Executive Summary
Renewable policy performance depends on several key factors including financial sustainability, adequate infrastructure, good and competent administration, clear proceedings, standardization and clear interconnection rules. If one is missing, the market might not develop. On the other hand, if support mechanisms like Feed-in-Tariff (FIT) are too high, it has the consequence of very fast development. The downside could be high social costs, due to huge amounts spent on FIT while some needed adaptions of legal requirements might be lagging the development. Therefore, careful balancing of market stimulation mechanisms is necessary.
In this report, conditions of regulatory and financial frameworks are examined in detail for four European countries that are the biggest biogas / biomethane producers in Europe, namely Germany, Italy, France and the United Kingdom. In addition, other European countries are shortly analysed, and important barriers are addressed.
The main findings are that uncertainty and inconsistency about targets and policies, including retroactive changes, significantly hamper renewable energy expansion, as support schemes or procedures that are unclear lower confidence amongst investors. Clear national or regional objectives are decisive. The government must have a vision of its future renewables market in order to know which sectors need to be developed. Clear and long-term goals offer investment security and create stable conditions that are favorable for long-term development of a market. Retroactive changes must be avoided at all circumstances as they undermine trust in the long run.
Which support system is preferable cannot be said without considering the specific situation in a country. Feed-in tariffs bring high investment security but must be well-designed and flexible in order not to induce high costs. Greenhouse gas quotas can help to start the development of the markets. However, it is important to set ambitious quotas and to install high fines if they are not fulfilled.
Another method to support renewables would be a high CO2 price. The advantage is that it is technology neutral. However, it is necessary to set a floor price in order to avoid a rate too low to induce any investments in renewables.
Auctions, however, are not the most suitable instrument to promote renewable energies – experiences up to now show that it is nearly impossible to set conditions in a way that guarantees the desired outcome.
In addition, it is vital to establish a regulatory framework before implementing the promoting polices. Clear rules for interconnection and cost distribution must be in place and a uniform application of rules must be ensured. It is especially important to give renewables projects priority access to the grid. In addition, it is necessary to have feed-in priority for renewables over fossil fuels in order to guarantee their selling.
Standards, codes of practice and technical specifications for biogas projects must be created and clear rules for emissions and handling of digestate must be made. All in all, the goal of renewables promotion is to reduce GHG emissions and enhance environmentally friendly technologies in order to solve energy problems with fossil fuels and combat climate change. Thus, it is vital to control the plants and their emissions and to ensure a safe and environmentally friendly operation.
Loan guarantees and tax incentives may also be helpful of pushing a market. Loan guarantees can especially address difficulties with the banks. Often, if technologies are new, banks are not keen on financing them without additional securities. However, without access to enough funding, projects will not be realized.
In the long-term, policy makers should make sure that renewable energy technologies can operate in the energy system on a level playing field with other technologies. It is necessary to plan well ahead, and to integrate exit strategies from fossil fuels well in advance. If investment periods of 30-40 years for fossil fuel-based projects are considered, it is vital to stop supporting such projects in time in order to avoid stranded investments. Policies need also to be flexible, to continuously adapt to changing market conditions, to achieve cost-competitiveness and to integrate renewables into the system. There must be enough funding opportunities.
With increasing shares of renewables, grid integration can be challenging. This also must be planned well ahead. The grid infrastructure must be adapted in time or even be upgraded in order to avoid curtailment of renewable energy. In addition, a lack of district heating or adequate cooling infrastructure hinders progress in the heating and cooling sector, and the absence of appropriate engines in vehicle fleets hampers the deployment of biofuels in the transport sector.
At last, public acceptance is very important, plants must run properly and safe in order to reduce noise and door emissions and to avoid accidents – otherwise public acceptance won’t be achieved.
All in all, it is wise to exchange views with countries that successfully promoted renewable energies to avoid their mistakes and to learn from the experiences. It must be examined in what way the own country differs, what are the specific conditions, how the country is structured and what could be transferred.
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