harmonised policy on Renewable Heating

Documentation of two Consultation workshops on “A common framework for a coordinated/ harmonised policy on Renewable Heating” D16 of WP5 from the RES-...
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Documentation of two Consultation workshops on “A common framework for a coordinated/ harmonised policy on Renewable Heating” D16 of WP5 from the RES-H Policy project

A report prepared as part of the IEE project "Policy development for improving RES-H/C penetration in European Member States (RES-H Policy)"

March / December 2010 Assembled by Johann Steinbach ([email protected]), Fraunhofer ISI Mario Ragwitz ([email protected]), Fraunhofer ISI

The project "Policy development for improving RES-H/C penetration in European Member States (RES-H Policy)" is supported by the European Commission through the IEE programme (contract no. IEE/07/692/SI2.499579).

The sole responsibility for the content of this report lies with the authors. It does not represent the opinion of the European Communities. The European Commission is not responsible for any use that may be made of the information contained therein.

© Fraunhofer ISI, March 2010

First consultation workshop on “A common framework for a coordinated/harmonised policy on Renewable Heating” Part I of D16 of WP5 from the RES-H Policy project A report prepared as part of the IEE project "Policy development for improving RES-H/C penetration in European Member States (RES-H Policy)"

March 2010 Assembled by Johann Steinbach ([email protected]), Fraunhofer ISI Mario Ragwitz ([email protected]), Fraunhofer ISI

Supported by

RES-H Policy

Attendance list of the first WP5 consultation workshop

RES-H Policy Project Policy development for improving RES-H/C penetration in European Member States Workshop on “A common framework for a coordinated/harmonised policy on Renewable Heating” Attendance list of the first consultation workshop of WP 5 Date: 10 February 2010 Location: Renewable Energy House, Brussels External participants: Xavier Noyon

ESTIF - European Solar Thermal Industry Federation

Sabine Froning

EuroHeat & Power

Philippe Dumas

EGEC - European Geothermal Energy Council

Theresa Doersch

EGEC - European Geothermal Energy Council

Uwe Trenkner

Trenkner Consulting

Milou Beerepoot

IEA Renewable Energy Unit

Alexandros Nikolian

EUBIA- European Biomass Industry Association

Simone Landolina

EUREC-European Renewable Energy Research Centres Agency

Eleanor Smith

EREC-European Renewable Energy Council

Stefaan Vanderstraeten

DAIKIN EUROPE NV

Zoe Wildiers

European Commission - EACI

Frank van Erp

NL Agency

Tom Howes

European Commission - DG TREN

Participants of the project team Veit Bürger

Öko-Institut e.V.

Liv A. Becker

Öko-Institut e.V.

Luuk Beurskens

ECN

Marijke Menkveld

ECN

Argyro Giakoumi

CRES

Ryszard Wnuk

KAPE

Peter Connor

UNEXE

Lei Xie

UNEXE

Karin Ericsson

ULUND

Lukas Kranzl

EEG

Jan Steinbach

ISI

Mario Ragwitz

ISI

1/1

Workshop of the RES-H Policy project: "A common framework for a coordinated/harmonised policy on Renewable Heating (RES-H)" Date: 10th of February Location: Renewable Energy House, 63-67 Rue d'Arlon, B-1040 Brussels Agenda 10:00 - 10:20:

Overview of RES-H Policy project; Veit Bürger (Oeko-Institut - Institute for Applied Ecology, Germany)

10:20 - 10:50:

Directive 2009/28/EC – implications for policy harmonisation for RES-H Tom Howes / Andrea Hercsuth (European Commission, DG TREN)

10:50 - 11:00:

Discussion

11:00 - 11:20:

General questions on RES-H policy harmonisation & coordination Mario Ragwitz (Fraunhofer ISI, Germany)

11:20 - 12:30:

Best practice examples from target countries – important design elements Pellets and solar thermal in Upper Austria Gerhard Dell (O.Ö Energiesparverband, Austria) District heating in Sweden Karin Ericsson (Lund University, Sweden) Solar thermal program in Greece Argyro Giakoumi (Centre for Renewable Energy Sources, Greece) Planned RES regulation in UK Peter Connor (University of Exeter, United Kingdom)

12:30 - 13:30:

Lunch break

13:30 - 14:30:

Two presentations on pros and cons of harmonisation for RES-H Veit Bürger (Oeko Institut) & Mario Ragwitz (Fraunhofer ISI)



No need and no added value of any harmonisation for RES-H



Substantial advantages can be expected from harm. for RES-H

14:30 - 15:00:

General discussion on pros and cons of harmonisation for RES-Heat

15:00 - 15:30:

Potential design criteria for a harmonisation of policies Jan Steinbach (Fraunhofer ISI, Germany)

15:30 - 16:00

Final discussion

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RES-H Policy

Minutes of first WP5 consultation workshop

RES-H Policy Project Policy development for improving RES-H/C penetration in European Member States Workshop on “A common framework for a coordinated/harmonised policy on Renewable Heating” Minutes of the first consultation workshop of WP 5: Summary of discussion and conclusions Date: 10 February 2010 Location: Renewable Energy House, Brussels For all agenda items, see the PowerPoint Presentations in the annex of these minutes.

1 Welcome, Introduction to the RES-H policy project Mario Ragwitz welcomes the participants to the 1st consultation workshop of work package 5 of the RES-H Policy project and presents the agenda of the day. Veit Bürger gives an overview of the project, the objectives and the contents of the different work packages. Overview of the project see presentation (RES-H Policy WS(10-02-10)-Overview project.pdf)

2 Directive 2009/28/EC – implications for policy harmonisation for RES-H Tom Howes (European Commission, DG TREN) introduces the Directive 2009/28/EC and outlines the policy process which finally resulted in the new Renewable Directive.

Comments and discussion: 1. Question: The Directive defines minimum conversion efficiency for biomass conversion technologies. How are they calculated, are there any specific definitions? Tom Howes: It refers to EUROSTAT and / or other eco-labels defined in EU legislation.

2. Question: What are the next steps following the submission of the National Renewable Energy Action Plans (NREAPs)? Tom Howes: 1) Evaluation of the quality of the report by the Commission 2) Assessment of the credibility of the NREAPs 3) Taking actions in case a NREAP is not appropriate. Possible actions include: giving recommendations to MS; taking action if MS cannot follow the targets; demanding a revised NREAP. 1/4

RES-H Policy

Minutes of first WP5 consultation workshop

3. Comment: The experience with authorities of different MS (e.g. Greece/ Bulgaria) show that they are not aware of how to set up the National Renewable Energy Action Plan, especially in terms of setting up targets for RES-H. Tom Howes: MS have a broad basis of assistance and information available both from the EC directly and from EU financed projects. MS are encouraged to use this opportunities.

3 General questions on RES-H policy harmonisation & coordination Mario Ragwitz presents the objectives of WP5, general background information for policy harmonisation and the general questions on harmonisation and coordination of RES-H/C policy. See presentation M. Ragwitz (RES-H Policy WS(10-02-10)-Harmonisation Definition.pdf)

Comments and discussion: 1. Comment: The role of seasonal thermal storage technologies should be addressed. What is its quantitative contribution in 2020? What is its the value in terms of shifting heat production and heat consumption on the time curve? Mario Ragwitz: Seasonal thermal storage is an important future technology in particular for beyond 2020. However, it is still in the very first phase of a diffusion curve and thus for the 2020 targets less relevant. 2. Comment: An important issue is the poor data quality of heat produced by RES. A harmonisation of data collection + harmonised methodology to determine the renewable output of RES-H installations are first essential steps towards any form of harmonisation. Mario Ragwitz: Different sources are consulted for the modelling work in this project (e.g Europe Observer and EUROSTAT). The project team is in contact with EUROSTAT in order to exchange data and provide additional data collected for this project.

4 Best practice examples from target countries – important design elements The following best practice examples with regard to national RES-H policy support framework design features are presented from target countries/regions: Gerhard Dell represented by Lukas Kranzl: Upper Austria – Pellets and solar thermal in Upper Austria, see presentation (RES-H Policy WS(10-02-10)-BestPractice_UpperAustria.pdf) Karin Ericsson: District heating in Sweden – Karin Ericcson, see presentation (RES-H Policy WS(10-02-10)-BestPractice_Sweden.pdf) Argyro Giakoumi: Solar thermal program in Greece see presentation (RES-H Policy WS(10-02-10)-BestPractice_Greece.pdf) Peter Connor: Planned RES regulation in UK, see presentation (RES-H Policy WS(10-02-10)-BestPractice_UK.pdf) Comments and Discussion: 1. Comment: An important success factor for the market diffusion of RES-H technologies is the reference heating structure. The high share of oil boilers in Upper Austria has facilitated the switch to pellets.

2/4

RES-H Policy

Minutes of first WP5 consultation workshop

5 Two presentations on pros and cons of harmonisation of RES-H support policies Veit Bürger and Mario Ragwitz present two opposite views on harmonisation of RES-H support policies. The first presentation points out potential advantages of a fully harmonised policy approach whereas the second presentation argues against any added value of a fully harmonise policy framework. The presentations aim in stimulating the discussion and do not represent the presenters view. see presentation (RES-H Policy WS(10-02-10)-Pros and cons harmonisation.pdf) Comments and discussion: 1. Comment: The presentations were more about the pros and cons of technology specific vs non-technology specific policies rather than full harmonisation against no harmonisation of overall policy approaches. 2. Comment: When discussing RES-H policy harmonisation the experiences of similar discussions in the RES-E sector should be completely ignored because of the big differences between the two sectors. Also lessons learnt of a quota system for the RES-E sector cannot be referred to for the RES-H sector. 3. Comment: An optimal resource allocation is not the important factor for RES-H since all potentials have to be deployed in the long-term. 4. Comment: Urban/ infrastructure planning in terms of heat density or the issue of gas grids vs. heating networks are one of the most important factors, which should be addressed by a RESH policy. 5. Comment: The standardisation of calculation of efficiency rates should be addressed by harmonisation. 6. Comment: Barriers to harmonisation are the different existing national motivations as already seen in the RES-E sector. 7. Comment: There must be a technology paradigm change with respect to RES infrastructure planning which should address all stakeholders (installers, architectures, technicians etc), this paradigm shift should be addressed by harmonisation. 8. Comment: Every approach has to be measured against system efficiency. An overall strategy is required for RES-H in combination with energy efficiency issues including building regulations. There is the need for a harmonisation of RES and building regulations. 9. Comment: Harmonised policy vs. different national policies: The benefit of a harmonised policy is that it forces those MS which haven’t done anything in terms of RES-H policy yet to introduce policy measures. However, harmonisation also restricts MS which have already different policies in place, which might already have proven to be effective. Setting harmonised standards or minimum support levels could hinder frontrunners (e.g. Upper Austria) to go ahead. 10. Comment: By thinking of different policy frameworks, the main question should be: Where does a certain measure have the highest impact? Where can the instrument be used most effectively?

6 Potential design criteria for a harmonisation of policies Jan Steinbach sums up the current state of harmonisation introduced by the Renewables Directive (2009/28/EC) and outlines possible next steps in the harmonisation process of RES-H/C policy. see presentation (RES-H Policy WS(10-02-10)-DesignCriteria.pdf)

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RES-H Policy

Minutes of first WP5 consultation workshop

1. Comments: A bonus model is not suitable as a policy instrument for addressing RES-H in district heating. For new district heating networks, the main barrier is the investment in the grid, which is not addressed by this measure. For existing heating networks, a bonus model would mostly replace waste heat from CHP plants, which would then generate surplus heat and lower efficiency of these plants.

4/4

The RES-H Policy Project Workshop of the RES-H Policy Project Brussels, 10th of February 2010

Veit Bürger Öko-Institut e.V. Supported by

www.res-h-policy.eu

The RES-H Policy Project

Overall objective of the RES-H Policy project •

To assist Member State governments in implementing the Renewables Directive (2009/28/EC) as far as aspects regarding renewable heating and cooling (RES-H/C) policy are concerned



Focus of the project: ─ sectoral targets for RES-H/C ─ support policies aiming at stimulating the market penetration of RES-H/C

www.res-h-policy.eu

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The RES-H Policy Project

Specific objectives of the project •

to develop a concise policy background for the implementation of RES-H/C support instruments at Member State (MS) level



to assist selected MS governments in setting up national sector specific RES-H/C targets as required by the new RES Directive



to assess selected policy options to support RES-H/C



to develop tailor made country specific policy recommendations as well as policy implementation guidelines



to investigate options of coordination and harmonisation of national RES-H/C policy approaches



to communicate and disseminate the project results to relevant stakeholder groups across the EU

www.res-h-policy.eu

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The RES-H Policy Project

Target countries

www.res-h-policy.eu

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The RES-H Policy Project

Project consortium

www.res-h-policy.eu

5

The RES-H Policy Project

www.res-h-policy.eu

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The RES-H Policy Project

WP2: Development of the Policy Background •

Overview of the current national/regional regulatory and market framework of the of the national heating and cooling markets in the target countries/regions



Detailed overview of principle policy options (incl. pros/cons) to stimulate increased RES-H/C market penetration



Analysis of the experience with the implementation of district heating systems in Sweden

www.res-h-policy.eu

7

The RES-H Policy Project

WP3: Fixing RES-H/C targets •

Analysis of existing RES-H/C scenarios and potentials in the target countries



Top down assessment of RES-H/C targets (calculations based on the Green-X model)



Bottom up approach to determine RES-H/C targets (focus: RES-H/C in buildings and industry)



Stakeholder dialogue (stakeholder consultations, consultation workshops)



Overall output of this WP: Overall and technology/sector specific options for RES-H/C targets (target ranges) for each of the target countries for 2020 and 2030

www.res-h-policy.eu

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The RES-H Policy Project

WP4: Assessment of national RES-H/C policy options •

Selection and description of 3-5 support options for each target country



Qualitative assessment of these support options against criteria such as stakeholder acceptance, investment security, market interaction, administrative synergies with other policies



Assessment of the effectiveness and economic efficiency of 2 support options per target country ─ costs: especially direct impact on the state budgets, transaction costs ─ benefits: reduced GHG emissions, growth in RES-H/C capacities and avoided fuel costs



Stakeholder dialogue (stakeholder consultations, consultation WS)



Development of policy recommendations and implementation strategies www.res-h-policy.eu

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The RES-H Policy Project

WP5: Options for policy harmonisation • • • • • •

Coordination / harmonisation – defining a common framework Assessment of costs & benefits of RES-H/C harmonisation Methodologies to share cost & benefits of a future harmonised European policy for RES-H/C Using Guarantees of Origin for the trade of the renewable attribute of RES-H/C between Member States 2 consultation workshops Overall output of this WP: Proposals for European harmonised policy to promote RES-H/C

www.res-h-policy.eu

10

The RES-H Policy Project

WP6: Communication and dissemination •

National dissemination conferences in target countries/regions: Presentation of the results of the policy analysis process to a broader stakeholder audience



European Dissemination Conference



Dissemination workshops in non-target countries: communication of the project results to target group representatives in countries which are not directly involved in the policy formulation process of the project



Project website (www.res-h-policy.eu)

www.res-h-policy.eu

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The RES-H Policy Project

Thank you for your attention

Contact Veit Bürger Öko-Institut e.V. tel.: +49-761-45295-25 email: [email protected]

www.res-h-policy.eu

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General questions on RES-H policy harmonisation & coordination Workshop of the RES-H Policy Project Brussels, 10th of February 2010

Mario Ragwitz Fraunhofer ISI Supported by

www.res-h-policy.eu

Harmonisation of RES-H/C policies

The challenge

www.res-h-policy.eu

> 20% of the (residual) heat demand (incl. also industrial processes, etc.)

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Harmonisation of RES-H/C policies

The challenge: ■ Capacities of solar thermal / geothermal / grid-based biomass RES-H have to increase by a factor of ~ 10 / 8 / 3 until 2020 to reach targets of Directive 2009/28/EC ■ Long reinvestment cycles in the building sector limit diffusion rate of RES-H/C – many currently installed boilers in the building sector will still be operating in 2020.

■ Large share of high temperature heat demand in the industry sector, which cannot easily penetrated by RES-H as well as strong barriers to integrate RES-H in sensitive industrial processes limit diffusion rate of RES-H/C ■ A very high share of all potential RES-H/C investments needs to be actually realised! www.res-h-policy.eu

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Harmonisation of RES-H/C policies

General conditions: ■ Policy makers are looking for the right balance between a harmonisation of support and the continuation of national instruments in order to: ■ not disrupt currently successful instruments by superimposing a harmonised system that may or may not be optimally designed ■ increase the overall effectiveness and efficiency on a European scale ■ improve the compatibility of RES support with other community policies such as creating a single European energy market and establishing an effective CO2 abatement framework and ■ allow Member States to reach their national targets if efficient and effective national instruments are implemented

www.res-h-policy.eu

4

Harmonisation of RES-H/C policies

General questions: ■ What is meant by “harmonisation”? Harmonising support schemes could range from defining generally binding (technical) 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, e.g. tax measures? ■ Which limitations on harmonisation will be effected by different combinations of mechanisms? www.res-h-policy.eu

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Harmonisation of RES-H/C policies

General questions:

www.res-h-policy.eu

6

Harmonisation of RES-H/C policies

General questions: ■ Which level of harmonisation is already resulting from the Directive 2009/28/EC? ■ Which consequences can be derived from the Directive 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 implications can derive from the use of cooperation mechanisms? ■ Which could be the role of Guarantees of Origin, if they are introduced in the RES-H/C sector www.res-h-policy.eu

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Harmonisation of RES-H/C policies

General questions: ■ Which 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? ■ Which implications are derived from the fact that physical trade of power does not exist in case of RESH/C ■ Is there a specific need for harmonisation of industrial RES-H/C in industries in global competition?

www.res-h-policy.eu

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Harmonisation of RES-H/C policies

WP5 Options for harmonisation of RES-H/C policies: ■ Elaborate on best practices of the main policy instruments at national level ■ Derive a set of generic criteria that could usefully apply to all main instruments in Europe, derive design criteria of one fully harmonised instrument ■ 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 ■ Conception of a methodology to share costs & benefits of a potentially harmonised future European policy ■ The role of GoO for RES-H/C development

www.res-h-policy.eu

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Harmonisation of RES-H/C policies

Thank you for your attention!

www.res-h-policy.eu

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Biomass and solar thermal in Upper Austria Workshop of the RES-H Policy Project Brussels, 10th of February 2010

Gerhard Dell O.Ö. Energiesparverband Supported by

www.res-h-policy.eu

Oberösterreich – Upper Austria Capital: Population: Area: Gross inland cons.: economic activities:

Linz 1.4 mio 12.000 km² 305 PJ; 33 % renewables industry, service sector, tourism, 25% of the Austrian exports

O.Ö. Energiesparverband • • • • •

regional energy agency energy efficiency, renewable energy & innovative technologies main funding: regional government services to private households, SMEs, public bodies

Energy Action Plan of Upper Austria 1994 - 1999

2000 - 2010

• 30 % renewable energy

• double biomass & solar:

(hydro, wood biomass, solar)

wood biomass 13 % (2007)

• energy consumption in new housing reduced by 30 % • 15,000 jobs

• 1 % energy saving/year • 1.5 % energy savings in the public sector/year

2010-2030 • 100 % space heating & electricity from renewable energy • reduction of heat demand by 39 % • minus 65 % CO2 emissions

Upper Austria's sustainable energy strategy – example biomass heating Legal measures

• Renewable heating obligations (public buildings & buildings > 1000 m²)

• Inspection of boilers & AC systems

• Energy performance certificates

Financial measures

• Grants for renewable heating & efficiency measures • Pilot projects • Contracting • Regional R&D programme

• Minimum requirements heating & cooling

Information & training

• Energy advice • Training & education programmes • Campaigns & competitions, media actvitivies • Local energy action plans • Publications • Oekoenergie-Cluster

Policy Packages

RES-H obligations: Examples Current policy: - user obligations for RES-h: - public buildings - new construction + renovation - new buildings > 1000 m² - obligation to connect to district heating in "district heating priority areas" - regular & "one-off inspections of boilers" Future options: - RES-h obligations for new construction (independent of the buildings use) for all heating and hot water demand - RES-h obligation for renovation, for either the whole heating or hot water demand or a fraction of it - RES-h obligation if an existing heating system does not meet emission and safety requirements (and this is detected in the course of a regular inspection) and/or if it reaches a certain age (e.g. 25 or 30 years).

Financial measures for RES-H - Examples Domestic sector - pellets heating: - 30% of the investment costs (max. 2,200 Euro) - plus max. 1,000 Euro (if switch from fossil fuels is made) - plus 500 Euro for the removal of an oil storage tank - in total, max. 3,700 Euro Domestic sector - solar thermal collectors: - 1,100 Euro plus 100 Euro (140 Euro vacuum collector) per m² - in total, max. 3,800 Euro - solar keymark & heat meter required Non-domestic sector – biomass heating (up to 400 kW): - 120 €/kW (0-50 kW) + 60 €/kW (per additional kW up to 400 kW) - up to 60% of the national subsidy (max. 15% of investment costs) Non-domestic sector – solar thermal installations (up to 100 m²): - 100 €/m² (flat plate) / 150 €/m² (vacuum) - up to 60% of the national subsidy (max. 15% of investment costs)

Biomass heating in Upper Austria 2500

• 14 % of total energy consumption • > 40,000 biomass heating installations

capacity in MW

2000

• 280 biomass district heating plants • > 40 % of the municipalities mainly use biomass for heating

1500

target: doubling by 2010

1000

500

0 -84

85

86

87

88

89

90

91

92

93

94

95

96

< 100 kW

97

98

99

00

100 kW - 1 MW

01

02

> 1 MW

03

04

05

06

07

08

09v 10

Solar thermal in Upper Austria cumulated

EU 2008: Germany 2008: Austria 2008: Upper Austria 2009: Upper Austria 2030: 1100

0.05 m² per capita 0.14 m² per capita 0.48 m² per capita 0.76 m² per capita 2.2 m² per capita

in 1000 m²

1000

target: 1 million m² by 2010

900 800 700 600 500 400 300 200 100 0 81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09v

New domestic buildings – the end of the oil-era?

1999 oil-heating

2009

36 % < 0.01 %

85 % renewable energy technologies

32 %

Renewable Heating in Upper Austria

• covers 45 % of the heating demand • more than 100 million Euro investment in new installations annually • reduces energy bill for imported fossil fuels by more than 500 million Euro annually • employs more than 5,000

• to meet our objective of 100 % renewable heating in 2030, heat demand has to be decreased by 39%

Success factors • Policy packages

• RES-h policy is building, economic, agricultural, social etc. policy -> - use different funding sources - promote the benefits beyond climate protection - link RES-h policy to energy efficiency policies • Take a longer-term and "sustainable" approach – less can be more (high quality standards, start with new construction) • Information is key (product-independent energy advice, training as a "public obligation") • Observe the market and react

European Pellet Conference

www.wsed.at

3. – 4. 3. 2010

Wels / Austria

European Pellets Conference Building Renovation – towards low Energy Consumption Solar Thermal Conference Energiesparmesse - trade show (1,600 exhibitors, 100,000 visitors)

Best practice examples - Swedish district heating

Workshop Brussels, 10 February 2010 Karin Ericsson, Lund University

Supported by

www.res-h-policy.eu

Best practice examples - Swedish district heating

Contents • Why is Sweden an interesting case? • History in brief • DH production development - energy sources and deliveries • Rationales and policy drivers in three development phases • Lessons learned for possible harmonisation of support mechanisms

www.res-h-policy.eu

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Best practice examples - Swedish district heating

Why is Sweden an interesting case? • High penetration rate of DH heating (50% of the heating of buildings) • High proportion of RES and non-fossils ─ ─ ─

48% biomass 12% fossil fuels 40% heat pumps, MSW, peat, industrial waste heat

www.res-h-policy.eu

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Best practice examples - Swedish district heating

History in brief • • • • •

1948 first public DH system in Sweden After 1960 more rapid development Densely populated city centres, public buildings More recently: also one- and two-dwelling buildings Municipal initiatives ─ Municipal ownership required by law until 1996 ─ In 2004 58% of the district heat was produced by municipal companies

www.res-h-policy.eu

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Best practice examples - Swedish district heating

District heating production development

www.res-h-policy.eu

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Best practice examples - Swedish district heating

Rationales and policy drivers in three development phases • 1950-1972: Municipal planning for increased efficiency • 1973-1991: Oil replacement • 1991- : Sustainable development and climate change mitigation

www.res-h-policy.eu

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Best practice examples - Swedish district heating

1950-1972: Municipal planning for increased efficiency • Little national energy policy (in general), although soft loans were granted to municipalities for building DHS • The municipalities were already responsible for the local electricity distribution and sewage water supply. • Economic means through taxation of inhabitants • Municipal initiatives driven by: ─ ─ ─

Opportunity to produce electricity efficiently through cogeneration Economy of scale and fuel flexibility Ambitions to improve local air quality

www.res-h-policy.eu

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Best practice examples - Swedish district heating

1973-1991: Oil replacement • The DHS were considered strategic due to their opportunity to use peat, waste, biomass, waste heat • State subsidies and soft loans to DH utilities and housing organisations. • Tax on oil products (previously only petrol). • Dramatic decrease in oil heating • Electric heating and district heating increased.

www.res-h-policy.eu

•The proportion of oil in DH production decreased from 100% to 11%.

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Best practice examples - Swedish district heating

1991: Sustainable development and climate change • Energy tax reform in 1991 - introduction of ─ carbon tax ─ sulphur tax ─ nitrogen charge • Two investment subsidy schemes targeting ─ Municipalities ─ Residential sector

www.res-h-policy.eu

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Best practice examples - Swedish district heating

The carbon tax • On fossil fuels used in heat production

2010 • 101 EUR/tonne CO2 • 87 EUR/tonne CO2

• 21 EUR/tonne CO2 • 7 EUR/tonne CO2

www.res-h-policy.eu

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Best practice examples - Swedish district heating

Consequences of the energy and carbon taxes • In the residential and service sector ─ Increased competitiveness of district heating, wood pellets and heat pumps.

• In DH sector ─ Increased competitiveness of biomass, waste and industrial waste heat

www.res-h-policy.eu

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Best practice examples - Swedish district heating

Lessons learned for possible harmonisation 1(2) • The Swedish DH development indicates that there is no particular need for harmonised support mechanisms ─ local character of heat markets

• However, need for coordinated regulations due to the distorting effects of the ETS (does not address emissions in the residential and service sector) ─ => without national taxation of fossil fuels, such as the Swedish carbon tax, the ETS is currently favouring individual heating over DH ─ =>EU or national carbon tax is required to level the playing field www.res-h-policy.eu

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Best practice examples - Swedish district heating

Lessons learned for possible harmonisation 2(2) • Standardisation of waste and biomass fuels, and possibly the development of joint technical standards of certain equipment

www.res-h-policy.eu

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Solar thermal program in Greece

Workshop of the RES-H Policy Project Brussels, 10th of February 2010

Argyro Giakoumi Centre for Renewable Energy Sources & Saving Supported by

www.res-h-policy.eu

Best practice examples from the target countries Statistics for solar thermal Greece has a well developed solar thermal market, which has been active for almost 30 years, for many years Greece held one of the highest solar thermal capacities within Europe.

(Newly Installed Capacity per Capita)

Source: European Solar Thermal Federation (ESTIF), “Solar Thermal Markets in Europe, Trends and Market Statistics 2008”

Best practice examples from the target countries Description of promotion schemes in Greece First steps advertising campaign, supported by the Greek government low interest loans & with tax credits

Î Development of a domestic market of solar thermal producers. national standards were introduced, helping to improve the efficiency and reliability of the products

Î Only the most experienced and well organized market actors managed to continue. Existing framework Residential Sector Tax deduction: 75% of the cost for buying and installing solar thermal applications was deducted from the taxable income (Law 2364 of 1995). In 2006 this percentage dropped to 20% (replacement Law 3522/2006) and in any case the tax relief cannot be above 700€. – No differentiation in the amount of the tax deduction depending on the type of the system. – The existing support is mainly used for thermosiphonic solar thermal applications for production of domestic hot water. Tertiary and Industry Sectors Investment subsidies for solar thermal applications, under the Operational Program of Energy - OPE (2nd Community Support Framework 1994-2000) and the Operational Program of Competitiveness - OPC (3rd Community Support Framework 20002006) – minimum efficiency requirements for the subsidized solar thermal systems. – different level of support depending on geographical & technological criteria. These programs are now closed

Best practice examples from the target countries Description of the Greek market In the history of the Greek solar thermal market the main solar thermal product was, and still is, the thermosiphonic water heater. The breakdown of solar thermal applications in Greece for year 2002, according to the GSIA, was as follows: • ~ 98% of installed collector area accounted to domestic hot water production (mainly thermosiphonic water heaters, including hotel studios, small commercial and industrial consumers). • ~1% of installed collector area accounted to large collective solar systems, which are installed mainly in hotels for hot water production. • Less than 1% of the installed collector area accounted to space heating, air conditioning and industrial process heating. Ζεστό Νερό

Thermosiphonic water heater

Ζεστό Νερό

Κρύο Νερό

Κρύο Νερό

Typical cost ranging from 1.000 – 1.600 euros

Εναλλάκτης Θερμότητας

Ανοιχτού κυκλώματος

Κλειστού κυκλώματος

Thus, it can be seen that the great majority of solar thermal applications in Greece are limited till now to producing domestic hot water, and have not yet been expanded to the area of space heating and cooling.

Best practice examples from the target countries Description of the Greek market Central systems Cover only Domestic hot water production Capability to cover more than one users Cost: 400 – 500 €/m2 For a single household ~3.000€

Combi systems Cover both domestic hot water production & space heating Cost: 500 – 600 €/m2 For a house of 100m², 20m² collectors can cover ~ 40-50% of the total heat demand. cost ~ 9.000€-12.000€

Best practice examples from the target countries

Identified problems in the existing support scheme Weak existing support scheme, which favorites only cheaper applications such as thermosifonic solar thermal systems. No differentiation of the amount of economic support depending on the type of technology. The amount of the tax deduction in the case of central solar systems, combi systems or solar cooling is negligible and does not give a real incentive to choose such a technology. Investment subsidies in the tertiary and industry sectors are based on calls and are not available on a constant basis.

Non economic barriers Another reason for the small penetration of solar thermal applications for space heating and cooling is the fact that such systems, as far as installation and design is concerned, require properly trained staff with technical skills. Unfortunately only few of the market actors have the technical skills to implement such projects.

Best practice examples from the target countries Actions for further development Necessary feature actions ¾ Introduction of training programs for engineers and technicians/ installers ¾ Certification of systems and certification of installers ¾ Creation of a registry for the certified installers

Proposed support schemes In the Energy Efficiency Action Plan use obligation measures have been proposed for solar thermal installations. Compulsory installation of central solar thermal systems in buildings of the tertiary sector which are larger than 1.000m2, for the production of domestic hot water. Compulsory installation of central solar thermal systems in buildings of the public sector and in tertiary buildings above 500m2 in the islands. In the New RES Law which is now subject to consultation process, use obligations are also proposed: Use obligation for covering part of the needs for domestic hot water production with solar thermal systems in all new buildings, independent of their use.

Planned RES-H Regulation in the UK: The Renewable Heat Incentive Workshop of the RES-H Policy Project Brussels, 10th February 2010

Peter Connor Exeter University Supported by

www.res-h-policy.eu

Best practice examples from the target countries

The Renewable Heat Incentive: As proposed •

A tariff based mechanism. Tariffs vary with: ─ ─ ─

• • • •

Technology Size of installation Allowed lifetime

Tariffs can be deemed or metered The aim is to give a return of 12% on all technologies, with the exception of a 6% return for solar thermal. Tariffs will not initially degress, but it is expected that this will apply later. Oversight by the UK energy regulator, OFGEM

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Best practice examples from the target countries

RHI Tariffs: small installations

Annual payments on installations up to 45kW www.res-h-policy.eu

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Best practice examples from the target countries

RHI Tariffs: medium installations

Quarterly payments on installations above 45kW www.res-h-policy.eu

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Best practice examples from the target countries

RHI Tariffs: large installations

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Best practice examples from the target countries

RHI: Deemed and Metered Output • • •

Estimated output eligible for subsidy based on property and inhabitants. Stated Aim: To try to incentivise only energy efficient properties to access the RHI. Additional benefits: ─ ─ ─



Avoids disproportional cost of metering smaller installations, Addresses the problem of subsidising unneeded heat Reduces the administrative costs of making more rather than fewer payouts to what is intended to be a large number of small stakeholders

Deemed technology will be subject to certification under the Microgeneration Certification Scheme (MCS).

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Best practice examples from the target countries

RHI: Transition arrangements • •

Developers currently holding grants will have to return the grant funding to access the RHI tariffs. Renewable CHP online now or before 2013 will have to choose between 1,5 ROCs for RES-E output only OR 1 ROC for RES-E plus the RHI for heat output. This choice will apply for the life of the plant. Post 2013 only the second option will be available.

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Best practice examples from the target countries

RHI: Regulatory oversight •



Office of Gas and Electricity Markets (OFGEM) will have oversight responsibilities. OFGEM already oversee the Renewables Obligation, and the gas sector which provides 85% of UK domestic heating and 55% of commercial heating. Responsibilities include: ─ ─ ─ ─ ─

Registration of owners (via submission of proof of installation) Making payments Monitoring the operation of the mechanism Enforcement Data collection to be used in assessing RHI effectiveness

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Best practice examples from the target countries

RHI: Please note! • • •

The RHI is a legal entity (adopted in the 2008 Energy Act) but the operational characteristics are proposed not actual as yet. The data comes from the consultation document. The timeframe for adopting the mechanism is April 2011.

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Pros and cons of harmonisation for RES-H policy Workshop of the RES-H Policy Project Brussels, 10th of February 2010

Mario Ragwitz (Fraunhofer ISI), Veit Bürger (Öko-Institut e.V.) Supported by

www.res-h-policy.eu

Advantages from harmonisation for RES-H

Supported by

www.res-h-policy.eu

Harmonisation of RES-H/C policies

Setting the frame:

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Harmonisation of RES-H/C policies

The challenge

www.res-h-policy.eu

> 20% of the (residual) heat demand (incl. also industrial processes, etc.)

4

Harmonisation of RES-H/C policies

The challenge: ■ Capacities of solar thermal / geothermal / grid-based biomass RES-H have to increase by a factor of ~ 10 / 8 / 3 until 2020 to reach targets of Directive 2009/28/EC ■ Long reinvestment cycles in the building sector limit diffusion rate of RES-H/C – many currently installed boilers in the building sector will still be there in 2020.

■ Large share of high temperature heat demand in the industry sector, which cannot easily penetrated by RES-H as well as strong barriers to integrate RES-H in sensitive industrial processes limit diffusion rate of RES-H/C ■ A very high share of all potential RES-H/C investments needs to be actually realised! www.res-h-policy.eu

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Harmonisation of RES-H/C policies

Compliance: ■ Barriers in the heating sector to implement RES-H can be much stronger than for electricity and transport because individual preferences of many small – medium scale investors are affected ■ Use obligations in the building sector only existing in two Member States and there only for new buildings Æ the strongest need for RES in existing buildings is not addressed at all in the EU yet ■ Investment incentives and tax rebates, which are currently the by far dominating measures for RES-H in EU MS will be insufficient for commercially owned apartment and office buildings, where willingness to pay is low www.res-h-policy.eu

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Harmonisation of RES-H/C policies

Compliance: ■ Investment in district heating infrastructure is currently by far too low to reach EU targets for 2020 ■ Supply chain in Europe needs to get the signal for ramping up manufacturing capacity for new RES technologies ■ The administrative process in Europe has little experience with assuring compliance with strong heating obligations

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Harmonisation of RES-H/C policies

Technical Standards: ■ Limited availability of biomass calls for high standards to assure most efficient conversion technologies, which is currently not the case in particular for decentralised plants ■ Performance coefficients for heat pumps are still too low in EU average ■ Technical standards also needed for solar thermal devices to assure a maximum heat output ■ How to assure the centralised use of biomass mainly in CHP systems as compared to separate district heating and electricity production?

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Harmonisation of RES-H/C policies

Efficiency: ■ Standardisation of conversion technologies will lead to economies of scale and cost reduction ■ Only if a strong growth of RES-H can be reached at an early stage, the need for more costly measures towards the end of the period until 2020 can be avoided. ■ Distortions between Member States and a competition for the highest subsidy can be avoided through a harmonised obligation ■ In many countries insufficient competition in the business of installers is observed – international firms in this sector could help operating under the same conditions in all MS could help www.res-h-policy.eu

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Harmonisation of RES-H/C policies

Industries under international competition: ■ RES-H/C also needs to show strong growth in the industry sector, which is often under strong international competition ■ Therefore a similar ambition level throughout the EU is suitable to avoid distortions ■ Interaction with the ETS for large plants calls for a harmonised approach in order to assure a maximum CO2 reduction ■ A coordinated (tax) policy in non-ETS sectors could reduce (unnecessary) biomass transport in the EU

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Harmonisation of RES-H/C policies

Conclusion: ■ A central coordination is most likely insufficient to create the development needed for RES-H/C in the building and industry sector. ■ Existing buildings, the industry sector and district heating based on RES-H will not get sufficient attention in a purely national approach. ■ Stronger reduction of generation costs can be expected from standardisation of requirements ■ A strong harmonisation either through obligations or price based incentives is needed.

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Harmonisation of RES-H/C policies

No need and no added value of a fully harmonised RES-H policy in Europe

Harmonisation of RES-H/C policies

Differences to the RES-E sector • • •

Discussion about a European harmonisation of RES policies is driven by the respective discussion in the RES-E sector, however both sectors differ significantly



Heat production is highly decentralised, in many Member States the domestic heat demand is mainly covered by on-site generation



Cross border trade of heat is marginal



Member States differ significantly in climate conditions, applied RESH/C technologies, heat infrastructures, structure of the building sectors etc. (see next slides)



Member States do not run country-wide transmission grids for heat → Harmonisation framework developed for the RES-E sector does not automatically work for RES-H/C

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→ Transfer of the harmonisation approach is linked to several problems

Harmonisation of RES-H/C policies

Potential economic benefits of harmonisation must be questioned (1) •

Main criteria for the idea of full harmonisation are ─ Maximisation of economic benefits vs costs (especially through leading investments to where it is most profitable) ─ Minimisation of transaction costs ─ Avoidance of market distortions (e.g. in order to support the idea of a harmonised European wide internal market)



For each instrument or instrument category targeting RES-H/C the concept of harmonisation needs to be assessed against these criteria → Necessary: Instrument specific view on the potential benefits of full harmonisation → Relevant perspectives: different sectors (especially buildings and industry), different project sizes (small scale vs large scale), different types of investors

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Harmonisation of RES-H/C policies

Potential economic benefits of harmonisation must be questioned (2) •

How could full harmonisation look like for different instruments?



Use obligation: e.g. all owners of new buildings in Europe have to ensure the same minimum level for the use of RES-H (e.g. 15% of the overall heat demand) Subsidies: e.g. all investors in RES-H would receive the same European wide harmonised technology specific investment support (e.g. X EUR/kW)





Bonus system: e.g. all European RES-H operators are entitled to receive a European wide harmonised technology specific bonus per kWh heat produced



Quota system: e.g. all European fossil fuel suppliers/ non-renewable heat suppliers have to purchase or sell a minimum amount of heat products produced from renewable energies

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Harmonisation of RES-H/C policies

Potential economic benefits of harmonisation must be questioned (3) •

From the harmonisation perspective most economic benefits seem to be linked to a European wide quota mechanism, but ─

Lesson learnt from RES-E: There is an increasing body of evidence that this mechanism does not offer the cheapest policy option (discrepancy between theoretical concept and empirical evidence)



Technology diversification: Quota systems favour the "cheapest" technologies, technologies which are less competitive are unlikely to be able to attract investments and may fail to further develop (in contradiction to long-term goals and requirements)

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Harmonisation of RES-H/C policies

Long-term climate goals •

Long-term climate protection goals (e.g. 2050) require that all existing RES-H potentials are more or less completely deployed in all Member States



Idea of full harmonisation is to ensure least cost allocation of potentials (short-term optimisation of benefits/costs), however this might lead to ─ sub-optimal developments in view of the long-term needs (that would require to support the development of technologies or system solutions adjusted to the specific framework conditions in a country) ─ potentially higher long-term policy costs

→ Long-term goals require a country specific policy mix that is adjusted to e.g. the country specific needs of different RES-H technologies, existing and required infrastructures, the institutional set-up of the different sectors using RES-H/C (e.g. buildings, industry) www.res-h-policy.eu

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Harmonisation of RES-H/C policies

Competiveness (economic needs) of RES-H/C technologies differs among Member States •

Heat demand (especially for space heating) varies essentially between Member States depending on the climate conditions



The performance of many RES-H systems is depending on the climate conditions they are operating in (e.g. air sourced heat pumps ambient temperature, solar thermal solar radiation)



Member States apply different RES-H technologies, e.g. ─ Solar thermal: passive vs active systems ─ Biomass: different sophisticated conversion technologies

→ Competiveness of RES-H technologies differs significantly between Member States -> support must be designed as to be adjusted to the (condition) specific economic needs of each technology → Setting harmonised standards or minimum support levels could hinder frontrunners to go ahead www.res-h-policy.eu

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Harmonisation of RES-H/C policies

Consumer perception/expectation •

Full harmonisation (e.g. European wide RES-H quota) is aiming at minimising economic costs (by leading financial support to RES-H potentials that can be exploited at lowest cost)



Facilitation could only be organised through cross border trade of attributes (no physical trade!) e.g. in form of certificates or guarantees of origins



Harmonised quota (e.g. on fuel/heat suppliers) fulfilled through investments in other countries might be in contradiction to what consumers expect to happen (deployment of regional RES-H potentials -> impact on regional economy)

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Harmonisation of RES-H/C policies

Thank you for your attention!

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Potential design criteria for a harmonisation of policies Workshop of the RES-H Policy Project Brussels, 10th of February 2010

Jan Steinbach Fraunhofer Institute for Systems and Innovation Research ISI, Germany Supported by

www.res-h-policy.eu

Harmonisation of RES-H/C policies

The issue of RES-H/C policy harmonisation No harmonisation

Full harmonisation

Design

Support scheme

Degree of harmonisation grants use Obligation tax related instruments Grants MS1

UOB MS3

TAX MS5

Grants MS2

UOB MS4

TAX MS6

One support scheme

Directive 2009/28/EC Same design in all Member States

Which degree of harmonisation is already achieved by the Directive? Which are reasonable next steps in the harmonisation process? www.res-h-policy.eu

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Harmonisation of RES-H/C policies

Contents

• • •

Harmonisation resulting from the Renewable Directive Next Steps for a harmonisation of policies Conclusion

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Harmonisation of RES-H/C policies

General scopes of RES-H/C policy harmonisation addressed by the Renewable Directive 2009/28/EC Policy instruments

Technology

Standardisation

Information and training

www.res-h-policy.eu

ƒ Postulating support mechanisms which should be introduced in the Member States

ƒ Technology-specific design criteria to comply with support mechanisms

ƒ Determination of joint standards in terms of the efficiency for RES technologies

ƒ Provision of information, training of professionals and minimum requirements for qualification system

4

Harmonisation of RES-H/C policies

Harmonisation resulting from the new Renewable Directive 2009/28/EC

Policy instruments Technology Standardisation Information and training

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5

Harmonisation of RES-H/C policies

Harmonisation resulting from the new Renewable Directive 2009/28/EC

Policy instruments Technology Standardisation Information and training

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Harmonisation of RES-H/C policies

Harmonisation resulting from the new Renewable Directive 2009/28/EC

Policy instruments Technology Standardisation Information and training

www.res-h-policy.eu

• General standardisation ¾MS should set clearly defined technical specification for all RES installations which are subject to a support scheme ¾Existing European Standards (eco-labels, energy labels) must be considered • Technology-specific standardisation ¾Biomass: Minimum conversion efficiencies are set by Directive ¾Heat pumps: Minimum ecological criteria by referring to the Community eco-label ¾Solar thermal: Referring to European ecolabels 7

Harmonisation of RES-H/C policies

Harmonisation resulting from the new Renewable Directive 2009/28/EC

Policy instruments Technology Standardisation Information and training

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Harmonisation of RES-H/C policies

Contents

• • •

Harmonisation resulting from the Renewable Directive Next Steps for a harmonisation of policies Conclusion

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Harmonisation of RES-H/C policies

Potential for a future policy harmonisation

1

• Addressing the district heating sector with a harmonised policy instrument

2

• Addressing the industry sector with a harmonised policy instrument

3

• Defining binding design criteria for the exiting harmonised policy instrument

4

• Accentuation of joint standards, technical requirements, information provision

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Harmonisation of RES-H/C policies

Potential and reasonable next steps for a harmonised policy framework 1

• Addressing the district heating sector with a harmonised policy instrument

• Tax related instrument Æ Swedish carbon tax • Bonus/ tariff based system as a harmonised policy instrument for the district heating sector ¾ Fixed bonus for the amount of energy from RES ¾ Comparable to the electricity sector with grid-based heating supply • National design ¾ Technology-specific bonus level ¾ Supported technology ¾ Bonus level

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Harmonisation of RES-H/C policies

Potential and reasonable next steps for a harmonised policy framework 2

• Addressing the industry sector with a harmonised policy instrument

• General obstacles ¾ Main barrier for renewable penetration in industry is the high cost • Policy options ¾ Use obligation ÆConsideration of the competitiveness of Europe’s industry • Subsidy / grant scheme ¾ The economic efficiency of renewable technologies could be approached ¾ Depending on financial position of national authorities ¾ Not appropriate for harmonisation

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Harmonisation of RES-H/C policies

Potential and reasonable next steps for a harmonised policy framework 3

• Defining binding design criteria for the existing harmonised policy instrument (use obligation)

• Strengthen the regulation in the building sector Æ “where appropriate” • Possible harmonised design criteria ¾ Defining technologies which can be applied to meet the regulation ¾ Defining minimum shares of RES deployment for each technology • Arguments for a national design ¾ Different environmental condition in the Member States (biomass potential vs. solar energy insolation) ¾ Different heating and building structure ¾ Different infrastructural requirements, e.g. existing heating network

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Harmonisation of RES-H/C policies

Potential and reasonable next steps for a harmonised policy framework 4

• Accentuation of joint standards, technical requirements, information provision

• Setting joint standards based on state of art technological development ¾ Economics of scale of best available technologies • Following best practice experiences for information provision ¾ Free energy advices for building owners

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Harmonisation of RES-H/C policies

Conclusion • •

• •



With the Renewable Directive a certain degree of harmonisation has already been achieved The harmonisation results in a harmonised policy instrument (use obligation), technical standardisation and information and qualification requirements Thereby, the building sector is addressed by the required use obligation The next steps in the harmonisation process should address the district heating and the industry sector and strengthen the incentives/ regulation in the building sector A potential harmonised policy instrument could be a “bonus system” for RES in the district heating sector

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Harmonisation of RES-H/C policies

Thank you for your attention!

Workshop of the RES-H Policy Project Brussels, 10th of February 2010

Jan Steinbach Fraunhofer Institute for Systems and Innovation Research ISI, Germany

Second consultation workshop on “A common framework for a coordinated/harmonised policy on Renewable Heating” Part II of D16 of WP5 from the RES-H Policy project A report prepared as part of the IEE project "Policy development for improving RES-H/C penetration in European Member States (RES-H Policy)"

December 2010 Assembled by Johann Steinbach ([email protected]), Fraunhofer ISI Mario Ragwitz ([email protected]), Fraunhofer ISI

RES-H Policy

Minutes of the second WP5 consultation workshop

RES-H Policy Project Policy development for improving RES-H/C penetration in European Member States Workshop on “Cost and benefits of coordinated/harmonised policy on Renewable Heating (RES-H)” Minutes, registrations and attendance list of the second consultation workshop of WP 5 Date: Thursday 2 December 2010 Location: Permanent Representation of North Rhine Westphalia, Brussels External participants: Surname

Institution

Registered Attended

Frank Baumeister

CEETP

Yes

Yes

NL Agency, Ministry of Economic Affairs, Netherlands

Yes

Yes

Lex Bosselaar Philippe Dumas

EGEC - European Geothermal Energy Council

Yes

Yes

Dörte Fouquet

EGEC - European Geothermal Energy Council

Yes

No

Tom Howes

European Commission - DG TREN

Yes

Yes

Luca Miraglia

G.S.E. s.p.a.

Yes

Yes

Jochen Penker

Federal Ministry (BMWFJ), Austria

Yes

Yes

Christoph Pfemeter

Austrian Biomass Association

Yes

Yes

Andros Racchetti

G.S.E. s.p.a.

Yes

Yes

Fanny Rateau

EHPA

Yes

No

Lucie Tesnière

EREC-European Renewable Energy Council

Yes

Yes

Frauke Thies

Greenpeace

Yes

No

Claude Turmes

European Parliament

Yes

No

Peter Vernon

Euro Heat & Power

No

Yes

Participants of the project team Name

Institution

Veit Bürger (VB)

Öko-Institut e.V.

Liv A. Becker (LAB)

Öko-Institut e.V.

Luuk Beurskens (LB)

ECN

Jaap Jansen (JJ)

ECN

Argyro Giakoumi (AG)

CRES

Katarzyna Jozwiak

KAPE

Peter Connor (PC)

UNEXE

Dalius Tarvydas (DT)

LEI

Marcus Hummel (MH)

Vienna Technology University EEG 1/4

RES-H Policy

Minutes of the second WP5 consultation workshop

Jan Steinbach (JS)

ISI

Mario Ragwitz (MR)

ISI

Minutes of the second consultation workshop of WP 5: Summary of discussion and conclusions For all agenda items, see the presentations in the annex of these minutes.

1 Welcome, Introduction to the RES-H policy project and recent development in renewable heating policy Peter Connor welcomes the participants to the 2nd consultation workshop of work package 5 of the RES-H Policy project and presents the agenda of the day. Tom Howes (European Commission, DG TREN) gives a short welcome note and speaks about the recent development in renewable heating policy. He reports from the assessment of the already submitted NREAPs. Thereby, Member States focus on the electricity sector in terms of target achievement, whereas renewable heating is mostly not addressed to the extent as it should be considering the cost effective potential compared to RES-E. He is convinced that a project like RES-H Policy is very helpful; he looks forward to the results.

Veit Bürger (VB) briefly introduces the RES-H Policy project, its background, tasks and objectives Overview of the project see presentation (RES-H Policy WS(10-12-02)-Buerger_Overview project.pdf)

2 Common framework for RES-H policy Mario Ragwitz (MR) presents the objectives of WP5 and introduces to the concept of policy harmonisation in the RES-H sector. He presents the key issues to be discussed at today’s workshop for RES-H/C policy. See presentation M. Ragwitz (RES-H Policy WS(10-12-10)-Ragwitz_Common framework.pdf)

Comments and discussion: 1. Comment: Lex Bosselar wonders why not all countries see the benefits of harmonisation. MR explains that the main interest of the counties is reaching their targets and this can be assisted by harmonisation (enforced target compliance = first benefit). A second benefit might be cost efficiency & third benefit harmonisation for RES-H/C in industry LB: For the industry sector, there is with ETS already a harmonised instrument in force (at least for large plants) More practical approaches for policy design are needed (especially in the New Member States). A more practical approach could be to look in detail into how to provide the necessary framework, as well as quality enforcement (medium to long term) MR: agrees; and refers to the first part of the WP starting with the derivation of best practice policies in the target countries

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Minutes of the second WP5 consultation workshop

3 Assessment of cost and benefits of RES-H/C harmonisation Jan Steinbach presents the assessment of cost & benefits of policy harmonisation, methodology and results see presentation (RES-H Policy WS(10-12-02)-Steinbach_Assessment policy harmonisation.pdf Comments and Discussion: 1. Comment: Shorter time scale, up to 2020, would be more practically for the quantitative assessment since EU policy is also focussing on 2020 and major policies will be revised after 2020. MR: RES-H diffusion in the building sector with long investment cycles and learning curves of technologies speaks for longer observation period 2. Comment: The analysis only considers a use obligation (for new buildings and buildings that are subject to major renovations); however, the heating market is very diverse and complicated, biomass might need different policies than heat pumps, district heating is different to decentralised on-site supply. A single harmonised policy instrument cannot cover the entire market specifications and requirements.

4 Cooperation mechanisms as vehicles for Member States to mutual agree on redistributing costs and benefits of RES deployment Luuk Beurskens (LB) presents some qualitative input on cooperation mechanism see presentation (RES-H Policy WS(10-12-02)-Beurskens_Cooperation Mechanisms.pdf)

5 The role of Guarantees of Origin within a harmonised policy framework for RES-H/C and general discussion Veit Bürger presents some thoughts on the potential role of Guarantees of Origin (GoO) within a harmonised policy framework for RES-H/C see presentation (RES-H Policy WS(10-02-10)-Buerger_Guarantees of Origin.pdf) Comments and Discussion: 1. Comment: The idea of GoOs within a use obligation as market based support scheme might turn out to be problematic because of potential leaks: Supply of GoOs must be limited to those RES-H installations that have been implemented in buildings that are subject to the obligation. VB agrees that it depends on the system design (eligibility to receive GoOs). Such a GoO system should probably not be opened to all market participants. Certificate trade on the level of household owners is also problematic; here e.g. the transfer should be facilitated by the installers. 2. Comment: End users connected to district heating networks want to know the share of RES in their product, but a potential benefit of a GoO system for this applications is not really seen VB agrees that for the whole grid a certain certification system might be needed, but agrees that GoO does not seem to fit the role; however GoOs would allow for allocate the RES share to those consumers that are actively asking for it. VB: Difference to RES-E in terms of potential trade or certificate system is that there is no physical connection of produced RES-H and consumer purchasing it. A certificate system would be of a purely virtual nature. (it is not that someone takes out a share of RES-H out of the grid & someone else feeds the same amount in another place -> different to RES-E or biogas market).

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RES-H Policy

Minutes of the second WP5 consultation workshop

3. Comment: The large market share of huge fossil fuel or waste heat based district heating networks and the further increase of it in the heating supply of some eastern Member States could be an obstacle to an expansion of RES. Once connected, consumers have to pay a fine in order to abandon the grid. Furthermore, these grids will still last for quite long time and have therewith determined the structure of the heating supply in these countries for the next decades (lock-in). 4. Comment: Harmonisation in terms of technology standardisation and requirements is the crucial issue since the supplier markets for RES-H are still rather localised. JS: .There are already some harmonisation measures in the Directive (e.g. Solar Keymark); and of course there is the Ecodesign Directive which is setting up minimum quality and efficiency standards for certain technologies.

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The RES-H Policy Project Consultation Workshop "Cost and benefits of coordinated/harmonised policy on Renewable Heating (RES-H)" B Brussels, l 02 D December b 2010 Veit Bürger, Öko-Institut e.V.

www.res-h-policy.eu

The RES-H Policy project

Policy background •

IIn many Member M b States St t supportt for f renewable bl heating h ti and d cooling li technologies (RES-H/C) is still lacking appropriate legislation even though this sector is offering a largely cost-effective potential for the use of renewables



With the Renewables Directive (2009/28/EC) Member States agreed on country specific binding and final energy related renewable energy targets for 2020



The Directive requires Member States ─ to set up (indicative) sector specific targets for RES-H/C ─ to report on measures and instruments for achieving these targets



For new buildings and existing buildings that are subject to major renovation the Directive defines some minimum policy requirements (use obligation or other approaches with equivalent effect)

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The RES-H Policy project

Overall objective of the RES-H Policy project •

To assist Member State governments in implementing the Renewables Directive as far as aspects p regarding g g RES-H/C p policy y are concerned



Focus of the project: ─ sectoral targets for RES-H/C ─ support policies aiming at stimulating the market penetration of RES H/C RES-H/C ─ options to coordinate or even gradually harmonise national RES-H/C policy approaches

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3

The RES-H Policy project

Target countries

target countries dissemination countries partner countries

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4

The RES-H Policy project

Working Plan WP1: Project Management WP2: Development p of the Policy y Background g WP3: Fixing RES-H/C targets WP4: Assessment of national RES RES-H/C H/C policy options WP5: Options for policy harmonisation WP6: Communication and dissemination WP7: Common dissemination activities

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The RES-H Policy project

AT

GR

LT

National/Regional Policy Processes NL

PL

UK

WP5 5 P Policy Harmonisation

WP P2 Development of the Policcy Backgrround

WP3 Fixing RES-H/C targets

WP4 Assessment of national RES-H/C Policy Options O

WP6 Communication and Dissemination WP7 Common Dissemination Activities WP1 Project Management

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6

The RES-H Policy project Development of the Policy Background (WP2) • Overview of current national/regional regulatory and market framework of the national heating and cooling g markets in the target g countries 9 • Overview of principle policy options to stimulate increased RES-H/C market penetration 9 • Working document on the experience with the implementation of district DH systems in SE 9 Fixing RES-H/C targets (WP3) • Different modelling approaches + stakeholder consultations -> Overall and technology specific 2020/2030 RES-H/C target ranges for each of the target countries 9 Assessment of national RES-H/C policy options (WP4) • Qualitative assessment of 3-5 RES-H/C support options against criteria such as stakeholder acceptance, investment security, market interaction, administrative synergies with other policies 9 p • Different modelling approaches -> Assessment of the effectiveness and economic efficiency of 2 support options per target country (RES-H/C capacity growth, public budget requirements, avoided fuel costs, GHG emissions, gross employment effects, public administration costs) 9 Policy coordination/harmonisation (WP5) • Assessment of different levels of coordinating/harmonising national RES-H/C policy approaches 9 www.res-h-policy.eu

7

The RES-H Policy project

Partners & Contact Project consortium: • Öko-Institut e.V., Germany • University of Exeter, United Kingdom • Polish National Energy Conservation Agency, Poland • Vienna University of Technology, Institute of Power Systems and Energy Economics, Energy Economics Group, Austria • Fraunhofer Society for the Advancement of Applied Research, Research Germany • Centre for Renewable Energy Sources, Greece • Lund University, Sweden ua a Energy e gy Institute, s u e, Lithuania ua a • Lithuanian • O.Oe. Energiesparverband, Austria • Energy Research Centre of the Netherlands, The Netherlands Project website: www.res-h-policy.eu www res h policy eu Project coordinator: Veit Bürger, Öko-Institut e.V., [email protected]

www.res-h-policy.eu

8

The RES-H Policy project

Thank you for your attention

Contact Veit Bürger Öko-Institut e.V. tel.: +49-761-45295-25 email: [email protected]

www.res-h-policy.eu

9

Common framework for RES-H/C p policy y Consultation workshop of the RES-H Policy Project Brussels, 2nd of December 2010

Mario Ragwitz Fraunhofer ISI Supported by

www.res-h-policy.eu

Harmonisation of RES-H/C policies

The challenge

> 20% of the (residual) heat demand (incl. also industrial p processes, etc.)

RES-H - en nergy outp put [Mtoe/ye ear]

120 Historical development

100

F Future development d l

80

Solar thermal h t heat

60 Geothermal heat pumps

40

Geothermal non heat pumps p p

20

Biomass heat

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2019

2017

2015

2013

2011

2009

2007

2005

2003

2001

1999

1997

0

2

Harmonisation of RES-H/C policies

The challenge: ■ Capacities of solar thermal / geothermal / grid-based grid based biomass RES-H have to increase by a factor of ~ 10 / 8 / 3 until 2020 to reach targets of Directive 2009/28/EC ■ Long reinvestment cycles in the building sector limit diffusion rate of RES-H/C – many currently installed boilers in the building sector will still be operating in 2020 2020.

■ Large share of high temperature heat demand in the industry sector, which cannot easily penetrated by RES-H as well as strong barriers to integrate RES-H in sensitive industrial processes limit diffusion rate of RES-H/C ■ A very er high share of all potential RES RES-H/C H/C investments in estments needs to be actually realised! www.res-h-policy.eu

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Harmonisation of RES-H/C policies

General conditions: ■ Policy makers are looking for the right balance between a harmonisation of support and the continuation of national instruments in order to: ■ not disrupt currently successful instruments by superimposing a harmonised system that may or may not be optimally designed ■ increase the overall effectiveness and efficiency on a European scale ■ improve the compatibilityy of RES support with other communityy policies such as creating a single European energy market and establishing an effective CO2 abatement framework and ■ allow Member States to reach their national targets if efficient and effective national instruments are implemented

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Harmonisation of RES-H/C policies

General questions: ■ What is meant by “harmonisation”? harmonisation ? Harmonising support schemes could range from defining generally binding (technical) framework conditions suitable for various instruments versus applying one common, precisely defined support scheme in the EU, as well as many discrete variations variations. ■ Which specific conditions apply to different support instruments in the heat sector that mayy affect the feasibility of any kind of harmonisation, e.g. tax measures? ■ Which Whi h limitations li it ti on harmonisation h i ti will ill b be effected ff t d b by different combinations of mechanisms? www.res-h-policy.eu

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Harmonisation of RES-H/C policies

General questions:  

type of scheme applied Degree of harmonisation

Use obligation (UOB)

Renewable heat incentive ((RHI))

Grants/ investment subsidy

Taxrelated

Inccreasing degree d of harmonisation

"Central co-ordination" (harmonised, binding framework conditions, minimum design criteria Æ independent of the type of support)

www.res-h-policy.eu

UOB

RHI

Grants

Tax

"Convergence" (one support system, national design) UOB

RHI

Grants

Full harmonisation harmonisation" "Full (one support system, same design in all MS)

technologyspecific harmonisation

1 technology . . . .

Tax . all technologies 6

Harmonisation of RES-H/C policies

General questions: ■ Which level of harmonisation is already resulting from the Directive 2009/28/EC? ■ Which consequences can be derived from the Directive 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? p ■ Which implications can derive from the use of cooperation mechanisms? ■ Which could be the role of Guarantees of Origin, if they are introduced in the RES-H/C sector www.res-h-policy.eu

7

Harmonisation of RES-H/C policies

General questions: ■ Which lessons regarding harmonisation of RES-H/C RES H/C policy can be learned from efforts to harmonise RES-E policy at the European level and the likely efforts of M b S Member States to subscribe b ib to the h h harmonisation i i process? ■ Which implications are derived from the fact that physical trade of power does not exist in case of RESH/C ■ Is there a specific need for harmonisation of industrial RES-H/C in industries in global competition?

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Harmonisation of RES-H/C policies

WP5 Options for harmonisation of RES-H/C policies: ■ Elaborate on best practices of the main policy instruments at national level ■ Derive a set of generic criteria that could usefully apply to all main instruments in Europe, derive design criteria of one fully harmonised instrument ■ Analyse Anal se the technolog technology deplo deployment ment and the costs associated with the different policy strategies for RES-H/C based on the INVERT scenarios for p policies selected ■ Conception of a methodology to share costs & benefits of a potentially harmonised future European policy ■ The role of GoO for RES-H/C development

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9

Harmonisation of RES-H/C policies

Th k you for Thank f your attention! tt ti !

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10

Assessment of cost & benefits of RES-H/C policy harmonisation Consultation workshop of the RES-H Policy Project Brussels, 2nd of December 2010

Jan Steinbach FHG-ISI

www.res-h-policy.eu

RES-H policy harmonisation

Contents Background Scope and Methodology Results Conclusion

RES-H policy harmonisation Implications of Directive 2009/28/EC on different levels of RES-H/C policy harmonisation Harmonisation levels 1

“Common target setting”

D Degree of  harmonissation

Statistical transfer between Member States

Directive 2009/28/EC • Minimum renewable extension levels have been deri derived ed for each MS • Targets presented in the NREAP (§4)

Different policy frameworks a e o s

2

“Central co-ordination” Harmonised, binding framework conditions, minimum design criteria Æ independent of the type of support

3 “Convergence of instrument type” One support system, national design

4

• Information and training requirements • Criteria for qualification schemes (§14(3)) • Technical standardisation/ sustainability criteria • Minimum use of RES in new and majorly renovated buildings (§13(5)) Æ RES-H use obligation g

“Convergence of instrument design” One support system, same design in all MS,

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RES-H policy harmonisation

General evaluation of RES-H/C policy harmonisation Main issue •

Is a more coordinated or full harmonised policy framework able to address the main barriers to an expansion of RES-H/C more effectively and economical efficiently than an uncoordinated policy on Member State’s level?

Main criteria to evaluate potential cost & benefits of RES RES-H/C H/C policy harmonisation 1. Enforced target compliance • Without a harmonised policy framework, Member State would only continue the current policy mix 2. Cost optimal resource allocation • Maximisation of economic benefits by leading investments to where it is i mostt profitable fit bl 3. Minimisation of transaction costs 4. Avoidance of market distortions www.res-h-policy.eu

4

RES-H policy harmonisation

Subject and scope definition of this analysis •

• • • •

Quantitative assessment of cost & benefits of different levels of RES-H/C harmonisation ¾ Convergence g of instrument type yp ¾ Convergence of instrument design RES-H use obligation as harmonised policy instrument Sectoral limitation of the analysis to the building sector Period from 2007 to 2030 Geographical limitation to the six target countries within the RES-H policy project being g representative p for EU 27 in terms of p policy y harmonisation ¾ Austria ¾ Greece ¾ Lithuania ¾ The Netherlands ¾ Poland ¾ United Kingdom

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RES-H policy harmonisation

Methodology to assess cost & benefits of RES-H/C harmonisation •



The bottom up simulation model Invert/EE-Lab (Vienna Technical University) , is applied to model different harmonisation scenarios Using country specific input data ¾ Heating and domestic hot water systems ¾ Building stock data ¾ Energy prices ¾ Climate data ¾ Preferences for heating systems ¾ Support policies ¾ ….

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Database heating  and hot  water sector (t=t0, input of simulation results for t1 … tn) Exogenous scenarios  growth of building stock  (t=t1 … tn)

Climate data (HDD, solar  irradiation …) User behavior Technology data space  heating and hot water  (t=t1 … tn) Energy prices (t=t1 … tn) Options for thermal  O ti f th l renovation  (t=t1 … tn)

Building stock data ‐ U‐values ‐ Geometry ‐ Age ‐ Regions ‐ Type of use

Installed heating and hot  water systems ‐ η/COP/solar yield ‐ Type of energy carriers ‐ O&M costs

Space heating and hot  water  energy demand calculation  module Diffusion restrictions  (t=t1 … tn)

Simulation algorithm Multi‐nominal logit approach Logistic growth model Logistic growth model

Simulation  results  (t=t1 … tn)

Biomass potentials (t=t1 … tn) Policies (t=t1 … tn) Preferences for heating  systems, , traditions, inertia (t=t1 … tn)

‐ Installation of heating and hot water systems ‐ Total energy demand by energy carriers (GWh) ‐ Total investments (M€) ‐ Policy programme costs (M€) etc. 

Source: Kranzl, Müller, and Hummel (2010)

6

RES-H policy harmonisation

Methodology to assess cost & benefits of RES-H/C harmonisation •





Definition of harmonisation scenarios in the model ¾ ‘Convergence of instrument type’ with a RES-H use obligation in national design g based on respective p national targets g ¾ ‘Convergence of instrument type’ with a uniform RES-H use obligation in all countries ¾ ‘No p policy’ y scenario as reference Design elements of the use obligation applied in the model ¾ Obligated parties (new buildings, existing buildings in case of renovation) ¾ Minimum RES-H share which has to be installed ¾ Level of penalty in case of opting out Assessment criteria for RES-H policy harmonisation ¾ RES RES-H H diffusion ¾ Total generating costs (capital costs, OM costs, fuel costs) ¾ Total penalties

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7

RES-H policy harmonisation

Contents Background Scope and Methodology Results Conclusion

RES-H policy harmonisation Comparison of the current situation with regard to RES-H deployment and competiveness in the selected Member States

25 .4 TWh

Increasingg competiven ness of RES‐‐H

5 .5 TWh

10 .4 TWh

30 .3 TWh

4 .9 TWh 7 .4 TWh

Increasing competiveness of RES‐H Source: Fraunhofer ISI

www.res-h-policy.eu

Size  expresses total RES‐H energy demand in the building sector 

9

RES-H policy harmonisation Results in terms of enforced target compliance – RES-H diffusion in ‘no policy’ and ‘convergence of instrument type’ scenario (low price)





The obligation is set in a national design (minimum res share, penalty) modelled according to national targets In total the RES-share rises to 18.4% assuming a use obligation in all countries compared to 11% in the “no policy” scenario In total the use obligation accounts for a additional RES-demand of 630 TWh from 2007 to 2030

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RES-H diffusion total (all selected MS) 70

18.4% 20%

Source: Fraunhofer ISI

18%

60

16%

50

14%

11.0% 12%

40

10% 30

8% 6%

20

4%

10

2%

0

0% 2007

2012

2017

2022

2027

Additional RES-H demand in total No Policy Scenario Convergence of instrument type

10

RES-H share in total energy dema and



The effect of introducing a use obligation instrument in all target countries is measured against a „No policy scenario“

Additiona al RES- energe ey demand [TW Wh]



RES-H policy harmonisation Results in terms of enforced target compliance – cost comparison between ‘no policy’ and ‘convergence of instrument type’ scenarios (low price) Additional generating costs 4,500 4,000 3,500

2,500

3 830 3,830

15%

2,726

1,709

5% 0%

1,043

2.7% 0 1% 0.1% AUT

2,000 1,500

Increase of total cumulative generating costs 2007 to 2020

10%

15%

1,000

GR

-500

Source: Fraunhofer ISI

www.res-h-policy.eu

0%

LT

0 6% 0 1% 0.6% 0.1% NL

PL

1.8%

UK

6.7%

5%

0

1.1%

Increase of total cumulative generating costs 2007 to 2030

10%

500

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

[€ millions ]

3,000

Additionall O Additi Operations ti and d ffuell consumption cost per year Additional capital costs per year Additional generating costs per year

Increase in cumulated generating costs

2.8% 0.2% AUT

GR

LT

3.4% 1 1% 0.5% 1.1% NL

PL

UK

Source: Fraunhofer ISI

11

RES-H policy harmonisation

Results in terms of cost optimal resource allocation (low price)



National designed compared to harmonised use obligation

21%



Cost opt optimal a app approach oac

• •

Constraint is overall RES-H diffusion Change of RES-H diffusion among M b St Member States t in i ah harmonised i d use obligation ¾ Higher RES-H diffusion in UK, AUT, PL ¾ Lower RES-H diffusion in GR, NL

11.0% 11% Source: Fraunhofer ISI

6% 2007

2012

2017

2022

2027

Change of RES-H diffusion between scenarios 4000 3000

AUT 

2000

GR 

1000

LT 

0

NL 

‐1000

PL  Source: Fraunhofer ISI

‐2000 2007

www.res-h-policy.eu

18.7% 18.4%

Use obligation‐national design No Policy Scenario Harmonised use obligation

16%

Harmonised use obligation with uniform design elements in all countries

[G GWj]



T t l RES-H Total RES H diff diffusion i iin th the b building ildi sector t

2012

2017

2022

UK 

2027

12

RES-H policy harmonisation

Results in terms of cost optimal resource allocation (low price) Differences in total generating costs

Differences in generating costs country

cumulated to 2030 Cumulated to 2020

1,000

200

500

-300 -222

-1,300 -1,800 -2,300

-3,800

-500

AUT

GR

LT

NL

PL

UK

-1,000 -1,500

-2,800 -3 3,300 300

0 [€ millions]

[ € millio ons]

-800

-3,280

-2,000 2,000 Source: Fraunhofer ISI

-2,500

Source: Fraunhofer ISI

Cost savings g up p to 2030 are attributed to ¾ Harmonisation gains through an cost optimal resource allocation among MS ¾ Different technological diffusion within MS Æ strengthened national policies

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RES-H policy harmonisation

Results in terms of strengthened nation policy (low price) •

Differences between the two harmonisation scenarios in terms of diffusion of RES-H technologies (example United Kingdom) Use obligation- national design (2030)

Harmonised use obligation (2030)

UK 

UK 

Biomass  district  heating 4% Solid Biomass 1%

Biomass  district  heating 4%

Biogas and  Bioliquids 17% Solar thermal  42%

Ambient  energy 36%

Source: Fraunhofer ISI

www.res-h-policy.eu

Solid Biomass ld 1%

Biogas and  Bioliquids 19%

Solar thermal  6% 26%

Ambient  energy 50%

Source: Fraunhofer ISI

14

RES-H policy harmonisation

Results in terms in terms of strengthened nation policy (low price) •

Differences between the two harmonisation scenarios in terms of diffusion of RES-H technologies (example Greece) Use obligation- national design (2030)

Harmonised use obligation (2030)

GR 

GR 

Solid Biomass 26%

Solid Biomass 32% Solar thermal  60%

Ambient  energy 2%

Solar thermal  72%

Ambient  energy 8% Source: Fraunhofer ISI

www.res-h-policy.eu

Source: Fraunhofer ISI

15

RES-H policy harmonisation

Contents Background Scope and Methodology Results Conclusion

RES-H policy harmonisation

Summary and Conclusion • • • •



Model based assessment of potential cost & benefits of RES-H policy harmonisation Results are based on a theoretical approach determining an optimal policy design RES-H RES H use obligation for new and majorly renovated buildings is chosen as harmonised policy instrument Analysis of the effects of RES-H policy harmonisation in terms of ─ Enforced target compliance ─ Cost optimal resource allocation Enforced target compliance through a national policy design based on target achievement in each MS ─ Model results show the effect of use obligation in terms of induced RES-H diffusion in the selected MS

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RES-H policy harmonisation

Summary and Conclusion •

Achievement of overall RES-H target through a harmonised use obligation determined under a cost optimal approach ─ Cost savings g in terms of less overall g generating g costs ─ Change of RES-H deployment among MS ─ Change of RES-H technologies applied within MS ─ Cost savings can be attributed not only to a different distribution of RES-H RES H deployment among MS, but also to different technological diffusion within certain MS



Further question: ─ How can potential harmonisation gains be distributed among MS?

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RES-H policy harmonisation

Thank you for your attention!

Consultation workshop of the RES-H Policy Project Brussels, 2nd of December 2010

Jan Steinbach Fraunhofer Institute for Systems and Innovation Research ISI Germany ISI, [email protected]

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits of RES deployment Brussels, 2 December 2010 Luuk Beurskens, Jaap Jansen Energy research Centre of the Netherlands (ECN)

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Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Cooperation mechanisms •

Facilitate Member States (MS) that a) are expecting to be under-compliant with respect to their respective renewables target or b) face high marginal compliance cost and c) other MS with more favourable target compliance conditions to transact target accounting units.



Based on ex ante mutual agreement between the governments concerned.



Moreover, the European Commission should be notified on the use of the cooperation mechanisms: Directive 2009/28/CE: Art 6.2; Art. 11.2

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2

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Cooperation mechanisms 1.

Statistical transfers between Member States.

2.

Joint projects between Member States.

3.

Joint projects between Member States and third countries.

4.

Joint support schemes.

Application of the last three mechanisms imply the explicit or implicit use of the statistical transfers mechanism. Joint projects with third countries only refers to RES-E. www.res-h-policy.eu

3

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Characteristics of cooperation mechanisms •

• • • •

Creation of a new valuable commodity: (cross-border) transferable target accounting units (TAU) (TAU), transacted between Member State (MS) governments. Renewable energy target accounting statistics are de-linked from the actual renewable energy performance of Member States. The mechanisms enable to reallocate available investment resources to MS with the cheapest RES(-H/C) RES( H/C) resource potentials Offer opportunities to involve the private sector of cooperating MS (varying among distinct mechanisms). Might entail transfer of know-how from investing MS to host MS.

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Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Characteristics of a harmonised obligation • • • • • • • • •

Costs Cost incidence Variation of costs across Member States Benefits Options and accounting measures Regulation costs Geographical scope Equity Political acceptability

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5

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Costs •



• •

Investing MS (and/or investing private-sector entities) might agree to transfer financial resources and/or physical production factors and/or know-how to the host MS concerned in exchange of the agreed share i the in th returns t including i l di TAU. TAU Especially in the cases of applying joint projects between MS and joint support schemes, a given aggregate volume of RES-H/C in the participating countries might be produced in a more cost-effective way than in the without case. This among others depends on the level of the occurring regulation costs of using the cooperation mechanisms concerned. Under certain special circumstances, application of the statistical transfers mechanism in isolation may also trigger, in an indirect way, enhanced cost-effectiveness of RES-H/C deployment.

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Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Cost incidence •

Who is bearing the (additional) costs?



question relates both to the cost incidence among: g This q ─ the co-operating MS concerned on aggregate ─ public and private economic entities within each of the co-operating MS.



A cooperation mechanism can be implemented in different ways with divergent implications for incidence of the cost burden among distinct actors, such h as: ─ tax payers ─ household energy end-users ─ penalty-paying energy-using companies ─ energy supply or building companies facing certain standards, e.g. use obligations among their customers.

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Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Variation of costs across Member States •

Some RES-H/C technologies might be significantly cheaper to be applied in a selection of Member States.



For instance, with a harmonised use obligation and uniform technical requirements, costs for obligated investors could differ due to different skill levels off installers, differences ff in market maturity off RES-H/C S /C or ffor geographical reasons.



Are MS with low marginal cost prepared to share their perceived marginal cost advantage with MS devoid of cheap marginal RES-H/C resources?



And if so, to what extent and under which conditionality?

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Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Benefits •

• • • •



Aspects include: ─ Nature of the benefits ─ (Real and perceived) magnitude of the benefits ─ Incidence of the benefits between MS and stakeholders within MS For instance, eventually a harmonised EU-wide subsidy scheme for RES-H/C with harmonised (ambitious) efficiency standards might be envisaged. Yet, MS with already high penetration of advanced technology would potentially benefit less than MS with predominantly less efficient technology in place. This could strongly impact the negotiations on MS contribution shares in the common fund on which such subsidy scheme has to operate operate. Another benefit may be that the so far nationally oriented building sector in the distinct MS might get a broader geographical orientation and start operating in other MS,, leading g to accelerated cross-border dissemination of best p practices. Co-operation might also yield new RES-H/C innovations and fasten its spread.

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9

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Options and accounting measures •

Which are possible options and accounting measures to share the additional costs and benefits benefits. E.g. E g what would be the accounting rules for running joint subsidy schemes?



How could a possible income from statistical transfers be re-injected re injected in support schemes of the host MS? ─ probably rather easy for investment incentive programmes ─ but very difficult for use obligations.

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10

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Regulation costs •



For the public sector the following costs might occur: preparation, introduction compliance enforcement introduction, enforcement, monitoring and supervising the measure. For market participants: partner search, risk assessments, contract negotiations incremental regulation cost to comply with all public negotiations, requirements, including staff hours spent to comply with the measure.

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11

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Geographical scope •

Can the measure be implemented EU-wide ?



Or has it a more limited geographical coverage ─ limitations due to climatic conditions ─ co-operation between ‘willing countries’ only

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12

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Equity •

Practicability and acceptability of cost reallocation mechanism among MS. MS



The mechanism should have a kind of automatism upon implementation that does not give rise to periodic squabbling among MS governments governments.

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13

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Political acceptability •

Political acceptability within MS: ─ which stakeholders gain? ─ which other groups loose?

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14

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Market information on target compliance Based on the National Renewable Energy Action Plans (NREAPs) it is possible to see which countries are overcomplying and which countries are undercomplying

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15

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Estimated d fi it deficit according to NREAP [ktoe]

www.ecn.nl/nreap

www.res-h-policy.eu

Belgium Bulgaria Czech Republic Denmark Germany Estonia Ireland Greece Spain France Italy Cyprus Latvia Lithuania Luxembourg Hungary Malta Netherlands Austria Poland Portugal Romania Slovenia Slovakia Finland Sweden United Kingdom Total

2010 n.a. 0 n.a. n.a. n.a. n.a. 0 n.a. na n.a. 0 0 n.a. n.a. 0 0 n.a. n.a. 0 0 n.a. n.a. 0 0 n.a. 0 n.a. n.a. 0

2011 n.a. 0 n.a. 0 0 n.a. 0 n.a. 0 0 0 n.a. n.a. 0 45 n.a. n.a. 0 0 n.a. n.a. 0 0 n.a. 0 n.a. 100 145

2012 n.a. 0 n.a. 0 0 n.a. 0 n.a. 0 0 0 n.a. n.a. 0 23 n.a. 0 0 0 n.a. n.a. 0 0 n.a. 0 n.a. n.a. 23

2013 n.a. 0 n.a. 0 0 n.a. 0 n.a. 0 0 0 n.a. n.a. 0 38 n.a. n.a. 0 0 n.a. n.a. 0 0 n.a. 0 n.a. 200 238

2014 n.a. 0 n.a. 0 0 n.a. 0 n.a. 0 0 0 n.a. n.a. 0 10 n.a. 0 0 0 n.a. n.a. 0 0 n.a. 0 n.a. n.a. 10

2015 n.a. 0 n.a. 0 0 n.a. 0 n.a. 0 0 0 n.a. n.a. 0 45 n.a. n.a. 0 0 n.a. n.a. 0 0 n.a. 0 n.a. 300 345

2016 n.a. 0 n.a. 0 0 n.a. 0 n.a. 0 0 0 n.a. n.a. 0 22 n.a. 0 0 0 n.a. n.a. 0 0 n.a. 0 n.a. n.a. 22

2017 n.a. 0 n.a. 0 0 n.a. 0 n.a. 0 0 0 n.a. n.a. 0 75 n.a. n.a. 0 0 n.a. n.a. 0 0 n.a. 0 n.a. n.a. 75

2018 n.a. 0 n.a. 0 0 n.a. 0 n.a. 0 0 0 n.a. n.a. 0 39 n.a. 0 0 0 n.a. n.a. 0 0 n.a. 0 n.a. n.a. 39

2019 n.a. 0 n.a. n.a. n.a. n.a. 0 n.a. na n.a. 0 284 n.a. n.a. 0 66 n.a. n.a. 0 0 n.a. n.a. 0 0 n.a. 0 n.a. n.a. 350

2020 n.a. 0 n.a. 0 0 n.a. 0 n.a. 0 0 1127 n.a. n.a. 0 93 n.a. 0 0 0 n.a. n.a. 0 0 n.a. 0 n.a. 0 1220

16

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Estimated excess according to NREAP [ktoe]

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Belgium

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Bulgaria

81

105

163

160

313

309

427

330

380

346

335

Czech Republic

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Denmark

n.a.

694

834

1123

1106

833

928

552

619

n.a.

63

Germany

n.a.

5703

7065

5507

7105

4761

6453

4130

5976

n.a.

3065

Estonia

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Ireland

0

168

168

233

233

211

211

136

136

0

0

Greece

257

408

513

686

812

856

842

737

743

683

529

S i Spain

n.a.

2986

3596

3056

4163

3379

4296

3180

4166

n.a.

2649

France

0

0

0

0

0

0

0

0

0

0

0

2839

2077

2157

2220

2143

1843

1511

1092

465

0

0

Cyprus

36

33

39

34

46

30

42

57

34

21

0

Latvia

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

0

36

37

123

126

178

182

231

235

0

61

Italy

Lithuania Luxembourg

www.ecn.nl/nreap

0

0

0

0

0

0

0

0

0

0

0

Hungary

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Malta

n.a.

n.a.

2

n.a.

8

n.a.

8

n.a.

16

n.a.

1

Netherlands

0

0

0

0

0

0

0

0

0

0

0

Austria

0

0

0

0

0

0

0

0

0

0

0

Poland

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Portugal

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Romania

0

0

0

0

0

0

0

0

0

0

0

Slovenia

0

0

0

0

0

0

0

0

0

0

0

Slovakia

n.a.

181

240

228

313

305

364

269

349

190

143

Finland

0

0

0

0

0

0

0

0

0

0

0

Sweden

162

194

227

259

291

324

356

389

421

453

486

United Kingdom Total

www.res-h-policy.eu

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

0

n.a.

n.a.

n.a.

3375

12585

15041

13629

16659

13029

15620

11103

13540

1693

7332

17

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Excess and deficit according to Action Plans •

In 2020 23 Members States have an aggregate RES deficit of 1.2 Mtoe (Italy and Luxembourg), Luxembourg) totalling approximately 0 0.6% 6% of expected amount of energy from renewable sources.



In 2020 23 Members States have an aggregate RES excess of 7 7.3 3 Mtoe Mtoe, (Bulgaria, Denmark, Germany, Ireland, Greece, Spain, Italy, Cyprus, Lithuania, Malta, Slovakia, Sweden) totalling approximately 3.4% of expected amount of energy from renewable sources sources.



However: the estimates can be adjusted the closer the year 2020 comes.

www.ecn.nl/nreap p www.res-h-policy.eu

18

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Future uncertainty

www.res-h-policy.eu

J2

19

Folie 19 J2

upside risk ==>maximum upside potential 2x downside risk ==> maximum downside risk 2x No policy ==> Baseline 3x Middelste No policy ==> projected baseline performance Jansen, 25.11.2010

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Conclusions •

The urgency of enhancing economic efficiency through use of the cooperation mechanisms – notably but not only in the RES-H/C subsector – is high.



With special reference to economic efficiency, proposed main use criteria include: 1.

The marginal cost (per target accounting unit) of the RES-H/C measures concerned should compare favourably to the marginal cost of measures undertaken in the RES-F and the RES-E subsectors of TAUs importing MS.

2 2.

The marginal Th i l RES RES-H/C H/C costt among MS should h ld show h sufficiently ffi i tl large l variation i ti to at least completely offset the regulatory cost of applying (one or more of) the cooperation mechanism considered.

3 3.

Use of the cooperation mechanism considered lowers the aggregate social cost burden the aggregate RES-H/C targets of the cooperating MS.

4.

Equity concerns for the cooperating MS: o

each MS perceives the net benefits to be acceptably high.

o

each MS perceives the internal distributive impacts politically feasible.

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20

Cooperation mechanisms as vehicles for Member States to mutually agree on redistributing costs and benefits

Thank you for your attention

www.res-h-policy.eu

21

The potential role of G Guarantees off Origin O within a policy y framework harmonised p for RES-H/C Consultation Workshop "Cost and benefits of coordinated/harmonised policy on Renewable Heating (RES-H)" B Brussels, l 02 D December b 2010 Veit Bürger, Öko-Institut e.V.

www.res-h-policy.eu

The Guarantee of Origin for RES-H/C

Overview •

What is a Guarantee of Origin (GoO)?



p regulations g for the GoO for RES-H/C following g Directive Specific 2009/28/EC



Potential roles of the GoO for RES-H/C (considering the differences b t between the th RES RES-E E and d RES RES-H/C H/C sector) t )



Potential benefits of introducing the GoO for RES-H/C ─ GoO for decentralised small small-scale scale RES RES-H/C H/C installations ─ GoO for large-scale grid-connected RES-H/C installations ─ Use of the GoO within different support pp instrument options p



Conclusions

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2

The Guarantee of Origin for RES-H/C

What is a GoO? Directive 2009/28/EC defines a GoO as an electronic document which has the sole function of providing proof to a final customer that a given share or quantity of energy was produced from renewable sources as required by Article 3(6) of Directive 2003/54/EC [[Electricity y Market Directive ] The concept of and specifications for the GoO for RES-H/C are i t d introduced db by A Article ti l 15 off th the Di Directive: ti Member States may arrange for guarantees of origin to be issued in response to a request from producers of heating and cooling from renewable energy sources. […]

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3

The Guarantee of Origin for RES-H/C

Specific regulations for the GoO for RES-H/C (1) • • •





Member States are allowed but not obliged to introduce a scheme for the GoO for RES-H/C Provided a GoO scheme for RES RES-H/C H/C is in place each producer running an eligible RES-H and RES-C installation would be entitled to request a GoO GoO schemes may be restricted to ─ large l RES RES-H H or RES RES-C C iinstallations t ll ti (i (in such h a case only l d devices i th thatt are exceeding the capacity limit would be eligible to the GoO system) ─ RES-H/C production that does not receive any form of public support In order to avoid double counting of the environmental benefit associated to RES-H/C ─ each kWh should be reflected byy one GoO onlyy ─ the value linked to a GoO must be cancelled once it has been used The lifetime of a GoO for RES-H/C would be limited to a period of 12 months

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4

The Guarantee of Origin for RES-H/C

Specific regulations for the GoO for RES-H/C (2) •

Main GoO system activities (issue, transfer, cancellation) must be supervised by either a governmental body or a designated competent body (that has to be independent from the RES-H/C market players). For each geographical region only one body should be in place



The GoO should be an electronic document and should hold an identification number that allows for an unambiguous g identification of the production plant



The minimum information displayed by a GoO for RES-H/C: ─ energy source (e (e.g. g biomass biomass, solarthermal) ─ production period ─ type, capacity and installation date of the production plant ─ whether and which kind of public support was given



A GoO from other Member States can only be rejected if there are doubts about the reliability of the GoO scheme under that it was issued

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5

The Guarantee of Origin for RES-H/C

Potential roles of the GoO for RES-H/C The guarantee of origin shall have no function in terms of a Member State’s compliance with Article 3. Transfers of guarantees of origin […] shall have no effect on the decision of Member States to use statistical transfers, joint projects or joint support schemes for target compliance […]. • •

The GoO does not have any function for target accounting The GoO does not have any effect on the decision to use the flexibility mechanisms

→ Thus a potential use of the GoO for RES-H/C could only lie in RES-H/C H/C products on the voluntary market 1 o the trade of RES (analogous to the use of the GoO on the RES-E market?) 2 o administering public RES-H/C support instruments www.res-h-policy.eu

6

The Guarantee of Origin for RES-H/C

Differences between the RES-E and RES-H market in view of potential benefits of the GoO • • •

Heat and cold is mostly consumed near the place where it is produced Marginal cross border trade of heat and cold which is resulting in a lack of country-wide transmission grids Existing heating and cooling grids are generally limited on a local or regional geographical scale

Consequences for RES-H/C 1 ─

Benefit of the GoO in the RES-E RES E sector (to be a reliable accounting tool for keeping track of the green attributes associated to RES-E especially in the case of cross-border trade) not really given for RES RES-H/C H/C 2 ─ Use of the experience gained from running GoO schemes in the RES-E sector is rather limited www.res-h-policy.eu

7

The Guarantee of Origin for RES-H/C

GoO for decentralised smallscale RES-H/C installations

GoO for large-scale gridconnected RES-H/C installations

1. Producer and consumer is generally the same actor (e.g. space heating is produced onsite) 2. Risk of double counting can more or less be excluded (heat is consumed at the place of its production)

1. In a district heating grid RES-H/C producers are clearly separated from the consumer 2. In larger DH grids (also fed by heat from fossil sources is) the GoO would allow for a clear allocation of the RES-H share to consumers

Ö Implementation of a GoO system

Ö Large DH grids: GoO might be a

does nott seem to d t provide id any practical benefit

Ö

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useful f l accounting ti and d allocation ll ti tool Small DH grids: GoO system costs might overweigh benefits

8

The Guarantee of Origin for RES-H/C

GoO within a subsidy scheme? P i i l IInvestors Principle: t in i RES-H/C RES H/C iinstallations t ll ti receive i fi financial i l supportt e.g. in form of an upfront investment grant, which the investor has to apply for Application requirements: • proof that the investment is done (generally in form of an invoice) • proof that the production facility is operating (e.g. in form of a statement by the installer) • proof of fulfilment of technological minimum criteria (e (e.g. g certification of a solar collector with the label "Solar Keymark") • Generally, no ongoing documentation of the amounts of produced h t or cold heat ld required i d

Ö No practical benefit of a GoO www.res-h-policy.eu

9

The Guarantee of Origin for RES-H/C

GoO within a RES-H/C Use Obligation? Principle: Building owners are obliged to source a certain share of their total thermal energy use from renewable energy sources Proof of compliance: • volume of consumed (and produced) RES RES-H H -> could be delivered by GoOs • total thermal energy demand for the entire building (reference)

Ö additional building specific data needs to be collected to verify compliance Ö no significant i ifi t simplification i lifi ti off the th verification ifi ti procedure d by b using GoOs

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10

The Guarantee of Origin for RES-H/C

Variant: Use obligation with compensation mechanism Background g • A use obligation commits all participants in the same way • Thus a fixed use obligation provides no incentives to optimally exploit the e g building specific RES-H/C e.g. RES H/C potentials Introducing a mechanism of compensation between the obliged actors could provide incentives to over-fulfil the minimum obligation • Building owners that over-fulfil the minimum RES-H share would be entitled to sell these surplus volumes to those obliged parties, which have to deal with minor conditions (and for which the purchase of such surplus volumes would be cheaper than installing a RES-H S device)) • Consequence: the same overall quantitative target could be reached at lower costs • Such a system could be jointly implemented by different Member States Ö GoO could facilitate the transfer of surplus volumes between obliged parties within one country p y or in different countries www.res-h-policy.eu

11

The Guarantee of Origin for RES-H/C

Summary and Conclusions •

The GoO does not seem to provide any practical benefit for decentralised small-scale RES-H/C installations



Potential benefits could be exploited in larger heating grids that are partly fed by RES-H/C



For some supportt instrument F i t t options ti the th GoO G O could ld be b a useful f l tool t l for administering the system



All in all all, dislike the RES-E sector, sector the GoO for RES-H/C seems to deliver only limited benefits

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12

The Guarantee of Origin for RES-H/C

Thank you for your attention

Contact Veit Bürger Öko-Institut e.V. tel.: +49-761-45295-25 email: [email protected]

www.res-h-policy.eu

13

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