UK&Germany Renewable Energy Policy Comparison Yousif Eltom

8/7/2019 UK&Germany Renewable Energy Policy Comparison Yousif Eltom

http://slidepdf.com/reader/full/ukgermany-renewable-energy-policy-comparison-yousif-eltom 1/16

A COMPARISON BETWEEN THE

RENEWABLE ENERGY POLICIES OF THEUK AND GERMANY

YOUSIF ELTOM | 061413353 | RENEWABLE ENERGY ME4504



EXECUTIVE SUMMARY

Due to the world’s rising energy costs and energy demands, alongside with evidence that

conventional fossil fuel energy is peaking there is growing concern as to how the world can

secure its future energy supply.The European Renewable Energy Directive which was issued in 2009 outlines how member’s

states of the European Union should work towards securing a stable and sustainable supply

of energy from renewable sources.

The UK was set a target of achieving 15% of final energy consumption from renewable

sources by 2020 and Germany were set a target of 18%, for which each country has to

develop an action plan on how they aim to achieve their respective targets.

The UK’s main policy instrument is to use renewable obligations (RO), which obliges

electricity suppliers to source a certain quota of their supply from renewable sources.

Besides this, the UK also implemented a feed in tariff for small scale low carbon electricity to

promote the use of small scale system in households and businesses. The UK Government

has also recently issued plans to implement a renewable heat incentive to provide funding

for heat generation from renewable sources. Finally, in terms of biofuel application, the UK

has put into place a renewable transport fuel obligation (RTFO) which obliges fuel suppliersto supply a certain amount of fuel from renewable sources.

Germany has been a world leader in the solar PV and wind energy industry and has

exploited this over the last decade. Germany’s main policy instrument focuses on providing

feed in tariffs for the supply of energy from renewable sources, and provides the electricity

suppliers with premium fees for providing electricity from renewable sources. The German

government has implemented a renewable heat incentive which actually obliges

homeowners to source a certain amount of heat from renewable sources, with a certain

amount required depending on the technology applied. Furthermore, to promote the use

of biofuels, Germany provides tax incentives on the use of biofuels in an attempt to reach

their target of 10% renewable share of fuel market by 2020.

Both governments are on track to reach their 2020 targets, however Germany is expected

to surpass their target and achieve 19.6% of final energy consumption from renewable

sources



TABLE OF CONTENTS

Executive Summary .................................................................................................................... 2

Introduction ............................................................................................................................... 4

European Renewable Energy Directive 2009 ............................................................................ 6

UK Renewable Energy Policy ..................................................................................................... 7

UK Policy instruments ............................................................................................................. 8

Renewable Obligations ....................................................................................................... 8

Feed in Tariffs ...................................................................................................................... 9

Renewable transport fuel obligation .................................................................................. 9

German Renewable Energy Policy ........................................................................................... 10

Germany Policy Instruments ................................................................................................ 11

Feed-in Tariffs .................................................................................................................... 11

Renewable Heat Incentives ............................................................................................... 12

Biofuel tax Exemption ....................................................................................................... 12

Conclusion ................................................................................................................................ 13

References ............................................................................................................................... 15



INTRODUCTION

According to the International Energy agency, the worldwide energy demand will rise by

45% from 2006 to 20301. With oil and gas production either at its peak or very close to

peaking2, the need for sustainable renewable energy is required with immediate effect.

3The world finds itself in a situation of great concern whereby the consumption of energy

continues to rise, however significant steps haven’t been taken to secure its future energy

supply. The added challenge of ensuring the effects to climate change is correctly observed,

coupled with the ongoing rise in energy costs has made the world very vulnerable.

The renewable energy sector is one which immediately grasps attention as a possible means

to supply the growing world energy demand. It is also capable of reducing green house

emissions and pollution and can grown to becoming recognised as the only sector capable

of providing clean energy.

One of the main driving forces was the Kyoto protocol which was initiated in 1997,

whereupon nations agreed on combating carbon emissions individually. The European

Union decided to develop its own targets and in 1997 started to work towards a 12% share

of renewable in energy consumption by 2010; however this target was not reached due to

Figure 1. Future World Energy Demands

3



many reasons. Primarily, the fact that the application of renewables is not economically

viable compared to fossil fuels led to the neglect of renewable. The absence of any real

legally binding targets also meant only a few member states would actually work towards

meeting their target.

This lead to the European Union agreeing in 2009 to implement the European Renewable

Energy Directive, with specific targets for each member state which they had to reach

before 2020.



EUROPEAN RENEWABLE ENERGY DIRECTIVE 2009

The European parliament and the council of the European Union issued in 2009 a directive for

the renewable energy targets of member states which they aim to achieve by 2020.

Germany and the UK are both member states and have signed up to the Directive which if

met, can provide a huge influx of funding in the area and create many job opportunities, the

UK believes over £100bn in investments can be sought and the creation of nearly half a

million jobs4. Provided that the targets could be met, it will also show the countries

commitment to preventing climate change and will be the foundation for which the

member states can build their future energy supply.

The Directive sets out targets for member states based on their renewable energy supply in

2005, with the aim of the European Commission as a whole to supply a 20% share of energy

from renewable energy sources and a minimum of 10% of transport energy to be supplied

from renewable sources5.

In 2005, the UK’s share of energy from renewable sources was 1.3% and Germany’s share of

energy from renewable sources was 5.8%. This lead to the targets for 2020 as set by the

European Commission to be 15% and 18% for the UK and Germany, respectively5. The

progress made by each member state is correlated to a trajectory starting in 2005 when the

latest and most accurate statistics were recorded, and should a member state fall outside

the trajectory, a review of how the member state will tackle the deficit should be reported

to the European Commission5.

The European directive is the key driver for the UK and Germany to embrace renewable

sources as a means to generate their national energy demands. Furthermore the directive

can lead to many investment opportunities and therefore it is in the best interest for the

member states to strive to implement meaningful policy instruments in order to take fulladvantage of the targets set by the European Commission, which will essentially lead to the

UK and Germany having a more secure energy supply from renewable sources opposed to

the great amount of energy consumed from fossil fuel sources.

Both the UK and Germany have developed action plans which were submitted to the

European Commission outlining their intended path to reaching their set targets. The action

plans are the basis for the policies set forth by the UK and Germany, and outline the

mechanism through which the UK and Germany aim to achieve their targets for 2020.



UK RENEWABLE ENERGY POLICY

The UK energy market (generation, transmission, distribution and supply) is almost wholly

run by the private sector6

which has increased reliability and investment besides leading to

reduced energy costs, however the UK cannot single handedly implement changes to the

sector, therefore must provide reasonably lucrative incentives and regulations to generate

interest from the private sector to embrace renewable energy.

In order to achieve the 2020 target, the UK has put forward a lead scenario19

which will lead

to achieving their 2020 targets. This lead scenario summarises the below: - More than 30% of the UK electricity generated will be from renewables, which is

over 5 times fold from the current 5.5% usage. This additional generation will be

from wind power, biomass, hydro and wave and tidal.

- 12% of heat will be generated from renewable. This is expected to come from a

range of sources including biomass, biogas, solar and heat pump sources. They will

be applied in homes, businesses and communities.

- 10% of transport energy from renewables, which will be significant increase from

current levels of 2.6%.

Outlined in the action plan submitted to the European Commission7

and in the UK

Renewable energy strategy8, the UK government aims to take a ‘strategic’

8 role in the drive

for greater renewable energy supply and has based its framework on three key

components6, 7

:

1. Providing more financial support to the renewables market

2. Removing all barriers to the delivery of renewable energy

3. Promoting and pushing the development of emerging technologies and resources



UK POLICY INSTRUMENTS

The UK renewable energy strategy sets out achieve its target for 2020 by providing long

term financial support to the energy market and using this to promote the use of renewable

energies.

RENEWABLE OBLIGATIONS

The main policy instrument implemented by the UK to incentivise renewable electricity

supply is the renewable obligation, which requires electricity providers to source a specific

and increasing amount of their electricity from renewable sources.

If an electricity supplier does not meet the quota for the renewable energy it supply’s it

must pay a penalty known as a buy-out price. Currently this is £36.999

per ROC (Renewable

Obligation Certificate) and electricity suppliers are obliged to source 11.1 ROC’s per 100

MWh for England and Wales. The scheme is currently administered by OFGEM (Office of the

Gas and Electricity Markets) however from 2011-2012 will be transferred to (DECC) the

Department for Energy and Climate Change.

The ROC’s are given to accredited renewable energy generators by OFGEM for their

qualifying output. Until 2000 each ROC represented 1 MWh however since April 2009 each

ROC has been banded according to the type of technology used to generate the electricity,

this banding promotes emerging technologies10

.

In addition to the RO, renewable energy is further incentivised by the climate change levy

which exempts renewable electricity from the climate change levy of £4.30/MWh.

Established Band

0.25 -0.5 ROCs/MWh

E.g. landfill Gas,sewage Gas

Reference Band

1 ROCs/MWh

E.g. On-ShoreWind,Hydroelectric,

Co-firing EnergyCrops/ Biomass

Post-Demonstration

band

1.5 ROCs/MWh

E.g. DedicatedBiomass, offshore

wind

EmergingTechnologies

2 ROCs/MWh

E.g. Wave, Tidal, SolarPV, Geothermal,

Gasification/Pyrolysis



FEED IN TARIFFS

Feed in tariffs were first drafted in the UK in 2008 during the Energy Act 2008, and have two

classifications.

- A feed-in tariff for small scale low-carbon electricity

- A renewable heat incentive

FEED IN TARIFF FOR SMALL SCALE LOW-CARBON ELECTRICITY

This tariff applies to small scale generation of electricity under 5MW to avoid confliction

with ROC’s and work on the basis that producer’s of small scale low-carbon electricity are

paid a premium for the electricity they produce. In April 2009 the system was first put into

practise, and electricity suppliers could earn between 4.5 and 41.3p/kWh11 of electricity

they produce depending on the technology used, with photovoltaic generating the largest

income.

RENEWABLE HEAT INCENTIVE

Similar to the feed in tariff for small scale low-carbon electricity, the renewable heat

incentive (RHI) is a policy instrument which the UK government intends to implement in

April 2011 which will provide financial support to those installing qualifying renewable heattechnologies. The introduction of the RHI shows the UK’s aim to honour its commitment to

increasing the amount of heat generated from renewable sources from 1% to 12%.

RENEWABLE TRANSPORT FUEL OBLIGATION

Since many vehicles can run on a combination of conventional fuel and biofuel, the UK

government introduced the Renewable transport fuel obligation (RTFO) in April 2008 to

promote the use of biofuels. The obligation ensures transport fuels contain a rising amount

of biofuel without requiring any modifications to the vehicle.

Similar to the renewable obligation, suppliers of fossil fuels for road transport are obliged to

prove that a certain quota of fuel they supply comes from renewable sources. For the

current Obligation period ending 14/04/2011 the price is 30 pence per litre. Currently the

target for the suppliers of fossil fuels is 3.63% by volume12

. The RTFO is the main policy

instrument which will drive the UK to reach its target of 10% of transport fuel from

renewable sources by 2020.



GERMAN RENEWABLE ENERGY POLICY

Since the early 1990’s Germany has been investing in renewable energies, and is world

renown for being a successful model for the implementation of renewable energy. This can

be seen by the gradual growth of the renewable energy market in Germany.

Figure 2. Figure showing the share of renewables of the German Final Energy Consumption13

The renewable energy market in German has already created over 250,000 jobs and

promises to provide much more. This is seen as a great economic stimulus as the world

reacts to the effects of the recession, even more the fact that in the implementation of the

Renewable Energy Source Act no public spending is involved, instead funding is attracted

from private investment, civil society, and financial investors.

The Renewable Energy Source Act was introduced in 2004 to facilitate the sustainable

development of energy supply, and had three further aims14

:

1. Reduce the cost of energy supply to the national economy

2. To promote the further development of technologies for generating electricity from

renewable sources

3. Contribute to the increase in percentage of energy from renewable sources to 20%

by 2020.

0

2

4

6

8

10

12

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

%

Year

Renewables as share of Final Energy

Consumption



These aims are within those set by the European directive, which states Germany should

aim to produce 18% of their final energy consumption from renewable sources. The German

Government has projected that it will pass this level, and can achieve 19.6% of their final

energy consumption from renewable sources

15

. Further to this the European Directive

expects Germany to achieve at least 10% share of renewable energy in final consumption of

transport energy by 2020.

GERMANY POLICY INSTRUMENTS

Besides the targets outlines by the European Directive, Germany has committed to increase

the electricity supplied by renewable sources to 30% by 2020, and the share of renewable

energy in the heat sector to 14% by 2020.

In order to reach its targets, Germany has three main policy instruments it utilises, these are

listed below16

:

1. Feed –in Tariffs for Renewable Electricity

2. Market Incentives for Renewable Heat

3. Tax Exemptions for Biofuels

FEED-IN TARIFFS

The German government has implemented feed-in tariffs since 1990, and have been

reviewed constantly since. Producers of electricity from renewable sources are paid a

premium tariff for a 20 year term for the electricity they produce from renewable sources.

They are paid per kWh of electricity produced, and this can vary between €3.50 – €36.00 per

kWh (£3.00-£30.00 per kWh) depending on the technology applied, with solar PV attractingthe largest income.

17

Germany also invest heavily in the solar PV market, and provides lucrative monetary

remunerations to those who wish to enter the PV market, with the exemption of VAT on

commercial systems one of the key policies. This has led to Germany maintaining its position

as the world leader in the PV market, with a growth of 111% from 1.8GW in 2008 to

3.806GW in 200918

.





CONCLUSION

Both policies of the UK and Germany concentrate on providing financial support to the

renewable energy industry as they see securing their future energy supply as imperative.

Germany is currently world renowned for its renewable energy applications and this is due

to the ability of the German government to foresee its future needs and being one of the

earliest country’s to administer a renewable energy policy; this proactiveness has given

Germany the head starts amongst most countries in Europe.

Unlike Germany, the UK was very slow to react when it came to installing renewable energy

systems and immediately recognizes the urgent need to switch to renewable energy

sources, an observation which is supported by its choice to use the terminology ‘radical’

when speaking about the need to change to renewable energy19

. This attitude must be

adopted because following Malta and Luxembourg, the UK has the world record of

renewable energy supply at 1.3% in 20054

and the only way the UK can meet its 2020 target

is to apply radical change, not transitional and not transformational.

Figure 4. Germany is only ahead of the UK due to their head start

The policies of both the UK and Germany have so far been effective, and this is mainly due

to the huge financial support both policies have contributed. The UK’s main policy

instrument is the RO and this has been amended many times to tweak the UK’s renewable

energy performance. Germany’s main policy is the feed-in tariff which promotes the use of

renewable sources to generate electricity and unlike the UK is not capped to a certain

UK Renewable

Energy Policy

GermanRenewable

Energy Policy



power output which has seen it being widely implemented, and promoting the use of

Germany’s well established solar PV market, wind energy and biofuels sectors.

Having said this, the UK is set to achieve its target of 15% of energy from renewable by

2020, whilst Germany is expected to surpass its target and generate 19.6% of its energy

from renewable in 202020

.



REFERENCES

1Tanaka,N. (2008). World energy outlook. International energy agency p78.

2 Sorrell,S. (2010). Global oil depletion:A review of the evidence. Energy Policy . 38, p5290.

3IEA. (2010). Key World Energy Statistics. International energy agency.p6

4DECC. (2011). The Renewable Energy Strategy (RES). Available:

http://www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/

res/res.aspx. Last accessed 12th Feb 2011.

5THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION. (2009).

Legislation L140. Official Journal of the European Union. 52, p16-44.

6

DECC. (2011). Regulation of GB energy markets. Available:http://www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/markets/regulation/reg

ulation.aspx. Last accessed 13th Feb 2011.

7DECC. (2010). The UK National Renewable Energy Action Plan . Available:

http://www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/

ored/uk_action_plan/uk_action_plan.aspx. Last accessed 12th Feb 2011

8HM Government (2009). The UK Renewable Energy Strategy . London: The Stationery

Office. P13.

9

OFGEM. (2011). THE RENEWABLES OBLIGATION BUY –

OUT PRICE AND MUTUALISATIONCEILING 2010-11. Available:

http://www.ofgem.gov.uk/Media/PressRel/Documents1/RO%20Buy-

Out%20price%202010%2011%20FINAL%20FINAL.pdf. Last accessed 16th February 2011.

10DECC. (2010). Department for Energy and Climate Change. Available:

http://chp.decc.gov.uk/cms/roc-banding/. Last accessed 17th Feb 2011.

11OFGEM. (2011). INTRODUCING THE FEED-IN TARIFF FACTSHEET. Available:

http://www.ofgem.gov.uk/Media/FactSheets/Documents1/fitfs_energy%20prices%20updat

e%20FS.pdf . Last Accessed 18th February 2011

12HM Government. (2009). The Renewable Transport Fuel Obligations (Amendment) Order

2009. Available: http://www.legislation.gov.uk/ukdsi/2009/9780111473665/article/4. Last

accessed 20th Februry 2011.

13Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. (2009).

RENEWABLE ENERGY SOURCES IN FIGURES National and international development.

Available:

http://www.bmu.de/files/english/renewable_energy/downloads/application/pdf/broschuer

e_ee_zahlen_en.pdf. Last accessed 20th February 2011.

14

Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. (2008).Act on granting priority to renewable energy sources. Renewable Energy Sources Act, EEG.




Federal Republic of Germany National Renewable Energy Action Plan in accordance with

Directive 2009/28/EC on the promotion of the use of energy from renewable sources.

Available: http://www.bmu.de/english/renewable_energy/downloads/doc/20026.php. Lastaccessed 20th February 2011.

16European Commission. (2009). Germany – Renewable Energy Fact Sheet. Available:

http://ec.europa.eu/energy/energy_policy/doc/factsheets/renewables/renewables_de_en.

pdf. Last accessed 22nd february 2011.


Act Revising the Legislation on Renewable Energy Sources in the Electricity Sector and

Amending Related Provisions – Renewable Energy Sources Act – EEG 2009 . Available:

http://www.bmu.de/english/renewable_energy/downloads/doc/42934.php. Last accessed

22nd february 2011.

18European Photovoltaic Industry Association. (2009). Global Market Outlook for

Photovoltaics until 2014. EPIA., pg12.

19HM Government (2009). The UK Renewable Energy Strategy . London: The Stationery

Office. p8.

20European Renewable Energy Council. (2011). EU Member States collectively forecast to

exceed the binding 20% RES target. Available:

http://www.erec.org/fileadmin/erec_docs/Documents/Press_Releases/EREC%20Press%20R

elease%20-%20Member%20States%20to%20Exceed%202020%20Targets.pdf . Last accessed23rd February 2011.