Research activities at Vienna University of Technology on promotion of Renewables and decentralised energy supply

1

Reinhard Haas, Amela Ajanovic

Energy Economics Group, Vienna University of Technology

decentralised energy supply

► Starting from an energy-economic assessment of decision-making for purchasing energy services:

S = E η(T) S = f(Y, ps, WTP(s))

Method of approach

2

► Combing bottom-up (technical) modeling with top-down (econometric) analyses

► Modeling dynamic processes based on technological learning, cost resource curves of potentials and policy measures

ElectricityfromRES

Energy

efficiency

Liberalisation& (re-)regulation

of electricitymarkets

Major research areas

3

efficiency

Heat fromRES (incl.buildings

Alternative fuels &automotive systems

SUPPLY DEMAND

SURVEY

1. Introduction mission / research focuses

3. Promotion of renewables for electricity

2. Liberalised vs regulated electricity

markets

4

3. Promotion of renewables for electricity

& heat

4. Promotion of alternative fuels and

alternative automotive systems in transport

5. Outlook

� Our current standard of living – all goodsand services we enjoy – is based on the consumption of energy

� However, this system is currently not

1. Mission statement

5

� However, this system is currently not sustainable. Renewable energy sources aswell as more efficient and more careful waysto use energy are cornerstones in convertingour economy into a sustainable system

� The objective of the EEG is, to contribute significantly to this process

2. Liberalised vs regulatedelectricity markets

• Major objective of liberalisation of ESI in

Europe: lead to ONE European electricity

market

6

market

• Core motivation:

LIB Competition! lower prices!

Average wholesale electricity price 2007 [€/MWh]

BottlenecksBottlenecks

Market separationMarket separation2828

1. INTRODUCTION

7

4040

4848

3838

7171

3737

4242 3131

3939

4343

3737--42 EUR/MWh42 EUR/MWh

60

70

80

90

100

EU

R/M

Wh

1. INTRODUCTION

• 2007: Slow convergence of spot prices?

ItalyItaly

8

Nordic marketNordic market

0

10

20

30

40

50

1999 2000 2001 2002 2003 2004 2005 2006 2007

EU

R/M

Wh

Nordic AT DE FR PL ES IT NL UK CZ

“Core” EU-market

Nordic market Nordic market • 2007: Trend towards

decrease?

60

70

80

90

100

1. INTRODUCTION

• At some times convergence of spot

prices:

ItalyItaly

9

0

10

20

30

40

50

60

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU

R/M

Wh

Nordic AT DE FR PL ES IT NL UK CZ

“Core” EU-market

Nordic marketNordic market

• 2008: Clear trend

towards

steep increase!!!

200

250

300

Lo

ad

an

d c

ap

acit

y [

GW

]

New plants

2. THE “EU-4” MARKET

• Trends in generation capacities and load:Looming capacity shortage with lowLooming capacity shortage with low

hydro/nuclear power availability hydro/nuclear power availability

10

0

50

100

150

2005 2007 2009 2011 2013 2015 2017 2019

Lo

ad

an

d c

ap

acit

y [

GW

]

Hydro

Oil

Gas

Lignite

Coal

Nuclear

Available Cap.

Load

Source: UCTE, Platts, national statistics

• Variations and uncertainties in available capacities play a

crucial role

AB

EU

R/M

toe

CS_B

PS_A

pA

pB

PS_A

3. MARKET INTEGRATIONE

UR

/Mto

e

11

A+B

TWhTWh

MBtu

EU

R/M

toe

pA

pA+B

EU

R/M

toe

3. MARKET INTEGRATION

• Textmasterformate durch Klicken bearbeiten

• Zweite Ebene

• Dritte EbenePrice = MC-A

Price = MC-B

• Textmasterformate durch Klicken

bearbeiten

• Zweite Ebene

• Dritte Ebene

Price = MC-A

• Comparison of price effects:

12

• Dritte Ebene

• Vierte Ebene

• Fünfte Ebene

28

Price = MC-A• Dritte Ebene

• Vierte Ebene

• Fünfte Ebene

29

Price = MC-B

Adding a “short” country Adding a “long” country

• Are “new” countries really long?

FRANCE, GERMANY, AUSTRIA – ONE MARKET

!!!

80

100

120E

UR

/MW

h

13

0

20

40

60

Jän.

02M

ai.0

2S

ep.0

2Jä

n.03

Mai

.03

Sep

.03

Jän.

04M

ai.0

4S

ep.0

4Jä

n.05

Mai

.05

Sep

.05

Jän.

06M

ai.0

6S

ep.0

6Jä

n.07

Mai

.07

Sep

.07

Jän.

08M

ai.0

8S

ep.0

8Jä

n.09

EU

R/M

Wh

Austria Germany France

80

100

120

EU

R/M

Wh

FRANCE, GERMANY, AUSTRIA, CZECH REPUBLIC, POLAND –ONE CONVERGING MARKET?

14

0

20

40

60

Jän.

02M

ai.0

2S

ep.0

2Jä

n.03

Mai

.03

Sep

.03

Jän.

04M

ai.0

4S

ep.0

4Jä

n.05

Mai

.05

Sep

.05

Jän.

06M

ai.0

6S

ep.0

6Jä

n.07

Mai

.07

Sep

.07

Jän.

08M

ai.0

8S

ep.0

8Jä

n.09

EU

R/M

Wh

Germany Poland Czech Republic

3. MARKET INTEGRATION

• Hypothetic price effects by integrating

CZ+PL:

40

50

60

[EU

R/M

Wh

]

“EU-4” market

15• Price reduction of 4% in the considered period – How

long?

0

10

20

30

Jan

05M

rz 0

5M

ai 0

5

Jul 0

5Sep

05

Nov

05

Jan

06M

rz 0

6M

ai 0

6

Jul 0

6Sep

06

Nov

06

Jan

07M

rz 0

7M

ai 0

7

Jul 0

7Sep

07

[EU

R/M

Wh

]

Source: EEX, UCTE, BAFA, TU Vienna

“EU-4” market

“EU-4+2” market

Current household electricity prices

(excl. Taxes)

0.08

0.1

0.12

0.14E

UR

/kW

h

Austria

EU-average

Convergence?

160

0.02

0.04

0.06

0.08

1991 1993 1995 1997 1999 2001 2003 2005 2007

EU

R/k

Wh

Czech Republic

3. PROMOTING RENEWABLES FOR ELECTRICITY

AND HEAT

17

CORE MOTIVATION:

Policy targets for an

PROMOTING RENEWABLES FOR

ELECTRICITY GENERATION

18

INCREASE of RES-E!

e.g. 20/20/2020 targets

RES-E directive: increase share of RES-E from 12% 1997 to 22% in 2010)

EU RES targets for 2020:

2020 Targets for RenewablesShare of Gross Final Energy Consumption

AustriaBelgiumBulgaria

CyprusCzech Republic

DenmarkEstoniaFinlandFrance

190.0% 10.0% 20.0% 30.0% 40.0% 50.0%

FranceGermany

GreeceHungary

IrelandItaly

LatviaLithuania

LuxembourgMalta

NetherlandsPoland

PortugalRomaniaSlovakiaSlovenia

SpainSweden

United Kingdom

Source: Based on European Commission (COM(2008) 19)

• Since about 1997 triggered by EU-directives and EU initiatives

REMARK ON RES – DEPLOYMENT IN THE EU-COUNTRIES

20

directives and EU initiatives

• Yet, specific country success stories verystrongly related to national policies design!

• Moreover, current harmonisation efforts notnecessarily towards most effective and efficient policies!

5000

6000

7000

8000

9000 Since 2005: Other countries gain

similar shares! (Italy, France, Ireland,

UK, Portugal, Netherlands) !!!

Wind in EU-27: Installed capacities per year

SPAIN

21

-1000

0

1000

2000

3000

4000

5000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

MW

/yr

AT BE DK DE FR GR IR IT NL PT PL ES SE UK

GERMANY

100

120

140

160

180

200

TW

h/y

rELECTRICITY GENERATION

FROM „NEW“ RENEWABLES IN EUROPE

1997: 1.4 %

2007: 5.2 %

22

0

20

40

60

80

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

TW

h/y

r

Biogas Solid biomass Biowaste Geothermal

Photovoltaics Wind on-shore Wind off-shore

1997: 1.4 %

RES for heating EU-27

1500

2000

2500P

J

Heat from renewables in EU-27

1997 ���� 2007:From 9% to

11%

23

0

500

1000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

PJ

Wood Non-Grid Biomass gridBiogas Solar ThermalGeothermal&ambient heat

Main support instruments: Subsidies and income

tax incentives for biomass boilers and solar thermal collectors

SURVEY ON STRATEGIESFOR PROMOTING RENEWABLE ENERGY

REGULATORY VOLUNTARY

Generation-based• RPS

• Quota-based TGCs• National generation targetsCapacity-

drivenstrategies Investment focused • Bidding/Tendering

• National installation or capacity

targets

GO-Trade

24

strategies Investment focused • Bidding/Tenderingtargets

Generation-based

• feed-in tariffs,

• rate-based incentives

• Net metering

• Green Power Marketing

• Green tariffs

• Solar stock exchangePrice-driven

strategiesInvestment focused

• Rebates

• Soft loans

• Tax incentives

• Contracting

• Shareholder progr.

• Contribution

• Bidding

Other –

• NGO-marketing

• Selling green buildings

• Retailer progr.

• Financing

• Public building prog.

MAJOR PROBLEM:

Correct design of policy

25

policy• with respect to:

• which targets to be reached when?• Financial incentives

• Credibility for investors• costs for customers

All regulatory All regulatory promotion schemes promotion schemes

(Quota(Quota--based TGC systems, tendering based TGC systems, tendering

systems, Feedsystems, Feed--in tariffs) create anin tariffs) create an

THE ISSUE OFTRANSFER COSTS

26

systems, Feedsystems, Feed--in tariffs) create anin tariffs) create an

artificial marketartificial market

and cause and cause

transfer costs (additional costs)transfer costs (additional costs)

How to minimiseHow to minimisetransfer costs transfer costs

Price, costs [Euro/MWh] MC (Static

cost curve)

?

Minimise additional costs for consumers = Producer Surplus + Generation costs - Revenues electricity market

( - Avoided External costs)

pMC

27Quantity kWh)

price of

certificate

Quota Q

pele

MC ... marginal

generation costs

pele ... market price for

(conventional)

electricity

pMC ... Marginal price

for green

electricity (due to

quota obligation)Generation Costs (GC)

Producer surplus (PS)?

Avoided External costs

2

2.5

3

Billio

n E

UR

/yr

Transfer costs vsTransfer costs vsavoided costsavoided costs

Example: Promotion of wind in Germany 2005Example: Promotion of wind in Germany 2005

28

0

0.5

1

1.5

Transfer costs EEG Avoided external costs

Billio

n E

UR

/yr

Source: Krewitt/Schlomann: Externe Kosten …( 2006)Source: Krewitt/Schlomann: Externe Kosten …( 2006)

The lower the additional costs The lower the additional costs

(=transfer costs) are which have (=transfer costs) are which have finally to be paid by electricity finally to be paid by electricity

customerscustomers

29

customerscustomers

the higher will be public acceptancethe higher will be public acceptance

the larger will be the amount of the larger will be the amount of additional electricity generated from additional electricity generated from

RES. RES.

2000 2002 2004 2006 2008

Green-X

ELGREEN

theoretical modeling

FOR FOR FOR FOR RES 2020RES 2020RES 2020RES 2020

>>The “policy” track <<Evolution

30empirical application

FOR FOR FOR FOR RES 2020RES 2020RES 2020RES 2020

2002 2004 2006 2008 2010

GreenNet

theoretical modeling

>>The track on

“RES-E grid integration” <<

31

GreenNet-EU27

GreenNet-Incentives

empirical application

SUCCESS OF STRATEGIES

Co

sts

(E

UR

/ kW

)

(=eff

icie

ncy)

Major objectives:

• increase the

amount of

32

MW /Number of plants

(=effectiveness)

Co

sts

(E

UR

/ kW

)

(=eff

icie

ncy)

amount of

electricity from

renewables and

• reduce costs!

Effectiveness vs Costs

8

10

12C

os

ts (

c/k

Wh

)

DE

UK

IT BE

EFFECTIVENESSVS COSTS

Feed-in tariffsTradable certificates

_

33

0

2

4

6

0 20 40 60 80 100 120

kWh/cap/yr

Co

sts

(c/k

Wh

)

ES

SE

AT

DE

+

_

8

10

12

14

Va

lue

of

ce

rtif

ica

te (

c/k

Wh

)

Belgium (average)

Italy

PRICES OF CERTIFICATES

Continuous increase!

34

0

2

4

6

8

2002 2003 2004 2005 2006 2007 2008

Va

lue

of

ce

rtif

ica

te (

c/k

Wh

)

Sweden

UK

*) Figures for 2007 and 2008 preliminary!

Shortage in banked certificates!

[cen

t/kW

h]

IMPACT OF THE SHAPEOF THE COST CURVE

Producer Surplus

35[GWh/year]

Biomass

Small HydroWind Loc. A

Wind Loc. B

Quota

PZert

Costs

[cen

t/kW

h]

Biomass pure

Small Hydro

IMPACT OF THE SHAPEOF THE COST CURVE

Producer Surplus

36[GWh/year]

Munic. waste

Wind

Quota

PZert

Biomass cofiring

Costs

80

100

120

140

160

Ge

nera

tio

n C

ost

[€/M

Wh

ele]

Cost-resource curve (RES-E in the EU27)

Marginal cost for RES-E

Producer Surplus

THE SHAPE OF THECOST CURVE E U - 27

Additionalgeneration

costs

Producer surplus

37

0

20

40

60

80

0 200 400 600 800 1000

Additional (up to 2020) realisable

potential for RES-E [TWh]

Ge

nera

tio

n C

ost

[€/M

Wh

Power price

Required

RES-E

deployment

RequiredRES-Edeployment

Electricity market price

Total costs

50%

60%

70%

80%

90%

RE

S in

term

s o

f fi

nal en

erg

y [

% o

f d

em

an

d]

RES share 2005

RES long term (2030) potential - share on 2030 demand (baseline case)

RES long term (2030) potential - share on 2030 demand (energy efficiency case)

EU27: Potential share of RES depending on efficiency

EU27 in 2030: FULL RES POTENTIAL

380%

10%

20%

30%

40%

50%

AT

BE

BG

CY

CZ

DK

EE FI

FR

DE

GR

HU IE IT LA

LT

LU

MT

NL

PL

PT

RO

SK SI

ES

SE

UK

EU

27

RE

S in

term

s o

f fi

nal en

erg

y [

% o

f d

em

an

d]

EU27 in 2030: FULL RES POTENTIAL

EXHAUSTED: WITHOUT EFFICIENCY 29%

WITH EFFICIENCY 38%

CONCLUSIONS (1)CONCLUSIONS (1)

• Careful design of a strategies: by far the most important success criteria!

• There should be a clear focus on NEW capacities!

• To ensure significant RES-E deployment in the long-term, it is essential to promote a broad

IMPROVE/OPTIMIZE THE CURRENT SYSTEMS

BEFORE HARMONISING

39

long-term, it is essential to promote a broad portfolio of different technologies

• Currently, a well-designed FIT provides RES-E-deployment fastest and at lowest costs for society. We expect GO Trade to be a very expensive way to promotes RES

• Ensure credibility of the system! Avoid „stop-and-go“ approaches

BEFORE HARMONISING OR IMPLEMENTING MAJOR CHANGES!

CONCLUSIONS (2)CONCLUSIONS (2)

• Instead of harmonisation: Stimulate/Foster competition between promotion schemes/between countries: Which system/where provides new RES-E capacities at lowest costs for society?

• Exchange of lessons learned: Improvement of

40

• Exchange of lessons learned: Improvement of strategy design must build on lessons learned

• For sustainable policy -> parallel focus on demand-side conservation of high priority!

• Supporting RES? Yes, but … externality-based taxation of all energy carriers preferable!

• Promoting RES in EU successful? Yes, but increase in energy consumption outweighed …

• Download reports from:

INTERESTED IN

FURTHER INFORMATION?

41

• Download reports from: www . eeg . tuwien . ac . at www . green-x . atwww . optres . fhg . de

• E-Mail to: Reinhard.Haas @ tuwien. ac.at

Deriving effective least-cost policy strategies for alternative

automotive concepts and alternative fuels

(ALTER-MOTIVE)

www.alter-motive.org

Amela Ajanovic, Reinhard Haas

• Coordinator:

• EEG, Vienna university of Technology

• Partners:– Stichting Energieonderzoek Centrum Nederland, The Netherlands

– Eni Corporate University S.P.A., Italy

– BSR Sustainability GmbH, Germany

– Wuppertal Institut für Klima, Umwelt, Energie GmbH, Germany

– AEOLIKI Ltd, Cyprus– AEOLIKI Ltd, Cyprus

– Black Sea Energy Center, Bulgaria

– Association Rhônalpénergie-Environnement, France

– Centre for Renewable Energy Sources, Greece

– Stowarzyszenie The Kraków Institute for Sustainable Energy, Poland

– Chalmers Tekniska Högskola Aktiebolag, Sweden

– Forschungsgesellschaft Mobilität-Austrian Mobility Research, Austria

– Sociedade Por Quotas CEEETA-ECO, Portugal

– Det Økologisk Råd (EcoCouncil), Denmark

• Duration:1 October 2008 - 30 April 2011

• The core objective is to derive effective least-cost policy strategies to achieve a significant increase in innovative alternative fuels (AF) and corresponding alternative more efficient automotive technologies (AAMT) to head towards a sustainable individual & public transport system.

• The heart of this project is an investigation of about 80 • The heart of this project is an investigation of about 80 recently implemented successful case studies of pilot projects for marketing AF & AAMT from all over Europe and beyond.

• Furthermore, prospective scenarios on the future deployment of AF & AAMT will be developed, showing how to meet EU targets with least-cost for EU citizens based on efficient & effective policy mixes.

.

Review of historical

developments

Deriving scenarios andTechnology and fuel

assessment

Evaluation of policy

effectivness

Deriving scenarios and

action plan

Development and

analysis of case studies

Economic analysis

Resource Fuels Powertrains

WTT TTWWTT TTW

WTW

�Fuel costs (€/l)

� Investments costs (€/vehicle)

� Mobility costs (€/km)

bxaxC

−

⋅=)(

C(x): Specific cost

x: Cumulative capacity

b: Learning index

a: Specific cost of the

first unit

Economic analysis

Technology learning curves

pb−

= 2

P: progress ratio

Economic analysis

Net feedstock costs :

productbyCASubFPFC−

−−=

Biofuels costs (BFC) :

SubACCFCBFC −+=

productbyCASubFPFC−

−−=

Average gross conversion costs:

MOCCACC &+=

CRFSCCC *=

Economic analysis

USA 2030

USA 2005

BRA 2030

BRA 2005

0 0.1 0.2 0.3 0.4 0.5 0.6

EU 2030

EU 2005

$/litre ethanol

Net feedstock cost Chemicals, energy

Labour costs Capital costs

Maintenance, Insurance, taxes

Cost structure of bioethanol

Economic analysis

Total vehicle costs:

INNOVCONICICIC +=

The total transport costs:

spICFCTC +=

The fuel cost per kilometre:

FPECFC ⋅=

kmsp DVATNOVAICIC /))1()(( +⋅+⋅= α

0,2

0,25

0,3

0,35

Fu

el

co

st

(EU

R/k

Wh

)

Hydrogen

0,05

0,1

0,15

2010 2015 2020 2025 2030 2035 2040 2045 2050

Fu

el

co

st

(EU

R/k

Wh

)

Gasoline Diesel Natural gas (CNG) GTLEthanol Ethanol (Ligno) Biodiesel BiogasFT-Diesel SNG H2 (Natural gas) H2 (RES)Eelectricity (Mix) Electricity (RES)

CNG

Biogas

Biofuel 2. generation

80000

100000

120000

140000

160000

180000

To

tal in

ve

stm

en

t c

os

ts p

er

ve

hic

le (

EU

R)

FC-car

E-car

0

20000

40000

60000

80000

2010 2015 2020 2025 2030 2035 2040 2045 2050To

tal in

ve

stm

en

t c

os

ts p

er

ve

hic

le (

EU

R)

Gasoline Gasoline-Hybrid Diesel Diesel-hybrid:

Natural gas motor Natural gas-Hybrid H2-ICE H2-ICE-Hybrid

E-car Fuel cell

E-car

0,32

0,34

0,36

0,38

0,4

0,42

0,44

Tra

ns

po

rt c

os

t (E

UR

/km

)

H2-ICE

H2-FCE-car

0,24

0,26

0,28

0,3

2010 2015 2020 2025 2030 2035 2040 2045 2050

Tra

ns

po

rt c

os

t (E

UR

/km

)

Gasoline Gasoline-Hybrid DieselDiesel-Hybrid CNG CNG-HybridDiesel (GTL) Diesel-Hybrid (GTL) H2-ICE (H2-Natural gas)H2-ICE-Hybrid (H2-Natural gas) E-car (Mix) FC (H2-Natural gas)Ottomotor (Ethanol) Otto-Hybrid (Ethanol) Otto (Etanol-lig.)Otto-Hybrid (Ethanol-lig.) Diesel (Biodiesel) Diesel-Hybrid (Biodiesel)Diesel (FT-Diesel) Diesel-Hybrid (FT-Diesel) BiogasBiogas-Hybrid SNG SNG-HybridH2-ICE (H2-RES) H2-ICE-Hybrid (H2-RES) E-car (RES)FC (H2-RES)

Biofuels 2. gen.Biogas-Hy.

Thank you!

ajanovic@eeg.tuwien.ac.atajanovic@eeg.tuwien.ac.at

www.eeg.tuwien.ac.at

www.alter-motive.org