Energy policy and the development of Renewable Energy Sources for Electricity: A comparative analysis of the Swedish and Greek cases
Iakovos-Marios Tsakiris
Master of Science Thesis KTH School of Industrial Engineering and Management Energy Technology EGI-2011-117MSC Division of Energy and Climate Studies SE-100 44 STOCKHOLM
2
Master of Science Thesis EGI 2011:117MSC
Energy Policy and the Development of Renewable Energy Sources for Electricity : A Comparative Study of the Swedish and Greek Cases
Iakovo s-Marios Tsakiris
Approved Examiner Supervisor 18th November 2011 Semida Silveira Semida Silveira Commissioner Contact person
Abstract Before electricity liberalization was implemented in the EU, national utilities controlled energy planning and technology choices and were basically the only ones with access to energy infrastructure finance. Liberalization came to change that. One of the goals of EU policies today is to create a level playing field for power production based on new technologies and decentralized supply. However, institutional, structural and other barriers hinder further RES diffusion. Such barriers need to be alleviated to accelerate the diffusion of RES technologies. This study analyses the Swedish and Greek experiences and actions in the energy policy area between 2003 and 2008. I identify actions and evaluate their effects highlighting similarities and differences between the two cases, as well as remaining challenges. I find that EU policy was a decisive national policy driver in both cases. In Greece, feed in tariffs created a more secure investment environment and a more level playing field for producers and technologies. In Sweden, the green certificates served to promote RES but could not avoid market control by larger players. In both cases, rent extraction mechanisms hindering competition were found along administrative and network access barriers affecting mostly wind power. In Greece, adjustments are needed to further promote PV and better manage public funds and excess profits. Market liberalization is also necessary. In Sweden, the certificates market expansion created a more competitive environment but some technologies still need more support. At EU level, further harmonization of rules concerning unbundling and the setting of binding RES targets and infringement procedures should reduce national policy risks and contribute to reduce costs for new technologies. Plurality of markets and support schemes should be pursued in order to create a large base of technologies while international markets for more mature technologies should be established. A more transparent process in achieving and revising targets at national levels should also be established while measures to avoid lock ins should be pursued.
3
Summary of the thesis Before electricity liberalization was implemented, national utilities controlled planning and technology choices along their preferred services and equipment suppliers as well as the access to finance. Liberalization came to change that. One of the goals of EU policy is to create a level playing field for power production based on new production technologies. Renewable Energy Source (RES) technologies have significant environmental benefits, but are not competitive enough since the economic benefits of the technologies have not yet been realized. Numerous barriers hinder the diffusion of RES technologies. Further coordination of energy policies is needed in order to alleviate market diffusion barriers, realizing the potential benefits from using RES and creating a level playing field for new technologies. In this study a comparative approach is used to identify actions towards creating a more level playing field for RES technologies for power production and alleviating barriers for their market diffusion. The study analyses the Swedish and the Greek case in relation to their actions in the energy policy area during the period 2003 to 2008. I identify actions towards creating a more level playing field for RES in the two countries and evaluate the effects in each case. Finally, I identify further challenges in the two cases. Energy policy formation in the EU is multi level. Therefore, I first analyze the policy actions at EU, national and other governance levels in the fields of RES support and electricity liberalization. I look at how EU directives have been translated into policies at country level and how different actors and institutions have promoted RES technologies and influenced the formation of RES markets. I use relevant literature and reports as well as interviews with key actors. I especially focus on policies and regulations related to RES and electricity pricing. Policies aiming towards shifting administrative and property rights and alleviating structural and institutional barriers are also taken into account. In order to identify relevant actions, I analyze the policy targets, the licensing procedure concerning different technologies and the support mechanisms put in place for different RES technologies. As a next step, I analyze the effects of regulations and relevant actions on the RES market to understand the actors’ willingness to invest. I investigate the reasons for the current RES mix and the role of regulatory and policy actions in the development of the RES mix. The effects of other institutions are also taken into account. I evaluate actions and institutions in relation to alleviating barriers and creating a more level playing field in RES production and RES technologies. Finally, I identify key structural barriers on market accessibility for various RES technologies. Structural barriers that affected the market formation and that may have impact on the future RES market evolution are considered. Furthermore, similarities and differences between the two cases are especially highlighted.
In the case of Greece, the EU targets for RES and CO 2 reductions were adopted unchanged and legitimacy for liberalization came through the EU. A main concern was to attract international and domestic private funding in order to support growth and security of supply. The stable feed in tariffs adopted along with EU investment grants provided the necessary security for investments. The prolongation of contracts, changes in the authorization procedure and the maturing of many investment efforts led to a wide expansion of wind power. Despite the fact that wind power can compete with conventional power in many cases, authorization procedures, local tensions, urban planning issues, the lack of forest registry and grid connection issues set barriers to its expansion. The programme for deployment of PVs, established in 2006 led to a small number of investments in the period studied. High feed in tariffs along with investment grants created expectations for large returns and led to high numbers of license applications. However, lack of appropriate regulatory provisions resulted in more license trading than direct infrastructure investments. This, along with the centralized application procedure led to a deadlock. Trading of licenses is also established for wind power and constitutes a mechanism of rent extraction well set in Greece that does not promote competition and needs to be addressed through appropriate regulatory actions.
4
Greece’s electricity system also includes a large number of non interconnected islands. In these areas, there are many opportunities for RES investments due to expensive generation that have not taken place yet due to lack of grid and the current network regime. An interconnection plan for some of them is being carried at present. An important challenge for Greece is investment subsidies to realize complementarities with other industrial sectors. Adjustment of the feed in tariffs to promote PVs is needed, including geographical differentiation on investments due to the specific remote characteristics of some areas. In Greece, structural and regulatory barriers play a very important role in RES competitiveness and diffusion as well as their legitimacy. Further liberalization is of outmost importance. In Sweden, lower and conditional targets for RES shares have been set than the ones set by the EU. A certificates system was set along expectations of establishment of a certificate system at EU level. Long term planning scenarios of alternative market structures did not materialize and investments took place in existing CHP plants due to a combination of structural, certificates’ system design and intra market uncertainties. Technology choices were left in the hands of the same players that managed to extract rents from the market. The 2006 changes in the system alleviated some of the uncertainties. Further support for wind power led to additional new large scale investments in a constrained environment. Several barriers still exist for wind power related to the planning and authorization procedure, local tensions, grid bottlenecks and technological issues. Large purchasers of wind equipment should be able to affect technology development. A challenge is to materialize the vision of power exports along a high ambition level for CHP in an environment of trade offs between prices, export increase rates and various possibilities of additional installed capacity. The effect of counter trading in the electricity system should also be studied. Sweden is a front runner in biofuels. The market needs further international expansion along identification of appropriate technology trajectories through cooperation while open access and competition in the wood fuel chain. The certificates market expansion at Nordic level will create a more stable and competitive environment for investments while regulatory learning and experimentation is necessary for legitimation at European level. EU policy was in both cases a decisive national policy driver. The challenge of long term planning along a variety of technologies that will progress on their learning curves as well as further inclusion of the benefits of decentralized production remains in both cases. In each case, solutions towards alternative networks regime that will enhance competition should be searched. At EU level, further harmonization of rules concerning unbundling and the setting of binding RES targets and infringement procedures should reduce national policy risks and contribute to reduce technology costs. Plurality of markets and support schemes should be pursued in order to create a large base of technologies while international markets for more mature technologies should be established. A more transparent process in achieving and revising targets at national levels should also be established while measures to avoid lock ins should be pursued.
5
List of Acronyms
ASEA Swedish General Electric Company CCGT Combined Cycle Gas Turbine CDL Main Grid Agreement CHP Combined Heat and Power DEPA National Gas Corporation DESMIE Hellenic Transmission System Operator (HTSO) EC European Commission EIA Environmental Impact Assessment EIB European Investment Bank ETS Emissions Trading System EU European Union EUA EU Emission Allowance Euratom European Atomic Commission EMI Energy Markets Inspectorate FIT Feed In Tariff GHG Greenhouse Gas HELAPCO Hellenic Association of Photovoltaic Companies HTSO Hellenic Transmission System Operator HV High Voltage HVDC High Voltage Direct Current ICT Information and Communication Technology ISO Independent System Operator MD Ministerial Decision MoD Ministry of Development MSP Marginal System Price MSW Municipal Solid Waste NG Natural Gas NUTEK Swedish Economic Development Agency OG Official Gazette PPC Public Power Corporation PSO Public Service Obligation PV Photovoltaic RAE Regulatory Authority for Energy
6
RES Renewable Energy Sources SEA Swedish Energy Agency SEES National Council for Energy Strategy SKM Svensk Kraftmäkling TPA Third Party Access TSO Transmission System Operator
7
List of Tables and Figures
p.17 Diagram 4.1. Electricity Generation development in Greece, by source 1960 2005 p.19 Graph 4.1 Electricity consumption Structure (in %) in Greece in the years 1998 (left) and 2008 (right) p.19 Table 4.2 Electricity consumption Mix by 31 December 2008 p.20 Diagram 4.2Average Wholesale Price (MSP) Development p.22 Table 4.3 Scenarios of possible RES production in the year 2010 p.24 Graph 4.2SEES electricity production scenarios for the year 2020 p.25 Table 4.4 Feed in tariffs in 2007 p.26 Map 4.1 Areas of wind priority (in red) and places that network absorption capacity strengthening will take place (elaboration on MoD, 2009). p.27 Table 4.5 Additional wind farms capacity from ongoing initiatives p.28 Figure 4.1 RES authorization procedure and jurisdictions p.31 Diagram 4.3 Cumulative installed capacity of RES in Greece p.32 Diagram4.4 Cumulative development of PV installations in the interconnected system p.33 Table 4.7 Licensed RES plants in the interconnected system as of 31.12.2008 p.33 Table 4.8Installed wind energy capacity market shares of largest producers, 2007 p.34 Table 4.9 Level of investments in RES 2003 2008 p.37 Diagram 5.1 Electricity production in Sweden by type of source p.39 Graph 5.1 Electricity consumption Structure in Sweden, in the years 1990 (left) and 2008 (right) p.39 Table 5.1 The Swedish Energy balance 2005 2009 p.40 Graph 5.2 Sweden’s (left) and the Nordic Region’s (right) largest electricity generators in 2007 p.40 Graph 5.3 Shares of low voltage consumers for the three largest distribution networks owners p.41 Diagram 5.2 Nordpool Prices development in Sweden p.42 Table 5.2 Comparison of 2001 scenarios for the electricity mix to the year 2020 p.43 Table 5.3 Annual quotas in the electricity certificates system and estimated new RES electricity production p.44 Graph 5.4 Long term plan for electricity production in Sweden p.48 Diagram 5.4 Installed power generation capacity changes in district heating cogeneration plants (left) and industrial back pressure p.48 Diagram 5.5 Installed power generation capacity changes in wind power plants p.49 Graph 5.5 Certificates production by type of plant p.50 Table 5.4 Investments in new RES plants
8 p.50 Graph 5.6 Biofuels use in the certificates system p.51 Graph 5.7 Swedish district heating ownership p.52 Diagram 5.6 Spot traded Electricity Certificate Prices p.52 Graph 5.8 Number of certificates issued and cancelled, together with accumulated surplus over the period 2003 2008 p.53 Table 5.5 Exposure to uncertainties by various technologies p.54 Graph 5.9 Expected increase in electricity production in the certificate system 2007 – 2012
9
Table of Contents Abstract ...... 3 Summary of the thesis ...... 4 Foreword ...... 12 1 Introduction ...... 14 2 Objective and Organization of the Study ...... 15 2.1 Objective ...... 15 2.2 Methodology ...... 15 2.3 Organization of the study ...... 15 3 The EU ...... 17 3.1 Energy Policy in the European Union ...... 17 3.2 Electricity Market Liberalization in the EU ...... 18 3.3 RES promotion ...... 18 4 The case of Greece ...... 20 4.1 Liberalization of Electricity Market in Greece...... 20 4.1.1 Country Profile ...... 20 4.1.2 Market characteristics and dominant positions ...... 21 4.1.3 Unbundling of functions ...... 23 4.1.4 Consumer pricing and Public Service Obligations ...... 24 4.2 RES policy ...... 25 4.2.1 Goals and planning targets ...... 25 4.2.2 RES financial support ...... 27 4.2.3 Access to Grid ...... 29 4.2.4 Authorization and Sitting ...... 30 4.3 Climate change policy ...... 33 4.4 Willingness to Invest and Actual Effects on RES market ...... 34 5 The Swedish Case ...... 39 5.1 Liberalization of Electricity Market in Sweden...... 39 5.1.1 Country Profile ...... 39 5.1.2 Unbundling of Functions ...... 41 5.1.3 Market characteristics and Dominant positions ...... 42 5.1.4 Consumer pricing ...... 44 5.2 RES policy ...... 44 5.2.1 Goals and long term planning ...... 44 5.2.2 RES financial support ...... 47 5.2.3 Authorization procedure and Sitting ...... 48 5.2.4 Grid Access ...... 49
10
5.3 Climate policy and Taxes...... 50 5.4 Willingness to invest and Actual Effects on RES market ...... 51 6 Discussion ...... 58 7 Conclusions ...... 63 8 Bibliography ...... 65 9 Appendix 1 – Relevant Legal and Policy provisions ...... 69 10 Appendix 2 –Swedish and Greek positions among EU states in various RES technologies diffusion 71 11 Appendix 3 –Electricity tariffs, RES consumer costs and RES shares in Greece and Sweden ...... 73 12 Appendix 4 Calculations on level of RES investments for the period 2003 to 2008 ...... 74 12.1 Greece ...... 74 12.2 Sweden * ...... 75
11
Foreword
When I use a word,” Humpty Dumpty said, in a rather a scornful tone, “it means just what I choose it to mean neither more nor less.” “The question is,” said Alice, “whether you can make words mean so many different things.” “The question is,” said Humpty Dumpty, “which is to be master that’s all.” Lewis Carroll – Through the Looking Glass
This study started with multiple aims and large ambitions. The layest was finding easy answers on how a less developed country such as Greece could 'emulate' ways of acting in the energy policy field of a more developed one like Sweden. Also, to map the space left for a country to form a national strategy for energy within the framework of European Union policy. Furthermore, address questions of personal professional orientation in an uncertain environment of industrial and technological change and finally, to put these questions under a proper framework. This meant that I should find new ways of organizing my thought. In this quest, I realized that since technology and institutions co evolve knowledge, experience and interpretation of meanings have their own role to play along economic facts at different points in time. In that way, context and timing of decisions seriously affects structural outcomes. The context of the two cases is not the same. Electricity systems are built over decades and used to be based on very stable business structures depending on specific societal organization models and political structures. In addition, they are very capital intensive and extend on a large scale. For these reasons, they cannot be changed overnight. Moreover, this societal economy technology link is governed by ambiguous actor networks when looked upon from an ethical normative perspective and not as historical constructions. In order to address this ambiguity, covered by discourses and bounded rationality, I felt obliged to check how the electricity system was set within the two societies historically. While this had a positive effect on my analytical skills as also having ready for use historical facts, it affected seriously the timeframe of my thesis. Putting the issues raised in an appropriate context was not an easy task. The context is related with the framing of an issue and dominant discourse has much power over the way the context is perceived. Inevitably, this affects the way some trade offs are viewed. It was quite a shock for me realizing that in many points instead of who I should ask why or what and the other way round. Choosing an appropriate level of analysis seemed related to grasping an acceptable context for my aims. The degree of breaking down the context is connected with opportunities to raise more questions while answers lie within the ability to rebuild a coherent link between the context and the issue of analysis. In any case grasping the right actor network was what I was searching for. The variable time also seemed of outmost importance. From a long term perspective, some efficiency beliefs could come in conflict with technology development. Societal and technological capabilities take time to develop even in a non turbulent environment. Technologies, attitudes, perceptions and trade relations do not change overnight. One can find cases that even the simplest bureaucratic procedure change might take substantial amounts of time and effort to put in place, let alone produce intended results. Nevertheless, it is difficult to deny that what some call timing in combination with change creates great opportunities for one to seize. Appropriate visions that can draw a path taking into account the possible extend of change may produce improved levels of equity. Commitment and policy recalibration are in need in order to win the games of setting and meeting objectives and targets. In order to close this study the aim was appropriately reduced into clarifying the role of the EU and national energy policy in the development of renewable energy market for electricity production. In general, but also in the case of member countries of the European Union, issues related to sovereignty as
12 well as trade relations and perceptions on way things are come to surface when asking this question. The EU is not a homogenous entity in economic and social terms. Sustainable energy technologies and their social impacts fit shockingly for study under the 'creative destruction' lenses. Opportunities for less developed regions to reduce the financial burden of energy system building as also fuel expenses rise along democratic demands. On the other hand, these opportunities might come at a cost for actors who want to do business as usual. The complexity of the issue is even more pronounced when considering that European Union does not act in vacuum in the energy and economic fields while energy is a basic factor of most of the activities in our civilization. When comparing the two cases, the differences related to their path dependencies can be revealed. In parallel, identification of the key actors and institutions can take place. On the other hand, the causal processes of change in the electricity systems relate more to ways that information and ideas are communicated and perceived. As the semantic networks evolve along the change process critical elements for the interests of each actor can be identified. Ambiguity can create both opportunities and losses according to interpretations and eventual policy programme implementation. For me, not accustomed to the practices of international relations, many questions came to surface related to key actors’ motivation and the boundaries of the extend of change. I want to thank Sandra, and my parents for supporting me. Many thanks also go to Semida Silveira for guiding me towards the comparative analysis method and into ways that contained the answers I was searching for but also for putting me back on track when I was completely lost. My aims would not have been reached and the study would not have been completed without her guidance. Thanks also to Nikos from BCG, A. Tagalakis, Mr. R. Maiopoulos, Mr. Kazianis, Emilios Alassis, Mr. Aslanoglou and Mrs Eleni Papaioannou from RAE. Further thanks to K. Andersson from Svebio, M. Wondollek from Svensk Vindenrgi and M. Andersson from SEA.
13
1 Introduction Until liberalization, the electricity sector was in the hands of State utilities which responded for energy planning including service provision, infrastructure and equipment supplies as well as funding. National electricity markets liberalization came to change this. Sweden was among the first to move into liberalization while Greece had to wait the European Union’s directives to justify the needs for liberalization. Opening access to the electricity sector and creation of competition is among the goals of liberalization. This would involve competition in the production and supply of electricity but also in technology development and fuels. Decentralized power supply also tries to find its place in this environment. In parallel to electricity market liberalization, concerns about climate change and environmental impacts of the electricity sector affect the way competition is taking place. RES technologies are often perceived as more expensive despite their actual benefits in environmental and economic terms. Moreover, they have to face numerous barriers that hinder their diffusion. RES policy but also wider energy policies altogether need coordination in order to alleviate these barriers and realize the existing RES potential benefits. Energy policy is a multi level process in the EU and its member states. The outcome of the European Union energy policy decision making process expresses the contradicting opinions of the numerous actors involved. The EU sets the agenda in agreement with member states. In that way, it sets a first policy space enabling or constraining some views and actions and therefore affecting expectations at national level. Within this policy setting, the national policy makers have to make their own decisions on the national path to be followed as policy goals are pursued. They further set national priorities according to which the translation of the EU mandates at national level takes place while they choose instruments and measures that fit their ambitions. Depending on the national capabilities, a narrower or wider policy space can be set, enabling the formation of relevant expectations and actions. Nevertheless, the implementation of the measures chosen is relying on the actions of various national, regional and local authorities according to the governance regime of each country. Therefore, constraints setting and expectations formation are also dependent on national views and interpretations. Policy actors act according to their access to information, their epistemic beliefs and their view of the world. Norms, beliefs and regulations as also financial and technological abilities define a policy space where expectations are formed and actions are to take place. A comparative analysis can help overcome issues of interpretation as also identify the role played by the policy context in each case. Linked to the different course of actions followed by each country, this comparative analysis can shed light on the critical parameters that shape the structure of the electricity sector in Europe and the extent to which a level playing field is actually being created by EU policies.
14
2 Objective and Organization of the Study
2.1 Objective The objective of this study is to analyze the role of energy policy in the development of RES in Sweden and Greece. We look at how EU directives have been translated into policies at country level and how different actors and institutions have promoted RES technologies and influenced the formation of markets for RES. The analysis focuses particularly on the period 2003 2008. We will evaluate the process of translation of the Directives into national policy in relation to its effect into shifting barriers for higher diffusion of RES and towards the creation of a more level playing field for electricity production from RES as also among RES technologies. The evaluation will take into account the success in shifting administrative, financial, network access and other institutional and structural barriers for RES. We will also identify policy trade offs between uncertainty, competition and the creation of a level playing field. We will further identify present and future challenges for further RES diffusion as also for enhancing a level playing field in RES electricity production and technology choice focusing on structural and legitimacy issues. Finally, we highlight similarities and differences in the two cases.
2.2 Methodology As a first step, a description of the content and mandates of the European Union Directives on Electricity market liberalization and RES promotion will take place, as these appear in the EU’s official site. We will also shortly refer to the drives behind EU legislation not assigning them to specific policy actors. Then, we will move at national country level. We will shortly describe the historical evolution of the electricity sector and its structure before liberalization and the institutions of that era. As we do that, we will be identifying the key actors of the sector. This will be followed by an analysis of the national reports submitted to the European Union and other national legislative provisions in order to identify actions taken for RES support. We shall also take a look on specific parts of the legal provisions that set the market liberalization at national level as also the ones aiming at promotion of RES. We will especially focus on regulations related to RES and electricity pricing as also ones aiming towards shifting administrative, property rights and other structural and institutional barriers. In order to do that, we will analyze the policy targets, the licensing procedure for different technologies and the support mechanisms put in place for different RES technologies. As a next step, we will analyze the effects of regulations and relevant actions on the RES market. We will use Agencies’, associations’ and companies’ reports and data sets, interviews and press releases in order to find what actual investments took place as also which ones did not. We will try to analyze the reasons why the actual RES mix occurred, and find out the role that regulatory and policy actions have had. Finally, we identify key structural barriers on market access for various RES technologies that affected RES market formation as also ones that may have further impact on present and future RES market evolution and expectations formation and highlight similarities and differences between the Swedish and Greek cases.
2.3 Organization of the study In chapter three, we make a short reference to the drives of the EU energy policy and describe the mandates of the two Directives for RES support and the liberalization of electricity. In chapter four, the Greek case is analyzed and in chapter five the Swedish case follows. In each case, we begin with a description of the electricity sector before and after liberalization. Then, the actions of each country towards translating the Directives into national policy are analyzed. We look at how liberalization and RES support was implemented by analyzing the role of the instrument of long term planning, and
15 measures taken in the areas of authorization procedures, grid access and RES support mechanisms. A short reference in the role of climate change instruments follows. Each chapter ends with an analysis of the actors’ willingness to invest as also the actual investments made in each case. In chapter six, a discussion of the role that various actors and institutions played in the formation of the national RES markets takes place, followed by a short chapter with the conclusions of this discussion.
16
3 The EU
3.1 Energy Policy in the European Union The EU Energy Policy is based on the three pillars: security of supply, competitiveness and sustainability (EC, 2006). To achieve these goals a number of policy initiatives have been launched. These concern, for example, the internal market for energy, the RES promotion and the European Union Emissions Trading Scheme among others. Since the very establishment of the European Community, the issue of covering the energy needs of a growing Europe has been high on the agenda. A first step towards defining common energy policies was the establishment of Euratom. Today, the EU’s level of energy dependence on imports is still high and the expectations are that it will grow further (EC, 2006). Environmental protection has also been at the heart of the European Union. Clauses for a common environmental policy and the polluter pay principle are set already with the Treaty of Rome (European Communities, 1957). Competitiveness has two aspects. The one is linked to securing low energy prices for the European industry in order to remain competitive in the global arena and thus contribute to growth and jobs (EC, 2006). The other aspect has to do with the development of new services, technologies and business in the energy value chain that will support European economic growth. The rise of the climate change issue in the global agenda has strengthened the last aspect. Nevertheless, risks related to the importance of the issue in the global agenda and questions concerning climate change science, its impacts and courses of action are still perceived as strong. Social and economic cohesion is also a motive for action in the energy policy arena (EC, 2006). RES can be an opportunity for less developed regions to reduce economic and political dependence on foreign fuel and technologies. Another motive for action in the energy policy field is keeping sectoral public funds spending low. A motive that is often downplayed in the energy policy field is European Integration. Integration can be achieved by divesting national governments of the authority to make substantive policy choices and concentrating such authority in the hands of EU institutions as also by devolving decision making to lower levels of government (Hadjilambrinos, 2000). Energy policy harmonization is a very strong tool towards both that direction and energy security. As national actors have to conform to a common European set of rules, actions driven by opportunistic behavior due to privileged access rights which might threaten European unity and security should be less likely to occur. Concluding, the main motives of EU energy policy are: • energy security • economic growth while maintaining employment levels • social and economic cohesion • integration • environmental protection • keeping public spending low As EU’s governance structure involves participation of many actors, these motives are not equally shared among them, nor do they express common expectations. In fact, what is asked for is a solidary EU strategy towards achieving the main policy goals. Along the drives and in order to achieve the EU’s principal energy goals it is critical that energy markets open to a diversity of technologies, services and fuels while environmental external costs are somehow incorporated in the energy prices and common principles apply to all EU member countries energy markets. The application of these practices also applies in the electricity sector. The main legal mandates along these lines are described in the next paragraphs.
17
3.2 Electricity Market Liberalization in the EU The first Directive on the internal market for electricity was adopted in December 1996 (EC, 1996). Its scope was to create a system of common rules applying to each member’s electricity sector. Special emphasis was given to the avoidance of dominant position by opening access to the sector. The measures adopted towards this direction were: • Unbundling of the vertical utilities accounts • Provision of access to the network for third parties (TPA) by means of regulated or negotiated TPA or a single buyer system It also designated the creation of a new body responsible for plant dispatching and publishing the tenders as also the plan for new capacity in generation and transmission, the transmission system operator (TSO). TSO:s could also give priority to new electricity generation resources if that was the State’s decision. It also designated undertaking of the distribution systems by the distribution system operator responsible, also possibly giving priority to new sources of generation and promoting efficiency of the distribution system. The directive also designates the need for a body to undertake the tendering procedure. The freedom to build direct lines by parties interested is also defined. The strong reactions of some actors led to the acceptance in the directive of the single buyer system and the possibility for designation of Public Service Obligations for the utilities by the States. Nevertheless, the obligations have to be published and not violate Article 90 of the Treaty of the establishment of the European Union, according to which parties enjoying exclusive rights should not act contrary to the competition rules. The directive designated a three step market opening procedure for all customers by 2003 while Greece was given an additional two years for applying it. As the procedure did not move as expected and significant barriers remained by 2001, the Commission acknowledged the need for a second directive that would strengthen the measures of the first one. The new Directive was adopted in June 2003, almost two years after the RES promotion directive (EC, 2003). The directive aimed at creating more transparent framework of access to the electricity market where planned future electricity system parameters will cover clear policy objectives. More specifically, the Directive imposed the legal unbundling of the vertical electricity undertakings and specified the minimum tasks for the TSO and the Distribution System Operator. At the same time, it also designated the establishment of a new regulatory body and specified its tasks in order to fulfill its mission. Third party access to the grid is to be ensured by published tariffs. The minimum criteria applying for the authorization procedure of new plants are specified, as well as the role that Public Service Obligations (PSO:s) are to play. In particular, once more, the option of using long term planning by the state or the appropriate body is specified in order to achieve environmental, security and energy efficiency objectives while for the same reasons all available tools and incentives should be used. At the same time, the member States are to take appropriate measures to protect vulnerable consumers that will be specified with transparency. Within the frame of PSO:s, it is specified that Member States will ensure that information on the fuel mix and its environmental impact are available to the consumers within their bills and other appropriate reference sources. Moreover, the terms under which direct lines electricity lines complementary to the interconnected system are to be applied are specified. Finally, stringent reporting procedures for the implementation of the measures into national legislation to the Commission as also a review procedure of the directive are adopted.
3.3 RES promotion In September 2001, under the scope of promoting the increase in the contribution of Renewable Energy Sources in the electricity sector and to create a basis for a future community framework, the Directive 2001/77/EC was adopted (EC, 2001). The directive aimed at creating a more transparent framework for
18 support of RES investments. This concerned the establishment of clearer levels of expectations, network access, and the realization of actual costs and benefits for the consumer. According to the Directive, the Member States are required to adopt and publish a report setting national indicative targets for future consumption of electricity produced from renewable energy sources in terms of a percentage of electricity consumption for the next 10 years not later than 27 October 2002 and every five years thereafter. The targets are to be according to the indicative targets set in the Annex of the Directive. Another report to outline the measures taken or planned, at national level, to achieve these national indicative targets will also be published regularly. Also an evaluation by the Commission of the application of mechanisms used in Member States on the basis that these contribute to the objectives of establishing an internal market, cost effectiveness and promotion of the renewable energy sources in electricity consumption in conformity with the national indicative targets is to take place not later than 27 October 2005. This report shall, if necessary, be accompanied by a proposal for a Community framework according to specific principles. Also, the Commission is to present to the European Parliament and the Council, no later than 31 December 2005 and thereafter every five years, a summary report on the implementation of the Directive. The MSs or the competent bodies are to evaluate the existing legislative and regulatory framework with regard to authorization and other relevant procedures not later than 27 October 2003, a report on the evaluation indicating the actions taken including measures to be taken to facilitate access to the grid system of electricity produced from RES e. Also, the MSs have to ensure that TSO:s and DSO:s guarantee the access to the networks and prioritize RES e in the dispatching. They may also provide priority access to the grid systems. The TSO:s and DSO:s are required to set up and publish standard rules relating to the bearing of costs of technical adaptations, such as grid connections and grid reinforcements and in relation to the sharing of such costs between all producers benefiting from them. The MSs may also require that the TSO:s and DSO:s bear full or in part, these costs. The rules regarding costs should reflect realizable cost and benefits resulting from the plant's connection to the network such as direct use of the low voltage networks. The Directive also establishes rules for use of Guarantees of origin and the term of hybrid plants. The Annex of the Directive provides indicative targets for the year 2010 for Greece at 20.1% and Sweden 60% of electricity produced from renewable energy sources to gross electricity consumption by 2010. Nevertheless, in the Annex, it is explicitly referred that Sweden considers a target of 52% more realistic taking into account issues related to calculations of hydropower capacity. Moreover, it is referred that achievement of the target is contingent upon specific limitations, the development of black liquor gasification among others.
19
4 The case of Greece
4.1 Liberalization of Electricity Market in Greece
4.1.1 Country Profile Before World War 2, electricity was only found in some large cities in Greece, while development of natural resources for electricity generation and industrialization stood at very low levels. The war had severe impacts on the underdeveloped local electric ity systems, almost totally dependent on oil. The Marshall plan provided resources for the country's reconstruction and electricity development. This happened in a context of severe battles concerning the organization of industrialization and electrificati on that were taking place in the political and societal turmoil of that period in the country (Pantelakis, 1991). Eventually, a centralized organization of the electricity system emerged and the state owned Public Power Corporation (PPC) was established. PPC gained the exclusive right for electricity business in the country and, according to rule of law, it had the freedom to regulate its tariffs. The development of indigenous resources such as hydro power and, to a small extent, lignite had already begun after the war while older oil fired generation was strengthened. In the turn of 1950s to 1960s, the establishment of energy intensive industries begun on a basis of doubling the electricity production of the country. The contracts signed and courses of act ion in relation to electricity generation mix and industrial investments timing preferred, raised battles in the political arena (Petrakis, 1990, Tsotsoros, 1991). As the 1970s approached, manufacturing industries related to electricity distribution and co nsumer use were created, based on foreign licenses. At the same time, a turn towards oil fired electricity ge neration was taking place (D iagram 4.1). This resulted in high generation costs when the oil price shocks occurred. Meanwhile by 1979 electrificati on in the country was completed. In 1981, among other solutions discussed, the path of investments in lignite fired plants was promoted with additions in the hydro power capacity. The European Investment Bank (EIB) contributed substantially in the investme nts after 1979 (EIB). As lignite was set under a discourse of national fuel, the national construction industry managed to grow by leading consortiums of hydro and lignite plants building while capital equipment was imported by European countries.
Diagr am 4.1. Electricity Generation development in Greece, by source 1960 2005 (Meidanis et al. 2007) By 1989, 73.1% of the electricity generation was concentrated in the two ‘national fuel’ mining centres of Ptolemaida and Megalopoli. During the 1980s, enviro nmental issues related to fossil fuel generation created tensions with the local communities. At the same time, the electricity demand structure was shifting from industrial use leading growth towards household and commercial consumption. In late 1980s, th e states of Greece and USSR signed bilateral agreements for purchase of quantities of natural gas (NG) including take or pay clauses. The deal would support Greece's weakening balance of imports and exports with USSR through exports of manufacturing, alumi nium and construction goods and services (Siolavos, 1991, Maiopoulos, 2008). Moreover, NG was considered an environmentally friendly fuel that
20 would help lower the energy intensity of the Greek economy (Vasilakos, 1991). At the same time, agreements for NG purchase with Algeria were also taking place. Greek companies participated in the pipelines construction while a large part of the project was financed by EIB. In the political turmoil of the early 1990s, many large industrial customers of NG either ceased to exist or were unable to accept the NG quantities while the urban distribution networks were still not ready. As the plan for NG introduction in the energy mix failed, PPC was forced to sign contracts for purchase of NG at specific prices and readjust its investment programme in order to avoid the take or pay clauses and secure the pipelines project finance by the EIB (Maiopoulos, 2008). In 1996, NG entered the electricity generation mix and since then it is raising its participation in the electricity mix substituting lignite and old oil fired units (Diagrams 4.1). During the 1990s, with EIB's financial aid, the international connections of Greece that were still underdeveloped started to be strengthened. By the time liberalization was gaining momentum in the European Union, the electricity system organization had to face a number of challenges. Its monolithic, decision making structure supported large scale overpriced investment and procurement practices based on unaccountability. Investment planning and assets operation was not taking place according to static and dynamic efficiency paradigms. The electricity tariff structure was set through political intervention and was not linked to consumer groups’ marginal costs, resulting in cross consumer subsidizations (Tsotsoros, 1991).Moreover, the tariff levels were not adjusted to the increased costs of fuel and expensive investment programmes of the last decades. In addition, the employee number was higher than needed for covering its operations. The result for the company was inability to change path dependent choices and practices, inability to incorporate technical and economic innovations as well as executing long term plans while its debt obligations could not be covered. Despite, the draw of various restructuring plans, the challenges persisted. The liberalization act with the issuing of law 2773/1999 came in order to adapt the Greek legislation to the provisions of the directive 96/92 EC. The new law did not come without reactions from the trade unions of PPC while it also met opposing discourse of loss of national sovereignty through market opening. The law gave to the Ministry of Development the right to regulate PPC tariffs according to a plan of strengthening the competencies of the general Competition Authority (Aslanoglou, 2009). In 1999, PPC was granted the option of acquiring 30% of DEPA and in 2000, after initial public offerings, state ownership was reduced to 51.5%. With the new law, other parties gained the right to electricity generation and with the invitation of interest from the newly established Regulatory Authority for Energy in December 2000, applications for licenses for 6800 MW NG fired units, 10000 MW wind power, 760 MW large and 550 MW small hydropower, 360 MW geothermal and 340 MW biopower were filled. The Ministry of Development on a first phase gave its concession for 2600 MW CCGT units, 1800 MW RES and 300 MW of large hydropower.
4.1.2 Market characteristics and dominant positions A specificity of the Greek electricity system has to do with the fact that 8.9% of its consumption takes place in the non interconnected island electricity networks that cover more than 90% of their demand through oil fired units (RAE, 2009). Due to that, electricity production is more expensive, nevertheless tariffs are regulated at the same level as the rest of Greece. Since 2004, the interconnection of the islands was discussed and in 2006 it entered the plan for grid expansion. In that way, the untapped wind potential of the islands could be exploited under interconnected system license regime while the PSOs burden would be reduced. Moreover, the cost burden of oil generation in the islands would be reduced. Solutions such as hybrid systems for islands that will not enter the interconnection scheme as also other solutions are under research. In Greece, according to HTSO studies, the electricity demand is rising fast reaching 4% per year. Peak demand occurs in late July due to the cooling loads. The demand has increased significantly since the 39182 GWh of 1998 to 55 902 GWh in 2008 (ESYE). The structure of consumption is also keeping its trends towards services with the domestic sector stabilizing its share (Graph 4.1). Electricity consumption per capita in Greece was 5037 KWh in 2006. Lignite’s share in electricity consumption is more than 50%
21 while natural gas has increased i ts share to more than 20% (T able 4.1). PPC has been granted the right to exploit approximately 60.5% of total exploitable reserves. It is expected that due to the age structure of its existing lignite plants, PPC will have to replace lignite power capacity totally by som e 620 MW by 2015 with the replacement rate increasing even faster after 2022 (Kavouridis, 2008). PPC also owns the whole of large hydroelectric plants in Greece, that due to precipitation scarci ty are used as peak power units. EC has initiated an infringement procedure in 2006, against the Greek State concerning the rights for exploitation of lignite deposits proposing ways that lignite mining would open to competition (EC, 2008). Imports account for almost 10% of consumption (Table 4.1). The interconnections capacity is limited compared to the market size and moreover up to 2006, a significant part of it was allocated directly to PPC for ensuring supply to non eligible customers (RAE, 2006).
Graph 4.1 Electricity consumption Structure (in %) in Greece in the years 1998 (left) and 2008 (right) (ESYE, personal elaboration)
Table 4.2 Electricity consumption Mix by 31 December 2008, (RAE, 2009) With the coming into force of the Law 3175/2003, a mandatory pool system was introduced for power gen eration and wholesale supply. T he right to submit free economic bids to the Pool that reflect at least their variable costs was granted to generation players. That was in order to reduce risk and allow them to pursue a return on their investment while PPC’s dominant position would be reduced by as new NG CCGTs would enter the system (MoD, 2003). In addition, a capacity assurance mechanism has been adopted, based on the obligation of suppliers to hold capacit y certificates and the obligation of generators
22 to issue and m arket these certificates. T he trading and supply of energy is regulated by special license and is separated from generation license. Through the capacity certificates, a margin of inland capacit y is secured in order to cover lacks of electricity in the future while the HTSO operates as last resort supplie r. In 2006, the methodology for calculating the System Marginal Price changed so that the value of the hydropower plants for the system is refle cted rather than their variable costs. The wholesale price shows an upward trend and at peak hours it reaches over 110 €/Mwh (DESMIE). The price is dependent on a variety of factors with most important hydro reserves levels, NG pri ce and prices of imports from Italy and Balkan region (Diagram 4.2).
Diagram 4.2Average Wholesale Price (MSP) Development (Athanasopoulos, 2008) The natural gas market opening in Greece has moved slowly. The Greek State, during 1990s had signed long term contracts with companies that included high clauses, in cases that the agreed amounts would not be purchased. These amounts accounted for 90% of t he existing transfer capability of the national pipeline owned by the national gas corporation DEPA (Kat himerini, 2001). Despite the construction of a NG storage, the situation of the market has not changed (RAE, 2009). PPC still is the main customer of DE PA. Up to 2008, only two IPPs a natural gas turbine, with installed capacity of 150 MW and an NG CCGT of 400 MW were operating . PPC’s investments, excluding RES are under sp ecial constraints and regulations while tenders for new capacity would take place from the HTSO according to 2005 law . Finally, PPC was granted a license for renewal and substitution of old units up to 1600MW that afterwards go into cold reserve and are managed by the HTSO. PPC tenders for construction of new plants are also under scrut iny by the European Commission. The EIB still participates in funding PPC generation and grid and network expansion investments (EIB).
4.1.3 Unbundling of functions According to the provisions of the first Electricity Directive, unbundling of accounts and third party access was an obligatory action for the incumbent utilities. As a first step, according to the article 14 of Law 2773/1999 and after the MD 328/2000 the Hellenic Transmission System Operator (HTSO DESMIE) was established with the scope of taking over the operation, management and expansion of the HV Grid in the whole country and the international connections. The body also assumed responsibility for the ma nagement of the RES plants of the interconnected system after October 2002. In order to further enhance the liberalization process and adapt to the provisions of Directive 2003/54/EC the law 3426/2005 was enacted. The law strengthened the HTSO’s competenc ies vis a vis Public Power Corporation regarding operation, maintenance and expansion of the grid. Nevertheless, the
23 ownership stays within PPC and therefore is in charge of implementing the relevant works according to the HTSO plans and orders. The Distribution network operator is legally unbundled from PPC by 1st July 2007 and its responsibilities are taken over by the HTSO which is to be named Hellenic Power Transmission System and Distribution Network operator (HTDSO DESDIE). The ownership of the responsibility for connecting new users and the day by day operation and maintenance of the distribution network remain with PPC while its management is undertaken by the HTSO. In the non interconnected islands, PPC continues to act as network operator while production authorization is granted to PPC, with the exception of Crete. In order that this does not have any bearing on the licensing regime of RES, hybrid stations and stations of auto producers, the law consolidates the system of direct licensing of plants for the whole country with the exception of Crete where a tendering procedure is foreseen. In order to overcome potential incompatibilities with the EU Directive, the law comprises specific rules for the functional unbundling of the PPC divisions that involve the obligation of PPC to create specialized units for the network and operation of the non interconnected system. On the issue of unbundling of accounts, infringement procedures were launched by RAE against PPC due to non compliance with the provisions of law 2773/1999 mainly in respect to the activity of lignite mining and administrative fines were set. This led to a long dispute between RAE and PPC that was concluded in 2007 when RAE approved the unbundling methodology (Iliadou, 2008).
4.1.4 Consumer pricing and Public Service Obligations In 2006, the EC launched an infringement procedure against the Greek state on the issue of PSO:s. In 2007, according to a Ministerial decision, it was decided that Generation in islands of the non interconnected system constitutes a public service obligation provided by PPC. In that way, island tariffs do not reflect their costs and are subsidized by the mainland consumers. Supply to families with many children also constitutes a PSO. RAE has launched a method for calculation of the PSO:s that was accepted by the Ministry the same year. With liberalization, the Ministry of Development acquired the right to regulate PPC tariffs as long as PPC has over 70% share of the supply market after opinion of RAE. In June 2009, the EC sent a letter of notice on that issue. Only customers connected at the high voltage are able to negotiate their prices with PPC. All consumers, except households and consumers located on non interconnected islands became eligible to change supplier from July 2004 and by July 2007 all household customers follow, except those located on the islands. Household tariffs are still below their marginal costs with subsidization from commercial and small industrial consumers (Appendix 3). By 2008, only four consumer category tariffs out of more than thirty covered their costs. The tariff regulation for commercial and small industrial consumers makes supply from new entrants in the retail market competitive. In that way, up to 2008, PPC still accounted for more than 98% of the supply. Only some large commercial consumers changed supplier. Due to its position in supply, PPC accounts as the largest single purchaser of power for the country. PPC’s production costs are dependent on fuel prices and since the establishment of the EU emissions trading scheme on need for carbon allowances purchase. Despite the fact that tariffs take into account such costs when issued, these costs do not appear on the bills separately as in the form of levies. Unbundled bills have been issued since autumn 2009. A RES levy also appears on bills and since 2004 and until July 2006 was at the level of 0.8 per MWh. After August 2006, it was reduced at the level of 0.4 per MWh since the higher wholesale price covered the payments of wind power production with the agreement of RAE (MoD, 2006, RAE 2006). The RES levy is applied to all retail customers. Nevertheless, RAE’s opinion is that its level should be adjusted to the kWh price that each consumer category pays (Papaioannou, 2011). Concerning real time metering, a programme including 10000 customers was meant to start but still it is not applied. The household tariffs increase with consumption in a step manner. In peak demand periods, there are measures for voluntary demand reduction.
24
4.2 RES policy
4.2.1 Goals and planning targets In the early 1990s, a new trend started to take place in academic cycles in Greece defending a decentralized system, development at local level and effectiveness of RES development in contrast to the path of large scale electricity system. Within that framing and in a spirit of emulation of the successful 1990 German Feed in tariffs, the 1994 Greek Feed in Tariffs were applied. In 2003, RAE presented for consultation three scenarios for the energy system development up to 2030 (RAE, 2003). The scenarios are based on the use of PRIMES model. The baseline scenario forecasted for the year 2010, a share of natural gas CCGT in the installed capacity of 25% while the total RES contribution including large hydropower would reach 10.37%. From this share wind power would contribute 24% while small hydropower would contribute another 4%. The rest would be covered by the large hydropower. According to that scenario, the wind capacity would reach 958 MW, small hydro 150 MW and other RES 5 MW. Under this scenario, the EU target of 20.1% share of RES in the consumption could not be reached. This scenario envisaged the year 2030 a rise in the wind share up to 47% while the share of small hydropower would stay at the same level and the rest of RES would reach 2% with installed capacity of 160MW. The demand stays at 4% increase per year up to 2010 and afterwards drops to 1.4% with peak demand rising faster. Gas turbines using NG or diesel are envisaged for peak demand cover while oil units’ installed capacity stays at the same level. Another scenario, called scenario of environmental policy was also developed. The starting point for this scenario is the reduction of CO2 emissions in relation to the basic scenario. The target of increase of CO2 emissions up to 2025 is set at 25%. In this scenario, the electricity demand stays at 2.9%. Up to the year 2010, in comparison to the baseline scenario, there will be 1017 MW of additional wind, and 643MW of additional large and small hydropower while after 2010 supercritical coal units enter the system. For the period up to 2030 the difference in capacities relate to less 18 094 MW lignite fired units, 9433 MW more of NG units, 2402 MW of coal supercritical units, 663 MW additional wind power and 757 MW additional hydro. Oil units keep their installed capacity level. In 2003, it was considered that in the case that the total capacity that can be covered in the country (Table 4.3), is built, taking into account network constraints of 2170 MW, the target of the directive will be achieved (MoD, 2003). Taking into account all financing mechanisms only 850MW could take public funding. In the case that there would be only fund subsidizing for the realization of investments the level of RES diffusion could reach only 14% and, therefore, the target would not be achieved. In order to avoid that, the attraction of foreign funds was considered worth studying especially since there were limits in the German and other countries’ networks to accept more RES (MoD, 2003). The introduction of the institution of green certificates trading as an effective mechanism of RES support was already considered by RAE at that point despite the fact that the MoD was moderately optimistic because of the burden that will be caused to the management mechanisms (Mod, 2003).
MW Installed scenario) scenario) (optimistic in 2003 MW in 2003 MW in 2010 MW (conservative capacity in 2010 capacity Installed capacity Installed capacity Installed capacity Wind power 420 1.200 2.170 Small hydropower 66 200 475 Large hydropower 3.060 3.680 3.680
25
Biomass 8 100 125 Geothermal 0 8 8 Photovoltaics 0 5 5 Total 3461 5193 6463 Table 4.3 Scenarios of possible RES production in the year 2010 (MoD, 2003) In the national report of 2005, the ministry of development sets arbitrarily a target for each technology's share in the RES mix in order to achieve the target set for Greece from the EU, 20.1%. Afterwards, three scenarios are developed 1. All of these scenarios are heavily dependent on wind power actual capacity achievements and on the effect of policies concerning this technology (MoD, 2005). The Law 3468/2006 came to change the way RES technologies besides wind and hydropower were faced. In that law, the basic axis of a PV energy deployment scheme is established and elaborated by following Ministerial decisions. It is envisaged that the share of PV stations will reach a target of 590 MW in the mainland’s interconnected system, 200 MW in the autonomous islands and 50 MW for auto producers during the 2007 2020 period. While new FITs have been set for other technologies, no targets for them are set. A very important contribution of the law was the incorporation in the national legislature of the 20.1% target of RES share in electricity consumption for the year 2010 and 29% in 2020 according to EU mandates. The target of the scheme was the deployment of decentralized stations with capacity up to 150 kW located as close as possible to the electricity consumption centres as these turn out form peak demand recordings. In the islands only such stations would be installed. The total capacity of the small scale stations would exceed 40% of the mainland total PV capacity target and with the islands reached 410 MW. It was expected that PV stations deployment would proceed with the diffusion rate of large scale stations but the existing holders of production authorizations would not be able to implement the projects until 2020. It was also aimed for the said projects to be provided with public investment grants from domestic and Community resources and therefore coordination for the preparation of the National Strategic Reference Framework was taking place. Despite the reference that progress of the PVs along their learning curve and reduced costs should be taken into account, no such provision was included in the Law 3468/2006 (MoD, 2007). The benefits anticipated from reaching that target concern (MoD, 2007): • lower environmental impact due to the small scale of installations • grid decongestion and lowering of transmission losses due to decentralized character • boosting of regional development through the creation of employment posts and revenue raising by small and predominantly locally active producers • redundancy of conventional peak capacity to cover peak loads as peak energy supply from PVs occurs during medium and high demand hours Albeit not directly reflected in the electricity bills and the special levy in favour of RES, these advantages are nevertheless real and knowledgeable and in the final analysis turn out to the benefit of national economy (MoD, 2007). In 2006, the National Council for Energy Strategy (SEES) was established. In 2007, its first report on the national strategy to the year 2020 was published (SEES, 2007). The report uses the MARKAL model and moves in the path of the scenarios developed by RAE in 2003. The business–as usual (BAU)scenario
1Basic scenario18.1%, Conservative 14.92%, Optimistic with additional measures 19.79% as a percentage of RES generation in the electricity demand
26 foresees the lignite capacity to slightly reduce due to coal introduction in comparison to present lev els while NG grows its share. RES share in consumption stays below 20% in 2020 while carbon dioxide emissions move at levels over the ones set by the burden sharing agreement and keep going up after 2012. In the second scenario energy conservation of 5.2% up to 2020 in comparison to the BAU scenario takes place while emissions stay below the levels indicated by the burden sharing agreement and after 2012 zero increase takes place. Higher wind power and CHP capacity is foreseen in comparison to the BAU scena rio as well as 800 MW of PVs while lignite reduces its share . The third scenario represents stabilization of emissions under high international oil prices. Conservation stands at 7.2% in comparison to the BAU scenario and is anticipated to take place throu gh heat pumps in the domestic and service sector. The foreseen smaller share of NG is substituted by more coal in the mix (Graph 4.2).
Graph 4.2SEES electricity production scenarios for the year 2020 (SEES, 2007)
4.2.2 RES financial support The Law 2244/1994 "Regulation of power generation issues from renewable energy sources and conventional fuels and other provisions" followed the same pattern as the German Stromeinspeisungsgesetz ushered in the RES era. The Law established fixed rates for sales of renewable energy in the country's interconnected system at a level equal to 90% of the medium voltage general use (commercial customers) tariff. In that way, a downward adjustment in tariff would reduce the earnings of the investors. According to law PPC was oblige d to buy the energy produced. A capacity availability reimbursement system for the interconnected system was also introduced that merely augmented earnings by some 6.5%. The final rate in 2006 corresponded to 0.07287 €/kWh. In the non interconnected system s
27 the pricing was based solely on 90% of the low voltage household rate, corresponding to 0.08458 €/kWh in 2006 (MoD, 2007). The Law 2773/1999 kept the FITs of Law 2244/1994 giving also priority to grid connected RES. The Law has also raised a 2% levy on electricity sales of renewable energy in favor of the local municipalities. The law 3468/2006 raised the special levy up to 3% before VAT. Half of the levy is redirected from the local authorities of the areas that RES investments take place to their citizens and the Greek fund for Natura 2000 areas (Tselepis, 2010). The Minister of Development was also given the power to ask for discount on the Feed in Tariffs, but this clause has not been used up to the present. In that way, the Government keeps the right to adjust the FITs in cases that this is considered necessary. Up to now this clause has not been used. The FITs are also adjusted according to inflation rates annually. The Law 3468/2006 moved along the principles of the 1994 law concerning the FITs with the exception of PV installations. Concerning the latter, a higher FIT was applied in order to boost investments in this technology area according to the programme for PV deployment (Table 4.4). The FITs established with law 3468/2006 involve power purchase contracts of 20 years and are adjusted annually according to 25% of the General Price index. For the payment of FITs a special Bill for RES was established, drawing funds from the difference between FITs and the System Marginal price and the difference between FITs and the average variable cost in the islands. The rest of the Bill is supported by the RES levy while the possibility for unused CO2 allowances is given after 2010 (Pappaioannou, 2011). Up to 2008 the high system price kept the need for support of the bill from the RES levy low. Generation of electricity from: Price of energy (Euro/MWh) Interconnected Non intercon System nected islands Wind energy, hydraulic energy exploited in small scale 75.82 87.42 hydroelectric plants with an installed capacity up 15 MW, Geothermal energy, biomass, gases released from sanitary landfills and biological treatment plants and biogases, miscellaneous RES, High efficiency cogeneration of heat and electricity Wind energy from sea wind farms 92.82 Solar energy utilised in photovoltaic units with an installed 452.82 502.82 capacity less than, or equal to 100 kW, and which will be installed in a lawfully owned or possessed property or in adjacent properties of the same owner or lawful possessor Solar energy exploited in photovoltaic units with an installed 402.82 452.82 capacity of over 100 kW Solar energy exploited in units employing a technology other 252.82 272.82 than that of photovoltaics with an installed capacity up to 5 MW Solar energy exploited in units employing a technology other 232.82 252.82 than that of photovoltaics with an installed capacity of over 5 MW Table 4.4 Feed in tariffs in 2007 A part of the 3rd sub programme of the 2nd Community support Framework completed in December of 2002 concerned RES allocating a budget € 196.4 million. According to estimations, the Ministry of Economy provided economic support from national resources in one third of the plants in operation. The Programme for Competitiveness can also draw funding as high as €1.02 billion from the 3rd Community
28 support Framework for RES and energy saving, substitution and other energy related actions (MoD, 2003a). According to the ‘development law’ 3299/2004, as in force, following its amendment in 2006, the Greek territory is divided into three zones of varying investment grants. Grid investment grants increase for smaller enterprises. For wind and solar power investments the total investment grant could reach 40% of the total cost (MoD, 2007). For the period 2003 2008, the total of investment subsidies for wind power projects reached 20 25% (Njatha, 2011). The law 3175/2003 shifted the unclear status of the hybrid stations, harmonizing their status according to 2001/77/EC, while their operation framework in the autonomous islands was set by the law 3468/2006. The new framework aims at increased penetration of RES into their energy balance without any bearing on the other RES plants which operate in those islands and do not form a part of the hybrid stations in order to achieve a real reduction in the consumption of conventional fuels in the islands where hybrid stations will be installed (MoD, 2007).
4.2.3 Access to Grid Since 2000, the HTSO took responsibility for the management of the national grid while PPC kept the management of the networks in the non interconnected islands. The Law 3175/2003 includes actions for introducing shorter and simpler procedures in relation to the necessary expropriations for extension of grid lines. The general lack of forest registry means that according to article 14 of the law 998/1979 a painful procedure of temporary solution for doubts regarding forest characterization has to be followed. According to the law 3175/2003, private forest areas can be expropriated without need for land use change. In that way, the lead times for grid lines authorization can be shortened. Moreover, some works can be characterized of public service after Ministerial decision of the MoD. Necessary expropriations for implementation of these works are announced with special act of the ministerial council. Several investments concerning relevant grid support that are important for RES have taken such characterization (MoD, 2003b) The highest amounts of wind potential in Greece occur in areas that need significant grid reinforcements. This concerns S. Euboea, Lakonia and SE. Peloponesse, E. Macedonia and Thrace and also the Cyclades islands. In many cases the projects are dependent on many factors linked to the environmental permitting, the necessary expropriations and completion of fossil fuel plant projects. In the case of Euboea previous planning had failed to be realized due to fierce opposition from local communities.
29
Map 4.1 Areas of wind priority (in red) and places that network absorption capacity strengthening will take place (elaboration on MoD, 2009). In Creta, Rhodes, Lesbos and other non interconnected islands the network constraints allow 30% of peak load without taking into account ability for storage through hybrid systems. That means 300 MW average of which 210 MW already have installation or operation license. However, a study is being carried out by RAE co operating with PPC to establish the absorption capacity of these islands more accurately. The absorption capacity in every island cluster has also to take into account the 200 MW PV needs (MoD, 2007). Moreover, the absorption capacity calculation method for RES in each prefecture is not is not agreed upon as yet. The table shows the additional wind farm capacity that will be covered by ongoing initiatives. It should be noted that for the areas of the table 4.6, production authorizations for 1,500 MW have been issued.
Area Capacity (MW)
1. Euboea Andros –Tinos 470
2. Southeastern Peloponnese 280
3. Eastern Macedonia Thrace 315
4. Crete, Rhodes and other islands not connected to Greece’s mainland 35
Total 1,100 Table 4.5 Additional wind farms capacity from ongoing initiatives (MoD, 2007) Since mid 2000s, the issue of interconnection of non interconnected island to the main grid is under discussion and several studies have been executed on the identification of islands and whether or not some scenarios can be economically effective without the addition of offshore wind power while the inclusion of geothermal power production is foreseen. The studies are carried under cooperation of PPC, RAE, the HTSO and the National Technical University of Athens. In July 2010 the study for Strategic Planning of Interconnected Islands was offered for public consultation by the HTSO (HTSO). Finally, the Law 3468/2006 lifted the 50 MW limit of installed capacity above which the provisions of article 35 of Law 2773/1999 did not grant priority to RES plants by load dispatch. In that way, larger installations have the same rights as smaller in terms of access to the power market.
4.2.4 Authorization and Sitting The overall procedure of authorization of RES involves three licenses: production, installation and operation and is shown in the following figure. Issues related to the lack of forest registry and spatial planning, the heavily bureaucratic procedure as also the raise of tensions within local communities hinder investors. The sitting of installations in combination to their environmental permits consist the main bottleneck in the authorization procedure.
30
Figure 4.1 RES authorization procedure and jurisdictions (Vassilakos et al, 2003) The main problems of the authorization procedure have to do with the lack of forest registry and spatial planning. Law 998/1979 established a tedious administrative procedure of interlocutory settlement of disputes concerning forest classification (MoD, 2007). In areas of high wind potential severe tensions were raised by local communities while the lack of grid capacity raised competition among projects at the same area. The general lack of institutions for land use raised the argument that such instruments cannot be used solely for the case of RES and the result was long judicial battles in the Council of the State (Greece's Supreme Administrative Court) since the article 24 of the constitution of Greece puts serious constraints concerning installations in forest and scrublands. This situation daunted most of the serious investors. Nevertheless, the council of state showed tolerance towards such cases as it considered the land use planning desirable but not necessary prerequisite for RES licensing. It is also considered that every legal intervention in the forest areas means that there is no essential change of natural environment as in the wind park cases the intervention is point and in the case of hydropower linear (MoD, 2003a).
The Regional Frameworks for land use planning and sustainable development, according to law 2742/1999 were pending up to October 2008. In 2004, the Council of State considered necessary the issuing of these frameworks or pronunciation as Area of Integrated Development of Productive Activities (POAPD), for areas of overconcentration of license requests. The cabinet committee decided to move forward urgently the establishment of special Land Use Framework for RES at national level in order to promote them in relation to other land use according to the Green Paper for the Security of Supply and the criteria of the Council of State under a perspective of consolidating the procedure until May 2006. In parallel, the Land Use and Special Frameworks for tourism, industry, mountains and coastal areas were developed. The expectations raised around the Special Framework for the RES were high (Mod, 2005).The Framework was issued in October 2008 and included:
31
• a methodology for calculating the carrying capacity for each prefecture concerning wind power while it set areas of wind priority. It also set landscape setting criteria for wind installations • on the other hand it did not specify carrying capacity rules for PV installations • rules for hydropower reserves capacity calculation and sitting • directions for examination of the projects application concerning their sitting for RAE and the prefecture offices that did not prove sufficient in unblocking the Environmental permit procedure
The authorization procedure involves various authorities at the Environmental permit stage that in the wind case might reach a number of more than 30 in total while expected lead times are around four years. The large number of authorities along with the insufficient and overlapping regulations concerning land use, the issuing of new regulations and the bureaucratic spirit of the many bodies lead to lack of coordination between authorities and heterogeneous expectations in relation to specific bodies and persons involved.
Concerning the raise of local tensions, these find grounds to put barriers in the development especially of wind and hydropower plants in relation to the lack of forest registry and overlapping urban plans, the lack of clear regulations on Environmental permits, the sound and visual nuisance as also beliefs that are closer to myth than reality.
In order to address these problems a series of laws were issued from 2001 to 2007 in accordance with the decisions of the council of State that asked for stricter rules on the RES issues. The main lines of the laws were (MoD, 2003a, 2005, 2007): • The exemption of RES and the accompanying works from the overall restrictions imposed by the forest laws by considering them as public benefit infrastructure works independently of the entity implementing them. In that way the necessary land expropriations and authorizations become easier. At the same time connection lines of RES installations may be constructed by any interested party according to the specifications of the System operator • Solar and wind installations need building permit only for the civil engineer works while in areas beyond the limits of existing city plans more relaxed zoning and subdivision controls, in comparison with the generally applicable town planning regime, were to be enacted in order to facilitate RES development • The Planning and Development Directorates of the relevant Regions having jurisdiction over the issue of installation and operating permits, act in some ways according to the one stop shop principle. The number of consenting authorities about the environmental permit for RES was reduced and deadlines were established after which the opinions of the authorities can be taken as positive • Revision of the environmental process and harmonization of the national legislation for the protection of the environment with the acquis communautaire • Shift of small scale RES plants to zero impact level, in order to make their integration in settlements easier and excluded small RES installations from the need for production, operation and installation permits (150 KW PV, 50 KW wind 20 KW for non interconnected islands, 100 KW biomass and 0.5 MW for geothermal) • Extension of validity time of installation permit, alignment of the connection works and terms with the environmental process in order to avoid modifications in the EIA and so as capacity taken up in the transmission system from projects which are lacking proper environmental
32
planning to be granted a permit and finally put pending applications submitted after the date of Law 3468/2006 under the new licensing regime. Despite these actions, a large number of projects is and still goes under the scrutiny of the Council of state, the bodies involved in the authorization procedure is large while deadlines are not kept and grid capacity is taken by projects that lack environmental planning. On the positive side, the connection of RES plants to the networks became easier while small scale RES like PVs are expected to reap the advantage of easier licensing.
4.3 Climate change policy According to the burden sharing agreement Greece’s cap for 2010 concerning GHGs in relation to 1990 level of emissions is 25%. The electricity mix of Greece is very carbon intensive and PPC purchased EUAs worth of 33.822 million Euros for the 2005 2007 period and 109.777 million Euros in 2008 (PPC, 2006, 2007, 2008).
33
4.4 Willingness to Invest and Actual Effects on RES market
Diagram 4.3Cumulative installed capacity of RES in Greece (MoD, 2009, CRES, 2009) Since 1998, wind power installed capacity increased substantially, reaching 10 22 MW in 2008, while noticeable additions took place in small hydropower reaching 158 MW the same year from 43 MW in 1997 reaching 2319 MW from 2165 in 1997. Biogas power production also reached 40 MW in 2008 from 0 in 1999 (CRES, 2009). These installations r elate to municipal waste and sewage treatment facilities. Further expansion is linked to plans of establishment of new waste and sewage treatment facilities at municipal and national level. T he number is considered pretty large taking into account that the potential at this moment including livestock industrial manure is 150 MW (Zafeiris, 2011). Photovoltaic installations reached 12 MW in 2008 from 1MW in 2005, a level that remained stable since 2001(CRES, 2009). With the new law 3468/2006, a large interest in PV plants was shown, reflected mostly in the authorization applications and less in actual investments. The investments concern mostly systems up to 150 KW in the mainland due to less complicated authorization procedure according to their legal status as small scale RES and the new favorable FIT level (D iagram 4.4). In the non interconnected system, the authorization is related to the network operator, PPC, and the absorption capacity for each island was not specified up to 2008.Absorption capacity for each prefecture in the mainland is not specified either.
34
Diagram4.4Cumulative development of PV installations in the interconnected system (HELAPCO) With the opening of the electricity market in 1999, a large number of applications for RES production permit and NG fired plants were submitted to RAE (look before). Despite the preliminary investigation of the project economics and capital availability by the RAE in the first stage of the authorization procedure, many projects do not have the necessary capital for implementation. In these cases, issued licenses become an object of trading by their holders. As the authorization procedure is complex and time consuming while FITs are high enough, parties interested in immediate investments are willing to purchase licenses at a price linked to the stage of the permit procedure reached and the project economics of each case (Table 4.7). In that way, a very profitable secondary market of licenses has emerged. Up to 2009, no actions have been taken to stop this institution at least concerning new license applications. Despite the fragmented market at the level of Production licenses, the ten largest investors account for almost 80% of installed capacity while they hold only 43% of the Production licenses with the rest held by more than 400 ones. At the same time the ten largest investors account for approximately 70% of the projects with installation license or being under construction. By early 2009, applications for more than 47000 MW of RES were submitted to RAE. Much interest is gathered around wind power and to a smaller degree around PVs and small hydro (Table 4.7). The existing FITs, the investment grants and the secondary market for licenses have created a large interest for licenses. Most of the ones submitted before the 2006 law, amounting to almost 29000 MW, are of questionable realization. At the same time, almost 7000 MW have taken production permit. Many of them are questionable in relation to the possibility of taking connection terms to the grid by the HTSO. There are also licenses that have booked grid capacity but according to estimations they will never get an Environmental permit or have serious sitting issues (Garis, 2009). Among the largest investors in RES is the first mover Rokas, construction companies that aspireto enter electricity business and establish strategic partnerships with international utilities as well as the Greek state utility. The largest five producers account for more than 55% of RES installed capacity (Table 4.8).
35
Table 4.7Licensed RES plants in the interconnected system as of 31.12.2008 (RAE, 2009) As the law 3468/2006 envisaged the establishment of special ministerial committees for creating conditions of putting large projects under a regime of fast track processes, many applications for new large scale projects with installed capacity over 100 MW and offshore wind farms were submitted to RAE. Some of the offshore projects ones are linked to the island interconnection plan not finalized yet. Also many older applications took modifications in terms of installed capacity. The combination of the new 2006 FIT and the availability of funding of up to 40% of the project for PVs led to submissions for production license to RAE for 3500 MW by early 2008. Due to the large number of applications received, the Ministry requested RAE to stop accepting new applications. The IRR of a 1MW plant with 40% funding could reach 30% while without funding it stayed at 14%. When it comes to wind power investments the IRR can reach 25% for a project of 10MW and capacity factor of 28% with 40% investment grand from EU. In both cases the IRR are much higher than other EU cases when the project receives investment grant (Garis, 2009). Company Installed capacity Shares (%) ROKAS 19 TERNA 12 EDF 9 PPC 9 ELLAKTOR 6 METKA Endesa 5 Acciona 5 Table 4.8Installed wind energy capacity market shares of largest producers, 2007 (ICAP, 2008) Investments in RES in Greece during 2003 2008 have reached MEuros 1086 with most of the amount directed to wind power (Table 4.9). The same years PPC completed investments for a 330 MW lignite fired plant and 385 MW CCGT units while decisions for future units include 1200 MW CCGT, 900 MW lignite fired units and 1500MW coal units. 1700 MW of these were already in procedure of finding contractors by the end of 2008 (Athanasopoulos, 2008). In this amount one could add the first IPP’s investment (Thessaloniki Energy) of 250 Meuros taken place in 2005 and one GT of 180 MW of Heron SA (ELPE, 2004). Total PPC licensed units are 2127 MW and total IPPs’ are 2262 MW. Expected commissioning dates for the IPPs plants are somewhere between 2010 and 2013 and for PPC 2011 to
36
2014 (RAE, 2009). Since 2005, PPC has announced a series of joint ventures with other companies in order to expand in the Balkan market and develop new plants but none has moved forward except in the renewable sector with EdF. The IPPs have also moved into joint ventures with foreign utilities from Italy, France and Spain. Wind PV Biogas Small hydro Investments 776.558 61 81 168 2003 2008 (Μeuros) Table 4.9 Level of investments in RES 2003 2008 (see Appendix 4) In 2008, Vestas accounted for 58% of the wind turbine installed capacity in Greece, with Siemens and Enercon accounting for another 35%. The Greek company Rokas, having the largest share in the wind plants market was acquired by Iberdrola in 2004 and switched from Bonus turbines to Gamesa. Wind power represents an enormous opportunity to attract foreign investments in Greece. Wind deployment has become a challenging area for development in the country and especially in poor infrastructure areas where most of the best sites are. Nevertheless, apart from a couple of steel industries that manufacture towers there is no wind turbine component manufacturing. On the other hand, there is considerable domestic added value in connection with infrastructure works, grid strengthening, road and foundation construction and civil engineering works. In addition, new jobs are created related to maintenance and operation of wind farms in mainly underdeveloped areas. An expanded network of highly experienced engineering firms has been established and is currently working on all phases of the development of new projects (IEA Wind, 2008). In that way, wind power is becoming very important in the development of the country. In the end of 2008, seven industrial investments had been completed or were taking place in Greece concerning PV modules manufacturing. The three most notable concern polycrystalline wafer production and thin film modules production, totaling an investment of 365 Meuros. Two of them are found in the industrial area of Patras. In one case, the project was supported by the Greek Investment law. The four other companies concern assembly of polycrystalline PV modules. The total PV module production capacity is estimated to more than 200 MW while the cells production reaches 51MW annually (Tselepis, 2010). PPC is planning the construction of 649.1 MW of large hydropower plants with the Greek Government taking a positive stance on their promotion. 340 MW are scheduled for commercial operation by 2010. Two other large hydroelectric plants of 153 MW total from private companies are in preliminary phase of implementation and authorization respectively (MoD, 2007). In the small hydro power field, TERNA and PPC account for almost total of the production. During 2005 2008 a rapid expansion of RES has taken place due to (MoD, 2005, 2007): • The realization of many efforts of licensing and investments that were slow during 2001 2004 due to the institutional restructuring of the electricity sector since early 2000s. • The maturing and consolidation of the administrative and institutional interventions of 2003 2004 that simplified the investment environment in comparison to the previous regime and lifted many administrative barriers • The thorough revision, by means of Law 3468/2006 of the licensing regime and the widening of the timeframe of the power supply contracts virtually to 20 years (period 2007 2008). In the autonomous island systems, the introduction of hybrid systems of considerable installed capacity poses highly complex problems due to be faced by the Grid Operation Code. Nevertheless, profound interest has been manifested for the installation of wind hydropower hybrid stations in the islands and relevant applications have been filed especially for Crete and also other smaller islands (MoD, 2007). On
37 the other hand, the percentage of RES in the islands has grown to over 10%, as compared to a 3.76% on the mainland. More than 99% of the RES installed capacity on the islands comes from wind plants (RAE, 2009). The non interconnected islands show important wind power potential with wind velocity of more than 8m/sec and can support RES investments without subsidizing also due to high cost of oil generation. Nevertheless applications for new projects stumble upon the lack of rules concerning the absorption capacity of these islands (MoD, 2007). The projects that will receive public funding from national and Community resources under the National Strategic Reference Framework (NSRF) in combination with the large scale hydroelectric projects are not expected to suffice in order to meet the target of 20.1%. Therefore, investments using purely private funding are considered necessary. In order to move into such a direction the main lines of action will be (MoD, 2007): • Further alleviation of bureaucracy through simplification of procedures and the overcoming of administrative constraints • The consolidation and stabilization of the investment environment and the facilitation of bank financing of projects by means of broader development and taxation policies and improvement of terms and duration of power purchase contracts • The continuation of the FIT regime of the renewable energy on a permanent and stable base The establishment of a more favourable grid access regime for large – scale hydropower plants, in comparison to conventionally generated electricity is considered as long as that the measure does not go against the acquis communautaire.
38
5 The Swedish Case
5.1 Liberalization of Electricity Market in Sweden
5.1.1 Country Profile Before the 20 th century, Sweden had already had hydropower and precision turbine technology. In early 20 th century, the so called development block emerges, formed by Vattenfall, the energy intensive industry and ASEA and financing by the Stockholms Enskilda Bank and state funds (Dahmen, 1989). The aim was to develop the proximal southern hydropower resources along with other electricity producers. The development block is backed up by the technonationalism spirit and wins over waterfall rights from the State in the judicial arena. Vattenfall leads the country development with its vision on a 'positive growth spiral' and electricity consumer patronage (Högselius and Kaijser, 2007). By 1910s, it is already the largest electricity producer in the country and the most significant purchaser for ASEA. With the exploitation of the national hydropower resources, the energy intensive industry gains access to low cost secure energy supply while electrification allows it to improve its productivity. As national electrification goes on, the older local municipally owned Direct Current producers cannot stay price competitive but manage to keep the ownership of the local distribution systems. This cleavage between electricity distribution and production ownership would characterize the Swedish electricity system for decades. Just before the outbreak of the second World war, as hydropower exploitation turns north, the issue of access and ownership of the HV transmission grid creates severe tensions between the two largest producers. During WW2, the CDL is established by participation of the twelve largest producers that all gain exclusive access to the grid and also secure regional lines exclusive access concessions. Initial plans indicating a path for the electricity system towards CHP and RES are turned in 1955 when the nuclear path is announced. The different visions over the control of nuclear technology between State and ASEA come to clash as hydropower was reaching its limits both in economic and political terms (Kåberger, 2002). During that time, the municipalities sought the opportunity to expand their district heating business into electricity through CHP production and recover independence from the large power producers as they could become price competitive. This threatened the position of the large producers for market control.Vattenfall offered extremely high prices for power shortages in municipalities that had built a CHP plant managing to discourage other potential investors. The electricity intensive industry had developed under conditions of high investment costs and low marginal costs as set by hydropower. The same seemed to fit nuclear power. The industry had interest to provide exaggerated future demand estimations in order to achieve overcapacity and therefore prices near the short term marginal costs while more nuclear reactors would lower their initial cost. At the same time, high future demand projections made RES technologies seem too expensive. In that way, the energy intensive industry and the CDL could proceed according to their planning and expectations (Kåberger, 2002). As the nuclear issue was entering the political arena, the oil price shock stroke. During the 1970s, the district heating systems shifted to biofuels while the energy intensive industry substituted oil processes with biofuels and electricity. Heat pumps also started to raise their share in the district heating systems in the 1980s and 1990s. Meanwhile, due to uncertain expectations after the nuclear referendum, the economy started to move towards less energy intensive sectors such as manufacturing and knowledge intensive industries. In the 1980s, as the last reactors were being built, Vattenfall lowered its prices and the other producers followed suit. Nevertheless, prices were kept over their short term marginal costs. Most of the output was absorbed in electric heating but even that was not enough and the output of the reactors had to be turned down. The producers were not able to cover the costs of the last two reactors (Kåberger, 2002). In this low electricity prices environment, the position of RES and CHP became even less favorable while the nuclear trauma affected the direction of research for new technologies.
39
Diagram 5.1 Electricity production in Sweden by type of source (SEA, 2009a) In 1985, the Parliament agreed for a zero energy growth target. Meanwhile, the old development block was loosening its bonds. ASEA was becoming a main participant in the creation and expansion of a European market while Vattenfall was pressing for stronger relations with Europe in order to test its competencies in the European arena, the least due to its low price power export ability (Hogselius and Kaijser, 2007). Moreover, the issue of electricity price and nuclear phase out was pending. As the first reactors were approaching the 25 years of operation and were to be shut down according to the parliamentary decision after referendum, the Energy Minister made a commitment for decommissioning of the first two reactors by 1996, accompanied by a proposition for a more freestanding form for Vattenfall concerning state control over its investments and returns as part of a general crisis package (Högselius and Kaijser, 2007:82). A campaign against closing down reactors followed from the energy intensive industry with the trade unions taking its side and the decision was revoked. The producers were not able to cover their costs. A new energy Minister ex trade union leader was appointed and a bill for electricity market liberalization was presented in 1990. The second crisis package included also an application for membership at the EU and a more free standing form for Vattenfall to be more effective in international competition while the increased profits could help the state budget and the separation of the grid from the company. The last was made possible by the favorable conditions in ICT technology (Högselius and Kaijser, 2007). In 1991, a new bill by the new Energy Minister was presented, underscoring electricity deregulation and introducing new energy taxation measures and investment subsidies for RES. At the same time, the beginning of decommissioning was becoming conditional but the 2010 phase out target of the 1980 decision of the Parliament was not revoked. A carbon tax on fossil fuels was introduced in 1990. At that point most of the district heating was based on fossil fuels. On the other hand electricity produced from fossil fuels did not receive taxation. Despite expectations for increase of electricity heating and competition with forest industry supplies, the tax helped the increase of the biofuels share in district heating and the use of residues from the forest industry (Kåberger, 2002).
Among different political opinions about the way Vattenfall should be handled, a phase of the liberalization process was concluded in 1996 and prices started falling. At these prices, the producers could not recover their costs (Kärrmark, 1999). A more consolidated market had occurred horizontally and vertically in Sweden. In the uncertain regulatory environment during 1991 to 1996 and with bad finances, many municipalities and small producers preferred to sell their assets to the larger utilities. Many municipalities tried to negotiate their contracts but producers did much against that while access to Norwegian power was not possible (Högselius and Kaijser, 2007:110,123). In that way, many RES and CHP installations passed over hands while producers strengthened their links to the end consumer. The energy intensive industries also sold their power production assets expecting pricing according to short
40 term marginal costs. While discussions on deregulation were holding, the internationalization of the European electricity market had begun. Some international players, not necessarily promoting a level playing field concerning national markets liberalization at European level had started to develop positions in the Swedish market (Kärrmark, 1999). In the turn of the century, the German utility Eon acquired Sydkraft while Vattenfall invested in assets that would provide it a position as the third largest electricity producer in Germany. In the unified Nordic market, a structure emerged, where the Swedish, Norwegian and Finnish State owned companies along with Eon manage to hold dominant positions. In 1998, the Swedish Energy Agency was established in order to promote the development of a sustainable energy system in Sweden.
In 1997, a Parliamentary negotiated majority decision was taken to shut down Barsebäck 1 and pay compensation to its owner. At the same time, the decision to close all reactors after 25 years of operation was revoked. The decision to shut down one reactor had minor effects in the short term marginal electricity price in the integrated Nordic market. The first reactor stopped operation in 1999. The decision also included the decommissioning of Barsebäck 2 that was contingent upon the availability of electricity from other resources or increased energy efficiency. Refurbishments in other nuclear units and energy use conservation measures took place and in 2005 Barsebäck 2 followed. Nuclear phase out became dependent on availability of power and price while demands for permitting further nuclear reactor refurbishments remained by end of 2008. Meanwhile, in Finland, in 2003, an agreement for building an extra nuclear reactor in Olkiluoto was reached, expected to be in operation around 2009 (WNA). A new HVDC line that would export part of its generation in Sweden would be built by then. Due to construction delays, the reactor will not be commercially ready before 2013. In February 2009, the decision to allow further refurbishments in the Swedish nuclear plants was taken.
5.1.2 Unbundling of Functions
In 1992, Svenska Kraftnät was established. The company took over ownership and operation of the HV grid. It also acquired partial ownership of international connections with continental Europe for providing transparency against potential manipulation of Swedish electricity prices through exports to Germany (Kärrmark, 1999). In that way, the grid became legally unbundled from other functions. The ownership of the regional networks (40 130 kV) stayed within the hands of five companies. Many distribution assets also came to the hands of larger producers during liberalization. Nevertheless, network activities stay legally unbundled from their electricity activities.
Swedish customers can only buy electricity from retailers located within the country. The number of retailers has fallen since 1996 to almost half, as many municipalities opted for linking in some way their retail companies to larger groups. From the 115 retailers 20 are still entirely independent from the large groups and 85 sell electricity throughout Sweden. In 2007 a German company started business in the retail sector (EMI, 2008).
The EC believes that the regulator's competencies especially for fixing tariffs for network access need strengthening. Moreover, it considers that unbundling of distribution system operators is insufficient in order to guarantee their independence (EC, 2006). The EMI, on the other hand, considers that while DSO further unbundling would create more equitable competition at retail level the market would be less effective due to the possibility of undermined investments in generation capacity. Moreover the fact that DSOs unbundling in EU is uneven would also make it more difficult for Groups with both generation and retailing operations to set up business in Sweden, and make it more difficult for Swedish companies to establish operations in the rest of the EU. Nevertheless, the EMI shares the view of the EC that there is a need for further harmonization of the various regulations of the Member States on areas such as competition and market integration (EMI, 2008).
41
5.1.3 Market characteristics and Dominant positions
Between 1970 and 1987, the increa se in electricity use was at an average rate of 5% per year. This rate has declined since then to about 0.2% per year (SEA, 2009a). In the structure of consumption the main change is the transfer of a significant part of electric heating share to the servi ces sector (Graph 5.1) .
Graph 5.1 Electricity consumption Structure in Sweden, in the years 1990 (left) and 2008 (right) (SEA, 2009b)
Swedish per capita electricity consumption was 14765 K Wh in 2006, one of the highest around the world. Power production and consumption in the country depends on yearly environmental, economic conditions and power plants availability (T able 5.1). In the long term, Sweden is expected to be a net exporter of ene rgy. At the end of 2008, the installed capacity in the country was 34 ,181 MW.
Table 5.1 The Swedish Energy balance 2005 2009 (EMI, 2009)
In 1996, the Nordic wholesale market, Nordpool was established and by 2000 it had incorporated participation from al l Nordic countries. Market participation is voluntary but today more than 70% of the electricity production in the Nordic area is traded through the pool (Energy Markets Inspectorate, 2008). The rest involves bilateral exchange actions . By the time that th e first directive on liberalization was issued, Sweden had already completed a first phase of the process and the second Directive of 2003 did not stress any need for changes apart from the strengthening of the Regulator's competencies.
42
The Nordpool, includes a voluntary day ahead market, Elspot, for selling and purchasing electricity and the intraday Elbas. These two markets include areas that extend beyond the Nordic countries (Nordpool). When the TSO considers that the technical limits of electricity exchange between regions are reached, the Nordic market is split into price areas. Market splitting results in serious dominant positions in some areas. In 2008, there was a common price for the entire Nordic region for 28% of time. It is therefore important, to the extent that this is profitable, to expand transmission links within the Nordic region. The Nordic electricity market would also benefit in the long term from an expansion into a large regional market before eventually becoming part of a common European market (Nordreg, 2008). For these reasons, Nordel has identified five areas where the grid needs to be reinforced in order to increase transmission capacity between the Nordic countries and to relieve bottlenecks. EMI believes that extensive market integration can be achieved through counter trading in the case of those transmission constraints where expansion or new construction would not be viable instead of market splitting (EMI, 2008). In 2007, the Government proposed in the Nordic Council the establishment of a common Nordic ISO in order to optimize and accelerate important investment decisions and make climate policy more effective as some interconnections do not move forward according to plan.
Graph 5.2 Sweden’s (left) and the Nordic Region’s (right) largest electricity generators in 2007 (Energy Markets Inspectorate, 2008)
The fact that electricity generation is highly concentrated in the hands of a few companies (Graph 5.2) poses a threat to competition, and it is almost impossible for new players to establish themselves as electricity generators on a large scale (EMI,2008).
Graph 5.3 Shares of low voltage consumers for the three largest distribution networks owners (EMI)
43
The fact that the same entities appear to have significant shares in generation and retail (Graph 5.3) might pose a threat to competition, nevertheless the trade offs of demanding actions towards a direction of ownership separation have to be weighed against risks of undermining future investments and lack of harmonized action at European level.
While wholesale prices after 1996 dropped significantly, since 2000 they show an upward trend (Diagram 5.2). The prices in Sweden are affected by many factors among them the continental Europe prices as also the level of the carbon emission price due to the fossil fuel production in Germany. The high prices of the 2006 winter were attributed to the high carbon prices (SEA, 2007).
Diagram 5.2 Nordpool Prices development in Sweden (SEA, 2009a)
5.1.4 Consumer pricing
In Sweden, all customers are eligible to choose their electricity supplier. Despite the eligibility, supplier shift is still very low. Different contracts are offered by the retailers to cover customer needs such as standard tariffs for various periods as also contracts connected to the Nordpool spot price. There are also contracts offering green electricity.
Since July 2009, it is required to read consumer meters on a monthly basis. So, all meters are able for remote metering. Many meters also have technology that enables them to perform other functions (Regeringskansliet, 2010). Moreover, it is permitted to install a real time meter device at a small cost. Electric heating peaked in 1990 with 29 TWh while after 1999 it has stayed around 23 21.5 TWh.
5.2 RES policy
5.2.1 Goals and long term planning
In order to support RES, in 2000, NUTEK decided that a system of electricity certificates would be established. It was expected that the system: • Would increase the share of RES electricity production (SOU, 2001/77) • Would be static efficient. This referred to the need that investments with low marginal cost would be made first (SOU, 2001/77) and also that consumer costs would be kept down (Bergek, 2010) • through an effective competition between technologies would lead to cost efficiency and new technological solutions (SOU, 2001/77)
44
• would be compatible with EU treaty rules and therefore would be the system chosen for a harmonized European RES market (Åstrand, 2005)
During the consultation process for the adoption of the certificates system, four scenarios for the electricity system mix to the year 2020 were produced (SOU 2001:77). In the normal scenario small scale biofuel CHP would have a significant contribution in the mix and by 2010 large scale CHP and industrial back pressure would also raise their share. In the second scenario electricity imports will create oversupply and large scale biofuel CHP and back pressure increase their share in the mix. In this scenario the low electricity prices would lead to a higher certificates price. In the third scenario wind power with large offshore additions would take place while additions in small scale CHP would also take place. In that case, higher electricity prices would result in lower certificate prices. There is also a fourth scenario based on fossil fuels with large NG CHP to contribute in the mix as well as significant wind power additions. In this scenario the tax on fossil fuels is zero while the certificates price curve foreseen in the second scenario here moves later in the time axis. District heating prices are also lower (Table 5.2).
Scenario A. Normal B. Electricity C. Wind power D. Fossil fuel oversupply Inst. Capacity Priority Outcome and price
Small scale bio 1 3 2 CHP 2020
Large scale bio 2 1 None 1 (lower biofuel CHP 2020 price)
Industrial 3 2 3 3 Backpressure 2020
Wind power 2020 4 (also offshore) 4 (no offshore) 1 (high offshore) 2
Waste CHP 2020 5 5 4 4
Electr. Imports None Limitless
Certificate price By 2010 additions in Higher prices due Lower certificate Certificate price evolution large scale bio CHP to lower electricity prices due to curve moves and bio industrial prices higher electricity towards later backpressure prices years, higher elcert price (as in B), lower DH prices, no tax on fossil fuel
Table 5.2 Comparison of 2001 scenarios for the electricity mix to the year 2020 (SOU 2001:77)
45
The national target for the share of RES production in relation to gross electricity consumption was set at 51%, well below the indicative target of 60% in the Annex of the Directive 2001/77. The Government considered that an increase of 26 TWh, estimated as necessary in order to achieve the target, was not reasonable in such a small timeframe. Targets are set in TWh in order to provide a more concrete number to pursue than one in percentage. Moreover, it is easier to communicate measure and evaluate them. In order to have all targets in TWh, a normalized year hydro power production is set. That was set at a level of 63.4 TWh net production. Historically, the hydro power varied from 52 to 79 TWh gross production (Näringsdepartementet, 2005).
In 2002, the Näringsdepartement considered that the large wind potential in offshore and mountain areas should be exploited. The ambitions for a large scale wind energy construction were also evident in actions according to proposition 2001/02:143 and the governmental orders for commissions in several state agencies towards that path. A national planning target of 10 TWh of wind up to 2015 was decided representing an ambition level for wind. The intention was to provide a more concrete objective in relation to spatial planning and the authorization procedure (Näringsdepartementet, 2002). In 2004, 49 areas were characterized as of state interest for wind energy in order to gain priority over other interests (Näringsdepartementet, 2005). In total for RES a target for an additional 10TWh of RES from 2002 to 2010 was decided, while in 2006it was raised to 17 TWh by 2016. This came along work of the SEA and the proposed changes in the certificate system. Three scenarios for different ambition levels for the system were produced. The final changes accepted, were closer to the 2 nd scenario of the SEA involving high wind power diffusion while new annual quota levels were set and the system was prolonged to 2030 (Table 5.3).
Table 5.3 Annual quotas in the electricity certificates system and estimated new RES electricity production (SEA, 2009c)
46
In 2009, a long term plan for the year 2030 for the electricity mix of Sweden was issued, envisaging electricity exports of 23.1 TWh for the year 2020 in the main scenario (Graph 5.4). In this scenario to the year 2020, nuclear share expands to 72.4 TWh, biofuel CHP 8.4 TWh, wind power 6.9 TWh. In the same scenario NG CHP share is 3.7 TWh in 2010 and waste CHP 3 TW hand industrial back pressure 6.2 TWh in 2030. The transport sector increases it consumption up to 2030 with 67.9% while industry by 5.5%. Services and buildings reduce consumption by 3% (SEA, 2009d).
Graph 5.4 Long term plan for electricity production in Sweden (SEA, 2009d)
5.2.2 RES financial support
Before the introduction of the electricity certificates scheme, RES financial support in the power sector was based on subsidies under the scope of compensating power generation for the close down of nuclear reactors. Short term subsidies have been preferred rather than open ended subsidy mechanisms, causing intervalswithout subsidies and interruption to development (Wang, 2006).
The green certificates provide an additional income to the RES producers, added to the income of selling electricity to the market. RES producers sell their certificates, one for each MWh, to the certificates market and quota obliged parties purchase them. Initially the system provided support until 2010. Also a penalty for parties that would not be able to fulfill their obligations was set at a 175 and 245 SEK for years 2003 and 2004 respectively that changed in 2005 to 150 % of the average certificate price. All RES technologies including additional large scale hydropower and excluding some biofuels are entitled to certificates while peat was added in 2004. The system allowed unlimited banking of certificates in order to prevent high prices fluctuations.
In 2006, after a Government decision, following a SEA inquiry and recommendations (SEA 2005a, 2005b) a number of changes took place in the certificates system. These concerned among others: • the setting of long term quotas and change of yearly quotas in order to reduce uncertainty and support investments
47
• the stop of showing separately the certificates and the electricity price in the consumer bills and the setting of all obligations for physical persons under their electricity suppliers in order to avoid loss of system credibility and make competition on prices easier
The fact that the amount of the total revenue that was received by the producers was very low threatened the credibility of the system. With the changes, this amount grew larger. Also, according to these changes, the inclusion of new plants in the system takes place for a maximum of 15 years or the year 2030. Plants that were commissioned before May 2003 will be out of the system in 2012 and the ones that have received public investment grants after February 1998 are entitled to certificates up to 2014 (SEA, 2009c).
The three largest producers have 36% of the total quota obligation. The 10% of all quota obliged parties accounts for 60% of total quota obligations and are related to electricity suppliers while a little over a third of total cost of certificates is paid by domestic consumers for 36 TWh (SEA,2009c). The international competitiveness of the energy intensive industry posed constraints in the way the quotas are distributed. In 2006, 262 companies were registered as electricity intensive in accordance with the old exception rules (SNI code), with an exempted electricity use amounting to 40.5 TWh. For 2007, 472 companies were registered in accordance with the new exemption rules. The SEA recommended a new structure for exemption of electricity intensive industries from having a quota obligation in relation to the Cabinet’s work on Energy Taxation Directive and the Energy Efficiency improvement Programme (SEA, 2009c, 2005a).
The wind marketing programme has allocated over 400 million kronor for the period 2003 to 2009. The support for wind includes also a support of 12 öre/KWh for land based wind power up to 2009 and a 17 öre/KWh for offshore that will become 12 after 2009 (Näringsdepartementet, 2005).
The Government considered that if small scale hydropower is excluded from the certificate system for environmental reasons, it would have a marginal effect on reaching the target of 2010 which is estimated to 70 GWh by SEA (Näringsdepartementet, 2006).
5.2.3 Authorization procedure and Sitting
In Sweden, the authorization procedure for new plants is decentralized. The Parliament and the Government issue regulations and laws that are applied by the national administrative authorities that autonomously interpret and apply them. Ordinances are decided by the Government, which in turn authorize the authorities to decide on regulations within their respective areas of responsibility. The authorities may issue general guidelines about the application of regulations in addition to the binding rules that are linked to the legislation (Regeringskansliet, 2010).
The regional government authorities have the task of coordinating and implementing the targets and mandates of the national authorities. The county administrative boards are also involved in supervision and issuing licenses in the area concerning environment. They also have promotional duties where they further governmental interests and advise the municipalities of the region as well as administer funding for areas such as energy efficiency and energy conversion (Regeringskansliet, 2010).
At the local level, there are the municipalities that make decisions with a high level of autonomy within their geographic area, including taking charge of the spatial planning, with the support of the municipal planning monopoly. They also have licensing and supervisory duties for smaller plants and control much of the physical sitting through their planning activities. The municipalities’ comprehensive survey plans are central instruments for the spatial planning while the development plan determines how the land in the area concerned is to be used (Regeringskansliet, 2010).
48
For the building of a plant two licenses are in need. An Environmental license and a building permit according to the development plan (for larger installations and changed in 2009 for wind farms). The Environmental Court examines licenses for larger installations (A installations) and the county administrative board’s Environmental Testing Delegation (MPD) examines those of smaller installations (B installations). Hydroelectric power plants are examined by the Environmental Court. Since 2006, plants smaller than 25MW need to apply only to the municipalities (Regeringskansliet, 2010).
The biggest problem for wind power investments is the municipality veto. At least 380 planned wind turbines, with a capacity of 1000 MW, has already been stopped by the veto and further projects of capacity of around 2000 MW are at great risk (Wondollek, 2010). Typical lead times for wind energy reach 3.5 years and they depend on the size of installation while appeals take longer. The number of authorities involved in the procedure is 24 (EWEA, Regeringskansliet, 2010). In the case of CHP, the permits are not a problem, nevertheless there are plans that met opposition by the local communities temporarily (Andersson, 2010).
5.2.4 Grid Access
EMI has the duty of monitoring the grid tariffs and specifying standard rules for calculation of connection charges. Svenska kraftnät applies point tariffs while in the regional grid, channel tariffs are applied. Both of the variations produce the same end result for the connecting party and are based on objective, transparent and non discriminatory criteria. The power producer who connects to a grid that has insufficient spare capacity is forced to pay the whole grid enhancement cost, including the future capacity that the producer is unable to utilize. The producers that subsequently connect to the grid may utilize this spare capacity without the payment of any separate charge (Regeringskansliet, 2010).
The procedures for network connection are considered complex both for small plants and regional network and were meant to be simplified with the inquiry of 2008 (Näringsdepartementet, 2009).It is often the lead times in the grid connection that are limit setting in the establishment of large wind farms and within the grid connection it is the lead times for matters relating to licenses that set the limits. It is not clear whether this is due to unnecessary obstacles or disproportionate requirements in relation to the approval procedure at the present moment in time. The Government believes that it is of vital importance to review the processes for grid connection/enhancement/expansion and proposed that grid owners submit a timetable for the process of application and a timetable for connection works to the applicant (Regeringskansliet, 2010).
Technical and legal grid bottlenecks and market splitting are a major problem for wind power, making investments in northern Sweden less certain (Wondollek, 2011). The Nordel has identified a number of areas where the grid needs to be reinforced in order to increase transmission capacity between the Nordic countries, and to relieve bottlenecks in the system. In addition to the projects running, (Fenno Skan, Great Belt, Nea Järpströmmen, Sydlänken and the Skagerack Link), Nordel has identified needs for new links in another three areas: the South West Link, between Sweden and Norway, Ørskog Fardal in Norway, and Ofoten Balsfjord Hammerfest, also in Norway. The grid also needs greater flexibility in order to suit expansion of wind power production in order to enable major variations in power flows to be compensated from other sources in other places (SEA, 2009).
The main issue regarding new concessions at regional and distribution level, concerns land expropriation and usually raises appeals prolonging the process. The grid company can offer additional compensation to the land owners to avoid such a procedure. Concerning wind power, as time is of outmost importance concession can be given before all permits are clear and is made dependent upon acquisition of the permits involved. Grid bottlenecks are handles jointly by the investor and the grid owner. The main action
49 taken in order to make it easier for wind power investments is that many wind power plants are exempted from concession regulation (Siden, 2011).
5.3 Climate policy and Taxes
Since 1991, Sweden also applies taxes for CO 2 and energy. Fuels that are used for electricity production are exempt from energy and carbon dioxide tax. The taxation regime for CHP has been changed with effect from 1st January 2004, so that the tax on the fuels used for heat production in such plants is taxed at the same rate as on these fuels when used in industry. According to that, all energy tax is deduced and 74% of carbon dioxide tax is deduced. However, that portion of the fuel which is used for the electricity production receives a full rebate of energy and carbon dioxide tax. With the introduction of these changes, CHP utilities were no longer allowed themselves to allocate the proportions of fuels used for heat and electricity respectively and all the fuel usage must be assigned in proportion to the actual quantities of electricity and heat produced (SEA, 2004).The new taxation makes NG CHP production more attractive while emission costs are internalized through emission rights allocation.
After the start of the EU ETS, electricity prices in the Germany increased. By means of electricity trading between Sweden and Germany electricity prices in Sweden also increased. This offered an additional support for RES investments. Additional support for fuel switching can be given through appropriate allocation of emission rights to the industrial and district heating sectors. Sweden has a commitment not to increase its emissions by more than 4 % up to 2010 in relation to 1990 levels according to the burden sharing agreement. Nevertheless, Sweden has gone further and set a target of an actual reduction of 4 % in its emissions that will be achieved without compensation for uptake in carbon sinks (uptake of greenhouse gases in vegetation and the ground), or by using flexible mechanisms (SEA, 2009a). The EU’s emission trading system, which started in 2005, and which applies to industries and electricity and heat producers, covers about one third of Swedish emissions. Since 2008, the country had long term and medium term targets for emissions. Electricity and heat production installations receive 80% of their emissions in 1998 2001 while industrial CHP receives 100%. In the allocation, one of the aims was to create incentives for more use of biofuels. On the other hand, peat electricity production has to face challenges as it needs allowances (Zetterberg, 2006).
50
5.4 Willingness to invest and Actual Effects on RES market
Diagram 5.4Installed power generation capacity changes in district heating cogeneration plants (left) and industrial back pressure(Svensk Energi, 2009)
Diagram 5.5Installed power generation capacity changes in wind power plants (Svensk Energi, 2009)
Since 2003, the largest increase in new plants and installed capacity was achieved in wind power with 729 MW added (SEA, 2010). With the introduction of the new system, wind power suffered a lowering of support for investments in new capacity and a stronger risk exposure over time, while existing capacity has stood to prosper under generous transition rules. In order to keep wind power investments attractive, the government provided investment grants and the environmental bonus.
In 2005, the Ministry for enterprise and energy considered wind power as means of reducing the need for natural gas investments that would increase CO2 emissions. At the end of 2009, the projects under construction were 397 MW while another 2167 MW had authorization. A large number of projects is under environmental permits procedure. Vestas accounts for more than 50% of the turbines installed (Svenskvindenergi, 2010). A large number of companies are operating in wind parks erection but also in the supply chain there many subcontractors around the wind power value chain. In that way, the value of manufactured goods in the country is large (IEA Wind, 2008). In the CHP sector around 40 projects were under planning or building phase in 2010 (Svebio, 2010).
51
The electricity certificates system was very effective in increasing investments in existing industrial and district heating plants by means of fuel switching and prolonged operation. This was not expected to such a degree. On the other hand, up to 2005, it had not led in large scale investments in biofuel CHP plants and wind that were considered necessary to meet the targets (Näringsdepartementet, 2006). For that reason, the certificates system was prolonged to 2030, a new target set for 17 TWh to 2015 and the certificates allocation became of a limited timeframe in order to support new investments. Also, the importance of municipalities, agencies and county committees for planning and permits process was pronounced by the government in order to support wind investments.
Graph 5.5 Certificates production by type of plant (SEA, 2009c)
Biofuel accounts for 68% of the total production of certificates (Graph 5.5). More than half comes from industrial back pressure in the forestry and forest products industry and 5.5% from CHP plants burning peat. Wind power plants received 13.3%, and hydro power plants received 17.3 %, thus making significant contributions to electricity production within the system. More than half of the certificates production from biofuel plants is delivered by five producers in normal year numbers (SEA, 2010).Due to reasons of market liquidity many existing plants entered the system. These plants were already commercially available or had received subsidies. Moreover, another 8 9Twh came from easily accessible production increases in existing plants. These came from increase in full load hours or conversion from fossil fuel to biofuels. The extra cost in relation to electricity price in the first case was zero while in the second could reach up to 80 SEK/MWh. Taking a mean value of 40 SEK/MWh and using the estimation of 10.8 TWh for such investments these can be calculated to SEK 432 million(Bergek & Jacobsson, 2010). Investments in new plants have reached SEK 30.065 billion (Table 5.4). Wind power and industrial back pressure account for the larger part of these investments (Table 5.4). Waste combustion is not entitled to certificates and tougher environmental legislation creates incentives for higher use of fuels based on MSW (Olsson, 2006).
52
Investm. cost Install. Cap. ( kW ) Investment (kr)
(Kr/KWe) onshore wind 12500 618,901 7,736,262,500 offshore wind 23200 110,400 2,561,280,000 biofuel CHP DC varying 82,625 3,138,515,000 biofuel industrial varying 267,720 backpr. 6,354,920,000 biogas power & CHP varying 3,271 34,297,650 waste combustion varying 148,425 10,239,725,000 Total 30,065,000,150
Table 5.4 Investments in new RES plants(Appendix 4)
Graph 5.6Biofuels use in the certificates system (SEA, 2009c)
By products from forest industries account for almost 54% of the biofuels used in the system while another 32.1%comes from by products from forestry (Graph 5.6). It is important to see the development of biofuel prices in the context of the forest products value chain. Traditionally, pulpwood was sorted out after timber and what did not match its standards went as biofuel. In recent years there are indications that this order of precedence might be changing. A combination of falling prices on pulpwood and rising biofuels prices, caused by the continuously increasing demand, has driven prices on biofuel near the level of pulpwood prices. A situation where wood is more profitable to sell as fuel than pulpwood is a scenario that the pulp industry wants to avoid. Therefore, the pulp industry is working hard towards increasing the quantity of other assortments of biofuels in the market such as tops and branches in order to keep biofuel prices at a ‘safe’ level. Since 1980s, a process of integration and consolidation of biofuel producers around the forest industry has started and is still evolving rapidly (Skogsindustrierna, 2003, Olsson, 2006). This situation allows security of access to resources for the forest industry along the creation of incentives for
53 more efficiency in the value chain. On the other hand, incentives for higher biofuel imports and therefore the creation of a biofuel infrastructure basis at regional level are created.
The system favors the cheapest method of producing renewable electricity. Wind power investments have more expensive financing. State or local companies show lower risk profiles while in wind power, ownership is more spread. Companies with core activity electricity production are more inclined to accept risks while the SEA considers that investors have sufficient power to affect manufacturers and influence technical development (SEA, 2005). From the perspective of the banks, the electricity certificate system merely slightly reduces the risks and therefore trust relations with investors, financing capability of investor and well proven technology are very important. Renewable energy projects often extend over 10 15 years, and it is not until the end of this period that loans have been entirely repaid. This works in favor of the project organization, as the banks would lose by pulling out of the project before it is completed, or before they attempt to resolve any problems with other financing parties if problems should arise during the project period. A credit term of about 15 years is often linked to the electricity certificate system, which allocates certificates to new production plants for a period of 15 years, thus also demonstrating the importance of the system when financing renewable electricity production projects (SEA, 2009c).
For more than a decade and up to 2006 a trend of reduction of the municipalities’ ownership share in the district heating has been observed (Graph 5.7). The requirement for a concession for constructing district heating distribution mains has been removed since 2006. This, in combination with changed taxation of CHP production, has helped to open up the market for district heating production (SEA, 2009).
Graph 5.7Swedish district heating ownership (Svensk Energi, 2009)
According to the SEA producers of electricity from CHP felt that the certificate system was meeting its objectives well as it favored the cheapest generation technology while it influences day to day work by means of optimizing fuel choice according to certificates price. At the same time it supports production of more expensive biofuel (like woodchips). Larger CHP producers do not consider price variation of certificates as a problem as they can wait to sell when prices are higher in distinction with smaller producers. Nevertheless, business conditions, economy fluctuations and liquidity needs are decisive factors for the choice of timing for certificates trading (SEA, 2009c).
54
Diagram 5.6 Spot traded Electricity Certificate Prices (SEA, 2009c)
The SEA believes that the first years of the operation of the certificates system the price cap became a target for prices. This undermined the very principle of a market with price being a signal for participants, favoring cost efficient producers (SEA, 2005b). Moreover, in the start of the system, generators effectively managed to ‘work’ the market price up from a level of 120 SEK to approximately SEK 240 250 SEK/MWh. This was done by partly ‘window shopping’ through which sellers provided constantly higher prices on the sell side of the spread, and then often disappeared before closing deals, but also through active trading (Midttun et al. 2005).
Graph 5.8 Number of certificates issued and cancelled, together with accumulated surplus over the period 2003 2008 (SEA, 2009c)
During the certificate system’s first three years, the number of certificates issued exceeded the demand for them, which resulted in a surplus of tradable certificates on the market. As the surplus of certificates is reduced certificate prices are increasing (Diagram 5.6, Graph 5.8). SKM estimates that the proportion of certificates traded in the exchange market is about 50 % for 2007, with an estimated 50 % being traded internally or directly between parties. Bilateral trade, between large producers and distributors is often within the same integrated company (Midttun et al. 2005). In 2012,the first group of plants existing in advance of the system will exit the system and in 2014 a second group will follow. Nevertheless, quotas are dropping significantly then, while a number of large projects are in the pipeline (SEA, 2009c).
55
At the same time, the first three years of the certificates system operation, physical persons were entitled to quota obligation. Electricity suppliers had little incentive to keep down costs or reduce them while a small amount of the total payment went to the producers. In that way, charges of the supplier to the consumers were extremely open to exploitation. At the same time, the legal change for inclusion of the certificates price in the electricity price that is open to competition created further incentives for certificates payments reduction while legitimacy of RES concerning their costs was strengthened. After these actions, the situation concerning certificates payments changed significantly (SEA, 2005b, 2009).
The uncertainties for investors in the certificates system are large especially for small ones. Investors have to take into account the effects of competitors’ actions and regulations in the electricity and the certificates market. Since the market is small, the impact of a new large CHP or wind plant will be important on certificates availability. Biofuel CHP are also dependent on biofuels prices that since 2000 have been rising, as also regulations affecting competing fuels like taxes and emission allowance allocation. The ones that can secure long term green certificate and biofuel contracts such as integrated companies or can wait to sell their certificates are better positioned. Other risks have to do with standards for commissioning of the plant. Until 2008, a biofuels CHP plant owner did not know whether it would receive certificates until after building. Smaller biofuel CHP are also more dependent on heating income. NG CHP is less dependent on heating income than biofuel fired CHP (Elforsk, 2007). The result is that small CHP has the highest exposure to uncertainty with wind power following (Table 5.5).
Small CHP Large CHP NG CHP Industrial Wind power biof biof Backpressure
Certificatescontinuous High Low (liquidity Low (liquidity Depends sales Dependence and fuel shift) and fuel shift)
Investment Costs High Medium Low Medium High
Biofuel Long term No space in Access to Good Contracts the market international Markets
Heating High Medium Low incomeDependence
Dependence on high High Low Low High electricity and certificates price
Table 5.5 Exposure to uncertainties by various technologies (Elforsk, 2007)
Legislation concerning guarantees of origin came into force on 1st July 2006. According to that, producers of electricity and district heating in high efficiency CHP plants, or from RES, can obtain a Guarantee of Origin from Svenska Kraftnät. The idea is that this guarantee can be used in marketing.
Within 2012, district heating CHP production is expected to be the main contributor with many new projects expected to move forward especially since the Energy intensive industry is reaching its potential
56 with current conditions (Svebio, 2008, 2010, Graph 5.9). Wind power will also contribute significantly since many projects have matured (Graph 5.9).
Graph 5.9 Expected increase in electricity production in the certificate system 2007 – 2012 (SEA, 2009c).
57
6 Discussion
Until early 2000s, in Greece, RES development was very slow. This situation has since then changed due to the combination of liberalization, authorization procedure changes, application of investment subsidies and application of a more secure and long term FIT. In fact, in the PV field Greece has already gained a good position among European countries despite existing policy challenges while future expectations are high (see Appendix 2). Long term planning scenarios are driven by a least cost investment logic which includes higher NG and introduction of coal in the generation mix though their wider acceptance is questionable. There is an inability to take into account wider international diffusion of more expensive technologies that would have as a result faster progress along their learning curves and build competencies on this option. It remains as a question whether this is due to lack of vision, uncertainty and concern over effects on electricity prices or financing considerations along traditional practice paths. Nevertheless, the planning period reaches up to 2030, which is a new practice in comparison to the ten year plans of PPC in the pre liberalization regime. Greece has adopted targets on RES share and CO 2 caps as they have been set by the EU processes.
A basic concern of the Greek actions in the RES policy field is to attract international and domestic private funding. An instrument providing a stable financial support like FITs and investment subsidies through EU funding was of paramount importance, along with EU policy mandates especially when taking into account the turbulent authorization environment in the country. The private capital is expected to contribute in the growth of the local construction, maintenance, engineering services and manufacturing industries related to RES. Moreover, funding can be directed away from State actors while public expenses minimize. A more decentralized system should be able to attract private funding from a larger variety of actors. In the Greek case, diversion of funding away from traditional actors means greater economic efficiency in the short term while further expansion of dispersed PV plants includes benefits that are not quantifiable as yet but nevertheless are real for the economy. In Greece, there is further scope for RES expansion. Electricity demand is rising while imports are high and older lignite plants are phased out. Lignite production in the existing mines is declining while NG pipelines and storage operate on full capacity. As liberalization moves further, approaching a more pragmatic value of lignite will drive wholesale prices up while some tariffs should follow. Since 2006, the wholesale price of electricity is high enough to make wind investments economically competitive. In the non interconnected system, high wind speeds and oil based production strengthen wind competitiveness. The Governments of Greece have shown commitment in supporting wind power in order to exploit the country’s good potential in the interconnected system. The actions taken in relation to liberalization of the electricity market the authorization procedure and networks connection in combination with an existing strong FIT and investment subsidies have supported wind power investments. During the period of focus, many wind power projects came into maturing due to that. The most important actions had to do with prolonging the timeframe of power supply contracts, permitting the constructions of connection lines by third parties and lifting barriers related to the lack of forest registry, land expropriations and environmental and building permits. Nevertheless, licensing and sitting barriers still remain.
Since 2006, a high FIT for PVs in combination with investment subsidies created high expectations regarding returns from investors and license holders especially for plants smaller than 150 MW. The centralized authorization process, the large number of applications and the unclear rules over priority to network access and absorption capacity at prefecture level soon led to a deadlock. The lack of appropriate rules, the investor spirit immaturity of many prospective license holders along with high financial incentives and the complexities of the authorization procedure played a key role to that, leading also to the emergence of a variety of discourses concerning PV licensing and market. The effect of this situation in
58 the future PV market and legitimacy remains to be seen. Clearer regulation concerning prefectural absorption capacity and time limits about validity of licenses should help into clarifying the landscape.
In the Greek case, the HV grid is not well developed and many wind investments are stopped due to lack of HV lines capacity. In the interconnected system, the management and ownership status of the grid along with land use problems and subsequent appeals to the Council of State create barriers for further development of wind power. The lack of HV lines along with local communities’ reactions has hindered wind investments while the lack of clear rules about prefectural RES absorption capacity and network connection affected mostly PV investments. In the case of non interconnected islands almost 90% of electricity consumption is based on oil fired units while their tariffs are subsidized through the interconnected system customers. PPC is the owner and manager of the local networks.
Despite the great wind potential and benefits such as avoidable generation costs of the oil fired units, investments on wind power and PVs have not moved forward. The new non interconnected system code is expected to take care of the absorption capacity and network connection issues in the islands. For the larger, more populated islands the decision to connect them to the central grid and therefore be transferred under TSO regime is being promoted. An interconnection plan is being developed with cooperation of RAE and PPC. The final plans of islands to be connected are under discussion while in some cases, the viability of the interconnection is dependent on offshore wind turbines construction. Also 250 MW of applications for small PV plants are pending in the non interconnected islands due to unclear absorption capacity rules. In these systems the fact that the tariffs are subsidized means that fuel cost are not reflected in the bill while the polluter pays principle is not applied. A strategy dependent on demographic issues, avoidance of fuel, CO 2 and grid lines costs, progress of RES technologies along their learning curve and reflection of actual benefits on customers’ bills is asked for in these cases. The oil fired units can reduce their operation according to a decided RES mix. In the medium and long term, various possibilities for development of niche markets in the non interconnected islands should be considered. It is questionable whether the present regime of grid management ownership and islands networks ownership management can respond to such a strategy.
In Greece, competition in the electricity wholesale market and the retail market is low. Only a small number of consumer tariffs reflect their costs with the household tariffs well below them as cross consumer subsidization is taking place. Tariffs are regulated by the MoD. Moreover, there are no contracts linked to the wholesale price. The lignite market is not open while peak load hydropower belongs to PPC. The competition in the natural gas market is also very low. As liberalization moves further, the effects of a competitive market in lignite and NG as well as alternative forms of hydropower ownership models on the wholesale price and RES will appear. It is expected that competition will help the reflection of the real values of fuels for the system including their environmental costs. This should make RES more competitive. Furthermore, auctioning of CO 2permits will create high capital needs for fossil power producers in the medium term. Today, the RES levy is very low in comparison to the total consumer bill due to the high marginal system price. As more expensive RES enter the system, and especially in a case of MSP collapse, the RES levy that appears on the bills will increase. This might threaten the legitimacy of RES. For that reason, and for as long as tariffs remain regulated and competition in the market is low, a CO 2 emissions and fuel levy should appear on the bill.
The reflection of the actual costs in the household consumers has the possibility to raise issues of legitimacy of the liberalization process should the electricity bill as percentage of income rise. Further attention is needed on network payments of the unbundled bills and further study of the effects that present and alternative regimes can have on it. Distribution and grid regime ownership change or break down will also affect the ability of PPC to raise funding while issues of sovereignty should also be studied.
59
At this point, the FIT payments for PV installations along with the investment incentives create rather high profits for potential investors. Nevertheless, at that point, no major investments have taken place due to the deadlock of the massive application number. The expectations for returns along the lack of institutions for guarantying the financial ability of investors created a massive application receive in RAE. The lack of institutions concerning the absorption capacity of prefectures and general urban planning for PVs, also supported the deadlock. At the same time, a large number of applicants that lacked the financial ability to support investments moved into trading of their licenses, an institution already in operation for wind. In that way the combination of FITs and investment subsidies with the existence of licensing bottlenecks created incentives for a mechanism of rent extraction by license holders through license trading concerning all RES technologies. At the same time, no mechanism that connects PV technology progress over the learning curve exists as costs are dropping (Appendix 4). Also FITs are not differentiated according to site irradiation or wind characteristics. Actions towards this direction should also consider the effects on license trading, actual installed capacity and generation. In order to shift the deadlock in PV authorization, clear urban planning and authorization rules for guiding a decentralized application procedure from the network manager should be applied. Furthermore a mechanism guaranteeing that the applicant has access to sufficient funding should be established. The term absorption capacity should be clarified. On the other hand, many of the benefits of PVs such as lower environmental impact, grid decongestion and lower transmission losses, boosting of development at local level and peak load availability are not incorporated in the billing and pricing system. The avoided costs of network investments and transfer losses should be taken into account in the long term plans. A real time competitive market along with changes in the authorization procedure and network regime in order to take into account their small scale decentralized character would help into boosting their competitiveness and realize their benefits. Moreover, policy actions focused on roof top systems that maximize some of the benefits of PVs should be established while new more dispersed funding resources can be attracted. Further actions for cooperation in the neighboring countries could help economies of scale and scope to be reaped. Concerning the authorization procedure a number of issues should be addressed. Urban planning authorities need clarified rules about permits needed inside and outside city limits as also for alternative land uses and roof top systems. The forest registry should proceed at a fast pace. New regulations that will address the secondary market of licenses along with old licenses at different stages of the licensing procedure referring to older authorization regimes should be established along with rules that will clarify network access priority. Information campaigns at local levels should take place in order to address NIMBY syndromes. The new rules concerning authorization should reflect environmental and visual impact benefits of technologies as also avoidance of transmission losses and transmission lines investment costs. The transfer of distribution networks management under TSO authority would help planning towards that direction. More transparency is in need in relation to network connection costs. Transfer of ownership of grid and networks under the TSO would contribute to that but would have negative effects on PPC’s credit ability. Greek policy also needs to address issues of dealing public investment subsidies among different technologies while stronger policy needs to be pursued in order to alleviate barriers concerning offshore wind and small hydropower development as also to realize possible complementarities with other industrial sectors. MSW environmental impacts and planning should also be addressed along energy recovery. The mechanism of license trading also needs to be addressed by appropriate rules. Sweden , in its national legislation, has set a target for RES share which is well below the one set at the Annex of the 2001 RES support Directive despite the explicit reference that its indicative target is dependent on climatic and technological conditions. Planning in the electricity sector leaves open different scenarios for future market structure while implementation moves on a logic of lowest cost investments and static efficiency under a market competition discourse. The adoption of an electricity certificates system came quite naturally along expectations of an obligatory European system after 2005.
60
In the Swedish case, the needs of the energy intensive industry for low electricity prices and cheap forest products are determining the policy formulation. Uncertainty over nuclear power availability has a high impact both on actions of the energy intensive industry and smaller actors. Interconnections policy also plays an important role. On the other hand, secure access to biofuels is easier for both energy intensive industry and large CHP producers. At the same time, smaller CHP producers are heavily dependent on a variety of factors such as electricity and certificate prices, access to biofuel market and regulations concerning competition from other fuels. In that way, moving into investments is very risky and that was clearly evident in investments from smaller producers and the reduction of the municipalities’ ownership share up to 2006.
The electricity certificates system has supported mostly low cost investments in existing plants while certificates payments and price were subject of manipulation by larger CHP producers that were able to extract rents. In that way, returns from the certificate system were not spread according to the investment burden of each investment while the system proved expensive (Appendix 3). This situation was more pronounced up to 2005. The changes of 2005 in the certificates system were very important in somewhat alleviating these problems as also some uncertainties. After these, a number of new installations have been added. Smaller biofuel fired CHP installations’ uncertainty over returns was reduced but still the lack of space for stable biofuel contracts and the need of continuous support for the fuel through certificates are a serious threat along with the small market. Wind power, having reduced operation costs in comparison with CHP was offered an investment subsidy in order to reduce uncertainty of investors and banks. The changes of 2006 in the electricity certificate system have also helped the reduction of financial uncertainties for wind. Nevertheless, the existing multilevel planning and authorization procedure creates severe barriers in wind power expansion. In addition, property rights, local tensions, grid bottlenecks and network connection lead times also hinder investments. Nevertheless, a large number of projects has matured and are at building phase. Wind power offers additional production in an environment of biofuel constraints, high NG prices and nuclear power uncertainty. Waste handling regulations have created incentives for MSW CHP that are not entitled to certificates.
In Sweden, initially the use of carbon taxes has been particularly effective in driving biofuel demand in the heating market while power production was exempted from carbon taxation. Based on these practices, Sweden is today a front runner in biofuel CHP production in Europe with Finland, Germany, Poland, Austria and Denmark following while it is the second largest biomass market (Appendix 2). Nevertheless, up to 2008 the certificate system has not been successful in supporting more expensive technologies such as gasification or ORC heat and power production. Access to low cost biofuels in addition to producers’ ability in optimizing production through a variety of fuel has played a very important role in the expansion of the market. This has supported lowest cost investments in production while it maintained fuel flexibility in relation to fuel costs and regulatory adjustments. On the other hand, learning over participants’ short term actions from the side of the energy agency as also the fact that the system was put in place, led to adjustments in the certificates system that improved its effectiveness and reduced uncertainty significantly, promoting a more level playing field for new participants. The experimentation over market design and the effect over legitimacy in successful national and regional practice will have a large impact on the adoption of a European system.
A combination of factors such as unlimited banking, the certificate price cap, the small size of the market with large players the unclear nuclear policy along a number of uncertainties led to market control by bigger players and absence of investments from the small ones. The expansion of the market at Nordic level should help towards creating a more stable investment environment while a larger market should further promote competition concerning best sites, technology choices and certificate prices. The decision not to phase out nuclear and allow plant refurbishment along a vision of power exports and a high ambition level for CHP, allows trade offs among electricity and certificate prices, amounts of exports and rate of transmission lines construction and various possibilities for new installed capacity. On the other
61 hand certificate market expansion gives an advantage for the regulators over the two level game at national and international level while a technological breakthrough creates large risks for existing investments that have not yet paid off.
Wind power faces a number of barriers concerning local tensions, difference between national planning targets and municipality planning and authorization and grid connection problems. Additional problems are legal and technical grid bottlenecks and market splitting. Technological issues related to icing also ask for solutions and are considered under a framing of large purchasing power of investors in order to be able to affect technology. Further work is in need in order to address questions over the effects of counter trading on wind power investments, grid investments facilitation, electricity price, returns division among actors and strategic issues of electricity producers and suppliers. It is also questionable how grid construction authorization issues and wind planning issues can be solved at the legal and regulatory arena.
Biofuel fired CHP shows large variety in investment costs among plants due to different generation technology, scale and actual products. The current certificates regime allows choice of more expensive technology investments by players that have higher market control than the rest. The 2009 exports vision allows space for more competition on that issue but still much uncertainty is left at the time being. Differentiation of the number of certificates received by each technology according to its benefits should help the creation of a more level playing field. Sweden should also weight the advantages of development of large scale biofuel CHPs against risks of moving along a technology path that may be outperformed by other ones, as it happened in the case of wind power technology development. The question of scope for decoupling electricity and heat production from biofuels concerning technology development and relevant policy development should also be addressed despite lower efficiency (Appendix 2).
In the biofuel sector, further study needs to be carried in relation to biofuel market expansion beyond national borders as also open and competitive access in the wood fuel chain. Along with these studies, technology and biofuel trajectories that can apply to regional and local networks through international cooperation should be identified and pursued.
62
7 Conclusions
In both Sweden and Greece, the role of EU policy is pronounced in the development of the energy sector. With the 2005 report of the EU on assessment of RES support schemes, important changes in the RES policy took place in both countries. Long term planning practice in Greece is based on current lowest cost technologies logic and not on costs of wider adoption of more expensive technologies while in Sweden scenarios for alternative market structures have not materialized. Benefits concerning avoided costs of networks expansion or efficiency due to proximity to consumption, or benefits related to the fact that high power production in CHP and PVs takes place at peak demand, and benefits related to avoidance of prolonged operation of base load plants have not been specifically accounted for. Nevertheless, in Greece more expensive technologies such as PVs managed to enter planning at marginal levels.
Greece has supported a secure financial investment environment with long term contracts decoupled from electricity prices or consumer tariffs along improvements in authorization procedure in order to attract international and local private funding. Sweden supported a market where the lowest cost RES resources would be promoted while large regulatory uncertainty affects the project appraisal especially of smaller producers. In the 2005 changes, significant steps were taken towards shifting these barriers. A constraint for more interventionist approaches was the pulp and paper industry interests’ that nevertheless accepted the system as power to affect basic market parameters was provided. In Greece, the FITs were high enough to allow rents extraction through licenses trading. The security provided through FIT and the investment subsidies has led to a more level playing field among investors. Nevertheless, rent extraction through license trading and high returns in the case of PVs has hindered fairness. Questions concerning fair access to public funds and the effects of geographically differentiated FITs remain.
In Sweden, uncertainty has been a decisive factor in the formation of the RES market limiting participation. Uncertainty affected also technology choices. In Sweden, the certificates system has not been able to promote more expensive technologies and additional measures were adopted for wind power. Choices over technology progress lie within the hands of actors that can better cope with intra markets and regulatory uncertainties In the Greek case, more expensive technologies such as PVs were able to find place in the market while future expectations are high. The adjustment of FITs to learning curve progress as also to site characteristics should be studied. Taxes can also be of use for internalizing the social costs of rent extraction. In both countries, continuous technology development monitoring along with adoption of appropriate measures that will support more efficient technology paths in order to avoid lock ins are in need. In Greece, measures to address the license trading mechanism and high returns are needed as also decisions on dealing public subsidies among technologies
Legitimacy and discourses related to payments towards RES can play an important role in both countries. In Greece further market liberalization will help RES legitimacy as well as strengthen the scope for their diffusion. In Sweden, the inclusion of certificates payments within the already subject to competition electricity bills strengthens their legitimacy by creating incentives for competition in the certificates market as also driving public attention away from the costs of the certificates.
In both cases, some small scale biofuel CHP and PVs show some benefits like lower power losses, less grid investments and peak production occurring when peak demand. In Greece such benefits are more pronounced due to the weak and deteriorated grid. In this case, the need for networks regime shifts that will enhance transparency, efficiency, realization of actual benefits and competition are more pronounced. In Sweden, such benefits can also be taken into account at planning and authorization level and should be weighted in relation to national and regional as well as present and long term industrial capabilities.
63
In both cases, barriers in relation to authorization and network connection procedure can be met. Both countries have taken into account the small scale character of some investments in the procedures. A large difference has to do with the fact that a more decentralized regime can be met in Sweden and barriers are met within local administrative levels, while in Greece barriers created by lack of institutions both at State and more local levels can be met. Land use and property rights issues as also local tensions hinder mostly wind power investments and are addressed according to the regime in each country. In Sweden, wind power faces also technological barriers in addition to grid bottleneck issues while in Greece small scale PVs have also met problems due to a combination of factors and lack of appropriate institutions. The need for network ownership and management regime changes in Greece are more pronounced if actual benefits of RES are to be met while in Sweden questions over counter trading should be addressed
In both cases, the challenge of planning along a vision of a variety of currently more expensive technologies that can progress on their learning curves remains to be addressed. In the case of wind power, in both cases progress on the learning curve during this period is slow (Appendix 4). The question of whether wind power has entered a more mature phase of its life cycle and the effects on technology of exposure in a more competitive international environment also taking into account local learning effects and different national energy policy contextual conditions is raised.
At EU level, further harmonization of rules concerning unbundling of functions should help the creation of a more level playing field in generation. Setting binding RES targets and appropriate infringement procedures would help national planning by creating a less risky international environment. This might help investments from more expensive technologies to take place earlier. This might be true for both small scale CHP in Sweden and for PVs in Greece. In both countries the RES targets are not expected to be reached (Appendix 3). Towards that direction, more transparency in achieving and revising targets at national levels is required. Plurality of markets and support schemes should be pursued in order to create a large base of technologies according to the subsidiarity principle. Enhancement of competition at European level should be pursued for technologies considered more mature.
64
8 Bibliography Andersson, K. 2011. Svebio. Communication January 2011 Aslanoglou, M., 2009.Regulatory Authority for Energy, Markets Monitoring and Competition Department, Athens. Communication. 19 th July 2009 Athanasopoulos. 2008. Presentation of the CEO in the Greek Parliament. October 16 th 2008. Åstrand, K., 2005. Examining influences of EU policy on instrument choice: the selection of a green certificate trading scheme in Sweden. Policy and Society 24 (2), 100–128 Bergek, A. &Jacobsson, S. (2010): Are Tradable Green Certificates a cost efficient policy driving technical change or a rent generating machine? Lessons from Sweden 2003 2008, Energy Policy, 38 (3): 1255 1271 Centre for Renewable Energy Sources. 2009. Annual Report 2009. CRES. Athens. Dahmen, E, 1989. Development Blocks in Industrial Economics. In Carlsson, B. 1989. Industrial Dynamics: Technological, organizational and Structural Changes in Industries and Firms. Kluwer Academic Publishers.Boston and Dordrect. DESMIE – Hellenic Transmission System Operator site www.desmie.gr Elforsk 2007. El från nya anläggningar 2007. Elforsk rapport 07:50. ELPE Hellenic Petroleum. 2004. Presentation of Thessaloniki Energia’s new CCGT plant. ELPE Energy Markets Inspectorate, 2008.Annual Report 2008 EMI. 2009 The Swedish Electricity and Natural Gas Markets 2009 Energy Markets Inspectorate site www.ei.se EurObserv’ER. 2010. The State of Renewable Energies in Europe. 10 th EurObserv’ER Report. European Commission. 1996. Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity. European Commission 2003.Directive 2001/77/EC of the European Parliament and the Council DIRECTIVE of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market. Official Journal of the European Union L 283/33. European Commission 2003.Directive 2003/54/EC of the European Parliament and the Council of 26 June 2003concerning common rules for the internal market in electricity and repealing Directive 96/92/EC. Official Journal of the European Union.L176/37. European Commission 2006.Infringement procedures opened by member state in the energy sector European Commission 2006. Green Paper: A European Strategy for Sustainable, Competitive and Secure Energy. COM(2006) 105 final. Brussels. European Communities. 1957. Treaty Establishing the European Community. Rome, 25 March,1957 European Investment Bank. www.eib.org ESYE National Statistic Authority of Greece. www.esye.gr Garis, A.. 2009. Business Deevelopment of RES in Greece: Is it Structurally attractive? Presentation in the Conference: Hellenic Industrial Commercial Chamber: ‘The present position and the Future of the Electricity Market in Greece. Athens 11 th February 2009. Hadjilambrinos, C. (2000). Understanding Technology Choice in Electricity Industries: A Comparative Study of France and Denmark Energy Policy, Vol. 28, No. 15, pp. 1111 1126 HELAPCO Hellenic Association of Photovoltaic Companies www.helapco.gr
65
Högselius P., Kaijser, A. 2007. När folkhems elen blev international. SNS verlag. Stockholm ICAP. 2008. Sector Analysis – RES IEA Wind, 2008.Annual Report 2008. Iliadou, E.N..2009. Electricity Sector Reform in Greece. Utilities Policy, 2009, vol. 17, issue 1, pages 76 87 Kathimerini 2001.Russian bonds in the Greek Natural Gas market. 27 1 2001. Kärrmark, U. 1999. Reform of the Swedish Electricity Market. In Silveira, S. 1999. Building Sustainable Energy Systems Swedish Experiences. Svenskbyggtjänst Stockholm Kåberger, T. 2002: Swedish Nuclear Power and Economic Rationalities, Energy and. Environment, Vol. 30, No. 2 2002, pp. 185 200 Maiopoulos, R., 2008. PPC: The Big Issues – Experiences of Ten Years in PPC Management. Athens. (In Greek). Meidanis, E. Christoloukas, D., Kalafatis, El., Fragos, P., Gaitanaros, D., Kaldellis, I.K..2007. Analytical Estimation of the availability of lignite resources. Journal of the Panhellenic Association of Mechanical & Electrical Engineers.December 2007.(In Greek). Midttun, A., Jakobsen, A., Kramer, N., Lagendijk, K., Voogt, M..2005. Developing Green Markets: Design Challenges and Pioneering Experience in three European Settings – The Netherlands, the United Kingdom and Sweden. Project Report from “the Energy related Environmental Policy Game in Europe”. Research Report 10/2005.BI Norwegian School of Management Departement of Innovation and Economic Organization Ministry of Development 2003a.2nd National Report Regarding the Penetration Levelof RES up to the year2010 (Article 3 of DIRECTIVE 2001/77/EC) Ministry of Development 2003b.2nd National Report Regarding the Penetration Levelof RES up to the year2010 (Article 3 of DIRECTIVE 2001/77/EC) Ministry of Development 2005.3rd National Report Regarding the Penetration Levelof RES up to the year2010 (Article 3 of DIRECTIVE 2001/77/EC) Ministry of Development. 2006. New Ministerial Decision for Readjustment of PPC tariffs. 28 7 2006. http://www.ypan.gr/c_announce/45_3182_cms.htm Ministry of Development 2007.4th National Report Regarding the Penetration Levelof RES up to the year2010 (Article 3 of DIRECTIVE 2001/77/EC) Ministry of Development 2009.5th National Report Regarding the Penetration Levelof RES up to the year2010 (Article 3 of DIRECTIVE 2001/77/EC) Njatha, E. 2011.Hellenic wind Energy Association. January 15 th 2011 Nordpool www.nordpool.com Nordic Regulators, 2008. Nordic Market report 2008 Näringsdepartementet, 2005. Report according to directive 2001/77/EC on the promotion of electricity produced from renewable energy sources Näringdepartementet, 2006. Angående skrivelse rörande directive 2001/77/EG, artikel 3.2 Näringdepartementet, 2006. Skrivelse rörande directive 2001/77/EG, artikel 3.3 Nikoletatos G.. 2010. CRES PV and Decentralized Generation Department. Communication December 10 th 2010. Panagiotopoulos, M. 2011. CRES Hydropower Department. January 11 th 2011
66
Pantelakis, N.,1991. The Electrification of Greece. From the Private Initiative to the State Monopoly.Educative Foundation of National Bank of Greece. Athens. (In Greek). Papaioannou, A. 2011.Electricity Markets and Tariffs Expert at RAE. Communication 10 1 2011 Petrakis, A. 1990.The Productive Circuit of Bauxite – Alumina – AluminiumManufacture.Papazisis. Athens Public Power Corporation 2006. Annual Report 2006 Public Power Corporation 2007. Annual Report 2007 Public Power Corporation 2008. Annual Report 2008 Regeringskansliet, 2010.The Swedish National Action Plan for the promotion of the use of renewable energy in accordance with Directive 2009/28/EC and the Commission Decision of 30.06.2009 Regulatory Authority for Energy. 2003. Long term Energy planning for the period 2001 2010. Plan for Public Consultation. Athens. January 2003. Regulatory Authority for Energy. 2009. Report to the European Commission. Regulatory Authority for Energy. 2006 Report to the European Commission SEES National Council for Energy Strategy.2007.First Report for the Long term Energy Planning of Greece. August 2007. Siden, J.. 2011. Energimarknadsinspektionen. Email communication 15 th May 2011. Siolavos, G., 1991. Perspectives for the increase of Greek Products in the USSR in view of the Soviet Natural Gas Procurement. Conference: Natural Gas and Development. Technical chronicles, March April, 65 69. (In Greek) SOU 2001:77: Handel med elcertifikat. Ettnytt sätt att främja el från förnybara energikallor (Trade with electricity certificates. A new way of inducing electricity from renewable energy sources), final report by the government committee of inquiry on electricity certificates, Swedish Government Official Reports (SOU) 2001:77, Stockholm, 2001 SveBio, 2008. Rapport om Potentialen för Bioenergi. SveBio, 2010. Biokartan 2010 Svensk energi. 2009. Elåret 2009. Svensk vindenergi, 2010. Vindstatistik 2009 Swedish Energy Agency, 2004. Energy in Sweden 2004 Swedish Energy Agency 2005a.Översyn av elcertifikatsystemet Delrapport etapp 1, Summary. Swedish Energy Agency 2005b. Översyn av elcertifikatsystemet Delrapport etapp 2, Summary. Swedish Energy Agency, 2007. Energy in Sweden 2007 Swedish Energy Agency, 2009a. Energy in Sweden 2009 Swedish Energy Agency, 2009b. Energy in Sweden 2009 Facts and Figures Swedish Energy Agency, 2009c. The Electricity Certificates Market 2009 Swedsih Energy Agency, 2009d. Långsiktsåprognose 2008. Swedish Energy Agency. 2010. Godkända Anlägningar 2010 11 3 Swedenergy www.svenskenergi.se
67
Tselepis, S. 2010. The Current State of the PV market in Greece. 25 th EU PVSEC 2010, Valencia, 6DV.2.4 Tsotsoros,S.. 1995. Energy and Development in the Afterwar Greece. The Public Power Corporation 1950 1992. Center of Neohellenic Studies. Athens. Vassilakos, N.. 1991. Presentation in the Workshop: Natural Gas and development. Technical Chamber of Greece, May 4 6, 1988, Athens. Technical Chronicles, March April, Issue 2, 24 27 (In Greek) Vassilakos, N., Karapanagiotis. N., Fertis, D., Tigas, G..2003. Methods of Financing Renewable Energy Investments in Greece. CRES. Athens. Wang.Y.. 2006. Renewable electricity in Sweden: an analysis of policy and regulations. Energy Policy 34.1209 –1220. Wondollek, M. 2011. Svensk Vindenergi. Communication January 2011. World Nuclear Association site Zafeiris, E. 2011.CRES Biomass Department. Communication January 11 th 2011 Zetterberg, L. 2006. Lessons learned from the national allocation of allowances The case of Sweden. IVL Reports B1680.
68
9 Appendix 1 – Relevant Legal and Policy provisions
Law 2244/1994 (O.G. Α 168) Regulation of issues of electricity production from RES and fossil fuels Law 2601/1998 Operational Programme Competitiveness Law 2773/1999 Liberalization of the electricity market and regulation of issues of energy policy Law 2941/2001 Simplification of the procedure of company establishment and licensing of RES, regulation of issues of EllenikaNafpegeia (O.G. Α 201) MD 1726/2003 (O.G Β 552) Procedure of preliminary estimation and evaluation and approval of environmental terms and approval of contingency of concession for forest or scrubland under the permit installation of power stations for renewable energy joint MD D6/F1/oik.19500/ By virtue of which small scale RES plants were shifted to zero 4.11.2004(O.G B’ 1671) impact level in order to make their integration possible into towns and settlements Law 3426/2005 Official Gazette A 304 Precipitation of the 69iberalization process of the electricity market Law 3468/2006 (O. G. A’ 129). Generation of electricity from renewable energy sources and through high efficiency co generation of electricity and heat and miscellaneous provisions decision Procedure of preliminary, environmental assessment and approval oik.104247/EYPE/YPEXODE/25.5.2 of environmental terms of power plants using renewable energy 006 (Official Gazette B 663) sources according to article 4 of Law 1650/1986 as replaced with article 2 of Law 3010/2002 Ministerial decision Regulation of production authorisations regarding electricity D6/F1/oik.5707/13.5.2007 (Official generated using renewable energy sources and through high Gazette B 448). efficiency cogeneration of heat and electricity Ministerial decision Procedure for the issue of installation and operating permits of D6/F1/oik.13310/18.6.2007 (Official power plants using renewable energy sources Gazette B 1153).
Table 9.1 Legal and Policy provisions in Greece
69
1991 Electricity Act 1997:857 Electricity Act SOU 2001/02:143 Samverkan för en trygg, effektiv och miljövanligelproduction SOU 2001:77 Handel med elcertifikat – ett nytt sätt att främja el från förnybara energikällor SOU 2002/03:40 Elcertifikat för att främja förnybara energikällor SOU 2002:100 Uthålliganvändningavtorv Bill 2004/05:01 Budget Bill Ds 2005:29 Förslag om ett utvecklad elcertifikatsystem Prop 2005/06:154 Förnybar el med gröna certifikat prop 2005/06:143 Miljöbanlig el med vindkraft Åtgärder för ett livskraftgtvindbruk ER 2007:45 Nytt planeringsmål för vindkraften år 2020 SOU 2008:13 Bättre kontakt via nätet om anslutning av förnybar elproduktion
Table 9.2 Legal and Policy provisions in Sweden
European Communities Treaty Establishing the European Community. Rome, 25 March,1957 Treaty. 1957 Directive 96/92/EC of the European Parliament and of the Council of 19 Directive 96/92/EC December 1996 concerning common rules for the internal market in electricity. Directive 2001/77/EC of the European Parliament and the Council of 27 Directive 2001/77/EC September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market. Directive 2003/54/EC of the European Parliament and the Council of 26 Directive 2003/54/EC June 2003concerning common rules for the internal market in electricity and repealing Directive 96/92/EC.
COM(2006) 105 final Green Paper: A European Strategy for Sustainable, Competitive and Secure Energy.
Table 9.3 Legal and Policy provisions in EU
70
10 Appendix 2 –Swedish and Greek positions among EU states in various RES technologies diffusion
Table 10.1 Position in PV capacity in EU (MW) (EurObserv’ER. 2010)
71
Table 10.2 Position in biofuel fired CHP (MWe) (EurObserv’ER. 2010)
72
11 Appendix 3 –Electricity tariffs, RES consumer costs and RES shares in Greece and Sweden
Sweden Greece
RES as percentage of 55% and 60% 8.3% and 20.1% electricity consumption in 2008 and 2010 target
RES Consumer costs 0.024 in 2003 to 0.05 in 0.0004 €/kWh 2008 (SEK/kWh)
Table 11.1 RES share in consumption and RES consumer costs (SEA, 2009d, Eurobserver, 2009, MoD, 2006)
73
12 Appendix 4 - Calculations on level of RES investments for the period 2003 to 2008
12.1 Greece
Cost Installed capacity 2003 - 2008 Total costs Technology €/kW (kW) € Biogas 4500 18000 81000000 Small Hydro 1750 96000 168000000
Cost Annual cost Wind power €/kW Installed capacity (kW) € 2003 1070 84000 89880000 2004 1070 101000 108070000 2005 1070 19000 20330000 2006 1000 258000 258000000 2007 1100 97000 106700000 2008 1100 176000 193600000 Total cost € 776580000
Cost Annual cost Photovoltaics €/kW Installed capacity (kW) € 2006 5000 4000 20000000 2007 5000 5000 25000000 2008 4000 4000 16000000 Total cost € 61000000
Total Investments 2003 -2008 ( €) 1086580000
Costs for wind (IEA wind 2003, 2004, 2005, 2006, 2007, 2008) Costs for hydropower (Panagiotopoulos, 2011) Costs for biogas (Zafeiris, 2011) Costs for photovoltaics(Nikoletatos, 2010) Installed capacity data CRES, 2009
74
12.2 Sweden * 0.107319167 2006 average krtoeuro exchange rate
Installerad effekt fuel Anläggningensnamn Företagsnamn (kW) Energikälla Typ kr/kw Investment cost biofuel steam gen ÄlvsbynsKraftvärmeverk ÄlvsbynsEnergi AB 3,020 Biobränsle Industrielltmottryck 46000 138,920,000 biofuel steam gen BillerudKarlsborg AB BillerudKarlsborg AB 52,000 Biobränsle Industrielltmottryck 24000 1,248,000,000 biofuel steam gen KraftvärmeverketNynäshamn FortumVärmeNynäshamn AB 1,400 Biobränsle Industrielltmottryck 55000 77,000,000 biofuel steam gen Östrandsmassafabrik G 3 SCA Graphic Sundsvall AB 112,000 Biobränsle Industrielltmottryck 20500 2,296,000,000 biofuel steam gen Ångcentralen SCA Hygiene Products AB 2,300 Biobränsle Industrielltmottryck 50000 115,000,000 biofuel steam gen Obbola 20:4 SCA Packaging Obbola AB 25,000 Biobränsle Industrielltmottryck 29000 725,000,000 biofuel steam gen GranskärsKraftvärmeverk Söderhamn NÄRA AB 9,000 Biobränsle Industrielltmottryck 37500 337,500,000 biofuel steam gen Södra Cell Värö Södra Cell AB 63,000 Biobränsle Industrielltmottryck 22500 1,417,500,000 biofuel steam gen ACB Kraftvärme ACB Laminat AB 6025 Biobränsle Kraftvärme 41000 247,025,000 biofuel steam gen Västermalmsverket G2 Falu Kraft AB 9000 Biobränsle Kraftvärme 37500 337,500,000
Master of Science Thesis KTH School of Industrial Engineering and Management Energy Technology EGI-2011-117MSC Division of Energy and Climate Studies SE-100 44 STOCKHOLM biofuel steam gen Johannes KVV GävleKraftvärme AB 23900 Biobränsle Kraftvärme 30000 717,000,000 biofuel steam gen Turbingatan A65 HalmstadsEnergi&Miljö AB 4000 Biobränsle Kraftvärme 43500 174,000,000 biofuel steam gen Munkegärdeverket KungälvEnergi AB 3070 Biobränsle Kraftvärme 49000 150,430,000 biofuel steam gen Assbergsverket Mark Kraftvärme AB 3500 Biobränsle Kraftvärme 47000 164,500,000 biofuel steam gen EC Arsta KVV 1 NorrtäljeEnergi AB 6360 Biobränsle Kraftvärme 41000 260,760,000 biofuel steam gen Octowood G1 Octowood AB 170 Biobränsle Kraftvärme 60000 10,200,000 biofuel steam gen SEVAB KVV SEVAB SträngnäsEnergi AB 9000 Biobränsle Kraftvärme 37500 337,500,000 biofuel steam gen BioStor SkellefteåKraftaktiebolag 8000 Biobränsle Kraftvärme 38000 304,000,000 biofmatavfall KraftvärmeverketEldaren TidaholmsEnergi AB 2200 Biobränsle Kraftvärme 50000 110,000,000 biofuel steam gen Lextorp TrollhättanEnergi AB 3650 Biobränsle Kraftvärme 44000 160,600,000 biofuel steam gen MotalaBergsättersverken BP5 Vattenfall AB 3750 Biobränsle Kraftvärme 44000 165,000,000 avfall NyaGärstad Tekniska Verken i Linköping AB 19,000 Biobränsle Kraftvärme 58000 1,102,000,000 avfall PC Filen 1 LidköpingsVärmeverk AB 6,000 Biobränsle Kraftvärme 91000 546,000,000 avfall Ljungsjöverket LjungbyEnergi AB 4,600 Biobränsle Kraftvärme 1E+05 460,000,000 avfall Korstaverket G 2 Sundsvall Energi AB 21,000 Biobränsle Industrielltmottryck 57500 1,207,500,000 SYSAV - avfall Malmö Avfallskraftvärmeverk L 4 SydskånesAvfallsaktiebolag 20,800 Biobränsle Industrielltmottryck 57500 1,196,000,000 avfall BäckelundPanna 7 AB BorlängeEnergi 8,000 Biobränsle Kraftvärme 82500 660,000,000
76
avfall BodensVärmeverk BodensEnergi AB 5,200 Biobränsle Kraftvärme 91500 475,800,000 avfall H21G2 EksjöEnergi AB 2,055 Biobränsle Kraftvärme 1E+05 256,875,000 avfall Kristinehedsverket HalmstadsEnergi&Miljö AB 10,000 Biobränsle Kraftvärme 75500 755,000,000 avfall Beleverket HässleholmMiljö AB 1,670 Biobränsle Kraftvärme 1E+05 225,450,000 avfall KVV Torsvik Jönköping Energi AB 14,000 Biobränsle Kraftvärme 65000 910,000,000 avfall KarlskogaKraftvärmeverk KarlskogaKraftvärmeverk AB 15,000 Biobränsle Kraftvärme 63000 945,000,000 avfall KarlskogaKraftvärmeverk KarlskogaKraftvärmeverk AB 15,000 Biobränsle Kraftvärme 63000 945,000,000 avfall WTE2 SAKAB AB 6,100 Biobränsle Kraftvärme 91000 555,100,000 biogas waste VankivaAvfallsanläggning HässleholmMiljö AB 360 Biobränsle Övrig 10200 3,672,000 biogas sludge CHP BorlängeReningsverk AB BorlängeEnergi 250 Biobränsle Kraftvärme 10600 2,650,000 biogas sludge chp Hässleholmsavloppsreningsverk HässleholmsVatten AB 100 Biobränsle Kraftvärme 11600 1,160,000 biogas waste CHP Gasmotor, Torvalla Jämtkraft AB 1000 Biobränsle Kraftvärme 9700 9,700,000 biogas CHP Frichs Mini 90 Jönköpingskommun 90 Biobränsle Kraftvärme 11700 1,053,000 biogas waste CHP Hyllstoftaavfallsanläggning NorraÅsbrorenhållnings AB 250 Biobränsle Kraftvärme 10600 2,650,000 biogas CHP Hagaviksbiogasanläggning Privatperson 11 0 Biobränsle Kraftvärme 11500 1,265,000 biogas sludge CHP Höganäskommunsavloppsreningsverk Turbec R&D AB 90 Biobränsle Kraftvärme 11700 1,053,000 biogas waste Östby 1:24 ÅmålsKommun 230 Biobränsle Övrig 10700 2,461,000
77
biogas waste Forsbackadeponi GästrikeAvfallshantering AB 97 Biobränsle Övrig 11600 1,125,200
biogas sludge Göteneavloppsverk GöteneVatten&Värme AB 99 Biobränsle Övrig 11600 1,148,400
biogas sludge Västrastrandensavloppsverk Halmstadskommun 330 Biobränsle Övrig 10300 3,399,000
biogas waste Svenstorps Biogas Privatperson 36.5 Biobränsle Övrig 12500 456,250
biogas waste Löt Sörab 210 Biobränsle Övrig 10800 2,268,000
biogas waste Biogas Sötåsen VästraGötalandsregionen 18.5 Biobränsle Övrig 12800 236,800
19,767,457,650
Table 12.2 Investments in new plants entitled to certificates calculations *Data on new plants from SEA 2010, Data on Kr/Kw costs from Elforsk 2007.
For biofuel fired plants an exponential curve referring to various installed capacities was constructed based on data from Elforsk 2007 while steam cycle plants were considered. It is expected that variations in calculated to actual costs should occur due to different technologies and plant scale. For waste combustion another exponential curve was constructed according to Elfork 2007 data. For biogas power production and CHP we used the Elfork data for gas turbines that are slightly higher than the ones for gas motors. Again a curve referring to various installed capacities was constructed.
78
Master of Science Thesis KTH School of Industrial Engineering and Management Energy Technology EGI-2011-117MSC Division of Energy and Climate Studies SE-100 44 STOCKHOLM