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SYSTEM INTEGRATION OF

DISTRIBUTED GENERATION -
RENEWABLE ENERGY
SYSTEMS IN DIFFERENT
EUROPEAN COUNTRIES

Arnhem, January 2009

Authors: Jitske Burgers, Rob van Ommen, Frits Verheij


KEMA Consulting
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30820139-Consulting 08-2744

© KEMA Nederland B.V., Arnhem, the Netherlands. All rights reserved.

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CONTENTS
page

SUMMARY ...............................................................................................................................6

INTRODUCTION....................................................................................................................10

1 EU-targets.............................................................................................................11
1.1 Kyoto-targets ........................................................................................................11
1.2 National overall targets for the share of energy from renewable sources ............12
1.3 RES-E targets.......................................................................................................15
1.4 Conclusions ..........................................................................................................17

2 Overview of different types of dg/renewables.......................................................18


2.1 Approach and results............................................................................................18
2.2 Conclusions ..........................................................................................................24

3 Different incentive schemes for promotion of DG/Renewables ............................29


3.1 Recent and current incentive schemes in Member States ...................................29
3.2 Feed-in-Tariff and premiums ................................................................................33
3.3 Quotas ..................................................................................................................35
3.4 Tradable Green Certificates (TGCs).....................................................................36
3.5 Tendering/bidding systems...................................................................................38
3.6 Fiscal and Financial Incentives.............................................................................39
3.7 Ranking of support instruments ............................................................................39
3.8 Conclusions ..........................................................................................................41

4 Lessons learned up to now...................................................................................44


4.1 Introduction ...........................................................................................................44
4.2 Germany ...............................................................................................................46
4.3 Spain.....................................................................................................................50
4.4 UK.........................................................................................................................55
4.5 The Netherlands ...................................................................................................60
4.6 Conclusions ..........................................................................................................64

5 Incentives on grid development ............................................................................67


5.1 Introduction ...........................................................................................................67
5.2 Status of experiences from DG in four countries ..................................................67

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5.2.1 Introduction ...........................................................................................................67


5.2.2 DG – what does it mean? .....................................................................................68
5.2.3 Germany ...............................................................................................................69
5.2.3.1 Grid development .................................................................................................69
5.2.3.1.1 The main players ..................................................................................................69
5.2.3.1.2 Grid development/structure ..................................................................................72
5.2.3.2 Grid integration of RES.........................................................................................76
5.2.3.2.1 Which system is being used and how is the grid integration developed?.............77
5.2.3.2.2 Legislation.............................................................................................................77
5.2.3.3 Conclusions ..........................................................................................................77
5.2.4 Spain.....................................................................................................................79
5.2.4.1 Grid development .................................................................................................79
5.2.4.1.1 The main players ..................................................................................................79
5.2.4.1.2 Grid development/structure ..................................................................................80
5.2.4.2 Grid integration of RES.........................................................................................84
5.2.4.2.1 Which system is being used and how is the grid integration developed?.............84
5.2.4.2.2 Legislation.............................................................................................................87
5.2.4.3 Conclusions ..........................................................................................................88
5.3 United Kingdom ....................................................................................................88
5.3.1.1 Grid development .................................................................................................88
5.3.1.1.1 The main players ..................................................................................................88
5.3.1.1.2 Grid development/structure ..................................................................................90
5.3.1.2 Grid integration of RES.........................................................................................93
5.3.1.2.1 Which system is being used and how is the grid integration developed?.............93
5.3.1.2.2 Legislation.............................................................................................................97
5.3.1.3 Conclusions ..........................................................................................................97
5.3.2 The Netherlands ...................................................................................................97
5.3.2.1 Grid development .................................................................................................97
5.3.2.1.1 Main players .........................................................................................................97
5.3.2.1.2 Grid development/structure ..................................................................................99
5.3.2.2 Grid integration of RES.......................................................................................103
5.3.2.2.1 Which system is being used and how is grid integration developed?.................103
5.3.2.2.2 Legislation...........................................................................................................105
5.3.2.3 Conclusions ........................................................................................................107
5.4 Conclusions ........................................................................................................107

LITERATURE .......................................................................................................................109

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Appendix I Several EU-targets .......................................................................................117

Appendix II Fact sheets EU-27 ........................................................................................123

Appendix III Overview of the main support schemes for renewable electricity in the EU-27
......................................................................................................................124

Appendix IV Information on Germany’s tariff degression system and stepped tariff design
......................................................................................................................127

Appendix V Dutch case – Westland CHP (Province of Zuid-Holland)..............................130

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SUMMARY

As the energy supply system will change dramatically over the coming decades this might
have an impact on the demand for materials like steel, copper and different plastics.
Therefore, the European Copper Institute (ECI) asked KEMA to carry out a cross analysis
study of incentive schemes in different EU countries in the field of renewable energy (RE)
systems and distributed generation (DG).

On the January 23, 2008 the European Commission agreed on a far-reaching package of
proposals that will deliver the European Council's commitments to fight climate change and
promote RE. With the publication of this Climate Action Plan and its several targets, the EU
wants to show global leadership in this area. The first chapter (deliverable) provides an
overview of these targets, i.e. the Kyoto-targets, targets for the share of energy from RES in
final energy consumption in 2020 and the 2010 RES-E target for the EU-27 MSs. At the end
of 2007 the Commission's annual report on progress towards meeting the Kyoto objectives
concluded that the EU is moving closer to achieving its Kyoto Protocol targets for reducing
emissions of GHG but additional initiatives need to be adopted and implemented swiftly to
ensure success. As the RES target has just been published, they have yet to be agreed. It is
expected the targets will be set by the EC Spring 2009. In the meantime MSs have to
prepare plans how to achieve the proposed targets. In 2001 the European Union issued after
long discussions between the different institutions the Directive on the promotion of electricity
produced from renewable energy sources (RES). This target is set for the year 2010 and the
progress made in the different MSs varies.

The second chapter (deliverable) provides a 1-2 page fact sheet for each MS with
information on the European set Kyoto, RES and RES-E targets for each country, their
progress so far and how they are planning to fulfill these targets nationally. Based on these
fact sheets it was possible to summarize the results of each MS. It can be concluded that
each MS has its own focus on some sort(s) of RES. These sources are normally the RES
with the largest potential in that country and depict the most efficient investments in
renewables in Europe. Additionally, if available, their expected RES goals are summarized
too. In this chapter it became clear as well that there exists a large RES potential in the
majority of the countries. A separate document with the fact sheets is provided.

As several incentive schemes exist, countries are using a variety of them. The majority of the
Member States (MSs) have opted for feed-in tariff regimes as the main support mechanism,
whereas a handful of MSs have opted for quota regimes. Striving to adopt best practice or
otherwise optimize the efficiency of the system countries are sometimes adapting their

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support mechanism. In the third chapter (deliverable) the primary renewable electricity
support systems are elaborated on. These are: Feed-in-Tariff, Quotas Tendering/bidding,
Fiscal and Financial Incentives and Tradable Green Certificates. The majority of MSs are not
using a single one system, but a combination. Research has shown that there is not a
system which is better than the others but that key success factors can be identified which
are a requirement for any support scheme to be successful. Finally, it can be concluded that
nearly every EU-country is setting up its own system. This approach will lead to sub-optimal
solutions. It can be substantiated that a move from a national approach to a more
harmonized European approach is needed. It was concluded from the four analyzed
countries (chapter 4), that a harmonized incentive scheme will not be operational in the near
future. A similar conclusion was drawn at the futures-e final conference (was mainly focused
on the Eastern-European countries). They concluded that there is no urgency for full
harmonization. In these countries internal market needs central coordination instead and is
not ready for full harmonization. A common power market is more important than a common
support system. It was however mentioned here as well that there exists a feed-in
cooperation between Germany, Spain and Slovenia. The cooperation aims to support the
promotion of RE in countries applying a feed-in tariff system for this purpose. On January 29,
2007 Slovenia became the third state to take part in the cooperation that already exists since
June 2004, when Spain and Germany founded it at the renewables2004 conference in Bonn.
The cooperation is supposed to contribute to a stronger exchange of experiences between
these countries in order to increase the share of RE in the generation of electricity, to
increase investor security, and with it, decrease the costs for RE.

As is concluded in the previous chapter, nearly each country is setting up its own system.
The fourth chapter (deliverable) assesses the approaches of four (leading) countries
(Germany, Spain, UK and the Netherlands) with their specific way of working in this area.
Lessons are drawn from their experiences. An early feed-in law for wind electricity has
existed in Germany since 1991. The Renewable Energy Act (Erneuerbare-Energien-Gesetz/
EEG) came into force in 2000. So far, Germany has achieved very good results with their
incentive scheme. It generates a stable investment environment and has created many jobs
in recent years accordingly. The question is however if the matured German RE-market is
not needing a more market-based system in the future as such a system is more cost
efficient for promoting high penetration of RE. Spain is using a FIT-scheme, with some
special features. So far, Spain has achieved, like Germany, very good results with their
incentive scheme. Biomass has however not developed as fast as expected. The main
reason for a further development of biomass are administrative barriers. As opposed to
Germany and despite the fast growth of some RES in Spain it remains probably too small to

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reach its 2010 RES-E target given the increase in electricity consumption. One of the
reasons might be their very attractive FIT system which causes bad practices (as PV in
Spain). Several solutions are available to overcome these bad practices. In the UK the
Renewables Obligation (RO) is the main mechanism for incentivizing its RES-E growth. This
RO-system is a quota system and is expected to be more cost efficient for promoting the
development of RE. It requires licensed electricity suppliers to buy at least part of their
electricity from renewable generation. Additionally, the UK applies a Climate Change Levy
(CCL), an exemption for renewables. As the UK has one of the best wind regimes in Europe,
they rank only sixth in Europe. Their largest contribution to renewables in input terms (82%)
comes from biomass. Problems that hinder the development of renewable electricity
initiatives are: regional differences; not strong enough grid network in Scotland, the
insufficient interconnection capacity between Scotland and England and planning problems.
It is therefore still uncertain if the UK will meet its European targets. In October 2007, the
government in the Netherlands published a new regulation for a feed-in premium for RE,
called SDE (“Stimuleringsregeling Duurzame Energieproductie”). This is the successor of the
MEP and has solved some of its problems. It took however about 1.5 years to introduce the
new SDE-system by which no new wind projects have been developed. Wind energy is the
main focus of the Dutch government, but they rank only eight in Europe. Reasons for these
results are: too many departments are involved and very long procedures exist. These issues
are getting attention now. From these countries it becomes clear that a support mechanism
is successful if a government introduces a stable support system and parallel political
framework conditions (spatial, grid, etc). In this way it is able to attract investors and financial
institutions by providing sufficient confidence and financial incentives over a longer period.
Investor confidence is of utmost importance. Secondly grid access is very important as well,
because investors need to be sure that they can feed-in the energy into the system.

In the final chapter (deliverable) DG is being discussed. In this chapter the latest
development on grid development policies and grid integration on RES in the same four
countries are being provided. It is concluded that there is a lot happening on grid
improvements within Europe. In the latest World Energy Outlook 2008 it becomes clear that
the energy sector will have to play the central role in tackling climate change. Additionally,
massive investments in energy infrastructure will be needed. What can be concluded from
the analysis of the four countries is that every country found its own solution for increased
RES feeding into the grid system. In Germany three of the four TSOs agreed to work more
closely together regarding the grid balancing. In Spain they introduced a novel Control
Centre for RE, to monitor and control these RES. The UK introduced two DG incentive
schemes (IFI and RPZ) and the Netherlands introduces a Working Group Decentralized
Infrastructure; a very Dutch approach as its participants are representatives of a variety of

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organizations (public and private). Additionally, in the Netherlands TenneT is currently fine-
tuning the congestion management system in collaboration with the Ministry of Economic
Affairs and the Office of Energy Regulation as there have occurred severe problems
regarding insufficient capacity to transmit the supply of electricity at all times. So countries
have found different mechanisms to evolve from a centralised generation system to a DG-
system.

Additionally, setting up research programmes trying to provide answers for questions on


smart grids and DG have only recently being set up. It can be concluded however that a
continuous dialogue between several stakeholders, national, but also at European or even at
global level, is very important as this results in flexibility and openness to changes which are
required in the future. Also a stable incentive scheme is very important here as well.
However, at this moment the systems introduced in the analysed countries are too new to
draw conclusions from. Therefore it remains to be seen what solution will bring about the
best results.

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INTRODUCTION

The energy supply system will change dramatically over the coming decades. Among others
renewable energy sources (RES) will increasingly be applied in all Member States (MSs).
This will have an impact on the demand for materials like steel, copper and different plastics.
Therefore, the European Copper Institute (ECI) asked KEMA to carry out a cross analysis
study of incentive schemes in different EU countries in the field of renewable energy (RE)
systems and distributed generation (DG). The target audience are all parties involved in the
elaboration of national programs to cope with the targets provided by the EU Directive.

ECI is a non profit organization representing the world's mining companies (through the
International Copper Association, Ltd.) and the European copper industry. Via its Brussels
based headquarters and its network of eleven Copper Development Associations, its mission
is to communicate copper is essentiality for health, technology and quality of life.

To meet the project’s objective six deliverables have been agreed upon, i.e.:
1 deliverable 1: EU goals
2 deliverable 2: Overview of different types of DG/Renewables
3 deliverable 3: Different schemes for promotion of DG/Renewables
4 deliverable 4: Lessons learned up to now
5 deliverable 5: Incentives on grid development
6 deliverable 6: Final Report.

The next chapters will report on these deliverables and this overall document represents
deliverable 6. Each chapter has a conclusion paragraph and the results are summarized in
the summary chapter.

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1 EU-TARGETS

With the publication of the EU-targets the EU wants to show global leadership in this area.
This chapter (deliverable) will provide an overview of the Kyoto and RE (for electricity)
targets and what this means to each EU MS (i.e. EU-27). It is important to emphasize that
the years for which the targets are set differ; this is caused by the fact that these targets are
not agreed simultaneously.

1.1 Kyoto-targets

Under the Kyoto Protocol, the 15 MSs that made up the EU until its enlargement to 27 MSs
have to reduce their collective greenhouse gas emissions by 8% below 1990 levels during
2008-2012. This target is shared among the 15 MSs under a legally binding agreement
(Council Decision 2002/358/EC of April 25, 2002). Most of the 12 new MSs have individual
targets under the Kyoto Protocol. The exceptions are Cyprus and Malta, which have no
targets. Refer to Appendix I for the targets of each MS. In the figure below the Kyoto-targets
for each MS are shown as well.

Kyoto target 2008-2012

30

20

10
Kyoto target (%)

0
AU BE BL CY CR DM ES FI FR DE GR HU IE IT LV LT LU MA NL PL PT RO SK SI SP SE UK
-10

-20

-30

-40
Country

Figure 1 Kyoto-targets 2008-2012 for each MS

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At the end of 2007 the Commission's annual report on progress towards meeting the Kyoto
objectives 1 concluded that the EU is moving closer to achieving its Kyoto Protocol targets for
reducing emissions of greenhouse gases but additional initiatives need to be adopted and
implemented swiftly to ensure success. The latest projections from MSs indicate that
measures already taken, together with the purchase of emission credits from third countries
and forestry activities that absorb carbon from the atmosphere, will cut EU-15 emissions in
2010 to 7.4% below levels in the chosen base year (1990 in most cases) - just short of the
8% reduction target for 2012. Additional policies and measures under discussion at EU and
national levels will allow the target to be reached and even take the reduction to 11.4% if
implemented promptly and fully.

From December 3 to 14, 2007, the thirteenth Conference of the 192 Parties to the United
Nations Framework Convention on Climate Change took place in Bali in Indonesia. The
objective was to set a timeline for negotiations (if possible with emissions reduction targets)
in order to produce a successor agreement to the Kyoto Protocol by year-end 2009. An
agreement was reached for post-Kyoto negotiations but no emissions reduction targets were
formulated. Instead, the countries attending the Bali summit finally adopted a “road map”
setting the agenda that they would be following until the Copenhagen summit in 2009.

However the United States, initially taking a defensive stance, finally entered into the
multilateral discussion process. Some developing countries have accepted the eventuality of
emissions reduction targets, which is necessary. Reduction targets have yet to be defined
and implemented and, as we know from experience, this is not easily done.

1.2 National overall targets for the share of energy from renewable
sources

In its Proposal for a Directive of the European Parliament and of the Council on the
promotion of the use of energy from renewable sources (23-01-2008) 2 the Commission aims
to establish an overall binding target of a 20% share of RES in energy consumption and a

1
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/07/1774.
2
http://ec.europa.eu/energy/climate_actions/doc/2008_res_directive_en.pdf.

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10% 3 binding minimum target for biofuels in transport to be achieved by each MS, as well as
binding national targets by 2020 in line with the overall EU target of 20%. Additionally, the
following targets have been set: 20% energy savings and 20% CO2-reduction. The main
purpose of binding targets is to provide certainty for investors.

At the time of the publication of the Proposal 8.5% of all energy is renewable in Europe. This
covers not only the electricity production, but also heating and cooling and transportation. To
be able to meet the 20% RE target in 2020, Europe needs another 11.5%.

MSs' starting points, RE potentials and energy mixes vary. It is therefore necessary to
translate the overall 20% target into individual targets for each MS, with due regard to a fair
and adequate allocation taking account of different national starting points, including the
existing level of RE and energy mix. This is being done by sharing the required total increase
in the use of energy from renewable sources between MSs on the basis of an equal increase
in each MS's share weighted by their Gross Domestic Product, modulated to reflect national
starting points, and by accounting in terms of final energy consumption.

Each MS shall ensure that the share of energy from renewable sources in final consumption
of energy in 2020 is at least their overall target for the share of energy from renewable
sources in that year, as set out in the third column of the table in Part A of Appendix I of the
Directive. Refer to Appendix I with the table on the national overall targets for the share of
energy from renewable sources in final consumption of energy in 2020. The figure below
shows these targets too.

3
Concerns about rising food prices and biodiversity loss as land is diverted to biofuel production,
sustainability as well as questionable CO2 reduction values the 2010 biomass target (5.75%) is
under consideration; on October 31, 2008 the EU Agriculture Commissioner, Mariann Fischer-
Boel, reaffirmed the EU 2020 target of 10% of fuel consumption from biofuels. She said: “While we
take well-reasoned arguments extremely seriously, we have not seen anything yet to deflect us
from the goals [that biofuel will make up 10 per cent of transport fuel by 2020] signed up to earlier
this year by EU leaders”.

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Targets for the share of energy from RES in final energy consumption in 2020

60

50

40
Target (%)

30

20

10

0
AU BE BL CY CR DM ES FI FR DE GR HU IE IT LV LT LU MA NL PL PT RO SK SI SP SE UK
Country

Figure 2 Targets for EU-27 countries for the share of energy from RES in final energy
consumption in 2020

These targets have yet to be agreed, but they are proposed by the European Commission in
January 2008. It is expected the targets will be set by the EC in spring 2009.

For each trading period, each MS is obliged to notify a national allocation plan to the
Commission. The national action plans shall set out MSs' targets for the shares of energy
from renewable sources in transport, electricity and heating and cooling in 2020, and
adequate measures to be taken to achieve these targets, including national policies to
develop existing biomass resources and mobilize new biomass resources for different uses,
and the measures to be taken to fulfill the requirements of Articles 12 to 17.

In the NAPs for the first and the second trading periods, MSs determined the total quantity of
allowances to be issued, the cap, and how these would be allocated to the installations
concerned. This approach has generated significant differences in allocation rules, creating
an incentive for each MS to favor its own industry, and has led to great complexity.

In its legislative package on climate and energy (Climate Action Plan 4 ) that the Commission
presented on January 23, 2008 the Commission proposed to set a single EU-wide cap on

4
http://ec.europa.eu/environment/climat/climate_action.htm

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ETS 5 emissions and to allocate allowances on the basis of fully harmonized rules. National
allocation plans will therefore not be needed any more. To provide companies still with a long
term view, the emissions cap is reduced every year with the same percentage: 1.74% per
year, until 1,720 Mton in 2020. The table below provides an overview.

Table 1 Emission gap after 2012

year Mton CO2


2013 1,974
2014 1,937
2015 1,901
2016 1,865
2017 1,829
2018 1,792
2019 1,756
2020 1,720

The starting point of this line is the average total quantity of allowances (phase 2 cap) to be
issued by MSs for the 2008-12 period, adjusted to reflect the broadened scope of the system
from 2013. Also after 2020 the 1.74% reduction per year will be applicable; in 2025 at the
latest the EC will review if this percentage works well (MEMO/08/35).

In implementing the national targets in practice, MSs will need to set their own specific
objectives for electricity, biofuels and heating and cooling, which would be verified by the
Commission to ensure that the overall target is being met (Renewable Energy Road Map,
2007).

1.3 RES-E targets

In 2001 the European Union issued after long discussions between the different institutions
the Directive on the promotion of electricity produced from renewable sources (RES-E

5
Emissions Trading System: EU ETS

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directive) 6 . This Directive sets out to create a framework that will facilitate, on the medium
term, a significant increase in renewable generated electricity within the EU. It constitutes an
important milestone in shaping the regulatory framework for RES-E generation in the EU.

The Directive set the target that 22.1% of renewable electricity in comparison to the overall
electricity consumption should be reached by 2010. In the annex of this Directive the
European target is transformed into targets for the MSs and are provided in Appendix I.

As Romania and Bulgaria joined the EU at a later stage, their RES-E targets for 2010 were
set separately. The Romanian RES-E target is set at: 33% of gross electricity consumption in
2010 and for Bulgaria this target equals: about 11% for electric energy consumption in 2010
(Renewable Energy Fact Sheets, January 2007 7 ).

In the figure below the above mentioned RES-E targets are shown too for all EU-27 MSs.

RES-E target 2010

90

80

70

60
Target (%)

50

40

30

20

10

0
AU BE BL CY CR DM ES FI FR DE GR HU IE IT LV LT LU MA NL PL PT RO SK SI SP SE UK
Country

Figure 3 RES-E targets 2010 for EU-27 countries

6
http://eur-lex.europa.eu/pri/en/oj/dat/2001/l_283/l_28320011027en00330040.pdf.
7
At: http://ec.europa.eu/energy/energy_policy/doc/factsheets/renewables/renewables_ro_en.pdf
and http://ec.europa.eu/energy/energy_policy/doc/factsheets/renewables/renewables_bg_en.pdf.

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For more information on the progress towards the different targets for each MS refer to the
fact sheets in Appendix II.

1.4 Conclusions

In this chapter an overview is provided of the different targets agreed on in the EU-27
countries. The relevant targets that have been discussed are: Kyoto-target, targets for the
share of energy from RES in final energy consumption in 2020 and the RES-E target. At the
end of 2007 the Commission's annual report on progress towards meeting the Kyoto
objectives concluded that the EU is moving closer to achieving its Kyoto Protocol targets for
reducing emissions of GHG but additional initiatives need to be adopted and implemented
swiftly to ensure success. The RES target has just been published in January 2008. These
targets have yet to be agreed, but they are proposed by the European Commission in
January 2008. It is expected the targets will be set by the EC in spring 2009. In the meantime
MSs have to prepare plans how to achieve the proposed targets. In 2001 the European
Union issued after long discussions between the different institutions the Directive on the
promotion of electricity produced from renewable sources (RES-E directive). This target is
set for the year 2010 and the progress made in the different MSs varies. Refer to the fact
sheets in Appendix II for more information on the progress.

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2 OVERVIEW OF DIFFERENT TYPES OF DG/RENEWABLES

2.1 Approach and results

For this deliverable for each MS a 1-2 page fact sheet is composed with information on the
European set Kyoto, RES and RES-E targets for each country, their progress so far and how
they are planning to fulfill these targets nationally. These pages can be found in Appendix II
and below a summary table is provided of these fact sheets showing the different RES main
focus and their goals (if known) in each country.

To be able to show this information, access to governmental policies documents/data was


required. As the majority of these documents are only written in national languages, we tried
to verify the information with national energy agencies. They proved to be a very important
source. Additionally, a web search was carried out for each MS and especially the following
sources turned out to be useful:
− legally binding Kyoto protocol: Burden Sharing Agreement, June 1998
− proposal for a Directive of the European Parliament and the Council on the promotion of
the use of energy from renewable sources from January 2008 (the targets agreed but the
directive is on legislative process) at:
http://ec.europa.eu/energy/climate_actions/doc/2008_res_directive_en.pdf and
http://ec.europa.eu/energy/climate_actions/doc/2008_res_working_document_en.pdf
− RES-electricity European Directive from 2001 (Directive 2001/77/EC) at:
http://eur-lex.europa.eu/pri/en/oj/dat/2001/l_283/l_28320011027en00330040.pdf
− www.erec.org (European Renewable Energy Council)
− www.iea.org (International Energy Agency)
− http://reports.eea.europa.eu/eea_report_2007_5/en
− www.energy.eu/#renewable
− websites of National Energy Agencies.

To be as clear as possible some used definitions are being explained below:


− gross national electricity consumption: “consumption of electricity” shall mean national
electricity production, including auto production, plus imports, minus exports (gross
national electricity consumption), Directive 2001/77/EC
− final consumption of energy: means the energy commodities delivered for energy
purposes to manufacturing industry, transport, households, services, agriculture, forestry
and fisheries, including the consumption of electricity and heat by the energy branch for
electricity and heat production and including losses of electricity and heat in distribution,
Directive{COM(2008) 30 final}.

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Based on the fact sheets as shown in Appendix II the following information on the RES main
focus of each EU-27 MS and their expected goals can be summarized. If an option is not
being ticked it does not mean that this MS is not generating energy from that source; only the
focus is less than on the main RES. In case no figure is provided it means that only the focus
of that country is known and not the specific RES targets.

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Table 2 RES main focus of each EU-27 MS and their expected goals (if available)

country wind onshore wind offshore biomass solar hydro geothermal wave energy
Austria
(2015) (700 MW) (100 MW) (700 MW)
Belgium
(2010) (40 MW) (330 MW)
Bulgaria
(2015)
Cyprus
(2010)
Czech
Republic (700 MW) (200 MW) (100 MW)
Denmark
(2012) (1300 MW) (14 PJ)
Estonia
(2010) (90 MW)
Finland
France
Germany
Greece
(2010) (2795 MW) (187 MW) (525 MW)

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country wind onshore wind offshore biomass solar hydro geothermal wave energy
(2020) (700 MWp)
Hungary
Ireland
(2020) (800 MW)* (500 MW)
Italy
Latvia
Lithuania
Luxembourg
Malta
Netherlands
(2020) (3,500 MW) (6,000 MW) (500 MW)
Poland
Portugal
(2012: (2010:
5,100 MW) 5,575 MW
2020:
6,960 MW)
Romania
Slovakia
Slovenia
Spain

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country wind onshore wind offshore biomass solar hydro geothermal wave energy
Sweden
UK

* a division between CHP on renewables and other fuels was not made only an emphasis for the development of biomass based CHP. - Additional
400 MW from Combined Heat and Power by 2010 through continued support under the CHP Deployment Programme and R&D supports with
particular emphasis on biomass fuelled CHP and will aim at least 800 MW by 2020

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2.2 Conclusions

With the publication of its Climate Action Plan 20-20-20 the European Commission agreed
on a far-reaching package of proposals that will deliver the European Council's commitments
to fight climate change and promote RE. The reasons for its focus on renewables are:
− RE has an important role to play in reducing CO2 emissions - a major Community
objective
− boosting growth and jobs
− increasing the share of RE in the energy balance enhances sustainability
− it also helps to improve the security of energy supply by reducing the Community's
growing dependence on imported energy sources
− RES are expected to be economically competitive with conventional energy sources in
the medium to long term.

As a result of this plan each MS has to meet different targets (re: chapter 1). The majority of
the MSs have targets formulated for the year 2010 and are in consultation how to meet the
proposed 2020 targets. There is a huge realizable potential 8 for RES-E in the EU-27
countries available, which is depicted in the figure below.

8
The realizable potential represents the maximal achievable potential assuming that all existing
barriers can be overcome and all driving forces are active (FORRES 2020).

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Figure 4 Mid-term realizable potential for RES-E in EU-27 (FORRES 2020)

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In the fact sheets the Kyoto targets of each EU-27 countries are shown and their progress
and plans are provided too. These targets and the progress so far is summarised in the table
below.

Table 3 Kyoto-target and progress of EU-27 countries


(http://www.energy.eu/#renewable; figures are in Megaton (Mt CO2-eq))

Each MS has agreed a share of RES targets on the final consumption of energy in 2020.
These targets and their progress are shown below.

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Table 4 Renewable energy in final energy consumption (2020 target)


(http://www.energy.eu/#renewable)

Within the European Union, each MS has its own sovereignty, which means that each
member can choose how to implement global and European policies in to legalization, all of
course within the framework set out in the Directives of the EU. Not all targets can be
reached by law, as this would be in conflict with the ideas of a liberalized market. What
governments can do is to set out incentives in order to steer the market. The variety of
legalization and incentives within all the MSs is vast and is changing constantly. In order to
keep track of the current policies and incentives, three prominent public internet databases
are presented below.

− The Dealing with Climate Change policies and measures database:


http://www.iea.org/textbase/pm/index_clim.html. Offers access to information on energy-
related policies and measures taken or planned to reduce greenhouse gas emissions.

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− The Global Renewable Energy Policies and Measures Database:


http://www.iea.org/textbase/pm/grindex.aspx. Provides information on policies and
measures taken or planned to encourage the uptake of RE.

From table 2 can be concluded that each MS indeed has its own focus on some sort(s) of
RES. These sources are normally the RES with the largest potential in that country and
depict the most efficient investments in renewables in Europe.

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3 DIFFERENT INCENTIVE SCHEMES FOR PROMOTION OF


DG/RENEWABLES

It was the aim of this deliverable to provide a description of the following incentive schemes
for the promotion of DG/renewables:
1 Feed-in-Tariff (§ 3.2)
2 Quotas (§ 3.3)
3 Tradable Green Certificates (§ 3.4)
4 Tendering/bidding systems (§ 3.5)
5 Fiscal and Financial Incentives (§ 3.6).

For each incentive scheme the following will be discussed:


− the concept: a short description of the system
− advantages and disadvantages
− conclusions.

Before going into the different schemes the next paragraph will provide an overview of the
different recent and current support schemes in the MSs.

3.1 Recent and current incentive schemes in Member States

In 2005, in accordance with directive 2001/77/EC on the promotion of renewable electricity,


the European Commission reported on the application and coexistence of the different
support mechanisms for electricity from RES (COM(2005)627 final 9 ). The COM(2008) 19
final report 10 presents an updated review of the performance of support schemes using the
same indicators presented in the 2005 report.

The policies and measures currently implemented in the European RE market have so far
been mainly directed towards the promotion of renewable electricity. A wide array of support
schemes is being used (and will be used) by the European countries in order to promote
RES-E. It should be noted that, of course, not all support schemes have the same relevance
for the promotion of RES-E. Countries normally use one (at most, two) of the different

9
http://ec.europa.eu/energy/res/biomass_action_plan/doc/2005_12_07_comm_biomass_electricity_en.pdf.
10
http://ec.europa.eu/energy/climate_actions/doc/2008_res_working_document_en.pdf.

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schemes. The main drivers for the specific choices made are often the national goals
specified in relation to RE. These include achieving environmental goals, security of supply,
and creating jobs by developing national RE industries. The figure below provides an
overview of the primary renewable electricity support systems in place in the EU-27 MSs.

Figure 5 Overview of primary renewable electricity support schemes in EU-27 (OPTRES


Final Report, February 2007)

It can be concluded that the majority of the MSs have opted for feed-in tariff regimes as the
main support mechanism, whereas a handful of MSs have opted for quota regimes. As can
be seen from the table below, MSs are continuously fine-tuning existing policy measures with
the aim of improving the performance of these measures. In fact, since the last report in
2005, ten countries have adapted their support schemes, striving to adopt best practice or
otherwise optimise the efficiency of the system.

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Table 5 Recent and current support schemes in MSs 11 (source: OPTRES, 2007
(modified by DG TREN))

11
Quota obligations are usually coupled with tradable green certificate markets (TGC). For the
Netherlands, TGCs were introduced with a tax exemption. For Latvia, renewable obligation exists
without the use of tradable green certificates. For Denmark, high and successful feed-in tariffs
were abolished in 2000/2001 and premiums were introduced in 2003, after a transitional period.
The framework for a tendering system for offshore was established in 1999. However, the political
decision to implement was taken in 2004 and the tender was conducted in 2005. A change in the
system represents a major policy change in the promotion of renewable electricity, i.e. change in
support scheme. An adaptation of the system represents modifications to existing support
schemes, such as the introduction of tariff degression or technology specific tariffs.

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Refer to Appendix III for an overview of current support schemes in the EU-27 countries. As
can be concluded from the previous table and Appendix III nearly every EU-country is setting
up its own system. This approach will lead to sub-optimal solutions. It can be substantiated
that a move from a national approach to a more harmonized European approach is needed.
This matter will be examined further in chapter 5.

In the following paragraphs the different support schemes will be shortly discussed. This
information is mainly obtained from the recently published (23-01-08) COM(2008) 19 final
report 12 , the Green-X 13 , FORRES 14 and OPTRES 15 final reports (respectively 2004 and
2007).

3.2 Feed-in-Tariff and premiums

The concept: a short description of the system


Feed-in-Tariffs and premiums are used in 18 MSs. These schemes are granted to operators
of eligible domestic renewable electricity plants for the electricity they feed into the grid. The
preferential, technology-specific feed-in tariffs and premiums paid to producers are regulated
by the government. Feed-in tariffs take the form of a total price per unit of electricity paid to
the producers whereas the premiums (bonuses) are paid to the producer on top of the
electricity market price. An important difference between the feed-in tariff and the premium
payment is that the latter introduces competition between producers in the electricity market.
The tariff respectively the premium is normally guaranteed for a period of 10-20 years. For
new entrants the tariff may also decline over time, tracking expected RE cost reductions.
Once a tariff has been assigned it is being guaranteed. In addition to the level of the tariff, the
guaranteed duration provides a strong long term degree of certainty which lowers the market
risk faced by investors. Both feed-in tariffs and premiums can be structured to encourage
specific technology promotion and cost reductions.

Even though the majority of the EU-27 countries apply feed-in tariff schemes as their main
support scheme these systems differ significantly because a multitude of design concepts is
used. Differences include the application of different tariff levels, whether or not a purchase

12
http://ec.europa.eu/energy/climate_actions/doc/2008_res_working_document_en.pdf.
13
http://www.green-x.at/downloads/WP4%20-%20trade-
offs%20between%20support%20mechanism%20(Green-X).pdf.
14
http://www.eu.fraunhofer.de/forres/FORRES-summary.pdf.
15
http://www.optres.fhg.de/OPTRES_FINAL_REPORT.pdf.

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obligation exists and the application of various concepts to account for different generation
costs within one technology (such as stepped tariff designs). Some of the MSs offer an
alternative to the fixed tariff scheme, the premium option, which involves the payment of a
premium in addition to the conventional market price. In order to take technological learning
into account and to avoid overcompensation, some countries have integrated tariff
degression into their FIT-system design. Design criteria which aim to enhance the
compatibility of RES with the characteristics of the conventional electricity market include, for
instance, a forecast obligation for fluctuating RES or a link between tariff level and electricity
demand (OPTRES, 2007). There exists however a feed-in cooperation between Germany,
Spain and Slovenia 16 . The cooperation aims to support the promotion of RE in countries
applying a feed-in tariff system for this purpose. On January 29, 2007 Slovenia became the
third state to take part in the cooperation that already exists since June 2004, when Spain
and Germany founded it at the renewables2004 conference in Bonn. The cooperation is
supposed to contribute to a stronger exchange of experiences between these countries in
order to increase the share of RE in the generation of electricity, to increase investor
security, and with it, decrease the costs for RE. In chapter 4 details will be provided of the
systems of four countries, among which three are using one of the above mentioned FIT-
scheme forms.

Advantages and disadvantages


The system is well-known for its success in deploying large amounts of wind, biomass and
solar energy in Germany, Denmark and Spain among others. The biggest advantage of the
systems as designed in these countries is the longer-term certainty about receiving support,
which lowers investment risks considerably. Another key advantage is the possibility of
technology-specific support, which leads to a relatively broad technology portfolio at low
windfall profits for low-cost technologies. With this system, by setting the price but not
(directly) the quantity produced, it is not entirely certain a priori how much renewable
electricity will be promoted.

Throughout the EU a discussion is currently being held on the advantages and


disadvantages of feed-in tariffs on the one hand and quota obligation systems based on
Tradable Green Certificates (TGCs) on the other. In countries with strong feed-in tariff
systems many stakeholders expressed a clear preference for the present system, indicating
appropriate tariffs, long-term stability and transparency as its major highlights. Other voices
from the same countries, however, suggested replacing the feed-in system with what they

16
http://www.feed-in-cooperation.org/.

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consider a more market-based instrument, proposing the introduction of a quota obligation


system. The main perception from these stakeholders was that this system is more cost
efficient for promoting high penetration of RE. Stakeholders from especially the new MSs
where feed-in tariffs are the dominant instrument, pointed out that they consider the
introduction of more market-based instruments like a quota obligation to be premature.

Some companies are even of the opinion that feed-in tariff systems are overdue. It has been
very successfully to provide an impulse for the premature market at the start, but from a
higher RE percentage this system can cause market disruptions and sub-hospitalization.
Additionally, if energy companies will receive this subsidy for many years it can cause an
awaiting attitude. It is emphasized as well that not only the production of RE should be
supported, but also consumption (to create more public support).

Conclusions
This support scheme is being used in the majority of the MSs. It normally provides a
guaranteed tariff for a period of 10-20 years, which provides certainty for investors. From a
stakeholder consultation 17 (March-May 2005) carried out by the OPTRES project team it
became clear that the stability of the support instrument is the most important condition:
“Creating a framework which ensures long-term stability is needed to attract investors and
project developers, and to allow sufficient time for project planning, authorization and
consenting procedures and then full realization and commissioning of the project”.

3.3 Quotas

The concept: a short description of the system


A relatively new system is that of renewable obligations, also called quota obligations, where
minimum shares of RES are imposed on consumers, suppliers or producers. The system is
often combined with TGCs, although this does not necessarily have to be the case. Quota
obligations are now used in seven of the 27 EU MSs. The actual design of obligation
systems can vary considerably among countries. In a quota system, one should strive for a
sufficiently liquid and competitive TGC market in order to secure a functioning market.

17
This consultation existed of two phases: phase one consisted of a web-based questionnaire
followed by in-depth interviews with selected stakeholders in the second phase. In total
251 respondents from all EU MSs except the Slovak Republic completed the web-based
questionnaire. During the second phase 25 interviews were held.

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Furthermore, the penalty for non-compliance needs to be set correctly, i.e. significantly
higher than the marginal production costs at quota level. If this is not the case and the
penalty is lower than the marginal costs, plants with generation costs higher than the penalty
will not be built. Instead electricity producers prefer to pay the penalty; this results in limited
effectiveness of the quota obligation. If the penalty price is reached the quota is not fulfilled
and so the utilities have to pay the penalty. Other features are the availability of long-term
contracts and the option of banking and/or borrowing. Finally, additional support has to follow
the quota system in order to support less mature technologies, unless the system is
designed to support different types of technologies by using separate quotas for technology
bands, for example.

Advantages and disadvantages


Quota obligations, particularly when they are combined with TGCs, are often considered to
be more in line with the requirements of market-conformity and competitive policies that
provide an incentive for short-term technology cost reductions. The perceived drawbacks of
the systems currently in place include lack of experience with the system making financial
actors reluctant to invest. In addition the complexity of some existing systems and the risk of
supporting on lower-cost technologies are also mentioned as disadvantages. The conclusion
can be drawn that it is a complex system, which will only function well if designed carefully.
Risk premium makes system more expensive. Consistent government policy is required as
there is direct influence on price. Therefore fewer possibilities exist to change policy.

Conclusions
This system is relatively new and so far seven EU-countries are using it. They are regarded
more market-conform and competitive than for example feed-in tariffs. As it is a rather new
instrument financial institutions might be reluctant to invest. On the other hand, different
market actors are looking for more market-conform instruments and this might be an answer
to that.

3.4 Tradable Green Certificates (TGCs)

The concept: a short description of the system


This system is an execution of the quota obligation. The important distinction is the “tradable”
part. TGCs are certificates, which can be sold in the market allowing RES-E generators to
obtain revenue, which is additional to the revenue from the electricity they produce, which is

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sold in the physical market. Therefore, two separate markets co-exist: a physical market and
a TGC market. Refer to figure 6 for a graphical overview of these separate markets.

Figure 6 Electricity is traded separately from Green Certificates

In the TGCs market, supply of TGCs is based on their issuing for every specified amount of
RES-E. The demand for TGCs can originate from an obligation (on consumers, suppliers or
even producers), from voluntary demand or even from fiscal incentives (ecotax exemption).
From the interaction of supply and demand, a TGC price emerges and generators and
investors plan their production and investments accordingly. Suppliers prove that they reach
their obligation by buying these TGCs or they pay a penalty to the government.

The Netherlands was the pioneering country in the implementation of TGCs (the 1998 Green
Label system) based on a voluntary demand. Mandatory TGC-schemes have been
introduced in a number of countries. Although there is a basic structure of these mandatory
TGC systems, important differences between them in relation to certain features (i.e., penalty
levels and quotas) exist. Eight of the 27 MSs are using the TGC-system. They all use it in
combination with a quota obligation system.

Advantages and disadvantages


TGC schemes are, in theory, a cost-efficient instrument to deploy RES-E. This is especially
true if certain conditions in the market for green certificates are met (wide markets, liquidity,
etc). Because of the higher risk-profile this system is however more expensive than the
Feed-in Tariff system.

Conclusions

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The TGC-system is normally combined with a quota obligation system. TGC schemes are, in
theory, a cost-efficient instrument to deploy RES-E and are often considered to be more in
line with the requirements of market-conformity and competitive policies that provide an
incentive for short-term technology cost reductions.

3.5 Tendering/bidding systems

The concept: a short description of the system


Tenders are invited by a public body to compete either for a certain financial budget or a
certain capacity of RES-E generation. Within each technology, the cheapest bids per kWh
are awarded contracts and receive the subsidy. The operator pays the bid price per kWh.
The difference between this price and the market price of electricity is reimbursed by a fund
or through the national budget, which is financed by a non-discriminatory levy paid by all
electricity consumers. Other financing systems do exist (e.g. in Denmark where the energy
price is being tendered and not only the premium).

In Europe two MSs are (partly) using a tendering system. France is the only country currently
still making substantial use of a tender scheme. It has tenders for large projects (power
plants > 12 MW (except wind)). Denmark has tender schemes only for wind offshore. The
British system was replaced by a quota obligation system from 2002 and in Ireland the
tendering system was replaced by a feed-in system in October 2006, which guarantees
feed-in tariffs to electricity suppliers for up to 15 years.

Advantages and disadvantages


Competition between RES-E producers is stimulated by this system. Once bids are awarded,
they give certainty to the generators/investors, as they work like a guaranteed feed-in
system. However, the high administrative costs and the complexity of the procedures
involved in a tendering system are important drawbacks of this system. With this system it
can happen for example that the tender contract has been awarded, but the project is still not
being realized due to the high investment costs. Also investments are sometimes not carried
out because of permit problems. In Denmark this problem is being solved by letting the
government prepare most of the work (e.g. the Environmental Assessment Report).

Conclusions
This system is not being used in many MSs. The reasons for this might be the high
administrative costs and the complexity of the procedures involved in a tendering system.

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3.6 Fiscal and Financial Incentives

The concept: a short description of the system


Fiscal incentives work via the tax system. These can be exemptions or rebates on (energy,
corporate or income) taxes, tax refunds, lower VAT rates or attractive depreciation schemes.
They might affect old and recent installations (generation-based incentives) or only the new
ones (capacity-based incentives).

An example of a financial incentive is an investment subsidy. They are considered an


appropriate instrument for stimulating new technologies and demonstration projects. The
subsidies can either be calculated as a percentage on the RE output or on the installed
capacity, the latter version is more common. Sometimes subsidies are awarded not on a
percentage basis but for EUR/kW or EUR/m2. The currently less economical technologies
(i.e. PV) usually receive relatively higher levels of subsidy while technologies closer to the
market profit from subsidies at lower levels.

Advantages and disadvantages


They are attractive because of the direct message transmitted to final energy consumers
about the added value of RE. An important disadvantage is that it cannot be guaranteed that
there will be enough generation after the installation is being built. This is the reason that an
investment subsidy should always be combined with a production subsidy.

Conclusions
Fiscal and financial incentives are widely used within the EU. Even though they have some
disadvantages (long-term uncertainty), they transmit a direct message to final energy
consumers about the added value of RE.

3.7 Ranking of support instruments

A more theoretical analysis of support instruments which did not consider administrative, grid
or other barriers was carried out in the Re-Xpansion project (OPTRES, 2007, p. 42). Via a

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web-based survey, respondents were asked to rank a set of predefined support instruments.
The figure below shows how support instruments were ranked according to preference 18 .

Figure 7 Score of support instruments according to RE-Xpansion project (OPTRES,


2007)

As this figure shows, a system fixed feed-in tariffs was the preferred support instrument
among the respondents. Investment grants were ranked second, scoring slightly better than
the premium tariff system. Perhaps somewhat surprisingly, the system of quota obligation
based on TGC was only ranked fourth, while the tender system was the least preferred
option.

Comparison of different support systems has shown that there is not a system which is better
than the others but that key success factors can be identified which are a requirement for any
support scheme to be successful 19 . It was shown that in countries where the development of
RE has been successful:
− governments have set clear long term targets
− support is given over sufficiently long periods

18
The classification does not exactly meet the one used in this report. Investment subsidies is a form
of a financial incentive and a premium is for example a surplus on the electricity bill and this can
be related to tax.
19
OPTRES, 2007.

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− the level of support is high enough to offer an attractive return on investment


− cash flows in the project are predictable and guaranteed
− the support system is transparent to the users and has low transaction costs.

In other words, a support mechanism is successful if it is able to attract investors and


financial institutions by providing sufficient confidence and financial incentives over a longer
period. A stop-and-go policy should be avoided at all cost as this ruins investor confidence.
This is the reason that budgets (or tariff increases) should be kept under control. A too high
burden on state or consumer budgets may make the support scheme politically indefensible,
leading to disruption.

In order to be successful in the long run not only the low hanging fruits should be supported,
but a wider range of technologies should be eligible. Care should be taken not to mix support
for old installations with that of new ones as this can lead to false competition.

3.8 Conclusions

The majority of MSs have opted for feed-in tariff regimes as the main support mechanism,
whereas a handful of MSs have opted for quota regimes. As can be concluded from this
chapter MSs are continuously fine-tuning existing policy measures. Additionally, nearly every
EU-country is setting up its own system. This approach might lead to sub-optimal solutions,
as every country is setting up its own system without optimal cooperation. It can be
substantiated that a move from a national approach to a more harmonized European
approach is needed.

The main incentive schemes for the promotion of DG/renewables are: Feed-in-Tariff, Quotas,
Tradable Green Certificates, Tendering/bidding systems and Fiscal and Financial Incentives.
These systems are being discussed in this chapter together with their advantages and
disadvantages. The majority of MSs are not using a single one system, but a combination.
Research has shown that there is not a system which is better than the others but that key
success factors can be identified which are a requirement for any support scheme to be
successful. A support mechanism is successful if it is able to attract investors and financial
institutions by providing sufficient confidence and financial incentives over a longer period. In
order to be successful in the long run not only the low hanging fruits should be supported, but
a wider range of technologies should be eligible. The table below summarizes some
important features of the different systems.

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Table 6 Summary of some important features of the different incentive schemes


(green: suitable; red: not suitable and grey: neutral or depends on how
policy is set)

FIT quota + TGC tendering/bidding fiscal/financial


systems incentives
suitable to depends on form yes, this is yes, this is yes, this is
encourage specific (i.e. technology possible possible possible
technology specific FIT
tariffs (banding))
take technology depends on depends on depends on form depends on form
learning into form; e.g. in form
account Germany: tariff
degression
system
suitable for especially for no, it is a more no, it is a more instrument for
immature RE market immature RE market conform market conform stimulating new
market system system technologies
and
demonstration
projects
compatibility with no, it is not depends yes yes
electricity market: entirely certain a
supply forecasts priori how much
renewable
electricity will be
produced.
long term yes no depends on form no, terms can
confidence for change quite
investors easily
administrative depends on form depends on yes, and complex yes, and
burden form complex
cost for community/ yes no, for investors no, for investors no, for investors
market efficiency

The practical implications of the different systems are discussed in the next chapter where
the specific systems in four countries are being analyzed.

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4 LESSONS LEARNED UP TO NOW

4.1 Introduction

As can be concluded from the previous chapters nearly every EU-country is setting up its
own supporting scheme. This approach will lead to sub-optimal solutions. For example of all
solar panels in Europe, 93% are built in Germany, while you would expect this in sunnier
countries (e.g. Spain). The same applies to wind energy. The highest yield is expected on
the western coast of West-European countries: from Portugal to France to Ireland, Great-
Britain and the Netherlands. Still the majority of the wind turbines are established in Germany
and Spain. It might be substantiated that a move from a national approach to a more
harmonized European approach is needed, where RES can be traded. This chapter will
assess the approaches of four countries with their specific way of working in this area.
Lessons can be learned from their experiences.

In this chapter the following countries will be investigated in more depth: Germany, Spain,
UK and the Netherlands. The reason for selecting these four countries is that they have their
own special characteristics which are interesting to assess:
− Germany: front runner in Europe in the development of RES, using feed-in tariffs
− Spain: also using feed-in tariffs, but also feed-in premiums and is a front runner this area
as well but with an expected additional value for solar energy
− UK: even though this country has a large wind potential the development of this energy
source lags behind in the UK, probably partly due to their quota system and their legal
problems leading to long development times
− the Netherlands: has had different schemes and is using a mixed system at the
moment.

The following issues will be discussed per country:


− system used in X country
− advantages and disadvantages of the system
− results
− conclusions.

At the end of this chapter the results of the individual countries are compared and some
overall conclusions are drawn.

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The majority of the information of this chapter is taken from the Final OPTRES report (2007)
and national policy documents.

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4.2 Germany

System used in Germany


An early feed-in law for wind electricity has existed in Germany since 1991. The Renewable
Energy Act (Erneuerbare-Energien-Gesetz/EEG 20 ) came into force in 2000. Since then,
under EEG regulations electricity produced from RESs is given priority for grid connection,
grid access in either distribution and transmission grid, and power dispatch. These include
hydropower, wind, solar, and biomass energy, geothermal energy as well as landfill, pit and
sewage gas. Grid operators are obliged to feed in electricity produced from RE and buy it at
a minimum price within their supply area. The regulation also introduced a German-wide
scheme to equalize these costs incurred by grid operators, as the amount of energy from
renewables being fed into the system differs in the various regions. The law was amended in
2004 and the next amendment was realized in 2008.

Germany is using a tariff degression system. The tariffs are generally fixed for 20 years. In
order to allow for technological progress and continuous cost reduction, the compensation
rates are subject to nominal annual degression (German WindEnergy Association (BWE 21 )).
Depending on the type of technology, the FITs for new installations decrease by 1% for small
hydro plants and by up to 5% for building-integrated PV-systems. The latest version of the
EEG has been ratified in the Bundesrat (the second and last legislative level for democratic
approval procedures) in July 2008 and will be valid from January 1, 2009. For more
information on the latest ratified version of the degression rates refer to Appendix IV.

Germany is currently also using a stepped tariff design depending on local conditions to
support onshore and offshore wind energy. Operators of onshore wind turbines receive a
fixed FIT during the first five years after the plant has started operating. The EEG defines a
reference wind turbine and this reference turbine generates a so-called reference yield over
a five year period. For more details on this system refer to Appendix IV. Also in Germany the
level of remuneration for electricity from biomass and biogas depends on different
characteristics of the power plant as well as on the fuel type. Furthermore the tariff level is
increased if the biomass has not been treated prior to its use as a fuel and if the power plant
fulfills certain criteria.

20
http://www.erneuerbare-energien.de/inhalt/6465/.
21
http://www.wind-energie.de/home/.

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Finally, Germany has a wide range of sub-systems. To mention a few: different feed-in tariffs
for new and old technology, different feed-in tariffs for repowering or normal onshore wind
farms and for a combination of renewables and CHP (combined heat and power); in some
cases a higher feed in tariff is provided if CHP is added.

Advantages and disadvantages of the German system


Setting a degression rate is a measure to encourage technology learning leading, in addition,
to a lower burden on the electricity consumer. One advantage of a fixed rate is that
investment security is communicated in the transparency of the tariff reduction. Another
consequence of an announced degression is the motivation to build a new RES-E plant as
soon as possible in order to apply for the higher tariff level.

Disadvantage of this system is that if the degression rate is set for a long period the system
is not very flexible to respond to technology price changes due to structural changes.
Additionally, it is difficult to set an appropriate degression rate due to the difficulties in
predicting technological learning. A feed-in system is not a market-based instrument and
therefore not cost efficient for promoting high penetration of RE.

The advantages of this stepped tariff design is not only the sites with most favorable
conditions can be exploited (as the support depends on favorable local conditions), the risk
of over-subsidizing very efficient plants is minimized, producer profit is kept on a moderate
level at favorable sites and therefore the burden on electricity consumers is lower and higher
electricity generations costs can be taken into account. Disadvantages of this system are: it
can lead to high administrative complexity (e.g. defining a reference turbine as in Germany),
many different tariff levels within the same technology may lead to less transparency and
uncertainty for investors, if the tariffs for low capacity plants are significantly higher than
those for larger plants, it might be economically feasible to construct two small plants instead
of one large one, even though larger plants may be more efficient. This decreases the overall
efficiency of the system.

Results in Germany
With 22,247 MW installed capacity at the end of 2007 Germany is still leading the wind
generated energy list in Europe. However, the newly installed capacity in 2007 equalled
1,667 MW in Germany while 3,522 MW of turbines were installed in Spain in 2007, the
largest figure ever, representing 40% of the European total. Germany now obtains 7.2% of its
electricity from wind; Spain 10%.

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In 2006, significant progress was made in the offshore sector 22 . Firstly, a German offshore
test field in the North Sea was given the go-ahead. 12 Multimegawatt turbines are to be
constructed there by the end of 2008. It is anticipated that this project will lend initial impetus
to the use of wind power in the German North and Baltic Seas. Secondly, the Infrastructure
Planning Acceleration Act entered into force. This new Act specifies that for all offshore wind
farms whose construction begins between now and the end of 2011, grid connection must be
installed and operated by the grid operators at their own expense. This relieves the wind
farm operators from the cost of grid connection, and facilitates a coordinated approach to the
grid connection of offshore wind farms.

The prospects for the wind power industry remain excellent. In Germany, the expansion of
offshore wind power use (offshore expansion) and the replacement of old turbines with new,
more powerful models (repowering) offers great potential. A recent study by the German
Wind Energy Institute (DEWI) predicts a potential doubling in the annual market potential in
Germany by 2020. Also foreign countries have formulated ambitious plans in this area (e.g.
US: “Energy Initiative”; China (30,000 MW installed by 2020). This is reflected in a growing
proportion of international business for German manufacturers as they move increasingly
into non-European markets. For German manufacturers and suppliers of wind turbines, more
than 70% of value-added is achieved through exports, and Germany accounts for 38% of
total world sales (Innovation Through Research, 2007).

The solar industry is a new industrial sector in Germany which has seen enormous growth
over the last number of years thanks to state support through the EEG. German solar
technology turnover has risen within the last six years from around EUR 450 million to some
EUR 4.9 billion. Although Germany is not the ideal location for solar energy due to moderate
levels of solar radiation, it has become the largest solar thermal market in Europe, helped by
the Market Incentive Programme (MAP). According to statistics from the International Energy
Agency (IEA), in 2006 production by Japanese companies dropped to below 50% of the
countries represented in the IEA for the first time, while German companies successfully
increased their market shares, e.g. in the case of cell production from 23% (2005) to 27%
(2006). Germany is the world leader for newly installed modules by a large margin. Around
half of all the modules installed worldwide are found in Germany. As a result, Germany now

22
Before the renewal of the EEG the German Feed-in Tariff for offshore wind was too low. Now this
has been increased and the connection fee will be paid as well. It is expected that new
installations will be built now.

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has the highest installed PV capacity per head of population of any country in the world. At
the end of 2007, this translated into a figure of 50 watts per inhabitant – significantly higher
than in Japan (around 16 watts as per the end of 2007); currently the second-largest market
(Innovation Through Research, 2008). The German Federal Association of the Solar Industry
reported that there were 1,300,000 solar plants in Germany in 2006. 220,000 new plants
were erected in 2006 alone (Federal Ministry of Economics and Technology). The number of
people employed directly and indirectly in the industry had risen to around 50,000 in 2006
(source: German Federal Association of the Solar Industry (BSW), as of April 2007). By
2010, the German PV industry is planning to further expand its capacity, and generate
around half of its sales from exports. The huge success of PV would not have been possible
without the radical progress achieved in PV systems engineering. In this respect, Germany
ranks as a world leader. German manufacturers of PV inverters have occupied almost 60%
of the world market (excluding Japan). In 2007, the export volume of German PV inverters
totalled around EUR 200 million (sales).

A project to examine the employment effects of RE, headed by the Zentrum für
Sonnenenergie- und Wasserstoff-Forschung (ZSW/Centre for Solar Energy and Hydrogen
Research Baden-Württemberg), examined the impacts of increasing the use of RE on the
German employment market up to the year 2030. The conclusions suggest that the ongoing
expansion in Germany has led to a significant rise in employment. In 2006, the number of
employees in this sector was at least 214,000. By the year 2030, this figure is expected to
increase further to at least 330,000 jobs in Germany. Some of the alternative scenarios,
depending on the assumptions made with regard to export and energy price developments,
indicate significantly higher job figures. One of the prerequisites for these positive effects on
employment is stable political framework conditions. This also determines Germany’s
positioning in the rapidly expanding world market (Innovation Through Research, 2007).

Conclusions
So far Germany has achieved very good results with their incentive scheme. They are
leading in Europe regarding the RES development and this line of business has created
many jobs in recent years. It is however the question if the German matured RE market will
ask for a more market-based system in the future as such a system is more cost efficient for
promoting high penetration of RE. However, large volumes of new RE projects are expected
to be promoted in the coming years too. It is BMU’s (Ministry for the Environment, Nature
Conservation and Nuclear Safety) opinion that with “a consistent promotion of research, they
can consolidate the leading position of Germany’s companies and research institutions, while
creating jobs in a rapidly expanding market”. So far, that is exactly what is happening.

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In 2007, around 14% of Germany’s gross electricity consumption was generated from RES,
which means that their 2010 RES-E target (12.5%) has already been significantly exceeded
(BMU, 2007 Annual Report).

4.3 Spain

System used in Spain


In Spain a FIT-scheme is being used, with some special features.

A FIT may be paid to RES-E generators as an overall remuneration (a fixed tariff) or


alternatively as a premium that is paid on top of the electricity market price (a premium tariff).
In case of a fixed tariff design, RES-E producers receive a certain level of remuneration of
the electricity market price. In contrast, the electricity price does influence the remuneration
level under the premium option. Hence, the premium tariff represents a modification of the
commonly used fixed tariff towards a more market-based support instrument. Currently, most
of the European countries with FIT-systems have opted for the fixed tariff model. In Spain the
Royal Decree 2818 of 1998 introduced a system offering RES-E producers the choice
between a fixed tariff option and a premium option. The choice is valid for one year, after
which the generator may decide to change to the alternative. In case of the fixed tariff option,
the electricity from RES is purchased by the electricity distributor, who pays a fixed
remuneration per kWh to the RES-E generator. RES-E producers who choose the premium
option still sell their electricity to the distributor and receive a premium on top of the final
hourly market price. Furthermore the electricity can be sold directly to other customers
through bilateral contracts or to electricity traders through forward contracts. The overall
remuneration consists of the market electricity price (or the negotiated price, respectively)
and the additional tariff components including a premium and an incentive for participation in
the market. Due to the increased electricity price, the share of electricity sold using the
premium option increased from 0% in June 2004 to 72% in July 2006. The Royal Decree
436/2004 has been replaced by RD 661/2007. This new decree maintains the same main
structure as RD 436 but it introduced some new issues, e.g. all installations > 10 MW must
be connected to a Generation Control Center (refer also to chapter 5) and also introduces
less favorable tariffs for some technologies and a cap and floor mechanism for the fixed
premium option. The effect of the new tariffs depends on the energy price on the electricity
market and on the technology. E.g. for wind generation and PV RD 661 is less favorable than
RD 436, but for cogeneration and biomass the opposite applies.

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The amount of electricity generated depends on external conditions such as solar radiation,
wind speed or the level of water in a river for certain types of RES. It is possible to improve
the RES-E integration into the power grid if the amount of electricity generated can be
forecasted. Operators of RES-E plants in a few countries with a FIT-system are obliged to
predict the amount of electricity they plan to feed into the grid. Spain is one of the countries
with such a forecast obligation. In the fixed price option, this only affects plants with a
capacity of more than 10 MW. The RES-E generators have to report to the grid operator the
amount of electricity they plan to feed into the system for each hour of the day, at least
30 hours before a day starts. It is possible to correct the predicted amount up until one hour
before an hourly interval starts. If the delivered electricity differs from the prediction by more
than 20% in case of solar and wind energy and by more than 5% in other cases, the
operators have to pay a penalty of 10% of the reference electricity price for each kWh of
deviation. For those plant operators who choose the premium option, market rules are
effective. Therefore they have to forecast the amount of electricity generated for all RES-E
plants (not only the one with a capacity of more than 10 MW). It should be pointed out that
RES-E producers are able to compensate the missing electricity from one wind park by an
excess of electricity from another. Electricity generated from other types of RES can also be
sued to balance any deviation.

For biomass Spain is also using a stepped tariff design in order to reflect the technology-
specific generation costs. The level of tariffs for biomass plants depends on the type of fuel
used. Biomass from energetic cultivation, garden, forest, and agricultural waste is supported
with a higher tariff than residues from industrial installations in the agricultural and forestry
sector, e.g. from olive cultivation.

Finally, in 2006, Spain passed a law making solar panels compulsory in new and renovated
buildings.

Advantages and disadvantages of the Spanish system


The premium option shows greater compatibility with liberalized electricity markets than fixed
feed-in tariffs. The risk for RES-E producers is higher in case of the premium option because
the total level or remuneration is not determined in advance and there is no purchase
obligation as is the case with the fixed option. Therefore the remuneration tends to be higher
for the premium option in order to compensate this higher risk for RES-E producers.
Nevertheless, the higher support level also implies higher costs for society, especially if
remuneration levels of the fixed and the premium option differ significantly.

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Imposing a forecast obligation for fluctuating RES can lead to improvements in the accuracy
of forecast measures, especially if penalty payments have to be made for deviations, as
realized in the Spanish feed-in system. It is then useful to give the RES-E producers the
possibility to pay the deviation fee or to organize a pool of RES generators in order to
balance their generation. A forecast obligation for RES-E may facilitate electricity integration
from RES into the grid. However, careful analysis is required of which market actors should
be obliged to forecast fluctuating power generation in order to minimize the costs for the
energy system.

The advantages and disadvantages of the stepped tariff design are explained in the previous
paragraph as Germany is applying this system for their wind energy development.

Results in Spain
For wind energy the most impressive performance in 2007 came from Spain. 3,522 MW of
turbines were installed, the largest figure ever, representing 40% of the European total. The
Spanish success story has resulted from a clear national incentive framework for RE, as well
as strong regional targets. Spain now obtains 10% of its electricity from wind power,
Germany 7.2% (EWEA Annual Report at www.ewea.org).

It was expected that Spain should be the leader in Europe regarding the development of
solar energy. However, Germany has become the largest solar thermal market in Europe,
helped by the Market Incentive Programme (MAP). One of the barriers to PV project
development in Spain are the administrative barriers to obtain the necessary permits from
the autonomous regions and the energy utility companies. Permits and legislation can differ
per region. It was hoped that the new RD 661/2007 would improve this. As RD 661/2007 was
published in May 2007 some results have been observed:
− speculation: capital owners diverted big amounts of money to these projects, with the
promise of large returns of investment (always > 15% per project, figure that becomes
much higher when banks lend 80% of investment at low rates – payments are
guaranteed by the State)
− this condition provided literally an explosion of projects. Administrative bodies were
suddenly overwhelmed by the exponential number of projects. Endless and ever growing
queues were generated. Many cases of administrative corruption were reported
− due to enormous increase of PV projects, other technologies suffered from delays in
administrative authorizations

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− additionally it has been observed that Distribution System Operators (DSOs) do not
provide transparent and non-discriminatory access. PV projects have been wrecked by
them, as they provided connection to the grid at too high voltage, too far from the project
location (which “kills” the project).

So it can be concluded that a drawback of a too attractive FIT can be the reason to create
conditions for bad practices (as PV in Spain). This can however be improved by:
administrative procedures (setting a maximum deadline after which authorization is
supposed to be obtained), governance of the administrative system to avoid discrimination
and corruption, governance on DSOs criteria for grid connection, etc.

The success in the development of wind power in Spain has been accompanied by the
creation of competitive companies now active in the international technology markets and
their great involvement in this sector. The photovoltaic energy is characterized by a similar
industrial development. Spain's Ministry of Industry estimates that at the current production
rate it will have 200,000 new jobs by 2010 in the RE sector.

Additionally, another main driver for the large deployment of RES in Spain is the 85%
dependency on energy imports, which is the highest in the OECD countries. Further, wind
deployment has been accompanied by a high involvement of regional and local authorities
and avoiding in this way the NIMBY-effect (Not In My Back-Yard).

Conclusions
So far Spain has achieved, like Germany, very good results with their incentive scheme.
They are one of the leading countries in Europe regarding the RES development (mainly
wind and solar) and this line of business has created many jobs in recent years. However,
biomass has not developed as fast as expected (nor for electricity or for heating purposes).
The main reason for a further development of biomass are administrative barriers. Another
drawback of the Spanish system is that the very attractive FIT system was the reason to
create bad practices (as PV in Spain). Several solutions are available to overcome these bad
practices.

Despite the fast growth of some RES in Spain it remains probably too small to reach the
2010 target given the increase in electricity consumption. So energy efficiency is getting
more attention now as well. The Ministry of Industry published the Energy Efficiency Plan for
2008-2012. It sets an objective for 2012 to reduce primary energy consumption in
24,776 ktep (13% from base year 2004).

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4.4 UK

System used in the UK


Renewables Obligation (www.ofgem.gov.uk)
The British RES-E target aims at 10% of gross electricity consumption by 2010, with an
aspiration for this level to double by 2020. The Renewables Obligation (RO) is the main
mechanism for incentivizing this growth. This RO-system in the UK is a quota system. This
system requires licensed electricity suppliers to buy at least part of their electricity from
renewable generation. The obligation was designed so the target increases each year from
3% at its instigation in 2002 to, under the current legislation, 15.4% in 2015-2016. This target
could increase further under the Government’s review of RE policy. The target for 2007-2008
was 7.9%. Over 14.6 million Renewables Obligation Certificates (ROCs) were issued during
2006-2007, compared with just over 13.7 million in 2005-2006. Ofgem also administers the
Renewables Obligation in Northern Ireland, via an agency agreement. This came into force
in 2005 and the target for electricity supply companies in Northern Ireland was 2.6% in
2006-2007 and is 2.8% in 2007-2008. This reaches 6.3% in 2012-2013 and stays at this level
until 2027. This RO-system is mainly aiming at not yet mature technologies that still need
some support (onshore wind, biomass, etc). For each renewable generated MWh the
licensed electricity supplier receives a ROC. To meet the obligation a supplier can either buy
ROCs, produce ROCs by generating RE or pay a buy-out price when his target is (partly) not
met.

It has been proposed in an evaluation of the RO-system to adapt the system as follows:
− introduction of “banding” of the RO to offer differentiated levels of support to different
renewable technologies. This will encourage the increased development and deployment
of a broader set of renewable technologies. More expensive technologies (e.g. tidal,
wave, offshore wind) per generated MWh RE will receive more ROCs than the cheaper
technologies. It is the intention that the new bands will come into force in 2009. In the
White Paper four bands are being proposed.

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Table 7 Proposed banding system (White Paper on Energy, 2007)

band technologies level of support ROCs/MWh


established sewage gas; landfill gas, co-firing of 0.25
non-energy crops (regular) biomass
reference onshore wind; hydro-electric; co-firing 1
of energy crops; energy from waste
with CHP; other not specified
post-demonstration offshore wind; dedicated regular 1.5
biomass
emerging technologies wave; tidal-stream; advanced 2
conversion technologies (gasification,
pyrolysis and anaerobic digestion);
dedicated biomass burning energy
crops (with or without CHP); dedicated
regular biomass with CHP; solar PV;
geothermal

− It has been proposed to retain the link between the Retail Price Index (RPI) and the RO
buy-out price from 2015/16. The 2002 buy-out price equalled GBP 30/MWh and is yearly
being adapted to the RPI. In 2007 the buy-out price equalled GBP 33.24/MWh.
− To increase the RES-E 2020 target to 20%.

Currently a public consultation is being held on the proposed changes to the RO.

Since the introduction of the RO-system large fluctuations have taken place in the ROC-
price.

Table 8 ROC-prices (http://www.e-roc.co.uk/trackrecord.htm)

Oct 02 Oct 03 Oct 04 Oct 05 Oct 06 Oct 07 July 08


ROC price 47.12 45.93 46.12 39.16 44.81 49.27 53.27
(GBP/MWh)

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Climate Change Levy


Additionally, the UK is applying a Climate Change Levy (CCL). Ofgem administers this levy
exemption for renewables. 2007-2008 was the seventh year of the CCL exemption and over
15.2 million Renewables Levy Exemption Certificates (LECs) were issued. Since April 2003,
the exemption from CCL for direct supplies of Combined Heat and Power (CHP) generated
electricity from sources designated as good quality was extended to include indirect supplies,
those suppliers exported to the grid. Ofgem issued over 25 million CHP LECs in 2006-2007
to complying CHP schemes this year.

Energy Efficiency Commitment/Carbon Emissions Reductions Target


On behalf of the Department for Environment, Food and Rural Affairs (Defra) Ofgem
administers as well the Energy Efficiency Commitment (EEC) programme. The EEC obliges
domestic electricity and gas suppliers to deliver energy savings from domestic consumers.
Half of the energy savings must come from priority customers who receive benefits or certain
tax credits. This was the last year of the EEC; it was succeeded in April 2008 by the Carbon
Emissions Reductions Target.

Advantages and disadvantages of the system


The RO-system creates an additional incentive on top of the certificate price but also
introduces greater complexity and uncertainty about the level of additional support at the
same time. The reason for the uncertainty is that the value of the recycle payment paid
depends strongly on the degree of target achievement (OPTRES, 2007).

Although the RO has been successful in supporting more renewable generation (and would
have been even more successful without planning problems) this has come at a very high
cost to customers compared to other carbon abatement measures. In 2006/07, the cost of
carbon abatement through the RO was in the range GBP 65-140/tCO2 depending on the fuel
that is assumed to be displaced. In contrast the cost of abatement in the EU Emissions
Trading Scheme it has varied between GBP 0-22/tCO2 (Ofgem, 2007).

The UK requires licensed electricity suppliers to buy at least part of their electricity from
renewable generation. These are long term targets. For producers it involves the risk that the
market conditions might change. The ROCs price is dependent of eventual readjustments of
the targets by the Government. Additionally, the ROCs price can increase if renewable
electricity supply is expanding.

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Because of their limited grid capacity the UK established a restriction on the expansion of
renewable electricity. This applies to the connection of offshore wind parks, but also to the
remote wind parks in Scotland.

Finally, planning problems are an important obstacle for a successful development of


renewable electricity initiatives in the UK.

Results in the UK
Even though the UK has one of the best wind regimes in Europe, they rank only sixth in
Europe (installed capacity at the end of 2007: 2,389 MW), behind Germany (22,247 MW),
Spain (15,145 MW), Denmark (3,125 MW), Italy (2,726 MW) and France (2,454 MW) (EWEA
Annual Report 2007).

In the UK the largest contribution to renewables in input terms (82%) is from biomass, with
large-scale hydro electricity production and wind generation contributing the majority of the
remainder as figure 8 shows. For the first time in 2007 wind (with a 9% share) contributed
more than large scale hydro in primary input terms. Only 2% of RE comes from renewable
sources other than biomass, wind and large-scale hydro. These include solar, small-scale
hydro and geothermal aquifers.

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Figure 8 RE-utilization 2007(1) (Digest of United Kingdom Energy Statistics 2008)

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In the UK regional differences hinder project development. The grid network in Scotland is
not strong enough, while the wind resources are more favorable here than in England. Also
the interconnection capacity of the two countries (Scotland and England) is not sufficient.
Additionally, planning problems are an important obstacle for a successful development of
renewable electricity initiatives.

A recent success strategy is the site leasing arrangement for offshore wind farms in the UK.
This is expected to accelerate the deployment of offshore wind in the UK market over the
next few years and gives the UK a chance of actually meeting its ambitious target of 20%
RES-E in the year 2020 (OPTRES, 2007). The ROC system is under consideration as well
and the suggested changes will encourage the increased development and deployment of a
broader set of renewable technologies.

Conclusions
Even though the UK has the best wind regimes in Europe the UK only ranks sixth within the
EU-27 with regard to installed wind capacity. The main reasons for this result are: planning
problems and grid capacity. Additionally, although the RO has been successful in supporting
more renewable generation this has come at a very high cost to customers compared to
other carbon abatement measures. It is still uncertain if the UK will meet its European
targets.

4.5 The Netherlands

System used in the Netherlands


Feed-in tariffs: Subsidies Duurzame Energie (SDE)
In July 2003, a feed in premium was introduced, the so-called MEP premium (premium on
top of the market price for power, fixed for ten years: “Wet Milieukwaliteit
ElektriciteitsProductie”). Under the MEP scheme, Dutch producers of renewable electricity
feeding into the public grid receive a fixed fee per kWh for a guaranteed period of ten years
The “MEP-premium” was abolished in August 2006 when the previous Minister for Economic
Affairs judged that the EU-approved target for the Netherlands of 9% renewable power
consumed by 2010 would be met. Since then, investments in new RE installations have
fallen down to practically zero.

One of the disadvantages of the MEP was the fixed subsidy amount for ten years; even
though the electricity price increased in the meantime. This resulted in very high costs for the

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government. In October 2007, the Dutch government published a new regulation for a feed-in
premium for RE (so not only electricity anymore). The new support mechanism, called SDE
(“Stimuleringsregeling Duurzame Energieproductie”) resembles the old MEP premium
system. Producers will get a premium covering extra costs on top of the wholesale energy
price for a number of years. The level of the premium and the duration of support will vary
with each technology. The subsidy period depends on the expected technical life span. This
means for example 15 years for onshore wind and PV and 12 years for biomass, waste
incineration and green gas. However, the premiums will also vary with the wholesale price of
electricity. For the new SDE regulation, a fund of EUR 300 to EUR 350 million per year will
be available by 2011. In contrast to the old scheme, the new one comprises an upper limit.
The 2008 upper limit equals EUR 1,344 million and the expected capacity is 633 MW in the
first year. In the first year, the premiums will be distributed on a “first come, first served”
basis.

Biomass and wind energy, that were already eligible for the old MEP regulation, will be
eligible for SDE too, except for large co-firing of biomass in power plants. A new entry in the
SDE is photovoltaic. Offshore wind has not yet been included, because no new permits have
been issued. Because of sustainability concerns, liquid biomass fuels are excluded in the first
year. Bio-energy producers will possibly be required to report on the sustainability of their
biomass. The SDE will be evaluated in 2010.

Table 9 Categories of 2008 SDE-regulation with base amount, correction and


subsidy (www.senternovem.nl/sde)

category base amount correction subsidy


(based on amount
power and
gas price)
1 onshore wind EUR 0.110 per kWh EUR 0.065 EUR 0.045
per kWh per kWh
2 power from sewage EUR 0.058 per kWh EUR 0.067 EUR 0 per
sludge, landfill gas per kWh kWh
3 green gas from sewage EUR 0.277 per Nm3 gas EUR 0.198 EUR 0.079
sludge, landfill gas per Nm3 gas per Nm3 gas
4 high efficient waste EUR 0.125 per kWh EUR 0.121 EUR 0.004
incineration (>22%) per kWh per kWh
5 solid biomass burning; EUR 0.12 per kWh EUR 0.058 EUR 0.062

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digester of organic waste, per kWh per kWh


(co) digesters of manure
6 small scale PV (0.6 kWp – EUR 0.564 per kWh EUR 0.234 EUR 0.33
3.0 kWp) per kWh per kWh

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Recently (July 2008) a new category has been added: renewable gas from co-digestion of
manure and digester of organic waste. Applications for this newly added category can be
submitted from August 4 until December 1, 2008. The available subsidy amount equals
EUR 42 million and the base amount equals EUR 0.44 per Nm3 gas. Applications for onshore
wind can be submitted until the December 1, 2008. The application deadline for the other
categories was closed at August 1, 2008. The Minister of Economic Affairs has recently
increased the maximum upper limit of two categories: PV (now EUR 83 million, an increase
of EUR 37 million) and biomass (now EUR 325 million, an increase of EUR 36 million).

Tax incentive
The Energy Investment Deduction scheme (EIA) is a scheme providing tax incentives for
investment in RE projects.

Advantages and disadvantages of the Dutch system


One of the disadvantages of the MEP was the fixed subsidy amount for ten years; even
though the electricity price increased in the meantime. This resulted in very high costs for the
government. With the new SDE-system the real electricity price is taken into consideration: if
the electricity price increases (correction amount) less subsidy is provided.

This new Dutch system is a stepped tariff design feed-in system. The advantages and
disadvantages of this system are explained in the paragraph on Germany as this country is
applying this system for their wind energy development.

It is known and still applicable that the development of wind parks is being slowed down
because of local resistance. It is expected that 2/3 of the initiatives is hindered by this.

As the SDE-system is only started this year, the system has not been evaluated yet. An
evaluation is planned for 2010.

Results in the Netherlands


Even though the Dutch governmental policy is focusing on the development of wind energy,
they rank only eight in Europe (installed capacity at the end of 2007: 1,746 MW), behind
Germany (22,247 MW), Spain (15,145 MW), Denmark (3,125 MW), Italy (2,726 MW), France
(2,454 MW), Italy (2,389 MW) and Portugal (2,150 MW) (EWEA Annual Report 2007). One of
the reasons that wind development in the Netherlands has been slowed down is the fact of
the abrupt standstill in August 2006. This meant that future wind energy projects did not
come into operation. It took more than 1.5 years to introduce the new subsidy system.

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Conclusions
Even though the Dutch governmental policy is focusing on the development of wind energy,
they rank only eight in Europe. Reasons for these results are: too many departments are
involved and very long procedures exist. It is getting attention now to improve the
procedures. Additionally, it also took about 1.5 years to introduce the new SDE-system by
which no new wind projects have been developed. The focus is mainly on offshore wind as
onshore wind is meeting its targets (the so-called BLOW-agreement was achieved ahead of
schedule: 1,500 MW wind energy by 2010 was met already in 2007). The share of RES in
the gross electricity consumption was 5.67% in 2006. The Dutch target is set at 9% share of
RES on gross electricity consumption by 2010.

4.6 Conclusions

From the previous paragraphs it can be concluded that Germany is the front runner on
developing RE, not only in Europe, but world-wide. The most important reason for this good
result is the stable support system and parallel political framework conditions. So low overall
barriers exist to develop RES-E. In this way this country has made great progress towards
achieving its European targets. In Germany the feed-in tariff system is applied, but it remains
to be seen if this matured RE market will ask for a more market-based system in the future
as such a system is more cost efficient for promoting high penetration of RE.

In 2007 a record of 3,522 MW of turbines were installed in Spain, the largest figure ever,
representing 40% of the European total. The Spanish success story has resulted from a clear
national incentive framework for RE, as well as strong regional targets. Presently, Germany
has become the largest solar thermal market in Europe; it is expected however that Spain
could be the leader in Europe regarding the development of solar energy in the near future
as their climatic conditions for this RES are much more profitable than those in Germany.
One of the barriers to PV project development in Spain are the administrative barriers to
obtain the necessary permits from the autonomous regions and the energy utility companies.
Another drawback of the Spanish system is that the very attractive FIT system was the
reason to create bad practices (as PV in Spain). Several solutions are available to overcome
these bad practices. In Spain feed-in systems are being used as well and it shows that this
system achieved good results in new markets, but administrative barriers can create less
development than expected.

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The RO-system in the UK is a quota system and is expected to be more cost efficient for
promoting the development of RE. However, although the RO has been successful in
supporting more renewable generation in the UK this has come at a very high cost to
customers compared to other carbon abatement measures. Additionally, even though the UK
has one of the best wind regimes in Europe, they rank only sixth in Europe. The reasons for
these results are manifold. Firstly, regional differences hinder project development. The grid
network in Scotland is not strong enough, while the wind resources are more favorable here
than in England. Secondly, the interconnection capacity of the two countries (Scotland and
England) is not sufficient. Finally, planning problems are an important obstacle for a
successful development of renewable electricity initiatives. A recent success strategy is the
site leasing arrangement for offshore wind farms in the UK. This is expected to accelerate
the deployment of offshore wind in the UK market over the next few years. It remains to be
seen if the UK will meet its European targets.

The Netherlands is using a feed-in tariff system as well, but its result is not as great as the
German and Spanish achievements. In October 2007, the Dutch government published a
new regulation for a feed-in premium for RE, Subsidies Duurzame Energie (SDE). Its
predecessor, the MEP premium, was abolished in August 2006. It was assumed that the
Netherlands will meet its RES-E target of 9% by 2010. Additionally, one of the disadvantages
of the MEP was the fixed subsidy amount for ten years; even though the electricity price
increased in the meantime. This resulted in very high costs for the government. This has
changed with the new SDE-system: the premiums will vary with the wholesale electricity
price. Additionally, the level of the premium and the duration of support will vary with each
technology as well. Compared to the previous system the SDE is more market-based. The
new SDE-system will be evaluated in 2010. To come to the system change took more than
1.5 years. In the meantime the RES development has slowed down. Mainly the development
of offshore wind is behind schedule. Reasons for this result are: too many departments are
involved and very long procedures exist. It is getting attention now to improve the
procedures. The share of RES in the gross electricity consumption was 5.67% in 2006. The
Dutch target is set at 9% share of RES on gross electricity consumption by 2010.

It can be concluded from the four analyzed countries that a harmonized incentive scheme will
not be operational in the near future. A similar conclusion was drawn at the futures-e 23 final
conference (was mainly focused on the Eastern-European countries). They concluded that
there is no urgency for full harmonization. In these countries internal market needs central

23
http://www.futures-e.org/.

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coordination instead and is not ready for full harmonization. A common power market is more
important than a common support system.

Additionally it became clear from these examples that a support mechanism is successful if a
government introduces a stable support system and parallel political framework conditions
(spatial, grid, etc). In this way it is able to attract investors and financial institutions by
providing sufficient confidence and financial incentives over a longer period. Investor
confidence is of utmost importance. Secondly grid access is very important as well, because
investors need to be sure that they can feed-in the energy into the system.

With the increase of RE generation DG is becoming more important. DG growth strongly lays
a claim on the capacity and developments of grid. Next chapter is investigating the
developments in this area for the four countries that have been discussed in this chapter as
well: Germany, Spain, UK and the Netherlands.

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5 INCENTIVES ON GRID DEVELOPMENT

5.1 Introduction

As in previous chapters has been explained both at EU level but as well at national level
policies on RE are being developed. As can be seen from table 2 (chapter 2) every country
has its own policies on renewables and put emphasis at different RES. Most of the currently
existing grids were built over 40 years ago with the focus on centralized generated electricity.
Currently, these different RES cause more DG into the grid. It is interesting to analyze how
different countries are dealing with this issue. In this chapter this is being done for the same
four countries that are being analyzed in the previous chapter: Germany, Spain, UK and the
Netherlands. For each country a description is provided on:
1 grid development
2 grid integration of RES.

These subjects go together with the development of the so-called Smart Grid system and the
European grid development in general. To be able to focus on these four countries, this
chapter will not go into these related issues. This chapter will first provide a definition of DG;
subsequently the four countries will be analyzed. Question is here: Which are the
mechanisms to evolve from a centralized generation system to a DG-system?

5.2 Status of experiences from DG in four countries

5.2.1 Introduction

In this paragraph the same countries as described in chapter 4 will be analyzed on their grid
development and grid integration of RES. As is explained in previous chapter the four
investigated countries have various systems in place to support RE generation. This will
consequently result in more DG than was the case in the past. DG growth strongly lays on
the capacity and developments of grid.

In its latest World Energy Outlook 2008 24 it becomes clear that the energy sector will have to
play the central role in tackling climate change. They will have to play the central role in

24
World Energy Outlook 2008, International Energy Agency, November 12, 2008, London at:
http://www.worldenergyoutlook.org/2008.asp.

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curbing emissions, through major improvements in efficiency and rapid switching to


renewables and other low-carbon technologies, such as carbon capture and storage (CCS).
Additionally, massive investments in energy infrastructure will be needed. The Reference
Scenario projections call for cumulative investment of over USD 26 trillion (in year-2007
dollars) in 2007-2030, over USD 4 trillion more than posited in WEO-2007. The power sector
accounts for USD 13.6 trillion, or 52% of the total.

On 13th of November 2008 the Commission has issued a Green Paper Towards a secure,
sustainable and competitive European energy network [COM(2008)782] 25 . This Green Paper
seeks views on how the EU can better promote the new energy networks which Europe
needs, using all the instruments at its disposal. It also suggests a number of major strategic
projects which the EU could promote to strengthen solidarity and security of supply in a truly
European energy network.

This paragraph will go into the initiatives taken up in this regard in these four countries and
their experiences so far. As wind energy is currently the largest RES generated in these four
countries it is interesting to look how this is being done here 26 . It is emphasized here that the
focus of this chapter is on grid development and grid integration of RES and therefore the
previously mentioned related issues are not included.

5.2.2 DG – what does it mean?

In this report the following definition of Distributed Generation or Dispersed Generation (DG)
is being used:

“It refers to the local generation of electricity (and the cogeneration of heat) often, but not
essentially, from renewable sources. It offers the opportunity to generate electricity from
locally available fuels that might otherwise be unexploited, so helping to reduce the

25
http://ec.europa.eu/energy/strategies/2008/doc/2008_11_ser2/green_paper_energy_network_en.pdf
26
Additional to other information that is being used for the part on Grid Development/Structure rather
some information is taken from Thomas Ackermann, Eva Centeno López and Lennart Söder, Grid
Connection Rules for Wind Farms in Spain, Germany, Portugal, UK and Sweden, 7th International
Workshop on Large Scale Integration of Wind Power and on Transmission Networks for Offshore
Wind Farms.

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environmental effects of electricity production and improve security of supply”


(http://www.leonardo-energy.org/drupal/DG).

5.2.3 Germany

5.2.3.1 Grid development

5.2.3.1.1 The main players

Germany has a large number of distribution and regional network companies (around 900)
and four transmission companies: E.ON, RWE, ENBW and Vattenfall (re: figure below).

Just recently (October 28, 2008) three of the four TSOs (Vattenfall Europe Transmission,
ENBW Transportznetze en Eon Netz) decided to work more closely together regarding their
grid balancing. So far RWE does not want to participate. The aim of the co-operation is to
make the balancing of these three grid areas more reliable, faster and less bureaucratic. The
Minister for the Environmental Sigmar Gabriel stated three conditions for this co-operation:

1 the new organization has to be well


managed to realize improving and investing
in the grid
2 the RE-industry has to have the feeling to be
represented in this new organization as this
industry is becoming increasingly important
3 fair and free access to the grid have to be
guaranteed.

Figure 9 TSOs in Germany

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As these companies are still vertically integrated companies in Germany, which means that
production and distribution are still united in one company; information to create extra
capacity is sensitive information. RWE stated however that this is not the reason for them not
to participate; they rather conduct the complete Transmission Network in Germany. The
other three organizations will however not agree to this idea.

According to the Dutch TSOs TenneT spokesman, Mr Jelle Wils, this co-operation is a big
step ahead and he expects that within some time the Dutch and German TSOs will work
together in the same way. Also just recently it has been announced that RWE and TenneT
will co-operate more closely from January 1, 2009. They will set-up a control center for the
high voltage grid. The aim of this co-operation is to improve security of supply and increase
the risk management.

Three other important players in the German market are:

German Federal Network Agency: www.bundesnetzagentur.de


This Agency's, the Bundesnetzagentur, task is to provide, by liberalization and deregulation,
for the further development of the electricity, gas, telecommunications and postal markets
and, as from January 1, 2006, also of the railway infrastructure market. For the purpose of
implementing the aims of regulation, the Agency has effective procedures and instruments at
its disposal including also rights of information and investigation as well as the right to
impose graded sanctions

German Energy Agency (Deutsche Energie-Agentur): DENA: www.dena.de


The Deutsche Energie-Agentur GmbH (dena) – the German Energy Agency – is the
competence center for energy efficiency and renewable energies. Its many objectives include
the rational and thus environmentally friendly production, conversion and use of energy, and
the development of sustainable energy systems with a greater emphasis on renewable
energy sources. dena develops concepts and implementation strategies for the sustainable
provision of energy in cooperation with the sector’s key players.

To this end dena initiates, coordinates and implements innovative projects and campaigns at
a national and international level. It provides information to end consumers, works with all
social groups active in politics and the economy and develops strategies for the future supply
of energy. It finances its projects primarily by means of Public Private Partnerships (PPP).
One of their projects is the dena Grid Study II which aims to develop a long-term plan for the
integration of renewable energies, and particularly wind energy, into the German power grid.

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It will build upon the conclusions drawn in (the finalized) Part I, and therefore assumes that
the grid enhancement and extension measures discussed in dena Grid Study I have been
implemented. The report on part I covers the time period up to 2015, with a share of RES in
power generation of 20%, while the part II of the dena grid study will examine the time period
up to 2025. The results are expected at the end of 2009

Offshore Forum Wind Energy: http://www.ofw-online.de/


The Offshore Forum Wind Energy (OFW GbR) is an association of organizations that
organizes the planning and project development of offshore wind parks in the North and
Baltic Sea.

5.2.3.1.2 Grid development/structure

Every country has its own grid connection rules for wind farms. As wind is currently the
largest generated RES in the analyzed countries, it is interesting to look into this and see
how each country try to come up with answers. This is done below.

Also in Germany nuclear and fossil energy sources dominate at present the electric-power
generation mix. The renewal and restructuring process of the German energy economy due
to plant age and the phasing-out of nuclear power stations give wider scope for more
integration of wind power. Of the 121,000 MW of gross power-generation capacity presently
installed in Germany, the plants to be shut down in this process by 2020 account for about
40,000 MW. Planning for the upcoming replacement investments in fossil power stations are
also affected by the increasing share of RE (dena, 2005).

In the medium term, wind power has the greatest potential for increasing the share of RE in
electricity generation. For the further development of RE, an efficient integration of onshore
and offshore wind energy into the power system is very important. For the further integration
of RES into the interconnected power system, an extension of the extra high voltage
transmission network will be necessary. The part below will go into the current situation of
the German grid structure. More information on further development of the power grid and
the best way of integrating wind energy by increasing the flexibility of the electricity system
will become available when the Grid II study is finished (end of 2009).

Ackermann (2007) have compared the grid connection rules for wind farms in several
countries. As this is a rather recent study and as wind energy is the most important RES in

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the majority of the EU countries, the conclusions of this study have been summarized for
Germany, Spain and the UK. The information on Germany is provided next.

Network connection procedure


A well-defined network connection procedure reduces the overall costs for the application. It
means that the applicant has a clear understanding of what is required from him and what he
has to pay and that the network company can develop a method and procedure of how to
deal with connection applications. In Germany, the procedure is not clearly described, but the
network association has developed a guideline for the network companies how to deal with
the applications, but most importantly the relevant law defines that “Grid system operators
shall immediately and as a priority connect plants generating electricity from renewable
energy sources”. Hence in case of delays the network companies have to explain to the
regulator what caused the delays. That causes additional costs to the network companies if
the application is not processed reasonably fast. In Germany, the evaluation methods that
determine how much additional generation can be connected at a certain point are not
considered sufficiently transparent as network data are typically not published. An
independent evaluation of the response to an application is therefore rather complicated.
Conflicts on the application procedure may arise and hence a clear procedure on how to deal
with these conflicts should be developed. Germany used to have a specific organization that
helped to settle such interconnection disputes. Today this task is part of the newly started
regulator in Germany, similar to the Spanish approach.

Network investment costs


Project developers have to pay for the construction of the line, transformers and all other
necessary installations for the connection to the grid. There is no difference between
conventional power producers and power producers using RES. However, in 2007 Germany
adopted a law which states that grid companies have to pay for power lines connecting
offshore wind projects to their grid. Updates of the grid are always paid by the grid owner in
Germany. If the upgrades are considered to benefit just one producer, then this producer has
to pay all costs associated to the upgrade. If they are considered to benefit more than one
producer costs are shared between the producer and the grid owner or between the different
producers. In Germany, grid companies are required to pay all network upgrading costs while
in principle RE generators are required to pay the costs for the grid connections, i.e. all costs
from the wind farm to the connection point. Germany is the country where project developers
pay less network investment costs since they only pay for the connection, but not for any
network upgrades, neither in the distribution grid nor in the transmission grid. Network
upgrade costs are paid by network companies in Germany, which partly causes higher

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network tariffs for network users, however, these higher network tariffs are currently not
considered as a major issue by the different stakeholders.

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Capacity limits
No network tariffs are being paid in Germany and no capacity limits exist for connection to
the grid.

Network concessions
Network concessions are legal authorizations that are required in some countries in order to
build power lines. The origin of these network concessions is the centrally planned electricity
system that, with the deregulation, has developed into the current system with several
network companies. Wind power producers can build the lines between the individual wind
turbines without needing concession. The main consequence of this is that grid companies
do not have a monopoly over such lines. Regarding the power lines from the wind farm to the
connection points in the transmission grid or in the distribution/regional grid, wind farm
owners do not need any concession for building them.

Metering
Metering costs become a very important issue for small installations in the kW range, e.g.
PV, as the metering costs can have a significant impact on the overall project economics. For
small projects Germany distinguishes between on-site generation, e.g. a PV panel on the
roof of a house, and grid-connected generation plant. In case of on-site generation generally
no metering is required if the local generation always exceeds local consumption. However,
in this case no special payment (feed-in tariff or RE certificates) can be received. In case the
local production sometimes exceeds local consumption, customers in Germany can opt for
net-metering. This means that the power company only bills the net consumption
(consumption minus local production). Typically such net-metering is only possible for small
installations, e.g. up to 500 kW in Germany. In addition, power producers in Germany that
are connected to the low-voltage grid, mainly PV, can also choose to have two different
measurement equipments, one for the produced power and one for the consumed power.
Producers typically choose this arrangement since the payment for the produced electricity is
almost three times larger than the cost for the consumed power. Small grid-connected
installations, i.e. no on-site installation, often have special rules for metering. For instance,
small grid-connected applications up to a certain size (in Germany 500 kW) only have to
install simple, cheaper, metering equipment, without 15 or 30 minute metering capabilities.

Network tariff structure


In Germany power producers do not need to pay any tariffs for using the power grid. This has
always been the case, both for conventional power generators and renewable power
generators. That means that grid tariffs do not play any role in energy policy in order to

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promote RE technologies. Germany has a large number of distribution and regional network
companies (around 900) plus four transmission companies. That means that any cost
caused by power generators are not distributed equally among all customer organizations
and the regulator in Germany revealed that this is generally not considered as an important
issue. Only for the connection of offshore wind farms in Germany, which is the responsibility
of the transmission system operators, a special mechanism was developed to equally
distribute the costs among all network customers.

Priority production
In Germany RE is defined as priority production. This means conventional power generation
must always reduce generation in case of transmission congestions in order for RES
generation to be able to generate power as long as they do not exceed the existing
transmission capacity. In Germany, network operators are required to upgrade the
distribution, regional and transmission network in order to make sure that RE generation is
not affected by any network congestions, independent of the actual location of the RES. As
network upgrades can take years, the additional connection of new RES has been put on
hold in some areas, because the existing network capacity is not large enough to guarantee
production of new RES. However, RE generators can enter into an agreement with the
network operator that they can be curtailed in situations where all transmission capacity is
already used up by other RES. That means that such an agreement makes it possible to
connect new renewable generation systems earlier, however, such new units can be
curtailed without any payment.

Current policy challenges


Germany continuously adapts and improves its relevant regulations. The changes mainly aim
at developing a regulatory environment that allows a development of RE in order to achieve
the national targets, and therefore mainly aim at reducing barriers, and thereby providing an
acceptable investment environment. At the same time, however, policy development typically
tries to adjust the regulations in a way that additional costs are equally shared by all
consumers and the RE development does not lead to windfall profits for its developers. This
flexibility and openness to change are based on a continuous dialogue between policy
makers, regulator, network companies and the RE lobby.

5.2.3.2 Grid integration of RES

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5.2.3.2.1 Which system is being used and how is the grid integration developed?

An early feed-in law for wind electricity has existed in Germany since 1991. The stability of
this incentive scheme is the main reason why there is still a large expansion of the wind
power and PV sector even if the remuneration level is not particularly high. Germany has
established different criteria in order to limit the State support to wind power (the so-called
stepped tariff design). After five years, each installation is compared to the reference model
and in case the production has reached more than 150% of the reference production the
payment decreases (for more information refer to chapter 4 and Appendix IV). Under the
Renewable Energy Act (EEG) priority is being given to RE.

5.2.3.2.2 Legislation

There is no specific legislation in Germany on grid development. The Renewable Energy Act
(Erneuerbare-Energien-Gesetz/EEG) is the most important law in Germany. Relevant
legislation regarding connection is:
− the Energiewirtschaftsgesetz (EnWG: describes the long-term aims of the energy supply)
− Kraftwerks-Netzanschlussverordnung (KraftNAV: connection policy for conventional
production units of 100 MW on 110 kV and up).

5.2.3.3 Conclusions

Just recently a big step forward has been announced in Germany: three of the four TSOs
decided to work more closely together regarding their grid balancing. In this way the grid in
the different areas should become more reliable, faster and less bureaucratic. Also in
Germany an efficient integration of onshore and offshore wind energy into the power system
is very important. For the further integration of RES into the interconnected power system, an
extension of the extra high voltage transmission network will be necessary. Currently a study
on further development of the power grid and the best way of integrating wind energy by
increasing the flexibility of the electricity system is carried out. The results will become
available around the end of 2009. Also important results are to be expected from the
TradeWind project by February 2009. Germany is in contact with several stakeholders on a
regular base which results in flexibility and openness to change. Feeding in RES is being
prioritized in Germany. Additionally, the stability of their incentive scheme is the main reason
why there is still a large expansion of the wind power sector (and other RES) even if the
remuneration level is not particularly high. This results in a stable investment environment.

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As can be concluded from chapter 4 Germany is one of the countries with most RES
generation. The way they developed the grid and the grid integration of RES have to be
credit to this development.

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5.2.4 Spain

5.2.4.1 Grid development

5.2.4.1.1 The main players

Red Eléctrica de España: www.ree.es


Red Eléctrica is the Spanish Transmission System Operator. Red Eléctrica, as the system
operator, guarantees the continuity and security of the power supply and the proper
coordination of the production and transmission system, performing its functions based on
the principles of transparency, objectiveness and Independence. In addition, Red Eléctrica is
the manager of the transmission grid and acts as the sole transmitter on an exclusive basis.
It was the first company in the world dedicated exclusively to power transmission and the
operation of electrical systems

National Energy Commission (Comisión Nacional de Energía or CNE): www.cne.es


The National Energy Commission is the regulatory body for Spain's energy systems. It was
set up under the Hydrocarbons Act 34/1998, dated October 7, and developed by Royal
Decree 1339/1999, dated July 31, which approved the Commission's Bye-laws. The goals of
the Commission are to ensure the existence of effective competition in Spain's energy
systems and their objective and transparent functioning for the benefit of all agents operating
in those systems and that of consumers. To this end, the energy systems are deemed to be
the electricity market and the liquid and gaseous hydrocarbons markets

Spanish Wind Energy Association: Asociación Empresarial Eólica - AEE: www.aeeolica.es/


While many solutions are available to predict wind energy output (e.g. statistical and physical
models), there has been misunderstandings and doubts about the actual possibilities of
prediction and factors that affect the accuracy of the forecasts. For that reason, the AEE led
in a coordinated effort from the whole wind sector the Prediction Exercise in which those
questions were addressed. For the Prediction Exercise, seven wind farms placed in different
terrains and with different turbine characteristics where chosen throughout Spain making a
characteristic sample of the whole system. Also, six predicting companies, which later
expanded to nine, given the interest awakened by the Exercise, were chosen, representing
several ways of making predictions: from purely statistical, using only historical weather and
power output data to mostly physical, using different levels of downscaling and a model of
wind farms including the wind turbine generator (WTG) power curve. The starting point was
simple: at lease one predictor would predict for the seven wind farms and at least one wind

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farm would receive predictions from all companies. This way the effect of terrain and
prediction type could be assessed

Spanish Ministry of Industry, Tourism and Trade: www.mytic.es


The energy sector is the ministry’s responsibility. CNE is an independent part of the ministry
and gives advice to the ministry but it is the ministry who establishes the laws, including the
remuneration for the distribution companies.

FutuRed
FutuRed is a platform to study the future grid in Spain. They have elaborated a study
identifying the future investigation subjects:
• Short term:
– Advanced electronic equipment
– Communication and Automation
• Medium and long term:
– Faults detection, reset and quality service
– Distributed energetic resources
– Operations support tools
– External connection to control systems

5.2.4.1.2 Grid development/structure

In Spain a special and normal regime exists. The special regime is allowed and preferred to
feed in the grid (Art. 17A), but there should exist an agreement with the distributor. The main
difference is that distribution companies are forced to buy energy from special regime plants
but not from the normal regime. Only in case of a very large technical problem a renewable
plant will be disconnected.

In Spain, monitoring of the energy produced and consumed, power demand forecasts and
transporting the production are carried out by Red Eléctrica´s telecontrol and management
systems.

The production of power from wind resources presents some unusual features which are
mainly associated with its uncontrollable nature. This factor makes it necessary to have a
backup power system of sufficient capacity constantly available. Such backup power must be
provided by other sources of energy. This particular aspect means that the forecasting,

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tracking and control functions related to this type of generation must be as accurately as
possible. This is achieved in Spain through tele-metering of wind farm output and it allows
the electricity system to be operated appropriately with regard to safety and in an economic
fashion, similar to power stations operating under the ordinary regime. Refer to the Spanish
RE Control Center (CECRE) that has been established in June 2006 in the next paragraph.

The charts of real time wind power output are prepared from tele-metered data on the
mainland electricity system obtained by Red Eléctrica's control systems. It covers a period of
30 hours, including the end of the previous day and the beginning of the next. The estimated
generation represents the total wind power, considered from the wind farms which are
monitored by Red Eléctrica and tele-metered generation means instantaneous value of wind
power generation corresponding to the wind farms which are monitored by Red Eléctrica.
The tele-metering systems at the wind farms are currently being installed and thus the data
represented by the graph will be progressively completed.

Spain attains high penetration of wind energy despite the limited grid interconnection with the
neighbouring grids compared to other wind power producing countries. The interconnection
capacity of Spain with its neighbors is only ca 6% 27 , which means that Spain has to deal with
its wind production almost on his own and it is reaching a penetration level that will require
innovative solutions if it is to increase in the future. Spain has interconnection agreements
with Portugal, France, Morocco and Andorra. In 2007 62% of the export went to Portugal,
24% to Morocco and 12% to France; the remainder went to Andorra 28 .

As has been done for Germany the conclusions of the Ackermann (2007) article have been
summarized for Spain as well. The information is provided below.

Network connection procedure


Spain is an example of countries with very detailed connection procedures. The procedures
are prescribed by law and are not only a conduct code between grid companies and
producers’ associations. Spain applies fees for processing connection applications. A reason
for such fees is to avoid non-serious applications and the work related to them.

27
J. Rivier Abbad, The Role of Market Participation for a Better System Integration of Wind Energy,
IEEE, 2007, 7th International Workshop on Large Scale Integration of Wind Power and on
Transmission Networks for Offshore Wind Farms.
28
El Sistema Eléctrico Español 2007, Red Eléctrica de España, at:
www.ree.es/sistema_electrico/informeSEE.asp.

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Network investment costs


Project developers have to pay for the construction of the line, transformers and all other
necessary installations for the connection to the grid. There is no difference between
conventional power producers and power producers using RES. In Spain, the costs to
upgrade the transmission grid are socialized, i.e. paid by all consumers. Project developers
have to pay deposits to transmission companies if upgrade works are necessary to connect
them. The reason is avoiding that projects are not realized and the upgrade works are
carried out. No network tariffs are being paid in Spain.

Capacity limits
Regarding the connection to the grid Spain has defined limits for the connection to the
different voltage levels. The reason for setting up such limits has been to simplify the
processing of connection applications and to clarify the different responsibilities of the grid
owners.

Network concessions
Network concessions are legal authorizations that are required in some countries in order to
build power lines. The origin of these network concessions is the centrally planned electricity
system that, with the deregulation, has developed into the current system with several
network companies. In Spain wind power producers can build the lines between the
individual wind turbines without needing concession. The main consequence is that grid
companies do not have a monopoly over such lines. Regarding the power lines from wind
farms to the connection points in the transmission grid or in the distribution/regional grid,
wind farm owners do not need any concession for building them. They can build such lines
once they are granted the necessary building permits that are the same as the permits
required for distribution companies or transmission companies including studies on
environmental impact and public consultation. By transferring the connection line to the grid
company, producers avoid operation and maintenance costs for that line since they do not
pay any network tariffs.

Metering
Metering costs become a very important issue for small installations in the kW range, e.g.
PV, as the metering costs can have a significant impact on the overall project economics. In
case the local production sometimes exceeds local consumption, customers in Spain can opt
for net-metering. This means that the power company only bills the net consumption
(consumption minus local production). Typically such net-metering is only possible for small

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installations. In addition, power producers in Spain that are connected to the low-voltage grid,
mainly PV, can also choose to have two different measurement equipments, one for the
produced power and one for the consumed power. Producers typically choose this
arrangement since the payment for the produced electricity is almost three times larger than
the cost for the consumed power. Small grid-connected installations, i.e. no on-site
installation, often have special rules for metering. For instance, small grid-connected
applications up to a certain size only have to install simple, cheaper, metering equipment,
without 15 or 30 minute metering capabilities.

Network tariff structure


In Spain power producers do not need to pay any tariffs for using the power grid. This has
always been the case, both for conventional power generators and renewable power
generators. That means that grid tariffs do not play any role in energy policy in order to
promote RE technologies. The whole distribution system in Spain differs somewhat from
other countries as it is owned by five companies. There are around 300 small distribution
companies in Spain, but their share in the distribution activity is lower than 1% 29 . Distribution
companies are regulated ex-ante which means that the Government decides every year on
the income for each distribution company and the tariffs they can charge consumers. The
transmission system is almost completely owned by one transmission company. Therefore, it
is easier to socialize any costs caused by one generator in the transmission grid since these
costs will be shared equally by all customers within Spain.

Priority production
In Spain RE is treated as a priority production. This means conventional power generation
must always reduce generation in case of transmission congestions in order for RES
generation to be able to generate power as long as they do not exceed the existing
transmission capacity. In Spain, RE without storage capacity, such as wind power, solar
energy and hydropower stations without a dam, have the highest priority. So they do not
need a special agreement on curtailment like in Germany.

Current policy challenges


Like Germany, Spain continuously adapts and improves its relevant regulations. The
changes mainly aim at developing a regulatory environment that allows a development of RE
in order to achieve the national targets, and therefore mainly aim at reducing barriers, and

29
Main Spanish DSOs: Iberdrola Distribución (approx. 40%), Endesa (approx 40%) , Unión Fenosa
(approx. 15%).

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thereby providing an acceptable investment environment. At the same time, however, policy
development typically tries to adjust the regulations in a way that additional costs are equally
shared by all consumers and the RE development does not lead to windfall profits for its
developers. This flexibility and openness to change are based on a continuous dialogue
between policy makers, regulator, network companies and the RE lobby.

5.2.4.2 Grid integration of RES

5.2.4.2.1 Which system is being used and how is the grid integration developed?

It is possible to improve the electricity integration from RES into the power grid if the amount
of electricity generated can be forecasted. Spain is one of the countries with a forecast
obligation: operators of RES-E plants are obliged to predict the amount of electricity they
plan to feed into the grid. In the fixed price option, this only affects plants with a capacity of
more than 10 MW. The RES-E generators have to report to the grid operator the amount of
electricity they plan to feed into the system for each hour of the day, at least 30 hours before
a day starts. It is possible to correct the predicted amount up until one hour before an hourly
interval starts. If the delivered electricity differs from the prediction by more than 20% in case
of solar and wind energy and by more than 5% in other cases, the operators have to pay a
penalty of 10% of the reference electricity price for each kWh of deviation. For those plant
operators who choose the premium option, market rules are effective. Therefore they have to
forecast the amount of electricity generated for all RES-E plants (not only the one with a
capacity of more than 10 MW). It should be pointed out that RES-E producers are able to
compensate the missing electricity from one wind park by an excess of electricity from
another. Electricity generated from other types of RES can also be sued to balance any
deviation.

Red Eléctrica, as operator of the power system, introduced a Centro de Control del Régimen
Especial (Control Centre for the Special Regime - CECRE) in June 2006, a worldwide
pioneering initiative to monitor and control these energy resources. It was put into service to
achieve a greater supervision and control of special regime generation which would then
help to reach a higher level of integration of the RES. This led to the idea of the specific
CECRE that came into practice with the last RD 661. The CECRE is mainly focused on wind
energy and should provide effective control of the turbines and enough capability to follow
the limitations and instructions issued by CECRE in order to achieve true real-time
management opportunities. CECRE is an operation unit integrated into the Power Control

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Centre (CECOEL). This CECRE is able to control every aspect of the assets and this Centro
de Operación de Energía Renevables (CORE) monitors around 300 variables of each single
wind turbine. This CORE center does not only monitor its wind parks, but is also capable of
operating them. It can control the reactive and active power output and does this from a
single control center and for all its operating wind assets. Under this scheme, the generation
control center to which an electrical energy production facility is assigned and to which the
wind farms are connected, acts as its Generation Control Centre and interlocutor with Red
Eléctrica. To this purpose, every generation control center must be connected to the Red
Eléctrica control centers and have been previously approved by Red Eléctrica. This structure
is depicted in the figure below.

Figure 10 Control of Renewable Energies Production by the System Operator


(www.ree.es)

It is not always possible to introduce all of the produced wind power into the grid, because of
system specifications. Also, as the system grows and wind power takes an even larger role
in the electricity production, absorbing all of the produced power in certain nodes, could be
possible due to over-installation, forcing wind farms to reduce their energy output in order to
meet the capacity of the lines to distribute the power. For those reasons Spain has made an
effort to have all of its wind farms connected to control centers sending in real time all

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necessary information and allowing the control center, on request by the system operator to
regulate the amount of energy into the grid.

The Operational Procedure 9 30 states that every power plant must provide information on its
structure, the real time situation and others for the correct system operation. Furthermore,
O.P. 3.7 31 states that every wind farm has to be connected to a Control Center which in turn
is connected through a point to point communication line or a dedicated ADSL line to the
CECRE.

The data transferred by the wind farms to the control centers are the following:
− active power
− reactive power
− state of wind farm connection to the transmission distribution grid ((dis)connected).

And if available:
− voltage level
− wind speed and direction
− temperature.

Throughout March 2008, the high winds registered in Spain have caused the perfect situation
for testing the system in depth. It has shown a perfect system, lowering production in the
necessary wind farms to maintain grid security and returning the normal working levels.

Recently, the high number of wind farms installed in certain nodes has caused peaks in
voltage levels just at the beginning of peak hours caused by the simultaneous connection of
many reactive power controls all producing reactive power. As soon as the problem was
discovered and thanks to the Control Center to which all wind farms are connected, simple
time shift instructions were given, solving the problem with the positive contribution of the
wind producers sector and opening the door to voltage control in the future.

30
Resolución de 16-10-2006, “P.O. 9.0 Información intercambiada por el Operador del Sistema”,
BOE 24/11/06.
31
Resolución de 04-10-2006, “P.O. 3.7 Programación de la generación renovable no gestionable”,
BOE 24/10/06.

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Red Eléctrica de España was a finalist in the European Environment Awards for The Best
Business Project thanks to its Control Centre for Special Regime (Cecre) within the “Product
for Sustainable Development” category.

5.2.4.2.2 Legislation

In the past years a strong co-operation between the system operator and the whole wind
power sector has struggled to find the best possible way to ensure grid security and develop
technological solutions for new challenges presented. This joint work has brought both the
O.P. 12.3 32 starting the appropriate response of wind farms to voltage dips, as well as the
Verification, Validation and Certification Procedure (PVVC) for checking compliance of the
wind farms with the O.P. 33 .

The RD 661/2007 which was published in May 2007 prescribes that all installations > 10 MW
must be connected to a Generation Control Center (CCG) and they should connect to
CECRE. Red Eléctrica will issue the corresponding qualification certificates of generation
control centers.

The following laws play an important role to apply DG into the Spanish electricity grid:
− RD 1663/2000 of September 29, about the connection of PV installations to the low
tension grid
− RD 661 of May 26, 2007, about the establishment of a more up-to-date methodology and
classification of the legal and economic system of the energy production and the special
regime
− information about special regime and its laws (in English):
http://www.cne.es/cne/contenido.jsp?id_nodo=85&&&keyword=&auditoria=F
− important law for DSOs: REAL DECRETO 222/2008, de 15 de febrero, por el que se
establece el régimen retributivo de la actividad de distribución de energía eléctrica. It is
the law that fixes remuneration for DSO.

32
Resolución de 04-10-2006, “P.O. 12.3 Requisitos de respuesta frente a huecos de tensión de las
instalaciones eólicas”, BOE 24/11/06.
33
“Procedimiento de Verificación, Validacion y Certificacion de los Requisitos del P.O. 12.3 sobre la
Respuesta de las Instalaciones Eólicas ante Huecos de Tensión”, version 4, March 10, 2008,
http://www.aeeolica.es/aee_actua_verificacion.php.

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In Spain each DSO has its own connection rules. These rules are called “Normas Técnicas
Particulares” or “Particular Technical Rules” and they established the technical requirements
of the installations to be connected to DSO grid and how to carry out that connection. These
Particular Rules only apply to installations up to 30 kV (Endesa and Iberdrola). For higher
voltage national regulation for high voltage lines are issued by the Industry Ministry, and the
safety regulation for transformers, substations and power plants. The technical rules of REE
are also important in Spain; the most important are:
− P.O.3.7 Generation Planning for non-scheduled renewable power plants
− P.O.12.2 Installations connected to transmission grid: minimum design requirements,
equipment, performance and security and commissioning
− P.O.9 Exchange of information by the system operator.

5.2.4.3 Conclusions

The incentive scheme that is being applied in Spain has created a stable and almost risk-free
investment environment. As a result Spain is one of the leading countries within Europe
regarding the RES-generation. Additionally, the Spanish regulator is in contact with several
stakeholders on a regular base which results in flexibility and openness to change. This is
necessary in a fast changing environment. Like in Germany feeding in RES is being
prioritized and additional costs are equally shared by all consumers and the RE development
does not lead to windfall profits for its developers. Additionally, Spain introduced a control
center of RE, which is a pioneering system to monitor and control RES. Finally, continuous
research is very important and carried out in Spain to improve the wind potential, to develop
better sensors and wind measurement tools, storage systems, etc.

As can be concluded from chapter 4 Spain is one of the countries with most RES developed.
The way Spain developed the grid and the grid integration of RES have to be credit to this
development. It goes without saying that the RES industry has a bright future ahead in Spain.

5.3 United Kingdom

5.3.1.1 Grid development

5.3.1.1.1 The main players

National Grid: www.nationalgrid.com/uk

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National Grid is the Transmission System Operator in the UK. National Grid is an
international electricity and gas company and one of the largest investor-owned energy
companies in the world. They play a vital role in delivering gas and electricity to many
millions of people across Great Britain and north-eastern US. National Grid owns the high-
voltage electricity transmission network in England and Wales and operates the system
across Great Britain. It also owns and operates the high pressure gas transmission system in
Britain and its distribution business delivers gas to 11 million homes and businesses.
National Grid also has a number of related businesses such as LNG importation and storage,
land remediation and metering.

Office of Gas and Electricity Markets (Ofgem): www.ofgem.gov.uk


Ofgem is governed by an Authority, consisting of non-executive and executive members and
a non-executive chair. Non-executive members bring experience and expertise from a range
of areas including industry, social policy, environmental work, finance and Europe. The
Executive members of the Authority are Ofgem’s Chief Executive and three Managing
Directors. The Authority determines strategy, sets policy priorities and takes decisions on a
range of matters, including price controls and enforcement. The Authority's powers are
provided for under the Gas Act 1986, the Electricity Act 1989, the Utilities Act 2000, the
Competition Act 1998 and the Enterprise Act 2002.

Department for Business Enterprise & Regulatory Reform (BERR): www.berr.gov.uk


BERR leads Government efforts to help ensure business success in an increasingly
competitive world. They negotiate in the EU and internationally, working for business, and
the benefit of consumers and employees to deliver free and fair markets which support
competition and investment. They aim to ensure secure, safe energy supplies at competitive
prices while tackling climate change. They work to reduce the burden of regulation on
business, and the public and third sectors. They manage the UK’s energy liabilities, and work
with all departments to improve the Government’s performance as a shareholder in
businesses. We promote enterprise and stronger regional economies. BERR also
coordinates activity in the DG area through two sub groups: the Transmission Committee
(formally the Transmissions Issues Working Group or TIWG) and the Distribution Committee
(formally the Distribution Generation Coordinating Group).

Electricity Networks Strategy Group (ENSG) - Distribution Working Group : www.ensg.gov.uk


The ENSG went through a restructuring in early 2008 and was re-constituted as a new body
in July 2008.

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5.3.1.1.2 Grid development/structure

Even though the UK has one of the best wind regimes in Europe, they rank only sixth in
Europe (refer to chapter 4 for more information). In the UK the largest contribution to
renewables in input terms (82%) is from biomass, with large-scale hydro electricity
production and wind generation contributing the majority of the remainder. In the UK regional
differences hinder project development. Also the interconnection capacity of Scotland and
England is not sufficient. Additionally, planning problems are an important obstacle for a
successful development of renewable electricity initiatives.

Despite of these barriers the UK is also busy preparing its grid for DG. They have also
introduced several fora that coordinate activities in the DG area (e.g. BERR). As has been
done for Germany and Spain the conclusions of the Ackermann (2007) article on grid
connection rules for wind farms have been summarized for the UK as well. The information is
provided below.

Network connection procedure


There are very detailed network connection procedures in the UK. The procedures were
developed by National Grid, the transmission system operator and reviewed and approved
by the regulator Ofgem. The UK applies fees for processing connection applications. A
reason for such fees is to avoid non-serious applications and the work related to them.

A fair treatment of connecting all interested parties is under constant debate between project
developers and the TSO. In the UK a chronological treatment of applications is being used.
National Grid is trying to find a fairer way to settle all applications. This is also one of the
recommendations in the recently published report 34 on this issue. It is being expected that
the next two years major changes regarding the connection procedure will be carried out.
The first consultation round was set up in August 2007 35 .

Network investment costs


Project developers have to pay for the construction of the line, transformers and all other
necessary installations for the connection to the grid. There is no difference between

34
A Review of TenneT’s Connections Policy (Advies inzake aansluitbeleid TenneT), Netherlands
Competition Authority (NMa) and the Energiekamer, December 2007.
35
http://www.berr.gov.uk/files/file41013.pdf.

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conventional power producers and power producers using RES. In the UK, the creation of
independent Offshore Transmission Owners (OFTO) is proposed. The OFTO would be
selected by competitive tender and awarded a transmission license which enables it to
receive a regulated income from offshore wind farms in return for meeting its license
obligation for a predetermined regulatory period (20 years), and would be incentivized to
achieve specified performance requirements during this period. OFTO would have the
responsibility for designing, building, financing and maintaining the offshore transmission
network required to connect an offshore generator. In the UK, costs for transmission
upgrades are typically socialized. In principle, transmission reinforcements are only
performed if sufficient requests for network connections are submitted. However, this
approach leads to long delays in cases where “strategic works” are needed. Recognizing
this, the regulator Ofgem approved GBP 560 millions for “Transmission Investment for
Renewable Generation” in 2007. When it comes to upgrades in the distribution grid,
producers in the UK connected to the distribution network after April 1, 2005 have to pay a
Distribution Network Use of System charge (DUoS) which generally reflects the upgrading
costs for the exclusive use of the generator. For connections to the distribution grid prior to
April 1, 2005, costs for distribution network reinforcement were charged upfront.

Capacity limits
The UK has network tariffs for producers. The UK has also limits related to the installed
capacity for the payment of network tariffs. There are capacity limits for generators
connected to the distribution grid regarding the payment of Transmission Network Use of
System charges (TNUoS). These limits vary between different areas in the UK, but in most
cases the limits 50 MW in England and Wales and 30 MW in the Scottish Power
transmission area and 10 MW in the Scottish Hydro transmission area. Most generators
connected to the distribution network with a capacity below these limits are exempted from
TNUoS in recognition of the reduced demand in a zone served by the transmission system.
However, generators that have been connected to the distribution network after April 1, 2005
have to pay Distribution Network Use of System charges if their connection required a
distribution network upgrade. The Distribution Network Use of System charge should then
recover some of the network upgrade costs.

Network concessions
Network concessions are legal authorizations that are required in some countries in order to
build power lines. The origin of these network concessions is the centrally planned electricity
system that, with the deregulation, has developed into the current system with several
network companies. In the UK wind power producers can build the lines between the

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individual wind turbines without needing concession. The main consequence is that grid
companies do not have a monopoly over such lines. Regarding the power lines from wind
farms to the connection points in the transmission grid or in the distribution/regional grid,
wind farm owners do not need any concession for building them.

Metering
Metering costs become a very important issue for small installations in the kW range, e.g.
PV, as the metering costs can have a significant impact on the overall project economics. For
small projects the UK distinguishes between on-site generation, e.g. a PV panel on the roof
of a house, and grid-connected generation plant. In case of on-site generation generally no
meter is required if the local generation always exceeds local consumption. However, in this
case no special payment (RE certificates) can be received. Small grid-connected
installations, i.e. no on-site installation, often have special rules for metering. For instance,
small grid-connected applications up to a certain size (UK 16 amps/phase) only have to
install simple, cheaper, metering equipment, without 15 or 30 minute metering capabilities.

Network tariff structure


In the UK, generators pay network tariffs (known as Use of System charges) if they are
connected to the transmission system. The charges do not distinguish between RE and
conventional energy, but they vary between the connection point on the location. Hence, the
connection charges to the transmission grid are high in Scotland, which has low load but
many generation sources, and low (in some cases even negative) in South England which
has high load and limited local generation sources. In addition, small power stations
connected to the distribution network, independent of their technology, do not have to pay
Transmission Use of System charges. In principle, power stations are defined as small if they
have a total capacity of up to 50 MW in England and Wales, up to 30 MW in the Scottish
Power transmission area and up to 5 MW in the Scottish Hydro transmission area. However,
generators that have been connected to the distribution network after April 1, 2005 and which
have caused reinforcement of the distribution grid have to pay Distribution Network Use of
System charges.

Priority production
In the UK, RE power sources are not treated as priority production. Curtailment is based on
bidding prices in a special regulating market which the transmission system operator has set
up to determine the generation source that has the lowest curtailment costs. RES can
participate in this market, i.e. they will be curtailed in case of transmission congestions if no
other cheaper generation technology is willing to be curtailed. However, as RES need to

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generate power to receive the RE certificates (ROCs), they typically require much higher
payment for curtailment than conventional generation resources.

Current policy challenges


The UK continuously adapts and improves its relevant regulations. The changes mainly aim
at developing a regulatory environment that allows a development of RE in order to achieve
the national targets, and therefore mainly aim at reducing barriers, and thereby providing an
acceptable investment environment. At the same time, however, policy development typically
tries to adjust the regulations in a way that additional costs are equally shared by all
consumers and the RE development does not lead to windfall profits for its developers. This
flexibility and openness to change are based on a continuous dialogue between policy
makers, regulator, network companies and the RE lobby.

5.3.1.2 Grid integration of RES

5.3.1.2.1 Which system is being used and how is the grid integration developed?

The British RES-E target aims at 10% by 2010, with an aspiration for this level to double by
2020. The Renewables Obligation (RO) is the main mechanism for incentivizing this growth.
This RO-system in the UK is a quota system. This system requires licensed electricity
suppliers to buy at least part of their electricity from renewable generation. Over 14.6 million
Renewables Obligation Certificates (ROCs) were issued during 2006-2007, compared with
just over 13.7 million in 2005-2006. Ofgem also administered this RO, both for the UK as well
as Northern Ireland. Currently a public consultation is being held on the proposed changes to
the RO. One of the suggested adaptations is the introduction of “banding” of the RO to offer
differentiated levels of support to different renewable technologies. Additionally, the UK is
applying a Climate Change Levy (CCL). Ofgem administers this levy exemption for
renewables. 2007-2008 was the seventh year of the CCL exemption and over 15.2 million
Renewables Levy Exemption Certificates (LECs) were issued. For more information on the
UK incentive scheme refer to the previous chapter.

Understanding how small generators interact with the electricity supply industry has formed
an important part of BERR's New and Renewable R&D Energy programme since 1995. At
the end of 2007 Ofgem launched a consultation on options to remove unnecessary barriers
for distributed energy projects, generators connected to the regional distribution networks 36 .

36
Ofgem Annual Report 2007-2008, at:

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The barriers had been identified by a working group set up by Ofgem and the Department for
Business, Enterprise and Regulatory Reform (BERR). The group worked closely with
renewable generators, micro generators and local government. Its joint consultation outlined
options for modifying the current regulatory arrangements so that they are more suitable for
distributed energy. Options for consultation included:
− making it easier for local schemes to sell small amounts of electricity in the wholesale
market
− putting more pressure on DNOs to change in a way that fairly reflects the costs and
benefits of DG
− inviting electricity companies to propose and trial ideas that will benefit distributed
generators; and
− making it easier for small operators to be licensed, by allowing the complicated and costly
obligations of being licensed to be subcontracted to another larger licensed supplier.

Additionally, regarding DG Ofgem has recently introduced two further incentive mechanisms
in addition to the DG-incentive 37 :
− the Innovation Funding Incentive (IFI) IS intended to encourage research and
development in a wide variety of distribution relates activities and
− Registered Power Zones (RPZ) is focused specifically on the connection of generation to
distribution systems and are intended to encourage DNOs to develop and demonstrate
new, more cost effective ways of connecting and operating generation that will deliver
specific benefits to new distributed generators and broader benefits to consumers
generally
(http://www.ofgem.gov.uk/Networks/Techn/NetwrkSupp/Innovat/Pages/Innvtion.aspx).

Features of IFI 38 :
− a “% of turnover” allowance for technical innovation set at 0.5%
− equates to EUR 2-3m per company per year cap
− companies must fund 20% of each project from their own money
− funding is on a “use it or lose it” basis
− compliance with the Good Practice Guide is a requirement
− Ofgem does not approve individual projects

http://www.ofgem.gov.uk/About%20us/annlrprt/Pages/AnnualReport.aspx.
37
This incentive came into effect on April 1, 2005 (Regulatory Instructions and Guidance (RIGs)
relating to the DG incentive); for more information refer to: www.ofgem.gov.uk.
38
Reflections, 2008.

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− annual, open, reporting of activities on Ofgem website


− Ofgem does not off-set any third party funding obtained.

Features of RPZ:
− RPZs are designated parts of a DNO network where innovation is to be used to connect
DG more efficiently
− Ofgem registers, but does not approve projects
− Ofgem’s Hybrid GBP/kW incentive to connect DG is increased in RPZs, for 5 years, by
3 times the basic level
− expenditure cap of EUR 0.8m per year per licensee
− open reporting of RPZ projects on Ofgem’s website.

The primary aim of these two new incentives is to encourage the Distribution Network
Operators (DNOs) to apply technical innovation in the way they pursue investment in and the
operation of their networks. The two main business drivers for providing these incentives at
this time are the growing need to efficiently manage the renewal of network assets and to
provide connections for an increasing capacity of generation at all distribution voltage levels.
These are significant challenges that will benefit from innovation. Since the 1990s
investments in R&D declined; with these two new incentives these investments has already
returned to above 1990 levels. This is an encouraging picture and shows that well designed
adjustment to regulatory frameworks can be highly effective.

Currently, distributed energy accounts for less than 10% of energy supply in the UK. In the
joint Ofgem-DTI review of distributed electricity generation the following key barriers to DG
were identified 39 :
− cost – firstly, the true cost of carbon is not yet fully incorporated in electricity prices and
this disadvantages lower carbon technologies. Secondly, DG technologies tend to have
higher capital costs. Finally, the rewards for exporting excess electricity produced by
distributed generators were seen as small and difficult to access
− lack of reliable information – there was a low awareness of DG options amongst
potential users; grants and financial incentives such as ROCs were perceived as being
hard to access, and the lack of an accreditation scheme for suppliers and installers put
people off untried technologies

39
Ofgem-DTI, Review of Distributed Generation, May 2007, at:
http://www.berr.gov.uk/files/file39025.pdf.

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− electricity industry issues – due to the nature of the existing industry structure, it could
be hard for small generators to connect to and operate in the centralized system.
Network operators could do more to accommodate the connection of distributed
generators. The cost to suppliers of rewarding small generators for exporting their excess
electricity was a disincentive
− regulatory barriers – the difficulties of getting planning permission for DG technologies
was raised, especially in the context of community developments and new housing,
where the associated costs and delays acted as a disincentive.

The Government has a range of policies which support the take up of DG. Additionally,
Ofgem is working to remove barriers to DG more widely. They are taking forward a number
of proposals and measures that will assist more widespread deployment of distributed
electricity and heat generation in the UK including:
− more flexible market and licensing arrangements for distributed, low carbon electricity
supply, to be implemented by the end of 2008
− greater clarity on the terms offered by energy suppliers to reward micro generators for the
excess electricity they produce and want to export back to the grid
− provision of information and advice to those individuals, communities and developers
considering distributed energy solutions, alongside advice on energy saving; and
− incentivizing DSOs to ensure more efficient and speedy connection to networks.

These measures will reinforce other steps that are already taking to boost distributed energy,
including:
− implementation of the Micro Generation Strategy, Our Energy Challenge: Power from the
people published in March 2006, with planning permission for micro generation becoming
easier from autumn this year and financial support to build the market for micro
generation
− measures to encourage deployment of combined heat and power (CHP), including:
exemption from the Climate Change Levy; improved treatment under Phase II of the EU
ETS; and better planning guidance to ensure that the CHP option is considered
− our commitment to require all new homes to be zero carbon, from a date to be fixed
following consultation. Using low carbon distributed energy technologies will be a key
way for developers to meet this requirement.

Taken together, these measures will help to ensure that decentralized energy can continue
to grow alongside the centralized system.

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5.3.1.2.2 Legislation

In the UK the British Electricity Transmission and Trading Arrangements (BETTA) are in
force. As explained, the general principle is “first come, first serve”.

The most important recently published legislations on DG are:


− the Innovation Funding Incentive (IFI) and
− the Registered Power Zones (RPZ).

5.3.1.3 Conclusions

The UK is using another support scheme than Germany and Spain. In the UK the RO-system
is being set up and this is a quota system. It requires licensed electricity suppliers to buy at
least part of their electricity from renewable generation. RE is not being prioritized in the UK;
it is only being fed into the grid if sufficient transport capacity exists. If this is not the case a
first-come/first-served approach is being applied. There exist some barriers in the UK which
hinder especially the wind energy development. A fair treatment of connecting all interested
parties is under constant debate between project developers and the TSO. It is being
expected that the next two years major changes regarding the connection procedure will be
carried out. The first consultation round was set up in August 2007. Despite of these barriers
the UK is also busy preparing its grid for DG. Just recently they introduced two further
incentive mechanisms for DG (IFI and RPZ). Policy development typically tries to adjust the
regulations in a way that additional costs are equally shared by all consumers and the RE
development does not lead to windfall profits for its developers. This flexibility and openness
to change are based on a continuous dialogue between policy makers, regulator, network
companies and the RE lobby. These measures will help to ensure that decentralized energy
can continue to grow alongside the centralized system.

5.3.2 The Netherlands

5.3.2.1 Grid development

5.3.2.1.1 Main players

TenneT: www.tennet.org

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As the Dutch Transmission System Operator, TenneT TSO has a duty to monitor the
continuity and security of the electricity supply in the Netherlands. In its capacity of TSO and
administrator of the national high-voltage grid, TenneT is in charge of the “highways” of the
Dutch electricity grid, which interconnects all regional grids and the European grid. Besides
managing the grid, they also monitor the reliability and continuity of the electricity supply in
the Netherlands. In addition to administering the national transmission grid and safeguarding
the reliability and continuity of the Dutch electricity supply, TenneT provides services and
performs duties aimed at developing the electricity market and ensuring that it functions
properly. They also provide services that support free-market operation and further the
development of a sustainable energy supply system.

As said earlier, also just recently it has been announced that TenneT and RWE will
cooperate more closely from January 1, 2009. They will set up a control center for the high
voltage grid. The aim of this cooperation is to improve the security of supply and increase the
risk management. TenneT prefers to work together with other TSOs as well (e.g. E.ON, Elia)
to be able to guarantee a stable European grid network.

Office of Energy Regulation (Energiekamer, formerly Dte): www.nma-dte.nl


The Dutch energy market is put under supervision of the Office of Energy Regulation. Its
duties are the following:
− supervising the services of the Distribution Network Operators (DNOs)
− determine the conditions and tariffs for energy transport
− advising on supply licenses applications
− advising on consumers’ energy delivering tariffs.

They report to the Ministry of Economic Affairs and are part of the NMa (Nederlandse
Mededingingsautoriteit - Dutch Competition Authority).

Working Group Decentralised Infrastructure:


http://www.senternovem.nl/energietransitiedev/werkgroepen/werkgroep_decentrale_infrastru
ctuur.asp
This working Group is established at the end of 2006 by the Platform Renewable Electricity
Supply and the Platform New Gas, representing two of the seven themes that have been
defined on which Energy Transition should focus in order to realise a sustainable energy
supply. Energy Transition is an initiative of all Ministries in the Netherlands, but also trade
and industry, research organisations and NGOs take part in this. It has analyzed the
consequences of a decentralized infratructure of gas, heat and electricity within the proposed

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transitions. They have summarized their findings in an Action Plan which contains actions for
the next four years. On October 3, 2008, the Working Group presented its Action Plan to the
Ministry of Economic Affairs and Netbeheer Nederland (Association of Energy Network
Operators in the Netherlands). This Working Group is set up in a very Dutch way as its
participants are from a large number and a variety of organizations, public and private.

5.3.2.1.2 Grid development/structure

No information was provided in the Ackermann (2007) article on grid connection rules for
wind farms for the Netherlands. Instead information was provided by KEMA experts as well
as a recently published report of the Dutch regulator: A Review of TenneT’s Connections
Policy (Advies inzake aansluitbeleid TenneT, December 2007.

Network connection procedure 40


In the past two years TenneT has received a high number of requests for new connections,
and the new demand currently exceeds network capacity. The abovementioned study was
carried out to find solutions for connecting generators, and to develop proposals for reform.
The current connection procedure follows the “first come-first serve” approach. If the network
does not have sufficient capacity to accommodate a request, then TenneT can at most offer
the new connection without transport service (i.e. capacity to make use of the grid) until
completing the reinforcements that are necessary to maintain grid integrity. Requesting a
connection at a particular site automatically precludes other generators from making
requests at the same site for at least six months. After signing a connection agreement, a
generator faces no deadline to complete the construction of a power station at the site. There
is no limit on the number of simultaneous connection requests that a generator can make. If
a generator is unsure about the location of a new power station, the generator can request
connections at several different sites. Nor is a generator limited to requesting an amount of
connection capacity that matches the size of the power station contemplated.

To cope with the recent high level of connection requests, TenneT has implemented a short-
term solution (a “run-back scenario”) offering connections with interruptible or partial
transport capacity service until the completion of the re-enforcements necessary to preserve
network integrity. The run-back policy accelerates plant construction, and deters generators

40
For the exact procedure used by TenneT to handle requests for connections, refer to:
http://www.tennet.org/english/images/aansluitprocedure%20TenneT%20engels_tcm43-12783.pdf.

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from locating new power stations in constrained areas where the transport capacity would be
insecure. At workshops organized by TenneT participants expressed support for the run-
back policy. TenneT only offers one “run-back scenario” to one generator at a particular site
(first come-first serve). If two generators apply at the same site, and sufficient capacity is not
available, the first applicant may receive an offer of a run-back scenario but the second will
not. The run-back scenario offered to a generator will specify the amount of capacity that is
“firm” and the amount that is interruptible. An applicant for the connection can modify its
plans if it wishes, and build a unit small enough to run entirely on a firm basis.

It was recommended to retain several important aspects of this existing “first come-first
serve” system and the use of “run-back scenarios” as it enjoys strong support among
generators. It has the advantage of treating all applicants equally and is therefore not
discriminatory. However, the review has also identified several concerns. The potential for
strategic behavior would include artificial despatch to create congestion that deters the
construction of new power stations by rivals, hoarding sites by submitting an excessive
number of applications for new connections, or delaying plant retirement specifically to
prolong congestion. Some aspects of the existing policy are not conductive to a favorable
investment climate. The strategic behavior described above can harm the investment
climate. The regulator advised to the Ministry of Economic Affairs some measures to improve
the current connection policy. TenneT can facilitate the market by publishing more
information: the length of the queue and the amount of available connection capacity at
different locations in the Netherlands. This information would guide the planning decisions of
generators, improving transparency and the investment climate. The study contemplates the
imposition of deadlines for the achievement of certain milestones with respect to site permits
and construction. Failure to meet milestones would sacrifice the generator’s position in the
first come-first serve queue, allowing others to proceed. TenneT should also face milestones.
TenneT should volunteer to reduce the connection fee by a given amount if it fails to meet
targets. The Office of Energy Regulation (Energiekamer) should also offer TenneT financial
rewards for consistent compliance with milestones.

Currently, the Ministry of Economic Affairs, the regulator, TenneT and other grid operators
and generators are developing a model for congestion management to improve the situation
in the Netherlands. The government is considering implementing measures to ensure RE
gets priority access to the grid. As the large grid capacity problems in the Westland area this
region has started a congestion management system as a pilot. This came into operation on
the December 8, 2008. This area can be seen as an example how the Netherlands tries to
solve the problems. More information on this area is provided in Appendix V.

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Network investment costs


All Dutch grid operators are obliged to comply with the codes and tariffs determined by the
Office of Energy Regulation (Energiekamer, formerly Dte). A DSO can yearly apply for a rise
in tariffs to cover the costs for an exceptional and substantial investment to enlarge the grid.
Generators pay a once-only connection fee for a new connection and a yearly fee to meet
the maintenance costs for the connection. Generators do not need to pay a transportation
fee; this fee is paid by the consumers.

The study has considered but ultimately rejected raising the up-front payments that
generators must make in congested areas. However, the idea was supported of cancellation
fees based on “deeper” costs, if a generator withdraws a project but there is no one else
willing to locate at the abandoned location. Generators should contribute toward any wasteful
deep costs they create from a connection application that they cancel subsequently. This is
the same approach that has recently been implemented in the UK, where cancellation fees
are higher in congested areas of the grid, and therefore relate to “deep” reinforcement costs.

Capacity limits
Like in Germany no capacity limits exist for connection to the grid. An applicant should
however make a reasonable case that his offer is serious. Subsequently the DSO composes
a price proposal for the connection. The larger the requested capacity, the higher the
connections.

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Network concessions
Network concessions are legal authorizations that are required in some countries in order to
build power lines. In the Netherlands the regional DSOs are formally being appointed by the
Ministry of Economic Affairs and have the permission to operate the grid. In case of a wind
farm the connections between the turbines fall within the scope of the own installation of the
owner. As soon as more parties are using one connection, a grid exists, and the DSO have
to carry out the operation or a private DSO has to be appointed (e.g. at industrial sites,
Schiphol). The connection to the grid may be subcontracted if the connection is larger than
10 MVA; the supervision and the approval still needs to come from the DSO.

Metering
Commercial customers are using a telemetric meter, i.e. remote reading of the consumption.
This is being measured by recognized parties responsible for metering electricity
consumption. This also applies to large/small producers: they have a connection and
transportation contract with their DSO, a measuring contract with their recognized
responsible party and a supply agreement with their supplier.

Domestic customers will keep their meter until the end of the lifetime of the meter. The DSO
will decide on this lifetime. Consequently, different systems are being used now: some
consumers are using meters that can register the feeding back into the national grid (net-
metering: consumption minus local production), others are using two meters. Normally these
meters cannot be read remotely (apart from some pilot projects).

Network tariff structure


Generators pay a one-off “shallow” connection charge for the new connection between their
facility and the network, and an ongoing maintenance charge 41 . The connection charges do
not depend on the congestion of the network; it does however depend on the length of the
cable. Generators do not pay annual transmission charges (“G” charges). If a generator
cancels a connection agreement with TenneT, it is liable for the shallow connection costs
that TenneT has incurred, which can be several million Euros.

Priority production
Like the UK, the Netherlands do not prioritise renewable production. The government is
considering implementing measures to ensure RE gets priority access to the grid. The Dutch
Government’s targets for renewables could justify advanced network construction, but

41
Approximately EUR 12,500 per year for 2007 on the 380 kV/220 kV network.

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TenneT should only build in advance if the Government changes legislation and takes the
initiative to guarantee the recovery of the associated costs. TenneT have to be sure that its
investment is being paid back and starts the process relatively late. Additionally, there exists
a difference in time span: DSOs need for grid investments a number of years, ca 6-12 years
(or longer because of permit procedures) for high voltage lines. The investments are written
off in 40-50 years. For generators it takes approximately 3-8 years to come from plan to
realisation (also depending on permit procedures). They are writing off in about 30-40 years.
For RE-producers it takes approximately 2-5 years to realize installations and they are writing
off in about 10-15 years. These differences in time span of different parties can lead to
problems when making investment decisions and writing off the investment. This caused
problems in the Westland area as well and a congestion management system started in
December 2008 as a pilot in this area. Refer to Appendix V for more information on this.

Current policy challenges


The demand for capacity on the high-voltage grid has risen sharply over the past two years
(2006 and 2007). In some locations the grid simply does not have sufficient capacity to
transmit this supply of electricity at all times. TenneT is currently fine-tuning the congestion
management system in collaboration with the Ministry of Economic Affairs and the Office of
Energy Regulation. For more information on this system, refer to:
http://www.tennet.org/transport_en_systeemdiensten/Congestiemanagment/
Congestiemanagement.aspx.

5.3.2.2 Grid integration of RES

5.3.2.2.1 Which system is being used and how is grid integration developed?

The Netherlands is using a feed-in tariff system as well, but its result is not as great as the
German and Spanish achievements. In October 2007, the Dutch government published a
new regulation for a feed-in premium for RE, Subsidies Duurzame Energie (SDE). Its
predecessor, the MEP premium, was abolished in August 2006 as it was assumed that the
Netherlands will meet its RES-E target of 9% by 2010 and the system resulted in very high
costs for the government. Compared to the previous system the SDE is more market-based.
To come to the system change took more than 1.5 years and resulted in a slow down of the
RES development in the meantime. Other barriers to develop RES are: too many
departments are involved and very long procedures exist. It is getting attention now to

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improve the procedures. The share of RES in the gross electricity consumption was 5.67% in
2006. For more information on the Dutch incentive scheme refer to chapter 4.

In June 2008 the Minister for Economic Affairs published the Energy Report 2008
(Energierapport 2008 42 ). In this report the government explains its energy vision and
indicates its plans and what is expected from other parties. DG is being discussed as well. In
the Netherlands the ratio between central and decentralized generation is 66% to 34%. In the
table below the expected development of DG in the Netherlands is being depicted.

Table 10 Development decentralized electricity production in the Netherlands


(Energierapport 2008)

2006 2020 2030 2040 2050


Schoon en Visie2030 WLO Electricity
Zuinig (TenneT) (ECN & MNP) networks of
(ECN & MNP) the future
(Meeuwsen)
electricity demand
yearly growth - 1.5-2.1% 0-3% 0.5-1.7% 1.35%
total demand 116 TWh 142-156 TWh 110-230 TWh 134-213 TWh 200 TWh
centralized production
fossil/biomass 14.4 GW 17.9-21.5 GW 12.9-20.9 GW 15.4-30.8 GW 8.2-22 GW
nuclear 0.5 GW 0.5 GW 0-3 GW 0-6 GW 5-7 GW
offshore wind 0.1 GW 2.2-6 GW 1-6 GW 0-10 GW 6.4-15 GW
total large scale 15.0 GW 23.2-24.2 GW 15.7-25.2 GW 19.1-30.8 GW 28.2-35.4 GW
decentralized production
onshore wind 1.5 GW 2.9-4 GW 2-4 GW 0-2.5 GW 0-2 GW
medium size CHP 5.9 GW 7.6-9.8 GW 7.3-9.3 GW 7.9-13.1 GW
micro CHP 0-5 GW 0-6 GW
PV 0.1 GW 0.1 GW 0-4 GW <0.1 GW 0-30 GW
biomass 0.4 GW 0.8 GW 0-4 GW 1 GW 0-4 GW
total decentralized 7.9 GW 11.4-14.7 GW 8.4-23.9 GW 9.3-18.4 GW 0-42 GW
total production capacity 22.9 GW 35.6-37.8 GW 29.6-44.6 GW 33.1-43.8 GW 35.4-70.2 GW
part centralized 66% 61-68% 40-72% 58-75% 40-100%
part decentralized 34% 32-39% 27-60% 25-42% 0-60%

42
Energierapport 2008, Ministry of Economic Affairs, The Hague, June 2008, at:
http://www.ez.nl/dsresource?objectid=158410&type=PDF.

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The Working Group Decentralized Infrastructure has published its Action Plan 43 describing
how Distribution Network Operators should prepare for the implementation of decentralized
applications. A number of Action Points relates to DG, e.g.:
− create a large “level playing field”; i.e., DNOs should disseminate their vision on DG at a
larger scale, communicate with relevant stakeholders, and be closely involved with
building new estates, etc
− have knowledge on the development and application of (large scale) PV, CHP and
hydrogen technologies
− stay in close consultation with SenterNovem (agency of the Dutch Ministry of Economic
Affairs) on supporting research on specific combinations of decentralized applications.

This Working Group is set-up in a very Dutch way as its participants are from a large number
and a variety of organisations, public and private.

Additionally, the Ministry of Economic Affairs, the regulator, TenneT and other grid operators
and generators are developing a model for congestion management to improve the situation
in the Netherlands. A pilot project has just recently started in the Westland area. The
government is considering implementing measures to ensure RE gets priority access to the
grid.

5.3.2.2.2 Legislation

The most important Energy law is the 1998 Electricity Law:


− Wijziging van de Elektriciteitswet 1998 ten behoeve van het stellen van nadere regels ten
aanzien van het netbeheer en de levering van elektriciteit aan beschermde afnemers,
Tweede Kamer, vergaderjaar 1998–1999, 26 303, nr. 7.

As said previously, TenneT is currently fine-tuning the congestion management system in


collaboration with the Ministry of Economic Affairs and the Office of Energy Regulation. This
might lead to new legislation in the future. For more information on this system, refer to:
http://www.tennet.org/transport_en_systeemdiensten/Congestiemanagment/
Congestiemanagement.aspx.

43
Actieplan Decentrale Infrastructuur, Platform Duurzame Electriciteitsvoorziening, 2008.

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5.3.2.3 Conclusions

The Netherlands is using a feed-in tariff system as well, but its result is not as great as the
German and Spanish achievements. RE is not being prioritized in the Netherlands; it is only
being fed into the grid if sufficient transport capacity exists. If this is not the case a first-
come/first-served approach is being applied. The government is considering implementing
measures to ensure RE gets priority access to the grid. In the past two years TenneT has
received a high number of requests for new (RE) connections, and the new demand currently
exceeds network capacity. To cope with the recent high level of connection requests,
TenneT has implemented a short-term solution (a “run-back scenario”) offering connections
with interruptible or partial transport capacity service until the completion of the
re-enforcements necessary to preserve network integrity. In the meantime, TenneT is fine-
tuning the congestion management system in collaboration with the Ministry of Economic
Affairs and the Office of Energy Regulation. In the Westland area a pilot project started on
December 8, 2008. The loading on the system in this region has increased enormously in
recent years and therefore it was not possible to feed TenneT's national grid because of a
lack of transmission capacity which causes major problems. To solve the problems the Dutch
approach is being applied: to involve all the stakeholders and try to come up with a solution.

5.4 Conclusions

In this chapter information is provided on how the four countries are trying to come up with
solutions for feeding the DG of RES into their existing grid.

DG can offer a few advantages (e.g. cleaner production, security of supply, etc). On the other
hand, the interconnection of distributed power resources to the distribution network brings
challenges of its own. These challenges include power quality issues, network stability,
power balancing considerations, voltage regulation, protection protocols, unwanted islanding,
losses, reliability and infrastructure capacity. Depending on the exact implementation, these
impacts can all work out in both a positive and a negative way.

Earlier it was stated that a move from a national approach to a more harmonized European
approach regarding incentives is needed. As can be concluded from the four analyzed
countries, such an incentive scheme will not be operational in the near future.

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It can be concluded from the analysis of the four countries that every country found its own
solution for increased RES feeding into the grid system. In Germany three of the four TSOs
agreed to work more closely together regarding the grid balancing. In Spain they introduced
a novel Control Centre for RE, to monitor and control these RES. The UK introduced two DG
incentive schemes (IFI and RPZ) and the Netherlands introduces a Working Group
Decentralised Infrastructure; a very Dutch approach as its participants are from a large
number and a variety of organizations (public and private). Additionally, in the Netherlands
TenneT is currently fine-tuning the congestion management system in collaboration with the
Ministry of Economic Affairs and the Office of Energy Regulation as there have occurred
severe problems regarding insufficient capacity to transmit the supply of electricity at all
times. So countries have found different mechanisms to evolve from a centralized generation
system to a DG-system. Additionally, setting up research programs trying to provide answers
for questions on smart grids and DG have only recently been set up. Therefore, at this
moment the systems introduced in the analyzed countries are too new to draw conclusions
from. It can be concluded however that a continuous dialogue between several stakeholders,
national, but also at European or even at global level, is very important as this results in
flexibility and openness to changes which are required in the future. Also a stable incentive
scheme is very important here as well.

Finally, regarding grid reinforcement the overall picture in Europe is that this is being taken
care of by DNOs. For offshore wind a different approach exists; here the project developer is
normally responsible as far as the substations. However, in 2007 Germany adopted a law
which states that the DNOs have to pay for power lines connecting off-shore wind projects to
their grid.

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LITERATURE

Aanbieding concept ministeriële regelingen Stimuleringsregeling Duurzame Energieproductie


(SDE), January 31, 2008 at http://www.ez.nl/dsresource?objectid=155139&type=PDF.

Accession Treaty, at: http://www.europarl.europa.eu/enlargement_new/treaty/default_en.htm.

ACKERMANN, THOMAS, CENTENO LÓPEZ, EVA, and SÖDER, LENNART, 2007. Grid
Connection Rules for Wind Farms in Spain, Germany, Portugal, UK and Sweden,
7th International Workshop on Large Scale Integration of Wind Power and on Transmission
Networks for Offshore Wind Farms.

Actieplan Decentrale Infrastructuur, Platform Duurzame Electriciteitsvoorziening, 2008.

Analysis of Trade-Offs between Different Support Mechanisms, Green-X project, Contract


number ENG2-CT-2002-00607, March 2004, at: www.green-x.at.

Climate Action, published by the European Commission at January 23, 2008, at:
http://ec.europa.eu/environment/climat/climate_action.htm.

Climate change: EU on track towards Kyoto target but efforts must be maintained,
projections show, IP/07/1774, Brussels, November 27, 2007, at:
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/07/1774.

COMMISSION STAFF WORKING DOCUMENT The support of electricity from renewable


energy sources. Accompanying document to the Proposal for a DIRECTIVE OF THE
EUROPEAN PARLIAMENT AND OF THE COUNCIL on the promotion of the use of energy
from renewable sources, {COM(2008) 19 final}, 23/01/08, at:
http://ec.europa.eu/energy/climate_actions/doc/2008_res_working_document_en.pdf.

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN


PARLIAMENT Renewable Energy Road Map Renewable energies in the 21st century:
building a more sustainable future, COM(2006) 848 final, Brussels, 10.1.2007.

COMMUNICATION FROM THE COMMISSION The support of electricity from renewable


energy sources {SEC(2005) 1571}, Brussels, 7.12.2005COM(2005) 627 final, at:

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http://ec.europa.eu/energy/res/biomass_action_plan/doc/2005_12_07_comm_biomass_
electricity_en.pdf.

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DENA – Deutsche Energie-Agentur, Summary of the Essential Results of the Study Planning
of the Grid Integration of Wind Energy in Germany Onshore and Offshore up to the Year
2020 (dena Grid study), March 2005.

Digest of United Kingdom Energy Statistics, 2008, at


www.berr.gov.uk/energy/statistics/publications/dukes/page45537.html.

DIRECTIVE 2001/77/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of


September 27, 2001 on the promotion of electricity produced from renewable energy sources
in the internal electricity market, Brussels, at:
http://eur-lex.europa.eu/pri/en/oj/dat/2001/l_283/l_28320011027en00330040.pdf.

Duurzame Elektriciteit in omringende Landen, ECN en KEMA, oktober 2007.

EC ratification decision, the so-called “Burden Sharing Agreement”, June 1998 (Council
Decision 2002/358/EC of April 25, 2002).

Energierapport 2008, Ministry of Economic Affairs, The Hague, June 2008, at:
http://www.ez.nl/dsresource?objectid=158410&type=PDF.

Energy.EU: Europe’s Energy Portal: www.energy.eu/#renewable.

Erneuerbare-Energien-Gesetz (Renewable Energy Sources Act): http://www.erneuerbare-


energien.de/inhalt/6465/.

EWEA 2007 Annual Report, March 2008, at:


http://www.ewea.org/fileadmin/ewea_documents/documents/publications/reports/ar07-
ewea.pdf.

Fact Sheets: http://ec.europa.eu/energy/climate_actions/facts_en.htm.

FORRES 2020: Analysis of the renewable energy sources' evolution up to 2020 – Final
Report, Karlsruhe, April 2005, at: http://www.eu.fraunhofer.de/forres/FORRES-summary.pdf.

German WindEnergy Association (BWE): www.wind-energie-de.

Greenhouse gas emission trends and projections in Europe 2007 at:

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http://reports.eea.europa.eu/eea_report_2007_5/en.

Green-X, Analysis of Trade-Offs between Different Support Mechanisms, Report of the


project Deriving Optimal Promotion Strategies for Increasing the Share of RES-E in a
Dynamic European Electricity Market, March 2004, www.green-x.at.

Innovation Through Research, 2006 Annual Report on Research Funding in the Renewable
Energies Sector, Federal Ministry for the Environment, Nature Conservation and Nuclear
Safety (BMU), Germany, March 2007, at:
http://www.bmu.de/files/pdfs/allgemein/application/pdf/jb_ee_2006_engl.pdf.

Innovation Through Research, 2007 Annual Report on Research Funding in the Renewable
Energies Sector, Federal Ministry for the Environment, Nature Conservation and Nuclear
Safety (BMU), Germany, February 2008, at:
http://www.bmu.de/files/pdfs/allgemein/application/pdf/jahresbericht_forschung_ee_2007_en.
pdf.

MEMO/08/35 at http://ec.europa.eu/environment/climat/climate_action.htm.

LÁZARO, C. and GIMENO SARCIADA, J., 2007. The Spanish experience in the integration
of the electricity from wind power plants into the electrical system, AEE, 2007,
7th International Workshop on Large Scale Integration of Wind Power and on Transmission
Networks for Offshore Wind Farms.

National Allocation Plans website at:


http://ec.europa.eu/environment/climat/climate_action.htm.

National Policy – Overview of EU Member States at: http://www.erec.org/policy/national-


policy.html and/or http://www.res2020.eu/.

Nieuwe energie voor het klimaat – Werkprogramma Schoon en Zuinig, september 2007,
VROM, at: http://www.vrom.nl/pagina.html?id=2706&sp=2&dn=7421.

Ofgem Annual Report 2007-2008, at:


http://www.ofgem.gov.uk/About%20us/annlrprt/Pages/AnnualReport.aspx.

Ofgem-DTI, Review of Distributed Generation, May 2007, at:

System Integration of Distributed Generation and Renewable Energy Systems


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http://www.berr.gov.uk/files/file39025.pdf.

OPTRES: Assessment and optimization of renewable energy support schemes in the


European electricity market, Final Report, Karlsruhe, February 2007, at:
http://www.optres.fhg.de/.

Procedimiento de Verificación, Validacion y Certificacion de los Requisitos del P.O. 12.3


sobre la Respuesta de las Instalaciones Eólicas ante Huecos de Tensión, version 4,
March 10, 2008, http://www.aeeolica.es/aee_actua_verificacion.php.

Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on


the promotion of the use of energy from renewable sources, {COM(2008) 30 final}, 23/01/08
at: http://ec.europa.eu/energy/climate_actions/doc/2008_res_directive_en.pdf.

http://ec.europa.eu/energy/climate_actions/doc/2008_res_working_document_en.pdf.

Renewable Energy Fact Sheets


http://ec.europa.eu/energy/energy_policy/doc/factsheets/renewables/renewables_ro_en.pdf
http://ec.europa.eu/energy/energy_policy/doc/factsheets/renewables/renewables_bg_en.pdf

Resolución de 04-10-2006, P.O. 3.7 Programación de la generación renovable no


gestionable, BOE 24/10/06.

Resolución de 04-10-2006, P.O. 12.3 Requisitos de respuesta frente a huecos de tensión de


las instalaciones eólicas, BOE 24/11/06.

Resolución de 16-10-2006, P.O. 9.0 Información intercambiada por el Operador del Sistema,
BOE 24/11/06.

A Review of TenneT’s Connections Policy (Advies inzake aansluitbeleid TenneT),


Netherlands Competition Authority (NMa) and the Energiekamer, December 2007.

Review of International Experience with Renewable Energy Obligation Support Mechanisms,


ECN, May 2005, ECN-C--05-025.

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RIVIER ABBAD, J., 2007. The Role of Market Participation for a Better System Integration of
Wind Energy, IEEE, 2007, 7th International Workshop on Large Scale Integration of Wind
Power and on Transmission Networks for Offshore Wind Farms.

SCOTT, J., VAESSEN, PETER, and VERHEIJ, FRITS, 2008. Reflections on Smart Grids for
the Future, KEMA, March 2008, at:
http://www.ez.nl/dsresource?objectid=157031&type=PDF.

El Sistema Eléctrico Español 2007, Red Eléctrica de España, at:


www.ree.es/sistema_electrico/informeSEE.asp.

Towards a secure, sustainable and competitive European energy network [COM(2008)782],


at:
http://ec.europa.eu/energy/strategies/2008/doc/2008_11_ser2/green_paper_energy_network
_en.pdf

World Energy Outlook 2008, International Energy Agency, November 12, 2008, London at:
http://www.worldenergyoutlook.org/2008.asp.

Websites
Department for Business Enterprise & Regulatory Reform (BERR): www.berr.gov.uk.

Deutsche Energie-Agentur: DENA: www.dena.de.

Electricity Networks Strategy Group (ENSG) - Distribution Working Group: www.ensg.gov.uk.

http://ec.europa.eu/energy/climate_actions/doc/2008_res_directive_en.pdf.
http://ec.europa.eu/energy/energy_policy/doc/factsheets/renewables/renewables_ro_en.pdf.
http://ec.europa.eu/energy/energy_policy/doc/factsheets/renewables/renewables_bg_en.pdf.
http://ec.europa.eu/environment/climat/climate_action.htm.

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/07/1774.

http://www.energy.eu/#renewable.

http://www.eu.fraunhofer.de/forres/FORRES-summary.pdf.

http://www.feed-in-cooperation.org/.

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http://www.futures-e.org/.

German Federal Network Agency www.bundesnetzagentur.de.

http://www.green-x.at/downloads/WP4%20-%20trade-
offs%20between%20support%20mechanism%20(Green-X).pdf.

The Dealing with Climate Change policies and measures database:


http://www.iea.org/textbase/pm/index_clim.html.

The Global Renewable Energy Policies and Measures Database:


http://www.iea.org/textbase/pm/grindex.aspx.

National Energy Commission: Comisión Nacional de Energía or CNE: www.cne.es.

National Grid UK: www.nationalgrid.com/uk.

Office of Energy Regulation (Energiekamer, formerly Dte): www.nma-dte.nl)


Working Group Decentralised Infrastructure:
http://www.senternovem.nl/energietransitiedev/werkgroepen/werkgroep_decentrale_
infrastructuur.asp.

Office of Gas and Electricity Markets (Ofgem): www.ofgem.gov.uk.

Offshore Forum Wind Energy: http://www.ofw-online.de/.

http://www.optres.fhg.de/OPTRES_FINAL_REPORT.pdf.

Red Eléctrica de España: www.ree.es.

www.senternovem.nl/sde.

Spanish Ministry of Industry, Tourism and Trade: www.mytic.es.

Spanish Wind Energy Association: Asociación Empresarial Eólica - AEE: www.aeeolica.es/.

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TenneT: www.tennet.org.

http://www.tennet.org/english/images/aansluitprocedure%20TenneT%20engels_tcm43-
12783.pdf.

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APPENDIX I SEVERAL EU-TARGETS

Kyoto targets
Under the Kyoto Protocol, the 15 MSs that made up the EU until its enlargement to 27 MSs
have to reduce their collective greenhouse gas emissions by 8% below 1990 levels during
2008-2012. This target is shared among the 15 MSs under a legally binding agreement
(Council Decision 2002/358/EC of April 25, 2002). Most of the 12 new MSs have individual
targets under the Kyoto Protocol. The exceptions are Cyprus and Malta, which have no
targets. The targets are summarized in the table below.

Table 11 Kyoto targets EU-27 (source: EC ratification decision, the so-called “Burden
Sharing Agreement”, June 1998)

member state Kyoto target


Austria* -13.0%
Belgium* -7.5%
Bulgaria -8.0%
Cyprus Na
Czech Republic -8.0%
Denmark* -21%
Estonia -8.0%
Finland* 0.0%
France* 0.0%
Germany* -21%
Greece* 25.0%
Hungary -6.0%
Ireland* 13.0%
Italy* -6.5%
Latvia -8.0%
Lithuania -8.0%
Luxembourg* -28.0%
Malta n.a.
Netherlands* -6.0
Poland -6.0%
Portugal* 27.0%
Romania -8.0%

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Appendix I page 2

member state Kyoto target


Slovakia -8.0%
Slovenia -8.0%
Spain* 15.0%
Sweden* 4.0%
United Kingdom* -12.5%
EU-15 -8%

* EU-15 countries

Targets for the share of energy from renewable sources in final consumption of energy
In its Proposal for a Directive of the European Parliament and of the Council on the
promotion of the use of energy from renewable sources (23-01-2008) 44 the Commission aims
to establish an overall binding target of a 20% share of renewable energy sources in energy
consumption and a 10% binding minimum target for biofuels in transport to be achieved by
each MS, as well as binding national targets by 2020 in line with the overall EU target of
20%. Additionally, the following targets have been set: 20% energy savings and 20% CO2-
reduction. The main purpose of binding targets is to provide certainty for investors. These
targets are shown in the table below.

Table 12 National overall targets for the share of energy from renewable sources in
final consumption of energy in 2020 (source:
http://ec.europa.eu/energy/climate_actions/doc/2008_res_directive_en.pdf)

share of energy from target for share of energy


renewable sources in final from renewable sources in
consumption of energy, 2005 final consumption of energy,
(S2005) 2020 (S2020)
Austria 23.3% 34%
Belgium 2.2% 13%
Bulgaria 9.4% 16%

44
http://ec.europa.eu/energy/climate_actions/doc/2008_res_directive_en.pdf.

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Appendix I page 3

share of energy from target for share of energy


renewable sources in final from renewable sources in
consumption of energy, 2005 final consumption of energy,
(S2005) 2020 (S2020)
Cyprus 2.9% 13%
Czech Republic 6.1% 13%
Denmark 17.0% 30%
Estonia 18.0% 25%
Finland 28.5% 38%
France 10.3% 23%
Germany 5.8% 18%
Greece 6.9% 18%
Hungary 4.3% 13%
Ireland 3.1% 16%
Italy 5.2% 17%
Latvia 34.9% 42%
Lithuania 15.0% 23%
Luxembourg 0.9% 11%
Malta 0.0% 10%
The Netherlands 2.4% 14%
Poland 7.2% 15%
Portugal 20.5% 31%
Romania 17.8% 24%
Slovak Republic 6.7% 14%
Slovenia 16.0% 25%
Spain 8.7% 20%
Sweden 39.8% 49%
United Kingdom 1.3% 15%

RES-E targets
The RES-E directive 45 sets out to create a framework that will facilitate, on the medium term,
a significant increase in renewable generated electricity within the EU. It constitutes an
important milestone in shaping the regulatory framework for RES-E generation in the EU.

45
http://eur-lex.europa.eu/pri/en/oj/dat/2001/l_283/l_28320011027en00330040.pdf.

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Appendix I page 4

This Directive set the target that 22.1% of renewable electricity in comparison to the overall
electricity consumption should be reached by 2010. In the Annex of this Directive the
European target is transformed into targets for the MSs and is provided in the table below.

Table 13 European target transformed into targets for the Member States (EU-15)

RES-E % 1997 RES-E % 2010

Austria 70.0 78.1

Belgium 1.1 6.0

Denmark 8.7 29.0

Finland 24.7 31.5

France 15.5 21.0

Germany 4.5 12.5

Greece 8.6 20.1

Ireland 3.6 13.2

Italy 16.0 25.0

Luxembourg 2.1 5.7

Netherlands 3.5 9.0

Portugal 38.5 39.0

Spain 19.5 29.4

Sweden 49.1 60.0

United Kingdom 1.7 10.0

In the Accession Treaty 46 the targets for the ten new MSs are set out.

46
http://www.europarl.europa.eu/enlargement_new/treaty/default_en.htm.

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Appendix I page 5

Table 14 European target are transformed into targets for the new Member States
(EU-10)

RES-E % 1999 RES-E % 2010

Cyprus 0.05 6

Czech Republic 3.8 8

Estonia 0.2 5.1

Hungary 0.7 3.8

Latvia 42.4 49.3

Lithuania 3.3 7

Malta 0 5

Poland 1.6 7.5

Slovenia 29.9 33.6

Slovakia 17.9 31

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APPENDIX II FACT SHEETS EU-27

For Deliverable 2 for each MS a 1-2 page fact sheet is composed with information on
European set RES targets for that country and how each country is planning to fulfill these
targets nationally and their progress so far.

The information is collected from different sources, e.g. European directives, national policy
documents, energy agencies, EREC (European Renewable Energy Council), etc and
provides an overview of the different targets of each MS, their progress so far and their future
plans.

A separate document is composed for these fact sheets.

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APPENDIX III OVERVIEW OF THE MAIN SUPPORT SCHEMES FOR


RENEWABLE ELECTRICITY IN THE EU-27

The table below provides an inventory of current support systems in the EU-27 countries.

Table 15 Overview of the main support schemes for renewable electricity in EU


(OPTRES, 2007)

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Appendix III page 2

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Appendix III page 3

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APPENDIX IV INFORMATION ON GERMANY’S TARIFF DEGRESSION


SYSTEM AND STEPPED TARIFF DESIGN

Germany is using a tariff degression system. The tariffs are generally fixed for 20 years. In
order to allow for technological progress and continuous cost reduction, the compensation
rates are subject to nominal annual degression (German WindEnergy Association (BWE 47 )).
Depending on the type of technology, the FITs for new installations decrease by 1% for small
hydro plants and by up to 5% for building-integrated PV-systems. The latest version of the
EEG has been ratified in the Bundesrat (the second and last legislative level for democratic
approval procedures) in July 2008 and will be valid from January 1, 2009. According to the
latest ratified version the degression rates are as follows:
− wind offshore from the year 2015 on: 5.0%, any other wind energy (including onshore)
every year (from 2010 on): 1.0%
− biomass: 1.0%
− solar:
A from solar power plants according to § 32 (Solare Strahlungsenergie)
(1) in the year 2010: 10.0%
(2) from the year 2011 on: 9.0%
B from solar power plants according to § 33 (Solare Strahlungsenergie an oder auf
Gebäuden)
(1) up to a capacity of 100 Kilowatt:
(a) in the year 2009: 8.0%
(b) in the year 2010: 8.0%
(c) from the year 2011on: 9.0%
(2) from solar power plants of a capacity from 100 Kilowatt:
(a) in the year 2009: 9.0%
(b) in the year 2010: 10.0%
(c) from the year 2011 on: 10.0%.

Details on solar power are as follows: the percentage according to paragraph 2 number 8
(= solar energy degression in the EEG)
a) will increase by 1.0 percentage points, as soon as the capacity of the solar power plants
registered in the official list of the Bundesnetzagentur (German Regulatory Agency) is
more than
(1) in the year 2009: 1000-1500 Megawatt,

47
http://www.wind-energie.de/home/.

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(2) in the year 2010: 1100-1700 Megawatt and

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Appendix IV page 2

(3) in the year 2011: 1200-1900 Megawatt


by September 30 of the year before within the past 12 months according to § 16,
paragraph 2, part 2
b) will decrease by 1,0 percentage points, as soon as the capacity of the solar power plants
registered in the official list of the Bundesnetzagentur (German Regulatory
Agency) is less than
(1) in the year 2009: 1000 Megawatt
(2) in the year 2010: 1100 Megawatt and
(3) in the year 2011: 1200 Megawatt
by September 30 of the year before within the past 12 months according to § 16,
paragraph 2, part 2.

Germany is currently also using a stepped tariff design depending on local conditions to
support onshore wind energy. Operators of onshore wind turbines receive a fixed FIT during
the first five years after the plant has started operating. The EEG defines a reference wind
turbine and this reference turbine generates a so-called reference yield over a five year
period. If a wind turbine produces at least 150% of this reference yield within the first five
years of operation, the tariff level is reduced for the remaining 15 years of support. However,
the time frame for the higher compensation will be extended by two months for each 0.75%
of the reference yield by which the actual generation falls below 150%. This means that the
use of wind energy to generate electricity is not restricted to locations with very good wind
conditions. Additionally, a Systemleistungsbonus (if the wind turbine contributes to
a frequency regulation and a more constant voltage) and a Repowering bonus (2 EURc/kWh)
can be gained. Offshore plants starting operation before the end of 2015 receive a higher
starting remuneration for the first 12 years (Frühstarter-Bonus of 2 EURc/kWh). This period is
extended if the wind turbine is positioned more than 12 nautical miles away from the
coastline and if the water depth is more than 20 meters. For each mile the distance to the
coast exceeds 12 miles, the period of higher remuneration will be extended by 0.5 months.
For every meter of water depth that exceeds 20 meter, it will be extended by 1.7 months.
Also in Germany the level of remuneration for electricity from biomass and biogas depends
on different characteristics of the power plant as well as on the fuel type. Furthermore the
tariff level is increased if the biomass has not been treated prior to its use as a fuel and if the
power plant fulfills certain criteria.

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APPENDIX V DUTCH CASE – WESTLAND CHP (PROVINCE OF ZUID-


HOLLAND)

Since September 2007, Dutch greenhouse horticulture entrepreneurs with plans for new
CHPs cannot be granted transmission on the electricity grid as a result of a lack of grid
capacity. The past few years the active power has been increased substantially in the
Westland area. The past four years the CHP-power capacity increased fourfold: from
150 MW in January 2004 to 600 MW in January 2008. Several parties (e.g. Westland Infra
and TenneT, LTO Glaskracht and Westland) work in close cooperation to develop plans to
solve the current bottlenecks.

Basic principles of extending the High Tension Network:


− economic wish: no overcapacity on the grids
− economic/social wish: fast connection
− grid connection on first come, first serve basis.

Developments in Zuid-Holland (Westland):


− more electricity transport because of liberalized market
− also more transport fluctuations and unpredictability
− larger demand for electricity transport in the “Randstad”
− 4,000 MW contracted for large-scale power.

Additionally, between different parties there exist a difference in time span for grid
investments and writing off investments. This can lead to problems when making investment
decisions and writing off the investment. This caused problems in the Westland area as well.

To solve these problems, TenneT and Westland Infra the following technical solutions are
being considered:
− congestion management available: second half of 2008
(www.tennet.org/congestiemanagement)
On June 27, 2008 TenneT was finalizing their proposal for setting up a congestion
management system. When introducing this system more transport capacity will be
generated at the national grid. The progress of a national system has been delayed, but
on December 8, 2008 a sort of pilot system got into operation in the Westland area. The
system is put together in close cooperation of the Ministry of Economic Affairs, regional
DSOs, market parties and lobby groups. It is not the best solution, but useful. This

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system is in advance of the adjustments of the technical codes and the introduction of the

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Appendix V page 2

bill “Voorrang voor Duurzaam” (Priority to Renewables 48 ). It should however meet the
requirements of these laws in the future 49
− custom-made solutions realized: autumn 2010
This means a physical link between the CHP-production and the areas where a high
electricity demand exists. In the vicinity is for example The Hague a “concentrated load
center” 50 . Solutions that are being investigated are: a new cable connection Westerlee-
Wateringen, optimize the existing connection and re-connect the connection to The
Hague. Finally, to guarantee the continuity of the transportation of the production from the
Westland area custom-made solutions should be realized by the end of 2010.
Additionally, the local distribution network of Westland Infra should be strengthened 51
− structural solution (more than 7 years)
A further extension of the national grid. Additional to the Randstad 380 project an extra
380 kV-connection should be realized from the Maasvlakte to the national grid (lead time
approximately ten years). In Q1 of 2010 the transformer capacity will be brought to the
required level of approximately 700 MWe, as a result of the commissioning of a totally
new procurement station. Until this structural extension is being realized, congestion
management on the Westland Infra grid offers a solution as well.

In conclusion it can be stated that disconnecting existing CHPs is no longer required. A form
of congestion management on the national grid and legal preference for power from CHPs
will replace this. The Westland Infra Electricity grid will be extended and the exchange
capacity of the grid connection between Westland Infra and the TenneT high-voltage grid will

48
Early 2009 the bill “Voorrang voor Duurzaam” (Priority to Renewables) will be presented. Currently
the draft is open for consultation. This bill states that TSOs RES-E should be transported without
any restrictions.
49
Aansluitbeleid Elektriciteit, 2 oktober 2008, ET/EM / 8147673.
50
Recently a connection of approximately 40 MWe was realized in The Hague. This allows honoring
the connection and transmission for new CHPs, which were disconnected prior to October 2007.
The first investigation of a new direct grid connection between Westland and The Hague indicates
that this will involve a period of three years. The trajectory study is started and implemented by the
municipality Westland and TenneT.
51
In the beginning of 2009 (expected to be in May) the exchange capacity of the grid connection
between Westland Infra and the TenneT high-voltage grid, will be increased by approximately
70 MWe.

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Appendix V page 3

be increased. Furthermore a trajectory study will be implemented in relation to a new direct


connection between Westland and The Hague. To work in close cooperation with many
different stakeholders is a typical Dutch approach to come to solutions. In this case these
meetings and discussions have offered a solution.

System Integration of Distributed Generation and Renewable Energy Systems