Deploying Renewables:
Principles for Effective Policies
Dr. Paolo Frankl
Head, Renewable Energy Unit
International Energy Agency
Press Conference, OECD
Berlin, 29 September 2008
© OECD/IEA - 2008
INTERNATIONAL
ENERGY AGENCY
Global electricity production (TWh)
© OECD/IEA - 2008
Global Power Generation Mix
Scenarios
Other
renewables
Solar
60,000
46.5%
50,000
Wind
Renewables Biomass + CCS
40,000
Biomass
Hydro
30,000
Nuclear
20,000
Gas + CCS
Gas
10,000
Oil
Coal + CCS
0
2005
Baseline
2030
Baseline ACT Map BLUE Map
2050
2050
2050
Coal
[Source: ETP 2008]
Renewables would have to play a particularly significant role in
the power sector, increasing from 18% today to nearly 50% by
2050. Non-hydro renewables show the highest growth rate.
© OECD/IEA - 2008
Global Renewable Energy Markets
and Policies Programme (GREMPP)

Comparative assessment of effectiveness and
efficiency of renewables support policies (market
deployment and RD&D policies)

OECD countries plus Brazil, Russia, India, China,
South Africa

Electricity, Heat and Transport Fuel sectors

Distillation of the best policy practices and of main
challenges encountered


‘Learn from success stories but also from failures’
Co-funded by German BMU, Japanese NEDO, and Enel
Quantitative Analysis

Chosen policy effectiveness
indicator on a yearly basis:
Incremental RE generation in a given year
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Remaining additional realisable potential (by 2020)
Realisable RES-Electricity_
generation potential up to 2020
[TWh/year]
Achieved (by 2005) and Additional
realisable mid-term potential (by
2020) for RES-Electricity
2000
1500
Additional potential
up to 2020
1000
Achieved potential
2005
500
EU 27
South Africa
Brazil
India
China
Russia
Turkey
Switzerland
Norway
Iceland
Australia
Korea
Japan
Mexico
Canada
New Zealand
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USA
0
Achieved (2005) and additional realisable mid-term (up to 2020) potential for
RES-Electricity by country (OECD+BRICS) – in absolute terms (TWh)
Source: IEA & EEG, 2008
Effectiveness & Efficiency
Wind On-shore 2005 (OECD & BRICS)
20%
u OECD - EU  Other OECD
18%
IRL
Long-term
predictable incentives
(FIT or FIP)
+
Appropriate
framework
Effectiveness indicator 2004/2005
16%
PRT
14%
12%
AUT
10%
6%
ESP
Higher risk (TGC)
+
Non-economic barriers
NLD
KOR
JPN
4%
IND
AUS
NZL
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DEU
LUX
8%
2%
0%
0.00
-2%
p BRICS
USA
RUS
2.00
ZAF
4.00
NOR
6.00
CHN
Annualised remuneration in [US cent / kWh]
SWE
BRA
8.00
GBR
BEL
POL
FRA
TUR
10.00
ITA
FIN
MEX
12.00
14.00
16.00
18.00
 Efficiency
Source: IEA & Fh-ISI, 2008
Effectiveness & Efficiency
Solid biomass el. 2005 (OECD+BRICS)
30%
u EU Countries
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Effectiveness indicator 2004/2005
25%
 Non EU OECD p BRICS
NLD
20%
TGC
15%
SWE
BEL
10%
FIT/FIP
5%
DNK HUN
NZL
RUS
0%
0
2
BRA NOR
USA
CHN
CAN
KOR
FRA
ZAF
ISL
FIN
SVK
4
6
8
DEU PRT
POL
CZE
IND
IRLAUS
CHE
GRC
LUX
TUR
ESP
10
12
GBR
JPN AUT
ITA
MEX
14
16
18
-5%
Annualised remuneration in [US cent / kWh]
Source: IEA & Fh-ISI, 2008
Effectiveness & Efficiency
Solar PV 2005 (OECD & BRICS)
7%
u OECD - EU
 Other OECD p BRICS
LUX
© OECD/IEA - 2008
Effectiveness indicator 2004/2005
6%
5%
4%
FIT
DEU
3%
2%
JPN
CHE
1%
0%
0
AUS
NLD
CAN
INDCZE
ZAF
DNK
FIN
MEX BEL
GBR
SWE
RUSNOR
CHN
BRA
SVK
NZL
ISL
IRL
TUR
POL
HUN
10
20
30
AUT
40
ESP USA
ITA
PRT
50
GRC KOR
60
FRA
70
80
Annualised remuneration in [US cent / kWh]
Source: IEA & Fh-ISI, 2008
© OECD/IEA - 2008
Main Lessons Learnt
and
Conclusions
Main Lessons Learnt (1)

Effective policies only in a limited set of countries

Sometimes depending on specific technology

Perceived risk, more than profit, is key to policy
effectiveness & efficiency

Price support can not be adequately addressed in isolation;
non-economic barriers must be addressed concurrently
Grid barriers
 Administrative barriers
 Social acceptance issues
 Other barriers (e.g. training, information, financial, etc.)
© OECD/IEA - 2008


Effective systems have, in practice, frequently been the most
cost efficient

Technology-specific support is key for both effectiveness and
cost-efficiency
Main Lessons Learnt (2)

Move beyond ‘Feed-In Tariff vs. Quota Obligation
System/ Tradable Green Certificate’ debate
© OECD/IEA - 2008

Both systems show success and failures depending on
specific country and technology

Precise design criteria and fine-tuning are key

Signs of convergence:


Feed-In Tariff: Premium tariff option, time digression
Quota System/Tradable Green Certificate: Technology
banding
Key Principles for Effective
Renewable Energy Policies
1.
2.
3.
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4.
5.
Remove non-economic barriers to
Continuity
improve market functioning
Establish predictable support framework - Certainty
to attract investments
Set up transitional incentives decreasing
over time – to foster and monitor
technological innovation and move towards
market competitiveness
Ensure specific support in function of
technology maturity to exploit potential of
large RET range
With increasing mass-scale RET penetration
impact on overall energy system must
be taken into account
Market Deployment
Fostering RE’s transition towards
mass market integration
Mature tech
(e.g. hydro)
4. Technology-neutral competition
TGC, Carbon trading (e.g. EU ETS)
1. Development
Low cost-gap
3. Shared/imposed market risk,
(e.g. wind onshore)
guaranteed minimum but declining
support
FIP, TGC (technology banding)
RD&D financing,
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capital cost support,
investment tax
credits, rebates,
High cost-gap
loan guarantees
(e.g. PV)
2. Stable, low-risk, sheltered
FIT, FIP, Tenders
Prototype & demo stage
(e.g. 2nd gen biofuels)
Development
Niche markets
Mass market
Time
Recommendations
© OECD/IEA - 2008
Urgent action for Energy Technology Revolution
1.
Realise urgency to implement effective policies to
exploit major potential of RETs in terms of energy
security and climate change mitigation
2.
Remove and overcome non-economic barriers first
3.
Exploit substantial potential for improvement of policy
effectiveness and efficiency: learn from good practice
4.
Focus on rigorous and coherent implementation of key
policy design principles with regard to long-term cost
efficiency and national circumstances
5.
Create level playing field by pricing in GHG
emissions and other externalities
6.
Allow a combination framework of incentive schemes in
function of technology maturity level