Different transition paths to low
carbon power: Germany, UK, EU
Volkmar.Lauber@sbg.ac.at
University of Salzburg, Austria
Carleton University, 1-2 October 2015
22.03.2016
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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
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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)
• Germany:decline of hard coal + nuclear from
2007 onwards; less gas; steady growth of
renewable power to 160 TWh in 2014 (slide)
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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_Infog
raphics.pdf.
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Electricity generation in Germany by fuel source/technology, 1990-2014
700
Other energy sources
600
500
Photovoltaics
Biomass
Wind power
in TWh
400
Household waste
Hydro power
300
Petroleum products
200
Natural gas
Hard coal
100
Nuclear
0
Source: Adapted from AGEB (Arbeitsgemeinschaft Energiebilanzen) (2015) Bruttostromerzeugung in Deutschland nach
Energieträgern, as of 27 Feb 2015.
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Lignite
5
Table of contents:
Politics and policy of transition
1.
2.
3.
4.
5.
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Germany 2000-2010
UK 2000-2008
Germany 2010-2015
UK 2008-2015
EU late 1990s-2015
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Part 1: Germany, 2000-2010
Intention and first implementation
of the Renewable Energy Act of
2000
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The origins of Germany’s
Renewable 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
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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
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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)
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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
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Renewable power generation by energy source in Germany, 1990-2014
180
160
140
Photovoltaics
120
TWh
100
Biomass
80
Wind power
60
40
Household
waste
20
Hydro power
0
Source: Adapted from AGEB (Arbeitsgemeinschaft Energiebilanzen) (2015) Bruttostromerzeugung in Deutschland
nach Energieträgern, as of 27 Feb 2015.
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Minimum targets regularly overachieved/ 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
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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-erneuerbarekarriere/arbeitsmarkt-erneuerbare-energien.html, 08.01.2013.
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Figure 1. Ownership structure in 2010 of renewable electricity installations in Germany (not including
pumped storage) (Total installed capacity: 53,0 GW)
Adapted from: trend:research (2011) p.45.
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Payment for Wind Energy in Europe 2011
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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.
CEC:Commission Staff Working Paper SEC(2008)57, The support of electricity from renewable
energy sources, pp. 25- 26
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Historically observed efficiency of support for onshore wind:
Effectiveness indicator compared to expected profit in 2006.
CEC:Commission Staff Working Paper SEC(2008)57, The
support of electricity from renewable energy sources, p.32
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Part 2: UK 2000-2008
• Intentions and first implementation
of Renewables Obligation (RO)
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Origins and Purpose
• Designed by Treasury (NFFO model) and DTI with minimal role for UK Parliament (Westminster 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
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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 -> volatility (“cliff”?)
• Volatility eliminates SME participation (high
risk) and deters rise of equipment industry
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Impact of RO
• Purpose of RO 2002 was to drive down prices
for renewable power -> 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 -> slow deployment
• Led to little technological learning, little
participation in RP industry
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Renewable power generation by energy sources in the United Kingdom, 1990-2014
10000
in thousand tonnes of oil equivalent
9000
Photovoltaics
8000
7000
Offshore wind
6000
5000
Onshore wind
4000
3000
Bioenergy
2000
1000
Hydro
0
Source: Department of Energy & Climate Change (2015) Digest of United Kingdom Energy Statistics,
https://www.gov.uk/government/statistics/renewable-sources-of-energy-chapter-6-digest-of-united-kingdomenergy-statistics-dukes.
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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)
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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?
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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
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Background: Acceleration of RP
growth (Source: AGEB, 2015)
Year
Total generation in TWh
1990
19.7
Annual increase in period
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
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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
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(2012).
28
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
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Installed net capacity for electricity generation
in Germany, 2002-2015
200
180
Solar
160
Wind offshore
140
Wind onshore
GW
120
Hydro
100
Biomass
80
Natural gas
60
Nuclear
40
Lignite
20
Hard coal
0
Source: Adapted from Fraunhofer ISE (2015b); * first half of 2015
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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 households+SMEs. Paradox:Lower
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)
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From Lauber and Jacobsson (2015)
PV 2015
8-12
1.18
0.4
11.58
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/files/smfiledata/3/0/3/4/9/9/TwoStrategicLessons.
pdf, 09.09.2013.
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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
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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
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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
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Britain 2008-2015
Zig-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 “lowcarbon” - to support nuclear (Hinkley Pt C)
and CCS generation.
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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)
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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
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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/uploads/attachment_data/file/449067/UK_Energy_
in_Brief_2015.pdf.
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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/uploads/attachment_data/file/449067/UK_Energy_in_Brief_2015.pdf.
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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
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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)
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Share of renewable electricity in EU-28, 2002-2012
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Source: SolarPower Europe Global Market Outlook (2015),
http://www.solarpowereurope.org/fileadmin/user_upload/documents/Publications/Global_Market_Outlook_2015_-2019
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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)
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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?
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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
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…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
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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”
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… 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
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…Dir. 2009/28/EC
• Commissioner Piebalgs stands by as Parliam.
and Council negotiate a new version (unusual
given the Commission’s 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
•
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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
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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)
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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 -> deter FITs and
thus small investors and SMEs, the most
motivated group so far and favouring
decentralised transition
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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
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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 highgrowth 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.
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WWF/Lichtblick (2015) Megatrends der globalen Energiewende,
http://www.energiewendebeschleunigen.de/fileadmin/fm-wwf/lichtblick/Megatrends-der-globalen-Energiewende.pdf
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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 EU’s big utilities
once cheaper+cleaner+simpler sources defeat
utilities’ efforts at holding them at bay. Will
incumbents survive that?
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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)
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61
HowEs
wind-generated
gibt im
electricity
reduces theviel
price of
Binnenland
mehr
Flächen
für
power at the electricity
die Windenergie
exchange
als notwendig!
62
62
Price
per
kWh
32 cent
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
3 cent
3,5 cent
Demand
4 cent
Volume of
electricity
generated
63
63
Not sold
Price
18 cent
volume
demand
64
64
Price
Price of the electricity
exchange applies to all
18
Profit
15 cent
3 cent
volume
Demand
65
65
Price
18 cent
Profits of onventional
z.B. für
electricity
Atomgenerators
kraftwerk
Price bids of generators
volume
Demand
66
66
Preis
Purchasing price
of suppliers
Strommenge
Nachfrage
67
67
price
Wind power fed into grid
reduces demand for
conventional electricity
18
Profits of conventional generators
volume
demand
Wind
power
68
68
price
What has to be paid
for wind power?
18
Feed-in
tariff
4
volume
Demand
Wind
power
69
69
price
18
4
Purchasing price for conv. electricity
Plus cost
for wind
power
Feed-in
tariff
volume
Demand
Windpower
70
70
price
18
Savings from wind power=
lower profits of conventional
generators
4
Purchasing price of convent. plectr.
Plus costs
for wind
power
Feed-in
tariff
volume
Demand
Wind
power
71
71
price
18
4
Savings due to wind
power
Savings of suppliers= lost
profits for conven-tional
Cost of
generators
price conventional gen.
wind
power
volume
Demand
Wind
power
72
72
Result: Conventional
generators do not like
wind generators
73
73
Main references
• Jacobsson and Lauber (2006) on Germany: The politics and
policy of energy system transformation, Energy Policy 34:3,
256-276
• Lauber and Jacobsson (2015) on Germany: The politics and
economics of constructing, contesting and restricting sociopolitical 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 20:4, 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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