E F F I C I E N C Y – O U R F O C U S . 1

Oliver Frank

Auctions and diesel substitution as samples for

competitive market integration of renewable

energies. November 18th, 2014, Geneva

2 E F F I C I E N C Y – O U R F O C U S .

Agenda.

1. dena at a glance

2. Status of RE integration

3. Fields of action: Important drivers for RES development

4. Auctions are gaining importance.

5. Substituting diesel? - Pricing matters

6. Conclusions and questions

5 E F F I C I E N C Y – O U R F O C U S .

2. dena´s 2014 Study on status and perspectives for renewable energies worldwide.

High market share in at least 3

technologies (A-Market)

Growth market in at least 3

technologies (B-Market)

High market share in 2 technologies

(A-Market)

Growth market in 2 technologies

(B-Market)

High market share in 1 technology

(A-Market)

Growth market in 1 technology

(B-Market)

Cumulative overview of

different market status for

wind energy (on- and

offshore), solar energy (PV,

solar thermal, CSP),

geothermal (electricity and

heat generation) excluding

results for bioenergy and

hydropower and other

technologies..

Status of RE integration within

the 56 UNECE partly differs

considerably.

6 E F F I C I E N C Y – O U R F O C U S .

3. Social 2. Economic

3. Fields of action: Important drivers for RES development. 1. Political / Regulatory

4. Technical

Security of

supply

Fossil

resources

Future demand

Import quota

Access to energy

Targets

Share of RES

Tech-nology target

Emission reduction

Efficiency

Promotion

Fixed tariff / premium

Net-metering/-

billing

Quota obligation

PPA

Tender

Auction

Taxes / other

incentives

Invest-ment

security

Market access

Priority purchase

Full

Limited

Restricted

Energy prices

Electricity

Liquid fuels

Gaseous fuels

Solid fuels

Economy and value

New industries

Labour market

Competi-tiveness

Social

Costs

Accept-ance

Know-ledge

Aware-ness

Potential

Theoretic.

Technical

Economic

R & D

Integration

Grid integration

Decent-ralised

production

Storage

Smart Metering

Demand

7 E F F I C I E N C Y – O U R F O C U S .

4.1 Auctions are gaining importance.

Today more than 20 countries have realized auctions for renewable energies.

Outlook: Guidelines of the European Commission present auctioning as standard procedure for allocating support for bigger plants starting in 2017

90´s 2000 2007 2014 2009

Brazil: technology specific auctions (biomass + small hydro). Since 2009: Auctioning of new wind projects (PPAs for 20 years)

Particularly in Latin America: Awarding new capacities in state organized auctions of long lasting PPAs as a new form of long-term planning in electricity markets.

Unbundling: Auctions are used more often to bring IPPs into the electricity markets

Since 2009: Auctioning is also used in some European technology-markets (e.g. Denmark Offshore-Wind, France (PV and Offshore-Wind)

8 E F F I C I E N C Y – O U R F O C U S .

4.2 States using auctioning models for renewable energies.

Auctions

Planned

Brazil

Uruguay

Argentina

Peru

USA

Guatemala Panama

South Africa

Canada

Australia

Russia

India

China

Uganda

Germany

United Kingdom

Poland

France Italy

Jamaica

Jordan Cyprus

Netherlands

Denmark

Sourc

e:

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pectives for

Renew

able

Energ

ies W

orld

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World

map: P

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9 E F F I C I E N C Y – O U R F O C U S .

4.3 Auctions: Key drivers.

NEW MARKETS: PROMOTE OFTEN IN A

DIFFERENT WAY

Auctions are used in new markets awarding

projects with high capacities. Especially energy

markets with a strong state influence tend to

make use of this form.

ESTABLISHED MARKETS: INFLUENCE

THROUGH GOVERNANCE RISING UP

Economical and technical interdependencies

and interactions led to an increase of

measures controlling the expansion of new

capacities. Experiences from new growing

markets are becoming paradigms.

TECHNOLOGY DEVELOPMENT:

DECREASING GENERATION COSTS

Steadily decreasing generation costs make it

challenging for policy makers to define

appropriate tariffs for the promotion of

renewable energies and to avoid over

promotion.

TECHNOLOGY SPECIFIC PROMOTION

–„NO ONE FIT(S) ALL

Special promotion schemes for certain

technology or fields of application are getting

more important. Governments tend to combine

different schemes and instruments according

to technology, plant size or technical relevance

for the energy system.

Particularly auctions are reaching more importance as competitive procedures for the promotion of new RE-capacities on international level.

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e:

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ers

pectives for

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able

Energ

ies W

orld

wid

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World

map: P

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nLoad.

10 E F F I C I E N C Y – O U R F O C U S .

4.4 Evaluation: pros and cons in discussion. Policy:

Cost efficiency: Pricing for promotional tariffs in

competition

Regulation of further expansion (e.g. amount,

technologies)

(where applicable) penalty fees if projects are not

completed

Businesses:

High level of transparency

In case of award through PPAs: Project realization to

given terms

Financing easier because PPAs are often seen less risky

Policy:

Administrative efforts by assessing offers or companies

for pre-selection

Appealing of allocation possible

Risk of non-realization of power projects or risk of low

quality of components / plants

Absence of longer lasting perspective for RE-

development / „stop and go“

Capacity factors of RE-technologies might not be

considered in an appropriate manner

Loss of social or financial models facilitating broad

project participation from society

Businesses:

Risk of non-consideration

High pricing pressure, partly also among different

technologies

long lasting procedure / high complexity

Risk of „sunk costs“ if not considered

Proof of liquidity / fees for participation

Tends to result in giving preference to bigger market

actors

Establishment of national value chains depends on

frequency of auctioning

11 E F F I C I E N C Y – O U R F O C U S .

5. Example: Substituting diesel? - Pricing matters: Regional differences for diesel prices in US cent / liter.

Sourc

e:

dena´s 2

014 S

tudy o

n S

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s a

nd P

ers

pectives for

Renew

able

Energ

ies W

orld

wid

e.

Data

: G

IZ 2

012,

World

Bank.

12 E F F I C I E N C Y – O U R F O C U S .

6. Conclusion and questions. Conclusions:

Status of RE integration within UNECE region: Existing differences between

member states.

Auctions will also play an important role for the further development of RE in

UNECE-member states.

Pricing for energy (such as fuel or electricity) is crucial for new business-models

based on increasing cost effectiveness of RE.

Question:

What is “best practice”?

How can different initial positions of member states be considered in an

appropriate manner?

Which additional dimensions and key drivers should be considered?

(…)

13 E F F I C I E N C Y – O U R F O C U S .

Your Contact.

Oliver Frank

Head of Renewable Energies Division

Deutsche Energie-Agentur GmbH (dena)

German Energy Agency

Chausseestrasse 128 a, 10115 Berlin, Germany

Tel: +49(0)30 72 61 65-680

Fax: +49(0)30 72 61 65-699

E-mail: ofrank@dena.de

Internet: www.dena.de

E F F I C I E N C Y – O U R F O C U S . 14

Efficiency – our focus.

Thank you.

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