1 Overview on assessed cases
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This section is dedicated to provide an overview on the scenario paths and cases investigated. Please note that, geographically, all scenarios refer to the European Union as of 2011, comprising 27 Member States. Results on RES(-E) deployment and accompanying parameters such as support expenditures are derived on a yearly basis covering the time horizon 2005 to 2020. A broad set of policy variants have been investigated in this modelling exam, aiming to consider the broad spread of possible RES(-E) policy options within the EU. For an improved understanding a clustering into “key policy pathways” and “other topical scenarios” is undertaken throughout this assessment.
1.1 Key policy pathways
Two different pathways have been assessed, on the assumption that either national or EU-wide harmonised RES policies will determine the future RES deployment. Thus, as applicable in Figure 1-1 scenarios conducted are clustered into both policy pathways for the subsequent characterisation.
Figure 1-1: Overview on assessed Green-X scenarios (part 1 - key cases)
National RES policy options
Common for all cases of this pathway is the assumption that national policies remain in place and determine the future development of RES in Europe. For this reason two variants will be reviewed:
- RES policies are applied as currently implemented (without any adaptation) – until 2020, i.e. a business as usual (BAU) forecast. Under this variant a moderate RES deployment is projected for the future up to 2020.
- Strengthened national policies (SNP): We assume a continuation of national RES policies until 2020 which will be further optimised in the future with regard to their effectiveness and efficiency. In particular the further fine-tuning of national support schemes will require in case of both (premium) feed-in tariff and quota systems a technology-specification of RES support. Similar to all other cases this scenario builds on the BAU-case for the near future. More precisely, it is assumed that assumed policy changes will become effective by 2013. The fulfilment of the target of 20% RES by 2020 is preconditioned both at EU level and at national level. Further light has been shed on the need for and impact of RES cooperation between Member States. For this three different variants of RES cooperation have been conditioned that can be distinguished as follows:
- As default scenario, i.e. for the reference case of “strengthened national policies” an efficient and effective resource exploitation is assessed assuming a moderate level of cooperation between Member States. Thus, this reference case of “moderate (RES) cooperation” can be classified as compromise between both “extreme” options sketched below.
- A “national perspective” is researched as sensitivity variant where Member States primarily aim for a pure domestic RES target fulfilment and, consequently, only “limited cooperation”(1) is expected to arise from that.
- A “European perspective” is taken in the third variant that can be classified as “strong cooperation” where an efficient and effective RES target achievement is envisaged rather at EU level than fulfilling each national RES target purely domestically.(2)
Policy options for an (early) harmonisation of RES support
In addition to the above national policy variants, the impact of a harmonisation of RES support is investigated, whereby for key cases the unlikely assumption is made that an early harmonisation would take place, assuming that harmonised RES policies become effective already by 2013. This unlikely assumption allows a better assessment of consequences arising from the applied support instruments. The assessed policy options comprise:
- Harmonised uniform RES support: Hereby it is assumed that a harmonised uniform certificate trading scheme would be applied to support RES in the electricity sector. It can be expected that this would give a strong incentive for the full exploitation of the least cost technology options and less emphasis on novel innovative technologies in the short term. The fulfilment of the 20% RES target for 2020 at EU as well as at national is envisaged in the applied quota obligation accompanied by an EU-wide trading scheme.
- Harmonised technology-specific RES support based on a quota with technology-banding: As an alternative to the above harmonised RES support technology-specific incentives are used to bridge the “valley of death” for novel RES technologies such as PV, wave and tide and solar thermal electricity. More precisely, in this particular case a trading scheme based on a banding approach is applied, which gives a different weighting to different technologies in terms of the number of green certificates (GC) granted per MWh generation, e.g. wind offshore obtains twice the weighting as wind on-shore. This approach reflects previous adaptations of Italy’s or UK’s RES-E trading regime.
- Harmonised technology-specific RES support based on premium feed-in tariffs: In this particular case, technology-specific (premium) feed-in systems are used to support RES-electricity, meaning in general a setting of equal financial RES incentives across all Member States.
1.2 Other topical scenarios
Figure 1-2: Overview on assessed Green-X scenarios (part 2 – other topical scenarios)
Complementary to above discussed key policy pathways for meeting 20% RES by 2020 other scenarios are conducted that aim to shed light on certain topics. As shown in Figure 1-2 these comprise:
- Outlook to 2030: A brief outlook beyond the scope of the 2020 RES Directive is provided within the model-based assessment, illustrating feasible pathways of RES development at EU level up to 2030. Thus, for selected policy scenarios a continuation of the policy intervention as tailored for 2020 is presumed, aiming to indicate prospects for RES up to 2030 under different framework conditions. In this context, a comparison of Green-X scenarios conducted in RE-Shaping to other modelling work is presented, assessing the consistency of Green-X and PRIMES scenarios. Next, technology perspectives in the 2030 timeframe are discussed, constrained to RES in the electricity, and finally implications for investments and support are illustrated.
- Impact of (imperfect) framework conditions on the performance of support instruments: Policy options discussed above related to a possible harmonisation of RES support are applied assuming “perfect” framework conditions. This includes the assumption that currently prevailing non-economic barriers are fully mitigated in the near future (i.e. already by 2013). To facilitate deeper understanding on how support instruments perform under imperfect conditions, a sensitivity assessment was conducted assuming that harmonised feed-in premiums and uniform quotas are used under “imperfect” conditions where non-economic barriers remain in place partly. Thereby the direct impact was studied, that is assuming no change of the initially defined policy design, as well as a variant where the design of support instruments was modified subsequently in order to (again) achieve given RES targets. While the first variant indicates generally the decrease in RES deployment due to imperfect framework conditions, the latter variant shows the necessary adaptation of financial support in order to “bring RES back on track” to meet the conditioned RES target (under the new “imperfect” framework conditions).
- Financing aspects – indication of impacts of country-related risks: As a consequence of the global financial crisis and the subsequent state debt crisis that popped up in recent years in at least several EU countries brought the impact of risk prominent on the table. In an indicative assessment we took a closer look on the possible impact of risk arising from a country’s general financial performance on the risk of RES projects planned within that country.
Thus, for illustrative purposes the country performance in Credit Default Swaps (CDS) was used to estimate a country-specific risk adder assuming that this equally affects all RES options within a country. Next, impacts of introducing such a risk adder have been assessed under BAU conditions with regard to RES support w/o mitigation of prevailing non-economic barriers.
- Biomass use – impacts of feedstock trade and sustainability concerns: Biomass as used for electricity, heat generation as well as for producing transport fuels is among all RES the key option for meeting the EU’s 2020 RES target. According to the National Renewable Energy Action Plans (NREAPs), biomass for energy purposes will supply about 53% of the 20% RES target by 2020 and the majority of this is expected to stem from the heat sector, and thereby in particular from solid biomass.
- Trade of biomass feedstock: Not all countries have sufficient (cost-competitive) domestic biomass resources to meet their targeted demand of biomass. Thus, trade of biomass feedstock is already happening in significant volumes today, and expectations are that this will become even more important in forthcoming years. In order to correctly incorporate related impacts in the prospective policy assessment, the Green-X model was extended within the RE-Shaping study with an international trade module for solid biomass. The cost and greenhouse gas emissions for trade between EU-27 Member States were calculated using a GIS-based intermodal biomass transport model. For non-EU biomass, exogenous supply potentials and related cost were added to the trade module in Green-X. Consequently, in the representation of scenario outcomes results on biomass trade are assessed and discussed in further detail.
- Sustainability concerns on biomass supply and use: Sustainability concerns related to the use of biomass deserve key importance in the policy debate of today. The RES Directive (2009/28/EC) introduced sustainability requirements for biofuels and bioliquids, and sustainability schemes for other energy uses of biomass are currently in discussion. How would (stringent) sustainability criteria affect the deployment of biomass in the electricity sector as well as the use in heating & cooling? In order to incorporate impacts arising from that likely development as default the assumption is taken that only a sustainable biomass supply and use is allowed. For sensitivity purposes the impact of having no sustainability regulation for biomass use in electricity and heating & cooling is assessed.
1.3 General remarks
Finally, we offer list of general remarks that aims to facilitate the understanding of the scenario work performed:
- Green-X scenarios are conducted in the 2020 timeframe, selected cases are however extended to offer a tentative outlook to 2030. Green-X calculates on a yearly basis while in the assessment a focus is given on the discussion of consequences by 2020 (2030).
- Geographically the scenarios will cover the EU27, if PRIMES data on Croatia can be provided in time, the calculations can be extended to include this country in addition.
- For all policy cases as default a mitigation of non-economic barriers (i.e. administrative deficiencies, grid access, etc.) is presumed for the future (3). More precisely, a gradual removal of these deployment constraints, which allows an accelerated RES technology diffusion, is conditioned on the assumption that this process will be launched in 2013. For sensitivity purposes the impact of prevailing (e.g. a default assumption to reflect BAU conditions) or only partly removing non-economic deficits (e.g. for the sensitivity assessment of policy performance under “imperfect” framework conditions as discussed previously) is researched.
- The detailed definition of policy options has been prominently discussed for RES electricity above. Note however that the overall assessment is not constrained to that – also RES in heating & cooling and RES in transport are included in the assessment. Thereby, for support of RES in heating & cooling a similar approach is applied as discussed for RES electricity, reflecting for example in the researched variants of strengthened national policies with differing emphasis on RES cooperation (i.e. from “limited” to “strong cooperation”) the gradual shift from a national to a more European approach within the assessed policy options. More precisely, in the case of “limited cooperation” support for RES heating & cooling (as generally offered through a combination of investment and tax incentives) differs substantially between Member States while in the case of “strong cooperation” differences in support vanish. Consequently, within all cases of harmonised RES support similar financial incentives are conditioned across all Member States.
- The policy framework for biofuels in the transport sector is set equal under all assessed policy variants (4): An EU-wide trading regime based on physical trade of refined biofuels is assumed to assure an effective and efficient fulfilment of the countries requirement to achieve (at least) 10% RES in the transport sector by 2020. Thereby, second generation biofuels receive a sort of prioritization (i.e. a higher support given via higher weighting factors within the biofuel quota regime) in line with the rules defined in the RES directive. Other novel options in this respect such as e-mobility or hydrogen have not been assessed within this analysis – as also no direct impact on the overall RES target fulfilment can be expected.
(1) Within the corresponding model-based assessment the assumption is taken that in the case of “limited cooperation / National perspective” the use of cooperation mechanisms as agreed in the RES Directive is reduced to necessary minimum: For the exceptional case that a Member State would not possess sufficient RES potentials, cooperation mechanisms would serve as a complementary option. Additionally, if a Member State possesses barely sufficient RES potentials, but their exploitation would cause significantly higher support expenditures compared to the EU average, cooperation would serve as complementary tool to assure target achievement.
(2) In the “strong cooperation / European perspective” case economic restrictions are applied to limit differences in applied financial RES support among Member States to an adequately low level – i.e. differences in country-specific support per MWh RES are limited to a maximum of 8 €/MWhRES.while in the “limited cooperation / National perspective” variant this feasible bandwidth is set to 20 €/MWhRES. Consequently, if support in a country with low RES potentials and / or an ambitious RES target exceeds the upper boundary, the remaining gap to its RES target would be covered in line with the flexibility regime as defined in the RES Directive through (virtual) imports from other countries.
(3) In general, it can be expected that a removal of non-economic RES barriers represents a necessity for meeting the 2020 RES commitment. Moreover, a mitigation of these constraints would also significantly increase the cost efficiency of RES support.
(4) An exception to this rule represents the BAU case where simply a continuation of current support policies for RES in transport is conditioned.