Tag Archives: united states

EU winter package brings renewables in from the cold

December 1, 2016 |

 

Joint press conference by Maroš Šefčovič and Miguel Arias Cañete on the adoption of a Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy

Christmas came early yesterday in Brussels, with the release of some heavy reading for the EU’s parliamentarians to digest over the festive season. Or at least that was the more jovial take on the launch of the EU winter package from Maroš Šefčovič, the EU vice-president in charge of the Energy Union (pictured).

Targets to cut energy use 30% by 2030, the phasing out of coal subsidies and regional cooperation on energy trading are central to the proposals, which updates the regulations and directives that support targets set out in 2014 as part of the Energy Package 2030.

Whether this gift is not just for Christmas will be down to the EU parliamentarians who have two years to debate these proposals and implement them.

So where does it leave us with the growth of renewables, the underpinning for a decarbonised power sector? If the EU meets its 2030 target, 50% of electricity should be renewable compared with an EU average of 29% today. That target remains unchanged, so those engaged in producing clean energy for Europe’s electricity grid should be reassured – up to a point.

A great deal was made of scrapping priority dispatch for renewables after that proposed change was ‘leaked’. In the end, the Commission merely soften its language but the outcome remains the same on priority dispatch, implying that policymakers think that renewable generation should be more responsive to the market.

Yesterday, Šefčovič and the Commissioner for Climate Action and Energy Miguel Arias Cañete both acknowledged that renewables need to be more integrated into wholesale markets, and those markets need to be more coordinated with each-other. Specifically, the package encourages member states to:

  • ensure that renewables participate in wholesale and balancing markets on a “level playing field” with other technologies. In particular, the new package removes the requirement for renewables to be given priority dispatch over other generation types (which most, but not all, member states currently abide by). It instead requires dispatch which is “non-discriminatory and market based”, with a few exceptions such as small-scale renewables (<500kW). In addition, renewables should face balancing risk and participate in wholesale and balancing markets.
  • increase integration between national electricity markets across the EU. Requirements include opening national capacity auctions to cross-border participation and an interconnection target of 15% by 2030 (ie, connecting 15% of installed electricity production capacity with neighbouring regions and countries). Earlier this year, the Commission established an expert group to guide member states and regions through this process.

What does this all mean for investors? The obvious concern is that removal of priority dispatch and exposure to balancing markets will increase revenue risk for renewables generators.

So, why is the EU removing these rules on priority dispatch once the mainstay of the Commission’s wholesale market rules? The main argument is to help reduce the costs of balancing supply and demand, and managing network constraints. Generally, it is most economic to dispatch renewables first because their running costs are close to zero regardless of whether they have priority dispatch.

But, when there is surplus generation, the most economic option is sometimes to curtail renewables ahead of other plant. For example, turning down an inflexible gas plant only to restart and ramp it up a few hours later can be expensive and inefficient. By contrast, wind generators can be turned down relatively easily.

Therefore, giving renewables priority dispatch can sometimes increase the overall costs of managing the system. When renewables were a small part of the market, any inefficiencies caused by priority dispatch were small and easy to ignore, while it helped reduce risks around renewables investment. But now renewables are set to become the dominant part of electricity markets it is harder to ignore.

Nevertheless, risks around balancing for wind can cause real headaches for investors. In our report from earlier this year, Policy and investment in German renewable energy we found that economic curtailment could increase significantly, potentially adding 17% to onshore wind costs by 2020.

The amount a generator is curtailed depends on a wide range of uncertain factors which wind investors have little or no control over (eg, electricity demand, international energy planning, network developments and future curtailment rules).

What could happen next?

So to maintain investor confidence (and avoid costly lawsuits) existing renewables investments need to be financially protected as rules are changed. There are many ways to do this. For example, priority dispatch status could be grandfathered for existing generators (as the winter package suggests) or, as set out in our recent report of Germany, generators could be fully compensated for curtailment through “take-or-pay” arrangements.

More generally, very clear rules around plant dispatch and curtailment are needed to avoid deterring investment. Ideally, dispatch will be determined by competitive, well-functioning balancing markets, where renewables are paid to be turned down based on what they offer, rather than by a central system operator curtailing without compensation.

The move to integrate renewables into balancing markets means they will compete with other options to balance the system such as storage and demand-side measures. These flexibility options should benefit from the sharper price signals and greater interconnection implied by winter package. But there is no clear consensus yet on the right business and regulatory models to support investment in flexibility. However, CPI is currently working on a programme as part of the Energy Transitions Commission to explore the role of flexibility in a modern, decarbonised grid and will be publishing our findings soon.

Ultimately, there is an unavoidable trade-off in designing electricity markets: it is very difficult to provide incentives for generators, storage and the demand-side to dispatch efficiently through market mechanisms without also exposing them to some risk. Yesterday’s announcement in the winter package means more countries will have to face this dilemma.

Disclaimer: Unless otherwise stated, the information in this blog is not supported by CPI evidence-based content. Views expressed are those of the author.

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What’s working and what’s not in state renewable portfolio standards

July 11, 2013 |

 

Combined renewable portfolio standards in the United StatesRenewable portfolio standards (RPS) are an important part of the U.S. renewable energy policy landscape.Twenty-nine states, from California to North Carolina, have enacted these policies to require utilities to provide at least some of their power from renewable sources. This year, at least fourteen of these states considered bills that would have watered down or repealed these policies. But these rollbacks proved to be unpopular, and on balance state legislatures have made RPS policies more ambitious in 2013.

Taken together, RPS policies will require nearly 10% of electricity sold in the U.S. to come from renewable sources by 2020. And with the help of federal tax credits, grants and loan guarantees, most RPS policies appear to have had limited impacts on electricity rates so far. But every state’s RPS is different, and the diversity of policy designs is a great opportunity to learn what is working well and what can be improved in these policies.

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Obama’s climate plan and what it means for states

June 28, 2013 |

 

This post originally appeared on The Huffington Post.

In his climate speech this week, President Obama gave the go ahead for the U.S. Environmental Protection Agency (EPA) to develop national greenhouse gas standards for both new and existing power plants — making carbon regulation under the Clean Air Act the primary action of his broader plan to reduce U.S. carbon emissions.

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In Prop 39 agreement, mixed news for schools and the climate — and some remaining questions

June 27, 2013 |

 

Today, California Governor Jerry Brown signs the state budget for 2013-2014, including a bill that will allocate Proposition 39 funds — an estimated $2.75 billion over five years — for energy-saving projects in schools.

In our analysis of school districts’ resources and needs, we found that Proposition 39 can most effectively drive energy savings in schools if it provides financial assistance that takes into account the wide variation in school districts’ existing resources and needs, and if it also offers technical assistance to help districts identify projects and put together funding. So how did these goals fare in the legislative process?

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The next step for U.S. renewables is to drive low-cost private investment – and to do so as cost-effectively as possible

June 25, 2013 |

 

Today President Obama announced a goal to double renewable electricity generation by 2020 as part of a broader plan to tackle carbon pollution in the U.S.

Reaching this goal would add to the substantial renewable energy capacity the U.S. can already boast: Over the past five years, U.S. workers have built enough wind and solar farms to power over six million homes with clean energy. And in 2012, renewables comprised more than half of all new power generation in 2012 in the U.S. — surpassing all other sources including natural gas.

I recently worked with the American Council on Renewable Energy and CalCEF to look at the state of finance for renewable energy in the U.S. And in a paper released at the Renewable Energy Finance Forum – Wall Street today, we point out that this boom was enabled by the alignment of federal, state, and private interests: State-level renewable portfolio standards helped create a market for renewable electricity, federal incentives helped cover the incremental cost of that electricity, while private investors have contributed tens of billions of dollars to getting wind and solar off the ground.

So what’s the next step? What needs to happen to reach Obama’s targets?

We argue that the next step for U.S. renewable energy is to drive low-cost private investment — and to do so as cost-effectively as possibly.  CPI analysis points to five practical ways do this.

1. Maintain consistent, long-term policies by building on the success of current policy efforts. Catalyzing change in a highly regulated industry such as electricity is difficult.

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Renewables and the U.S. Defense Department

February 1, 2012 |

 

The American Council on Renewable Energy (ACORE)’s webinar last month on Security, Sustainability, and Renewables was the latest in a series of recent renewable energy policy discussions to highlight growing interest in the emerging opportunities for the renewable sector to work with the U.S. military. Interest in military applications of renewables have risen at least in part due to federal policy uncertainty. The impending expiration of several renewables incentives (such as the Recovery Act’s tax grant program and the production tax credit for wind) along with the budget constraints arising from the political impasse over government spending and debt suggest the real possiblity of significantly lower direct federal government support for renewable technology R&D and deployment. As a result, there is growing interest in looking for ways to improve the efficiency of existing renewable policies as well as looking for opportunities for hedging against possible removal of support (see for example, the work of the Bipartisan Policy Center on more efficient subsidies for renewables).

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Cost savings from U.S. state building energy codes: A first look

January 1, 2012 |

 

recent CPI study estimated the impacts of U.S. building energy codes on energy use and carbon emissions in new homes.  While energy savings is a very logical place to start in measuring the effectiveness of these codes, it’s also important to understand their impact on costs.  Much of the appeal of energy efficiency programs lies in the persistent finding that they are very cost-effective, often paying for themselves with their own energy savings over time.

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