The Energy Transition in Europe: Initial Lessons from Germany, the UK and France
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The energy transition in Europe: initial lessons from Germany, the UK and France Towards a low carbon European power sector Professor Natalia Fabra (Joint Academic Director, CERRE, and Universidad Carlos III, Madrid), Editor Dr Felix Christian Matthes (Öko-Institut, Berlin) Professor David Newbery (University of Cambridge) Dr Michel Colombier, Mathilde Mathieu and Andreas Rüdinger, (Institute for Sustainable Development and International Relations - IDDRI, Paris) 6 October 2015 151006_CERREStudy_EnergyTransition_Final Centre on Regulation in Europe (CERRE) asbl Rue de l’Industrie 42 Box 16 - B-1040 Brussels - Belgium Ph.: +32 (0)2 230 83 60 - Fax: +32 (0)2 23 0 83 70 Contents About CERRE .............................................................................................................................. 5 About the authors ...................................................................................................................... 6 Executive Summary .................................................................................................................... 8 Foreword ................................................................................................................................. 10 1. Towards a low carbon European power sector, by Natalia Fabra ........................................ 12 1.1 What is the Energy Transition? ........................................................................................12 1.2 The Energy Transition: a regulatory challenge for the power sector ................................13 1.3 The Energy Transition in Germany, the UK and France: an overview................................14 1.3.1 Differences and similarities across the three countries ................................................15 1.3.2 Overview: targets and policies .....................................................................................18 1.3.3 Policies towards renewables .......................................................................................20 1.3.4 Capacity mechanisms ..................................................................................................22 1.4 Lessons from the Energy Transitions in Germany, the UK and France ..............................23 1.5 Policy recommendations: towards a low carbon power sector ........................................36 1.6 Concluding Remarks ........................................................................................................46 2. Case Study 1: The Energy Transition in Germany, by Felix Christian Matthes ....................... 48 2.1 History, objectives and targets of the energy transition in Germany ................................48 2.2 Main policies and regulatory instruments in the power sector ........................................53 2.2.1 Introduction ................................................................................................................53 2.2.2 The remuneration scheme for power generation from renewable energy sources ......55 2.2.3 The remuneration scheme for combined heat and power production .........................60 2.2.4 The nuclear phase-out .................................................................................................62 2.2.5 Policies to enhance the efficient use of electricity .......................................................64 2.2.6 Transmission and distribution network development ..................................................65 2.2.7 The acceleration of decarbonisation in conventional power generation ......................68 2.2.8 An energy market reform? ..........................................................................................70 2.3 Evaluation and prospects ................................................................................................71 2.3.1 Greenhouse gas emissions ..........................................................................................71 151006_CERREStudy_EnergyTransition_Final 2/152 2.3.2 Electricity costs ...........................................................................................................73 2.3.3 Participation ................................................................................................................76 2.3.4 Innovation ...................................................................................................................77 2.3.5 European cooperation .................................................................................................80 2.3.6 Institutional arrangements and specifics .....................................................................80 2.4 Lessons and challenges ahead .........................................................................................83 3. Case Study 2: The Energy Transition in the UK, by David Newbery ...................................... 87 3.1 Objectives and targets of the UK energy transition ..........................................................87 3.2 Main policies and regulatory instruments in the power sector ........................................89 3.2.1 The rôle of the power sector in the energy transition ..................................................90 3.2.2 Electricity Market Reform ............................................................................................92 3.2.3 Delivery of the Electricity Market Reform ....................................................................95 3.3 Evolution and prospects ................................................................................................ 101 3.3.1 Evolution of prices ..................................................................................................... 102 3.3.2 Impact on investment ............................................................................................... 103 3.3.3 Distributional impacts ............................................................................................... 103 3.3.4 Cooperation with neighbouring countries ................................................................. 104 3.4 Challenges and lessons .................................................................................................. 105 3.4.1 Reconciling the energy trilemma ............................................................................... 105 3.4.2 Success stories and lessons ....................................................................................... 105 4. Case Study 3: The Energy Transition in France, by Michel Colombier, Mathilde Mathieu & Andreas Rüdinger.............................................................................................................106 4.1 Introduction .................................................................................................................. 106 4.2 A glance at the French energy model: main characteristics and long-term objectives .... 107 4.2.1 Historic evolution of energy demand ......................................................................... 107 4.2.2 Energy supply and electrification ............................................................................... 110 4.2.3 General objectives and targets for the energy transition ........................................... 114 4.3 Main policies and regulatory instruments in the power sector ...................................... 118 4.3.1 Long-term planning in the electricity market ............................................................. 119 4.3.2 The evolution of support mechanisms for renewable electricity generation .............. 120 151006_CERREStudy_EnergyTransition_Final 3/152 4.3.3 The French capacity mechanism ................................................................................ 123 4.3.4 Power market liberalisation and European integration: the French case .................... 124 4.4 Evolution and prospects ................................................................................................ 126 4.4.1 Compliance with targets ............................................................................................ 126 4.4.2 Evolution of prices and distributional issues .............................................................. 127 4.4.3 Potential for regional cooperation ............................................................................. 130 4.5 Challenges and lessons .................................................................................................. 131 References ..............................................................................................................................133 References for Chapter 1: Towards a low carbon European power sector .................................133 References for Case Study 1: The Energy Transition in Germany ...............................................136 References for Case Study 2: The Energy Transition in the UK ...................................................148 References for Case Study 3: The Energy Transition in France ...................................................151 151006_CERREStudy_EnergyTransition_Final 4/152 About CERRE Providing top quality studies and dissemination activities, the Centre on Regulation in Europe (CERRE) promotes robust and consistent regulation in Europe’s network industries. CERRE’s members are regulatory authorities and operators in those industries as well as universities. CERRE’s added value is based on: • its original, multidisciplinary and cross-sector approach; • the widely acknowledged academic credentials