Lessons learnt from German Feed-in Tariff Policy

for policy approaches in ASEAN countries

Asia Clean Energy Forum 2011 June 20 21, 2011 in Manila

Prof. Dr.Ing. Christoph Menke

University of Applied Science, Trier, Germany Joint Graduate School of Energy and Environment, Bangkok, Thailand Senior Consultant for Renewable Energy Policy, GIZ GmbH, Germany
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Framework Conditions for Energy Future:

Reduction of CO2 emissions by 80% until 2050 Availability of Oil & Gas in 40 years questionable Foreign exchange requirement for imported fuels Coal has too high CO2 emission without CCS Nuclear? No option for most countries

We have to go for 100% RE electricity in the long run! If we want this by 2050, we need to start now!
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RE is much more than CO2 reduction: New business opportunities especially for SME Employment, jobs and income for people More independence from oil price fluctuations Additional pension fund for people It is about regional restructuring of economic cycles! Is that really possible or is this a Green Dream? Germany: 2010 = 17% RE electricity; 2050 = 80%! In Bavaria last year 30 000 new PV plants built! 150 000 new jobs created in last 5 years!
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Scenario 2010- 2030 Germany (Guiding Scenario 2010)

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Contribition from RE Electricty to German grid (about 18% now)

Beitrag der erneuerbaren Energien zur Stromerzeugung in Deutschland

120.000

Wasserkraft
100.000

Windenergie Photovoltaik EEG: August 2004

Biomasse *

EEG: Januar 2009

80.000

EEG: April 2000 Novelle BauGB: November 1997 StromEinspG: Januar 1991 - Mrz 2000

[GWh]

60.000

40.000

20.000

0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
* Feste und flssige Biomasse, Biogas, Deponie- und Klrgas, biogener Anteil des Abfalls; 1 GWh = 1 Mio. kWh; Aufgrund geringer Strommengen ist die Tiefengeothermie nicht dargestellt; StromEinspG: Stromeinspeisungsgesetz; BauGB: Baugesetzbuch; EEG: Erneuerbare-Energien-Gesetz; Quelle: BMU-KI III 1 nach Arbeitsgruppe Erneuerbare Energien-Statistik (AGEE-Stat); Bild: BMU / Christoph Edelhoff; Stand: Mrz 2011; Angaben vorlufig

BMU KI III 1 Development of renewable energy sources in Germany in 2009

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Development of wind power installations in number and in MW in Germany

Entwicklung der Anzahl und installierten Leistung von Windenergieanlagen in Deutschland

30.000 30.000

Anlagenanzahl, kumuliert [-] installierte Leistung, kumuliert [MW]

25.000

27.204 MW

25.000

20.000

Anlagenzahl [-]

StromEinspG: Januar 1991 - Mrz 2000

Novelle BauGB: November 1997 EEG: April 2000

20.000

[MW]

15.000

15.000

10.000 5.178 6.185

EEG: August 2004

EEG: Januar 2009

10.000

1.084

1.675

2.467

5.000 405 700

3.528

4.326

5.000 17.474 18.578 20.151 13.739 11.415 15.371 16.518 19.344 20.971 21.585 7.861 9.359

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Quelle: J. P. Molly, "Status der Windenergienutzung in Deutschland", Stand: 31.12.2010; Deutsches Windenergie-Institut (DEWI) und Bundesverband WindEnergie e. V. (BWE); 1 MW = 1 Mio. Watt; Bild: BMU / Brigitte Hiss; Angaben vorlufig

BMU KI III 1 Development of renewable energy sources in Germany in 2009

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Development of PV installations in number and in MW and GWh/a

Entwicklung der Stromerzeugung und installierten Leistung von Photovoltaikanlagen in Deutschland

18.000 18.000

Energiebereitstellung [GWh]
16.000

17.320 MWp
16.000

installierte Leistung [MWp]

14.000

14.000

12.000

12.000

[GWh]

10.000

10.000

[MW p]

8.000

8.000

6.000

6.000

4.000 556 1.282 2.220 3.075 1 0 2 3 6 8 11 16 26 32 42 64 76 4.420 6.578 162 313 12.000

4.000

2.000

2.000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Quelle: BMU-KI III 1 nach Arbeitsgruppe Erneuerbare Energien-Statistik (AGEE-Stat); 1 GWh = 1 Mio. kWh; 1 MW = 1 Mio. Watt; Bild: BMU / Bernd Mller; Stand: Mrz 2011; Angaben vorlufig

BMU KI III 1 Development of renewable energy sources in Germany in 2009

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Total Greenhouse-Gas (CO2 equiv.) avoidance via the use of renewable energy sources in Germany 2009
72.7 million t Electricity

16.5

29.9

22.4

3.8

1.1

31.3 million t Heat

29.9

0.4

5.1 million t Biofuels

5.1

Total: approx. 109 million t CO2 equiv., from this approx. 57 million t CO2 equiv. by EEG quantity of electricity recompensed

0 Hydropower

10 Windpower

20

30 40 50 GHG avoidance [million t CO2 equiv.] Biomass Photovoltaics Geothermal energy

60

70

80 Biofuels

Solar thermal energy

GHG: Greenhouse-Gas; deviations in the totals are due to rounding; Source: UBA according to Working Group on Renewable Energies-Statistics (AGEE-Stat); Image: H. G. Oed; as at: September 2010; all figures provisional

BMU KI III 1 Development of renewable energy sources in Germany in 2009

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Total turnover from renewable energy sources in Germany 2009 (investments and operation)
Total: approx. 37.5 Bill. EUR
Geothermal energy * 1,004 Mill. EUR

Hydropower

1,420 Mill. EUR

Wind energy

6,050 Mill. EUR

Biomass

12,600 Mill. EUR 16,400 Mill. EUR

Solar energy **

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000 [Mill. EUR]

* Large plants and heat pumps; ** Photovoltaics and solar thermal energy; deviations in the totals are due to rounding; Source: BMU-KI III 1 according to the Centre for Solar Energy and Hydrogen Research Baden-Wuerttemberg (ZSW); as at: September 2010; all figures provisional

BMU KI III 1 Development of renewable energy sources in Germany in 2009

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Jobs in the renewable energy sector in Germany 2004, 2008 und 2009
87,100

Wind energy
63,900

85,100 109,000 95,800 56,800 79,600

Biomass

Solar energy
25,100 9,000

74,400

Hydropower

9,300 9,500 9,300

Increase: approx. 87 %

Geothermal energy
1,800

9,100

Public / non-profit sector jobs

6,500 4,300 3,400

160,500 employments
2004

278,000 employments
2008

300,500 employments
2009

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000 110,000

Figures for 2008 and 2009 are provisional estimate; Source: BMU-KI III Projekt "Gross employment from renewable energy in Germany in the year 2009, a first estimate"; Image: BMU / Christoph Busse / transit; as at: September 2010

BMU KI III 1 Development of renewable energy sources in Germany in 2009

10

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Lessons Learnt (LL): Preconditions for FiT (1):

Clear Regulation of the interactions between private market participants
Priority access for RE electricity delivery to the grid Right to connect to the grid can not be refused Shallow cost pricing principle for connection to nearest grid line

Long term Financing: 20 years payment for each kWh

FiT differs for each RE technology FiT is size specific, sometimes even site specific (wind) Tariffs are degressive, depending on technology development progress and year of start of operation FiT is regularly reviewed, Assumed: IRR only: 6 - 8%!

No need for a PPA, banks accept future FiT payments Reduced red tape: by clear rules, setting up clearing house
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LL: Preconditions for successful FiT (2):

Make sure local people/communities and SME can participate in RE market!
In Germany private people invested in 15 000 MW PV mainly as addition to their pension fund Communities invest in local wind parks to generate local tax and income

Ensure early stakeholder communications with business and with civil society, so both support the RE development Develop local/national industry:
FiT is the precondition to develop a national RE industry FiT is a low entry barrier for new business, esp. SME to enter market

But remember: It took Germany nearly 20 years to develop its RE Markets!

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LL: Preconditions for successful FiT (3):

No caps, but clear targets, which are regularly adopted
Caps lead to distortion and prevent market development Actual FiT that is valid on date of completion of project, not on day of signed PPA, but new FiT only after 12 months Better: FiT degression as function of realized targets

Strong monitoring of the market behavior is required

Stakeholder consultation with private sector and consumer groups Support of academic institutions to monitor/study RE

Need for clarifying the macro economic advantage of FiT

Clarify external costs of conventional power & subsidies for power

Evaluate & publish side effects: jobs & economic growth Financing of FiT through surplus to electricity rates makes it independent from national budgets & tax discussion (Spain) Avoid Stop and Go policy! Continuity is required
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Lessons Learnt for ASEAN (1):

FiT is the most stable, long term financial scheme
To allow private market development especially SMEs To lower project costs as it reduces the risk in RE investments

You need to develop the infrastructure for RE market dev.

But it needs to discussed which RE technologies are most appropriate for each country Support technology development/adaptation through capacity build.

To lower the costs of RE projects needs time

Service industry needs to be developed and ensured to stay in the market (Thailand)

Invest in capacity building/institutions

Need for local academic involvement to monitor RE market and assist in adjustment of regulations Develop national centers of excellence in RE /EE
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Lessons Learnt for ASEAN (2):

In the long term: Restructuring of energy grids and energy markets is required
Grid integration & system services are required in future

Dont expect, that national/big utilities are in favor of it!

They will obstruct development as long as possible through red tape in the administration of grid access, excessive pricing, not passing through benefits of e.g. merit-order effect, etc. Because they might loose market shares and influence But RE is the chance for SME und civil society for regional economic development, jobs and additional income

Be prepared for a constant adjustment of FiT rules

Because of technology changes, especially in PV Changes of commodities, like steel, financing costs, etc. => Therefore build up monitoring of the RE market development through academic sector / stakeholder consultation process
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Avoid the pitfalls and the myths

Avoid the pitfalls and the myths: 1. 2. 3. 4. 5. RE electricity is a burden to consumer PV and Wind power is not predicable CO2 impact on Climate change is not proven Nuclear is a solution... We can wait until RE technologies are cheaper

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FiT is the policy tool to support regional economic development and to create jobs!
It requires: 1. Long-term financial framework: Feed-In Tariff 2. Access to reasonable long term loans 3. Transparent procedures / administrative rules 4. Monitoring of regulation and market behavior 5. Establishment of stakeholder dialog: Government, Utilities, Private Sector & Consumer Groups 6. Technology Transfer 7. Capacity Building

GIZ is active in this as an international partner

e.g. Vietnam, Thailand, The Philippines and ACE /ASEAN
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RE Support Programme for ASEAN

Cooperation : ASEAN Centre for Energy (ACE) und GIZ GmbH Via Renewable Energy Subsector Network (RE-SSN) Objective: Support realization of the ASEAN Plan for Action in Energy Cooperation (APAEC) 2010-2015

Activities: 1. RE Networking 2. RE Policy 3. RE Capacity Building

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Activities: RE Networking

Set up of webpage and online newsletter Install internet based Information Platform (iip) Steer promotion networks Develop ASEAN RE networking concept Promote ASEAN Hydropower Competence Centre (HYCOM)*

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RE Networking: HYCOM

ASEAN-RESP promotes HYCOM and its services through its regional and international networks

Training and expertise provided by HYCOM are expected to serve as a role model and will be included into ASEAN-RESP capacity building measures
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Activities: RE Policy

Promote RE financing mechanisms and bankable RE approaches

Facilitation of intra ASEAN exchange on feasible RE financing mechanisms; focus on the attraction of private sector investment

Disseminate RE rural electrification approaches

Promotion of best practices regarding RE rural electrification in ASEAN; focus on successful business models and isolated/mini grids

Develop guideline for RE standards

Identification of RE technical standards in the ASEAN; aiming at develop a roadmap on specific RE standards and potential harmonization

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RE Capacity Building

Facilitate intra ASEAN exchange of RE training institutions

Support to quality ensurance and improvement of RE curricula through train-thetrainer measures and regional exchange

Conduct RE practitioner trainings

Conduction of demand oriented practitioner trainings for regional participants

Facilitate the setup of ASEAN RE Competence Centres

Support to further ASEAN RE Competence Centres (need/demand based approach!)

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GIZ activities in RE Policy in Vietnam

Project 1: Legal Framework for Wind Power o Project goal: Establishment of a Legal Framework and Improvement of Technical Capacities for GridConnected Wind Power Development Project 2: Renewable Energy Agency o Project goal: Support to the build-up of an Renewable Energy Agency for the promotion of renewable energy Both supported by BMU, Germany

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GIZ Activities in RE policy

Thailand:
Supporting the dissemination/quality improvement of solar thermal systems in agro-industry Training programme for biogas performance optimization CDM-PoA for biomass power plant projects

The Philippines:
Advisory service to DOE/NREB on development of the Feed in Tariff scheme Fostering regional RE policy exchange between Thailand and The Philippines

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Thank you for your kind attention!

Prof. Dr.Ing. Christoph Menke

University of Applied Science, Trier, Germany Joint Graduate School of Energy and Environment, Bangkok, Thailand Senior Consultant for Renewable Energy Policy, GIZ GmbH, Germany menke@fh-trier.de

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