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The Clean Energy Package and the Role of Renewables


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Spring Seminar FUNSEAM
The Clean Energy Package and the Role of Renewables
Sofia Pinto Barbosa
Unit Renewable Energy and CCS Policy, DG ENERGY
European Commission
Madrid, March 23rd. 2017

Published in: Environment
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The Clean Energy Package and the Role of Renewables

  1. 1. CLEAN ENERGY FOR ALL EUROPEANS Spring Seminar The Clean Energy Package and the Role of Renewables Sofia Pinto Barbosa Unit Renewable Energy and CCS Policy, DG ENERGY European Commission Madrid, March 23rd. 2017
  2. 2. CLEAN ENERGY FOR ALL EUROPEANS The Clean Energy Package and the Role of Renewables Madrid, 23rd March 2017 Sofia Pinto Barbosa European Commission – DG ENERGY Unit C1 – Renewables
  3. 3. CLEAN ENERGY FOR ALL EUROPEANS 1. Clean Energy for All Europeans 1. Revised Renewables Directive for the Period after 2020 3 AGENDA
  4. 4. CLEAN ENERGY FOR ALL EUROPEANS GOALS OF THE CLEAN ENERGY FOR ALL EUROPEANS PACKAGE LEADING THE ENERGY TRANSITION - CREATING VALUE FOR CITIZENS AND BUSINESS Demonstrating global leadership in renewables Delivering a fair deal for consumers Putting energy efficiency first
  5. 5. CLEAN ENERGY FOR ALL EUROPEANS New Electricity Market Design (including Risk Preparedness) HOW DO WE GET THERE ? THE RIGHT REGULATORY FRAMEWORK FOR POST – 2020 Energy Union Governance " In essence the new package is about tapping our green growth potential across the board" Commissioner Miguel Arias Cañete (2016) Energy 5
  6. 6. CLEAN ENERGY FOR ALL EUROPEANS HOW DO WE GET THERE? THE RIGHT ENABLING ENVIRONMENT FOR POST – 2020 Setting the right incentives for investment in the energy transition and maximising the use of public funds Delivering on social concerns and job training to ensure a socially fair energy transition Driving digitalization forward to enable new energy technologies Delivering on key energy infrastructure projects Accelerating research and innovation to support leadership in advanced RES Ensuring regional cooperation: Making the energy transition a multi-level government and stakeholder project External dimension: Fostering security of supply and promoting clean energy measures abroad 6
  7. 7. CLEAN ENERGY FOR ALL EUROPEANS The package presents a dual opportunity to speed up decarbonisation and to speed up growth and job creation. WHAT CAN WE EXPECT IN TERMS OF RESULTS? Economic growth*: • 1% increase in GDP • 190bn EUR into the economy • 900,000 new jobs *Upper end of estimates 2016 2030 Investment: • extra 177bn EUR euros per year of investment from 2021 to meet 2030 climate & energy targets • Crucial role for EFSI Decarbonisation: • Carbon intensity of the economy 57% lower in 2030 than in 2015 • 72% share of non-fossil fuels in electricity generation in 2030 7
  9. 9. CLEAN ENERGY FOR ALL EUROPEANS THE REVISED RES DIRECTIVE POST-2020 - CONTEXT More than 1 million people work in the renewable energy sector, with potentially 3 million more jobs by 2020 With an estimated renewable energy share of 17% of gross final energy consumption in 2015 the EU is on track to meet the 2020 target Reduced dependence on fossil fuels and energy imports: cut fossil fuels use by the equivalent of Poland's entire annual energy consumption Renewables are becoming affordable: 80% decrease of PV panel prices in 5 years, offshore wind already met targets for 2020 European leadership: in 2016 173 countries have renewable energy targets
  11. 11. CLEAN ENERGY FOR ALL EUROPEANS Investment certainty Cost-effective deployment Collective target achievement Strengthening bioenergy sustainability Promoting innovation in transport Tapping heating and cooling potential Contributing to the EU political priority of becoming world number 1 in renewables & Achieving the at least 27 % EU-level binding renewables target cost-effectively THE REVISED RES DIRECTIVE POST-2020 – KEY OBJECTIVES
  12. 12. CLEAN ENERGY FOR ALL EUROPEANS Various measures can ensure a more even and more cost-effective deployment of RES across the EU e.g. Financial instruments tackling cost of capital, no retroactive changes, open up support schemes… A MORE EVEN DEPLOYMENT ACROSS MEMBER STATES IS CRUCIAL Investments are increasingly concentrated in a few Member States with low cost of capital and policy frameworks perceived as more stable UK and Germany alone represented over 2/3 of all investments over 2013-2015 Baseline EUCO27 RES share in 2030 27% 27% Assumptions National support; diverging cost of capital EU-wide support; same cost of capital RES investments required (2021-2030) € 404 bn € 240 bn Share of top 3 MS in total investments 67% 47%
  13. 13. CLEAN ENERGY FOR ALL EUROPEANS ENSURING A HOLISTIC APPROACH ACROSS THE PACKAGE RED II Electricity Reg. • Balancing responsibility (art 4) • Balancing market rules (art 5) • DA and ID market rules (art 6-7) • Priority dispatch (art 11) • Priority access / curtailment (art 12) • Network planning (art 12) • T&D network tariffs (art 16) • ENTSO-E tasks (art 25) • Network codes on curtailment + grid tariffs (incl. connection charges) + ancillary services (art 55) Electricity Dir. • Entitlement to a dynamic price contract (art 11) • Aggregators (art 13, art 17) • Active / self-consumers' rights (art 15) • Local energy communities' rights (art 16) • Smart metering (art 19-21) • Ancillary services by DSOs (art 31) and TSOs (art 40) • Integration of electro-mobility in networks (art 33) • Gos mandatory for RES-e disclosure (Annex II) EPBD • Definition of technical building systems (art 2) • Long term renovation strategies (art 2) • Smart finance for smart buildings (art 2) • Charging points / pre-cabling requirements (art 8) • Calculation of EPBD (Annex 1.2) Governance Reg. • Integrated national energy and climate plans (art 3, art 13) • Integrated national energy and climate reports (art 15, art 18) • Assessment of progress (art 25) • Response to insufficient ambition and progress (art 27) • Commission recommendations (art 28) • Template for national plans (Annex I) • MS reporting obligations for RES (Annex VII) EED • Energy savings obligation (art 7) • Metering obligations for H&C (art 9a) • Billing and consumption information (art 10, Annex VII) • Update of the PEF (Annex IV) • Common method for calculating energy savings (Annex V)
  15. 15. CLEAN ENERGY FOR ALL EUROPEANS 15 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 2005 2015 2020 2030 2050 Other electricity RES-E RES-E: Where are we and where do we need to go? RES-E share of total electricity 66% 49% 36% 28% 15% 247 142 103 79 42 Ktoe Ref16 Euco30 Euco30 +13pp +39 Mtoe +17pp +105 Mtoe 79 1/3 1/2 2/31/4
  16. 16. CLEAN ENERGY FOR ALL EUROPEANS 16 PROMOTING A STABLE FRAMEWORK FOR RENEWABLE ELECTRICITY STATE AID RULES 1. Guidelines 2. Case by case notifications to and assessment by DG COMP Support to be market- responsive and cost effective Visibility for investors (3- year cycle) Gradual and partial opening to cross-border participation Stability of financial support (no retroactive changes) Support schemes One-stop shops Time limits Simple notification for small-scale Simple notification for repowering Administrative barriers Article 4 Art 15(3) Article 5 Article 6 Article 16 Art 16, 17 Article 17 Article 16
  17. 17. CLEAN ENERGY FOR ALL EUROPEANS 17 Unlocking the Potential of Consumer Engagement Consumer Mobilise private capital Increase local acceptance Inform consumer choices Drives 50% of rooftop PV Good sites are getting scarcer Ready to pay a premium for RES?
  18. 18. CLEAN ENERGY FOR ALL EUROPEANS 18 EMPOWERING CITIZENS AND COMMUNITIES Renewable self-consumers to be allowed to generate, store, sell and consume their own electricity (linked to art. 15 Electricity Directive) Renewable self-consumers in multifamily houses to be allowed to generate, store, sell and consume their electricity jointly No disproportionate procedures and charges that are not reflective Specific provisions for energy communities (linked to art. 15 Electricity Directive) Improved Guarantees of Origin for better consumer information (art. 19)
  19. 19. CLEAN ENERGY FOR ALL EUROPEANS RES-H&C – What Is At Stake? Why act at EU-level ? • ≈ 50% energy consumption • 18% RES today => 27% in 2030 • 68% of the EU's gas imports • Risk of missing target if no action Primary energy demand for heating and cooling in the EU Essential yet fragmented sector
  20. 20. CLEAN ENERGY FOR ALL EUROPEANS ADDRESSING THE UNTAPPED POTENTIAL OF HEATING & COOLING Article 23 • MS "shall endeavour to increase" the share of RES-HC by 1pp/year • Flexibility on the measures • Flexibility on implementing entities • Possible combination with EED Art 7 Article 24 • Consumers' information on DHC energy performance and RES share • Consumers can disconnect, if they can achieve a higher performance, or switch within the DHC system to RES/waste heat suppliers • Opens DHC for RES/waste energy suppliers Article 2 (definitions) introduction of ambient heat and waste heat Article 15 (reg. and codes) • Reinforcement of RES-HC in planning & building • Minimum levels of RES in buildings + link with EPBD • Easier technical requirements Article 26 to 28 bioenergy sustainabitility criteria Article 20 (grid operation) DHC deployment, RES integration New Articles Revisions
  21. 21. CLEAN ENERGY FOR ALL EUROPEANS 21 23% 56% 15% 0% 5% 1% Gasoline Diesel Kerosene Gas Biofuel Electricity • 32% of final energy consumption • Relies on oil for 94% of its energy needs. • Increasing share of total GHG emissions (23% in 2014) • GHG emissions remain higher than in 1990. Source: Primes, 2015 shares in transport energy consumption RES in Transport – Key Figures
  23. 23. CLEAN ENERGY FOR ALL EUROPEANS BIOENERGY – THE ISSUES Focus on solid biomass/biogas for heat and power – major role for the EU climate & energy objectives. Clear benefits in terms of energy security, growth and jobs, technology innovation, and climate action. Emerging risks :  Climate performance of forest biomass depending on future trends on forest management practices  Environmental impacts (e.g. biodiversity, soil and air quality)  Potential competition for biomass resources and biomass availability  Fragmentation of the internal market resulting from diverging national sustainability schemes
  24. 24. CLEAN ENERGY FOR ALL EUROPEANS 24 agriculture biomass – kept/streamlined existing sustainability criteria (e.g. no-go areas) (full harmonization) biofuels/bioliquid - GHG savings increased to 70% for new installations heat and electricity from biomass (20 MWfuel) and biogas (0.5 MWel) - new GHG saving requirement: 80% for new plants in 2021 (85% in 2026) Sustainability criteria forest biomass – new risk-based criteria on biodiversity and carbon management (minimum requirement, Member States can go beyond) End-use performancecriteria Cogeneration requirement for all new bioelectricity plants (20 MWfuel), 3-year transition period + exceptions for security of supply. EU BIOENERGY SUSTAINABILITY FRAMEWORK GHGefficiencyagriforest • Sustainability criteria for same feedstock independent of final use • End use performance criteria for biofuels, biomass and biogas
  25. 25. CLEAN ENERGY FOR ALL EUROPEANS HOW TO MAKE IT HAPPEN: ACHIEVING AT LEAST 27 % RES EU-WIDE 2030202320212019 Governance (reporting & monitoring) Sector specific measures (transport, H&C, support schemes, self-consumers…) Flexible Gap filler If gap, MS decide on measures incl. voluntary contribution to financing platform Enabling framework incl. enhanced use of funds Planning, reporting and monitoring 2020 targets as the baseline Governance RED II
  26. 26. CLEAN ENERGY FOR ALL EUROPEANS 26 #EnergyUnion
  28. 28. CLEAN ENERGY FOR ALL EUROPEANS • Renewables (2/3) • Recast of the Electricity Regulation
  29. 29. CLEAN ENERGY FOR ALL EUROPEANS 29 Solution: merit order dispatch, unless… Administrative effort Demonstration project Grandfathering Problem: increasing share of PD, no room for market, loss of flexibility incentives Priority Dispatch current law: PD for all RES, CHP, some indigenous ressources, no definition Priority dispatch
  30. 30. CLEAN ENERGY FOR ALL EUROPEANS 30 Solution: clear curtailment rules Voluntary & Market- based where possible Clear curtailment order Clear compensation Reporting & Planning, Countermeasures Problem: balancing economic efficiency, secure system operation, and achieving decarbonisation objectives; legal certainty Priority access current law: PA for all RES & CHP, no definition Priority access / curtailment
  31. 31. CLEAN ENERGY FOR ALL EUROPEANS 31 Market-based where possible • Voluntary offers for being curtailed come first • Market-based compensation • But not always possible/sufficient Clear curtailment order • When non-market based • First conventional, then CHP, then RES, then self-consumption (no export to the grid) • Deviation if disproportionate costs or security issues Compensation • At least 90 % of lost net revenues (including subsidies) or additional costs, whatever higher Reporting & planning & countermeasures • Yearly report by TSO on RES & CHP curtailment & redispatch • Obligation to aim for minimum curtailment & redispatch • Right to integrate 5 % curtailment in network planning where more efficient Priority access / curtailment
  32. 32. CLEAN ENERGY FOR ALL EUROPEANS 32 Solution: BR for all with possible national exemptions Administrative effort Demonstration project Grandfathering Problem: balancing responsibilty is fundamental for flexibility (e.g. aggregation), stable network & liquid short-term markets Balancing responsibility No principle in 3rd package. EEAG requires "standard balancing responsibility" with exceptions Balancing responsibility
  33. 33. CLEAN ENERGY FOR ALL EUROPEANS 33 What does that mean for investors? • Full protection of legitimate expectations / grandfathering • Priority dispatch has little impact on solar and wind running hours due to their position in the merit order (but can have impact on high marginal cost RES) • Curtailment rules provide clarity and legal certainty, strongly protecting RES and CHP • Balancing responsibility provides incentives for aggregation and liquid short-term markets • Stronger intraday & day-ahead markets help renewables to hedge • RES can capture higher prices when the system is tight, can participate in system services and will be curtailed as a last resort • Level playing field and strict rules on capacity mechanisms reduce risk for new distortions in favour of conventional generation Impact for investors
  34. 34. CLEAN ENERGY FOR ALL EUROPEANS • Renewables (3/3) • Governance Regulation
  35. 35. CLEAN ENERGY FOR ALL EUROPEANS FOR ACHIEVEMENT OF ENERGY UNION OBJECTIVES AND 2030 TARGETS Draft National Plans (and their updates) Implementation of National Plans (Progress Reports) Final National Plans (and their updates) Recommendations (2018 and 2023) MS COM Recommendations (2021-2030) Union measures (2019 and 2024) Union measures (2021-2030) National measures for RES (2024) Closing "Delivery gap"Closing "Ambition gap" Achieving the at least 27% target