Support regimes for offshore wind in Europe Florian Bauernfeind

Transcription

1 Winter Academy 2018 Trading, Sales and Financing in the European Energy Market and Industry Support regimes for offshore wind in Europe Florian Bauernfeind Vattenfall

2 Agenda 1. Wind Power in Vattenfall 2. The cost reduction path in offshore wind 3. National offshore wind support regimes UK Germany Netherlands Denmark 4. Conclusions

3 Agenda 1. Wind Power in Vattenfall 2. The cost reduction path in offshore wind 3. National offshore wind support regimes UK Germany Netherlands Denmark 4. Conclusions

4 Vattenfall at a glance One of Europe s largest generators of electricity and heat 100% owned by the State of Sweden Vattenfall has approx. 6.2 million electricity customers, 3.2 million electricity network customer and 2.1 million gas customers Net sales in 2017: 13.7 million Operations mainly in Denmark, Finland, Germany, Netherlands, Sweden and the UK Main products: electricity, heat, gas, energy services Business operations: Production, Trading, Distribution, Sales and energy services 4

5 Vattenfall Wind Power - Overview 5

6 Vattenfall Wind Power - Overview Offshore wind is experiencing a learning curve similar to other renewable technologies, from learning to fine-tuning. Vattenfall has been setting sustainable and new benchmarks throughout the whole journey of cost reductions. The development over the last years ensures offshore wind a long term position in the energy production mix, with benefits for the customers and the most competitive developers/operators. 6

7 Vattenfall Offshore Wind - Overview 7

8 Agenda 1. Wind Power in Vattenfall 2. The cost reduction path in offshore wind 3. National offshore wind support regimes UK Germany Netherlands Denmark 4. Conclusions

9 Cumulated wind energy capacities (on- & offshore) in the EU in 2016 ( 154 GW) Offshore by country Sources: WindEurope, Wind in power 2016 European statistics, Annual Offshore Statistics,

10 Future offshore wind volumes? The offshore wind industry needs market volume and certainty for the continuation of technological innovations and cost reductions. 10

11 Offshore wind an industry in rapid change 11

12 Technological Innovation It s all about scale! ,45MW 35m RØ 2,0MW 76m RØ 2,3MW 82m RØ 2,3MW 93m RØ 3,6MW 120m RØ 6,0MW 154m RØ 8MW+ 164m RØ Source: 12

13 Offshore wind massive cost reductions and competition Industry Development 13

14 Agenda 1. Wind Power in Vattenfall 2. The cost reduction path in offshore wind 3. National offshore wind support regimes UK Germany Netherlands Denmark 4. Conclusions

15 Offshore Wind Support in UK 15

16 Offshore Wind Support in UK Crown Estate: legal owner and manager of the UK seabed (incl. offshore wind sites) Crown Estate is responsible for programme delivery (includes geological modelling and zone contract management) Leases provide successful bidders with the responsibility to develop, operate and manage an asset for the period of the lease, in return for lease payments (payable once the wind farm is operational) In addition: Project developer requires a revenue support contract (Contract for Difference), stabilises revenues for 15 years Offshore Transmission Owners (OFTOs) are responsible for connection to the onshore high voltage transmission grid. 16

17 Offshore Wind Support in UK The Contract for Difference (CfD) scheme Pays developers a pre-agreed price (strike price) for 15 years (longterm contract). The price payable is determined through a competitive tender process. The level of subsidy is determined by the difference between the strike price and the half-hourly electricity price. If the wholesale market price falls below the strike price, the generator gets paid the difference ( fill up ). If market prices rise above the strike price, the generator pays back the difference ( pay back ). pay as clear auction = the highest priced affordable bid in that delivery year sets the price for all lower bids behind it. 17

18 Offshore Wind Support in UK Current model Screening Crown Estate are identifying zones / developer does the detailed work Tender model Support scheme Transmission Tender in combination with the CfD regime Local content requirement for schemes over 300 MW CfDs pay developers a pre-agreed price (strike price) for 15 years Government controls costs by capping strike prices at 105/MWh ( prices), falling to 85/MWh for projects commissioning by 2026 The price payable is determined through a tender process. The level of support is determined by the difference between the strike price and the half-hourly wholesale electricity market price Offshore Transmission Owners (OFTOs) are responsible for connection to the onshore high voltage transmission grid. 18

19 Agenda 1. Wind Power in Vattenfall 2. The cost reduction path in offshore wind 3. National offshore wind support regimes UK Germany Netherlands Denmark 4. Conclusions

20 Offshore Wind Support in Germany 20

21 Offshore Wind Support in Germany Since 2017: offshore wind support predominantly regulated in the Offshore Wind Act (Windenergie-zur-See-Gesetz) Main element: conversion of offshore wind support to a competitive bidding regime (tender) Linked with the Erneuerbare Energien Gesetz (EEG; Renewable Energy Act) - goals: steady increase in offshore wind production capacity, harmonisation of grid expansion, reduction of support costs Target: 15 GW installed capacity by System roll-out in three intervals 21

22 Offshore Wind Support in Germany Until end GW to be installed existing regime (already awarded unconditional grid connection capacities) statutory fixed feed-in premium over 20 years Transition period Grid connection and market premium remuneration awarded in 2 tenders (2017 & ,550 MW each) projects with certain level of development maturity Central regime Pre-developed sites will be allocated by the Federal Government (agencies) tenders of MW per year Sites will be awarded to bidders who claim the lowest market premium step-in-right for existing projects 22

23 Offshore Wind Support in Germany Transition and central model Screening Federal Grid Agency / Federal Maritime and Hydrographic Agency Tender model Support scheme Transmission Current regime (until end-2020): no tender Transition period ( ): tenders in 2017 & 2018 (2x 1,550 MW) Central regime (as of 2026): tenders for MW/year Market premium model: Until end of 2020: statutory fixed tariff As of 2021: Fixed tariff according to tender award Financial support is provided for 20 years Allocation of grid connection by Federal Grid Agency (BNetzA) 23

24 April Results of the first-ever German offshore wind tender Source: 24

25 Agenda 1. Wind Power in Vattenfall 2. The cost reduction path in offshore wind 3. National offshore wind support regimes UK Germany Netherlands Denmark 4. Conclusions

26 Offshore Wind Auctions in the Netherlands 26

27 SDE+ system The subsidy that will be granted every year is the difference between the basisbedrag and the correction sum (=average grey electricity price). When the electricity price would rise, the net SDE+ subsidy decreases, because the difference between the basisbedrag and correction sum decreases. The opposite also counts, but a minimum electricity price/floor price (basisenergieprijs) has been defined. When the electricity market price drops below this level, no additional subsidy will be granted. E-price ahead P Real E-price (backwards) No subsidy Maximum net subsidy Basisbedrag (base amount) Total revenues (SDE+ + E-price) Wholesale E-price (real) No subsidy etc. t (year) Correction sum in a certain year (=avg. wholesale price in a year) Total subsidy Basisenergieprijs (base energy price = minimum correction sum) 27 27

28 Offshore Wind Auctions in the Netherlands SDE+ model Screening Tender model Support scheme Transmission The project rights (permits) and subsidy for sites are put out for tender by the Dutch Government. RVO (tender authority) checks bids for technical and economical feasibility based on the submitted project plan. Competitive tender for each site The winner is determined among all eligible bids. The lowest bidder will be awarded. The bid must be equal or lower than the maximum amount (in /kwh) set for the specific wind farm site. The lowest bidder will be awarded with both the grant and the consent to build and operate a wind farm according to the wind farm site decisions. SDE+: feed-in premium at bid level; awarded for the first 15 years of operation Actual amount paid is based on actual production and corrected for the electricity market price, except for when the market price drops below the floor price ( 0,30/kwh in 2016) Grid connection (HVAC) is provided by Dutch TSO TenneT, compensation (for additional cost and revenue loss) to the developer in case of delay 28

29 Offshore Wind Auctions in the Netherlands 29

30 Offshore Wind Auctions in the Netherlands Hollandse Kust Zuid tender (December 2017) the first zero-subsidy tender Beauty contest, based on qualitative criteria for two sites of ~370 MW each. Grid connection and permit package will be available for the best proposal ( no actual bidding or payment) 6 criteria to evaluate each proposal knowledge & experience involved parties (10 pts) quality of wind farm design (10 pts) wind farm capacity (10 pts) social costs (10 pts) quality of identification and analysis of the risks (20 pts) quality of measures to ensure cost-efficiency (40 pts) An external review committee, composed by experts in the field, has been commissioned by the Ministry to review the proposals. 30

31 Offshore Wind Support in the Netherlands The future of (subsidy-free) offshore tendering Expected structural change to Wind Offshore Act for the subsidy-free tender procedure for 2018 onwards Auctioning (basic lump sum payment) of the site/permit currently seems to be the most suitable option. Alternative options: Contract for Difference (CfD) system, by making the SDE+ scheme two-sided. Permit auctioning with floor price guarantee to stabilize revenues for the developer 31

32 Agenda 1. Wind Power in Vattenfall 2. The cost reduction path in offshore wind 3. National offshore wind support regimes UK Germany Netherlands Denmark 4. Conclusions

33 Offshore Wind Support in Denmark 33

34 Offshore Wind Support in Denmark Conditions for offshore wind farms are defined in the Promotion of Renewable Energy Act Changes to the current regime possible under upcoming Energy Agreement Two different procedures: Government tender procedure (Danish Energy Agency) Open-door procedure Project developer must obtain three licenses: License to carry out preliminary investigations License to establish the offshore wind turbines License to exploit wind power for a given number of years + approval for electricity production Mandatory environmental impact assessment 34

35 Offshore Wind Support in Denmark Current model Screening Government is handling the screening for offshore sites Tender model Support scheme Transmission Single-site tender, exclusively on the wind farm, announced by the Danish Energy Agency Feed-in premium fixed-price model with upside to the developer Financial support is provided for the first 50,000 full load hours (30 TWh) or approx years, depending on wind conditions Currently financed by a Public Service Obligation on the electricity bill Cost will be transferred to the State budget, 100 % by 1 January 2022 Construction, commissioning and operation is handled by the Danish TSO Energinet.dk Financed over the transmission tariff Wind farm owner is kept damage-free in case of breakdown or out-time, risk is on transmission owner 35

36 Agenda 1. Wind Power in Vattenfall 2. The cost reduction path in offshore wind 3. National offshore wind support regimes UK Germany Netherlands Denmark 4. Conclusions

37 Overview Screening Crown Estate and developer Government (agencies) Government (RVO/tender authority) Government Tender model Tender in combination with the CfD regime Until end-2020: no tender : tenders in 2017 & 2018 (2x 1,550 MW) : tenders for MW/year Until 2016: Competitive tender for each site 2017/18: Beauty contest Single-site tender (central system) Support scheme Contracts for Difference (CfDs) pay developers a preagreed price (strike price) for 15 years Market premium model (until end- 2020: statutory fixed tariff; as of 2021: fixed tariff acc. to tender award); support for 20 years Until 2016: Feed-in premium (SDE+) at bid level; for the first 15 years of operation 2017/18: subsidy-free Feed-in premium; for the first 50,000 full load hours (approx years), depending on wind conditions Transmission Offshore Transmission Owners responsible for grid connection Allocation of grid connection by Federal Network Agency provided by TSO /grid costs covered by Government handled by TSO /grid costs covered by Government 37

38 Conclusions what to take away? Competitive bidding procedures are most efficient instrument for awarding offshore wind support Massive cost reductions in offshore wind (trend towards subsidy-free production) have effect on support regimes Ongoing political discussions around the best support framework in several countries Clarity on regulatory framework & volumes is needed for the sector to deliver 38

39 Thank you for your attention! 39

40 Contact: Florian Bauernfeind Policy & Regulatory Advisor Vattenfall Chausseestraße 23, Berlin, Germany 40