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Harmonising renewable support mechanisms

Dr. David Toke, Senior Lecturer in Environmental Policy at the University of Birmingham and energy expert at the World Future Council, examines renewable energy support mechanisms, focusing on REFIT (Renewable Feed-In Tariff) and renewable electricity certificate schemes (RECs). He highlights the advantages of REFIT, including reduced income uncertainty and its effectiveness in driving investments, particularly in renewable sources like wind and solar. Toke argues that harmonisation of support mechanisms can lead to increased efficiency but notes challenges such as local conditions and varying national participation.

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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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