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Wind Energy Lessons from the European Experience

• Kiev, November 3, 2009
• Kevin Mason

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Outline

• Overview of Wind Power in the World and in Europe
  
• Strong Growth in Recent Years
• Legal Framework
• Challenges to Expansion of Wind Power in Europe
• Technical Challenges
• Legal Challenges
• Overcoming the Challenges
• Prospects for the Future

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Overview of Wind Power in the World and in Europe

• Recent growth in wind power can only be described
  as astronomical
• Number of stations
• Quantity of electricity generated
• Turnover
• Investments
• Europe is a world leader in development of wind
  power as a way to generate electricity and also
  minimize negative externalities (costs borne by
  society or third parties)
• Germany is a leader in development of wind energy
  within the European Union (some 25,000 wind
  turbines as of 2009)

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Total wind power installed in the world since
1993 (in MW)
Source Systêmes Solaires, EurObservER, No. 177,
2007
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Breakdown of worldwide wind power at the end of
2006
Source Systêmes Solaires, EurObservER, No. 177,
2007
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Source BMU-Brochure Renewable energy sources in
figures national and international
development, June 2007, provisional figures
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Source BMU-Brochure Renewable energy sources in
figures national and international
development, June 2007, provisional figures
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(No Transcript)
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Source Federal Ministry for the Environment,
Nature Conservation and Nuclear Safety,
Development of Renewable Energy Sources in
Germany in 2007, March 2008
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EU Statutory Framework

• directive 2001/77/EC of 27 September 2001
• commitment of the member states to foster the
  consumption of electricity from renewable energy
  sources (RES-E)
• indicative target 12 gross national energy
  consumption by 2010
• no default measures
• commitment of the member states to national
  indicative targets on the basis of reference
  values mentioned in the directive
• European Commission supervises the compliance
  with the global indicative target and may provide
  mandatory national targets where necessary
• all support schemes are however subject to the
  provisions in article 87 and 88 of the European
  Treaty

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Support Schemes

• Four support schemes have been established in the
  EU
• Feed-In Tariffs
• Quotas/Green Certificates
• Tax benefits
• Tender
• These support schemes partially overlap, meaning
  that a developer/operator may be able to take
  advantage of more than one support

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Feed-In Tariffs

• The feed-in tariff is fixed by the state for a
  certain period of time (minimum tariff)
• Grid system operators are obliged to purchase the
  RES-E at this fixed tariff
• Variant premium system
• RES-E is traded at conventional energy-market
  prices, with the producer additionally receiving
  a fixed bonus (premium).
• Additional costs are passed through to the energy
  consumer (estimated at 1.01 (1.55) per
  household electricity bill per month)

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Quotas/Green Certificates

• Producers of RES-E issue certificates for
  specific amounts of energy produced (Green
  Certificates)
• The consumers or in some countries (BE, UK,
  IT), the electricity suppliers must purchase a
  fixed amount of these Green Certificates,
  depending either on their consumption of
  electricity or the amount of electricity produced
  by them (Quota)
• If the Quota is not achieved, a penalty must be
  paid (not in PL)
• Green Certificates are freely tradeable
  therefore, a secondary market exists in which the
  producers of RES-E compete with each other

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Tax benefits/Tender

• Tax benefits
• Producers of RES-E obtain tax reductions or
  exemptions
• Often used as an additional incentive (i.e. UK,
  CZ)
• Tender
• The state places a series of tenders for the
  supply of RES-E on a contractual basis
• The price results from the tender
• Additional costs are passed on to the energy
  consumer through a specific contribution

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Source Fraunhofer Institute Systems and
Innovation Research, Karlsruhe
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Selected German Laws
Renewable Energy Sources Act (EEG)

• Obligations of the grid system operators
• Connect plants generating RES-E to their grid as
  a matter of priority
• Purchase and transmit all RES-E as a matter of
  priority
• If the grid capacity is insufficient, upgrade the
  grid at a reasonable economic expense
• Pay a minimum tariff to the plant operator
  (normally guaranteed for 20 years) for RES-E
  (feed-in tariff)
• Progress report by 31 December 2007 and every
  four years thereafter

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Challenges for the wind power industry to
overcome are both technical and legal in nature

• Technical challenges include
• Variable output
• Grid interconnection and location of consumers
• Small number of good locations available
• Expense (who will pay for wind farms and grid
  expansion?)
• Certain legal challenges arise as a result of
  technical challenges. In particular

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NIMBY was the single biggest challenge to
expanding the wind energy industry in Germany

• NIMBY Not In My Back Yard
• Everybody is for the environment, everybody is in
  favor of clean and green and renewable energy,
  but many citizens do not want to live next to a
  wind farm
• Some citizen objections to locating a wind farm
  near their home or land
• Shadows
• Noises
• Safety
• Birds
• Further, wind farms can only be located in some
  locations (wind, aircraft, etc.)

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Some German responses to legal and technical
challenges

• Electricity grid operators are to pay for the
  expansion of the electricity grid to accommodate
  wind farms
• Lawmakers have supported laws making zoning
  objections more difficult for citizens opposing a
  local wind farm
• After the elections in Germany, the future of
  subsidies for wind energy are unclear
• However this still does not solve all problems
  of location in spite of the advanced
  development of its wind farm industry, Germany
  still needs more farms, and there is still not
  enough suitable land.

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To solve the location problem

• Wind
• Offshore wind farms
• Repowering existing wind farms

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Wind Onshore

• The minimum tariff is 8.19 Cents/kWh initially
  (commissioning in 2007). 5 years after
  commissioning, this declines to 5.17 Cents/kWh,
  if the output of the facility during this period
  of time reaches 150 of the calculated output of
  a reference plant (reference yield)
• If this yield is not achieved, the initial
  minimal tariff is extended by 2 months for each
  0.75 that the actual yield stays below 150 of
  the reference yield
• The extension is 2 months for each 0.6 , if
  plants are replaced, which were commissioned no
  later than 31 December 1995 in the same rural
  district and thereby the installed capacity will
  be at least tripled (repowering plants)
• The minimum tariff received will be reduced by 2
  annually beginning 01 January 2005

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Wind Offshore

• The minimum tariff is 6.19 Cents/kWh initially,
  if the facility is located a distance of at least
  3 nautical miles from the coast (offshore wind
  power plants)
• A bonus of 2.91 Cents/kWh is granted for a period
  of 12 years starting from the date of
  commissioning, if the plant was commissioned no
  later than 31 December 2010
• For each nautical mile exceeding 12, this period
  is extended by 0.5 months and by 1.7 months for
  each full metre of water depth exceeding 20
  metres
• The annual tariff reduction of 2 starts for
  offshore wind power plants in 2008

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Repowering existing wind farm stations

• Repowering a wind farm is the installation of
  new and more modern electricity generation
  equipment in an existing wind farm
• Result a more efficient wind farm located in a
  prime location
• Repowering is supported in the Renewable Energy
  Sources Act (EEG 2009) which went into force
  January 1, 2009

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Contact

• Alexander Weigelt
• Kevin Mason
• 7/11 Khreschatykstreet
• 01001, Kiev, Ukraine
• Tel [phone]
• Fax [phone]
• E-mail kevin.mason_at_noerr.com
• www.noerr.com