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Harmonising renewable support mechanisms

Harmonising renewable support mechanisms. Dr David Toke: Senior Lecturer in Environmental Policy, University of Birmingham and also Energy Expert, World Future Council. What is a REFIT?. Guaranteed minimum price for electricity sales Long term contract for power purchase (15-20 years)

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Harmonising renewable support mechanisms

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  1. Harmonising renewable support mechanisms Dr David Toke: Senior Lecturer in Environmental Policy, University of Birmingham and also Energy Expert, World Future Council

  2. What is a REFIT? • Guaranteed minimum price for electricity sales • Long term contract for power purchase (15-20 years) • Different to NFFO and RO

  3. What is a renewable electricity certificate scheme (RECS) • Electricity suppliers given renewable obligation • RE projects sell certificates (and energy) • Electricity suppliers buy certificates or pay penalty

  4. Use of systems • REFIT dominant in Europe (over 80 per cent of EU wind power installed under REFIT) • Less than 10 per cent of EU wind power installed under RECs • RECs used in USA, but underpinned by ‘rich man’s REFIT, the Federal ‘Production Tax Credit’

  5. Why a REFIT? Less income uncertainty, higher project IRR for a given income level

  6. 2005-2006

  7. UK RO confusion? • Uncertainty over future price of renewable obligation certificates (ROCs) • Uncertainty over future value of electricity • Banks use low estimates of future income • In practice projects earn much more than what they would if income stream was secure • RO not cost effective • But local investors deterred by insecurity

  8. REFIT = transparency for local and small investors • Local investors often need lower returns • Local investors have better networks to gain planning consent • REFIT better for higher cost renewables such as solar power

  9. Advantages of harmonisation

  10. Theoretical advantages of harmonisation • Investment would flow to where it is most efficient • All countries would be forced to participate

  11. Harmonised EU-wide RPS? • Great uncertainty over certificate value • Lack of competition in several countries (eg France, Germany) • Bottlenecks in some countries (eg UK) • Loss of local investment • Some countries would refuse to participate

  12. A single REFIT? • Local conditions (esp wind speeds) differ • Some countries would object

  13. Harmonised transferability • UK RO de-stabilised • Germans would pay for Danish etc renewables • No efficiency advantages

  14. Contacts • ‘Making Renewables FITTER’ report available at http://www.worldfuturecouncil.org/ • Dr David Toke: d.toke@bham.ac.uk • Miguel Mendonca (WFC): miguel@worldfuturecouncil.org

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