Deploying Renewables:

Principles for Effective Policies

Dr. Paolo Frankl
Head, Renewable Energy Unit
International Energy Agency

Press Conference, OECD

Berlin, 29 September 2008 INTERNATIONAL
© OECD/IEA - 2008 ENERGY AGENCY
 Global Power Generation Mix
Scenarios
Other
Global electricity production (TWh) 60,000 renewables
Solar
46.5% Wind
50,000
Renewables Biomass + CCS
40,000
Biomass

Hydro
30,000
Nuclear
20,000 Gas + CCS

Gas
10,000
Oil

Coal + CCS
© OECD/IEA - 2008

0
2005 Baseline Baseline ACT Map BLUE Map
Coal
2030 2050 2050 2050
[Source: ETP 2008]
Renewables would have to play a particularly significant role in
the power sector, increasing from 18% today to nearly 50% by
2050. Non-hydro renewables show the highest growth rate.
 Global Renewable Energy Markets
and Policies Programme (GREMPP)
 Comparative assessment of effectiveness and
efficiency of renewables support policies (market
deployment and RD&D policies)

 OECD countries plus Brazil, Russia, India, China,

South Africa

 Electricity, Heat and Transport Fuel sectors

 Distillation of the best policy practices and of main

© OECD/IEA - 2008

challenges encountered
 ‘Learn from success stories but also from failures’

 Co-funded by German BMU, Japanese NEDO, and Enel

 Quantitative Analysis

 Chosen policy effectiveness

indicator on a yearly basis:

Incremental RE generation in a given year

Remaining additional realisable potential (by 2020)
© OECD/IEA - 2008
 Achieved (by 2005) and Additional
realisable mid-term potential (by
2020) for RES-Electricity
2000
generation potential up to 2020
Realisable RES-Electricity_

1500
[TWh/year]

Additional potential
up to 2020
1000
Achieved potential
2005
500

0
Norway

Brazil
Switzerland
Mexico

Turkey
USA

India
Japan

Korea

New Zealand

EU 27
Iceland

Russia

China
Canada

Australia

South Africa
© OECD/IEA - 2008

Achieved (2005) and additional realisable mid-term (up to 2020) potential for
RES-Electricity by country (OECD+BRICS) – in absolute terms (TWh)

Source: IEA & EEG, 2008

 Effectiveness & Efficiency
Wind On-shore 2005 (OECD & BRICS)
20%
u OECD - EU  Other OECD p BRICS
18% IRL

16% Long-term
predictable incentives
14%
PRT
(FIT or FIP)
Effectiveness indicator 2004/2005

+
12% Appropriate
DEU
AUT framework
ESP
10%

8% LUX
NLD
Higher risk (TGC)
+
6% Non-economic barriers
KOR
JPN
4%
NZL IND GBR
ITA
2% AUS BEL
USA
© OECD/IEA - 2008

SWE FRA POL

NOR BRA FIN
0% RUS ZAF TUR MEX
CHN
0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00
-2%
Annualised remuneration in [US cent / kWh]
 Efficiency
Source: IEA & Fh-ISI, 2008
 Effectiveness & Efficiency
Solid biomass el. 2005 (OECD+BRICS)
30%
u EU Countries  Non EU OECD p BRICS

25%
NLD
Effectiveness indicator 2004/2005

20%

15% TGC
SWE BEL
10%

5%
FIT/FIP DNK HUN
GBR
JPN AUT ITA
NZL
DEU PRT
POL
© OECD/IEA - 2008

CZE
0% RUS BRA NOR
ZAF USA
CHN
CAN
KOR FRA
ISL IRLAUS
IND
TUR CHE
GRCLUX MEX
FIN ESP
0 2 4 6 SVK 8 10 12 14 16 18

-5%
Annualised remuneration in [US cent / kWh]

Source: IEA & Fh-ISI, 2008

 Effectiveness & Efficiency
Solar PV 2005 (OECD & BRICS)
7%
u OECD - EU  Other OECD p BRICS LUX

6%
Effectiveness indicator 2004/2005

5%

4%

FIT
3% DEU

2%

JPN
1% CHE
© OECD/IEA - 2008

AUS
0% CHN
BRA SWE
RUSNOR
SVK
NZL
ISL
IRL
TURPOLNLD
ZAF
HUN CAN
INDCZE
FIN
GBR DNK
MEX BEL AUT ESP USA
ITA
PRT GRC KOR FRA
0 10 20 30 40 50 60 70 80
Annualised remuneration in [US cent / kWh]

Source: IEA & Fh-ISI, 2008

 Main Lessons Learnt
and
Conclusions
© OECD/IEA - 2008
 Main Lessons Learnt (1)
 Effective policies only in a limited set of countries
 Sometimes depending on specific technology

 Perceived risk, more than profit, is key to policy

effectiveness & efficiency

 Price support can not be adequately addressed in isolation;

non-economic barriers must be addressed concurrently
 Grid barriers
 Administrative barriers
 Social acceptance issues
 Other barriers (e.g. training, information, financial, etc.)

Effective systems have, in practice, frequently been the most

© OECD/IEA - 2008


cost efficient
 Technology-specific support is key for both effectiveness and
cost-efficiency
 Main Lessons Learnt (2)

 Move beyond ‘Feed-In Tariff vs. Quota Obligation

System/ Tradable Green Certificate’ debate
 Both systems show success and failures depending on
specific country and technology

 Precise design criteria and fine-tuning are key

 Signs of convergence:
 Feed-In Tariff: Premium tariff option, time digression
© OECD/IEA - 2008

 Quota System/Tradable Green Certificate: Technology

banding
 Key Principles for Effective
Renewable Energy Policies
1. Remove non-economic barriers to
improve market functioning Continuity
2. Establish predictable support framework - Certainty
to attract investments
3. Set up transitional incentives decreasing
over time – to foster and monitor
technological innovation and move towards
market competitiveness
4. Ensure specific support in function of
technology maturity to exploit potential of
large RET range
© OECD/IEA - 2008

5. With increasing mass-scale RET penetration

impact on overall energy system must
be taken into account
 Fostering RE’s transition towards
mass market integration
Market Deployment

Mature tech

4. Technology-neutral competition (e.g. hydro)

TGC, Carbon trading (e.g. EU ETS)

Low cost-gap 3. Shared/imposed market risk,

guaranteed minimum but declining
1. Development (e.g. wind onshore) support
FIP, TGC (technology banding)
RD&D financing,
capital cost support,
investment tax
credits, rebates, High cost-gap
2. Stable, low-risk, sheltered
loan guarantees (e.g. PV) FIT, FIP, Tenders
© OECD/IEA - 2008

Prototype & demo stage

(e.g. 2nd gen biofuels)

Development Niche markets Mass market Time

 Recommendations
Urgent action for Energy Technology Revolution
1. Realise urgency to implement effective policies to
exploit major potential of RETs in terms of energy
security and climate change mitigation

2. Remove and overcome non-economic barriers first

3. Exploit substantial potential for improvement of policy

effectiveness and efficiency: learn from good practice

4. Focus on rigorous and coherent implementation of key

policy design principles with regard to long-term cost
efficiency and national circumstances
© OECD/IEA - 2008

5. Create level playing field by pricing in GHG

emissions and other externalities

6. Allow a combination framework of incentive schemes in

function of technology maturity level