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2. Wind Energy – Lessons from the European Experience Kiev, November 3, 2009 Kevin Mason

3. 3 Outline Overview of Wind Power in the World and in Europe  Strong Growth in Recent Years  Legal Framework Challenges to Expansion of Wind Power in Europe  Technical Challenges  Legal Challenges Overcoming the Challenges Prospects for the Future

4. 4 Overview of Wind Power in the World and in Europe Recent growth in wind power can only be described as “astronomical”  Number of stations  Quantity of electricity generated  Turnover  Investments Europe is a world leader in development of wind power as a way to generate electricity and also minimize “negative externalities” (costs borne by society or third parties) Germany is a leader in development of wind energy within the European Union (some 25,000 wind turbines as of 2009)

5. 5 Total wind power installed in the world since 1993 (in MW) Source: Systêmes Solaires, EurObserv’ER, No. 177, 2007

6. 6 Breakdown of worldwide wind power at the end of 2006

7. 7 Source: BMU-Brochure “Renewable energy sources in figures – national and international development”, June 2007, provisional figures

8. 8

9. 9 Total turnover from renewable energy activities in Germany 2006 Total: approx. € 22.9 billion Biomass; € 9.10 B; 39.8% Wind energy; € 5.65 B; 24.7% Hydropower; € 1.28 B; 5.6% Geothermal energy; € 0.59 B; 2.6% Solar energy; € 6.24 B; 27.3% Sources: BMU-Brochure " Renewable energy sources in figures – national and international development„, June 2007 provisional figures

10. 10 Source: Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, Development of Renewable Energy Sources in Germany in 2007, March 2008

11. 11 In billion Euro Investments through 2020 200 billion Euro Sources: 2003 to 2005: AGEE-Stat, 2020: Renewable Energy branch Investments in Renewable Energy through 2020 according to the industry

12. 12 EU Statutory Framework directive 2001/77/EC of 27 September 2001  commitment of the member states to foster the consumption of electricity from renewable energy sources (RES-E)  indicative target: 12 % gross national energy consumption by 2010  no default measures  commitment of the member states to national indicative targets on the basis of reference values mentioned in the directive  European Commission supervises the compliance with the global indicative target and may provide mandatory national targets where necessary  all support schemes are however subject to the provisions in article 87 and 88 of the European Treaty

13. 13 Support Schemes Four support schemes have been established in the EU: 1. Feed-In Tariffs 2. Quotas/Green Certificates 3. Tax benefits 4. Tender These support schemes partially overlap, meaning that a developer/operator may be able to take advantage of more than one support

14. 14 Feed-In Tariffs The feed-in tariff is fixed by the state for a certain period of time (minimum tariff) Grid system operators are obliged to purchase the RES-E at this fixed tariff Variant: premium system  RES-E is traded at conventional energy-market prices, with the producer additionally receiving a fixed bonus (premium). Additional costs are passed through to the energy consumer (estimated at €1.01 ($1.55) per household electricity bill per month)

15. 15 Quotas/Green Certificates Producers of RES-E issue certificates for specific amounts of energy produced (Green Certificates) The consumers – or in some countries (BE, UK, IT), the electricity suppliers – must purchase a fixed amount of these Green Certificates, depending either on their consumption of electricity or the amount of electricity produced by them (Quota) If the Quota is not achieved, a penalty must be paid (not in PL) Green Certificates are freely tradeable; therefore, a secondary market exists in which the producers of RES-E compete with each other

16. 16 Tax benefits/Tender Tax benefits  Producers of RES-E obtain tax reductions or exemptions  Often used as an additional incentive (i.e. UK, CZ) Tender  The state places a series of tenders for the supply of RES- E on a contractual basis  The price results from the tender  Additional costs are passed on to the energy consumer through a specific contribution

17. 17 Source: Fraunhofer Institute Systems and Innovation Research, Karlsruhe

18. 18 Selected German Laws Obligations of the grid system operators  Connect plants generating RES-E to their grid as a matter of priority  Purchase and transmit all RES-E as a matter of priority  If the grid capacity is insufficient, upgrade the grid at a reasonable economic expense  Pay a minimum tariff to the plant operator (normally guaranteed for 20 years) for RES-E (feed-in tariff) Progress report by 31 December 2007 and every four years thereafter Renewable Energy Sources Act (EEG)

19. 19 Challenges for the wind power industry to overcome are both technical and legal in nature Technical challenges include:  Variable output  Grid interconnection and location of consumers  Small number of good locations available  Expense (who will pay for wind farms and grid expansion?) Certain legal challenges arise as a result of technical challenges. In particular:

20. 20 NIMBY was the single biggest challenge to expanding the wind energy industry in Germany NIMBY = Not In My Back Yard Everybody is for the environment, everybody is in favor of clean and green and renewable energy, but many citizens do not want to live next to a wind farm Some citizen objections to locating a wind farm near their home or land:  Shadows  Noises  Safety  Birds Further, wind farms can only be located in some locations (wind, aircraft, etc.)

21. 21 Some German responses to legal and technical challenges:  Electricity grid operators are to pay for the expansion of the electricity grid to accommodate wind farms  Lawmakers have supported laws making zoning objections more difficult for citizens opposing a local wind farm  After the elections in Germany, the future of subsidies for wind energy are unclear However: this still does not solve all problems of location – in spite of the advanced development of its wind farm industry, Germany still needs more farms, and there is still not enough suitable land.

22. 22 To solve the location problem: Wind  Offshore wind farms  Repowering existing wind farms

23. 23 Wind Onshore The minimum tariff is 8.19 Cents/kWh initially (commissioning in 2007). 5 years after commissioning, this declines to 5.17 Cents/kWh, if the output of the facility during this period of time reaches 150 % of the calculated output of a reference plant (reference yield)  If this yield is not achieved, the initial minimal tariff is extended by 2 months for each 0.75 % that the actual yield stays below 150 % of the reference yield  The extension is 2 months for each 0.6 %, if plants are replaced, which were commissioned no later than 31 December 1995 in the same rural district and thereby the installed capacity will be at least tripled (repowering plants) The minimum tariff received will be reduced by 2 % annually beginning 01 January 2005

24. 24 Wind Offshore The minimum tariff is 6.19 Cents/kWh initially, if the facility is located a distance of at least 3 nautical miles from the coast (offshore wind power plants) A bonus of 2.91 Cents/kWh is granted for a period of 12 years starting from the date of commissioning, if the plant was commissioned no later than 31 December 2010  For each nautical mile exceeding 12, this period is extended by 0.5 months and by 1.7 months for each full metre of water depth exceeding 20 metres The annual tariff reduction of 2 % starts for offshore wind power plants in 2008

25. 25 Repowering existing wind farm stations “Repowering” a wind farm is the installation of new and more modern electricity generation equipment in an existing wind farm Result: a more efficient wind farm located in a prime location Repowering is supported in the Renewable Energy Sources Act (“EEG 2009”) which went into force January 1, 2009

26. 26 Contact Alexander Weigelt Kevin Mason 7/11 Khreschatykstreet 01001, Kiev, Ukraine Tel +380-44-495 30-80 Fax +380-44-495 30-90 E-mail: kevin.mason@noerr.com www.noerr.com