Renewable Energy Industry Roadmap for Finland · Mario Ragwitz 1, Daniel Rosende 1, Gustav Resch 2, Christian Panzer2 1Fraunhofer Institute Systems and Innovation Research (Fh-ISI)

Mario Ragwitz1, Daniel Rosende1, Gustav Resch2, Christian Panzer2

1Fraunhofer Institute Systems and Innovation Research (Fh-ISI)2Energy Economics Group, Technische Universität Wien (EEG)

Renewable Energy Industry Roadmap for Finland

Finland, 04.05.2010

Finland Finland –– 44thth May May –– Slide 2Slide 2

Content

1. Current renewable energy (RES) situation

2. Current RES support policies

3. Targets & trajectories

• European RES Directive: 2020 targets

• Background information: The Green-X model

• Scenarios on meeting Finland’s 2020 RES commitment

4. Measures for achieving the target

5. Estimated costs & benefits of RES policy support measures

6. Concluding remarks


Current RES situation in Finland

RES-E:

Development of RES-Electricity generation in Finland 1990 – 2007

Source: Eurostat

0

5

10

15

20

25

30

0

5,000

10,000

15,000

20,000

25,000

30,0001

99

0

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

Shar

e [%

]

Ele

ctri

city

ge

ne

rati

on

[G

Wh

]

Biogas

Biowaste

Geothermal power plants

Hydro large scale

Biomass solid

Hydro small scale

Photovoltaic systems

Solar thermal

Wave-Tide

Wind-turbines Onshore

Wind-turbines Offshore

Share of renewable electricity



Development of RES-Electricity generation in Finland 1990 – 2007

Source: Eurostat

RES-E:

1990

[G W h]

2000

[G W h]

2007

[G W h]

1990-2007

[%]

1990-2000

[%]

2000-2007

[%]

Biogas 5 22 29 10.9 16.0 4.0

Biomass solid 4,682 8,476 9,661 4.4 6.1 1.9

Biowaste 4 35 210 27.1 25.7 29.2

G eothermal power plants 0 0 0 : : :

Hydro large-scale 9,867 13,468 12,972 1.6 3.2 -0.5

Hydro small-scale 1,048 1,192 1,206 0.8 1.3 0.2

Photovoltaic systems 0 2 4 : : 10.4

Solar thermal 0 0 0 : : :

Tide & wave 0 0 0 : : :

W ind-turbines offshore 0 0 0 : : :

W ind-turbines onshore 0 78 188 : : 13.4

RES-E total 15,606 23,273 24,270 2.6 4.1 0.6

Technology

CAG RElectricity generation



Development of RES-Electricity capacities in Finland 1990 – 2007

Source: Eurostat

RES-E:

1990

[MW ]

2000

[MW ]

2007

[MW ]

1990-2007

[%]

1990-2000

[%]

2000-2007

[%]

Biogas 1 6 8 10.9 16.0 4.0

Biomass solid 983 1,500 1,757 3.5 4.3 2.3

Biowaste 1 5 0 -100.0 22.4 -100.0

G eothermal power plants 0 0 0 : : :

Hydro large-scale 2,322 2,574 2,786 1.1 1.0 1.1

Hydro small-scale 298 308 316 0.3 0.3 0.4

Photovoltaic systems 0 3 5 : : 7.6

Solar thermal 0 0 0 : : :

Tide & wave 0 0 0 : : :

W ind-turbines offshore 0 0 0 : : :

W ind-turbines onshore 0 38 110 : : 16.4

RES-E total 3,605 4,433 4,982 1.9 2.1 1.7

Technology

CAG RCapacity



Development of RES-Heat generation in Finland 1990 – 2007

Source: Eurostat

RES-H:

1990

[ktoe]

2000

[ktoe]

2007

[ktoe]

1990-2007

[%]

1990-2000

[%]

2000-2007

[%]

Biogas (grid) 0.0 11.0 17.0 : : 6.4

Solid biomass (grid) 0.0 394.0 1249.0 : : 17.9

Biowaste (grid) 0.0 13.0 28.0 : : 11.6

Geothermal heat (grid) : : : : : :

Solid biomass (non-grid) 3522.0 4903.0 4450.0 1.4 3.4 -1.4

Solar thermal heating and hot water 0.0 0.0 1.0 : : :

Heat pumps : 9.7 128.1 : : 44.5

RES-H total 3522.0 5330.7 5873.1 3.1 4.2 1.4

Generation

Technology

CAGR



RES-T:

• According to Eurostat, there was no consumption of biofuels in 2005.

• In 2006 and 2007, 1 ktoe of biofuels was consumed.

• The following table gives an overview of the biofuel situation in Finland:

Technology Unit 2005 2006 2007

Biodiesel [ktoe] : : :

Bioethanol [ktoe] 0 1 1

Biofuels, total [ktoe] 0 1 1

Share Biofuels [%] 0.0 0.02 0.02

Source: Eurostat

Biofuel consumption and share of biofuels in Finland 2005 -2007


RES-E:

• The main support instruments for RES-E are investment subsidies and a tax measure.

• The so called “energy aid” is a state grant for investments in RES. Grants are available for

investment and research projects.

• “Tax aid“ is a guaranteed payment similar to a feed-in tariff and is paid per kilowatt hour of

electricity fed into the grid.

• These support instruments for RES-E are applicable at national level. There are no other

important additional instruments contributing substantially to the growth of RES-E.

• The introduction of feed-in tariffs for electricity from wind power and biogas is currently

being discussed.

• Support in the form of green certificates, investment subsidies for consumers, higher taxes

on fossil fuels and additional tax exempts are under consideration.

Current RES support policies in Finland


RES-H&C:

• The generation of RES-H is supported by investment subsidies and tax reliefs.

• State grants are available for RES-H investment and research projects.

• The maximum available investment subsidy is 30%.

• Finnish households can benefit from Energy Grants for Residential Buildings.

• There is a cap on the annually available budget: 14 million EUR in 2008 and 22 million

EUR in 2009.

• The maximum amount of this subsidy is 25% of eligible costs. Such eligible costs might

include material and equipment costs but not the cost of work.

• Taxes on heat are based on the net carbon emissions from input fuels and are zero for

RES.



RES-T:

• A quota obligation (a minimum percentage of biofuels to be supplied for consumption) for

the distributors of transport fuels has been set for the years 2008-2010.

• This minimum percentage will increase annually: 2% in 2008, 4% in 2009 and 5.75% in

2010.

• If the distributors failed to fulfill this obligation, the customs authorities will impose a penalty

fee.

• There are a few financial measures for RES-T production available:

• vehicle tax exemption according to the Law on Vehicle Tax,

• grants for R&D and pilot projects under the technology programme “BioRefine - New

Biomass products”.

• There is no specific support for electric vehicles that use RES-E.



European RES Directive – 2020 targets

0%

10%

20%

30%

40%

50%

60%

70%

80%A

T

BE

BG

CY

CZ

DK

EE FI

FR

DE

GR

HU IE IT LA

LT

LU

MT

NL

PL

PT

RO

SK SI

ES

SE

UK

EU

27R

ES

in

te

rms o

f fi

na

l e

ne

rgy

[%

of

de

ma

nd

] RES potential 2020 - share on current (2005) demand

Proposed RES target for 2020

RES share 2005

Note: Additional potentials do not include biofuel imports


Key elements of the new RES directive

• National support schemes remain as key driver for the future RES

deployment in Europe

• Target definition: RES share in gross final energy consumption

• Binding national targets for RES (in total*) by 2020 (*no sectoral targets

except the minimum target (10%) for RES in transport)

• Flexibility with respect to national target achievement (national

compliance but with increased cooperation between Member States)

• Measures for an accelerated removal of non-economic RES barriers

(grid access, accompanying market stimulation measures, etc.)


Background information: the Green-X model

Simulation model for energy policy instruments in the European energy market

RES-E, RES-H, RES-T and CHP, conventional power

Based on the concept of dynamic cost-resource curves

Allowing forecasts up to 2020/2030 on national / EU-27 level

Reference clients: European Commission (DG RESEARCH, DG TREN, DG ENV), Sustainable Energy Ireland, German Ministry for Environment, European Environmental Agency,

Consultation to Ministries in Serbia, Luxembourg, Morocco, etc.


The Green-X approach: cost-resource curves

•Potentials

•by RES-E technology (by band)

•by country

•Costs of electricity

•by RES-E technology (by band)

•by country

•COST-RESOURCE CURVES

•by RES-E technology

•by country

•costs

•potential

•Dynamic aspects

•Costs: Dynamic cost assessment

•Potentials: Dynamic restrictions

•DYNAMIC

•by year

The Green-X approach: Dynamic cost-resource curves


Developed scenarios

Proactive RES support beyond the

(boundaries of) 2020 RES targets

Countries aim for pure

national target fulfillment

Based on calculations done with the Green-X model:

Flexibility measures give more attention in

order to fulfill the 2020 RES target from the EU

perspective more efficiently (resource

allocation)


General remarks

• The assessed cases follow the concept of strengthened national support.

• The fulfillment of the target of 20% RES by 2020 is preconditioned both at the EU level as

well as at the national level for all cases.

• The ACT scenario goes beyond that level of ambition and illustrates the impact of an EU-

wide proactive RES support.

• The policy framework for biofuels in the transport sector is set equal under all assessed

policy variants.

• For all cases a removal of non-economic barriers (i.e. administrative deficiencies, grid

access, etc.) is presumed for the future.

• An adequate removal of these deployment constraints is conditioned on the assumption

that this process will be launched in 2010-2011.

• Results of the scenario calculations include details on RES deployment as well as on the

associated costs and benefits.


Scenarios assumptions

Key assumptions:To ensure maximum consistency with existing EU scenarios and projections the key input

parameters of the Green-X scenarios are based on PRIMES modelling and the (updates of the)

FORRES 2020 study.

Corresponding PRIMES scenarios:

- The European Energy and Transport Trends by 2030 / 2007 / Baseline

- The PRIMES scenario on meeting both EU targets by 2020

(20% GHG reduction and 20% RES by 2020) / 2008

- The European Energy and Transport Trends by 2030 / 2007 / Efficiency case



Key assumptions: on future energy and CO2 prices

• Fossil energy

prices

• CO2 prices


Reference prices for electricity, heat and transport fuels

(referring to the default case of strengthened national policies)


Key assumptions: on future sectoral energy prices



Key assumptions: RES Costs

0 20 40 60 80 100 120 140 160 180 200 220

Biogas

(Solid) Biomass co-firing

(Solid) Biomass

Biowaste

Geothermal electricity

Hydro large-scale

Hydro small-scale

Photovoltaics

Solar thermal electricity

Tide & Wave

Wind onshore

Wind offshore

Cost of electricity (LRMC - payback time: 15 years) [€/MWh]

cost range (LRMC)

Cu

rre

nt

ma

rke

t p

rice

PV: 430 to 1640 €/MWh

*Ranges of long-term marginal generation cost (for 2006) for various RES

technologies in the electricity sector (above)



Key assumptions: RES Costs

RES Costs Assumptions on expected future technological progress (technological learning).

Resulting (investment) cost reduction.

RES-Electricity technologies

35%40%45%50%55%60%65%70%75%80%85%90%95%

100%105%110%115%120%

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

20

22

20

24

20

26

20

28

20

30

Co

st

red

uc

tio

n -

sh

are

of

init

ial

inv

es

tme

nt

co

sts

(a

s i

n t

he

ye

ar

20

06

) [%

]

Hydropower

Geothermal electricity

Solid biomass - cofiring &large-scale plant

Solid biomass - small-scale CHP

Gaseous biomass

Gaseous biomass CHP

Wind energy

Tidal & wave

Solar thermal electricity

Photovoltaics

*High energy prices changed the overall situation. Prior learning expectations will not be met

with a continuation of high energy prices (i.e. an increase of investment cost could be observed for

almost all energy technologies in 2006 to 2008 caused by increasing energy and raw material prices)


Key assumptions: on the future energy demand

Development over time (gross final energy demand)

Scenarios assumptions for the case of Finland


Key assumptions: on the future energy demand

Demand by sector in 2020

Scenarios assumptions for the case of Finland


Scenarios on meeting Finland’s 2020 RES commitment

Development over time in relative terms (RES share in gross final

energy demand) referring to “low energy demand growth”

National RES deployment [% - share of gross final energy demand]

low energy demand growth (PRIMES high energy efficiency

case)

moderate energy demand

(growth) (PRIMES 20% case)

NAT - National perspective 43,7% 39,6%

EU - European perspective 44,3% 41,3%

ACT - Proactive RES support 51,0% 46,5%


RES share in corresponding (gross) demand in 2020 by sector


Sectoral RES deployment by 2020 [%

- share of corresponding (gross)

demand]

low energy demand growth

(PRIMES high energy

efficiency case)


growth (PRIMES 20% case)

RES-Electricity

RES-Heat BiofuelsRES-

ElectricityRES-Heat Biofuels

NAT - National perspective 30,7% 66,0% 10,0% 27,2% 60,3% 10,0%

EU - European perspective 30,9% 66,9% 10,0% 29,4% 62,5% 10,0%

ACT - Proactive RES support 45,3% 71,0% 10,0% 41,2% 65,0% 10,0%


RES deployment in 2020 by sector


Sectoral RES deployment by 2020

[ktoe]

low energy demand growth

(PRIMES high energy

efficiency case)


growth (PRIMES 20% case)

RES-


RES-


NAT - National perspective 2.423 7.738 381 2.462 7.765 425

EU - European perspective 2.442 7.852 381 2.660 8.043 425

ACT - Proactive RES support 3.577 8.335 381 3.734 8.370 425


Development over time - NAT case: low energy demand (growth)



RES deployment in 2020 by sector“low energy demand growth” (left) versus “moderate energy demand growth” (right)


0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000

NAT - National perspective

EU - European perspective

ACT - Proactive RES support

RES deployment by 2020 [ktoe]

RES-Electricity RES-Heat Biofuels

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000

NAT - National perspective

EU - European perspective

ACT - Proactive RES support

RES deployment by 2020 [ktoe]

RES-Electricity RES-Heat Biofuels



RES-E capacity in 2020: low energy demand (growth)


Electricity generation from RES:

Referring to the

NAT-case at “low

energy demand

(growth)”



Heat generation from RES:

Referring to the

NAT-case at “low

energy demand

(growth)”



Measures for achieving the target

Measures on administrative procedures, regulations and codes:

• Should authorization procedure take into account the specificities of different renewable energy

technologies?

• Should the renewable energy potential be taken into account in spatial planning?

• Should timetables for processing applications be communicated in advance?

• How many steps should be needed to obtain the final authorization? Should there be a one-stop

shop for coordinating all the steps?

Measures concerning buildings:

• What measures should be introduced into the building codes to ensure the share of renewable

energy used in the building sector will increase?

• How should an obligation for minimum levels of renewable energy in new and newly refurbished

buildings be drafted to best ensure renewable energy integration in buildings? At what levels

should it be set?

• What is the projected increase of renewable energy use in the building sector until 2020?


Measures for achieving the target

Measures on information:

• How should specific information be targeted at different groups, as end consumers, builders, property

managers, property agents, installers, architects, farmers, suppliers of equipment using renewable energy

sources, public administration?

• How should guidance for planners and architects be provided to help them consider the optimal combination of

renewable energy sources, high efficiency technologies and district heating and cooling when planning,

designing, building and renovating industrial or residential areas?

Measures on electricity infrastructure development:

• Should there be priority connection rights or reserved connection capacities provided for new installations

producing electricity from renewable energy sources?

Priority/guaranteed access to the grid:• Should priority or guaranteed access be ensured? Explain.

• How should it be ensured that transmission system operators, when dispatching electricity generating

installations give priority to those using renewable energy sources?

• How should the transmission and distribution of electricity from renewable energy sources be guaranteed by the

transmission and distribution system operators?


Financial support

Weighted average (2011 to 2020) total remuneration for yearly new RES

installation in Finland – NAT and ACT scenario

NAT (National target

fulf illment)

ACT (proactive support -

realisable deployment)

Biogas 61.3 106.3

(Solid) Biomass 63.7 130.5

Biowaste 57.1 95.7

Geothermal electricity 0.0 0.0

Hydro large-scale 61.5 106.1

Hydro small-scale 0.0 108.2

Photovoltaics 0.0 350.3

Solar thermal electricity 0.0 0.0

Tide & Wave 0.0 0.0

Wind onshore 62.1 87.5

Wind offshore 0.0 106.5

RES-E (average) 63.3 137.8

RES heat (district heat) 49.2 78.8

RES heat (decentral) 86.8 129.0

Biofuel (average) 101.7 101.7

RES policy indicator

(i.e. required total

remuneration)

Weighted average (2011 to 2020) total

remuneration for yearly new RES installations

[€/MWhRES]


Increasing biomass availability

Availability of biomass in Finland

NAT scenario ACT scenario

• The total primary energy use of biomass in 2020 is with 10,444 ktoe in the NAT and

11,862 ktoe in the ACT scenarios similar in both scenarios.

• In both scenarios, forestry products and forestry residues are strongly dominating the

market, while only small amounts of biomass get imported.

Finland ACT (proactive support - realisable deployment)

Feedstock category UnitTotal

2015

Imports

2015

Total

2020

Imports

2020

Agricultural products [ktoe] 217 35 267 129

Agricultural residues [ktoe] 334 : 448 :

Forestry products [ktoe] 5.573 : 6.046 :

Forestry residues [ktoe] 3.872 313 4.020 675

Biowaste [ktoe] 234 : 276 :

Total biomass availibility [ktoe] 10.577 11.862

Finland NAT (National target fulfillment)

Feedstock category UnitTotal

2015

Imports

2015

Total

2020

Imports

2020

Agricultural products [ktoe] 168 35 220 129

Agricultural residues [ktoe] 329 : 407 :

Forestry products [ktoe] 4.976 : 5.259 :

Forestry residues [ktoe] 3.872 153 3.970 183

Biowaste [ktoe] 233 : 275 :

Total biomass availibility [ktoe] 9.765 10.444


Flexibility/Joint projects/European perspective

Excess and deficit production of renewables compared to the indicative trajectory in Finland

FinlandNAT (National target fulfillment)

Sector UnitAverage

2011 - 2012

Average

2013 - 2014

Average

2015 - 2016

Average

2017 - 20182020

Excess [ktoe] 1.377 1.238 1.058 761 424

Deficit [ktoe] : : : : :

FinlandEU (European perspercitve)

Sector UnitAverage

2011 - 2012

Average

2013 - 2014

Average

2015 - 2016

Average

2017 - 20182020

Excess [ktoe] 1.433 1.362 1.332 1.170 900


FinlandACT (proactive support - realisable deployment)

Sector UnitAverage

2011 - 2012

Average

2013 - 2014

Average

2015 - 2016

Average

2017 - 20182020

Excess [ktoe] 1.689 1.903 2.065 2.183 2.301



Costs & benefits* of the future RES deployment (new installations 2006 to 2020)*monetary expression – limited to direct avoidance of fossil fuels and the corresponding contribution to combat climate change

Referring to “low

energy demand

(growth)”

Estimated costs & benefits of RES policy support measures


Costs & benefits* of the future RES deployment (new installations 2006 to 2020)*monetary expression – limited to direct avoidance of fossil fuels and the corresponding contribution to combat climate change

Referring to

“moderate

energy demand

(growth)”



Policy evaluation: RES deployment versus policy cost (consumer expenditures)



Concluding remarks for Finland

• In the NAT and ACT scenarios Finland achieve its 38% 2020 RES target.

• An important growth will have particularly the RES-E sector up to 2020.

• In the RES-E sector a key role will play biomass (solid) and hydro (large & small

scale).

• Biomass (decentral & grid connected) will generate the mayor contribution in the

RES-H sector.

• The 10% target of RES in transport will be mainly fulfilled through biofuels imports.

• Increased RES deployment brings large benefits to Finland’s supply security.

• Increased penetration of RES does have a price but actual costs and benefits are strongly influenced by the future energy price & demand development.


General remarks (EU level)

Necessary steps to let the target of 20% RES by 2020 become reality:

• Removal of non-economic barriers of an accelerated RES deployment is a

precondition for reaching the 2020 RES commitment (at moderate cost)

• A stable effective & efficient RES policy based on technology-specific support

is a key success criterion – “Stop-and-Go(GO)” policies increase the cost of meeting

Europe’s RES commitment

• Ambitious RES support needs to be accomplished by a strong energy efficiency policy

• The new policy framework requires strong central coordination to assure the

required flexibility (for RES target achievement)

o continuous monitoring of member states progress

o transparency (e.g. trading platform)

o clear enforcement mechanism (in case of non-compliance)

Thanks for your attention!Thanks for your attention!

In case of questions / remarks:

• Email: [email protected]

• or http://www.repap2020.eu


Background information: the Green-X model


Overview on economic & technical specifications for new RES-E plant


Overview on economic & technical specifications for new RES-H plant (grid & non-grid)


Overview on economic & technical specifications for new RES-T plant

Documents

Renewable Energy Industry Roadmap for Finland · Mario Ragwitz 1, Daniel Rosende 1, Gustav Resch 2, Christian Panzer2 1Fraunhofer Institute Systems and Innovation Research (Fh-ISI)