Harmonising renewable support mechanisms

Harmonising renewable support mechanisms

Dr David Toke: Senior Lecturer in Environmental Policy, University of

Birmingham and also Energy Expert, World Future Council

What is a REFIT?

• Guaranteed minimum price for renewable electricity production

• Long term contract for power purchase (15-20 years)

• Different to NFFO and RO

What is a RPS? (green electricity certificate scheme)

• Electricity suppliers given renewable obligation

• RE projects sell certificates (and energy)

• Electricity suppliers buy certificates or pay penalty

Why a REFIT?

Less income uncertainty, higher project IRR for a given income level

Costs (£/MWh) of offshore and onshore windfarms at

different internal rates of return (IRR)

02040

6080

5% IRR 11%IRR

£/MWh offshore

onshore

Country Tariff in p/KWh 2004

Average capacity factor (%)

Annual Return per installed MW (£) 2004

Germany 5.5 18 87,000

United Kingdom

5.2 28 128,000

Spain 4.5 28 110,000

2005-2006

Country Tariff

in p/KWh

Average

capacity

factor (%)

Annual Return per

installed MW (£)

Germany 5.6

(declining)

18 88,000

United Kingdom 7.3 28 179,000

Spain 5.9 28 145,000

UK RO confusion?

REFIT = transparency for local and small investors

Advantages of harmonisation

Theoretical advantages of harmonisation

• Investment would flow to where it is most efficient

• All countries would be forced to participate

Harmonised EU-wide RPS?

• Great uncertainty over certificate value• Lack of competition in several countries (eg

France, Germany)• Bottlenecks in some countries (eg UK)• Loss of local investment• Some countries would refuse to participate

A single REFIT?

• Local conditions (esp wind speeds) differ

• Some countries would object

Harmonised transferability

• UK, Italian, Belgium obligations de-stabilised

• Germans would pay for Danish etc renewables

Contacts

• ‘Making Renewables FITTER’ report available at http://www.worldfuturecouncil.org/

• Dr David Toke: [email protected]

• Miguel Mendonca (WFC): [email protected]