Renewable Energies and PV in Germany and
other countries
Critical factors for building up sustainable
markets
Buenos Aires, 15. Dec. 2015
Jan Knaack
International Affairs
Bundesverband Solarwirtschaft e.V. (BSW-Solar)
Market deployment barriers for
renewable energy sector: structures
2
Energy market is dominated by very large actors,
small and medium RES actors are disadvantaged
– Investment risks has to be reduced for RES actors
– Grid access for RES has to be regulated
The conventional energy system is centralized
and discriminates decentralized power generation
– Change of the energy system must be actively supported
– New players (independent power producer) must become the
chance to enter the energy market
 Need to create a “Level playing field”
=> Policy support necessary to open opportunities for PV and RES
– Priority grid access
– Financial incentives to kick-start market development
© BSW-Solar
Market deployment barrier: costs
•
Especially in the case of PV, initial investment has to be financed
upfront
– High upfront investment, low running costs
– Comparison of costs is difficult
• External costs of conventional energy generation are not
included in the retail price
– higher investments cost require high trust in PV technology
– Cost of capital (financing) becomes important
•
RES becoming increasingly cheaper by technological development
and economy of scale effects
•
Conventional energy massively receives state subsidies in many
countries
3
© BSW-Solar
RES/PV support policies aims…
4
… to reduce barriers for RES deployment
… to provide for a level playing field
… to kick start a RES industry development
… to build up RES market capacities
… to make RES cost competitive
… to mitigate climate change
… to increase energy independency
© BSW-Solar
1. Producer-oriented support policies
Target group
Investors in power systems
Aim: Generate profits
Utilities
Concept
Investment in PV becomes
financially attractive
Aim: Comply with law
Obligations to purchase a
certain share of RES-E
Scheme
Feed-in-Tariff, PPA
Quotas / certificates
Funding
Cost-redistribution,
Earnings by sale of electricity
5
Electricity Consumers
Aim: Reduce consumption /
Savings
Create incentives to produce
electricity for own
consumption an reduce the
Grants and tax incentives, Net
Metering
State – Budget / all taxpayers
© BSW-Solar
Producer-oriented support: FIT / PPA
Policy
FIT (Feed-in-tariff)
PPA (Power purchase
agreement)
Popularity
Dominant policy for
many years
For RES since a few years more
and more popular
Risk
Depends on rating of off- Off-takers are often private
taker (usually national
institution – rather high)
Tariff level Set by legislator for 15 –
/ duration 25 years
Set by legislator or negotiated
for 15 – 25 years
Off-taker
Public or private utility
Public or Private (utilityy)
Financing
Levy / Surcharge
Energy sales to off-taker
Public
costs
Dep. on setting of FIT
Usually privately covered
Positive
Highly accepted by
banks
Price is set by negociation –
both parties can win
Negative
Difficulty to set tariff
Negotiation increases costs
6
© BSW-Solar
FIT/PPA – schematic flowchart
7
Regulation / Law
/ neg. process
Government
Money
Power
Provides for grid
access, sets
Tariff
Utility
Off-taker
Negociates
PPA
Feed-in tariff
conventional
electricity
free market
renewable
electricity
Electricity
rates
+ FIT surcharge
RES-E
Producer
Electricity
consumer
© BSW-Solar
FIT / PPA success factors
8
• Priority connection for all PV systems must be granted by the
Government
• Each solar kWh must be purchased by the utility
• Fixed (feed-in tariff) payments have to be guaranteed
(generally) for 15 - 25 years
• FIT: Annual reduction of the feed-in tariff for newly installed
PV systems (Degression) / PPA: Negotiations per project
• If costs are redistributed to the rate payer, Feed-in tariffs are
not a state subsidy /
• PPA usually only realized if the RES is a competitive form of
energy production
© BSW-Solar
Current FIT & adaption mechanism in
Germany
9
© BSW-Solar
2. Utility-oriented support policies
Target group
Investors in power systems
Aim: Generate profits
Utilities
Aim: Comply with law
Obligations to purchase a
certain share of RES-E
Concept
Investment in PV becomes
financially attractive
Scheme
Feed-in-Tariff, PPA, NetQuotas / certificates
Metering
Cost-redistribution,
Earnings by sale of electricity
Funding
13
Electricity Consumers
Aim: Reduce consumption /
Savings
Create incentives to produce
electricity for own
consumption an reduce the
Grants and tax incentives
State – Budget / all taxpayers
17/01/2010
© BSW-Solar
Quota & certificate systems (e.g. RPS)
•
•
•
•
•
14
Quotas are set by the government in order to reach certain RES-E
targets (22 states in the US have an RPS with solar energy)
– Specific carve-outs for solar may exist
– many states in the US have such carve-outs (16)
Utilities (consumers) are obliged to proof a certain percentage of RESE production (consumption)
Quotas can be met either by trading or producing green certificates
– whatever is more economic to the obligor
Electricity produced by RE producers is traded at the spot market
Penalty payments for non-compliance are transferred to the
government or RE R&D funds
© BSW-Solar
Quota/certificates – schematic flowchart
15
Regulation / Law
Government
Certificates
sets quota
Money
Utility
Certificate
& power
payments
Power
conventional
electricity
free market
renewable
electricity
Electricity
rates
+ Quota surcharge
allocates
Certificates
RES-E
Producer
Electricity
consumer
© BSW-Solar
Renewable Portfolio Standards (RPS) with Solar or Distributed Generation Provisions
VT: 1% DG X 2017 + 3/5ths of
1%/year until 10% X 2032
www.dsireusa.org / August 2015
WA: 2 MW
DG (M)
NH: 0.3% (E) x 2014
MA: 400 MW PV x 2020
MN: 1.5%
(E) x 2020
0.15% PV
DG x 2020
OR: 20 MW PV
x 2020
2 for PV (M)
NY: 0.58% customer sited x 2015
MI: 3.2
+ (M)
for (E)
NV: 1.5% (E)
x 2025 2.4 +
for PV (M)
UT: 2.4 (M)
for (E)
AZ: 4.5%
DG x 2025
CO: 3.0% DG
x 2020
1.5% CST x
2020 (M)
MO:
0.3% (E)
x 2021
NM: 4% (E)
x 2020
0.6% DG x
2020
Renewable Portfolio Standard with solar/distributed
generation (DG) provision
Renewable Portfolio Goal with solar/DG provision
IL: 1.5%
PV x 2026
0.25% DG
x 2026
PA: 0.5% PV x 2021
NJ: 4.1% (E) x 2028
DC: 2.5% (E) x 2023
OH: 0.5%
(E) x
2027
DE: 3.5% PV x 2026
3.0 (M) for PV
MD: 2% (E) x 2020
DC
NC: 0.2% (E) x 2018
SC: 0.25%
DG x 2021
(E): Solar Electric
PV: Solar Photovoltaic
DG: Distributed Generation
(M): Multipliers
(CST): Customer - Sited
Delaware allows certain fuel cell systems
to qualify for the PV carve-out
Solar water heating counts toward
solar/DG provision
22 States + DC
have an RPS with
solar or DG
provisions
3. Consumer-oriented support policies
Target group
Investors in power systems
Aim: Generate profits
Utilities
Concept
Investment in PV becomes
financially attractive,
Aim: Comply with law
Obligations to purchase a
certain share of RES-E
Scheme
Feed-in-Tariff, PPA,
Quotas / certificates
Funding
Cost-redistribution,
Earnings by sale of electricity
18
Electricity Consumers
Aim: Reduce consumption /
Savings
Create incentives to produce
electricity for own
consumption an reduce the
Grants and tax incentives,
Net-Metering
State – Budget / all taxpayers
© BSW-Solar
Consumer-oriented measures
•
•
•
•
19
Aim at providing an incentive to produce electricity for own
consumption
– whereas the end-user is either a private individual or a commercial
user of the plant
Policies reduce the burden of the investments for the consumers of
self-generated RES-E
Eventually, the incentiviced investment reduce the electricity
consumption of the consumer
Policy measures comprise
– Investment aids
• fiscal (tax) incentives
• grants and interest reduced loans
• Tax incentives
– Net-metering
© BSW-Solar
Customer support –flowchart
20
Regulation / Law
Government
Money
Power
Provides for grid
access
Utility
conventional
electricity
Incentivices
renewable
electricity
Electricity
rates
RES-E
Producer
Electricity
consumer
© BSW-Solar
Fiscal (tax) incentives
21
• Fiscal incentives, such as tax exemptions or
reductions, do mostly supplement other support
schemes
• RE producers are exempted from certain taxes (e.g.
carbon taxes) or tax credits are applied to reduce the
average tax load (very prominently in the US)
• Effectiveness of such fiscal incentives depends on
the applicable tax rate
• In those countries, which apply high energy taxes,
exemptions may be sufficient to stimulate the use of
RES, in countries with different tax structures, this
measure alone might not suffice
© BSW-Solar
Investment aids (grants and loans)
22
• Grants are a classical means to reduce the investments load
for an investor in a PV system, ( provides up-front clarity)
• Grant programs are usually taken from the state budget
(classical subsidy)
• Such programs are usually capped to specify the amount of
money to be available ( cost control,  selection of projects)
• Especially in the very first market phase of young RE
technologies grants have proven to be an effective means to
create first demand
• Attractive conditions for loans provide an incentive for investors
to specifically use available equity to finance PV systems
• Low interest loans that are offered by governments or state
bank are usually combined with other support instruments
• Usually, different conditions for private and commercial users
exist
© BSW-Solar
A good strategy is crucial…
25
• RES support policies are an instrument to provide for a
more level playing field in the energy sector
• However, support policies need to be embedded in more
comprehensive strategies in order to be successful
• Even if well-designed policies are in place, bureaucratic
procedures and administrative hurdles, as well as difficult
access to the electricity grid can prevent a rapid market
development
• Not only solar, all RE technologies should be considered
in such a strategy
• Therefore, continuous and comprehensive National
Renewable Energy Strategies should be established
and budgets for the market introduction of RES must be
defined
© BSW-Solar
Market development strategy
26
1. PV (RES) targets determine the strategy
– Setting (mandatory) goals/targets establishes investment security
(political, technical, industrial)
2. Trigger first demand, support R&D activities
– Stimulating demand via grants and tax incentives, legal security
– R&D budgets to be defined to provide and maintain excellence
3. Establish support policies, training and awareness
– Grid-connection rules and adequate long-term support policies
need to be defined
– Installation capacities (HR) need to be build up (qualified)
– Awareness raising campaigns (aiming at general public)
4. Monitoring and improvements
– Continuous monitoring and evaluation and adaptation of tools where necessary – guarantee cost-efficient functioning of support
policies
© BSW-Solar
Conclusion
27
• Successful and effective PV support policies must provide
stable long-term investment security
• Key precondition for renewables to develop is guaranteed (or
priority) grid access
• Stop-and-go approaches must be avoided to maintain the
credibility of the program
• Feed-in tariffs have proven to be an economically efficient way
to promote RES, however, tariffs need to be set correctly
(Germany)
• A combination of support policies (tax credits, net-metering,
RPS) in combination with PPA’s have produced considerable
results in the US
• Today, financing is the most pressing issue, since many RES
are cost competitive
© BSW-Solar
28
Thank you for your attention…
Jan Knaack
International Affairs
German Solar Association
knaack@bsw-solar.de
© BSW-Solar
24/01/2013
Source: Solarmarkt