Feed in Tariffs: A Time for Real Action on Renewable Energy
July 12, San Francisco, Sponsored by:
French Feed-in Tariffs: Drivers, Present Status, Potential Evolution Bernard CHABOT Renewable Energy Consulting and Training bechabot@wanadoo.fr Garbejaire B107, 06560, VALBONNE Phone +33(0)6 63 84 81 98
1
Content
The
European context as a driver for French FiTs The French context French FiTs Grading and principles Potential evolution: “ARTs” (advanced Renewable Tariffs) Conclusion 2
The European Context As a driver for French FiTs
3
Europe energy and climate policy: ÂŤ 3*20 % in 2020 Âť 20
% reduction of greenhouse gases emissions in 2020
Compared to 1990 emissions 20
% more energy efficiency
Beyond effects of already decided policies and measures 20
% renewable energy in final energy consumption
Compared to 6.9 % in 2006 Binding target at the European Union level Binding target of 10 % of fuels for transportation from RES A related European Directive (= European Law) o Under the French Presidency (June to december 2008) o Adopted in April 2009
All the 27 member states will have to present their National Action Plan to the European Commission before June 30, 2010 July 8, 2010 : 7 national RE plan available : UK, Spain, Netherland, Sweden, Bulgaria, Austria, Finland, Denmark 4
The European RE Directive « 20% RE in 2020 » (Heat, electricity, fuel for transportation final demand) Projet directive ER 2020: % ER dans CEF en 2006 et objectifs 2020 UE27
20 %
6,92
Suède Finlande Autriche
49
30,02
38
22,84
34
21,81
Portugal
31 30
16,53
Danemark
15,01
Italie Espagne
17
6,82 6,6
France
% CEF en 2006
23 %
6,33
18
Allemagne Pologne Pays-Bas
2,31
Belgique
2,11
15 14 13
UK
1,98
15
5,94 4,86
0
% CEF en 2020
20
10
20
30
40
50 5
Renewable Electricity Roadmap for the « 3 * 20 % » Plan Source: European Renewable energy Council, November 2008
Source: EREC, Nov 2008, "RE Technology Roadmap" Wind Hydro Bioenergy Photovoltaic Solar Thermal Geothermal Ocean Energy TOTAL % of EU Electricity
2006 82 357,2 89,9 2,5 0 5,6 0 537 16%
TWh from RE in EU27 2010 2020 176 477 360 384 135 250 20 180 2 43 10 31 1 5 704 1 370 19,7% 33 to 40 %
% in 2020 35% 28% 18% 13% 3% 2% 0,4% 100%
GW RE in EU27 GW 2020 % in 2020 180 35% 120 23% 50 10% 29% 150 15 2,9% 4 0,8% 2,5 0,5% 100% 522
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First assessment of 7 NREAP published by July 8 Based
on 8 countries representing 156 M inhabitants (31 % of the 491 Millions inhabitants in EU27 in 2006): UK, SP (Spain), NL (Nederland), SW (Sweden), BU (Bulgaria), AT (Austria), FI (Finland), DK (Denmark)
For
electricity, 2020 targets represent:
528 TWh of RES-E, around 40 % of final electricity demand From: 42.8 % wind power, onshore and offshore; 33 % from hydropower (small and large);18.4 % from bioelectricity (biomass, biogas); 6.3 % from solar (PV + CSP); 0.8 % from marine power; 0.06 % from geothermal energy (without Italy) National targets for % electricity from RES-E in final demand: AT: 70.6 %; SW: 62.9 %, DK: 51.9 %; SP: 40 % ; NL: 37 %; FI: 33 %; UK: 30 %; BU: 20.6 % Other
NREP to be published at:
http://ec.europa.eu/energy/renewables/transparency_platform/action_plan_en.htm Policy (including FITs policy) is described in ยง 4 of each NREP 7
The French Context
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Electricity in France: very specific characteristics
Large amount of nuclear + large Hydropower, huge exports Electricity production (TWh/year)
Electricity exports and imports (TWh/year)
Nuclear Fossils Hydro & Wind
Imports Exports Net exports
9
RE in France: shifting from “old” to “new” RE Main present contribution from large hydro and biomass Efforts on “new renewables” (wind, biofuels, solar, CHP from biogas and biomass) started from 2001, due to European directives for electricity from renewables (2001 implementation of French FITs from 2001 to 2006) and for biofuels (2002)
Renewable Energy Production in France (Mtoe/year) 2009: Source: MEEDDDM , June 2010
Other renewables Biofuels Biomass from waste Solid biomass Wind Power Hydropower 10
Recent increase of renewables in France
FITs covering now all RE for electricity and CHP Renewables in France for heat, electricity, fuels. Source: MEDDM, June 2010 ktoe/year 2007 2008 2009 % in 2009 FITs 24,7% Yes Hydro 5 025 5 514 4 931 Wind 348 489 3,3% Yes 667 0,1% Yes Solar PV 2 4 14 45,4% Yes Biomass: wood 8 267 8 872 9 055 Biomass: agric. Waste 338 362 1,8% Yes 352 1 242 6,2% Yes Biomass: MSW 1 167 1 205 Biogas 253 284 298 1,5% Yes 119 0,6% Yes Geothermal 109 116 Solar thermal 35 44 0,3% NA 52 4,7% NA Heat pumps 531 771 947 2 279 11,4% NA Biofuels 1 122 1 946 TOTAL 17 198 19 605 19 956 100% 11
The « Grenelle de l’Environnement » outcome A
2007-2008 national debate on environment and energy between government and « civil society » Complements the July 2005 law on energy (« F4 in 2050 ») The « Grenelle 1 » law adopted in November 2008 The « Grenelle 2 » law (detailed measures) on June 2010 Will serve as a basis for French action plan for renewables Confirms the 23 % target from renewables in France’s final energy consumption in 2020 compared to 6.3 % in 2006 From -35 Mtoe by supplementary Energy Efficiency measures And by + 20 Mtoe of Renewables, of which + 7 Mtoe power o Of which + 5.3 Mtoe from wind power: 60 TWh from 25 GW in 2020 o And around + 0.5 Mtoe from Photovoltaics: 5.8 TWh from 5.6 GW
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The 2020 targets from 2008 “Environment debate� European directive
will require 23 % RE in final energy
"Grenelle Environnement": Renewables Total: + 20,5 Mtoe for 20 % Final Energy in France in 2020 Biofuels; 3,30; 16% Other RE power; 0,10; 1%
(5.6 GW)
Biomass thermal; 6,20; 30%
Solar PV; 0,50; 2%
Biomass power; 1,20; 6%
(6 GW)
Wind off-shore; 1,54; 8%
Geothermal heat; 1,90; 9%
(19 GW) Wind on-shore;
Solar thermal; 0,90; 4%
3,51; 17%
Hydropower; 0,60; 3%
Biogaz thermal; 0,50; 2%
Waste heat; 0,50; 2%
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French RE FITs
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History and drivers for French FITs No
FITs before 2001
“EOLE 2005”: “small French NFFO”: failure (as predicted !) European subsidies and demonstration projects for on grid PV 2000:
European Directive on RE negociations under French Presidency of the EU France motivation for applying this directive OK for tiered wind tariff designed in 2000, published in June 2001 Wind success Other FITs not sufficiently efficient PV: 0.15 €/kWh in 2002, 0.3 announced in 2003 Biomass and biogas: tariffs lower thanfor fossil fuels based CHP
law on Energy “POPE Law” July 2005 requires public assessment of tariffs new tariffs in July 2006
New
PV: BIPV Bonus (tariff 0.58 €/kWh), Biogas, & geothermal up, tiered offshore wind tariff created (0.13 €/kWh max) “Environment
debate”: new biomass, PV FiTs in 2010
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Grading the French 2010 FITs System Source: WFC, “Grading North American Feed-in Tariffs, Paul Gipe, May 2010
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French FiTs are differentiated and cover all RE By
renewable energy technologies
Wind Solar photovoltaic (same tariffs for Solar CSP) Hydropower, marine energy Bioenergy: biogas, solid biomass, biomass part of MSW Geothermal energy for power By
Applications
Wind: onshore or offshore PV: Building integrated, non BIPV, PV plants on land According to rated power range: PV, biomass, biogas, Hydro High efficiency CHP bonus Options for time and seasons of delivering: hydropower By
regional application: Mainland, Overseas Departments17
French renewable FiTs are Cost + Profit based Officially
based on a real project IRR before tax on profit
8% real project IRR from the 2006 review imposed by the July 2005 law on energy (« Loi POPE ») Fined-tuned
by profitability levels adapted to targets
Wind: profitability increase with wind speed at hub height BIPV: increased profitability to help innovation and market deployment of new BIPV modules and systems (BIPV bonus) CHP from biogas: at least same profitability level than the one from CHP based on fossil fuels Fine
tuning easy from the « Profitability Index Method » :
From success stories and failures: 0.1 < PI (= NPV / I) < 0.3
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Profitability Target Choice for FITs Using the “Universal Profitability Index Scale”: Targeted Profitability Index (PI) Values According to Risks and Growth Strategies -0,1
0
Non Profitable Projects
0,1
0,3
0,2 No Growth
Towards failure
0,5
Defensive Growth
Low Risks
0,6
0,7 +
Crash programme
Offensive Growth
Surviving No Risks at all
0,4
Leadership
High to very high risks
Targeted zone For « Fair and Efficient tariffs » 19
â&#x20AC;&#x153;Advanced Renewable Tariffsâ&#x20AC;?: RE FITs adapted to different sites with different potential energy yield: * Wind (1) * Solar PV (2)
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ARTs : Advanced Wind Tariffs Principle TWh/y
Target:
60 9 V m/s at hub height
Profitability PI = NPV/I
6.2
7.5 Tari ff
0.1
ili b ita f o Pr
8.5
0.3 ty
V m/s
0 B. Chabot 11-08
A « Win-Win situation »
6.2
8.5
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Example of the French onshore wind tariffs Adapted
from the first tiered wind ART: Germany, 2000 With a different approach: two successive tariffs levels : T1 fixed for all projects from years 1 to 5 ( > 7/2006: 1 to 10) T2 variable for projects from years 6 to 15 (>7/2006: 10 to 15) T1 and T2 define a virtual constant â&#x20AC;&#x153;equivalent tariffâ&#x20AC;?, Tce For
a specific project :
Nh = averaged Ey / P from values years 1 to 5 (hours/year) T2: linear calculation from reference values of Nh = Ey / P Tce from (T1, T2, t = real discount rate = AWCC before tax) Tariffs T1, fixed
Tce
T2, variable J, fixed
Years
N=15 years
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Reference profitability : example of 2001 wind tariffs
Internal Rate of Return - 2001, Mainland
Profitability Index - 2001, Mainland
Nh (hours/year at rated power)
Reference
3600
3400
3200
3000
3600
3400
3200
3000
2800
2600
2400
2200
2000
1800
0,0
2800
0,1
2600
0,2
2400
i=2%
i=2%
2200
0,3
i=0 %
2000
i=0 %
13 12 11 10 9 8 7 6 5 1800
0,4
IRR (%)
PI = NPV / I
0,5
Nh (hours/year at rated power)
case
Yearly O&M expenses: Kom = 4 % of initial investment Mean inflation rate 2001 - 2015: i = 0% or i = 2 % / year PI = NPV/I = Profitability index = NPV per â&#x201A;Ź invested 23
What potential evolution for French FITs ? General
Shift inflation protection within a PPA from to 80 // 90 % Wind
Shift from capacity factor Nh (h/year) to Energy Yield Eas (kWh/m2.year): see OSEA 2005 adoption and proposal. For onshore shift from n = 15 years to n = 20 years Adapt levels of tariffs for the 25 GW target in 2020 and taking into account increasing wind turbines costs. Photovoltaic:
Create tiered PV tariffs: North: 1000 kWh/m2.y, vs 1800 south o 2010 non BIPV projects > 250 kWp: Coefficient “R” on tariff from R = 1 very South to R = 1.2 to the very north, from Departments (90 “county”) o Potential adoption of the “USPV tariff system” for PV ART
Define new tariffs from investment cost decrease < 2012 Nobody
is perfect, but everyone can learn from others !
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2009 UNDP-Wind Energy Project Pakistan proposal Projects real IRR before tax (% real) (WACC = 6 % real)
Profitability before (PIo) and after inflation (PIv)
15,0
0,7 PIo
0,6 PIv
12,66
0,528
0,5
10,0
10,51
0,415 0,445
0,4
7,08
0,337
0,3
5,0
0,2
0,151
0,1 0,083
0,0 700
0,0 600
700
800
900
1000
1100
1200
1300
800
900
1 000
1 100
1 200
1 300
Eas (kWh / m2.year)
Eas (kWh / m2.year)
Shifting from Nh = Ey / P to Eys = Ea / S m2 (kWh/m2.y) See GWEC 2002 Paris paper (Chabot, Kellet, Saulnier) From a PI seminar in February 2009; Decision pending Same design proposed in Ontario to OSEA and OPA in
2005 and to GEA in 2009 (not implemented by OPA)
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ARTs : Advanced PV Tariffs Principle TWh/y
Target:
9 1 Eiy (kWh/m2.year)
Profitability PI = NPV/I
1400
1100
Tari ff
0.1
ili b ita f o Pr
1600
0.3 ty
Eiy (kWh/m2.year)
0 B. Chabot 11-08
A « Win-Win situation »
1100
1600
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Suggested design of an USPV tariff system (1)
Inspired from the German EEG 2000 wind tariff system, but much more simple for PV T1 on years 1 to j and T2 from year j+1 to year n: constant values for all projects in the tariff system for a specific PV application (residential, or commercial or PV plantsâ&#x20AC;Ś) j: variable from j = jmin to j = n Tce = constant equivalent tariff, giving the same profitability than T1 and then T2 For a specific project: j = f (potential maximum energy yield at he project location) Potential energy yield: from PVGIS or PVWATTs for Eiy (kWh/m2 in the optimal plane of modules, without any shadow) and performance ratio PR = 0.75 Case studies EPIA 2009: France, Germany, Italy and Spain, Turkey. USA: California
Tariff â&#x201A;Ź(0)
T1 Tce = f(T1,T2,t, j, n)
T2 0
1
j
j+1
n
Years 27
Conclusions Market regulation in favour of RE electricity is logical and is
simple and effective if based on fair and efficient feed-in tariffs (ARTs = â&#x20AC;&#x153;advanced Renewable tariffs) as demonstrated in Europe and in France Benefits from this regulation are rapidly outweighing its cost Future French renewable policy and FiTs from the new 20 % European target for renewables in 2020 (23 % in France) will be based on continuity in success from fair and efficient tariffs As a potential of FiTs improvement, â&#x20AC;&#x153;Advanced Renewable Tariffs adapted to site quality are the most promising, as demonstrated for wind and as possible for PV Sharing experience, methods and tools can avoid delays and unnecessary or risky tests or trials for FiTs systems designs Thanks to generous sponsors and dedicated organizers for facilitating this experience sharing ! 28