The French feed-in tariffs to support electricity from renewable

2nd Workshop of the International Feed-in
Cooperation
The French feed-in tariffs to support
electricity from renewable energy
sources
Christophe Lesieur
In charge of Energy questions
French Ministry of ecology and sustainable development
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Summary
I.
II.
III.
IV.
Presentation of the supply in France
Method for the determination of tariffs
Lessons from the feed-in system
The new « Energy Law »
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Supply for electricity
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Power at the end of 2004
installed GW
Net Supply at the end of 2004
In TWh
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RES for electricity, except hydro
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Power from renewables, except hydro (Gwh/y)
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The French Programmation
Pluriannual Programmation for electric investments (2005)
For France: increase from 15 % to 21 % (including large hydro: 66 TWh)
- Requires a minimum increase of 40 TWh/year of new RE (excluding
large hydro)
- Requires a minimum of 10 GW of wind power in 2010 (versus 0.5 GW in
2004)
- Wind power should contribute to 73 % of new renewable energy
increase (81% of new RE power increase)
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Source: Pluriannual Programmation for electric investments (2005)
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The French system to support electricity from
renewable energy sources
< 12 MW: feed-in tariffs
> 12 MW: calls for tender
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The "Profitability Index" (PI) method
• Profitability index PI = Net Present Value / Investment
• Gives both kWh manufacturing cost and selling price:
Tariff T = ((1 + PI)Kd + Kom) Iu / Nh + Cvu (Euro/kWh)
– CRF = Capital recovery factor (based on actual discount rate = t =
AWCC = Average Weighted Cost of Capital, and n): CRF= t / (1-(1+t)^-n)
– Kom = O&M ratio = yearly O&M expenses / Investment (wind: Kom =
0.04)
– Iu = investment cost ratio = I / P (EURO/kW)
– Nh = Ey / P = kWh / kW = number of hours per year at rated power
– Cvu : variable cost (fuel cost part: Cvu = Fuel Cost / (Efficiency.LHV)
If PI=0, Tariff =ODC (Overall Discounted Cost), Margin = 0
• Direct link PI <==> IRR or DPBT (disc. PB time)
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CRF (IRR, n) = (1+PI).CRF (t, n)
CRF (t, DPBT) = (1+PI).CRF (t, n)
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Links PI / IRR for n = 15 years
Ex: t = 6 %: 100 % PI variation from 0.15 à 0.3 : IRR vary only from 8 to 10.3 %
TR I = f(TEC , t) pour n = 1 5 ans
30
t = 15 %
25
12 %
10 %
TRI (%)
20
15
5 %
10
1%
0 %
5
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0
0
0 ,1
0 ,2
0,3
0,4
0,5
0,6
0 ,7
T E C = VA N /I
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Method (2) Universal linear model
PI = f(Tariff T)
•
PI = aT - b = (Nh / CRF.Iu)(T - Cvu) - (1 + Kom / Kd)
• where Iu = I / P, Nh = Ea / P, Kom = Dom / I, CRF = t / (1 - (1+t)exp-n)
• Cvu = part of cost due to the fuel (Zero for wind/solar/hydro systems)
• Com = part of the cost due to O&M costs = Kom.Iu / Nh
• Ci = part of the cost due to the investment cost = CRF.Iu / Nh
•
From Thales of Milet: PI = {(T-Cost)/Cost} / (ci/Cost)
PI
Golden rule:
PI > 0.3
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Margin On Cost (MOC) /% inv. In cost
PIr
Cvu
Com
Cost
-1
-(1+Kom/CRF)
Ci
Tr
Tariff T
M
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Method (3)
•
Margin on cost, MOC
MOC =(Price-Cost)/Cost
•
MOC of Fossil versus Renewable Energy Sources
- Introducing Kfuel
• Kfuel = cost per kWh without fuel cost / cost per kWh
• Kfuel = 1,0 for Wind; 0,5 for Coal; 0,33 for CCGT
• MOC =PI*Kfuel*(Kd/(Kd+Kom))
At equal kWh cost, if PI Renewables = PI Fossil, then:
MOCR / MOCF > 1 / KFUELF
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A Renewable energy investment commands a higher margin
to reach the same profitability than a Fossil energy investment !!
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Method (4)
• The « zero fuel cost RETs paradox » (wind, hydro, solar, geothermal based
power plants) :
- (MOCwind / MOCfossil) = (cost / non fuel cost part)fossil
- MOC wind = 2 times MOC coal = 3 times MOC nat. gas !
- Minimum 10 % MOC from coal plants ==> PI = 0,3
•Implies minimum PI value of 0.3 for wind projects (project IRR = 10% for t = 6
% and n = 15 years)
Wind:
120
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Coal:
110
Nat.gas:
Different selling prices for the same
profitability (PI = 0.3)
106
100
Fuel cost
part
Non-Fuel cost
part
Same kWh cost
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Example 1: comparing coal & CHP
from biomass
Differences:
costs: 1.7 c€/kWh
Tariffs 2,6 c€ (+50%)
Efficient Tariffs 6,8 c€ versus 4,2 (+62%)
Tariffs Chp
G: 8.7 to 10.2 c€
DK: bonus 1.3 to 4.6 cE/kWhe
Sp: 3 cE/kWhe
Différentiel d e rentab ilité c entrales à c harb o n et
c o génératio n ex-b io m as s e (p aille, DK, 1999, 6 M we)
TEC = VAN/ I
1,0
0,5
C harb o n
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C o gen p aille
0,0
0,03
0,04
0,05
0,06
0,07
0,08
T Ve (Euro /kW he)
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Example 2: “Advanced tariffs” for Wind
Power
Taking into account return of experience and context:
- Competitive calls for tenders
• Not enough efficient for new French Wind Energy goals: 10 GW
• Feb. 2000 French electric law: the only solution for projects > 12 MW
- Green certificates: not proven, not sufficient for 5 to 11 GW
- “Fixed Tariffs”: past and ongoing successes (Dk, G, Sp...)
Basis: fair profitability for private investors:
- Minimum profitability for strong market growth, including on low quality sites
largely available (from Nh = 2 000 h/y)
- No undue profits on high quality sites: tariffs adapted to potential energy yields
- Simple system, easy to define, to control and to adapt
- Not state aid: charging the cost on all electricity consumers
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Principles for Tariffs Definition and
Calculation
Two successive tariffs levels (F: only for P < 12 MW):
T1 fixed for all projects from years 1 to 5 (= German idea !)
T2 variable for projects from years 6 to 15 (diff. From Ger.)
T1 and T2 define a constant “equivalent tariff”, Teq
Ref. Nhmin : PI=PImin => Teqmax=T2max =>T1= T2max
Ref. Nhmax : PI = PImax > PImin => T2min
For a specific project (P < 12 MW):
Nh from average values years 1 to 5
T2: linear calculation
Teq from (T1, T2, t)
Tariffs
PI from Teq, Nh, Iu
Reference values:
T1
Teq
Iu=1067 EURO/kW
Kom = 4%, t=6.5%
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T2
5
15
Years
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Results: June 8th 2001 Arrêté, 2001 Tariffs
2001 Rates(Mainland France, P < 1500 MW )
Reference values for 2001 tariffs
T1
Mainland France, projects < 12 MW
cEURO / kWh
T1
T2
Teq
8,38 8,38 8,38
8,38
3,05
5,41
Corsica & Overseas Depart. projects <12 MW
P (MW) P (MW)
Nh:
<1500
>1500
Nhmin:
2050
cEURO / kWh
T1
T2
Teq
9,15 9,15 9,15
Nhint:
Nhmax:
9,15
9,15
2400
3300
Hypothesis for Teq:
Real discount rate t = 6.5%
n = 15 years
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7,47
4,57
8,21
6,59
6
5,41
5,95
5
4
3,05
3
2
1
0
3600
3300
3400
3600
7,02
3200
Nhmax:
8,38
7
3000
7,02
2800
5,95
2600
8,38
2400
2400
2200
2600
8,38
8
2000
Nhint:
Teq
9
1800
P (MW)
>1500
1900
cEUR / kWh .
P (MW)
Nh:
<1500
Nhmin:
2000
T2
Nh (hours/year at rated power)
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Results: June 8th 2001 Arrêté, 2001 Tariffs
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Filière
arrêtés
(*)
Durée
des
contrats
Biomass
16 avril
2002
15 years
4,9 c€/kWh (32,1 cF/kWh) + prime à l’efficacité énergétique comprise entre 0 et de
1,2 c€/kWh (7,8 cF/kWh)
Methanisation
16 avril
2002
15 years
4,6 c€/kWh (30,2 cF/kWh) + prime à l’efficacité énergétique comprise entre 0 et
1,2 c€/kWh (7,8 cF/kWh)
Geothermie
13
mars
2002
15 years
7,62 c€/kWh (50 cF/kWh) + prime à l’efficacité énergétique comprise entre 0 et 0,3
c€/kWh (2 cF/kWh)
PV
13
mars
2002
20 years
15,25 c€/kWh en France continentale et 30,5 en Corse et Dom (1F/kWh et 2F/kWh)
Animal wastes
13
mars
2002
15 years
4,5 à 5 c€/kWh (29,5 à 32,8 cF/kWh) énergétique comprise entre 0 et 0,3 c€/kWh
Small installations
13
mars
2002
15 years
7,87 à 9,60 c€/kWh (51,6 à 63 cF/kWh)issu du tarif « bleu » aux clients domestiques
Biogaz
3
octobr
e 2001
15 years
4,5 à 5,72 c€/kWh (29,5 à 37,5 cF/kWh)selon la puissance + prime à l’efficacité
énergétique comprise entre 0 et 0,3 c€/kWh (2 cF/kWh)
Domestic waste
2
octobr
e 2001
15 years
4,5 à 5 c€/kWh (29,5 à 32,8 cF/kWh) + prime à l’efficacité énergétique comprise entre 0
et 0,3 c€/kWh (2 cF/kWh)
CHP
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juillet
2001
12 years
6,1 à 9,15 c€/kWh (40 et 60 cF/kWh) environ en fonction du prix du gaz, de la durée de
fonctionnement et de la puissance
Small hydraulic
25 juin
2001
20 years
5,49 à 6,1 c€/kWh (36 à 40 cF/kWh) selon la puissance + prime comprise entre 0 et
1,52 c€/kWh (10 cF/kWh)en hiver selon régularité de la production
Wind on-shore
8 juin
2001
15 years
8,38 c€/kWh (55 cF/kWh) pendant 5 ans, puis 3,05 à 8,38 c€/kWh (20 à 55 cF/kWh)
pendant 10 ans selon les sites
Fourchette de tarifs pour les nouvelles installations (métropole)
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Source: DGEMP-Dideme. Februar 2005.
Lessons from French Tariffs
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Price ranges (average to maximum support) for direct support of wind onshore in
EU-15 Member States (average tariffs are indicative) compared to the long-term
marginal generation costs (minimum to average costs). Support schemes are
normalised to 15 years. Average effectiveness indicator Wind on-shore 17
Lessons from French Tariffs
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Effectiveness indicator for wind onshore electricity in the period 1998-2004. The
relevant policy schemes during this period are shown in different colour codes.
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Lessons from French Tariffs
Administrative barriers
Æ Large number of authorities involved and lack of
coordination between them
Æ
Long lead times needed to obtain necessary permits
Æ
RES insufficiently taken into account in spatial planning
12 MW threshold
Æ
Many projects were cut
“sheating” on Nh on years 1-5 was profitable!
Æ
Some installations was volontary stopped
during the first years
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The energy Law (13th july 2005)
FEED- IN TARIFF = APC + BONUS
•
APC
= avoided private costs
2.
Bonus = contribution to the 4 objectives of the
energy law:
The energy Law suppress the threshold of 12 MW
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The energy Law (13th july 2005)
1. Avoided private costs = avoided investment costs
+ avoided exploitation costs
We must take into account:
•
structure of the supply:
-
In what measure wind energy (or solar energy) susbstitute to
nuclear plant, gaz plant?
What are the possible cost of gaz in mid term?
Intermittence and lack of predictability:
-
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In what measure wind energy (or solar energy)permit to avoid investments
in installation supplying the peak period- load?
Æ Cost of intermittence = [2 €/MWh – 4 €/MWh]
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The energy Law (13th july 2005)
Bonus = contribution to the 4 objectives of the energy law:
-
Independance
External costs of Energy
Low costs of energy
ExternE - NEEDS
Environnement
Social cohesion and energy for all
We must quantify these elements!
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Conclusions
•
Defining a fair and efficient tariff system is possible
- Taking into account other “success stories” (Dk, G, Sp)
- Within a deregulated electricity market ("advanced tariffs")
•
The Profitability Index Method gives:
- A rational basis for minimum values of profitability
- Simple formulas to define, monitor, adapt the tariff system
•
Lessons from France
- Administrative barriers
- threshold of 12 MW
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