Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 1 WP5: Options for policy harmonisation Mario Ragwitz Fraunhofer Institute Systems and Innovation Research RES-H Policy Kick-off meeting October 22nd 2008 Fraunhofer Institute Systems and Innovation Research

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 2 Content General concepts and options for harmonisation at the example of RES-E Flexibility instruments in the Directive proposal Objectives of WP5 Tasks of WP 5

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 3 The general concept of harmonisation - For the case of RES-E -

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 4 Analogy with the electricity sector type of scheme applied Degree of harmonisation TGC Tradeable Green Certificates FIT Fixed Feed- in Tariff FIP Premium Feed-in Tariff Tender technology- specific harmonisation "Central co-ordination" (harmonised, binding framework conditions, minimum design criteria  independent of the type of support) 1 technology. all technologies TGCFITFIPTender "Convergence" (one support system, national design) TGCFITFIPTender "Full harmonisation" (one support system, same design in all MS) Increasing degree of harmonisation Establishment of a unique support mechanism in all Member States possibly including a component to consider national circumstances Equalisation of costs of the promotion system between EU Member States

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 5 Flexibility elements of the new proposal for a RES directive - Discussion on GO trade -

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 6 Green-X balanced scenario Renewable Energy Roadmap (European Commission, January 2007) European Union 20% Renewable Energies by 2020 Future perspectives: a scenario on how to meet the challenge

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 7 National RES targets for 2020 – the proposed definition How the European Commission set the targets … „FLAT RATE“ & „GDP-Variation“ … i.e.: RES-target 2020 = RES 2005% + 50% *RES NEW % + 50%*“RES NEW % GDP-weighting“-“first mover bonus“

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 8 In order to give MS a maximum of flexibility for reaching their targets different options for trade of guarantees of origin are foreseen In the original EC proposal this meant to open national systems Main Challenges: ► National governments need national targets and action plans to deliver necessary regime for planning, grid access, balancing and congestion management ► Investment risk to be minimised in a potentially complex policy environment ► One support price creates potentially large windfall profits and fails to support technology portfolio Proposed RES directive: flexibility based on GO trade

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 9 Rationale for flexibility between Member States ► Renewable energy potentials are distributed unevenly across Europe. ► A trading option could help MS with low RE potential to achieve their targets at lower societal cost (depending on the trade design). ► Potentially, this could lead to lower overall costs for reaching the European 2020 targets (up to 8 bn €/a according to Directive impact assessment). ► Using standardised GOs for trade and disclosure may avoid double counting and double selling of RE. Proposed RES directive: flexibility based on GO trade

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 10 Implementation of GO trade in the Directive proposal ► Directive aims to open the opportunity for both private party trade as well as MS trade ► The default option is private participant trade according to art. 8.1 (b), 8.2 and 9.3 ► MS may restrict private participant trade using "prior authorisation" based on art. 9.2 – it is however unclear, whether such restrictions will be effectively possible under EU law ► Trade between MS is possible based on art. 8.1 (a) and only between MS, which have reached their interim targets Proposed RES directive: flexibility based on GO trade

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 11 State of discussion on trade options in the Directive in Parliament and Council:  The current draft of the EU parliament defines a clear separation between government trade and joint projects based on statistical transfers and flexibility on plant level based on so called transfer accounting certificates (TACs)  The current draft of the Council concentrates on government trade and joint projects based on statistical transfers Negotiated RES directive: flexibility based on GO trade Besides the GO trade the Directive proposal contains a use obligation for new and existing buildings (the latter under strong debate) and minimum efficiencies for RES H/C technologies

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 12 General questions addressed to the WP ■ What is meant by “harmonisation”? Harmonising support schemes could range from defining generally binding framework conditions suitable for various instruments versus applying one common, precisely defined support scheme in the EU, as well as many discrete variations. ■Which specific conditions apply to different support instruments in the heat sector that may affect the feasibility of any kind of harmonisation? What limitations on harmonisation will be effected by different combinations of mechanisms? ■Which level of harmonisation is already resulting from the Directive proposal COM(2008) 19?

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 13 General questions addressed to the WP ■Which consequences can be derived from the Directive proposal for national policy frameworks and what could be an optimised national implementation of the proposed heating obligation? Which design features can be recommended from a national viewpoint? ■Which could be the role of Guarantees of Origin, if they are introduced in the RES-H/C sector and used for trading the RES attributes between Member States? ■What lessons regarding harmonisation of RES-H/C policy can be learned from efforts to harmonise RES-E policy at the European level and the likely efforts of Member States to subscribe to the harmonisation process?

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 14 Task 5.1 Preparation of previous results - best practices of implemented support schemes Prepare results of previous and ongoing activities in this area also based on similar discussions in the RES-E sector. Focus on the consequences from a national viewpoint – in particular for the target countries Based on the work in WP2 elaborate on best practices of the main policy instruments at national level – i.e. investment schemes, tax measures, building standards, installation obligations, quota obligations and bonus systems – from a historical perspective. The results of this task will form the basis for the first chapter of D 17.

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 15 Task 5.2.Coordination / harmonisation – defining a common framework A)Harmonisation could mean to prescribe a set of generic criteria that apply to all main instruments in Europe. These criteria could aim at guaranteeing the effectiveness of the applied measures, to set certain minimum requirements with respect to the economic efficiency or to ensure investment stability. leading to a convergence of national policies define and elaborate convergence criteria and common design rules derive suggestions for the specific implementation of these criteria into national policies. B)Define the key elements of ONE harmonised support scheme (policy package / basket) in Europe for the most promising policies identified in WP4 Propose different design variants of main instruments, which will be quantitatively analysed in task 5.3. The results of this task will form the basis for the second chapter of D 17.

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 16 Task 5.3. Assessment of costs & benefits of RES-H/C harmonisation Analyse the technology deployment and the costs associated with the different policy strategies for RES-H/C based on the INVERT scenarios for policies selected in task 5.2 Focus on the elaboration of purely national strategies for selected Member States versus a coordination of support between these Member States. Consequences of different cases of a harmonised policy to be analysed regarding generation costs, costs for consumers and the effect on public expenditures Assessment will model an increasing degree of harmonisation, deriving the quantitative consequences on the technology portfolio, the costs and use of fossil fuels. Work will be based on the quantitative outcomes of WP3/4 as well as on available outcomes of existing studies The results of this task will form the basis for the third chapter of D 17.

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 17 Task 5.4. Methodologies to share cost & benefits of a future harmonised European policy for RES-H/C Focus on the conception of a methodology to share costs & benefits of a future harmonised European policy for RES-H/C among all Member States. The main idea is to differentiate between national and international costs and benefits in order to derive a reasonable mechanism to share the occurring costs by allocating the corresponding benefits in an adequate manner. The results of this task will form the basis for the fourth chapter of D 17.

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 18 Task 5.5. Using Guarantees of Origin for the trade of the renewable attribute of RES-H/C between Member States ■The current concept of Guarantees of Origin (GOs) in the proposed RES Directive covers large-scale RES-H applications as well as RES-E. ■In the future, further extensions of the application of GOs to medium to small scale heating possible. ■The consequences and the practicality of this concept for the different sub-sectors of the RES-H sector, i.e. small-scale decentralised versus large scale grid-connected applications, will be assessed. ■Recommendations will be made as to how to optimally design such a system and to implement it on a Member State level. ■The implications of a stronger use of the GOs in the RES-H sector will be assessed based on the INVERT model in close connection to the task 5.3. ■Discussion to be based on the final version of 2020 Directive. ■The results of this task will form the basis for the fifth chapter of D 17.

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 19 Task 5.6. Consultation Workshops: Consultation with stakeholders on EU and Member State level ■Two consultation workshops directed to the issue of RES- H/C policy harmonisation at EU and Member State level ■The first consultation workshop will be on the common framework for a coordinated/harmonised RES-H policy framework (task 5.2). ■The second workshop will be on the costs and benefits of RES-H/C harmonisation (tasks 5.3 and 5.4) as well as the GoO on RES-H (task 5.5). ■The findings of the relevant tasks will be circulated at least 14 days before each workshop.

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 20 Distribution of work among partners Fraunhofer ISI: WP Coordinator, responsible for the overall coordination of this WP, responsible for the WP report (D 17), responsible for the organisation of the two consultation workshops ECN: Contribution to analysis in tasks and 5.5; leader of task 5.4 ULUND: Contribution to analysis in tasks 5.1, 5.3 ands 5.4; leader of task 5.2 Oeko: Contribution to analysis in tasks 5.1, 5.2, leader of task 5.5 UNEXE: Contribution to analysis in tasks EEG: Contribution to tasks 5.1 and 5.3 (INVERT modelling) KAPE, LEI, ESV: Contribution to analysis in task 5.1 All partners: participation at both consultation workshops

Fraunhofer Institute Systems and Innovation Research / Mario Ragwitz 21 Thank you for your attention Contact Mario Ragwitz