The efficiency of feed-in tariffs in Germany and Spain

TOPIC III: Instruments of
environmental economics in
environmental policy: The
efﬁciency of feed-in tariffs in
Germany and Spain

Amin Zayani 2806043 Environmental Economics
ER M WS 2009 / 2 0 1 0 16 January 2010
1

Table of content

1. PV electricity generation costs
2. Existing support systems in the EU
3. The EEG case in Germany
4. The FIT law in Spain
5. Criticism of FIT policies
6. Conclusion
7. References

2

1. PV electricity
generation costs

Table 4.1: Expected PV generation costs for roof-top systems at different locations

Sunshine
hours 2007 2010 2020 2030
Berlin 900 0.44 € 0.35 € 0.20 € 0.13 €
Paris 1,000 0.39 € 0.31 € 0.18 € 0.12 €
Washington 1,200 0.33 € 0.26 € 0.15 € 0.10 €
Hong Kong 1,300 0.30 € 0.24 € 0.14 € 0.09 €
Sydney/Buenos Aires/ Bombay/Madrid 1,400 0.28 € 0.22 € 0.13 € 0.08 €
Bangkok 1,600 0.25 € 0.20 € 0.11 € 0.07 €
Los Angeles/Dubai 1,800 0.22 € 0.17 € 0.10 € 0.07 €

3

1. PV electricity
generation costs
Figure 4.1: Development of utility prices and
PV generation costs

[€/kWh]
Photovoltaics
1,0
Utility peak power
Utility bulk power

0,8
900 h/a*:
0.44 €/kWh
Table 4.1: Expected PV generation costs for roof-top0,6
systems at different locations
1800 h/a*:
0.22 €/kWh
Sunshine
hours 0,4
2007 2010 2020 2030
Berlin 900 0.44 € 0.35 € 0.20 € 0.13 €
Paris 1,000 0,2
0.39 € 0.31 € 0.18 € 0.12 €
Washington 1,200 0.33 € 0.26 € 0.15 € 0.10 €
Hong Kong 1,300 0.30 € 0.24 € 0.14 € 0.09 €
1990 2000 2010 2020 2030 2040
Sydney/Buenos Aires/ Bombay/Madrid 1,400 0.28 € 0.22 €
*h/a: Hours of sun per annum
0.13 € 0.08 €
900 h/a corresponds to northern countries of Europe
Bangkok 1,600 0.25 € corresponds to southern countries of Europe
1800 h/a 0.20 € 0.11 € 0.07 €
Note: The blue band indicates that market support programmes will be
Los Angeles/Dubai 1,800 0.22 € 0.17 €
necessary until about 2020 in some markets.
0.10 € 0.07 €

3

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Renewable Energy Law (EEG) in Germany – how does it work in practice?

3. The EEG case 1. Government [Gov]
Key responsibilities:
Set up legal framework for grid connection
and distribution of electricity

in Germany
Sets (decreasing) tariffs for all RE sources
NO involvement in money flow

2. Renewable energy generator operator [RE] 6. Consumer [con]
Key responsibilities: Key responsibilities:
Follows technical standards for grid connection Pays electricity bill
and operation (-> LG) (including the extra charge
Reports every technical failure etc directly to LG for feed-in tariffs)
Operator of RE power plant Gets renewable and
conventional electricity

3. Local grid operator [LG] 5. Distributor [dis]
Guarantees grid connection Collects money from consumer
Reports quantity of estimated (based on forecast of TM)
RE electricity (forecast) to TM and transfer it to TM
Reports quantity of produced Organises billing for consumer
RE electricity to TM Distributes RE electricity
Pays feed-in tariff to RE power plant

4. Transmission grid operator [tm]
Calculates the total estimated RE electricity
generation based on forecasts from LG
Calculates the total generated RE electricity
based on information from LG
Calculates needed total feed-in tariffs based
on estimated RE electricity production
Breaks down the additional costs per kWh for distributor
Collects the money from Distributors (DIS)
Distributes money to LG to pay feed-in tariffs to RE operators

Supply [generation] 7 Demand [consumption]

Renewable Energy Law (EEG) in Germany – how does it work in practice?

3. The EEG case 1. Government [Gov]
Set up legal framework for grid connection
and distribution of electricity

in Germany
Sets (decreasing) tariffs for all RE sources
NO involvement in money flow

2. Renewable energy generator operator [RE] 6. Consumer [con]
Follows technical standards for grid connection Pays electricity bill
and operation (-> LG) (including the extra charge

Adjustment in feed in tariff digression rate Reports every technical failure etc directly to LG for feed-in tariffs)
Operator of RE power plant Gets renewable and
conventional electricity

in Germany

2008 3. Local grid operator [LG]
2009 2010
2011 5. Distributor [dis]
Guarantees grid connection Collects money from consumer
Roof top <100 kWp 5% 8%
Reports quantity of estimated8%
RE electricity (forecast) to TM
9% (based on forecast of TM)
and transfer it to TM
Reports quantity of produced Organises billing for consumer

Roof top >100 kWp 5% 10%
RE electricity to TM
10%
Pays feed-in tariff to RE power plant 9% Distributes RE electricity

Ground mounted 6.5% 10% 10% 9%
4. Transmission grid operator [tm]
Degression KeyCalculates the total estimated RE electricity2011
2009 2010
responsibilities:

generation based on forecasts from LG
Calculates the total generated RE electricity
Upper limit in MWp above: +1% 1,500 1,700 1,900
based on information from LG
Calculates needed total feed-in tariffs based
on estimated RE electricity production

Lower limit in MWp below: -1% 1,000 1,100 1,200
Breaks down the additional costs per kWh for distributor
Collects the money from Distributors (DIS)
Distributes money to LG to pay feed-in tariffs to RE operators

Supply [generation] 7 Demand [consumption]

3. The EEG case in Germany 850 850

New feed-in Law 600

Feed-in Law 150

1,000 roof programm 100,000 roof programm 78 80
40
3 3 3 3 4 7 12 10 12

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

annually installed PV power in MWp
Inﬂuence of Feed-in Tariff on annual PV installations in Germany
8


Law 54/97 of the Electric Sector 17
Royal Decree 661/2007

Retribution will be as follows:
• P≤100 kW: for the first 25 years 44,0381 € then 35,2305 €
• 100 kW<P≤10 MW: for the first 25 years 41,75€ then 33,4
• 10<P≤50 MW: for the first 25 years 22,9764€ then 18,3811

The revision of the feed in tariff will be done every four years.
Revisions will not be retroactive.

9

the Czech Republic (51 MW), Portugal (50 MW) and Belgium (48 MW).

Figure 2: Historical development of the Global annual PV market per Region

6,000
5,559

5,000

4,000
FIT law amendment
MW 3,000

2,392

2,000
1,603
1,321
1,052
1,000
594
439
278 334
155 197
-
MW 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Spain 0 1 - 2 9 10 6 26 88 560 2,511
USA - 17 22 29 44 63 90 114 145 207 342
Japan 69 72 112 135 185 223 272 290 287 210 230
Rest of the world 68 84 94 75 104 98 53 12 196 207 485
Rest of Europe 8 11 10 16 16 50 30 30 37 108 492
Germany 10 12 40 78 80 150 600 850 850 1,100 1,500
TOTAL 155 197 278 334 439 594 1,052 1,321 1,603 2,392 5,559

Historical development of the global annual PV market
2008 was an exceptional year due to the continuous development of PV in per Region
10
established markets (like Germany, the US and Japan), an astonishing growth


2009 cap introduction

11

in Spain, EPIA expects these 4 countries to represent more more than 75% of the

European market by 2013.

Figure 7: European annual PV market Outlook until 2013 (Policy-Driven scenario)

12,000

Rest of Europe 10,925
Belgium
10,000 Czech Republic
Portugal
Greece 8,785
France
8,000 Italy
Spain 7,110
Germany

MW 6,000
5,490

4,503
4,302
4,000 75%

2,000 1,768

975

-
2006 2007 2008 2009E 2010E 2011E 2012E 2013E

European annual PV market outlook until 2013 (2009 to 2013 are estimations)
12

in Spain, EPIA expects these 4 countries to represent more more than 75% of the

European market by 2013.

Figure 7: European annual PV market Outlook until 2013 (Policy-Driven scenario)

12,000

Rest of Europe 10,925
Belgium
10,000 Czech Republic
Portugal
Greece 8,785
France
8,000 Italy
Spain
Cap introduction 7,110
Germany

MW 6,000
5,490

4,503
4,302
4,000 75%

2,000 1,768

975

-
2006 2007 2008 2009E 2010E 2011E 2012E 2013E

European annual PV market outlook until 2013 (2009 to 2013 are estimations)
12

5. Criticism of FIT policies

•Too expensive!

Source: Wind PV
Electricity produced: 42 660 GWh 4 374 GWh

EEG cost: 4 Bn € 2.1 Bn €

Cost per GWh: 94 000 € 480 000 €

13

6. Conclusion
• Feed in tariffs are effective.

14

6. Conclusion
• The most preferred policy by investors
and industry.

14

6. Conclusion
and industry.
• Technology adaptive.

14

6. Conclusion
and industry.
• Burden not on tax payers.

14

6. Conclusion
and industry.
• Burden not on tax payers.
• Can be less efﬁcient than other policies.

14

7. References

• Assessment and optimisation of renewable energy support schemes in the European
electricity market. Ragwitz et al. 2007.

• Global Market Outlook for Photovoltaics until 2013. EPIA. 2009

• EEG-Mittelfristprognose: Entwicklungen 2000 bis 2013. VDN. 2007

• Solar Generation V. EPIA. 2008

• Supporting Solar Photovoltaic Electricity An Argument for Feed-in Tariffs. EPIA. 2008

• http://www.epia.org/policy/national-policies/spain/legislation.html <last access: 15/01/2010>

• http://www.export.gov.il/Eng/_Articles/Article.asp?CategoryID=640&ArticleID=6596 <last access:
15/01/2010>

15

The efficiency of feed-in tariffs in Germany and Spain

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The efficiency of feed-in tariffs in Germany and Spain