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Electricity from Renewable Energy Sources - POPA CTDA

Authors Anders Ahlbäck
Dan Strömberg
Place of publication Brussels
Publication year 2006
Published at Department of Plant and Environmental Sciences
Centre for Environment and Sustainability
Language en
Keywords Renewables, Rets, POPA-CTDA, environmental technology, cleantech, barriers, drivers, european, ETAP
Subject categories Environmental engineering


Executive summary Introduction In the strive towards a sustainable society, environmental technologies will play an increasingly important role. This has been acknowledged by the European Commission, and through the launching of the rather ambitious Environmental Technologies Action Plan (ETAP) the Commission has committed to the wide-spread of clean technologies in all the sectors of society. This programme encourage a numerous of actions designed to “remove barriers for the development and diffusion of environmental technologies”, to “ensure that the EU will take a leading role in developing and applying such technologies”, and to “mobilise all stakeholders in support of these objectives” (EU, 2004a). As a measure within the framework of ETAP, this project is designed to identify policy pathways to the promotion and development of clean technology development (POPA-CTDA) in the sectors of industry, transport, agriculture and energy. This case study deals with renewable energy technologies (RET) (bio-fuelled combined heat and power, wind power and solar power). Currently driven by all three pillars of sustainability in addition to the ‘traditional’ environmental one, RETs are increasingly looked upon as commercially competitive alternative to fossil based energy technologies. Use of renewable energy is growing on the global market - not only in niche applications as e.g. remote installations but on the broader energy/electricity markets as well. The share of renewable energy in the global primary energy supply (TPES) is about 11.3%, which of the vast majority is combustible bio resources (about 10.8%) and about 0.5% being wind, solar and geothermal (IEA, 2005). On the European energy market, RETs accounts for approximately 5% of TPES. This can be compared with the 12% penetration target by 2010 stated by the Commission in 1997. Methodological approach Starting point for the design of an integrated policy strategy supporting the development and adoption of RETs are the barriers and drivers responsible for the corresponding engagement of relevant actors in this field. Both barriers and drivers have been identified in a previous study, Work Package 2 (WP2), by the means of a behavioural approach developed by Montalvo (2001; 2002) on the basis of a survey conducted with actual and potential developers, manufacturers, operators and end-users of RETs from Austria, Germany, Netherlands, UK, Sweden and Hungary. In the survey actors in the energy UGOT POPA-CTDA: Work package 3 5 sector where asked about their opinions concerning development and adoption of RETs. Various aspects of their attitudes where addressed such as economic and environmental risk perception, relevant pressure arising from the social environment, the market and regulatory bodies and of their own technical and managing capabilities. The full analysis of the questionnaire is presented in the WP2 report. In the present study, Work Package 3, plausible policy instruments are identified to address those barriers found in WP2 and to encourage the diffusion of RETs. The insights presented in this report are based on literature study, interviews and the questionnaire study conducted in WP2. Main insights Economy Costs of producing electricity from RETs have been greatly reduced during latest decades but are generally still above the ones of fossil fuels; in particular PV technology that is, roughly, 10 times as expensive as average generation costs.1 The inability to include environmental damage costs of electricity generation (combustion of fossil fuels, nuclear power plants or even renewable technologies), the vast amount of direct or indirect subsidies, tax concessions etc. all distort competition on the energy market. Hence, some level of economic support is required for RETs to compete on the open market. In the case of both wind and solar power, the German feed-in law has proved very successful in lowering investment risk and encouraging new installations. Market On a local level, the job and economic growth opportunities derived from an establishment of local electricity production is becoming increasingly recognised. RETs compared with fossil based technologies are generally more labour intensive and, coupled with increasing recognition of RETs to fulfil national/local sustainability targets, provides an attractive option for politicians and entrepreneurs to promote local business. This is particularly a driver to establish biomass power and, if locally available, biomass resources via crop or forestry industry. 1 Average spot market price for electricity in the Eu-15 was in 2004 about 30-35 €/MWh, where average generation cost for PV is roughly 500 €/MWh electricity. UGOT POPA-CTDA: Work package 3 6 Technology and infrastructure Several interviewees pointed out performance, power output fluctuations (intermittency), actual power generation costs (factoring in costs of maintenance and service etc.) and lifetime as technological uncertainties and potential barriers to up-take. There is a need for further RD&D (research, development and demonstration) to develop both specific technology characteristic and systemic issues as grid compatibility. The varying power output of renewable generation and its consequences to power distribution is a source for controversy and may pose challenges in grid management. While it was earlier believed that even small fractions of intermittent capacity would cause instability on the power grid, new empirical data from practical examples2 shows that it is foremost a question of grid-management techniques. Institutional and regulative While wind power in general has gained in economic competitiveness, several interviewees mention regulative barriers as, perhaps, the main obstacle to a wide-spread diffusion. Issuing building permits is a complicated and time consuming process, where in Sweden, for example, several authorities at various levels are involved at different stages. A projector has to face the same process twice; first against the planning and building regulation, then the environmental legislation, in order to obtain building permits. Opposing groups may quite easily appeal and, thereby, delaying the process up to several years and risking the economy of a project. Especially small actors with no internal legal resources may face great challenges in the planning phase of a project. The coordination between the involved authorities is regarded as not very well-organised and there most definitely is a large potential to streamline the current processes. Recommendations Policy support on the EU level via communications, directives green/white papers etc. is a significant driver to policy implementation on the national level. It is of most importance to continuing to show this support by stating new targets for RET penetration (post-Kyoto objectives) and ensure compliance with e.g. national Kyoto-bindings. 2 E.g. in western Denmark, over 20% of the total load is covered by wind energy (IEA, 2005). UGOT POPA-CTDA: Work package 3 7 RETs in general • The European Emission Trading Scheme (ETS) has yet to prove its positive affects on RET diffusion. The potential is great however, but is to a large deal dependent on the size of the national allocation plans. If the acceptance and compliance of the scheme is not kept strong enough, the potential might very well get lost in a political barging between member states. • The formation of a single European electricity market have the potential of being the “hardware” necessary for implementing EU-wide supporting schemes. Particularly a common market for Tradable Green Certificates could be realised, where actors all over Europe would trade green electricity, ensuring a wide competition among producers and, thereby, keeping over all costs low. • RETs are in the need of continuing R&D support to increase product performance and lower manufacturing costs. Positive side-effects of R&D and demonstration programmes may be gained from actors forming networks and alliances for knowledge transfers and partnership. This is a necessity to counter powerful coalitions promoting fossil based technologies that for decades have influenced the institutional framework in favour of coal, oil and natural gas. • To minimise risk perception of investment, clear and long-term policy guidelines is needed to support RETs. Almost all interviewees expressed the short-term design of the current supporting schemes as a major barrier to investments. Some level of security is needed to induce investments, and that is foremost achieved by clearly stated rules and stable support. Biomass • Even though biomass is being close to commercially competitive, it is still in the need of economic support. The CHP technology in it self is well proven and developed; future technology developments will probably focus on the gasification of biomass resources, where there is extensive efficiency gains to be made in the production of electricity. UGOT POPA-CTDA: Work package 3 8 Wind Power • For wind power to be able to compete with old (often governmentally financed) installations, some level of economic support is still needed. Germany and Spain have primarily through the use of feed-in systems emerged as world leaders in the use of wind power in their national electricity systems. • Issuing building permit processes are often time consuming and perceived as unreasonably complicated. To counter this, there are needs to both streamline the permit process by coordinating involved governmental bodies and to pre-allocate land for wind power installations. • The intermittency of wind power generation might prove to have deteriorated affects on power quality in regions with relatively high shares of installations. This is mostly a matter of managing the power production/transfer with dedicated routines and technology, but will require R&D efforts to increase the knowledge of how to handle even larger shares of wind power and the affect on regional/national power grids. PV • Government and authorities can play a crucial role by “buying costs down” along the learning-curve of PV-modules as solar technology is stuck in a Catch-22 situation; as expressed by Sandén (2005): “It is not widely used because of the high cost, and the high cost is due to the low level of adoption”. By investing in solar technology and increase the level of adoption (public procurement, investment grants etc.), cost will decline from various positive feed-back mechanisms: economy of scale, learning by doing/using, decreased uncertainty etc. In such a strategy, it is of great importance to maintain variety. There are several technological designs (crystalline silicon, thin-film cells etc.) competing to becoming the dominant design. To avoid look-in in sub par designs, a “buying down”-strategy will have to ensure that investments are carried out along the whole field of potential PV-module technologies, and not only the currently less costly one.

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