since 2010 (not increased
as in past)
  • Goal 80 renewable power by 2050, set in 2010
    when nuclear phase-out was postponed. Then this
    was a minimum target 2014 a cap
  • But at EU level, the German government presses
    for binding 2030 targets, though still modest
    ones (30 for all renewable energy)
  • Currently govt. hesitates to openly put coal
    phase-out on its agenda

37
Part 4 UK policies 2008-2015 Contradictory
developments
  • 2008-10 Strong stimulation of RP growth by
    banded RO and German-style FITs, leads to
    near-tripling of RP generation in 2010-14
  • Since 2010, Cameron govt. formulates new policy
    (CfD) to privilege nuclear power Bidding for
    subsidies
  • Simultaneously, govt. plans to terminate banded
    RO and perhaps FIT by 2016

38
Britain 2008-2015Zig-zag policies?
  • 2008-2010 Reforming RO and introducing FITs
    almost triples deployment in four years (slide),
    increases spending, raises ambitions (30 by 2030
  • But more or less U-turn with Electricity Market
    Reform since 2011 Reform stretches FITs with
    Contracts for Difference (CfD), a method to
    allocate subsidies by auction for all
    low-carbon - to support nuclear (Hinkley Pt C)
    and CCS generation.

39
End of RO in 2016. And also of FIT?
  • Banded RO is successful, achieves high growth
    terminated because too expensive
  • FIT tariff benefits above all solar PV About 8
    GW installed by 3rd quarter of 2015 by some
    800.000, mostly small investors.
  • In summer 2015, DECC announced the end of FITs
    for onshore wind and strong reductions for
    biomass and (by 60-70) for PV by 2016 (new PV
    FIT 1.03 to 1.63 pence)

40
UK position in EU with Cameron
  • UK reverts to its old position At EU level, it
    opposes binding and ambitious (beyond 27) 2030
    targets for member states. Cost argument
    credible? (given special treatment for Hinkley
    Point C)
  • Allies with Poland, Czech Republic to hold down
    EU targets for renewables
  • Pleads for more use of gas (Shell intervention
    with EU in 2013), slowdown for renewables
  • CfD fit 2014 EU State aid guidelines for energy

41
Electricity generation from renewable sources in
the United Kingdom, 2000-2014
Source Department of Energy Climate Change
(2015) UK Energy in Brief 2015, p.30,
https//www.gov.uk/government/uploads/system/uploa
ds/attachment_data/file/449067/UK_Energy_in_Brief_
2015.pdf.
42
Feed in Tariffs in the United Kingdom, 2011 to
2015
Source Department of Energy Climate Change
(2015) UK Energy in Brief 2015, p.28,
https//www.gov.uk/government/uploads/system/uploa
ds/attachment_data/file/449067/UK_Energy_in_Brief_
2015.pdf.
43
Part 5 European Union politics and policy on
renewable power
  • Political controversy extended above all to
    definition of renewable energy (nuclear?
    waste?), targets, support schemes, and state aid
    guidelines
  • Outcomes are codified in
  • -Renewable Energy Directive 2001/77/EC,
  • -Renewable Energy Directive 2009/28/EC,
  • -State aid guidelines on environment/energy,
    most recently from 2014

44
Transformation in EU-28 is much slower than in UK
or Germany
  • Renewable power generation doubled between 2002
    and 2012 (next slide)
  • Phase-out of generation from fuel oil, coal and
    nuclear started (upcoming slide), but
    fossil/nuclear resistance hardened since 2010
  • Post-2010 EU policy is to go slow on renewables
    deployment (Europe alone cannot save the world
    Oettinger)

45
Share of renewable electricity in EU-28, 2002-2012
46
Source SolarPower Europe Global Market Outlook
(2015), http//www.solarpowereurope.org/fileadmin/
user_upload/documents/Publications/Global_Market_O
utlook_2015_-2019
47
Biggest controversies over choice of support
instruments and targets
  • Before first (2001) RP Directive Effort by
    European Commission to push through quota cum
    tradable certificate scheme (such as RO)and to
    ban FITs founders in Parl. and Council
  • Before 2nd (2009) RP Directive Similar
    Commission effort, fails again
  • 2013-14 Similar Commission effort to phase out
    FITs by backdoor of state aid guidelines
    legality still controversial (is before Court)

48
Different philosophies and interests
  • Stimulate RP growth via competition by
    incumbents (UK most of the time, EU Commission,
    EURELECTRIC) or via supporting technological
    learning and innovation?
  • Rapid shift to RP power to limit global warming
    (Denmark, Germany,) or slow shift nursing
    existing fossil and nuclear generation (UK most
    years, power incumbents, Poland, Czech Rep., some
    other Eastern Europeans)
  • Physical trade of RP or just certificate trade?

49
Conflict over Dir. 2001/77/EC
  • Energy Commissioner Papoutsis tried to push
    through a quota cum tradable certificates model,
    similar to later RO. Sends emissaries to EU
    capitals (governments, utilities). Supports
    lawsuit challenging German FIT.
  • Met with strong resistance from renewable power
    assoc. (exc. British and Danish wind power),
    Parliament, German and Spanish governments

50
2001/77/EC
  • Commission resigns, de Palacio is new energy
    commissioner. Submits a draft proposal (bill)
    that leaves choice of support up to member states
    (subsidiarity), but they respect state aid and
    internal market provisions - opens back door
    challenge to FIT
  • However, Court in PreussenElektra vs. Schleswag
    rejects COM argument that FIT are state aid or
    violating internal market

51
Conflict over Dir. 2009/28/EC
  • Comparative studies of quota systems (UK, IT, BE,
    PL) and FIT (most other member states) show
    greater efficiency and effectiveness of FIT
    issue appears settled in favour of free choice of
    support system by member states
  • But in 2007 attempt by certificate trading
    advocates in COM (neoliberals, UK) to introduce
    a trading mechanism so that small states (UK?)
    can meet now binding quotas

52
Dir. 2009/28/EC
  • Renew. power stakeholders claim this would
    destroy FITs, energy commissioner Piebalgs grants
    them a hearing
  • Result Opt-outs from trading mechanism are
    introduced into proposal
  • Legal experts discover that opt-outs would not
    hold up in Court
  • Certificate trading advocates concede defeat

53
Dir. 2009/28/EC
  • Commissioner Piebalgs stands by as Parliam. and
    Council negotiate a new version (unusual given
    the Commissions exclusive right to legislative
    initative).
  • Green MEP Turmes and Council led by core group
    formed by UK(!) /Poland /Germany negotiate new
    bill free choice of support system plus
    non-trading flexibility to satisfy target
    fulfilment anxieties of small countries

54
Commission (2014) guidelines on state aid to
energy new attempt
  • These guidelines require bidding, ban FIT from
    future support schemes except for small
    installations (1 MW for PV, 6MW for wind),
  • This will inhibit decentralised energy transition
    by motivated citizens, many SMEs
  • Likely to give electr. incumbents and other
    corporate actors a new chance to take over the
    renewables business and to keep it small

55
2014 state aid guidelines
  • European Renewable Energy Foundation has
    challenged guidelines in Court for violating
    renewable energy directive 2009/28/EC, which is
    valid until 2020
  • But no political resistance from member state
    governments so far since Germany accepted
    Commission view (this was different with similar,
    earlier COM efforts)

56
Legal nature of guidelines
  • In theory, these guidelines only inform on
    criteria that Commission will apply when
    accepting/rejecting national support schemes (not
    a legislative document)
  • In practice, they influence the formulation of
    national support schemes -gt deter FITs and thus
    small investors and SMEs, the most motivated
    group so far and favouring decentralised
    transition

57
EU falling behind on renewables and climate
action?
  • Europe has played a big role in promoting
    renewable power until 2010, building up the first
    renewable energy industry
  • But COM unable (unwilling?) to build a truly
    European RP sector, preferring liberalisation
  • Since 2010, resistance from fossil/nuclear
    incumbents slows deployment dynamic
  • COM accepted their claims that renewables are
    competitive already and that high costs of
    support endangers EU competitiveness

58
EU now falling behind on renewables and climate
action (2)
  • That is likely result of the 2014 COM guidelines
    on state aid to energy
  • Renewable power now does better in high-growth
    developing countries without entrenched
    fossil/nuclear incumbents and without an
    Emissions Trading System (which in the EU
    practically ignores climate costs lately
    5-10/t of CO2 instead of about 80 UBA
    estimate 2012, Alberici et al., 2014.

59
WWF/Lichtblick (2015) Megatrends der  globalen
Energiewende,http//www.energiewendebeschleunigen
.de/fileadmin/fm-wwf/lichtblick/Megatrends-der-glo
balen-Energiewende.pdf  
60
Current policy intensifying upcoming shocks?
  • The likely result of EU slowdown for RP and its
    protection of fossil power
  • Higher impact on climate more costs borne by
    future generations (Stern report)
  • EU may lose /has lost its leadership in RP
    industry - China and other regions caught up
  • Even bigger shock likely to hit EUs big
    utilities once cheapercleanersimpler sources
    defeat utilities efforts at holding them at
    bay. Will incumbents survive that?

61
Merit order effects explained by sfv
(Solarenergieförderverein)
  • The following slides (62 to 73) are taken from a
    presentation by SFV (updated versions can be
    found on its homepage www.sfv.de)

62
How wind-generated electricity reduces the price
of power at the electricity exchange
Es gibt im Binnenland viel mehr Flächen für die
Windenergie als notwendig!
62
63
32 cent
Price per kWh
Different generators have different costs, are
dispatched in merit order (lowest cost first)
until demand is satisfied. Red line shows where
demand is cut off
27 cent
18 cent
11 cent
4 cent
3,5 cent
3 cent
Volume of electricity generated
Demand
63
64
Not sold
Price
18 cent
volume
demand
64
65
Price
Price of the electricity exchange applies to all
18
Profit 15 cent
3 cent
volume
Demand
65
66
Price
18 cent
Profits of onventional electricity generators
z.B. für Atom- kraftwerk
Price bids of generators
volume
Demand
66
67
Preis
Purchasing price of suppliers
Strom-menge
Nachfrage
67
68
Wind power fed into grid reduces demand for
conventional electricity
price
18
Profits of conventi-onal generators
volume
demand
Wind power
68
69
price
What has to be paid for wind power?
18
Feed-in tariff
4
volume
Demand
Wind power
69
70
price
18
Feed-in tariff
Plus cost for wind power
4
Purchasing price for conv. electricity
volume
Demand
Wind- power
70
71
price
18
Savings from wind power lower profits of
conventional generators
Feed-in tariff
Plus costs for wind power
4
Purchasing price of convent. plectr.
volume
Wind power
Demand
71
72
Savings due to wind power
price
18
Savings of suppliers lost profits for
conven-tional generators
Cost of wind power
4
price conventional gen.
volume
Wind power
Demand
72
73
Result Conventional generators do not like wind
generators
73
74
Main references
  • Jacobsson and Lauber (2006) on Germany The
    politics and policy of energy system
    transformation, Energy Policy 343, 256-276
  • Lauber and Jacobsson (2015) on Germany The
    politics and economics of constructing,
    contesting and restricting socio-political space
    for renewables, Environmental Innovation and
    Societal Transitions, in press.
  • Lauber and Schenner (2011) on EU The struggle
    over support schemes for renewable electricity in
    the EU, Environmental Politics 204, 508-527.
  • Lauber (2012) on UK-Germany comparison Wind
    Power Policy in Germany and the UK, in Szarka et
    al., Learning from Wind Power, Basingstoke
    Palgrave Macmillan.
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