1. 08/12/2015 Developing renewable energy cost effectively EUROPEAN COMMISSION Tom Howes European Commission

2. Progress to date… Eurostat

4. Technology breakdown - electricity

5. Cost estimations Total investments in renewables are currently at a level of approximately € 35 bn/y Most analysis predict this has to double to reach our 2020 targets Unit cost of renewables, contrary to other forms of energy, are declining; for certain technologies sharply PV module costs around €500/kW Producing (and generating) renewables where most cost- efficient offers significant potential for lowering overall cost

6. Merit order effect Denmark 2005: saving of 0.3 to 0.5 €cents per kWh consumed. Spain 2005: a reduction of about 0.5 €cents/kWh at peak hour for each additional GWh Germany 2006: €5bn electricity price saving + CO2 exp. = cost of EEG Ireland 2011: neutral impact EWEA EU 2020 estimate (265GW wind): €41.7bn/year savings (gross)

8. Market price RES-support TGC revenues FIT FIPs Quota stability of revenues and their composition (TGC=tradable green certificate) Quota Gov fixes quantity, market decides price  Obligation for suppliers:  Minimum RES-E share  Increasing over time  Penalty  Tradable certificates for RES-E production (‘market’ price)  Obligation is met by submission of certificates to competent authority  Power sold on conventional markets Fixed feed-in tariff (FIT) Gov fixes price, market decides quantity  Fixed tariff (€/MWh)  Guaranteed during lifetime or x years  Purchase obligation  (Grid (access & use) priority) Feed-in premium (FIP)  Fixed premium (€/MWh)  Guaranteed during lifetime or x years  Power sold on conventional markets Feed in tariffs, Feed in Premiums & Quotas Source: RE Shaping project

9. Points for reflection on support schemes (electricity) Provide policy stability (for FIT / FIP / Quota):  Retroactive / sudden changes should be avoided.  Move away from annual budgeting (creates stop and go) Reduce revenue risk:  Long term contracts are most relevant (15-25 years)  Priority dispatch/curtailment compensation Apply automatic degression formulae for tariffs and premiums.  New tariffs (or premiums) fall according to learning curve of technology.  Other reductions in FIT/FIP require well planned, public tariff adjustment cycles or mechanisms (e.g. DE tariff falls if capacity grows by more than 3.5 GW...) Small scale development is a different market:  Many quota countries offer separate incentives: BE minimum prices for PV, IT FIP for PV, UK FIT for small-scale applications. Technology-banding within the quota as applied in UK can help to support cost-intensive technologies like wind offshore, but is less suitable for small-scale projects.

10. The other elements of European energy policy:. EU policies working in tandem to provide a stable long term framework: » The creation of competition and the single market in energy » The development of European infrastructure (@1c/kWh) » Europe's R&D programme for new technologies » Energy Efficiency proposal to reduce consumption and transform the market » 2050 – decarbonisation… 2030 milestones?.... Impact of costs is clearly important: » Explore net impact (merit order effect) » Recall the whole 2008 energy and climate package price estimate was “up to 10%” » Operating costs of non renewable energy rising (again) » 2050 energy scenarios explore cost consequences of decarbonisation » RES costs driven by capital costs, driven by risk, driven partly by regulatory framework

11. 2020/2050 Key Challenges » Increasing importance of RES increases requirements on: Capacity and flexibility ­ of electricity grids, ­ of power plants, ­ of energy storage ­ of demand side management (~smart) » Energy Roadmap 2050 – due December » Renewable energy Communication on “post 2020” - due 2012 (public consultation imminent) » Update on state of internal market - due 2012

12. Th ank you for your attention http://ec.europa.eu/energy/renewables/index_en.htm