RE-INDUSTRY

Fostering renewable industry integration in the industry

As one of the largest energy consumers and contributors to greenhouse gas emissions, industry will have to play a significant role to reach the targets of the Paris Agreement. Renewable energy (RE) is bound to provide renewable electricity, heat and fuels to this economic sector, as is demonstrated by several inspirational applications around the globe.

This IEA-RETD study explores 21 case studies of state-of-the-art renewable energy (RE) applications in the industry and provides lessons learned for industrial actors and recommendations for policy makers. It finds that RE integration in the industry is already widespread worldwide, mainly driven by its direct benefits for industrial players in a changing energy environment.

RE integration in industrial assets brings direct benefits: Reduced energy costs and price hedging, improved energy supply reliability, increased productivity, additional revenue-generating opportunities and greater coherence with corporate environmental and local commitments. But various barriers still hinder full RE development in the industry. Eight issues have been identified that can tilt an industrial actor towards or away from deploying RE production assets in its facilities, from regulatory regimes and investment costs over technology maturity to awareness. However, industrial players and policy makers have a wide array of options to overcome those barriers. Beyond direct financial incentives, innovative public support schemes should be implemented to facilitate RE integration projects, like guarantees to address risks, third party power production to improve pay-back time and operational implementation, and localized policy demonstration projects and clusters to test optimal regulatory solutions globally and to generate many new and successful projects in the coming years.

On this page, you can find the policy report, the final presentation the compilation of the 21 case studies, and the long list of cases.

RE-INDUSTRY was presented at the IEA-RETD workshop, co-organized by NEDO, on 15 May in Tokyo. For more information on the event, visit http://iea-retd.org/archives/events/iea-retd-workshop-in-tokyo-japan

 

REWind Offshore

Comparative Analysis of International Offshore Wind Energy Development

The new IEA-RETD report REWind Offshore highlights the importance of effective policy in stimulating deployment and driving cost reduction in the offshore wind sector. Following a year of record breaking auction prices in the Netherlands and Denmark, the study identifies the key success factors that have supported a burgeoning industry in Europe, drawing lessons learned for both policy makers and industry players.

The report, delivered through a collaboration between the Carbon Trust, Mott MacDonald, and Green Giraffe, projects that global offshore wind capacity is set to increase threefold in the period from 2015 to 2020, marking a period of industry maturation as costs fall and new offshore wind markets emerge, both within and beyond Europe. Cost reduction of 60% from 2010 to 2017 indicates that industry targets for 2025 have been exceeded 8 years ahead of schedule, suggesting that offshore wind could potentially be fully integrated into the market on a competitive basis in some European countries within the next decade. However, the report suggests that a more cautionary approach is expected in new markets with less established industry structures, such as the United States and East Asia.

Analysis of the evolution of regulatory frameworks identifies several examples of best practice, underpinned by the need for political stability and visibility of market scale and support mechanisms. Notable recent policy trends include the introduction of competitive auctions and centralised development models, in which government bodies take on a greater role in the development process.

These trends are seen to be having a considerable impact on the risk profile for developers, with increased allocation and price risk countered by reduced development and technical risk. In combination, this is resulting in lower perceived risks from the finance community due to growing confidence in the ability of developers and the supply chain, with offshore wind increasingly considered an attractive investment opportunity for a more diverse range of actors.

Recommendations for policymakers and industry players include:

  • Governments should re-evaluate their offshore wind ambitions in light of accelerated cost reduction
  • Governments should consider implementing near-term roadmaps to hedge against long-term uncertainty
  • Competitive auctions can drive down costs, but should be accompanied by government de-risking activities
  • Governments and industry players should continue investing in technology innovation to achieve long-term cost reduction
  • Industry players should embrace collaboration to share the cost and risk of delivering large-scale projects and undertaking R&D activities
  • Industry players should engage more with the public to highlight successes and improve the public perception of the offshore wind industry

You can download the full report and presentation on this page.

REWind Offshore was presented at the IEA-RETD workshop, co-organized by NEDO, on 15 May in Tokyo. For more information on the event, visit http://iea-retd.org/archives/events/iea-retd-workshop-in-tokyo-japan

RES-E-MARKETS

Electricity market design and renewable energy deployment

 Will the evolution towards a power system with high shares of variable renewable energy sources (VRE) require a new electricity market design?

Real-world electricity market design is diverse, complex, multi-level and path-dependent, ranging from liberalised markets to integrated utilities, from very flexible power systems to very inflexible systems. Characteristics of VRE sources like solar and wind energy provide challenges to these systems and markets, once deployed at high shares. These are mostly linked to capital intensity and low short-run marginal cost, limited predictability and variability, and decentralised generation.

The RES-E-MARKETS project aims to answer the question: how to reform current market and regulatory frameworks in order to accommodate high shares of VRE in a timely, cost-effective and secure fashion? To do so, the IEA RETD TPC commissioned FTI-CL Energy and Neon Consulting to offer practical, relevant and implementable policy recommendations differentiated between jurisdictions with and without liberalised wholesale electricity markets, for a time horizon of 2050.

Four power system prototypes were selected to ensure the whole coverage of the electricity market, namely Energy-only market, Vertically integrated utility, Hybrid market and Prosumer market. The report includes (i) high-level recommendations focusing on short-term system operations, system development and investment, and governance and regulatory framework, (ii) recommendations for whole market design, and (iii) recommendations for retail market design.

High-level and specific criteria used to evaluate these market and system prototypes are:

RES E MARKET graph

Key messages

With regard to the wholesale market, the deployment rate of flexible resources as well as the willingness of policy makers to support specific technologies will be the key drivers determining (1) whether some incremental reforms to the current short-run marginal-cost based power markets will be sufficient, or (2) whether more radical reforms are required to introduce hybrid power markets.

With regard to the retail market, all markets will have to introduce reforms to drive an efficient system development given the rise of prosumers’ development. The potential move towards energy services (away from a commodity pricing approach), as well as the level of engagement of consumers will drive the speed and magnitude of the market reforms required.

Nevertheless, regardless of the market prototype, policymakers need to address three main areas to ensure a smooth transition to a system with high share of VRE. A snapshot of high-level recommendations includes:

Short-term system operations

  • Remove barriers to scarcity pricing to allow power prices to convey the high value of electricity at times of scarcity;
  • Ensure that the market design creates a level playing field and fosters the development of flexibility in its various forms;
  • Introduce locational signals to coordinate in real time many decentralised players and transmission and distribution networks;
  • Develop new risk hedging and risk transfer mechanisms specifically tailored to the new types of risks; and
  • Revisit the optimal mix of decentralised (price based) and centralised (planned) steering mechanisms.

System development and investment

  • Policies supporting the development of efficient risk transfer and risk hedging mechanisms will be needed to ensure the financeability and bankability of capital intensive technologies and to reduce the cost of capital;
  • The market design should introduce long-term coordination mechanisms for the decision on siting and timing of investment across centralised / decentralised generation capacity and network expansion; and
  • A regulatory framework of the network development should evolve to include necessary elements of incentive regulation to drive efficient and timely development of the grid infrastructure.

Governance and regulatory framework

  • Policies supporting technological innovation and smart, unconventional solutions are needed; and
  • An efficient allocation of responsibilities between the different geographic levels of governance is warranted.

Future research will need to focus on the interface between wholesale and retail markets and the consistency of price signals across these different markets. In the meantime RES-E-MARKETS provides valuable insights and recommendations for both wholesale and retail market design in the report above.

REvLOCAL

Revitalisation of local economy by development of renewable energy: good practices and case studies

Renewable energy can contribute to the creation or revitalisation of local economies, by creating new jobs and services. But what is the exact nature of these benefits, how can they be realised, and what policies could support this? On behalf of the IEA RETD TCP, the Institute for European Environmental Policy (IEEP) explored good practices, by addressing the following topics:

  1. How to increase and/or maintain employment in the local economy induced by the development of renewable energy projects?
  2. What type of employment and new business can it create? What are the conditions to make it happen?
  3. How to divide policy roles between national and local governments to achieve successful revitalisation of the local economy?

Six in-depth case studies were carried out, namely:

  • Nord-Norge (Norway) –a cluster of renewable energy sources
  • Saint Dizier and Le Mené (France) –a biomass heater with district heating network and a renewable energy cluster, respectively
  • Santa-Cruz (USA) –solar PV installations
  • Bay of Fundy (Canada) –in-stream tidal turbines including research and pre-commercial activities
  • Furness Peninsula (the UK) –off-shore wind farms
  • Hamburg (Germany) –renewable energy cluster

REvLOCAL was launched at a workshop on the revitalisation of local economy by development of renewable energy, which was held on 1 September 2016 in Fukushima in Japan.  This region is in dire need of a revitalisation of the local economies, after the Great East Japan Earthquake in 2011, and the damage caused by the resulting tsunami and nuclear disaster at the Fukushima Daiichi Nuclear Power Plant. For more information visit the event page on the website.

The detailed case studies as well as the summary findings and the Japanese translation of the Executive Summary can be downloaded on this page.

Main recommendations

Policymakers should seek to stimulate the following local and regional RES deployment strategies:

  • Clear commitment of local political decision-makers towards ensuring the success of renewables projects is critical, helping to ensure a positive spirit of cooperation and facilitation
  • A clear local strategy for renewables depends on identifying potential economic advantages, and an urgent need for action. Where local areas face disadvantages such as old, declining industries, or isolation, renewable energy investment can therefore gain traction and support more quickly. Long-term national strategies for energy decarbonisation should identify not just geographical opportunities for renewables installation, but also the potential synergies with the economic needs of such disadvantaged areas
  • Cooperation among a wide range of key local stakeholders is important in helping to overcome bureaucratic delays and find creative solutions (and can be easier to generate where there is a sense of urgency about local economic conditions)
  • Approaches based on local ownership and control of RES projects may facilitate local acceptance and maximise local benefits
  • Regions and local areas need to identify and capitalise on their strengths, in terms both of the renewable resources available and the local economic context
  • Care needs to be taken to secure local support both for the overall strategy and for individual projects, on the basis of transparent and realistic assessments of impacts and benefits
  • A one-window approach to applications is a useful way of facilitating early deployment of projects. But in practice the degree of commitment shown by local political leaders seems to be the most important factor in ensuring that relevant local bureaucracies work together to make things happen
  • The strengths of the local skills pool need to be identified, together with the investments necessary to develop new skills relevant to renewables deployment
  • A supportive national or state-level policy framework, based on continuity and predictability, is important; while local commitment might be effective in the absence of supportive national policies, the two operating together create an enhanced, synergetic impact.

Further issues to be considered include the following:

  • Self-sufficiency and lower fuels bills can be an important driver of local attitudes and enthusiasm; but political commitments on these issues need to be managed carefully if they are not to hamper further development of renewables for export
  • The local economic benefits of renewable investment are not a ´zero-sum game´. Creating centres of expertise, and gaining early deployment experience, make the economics of renewables investment more attractive generally
  • People learn by seeing and doing, and demonstration by example can have a big impact. More attention should be paid to ensuring that the wider benefits of first-mover experience are shared promptly.

 

 

RES-T-BIOPLANT

 

Towards advanced biofuels – options for integrating 1st and 2nd generation biofuel production (RES-T-BIOPLANT)

The integration of advanced (2nd generation / 2G) biofuel plants with conventional (1st generation / 1G) biofuel plants can lead to significant synergies and cost savings, especially for bioethanol plants. For biodiesel, conversion of fossil refineries to advanced biofuel production is another promising option as well.

These are the results of a scoping study commissioned by the IEA Implementing Agreement for Renewable Energy Technology Deployment (IEA-RETD) “Towards advanced biofuels – options for integrating conventional and advanced biofuel production sites (RES-T-BIOPLANT)”. The aim of this study was two-fold:

  • Getting a better understanding of the scale of the opportunity for adapting existing sites to produce advanced biofuels; and,
  • Analysing the potential role of government policy to incentivise site conversion.

Advanced (2nd generation / 2G) biofuel plants can be implemented as stand-alone units or integrated with conventional (1st generation / 1G) biofuel plants. Integration strategies can refer to: co-location (installing a separate 2G entity adjacent to an existing 1G facility), retrofitting (altering the existing 1G production line for producing 2G biofuels alongside 1G biofuels) or repurposing (adjusting the production process of an existing (mothballed) facility to produce 2G biofuels). There are cases where significant synergies between 2G and 1G plants exist, while in other cases, integration options are very limited. The variety of conceptual and design studies identify cost-savings from co-location for all 2G conversion pathways in the order of 5-10%.

The sequence of implementation of policy instruments is crucial. A market start-up will only happen if stable support to technology development and technology commercialization is given (by way of economic incentives) for a reasonable timeframe reflecting investment lifetimes. Blending mandates would cause more harm than benefits if they were applied in an immature market where biofuel prices have not yet reached stability and fossil fuel prices remain low.

Further analytical studies on the economic feasibility and other benefits of specific co-location and retrofitting strategies for 1G bioethanol sites as well as a specific mix of policy instruments are recommended.

RES-T-NEXT

Driving renewable energy for transport – next generation policies

Renewable energy sources in transport (RES-T) are crucial for avoiding climate change. As transport is currently almost fully dependent on conventional fuels, the transition to RES-T is an important aspect in the broader climate policy. What policy instruments deliver the job? The IEA-RETD report “Driving renewable energy for transport – next generation policies (RES-T-NEXT)”, carried out by CE Delft and Stratas Advisors, evaluates in detail 17 renewable policy instruments for the three pathways of electric, hydrogen and biofuels, under consideration of three dimensions: the vehicle fleet, energy infrastructure and energy carriers.

The study finds that most policy instruments increase the share of alternative powertrains, but few (also) directly target the share of renewable energy consumption. The most effective instruments for increasing the share of Alternative Fuel Vehicles (AFVs) are:

  • Zero Emission Vehicle (ZEV) mandates (obliging OEMs to meet a minimum share of ZEVs in their sales);
  • Financial incentives in vehicle registration taxes (VRT) and in company car taxation
  • CO2 regulations of road vehicles, particularly when CO2 targets are sufficiently ambitious.

For effectively increasing the share of renewable energy in transport, there are fewer instruments available. Most effective are Fuel regulations and renewable energy mandates.

Regarding the pathways, the study concludes that Battery-electric is the most promising pathway for urban transport. Battery-electric technology has already been commercialised; it now requires policy instruments which generate volume. Hydrogen may provide a feasible alternative or complementing pathway for urban road transport; however, hydrogen technology is not yet fully commercialised and requires policies which primarily promote pilots, first market uptake and further product development. The role of biofuels in (urban) transport firstly depends on the availability of available and sustainable feedstock.

Remote Prosumers – Preparing for deployment

Roof-top solar PV prosumers in remote areas and islands (REMOTE PROSUMERS)

Many remote areas and islands (RAI) are deploying renewable energy (RE), some with ambitious plans to meet 100% of their electricity or even final energy needs with renewables. For most of them, roof-top PV systems offer clear advantages but most of their deployment potential still remains largely untapped. The setup of consistent prosumer policies can provide a means to achieve the islands’ objectives faster and with lower costs to society.

This report provides guidance to policy makers on the drivers, opportunities, challenges and implementation strategies of PV prosumer policies that can be considered within a comprehensive renewable energy strategy for RAI. It is based on the frameworks and methodologies developed on the IEA-RETD publications RE-PROSUMERS (2014) and REMOTE (2012).

The preliminary results were presented at the IRENA Island conference in Martinique in July 2015, see presentation slides.

OPTIMUM

Large-scale deployment of renewable energy asks for a next step in the design of the energy system, which extends to the structure of energy demand sectors. In this project the benefits of an energy systems approach are addressed in a position paper: which policies can be used to establish a further integration of energy demand sectors in the total energy supply system with the objective to maximize the uptake of renewable energy? The paper describes the key challenges that society will face on its road towards a sustainable energy supply.

REMOTE

Renewable Energies for Remote Areas and Islands

Remote areas around the world are at the forefront of the transition towards a more sustainable energy future. IEA-RETD has commissioned a study with the overall objective to provide policy perspectives for making remote areas and islands largely independent from fossil fuel imports or costly transmission infrastructures. The project gives national, regional and local policy makers and initiatives a better grasp of the technical, economic and energy issues facing remote areas, and provides a menu of policy options and case studies available to accelerate renewable energy development in these regions. The intention is to inspire and to trigger action to deploy renewables and thus contribute to more sustainable energy systems in remote areas.

IEA-RETD was represented at the IRENA “Renewables and Islands Global Summit” on Malta on September 6, 2012. More information can be found here.

RE-BIZZ

Business models for Renewable Energy in the Built Environment

The project RE-BIZZ aims to provide insight into policy makers and market actors in the way new and innovative business models (and/or policy measures) can stimulate the deployment of renewable energy technologies (RET) and energy efficiency (EE) measures in the built environment. It analyses ten business models in three categories (amongst others different types of Energy Service Companies (ESCOs), Developing properties certified with a ‘green’ building label, Building owners profiting from rent increases after EE measures, Property Assessed Clean Energy (PACE) financing, On-bill financing, and Leasing of RET equipment) including their organisational and financial structure, the existing market and policy context, and an analysis of Strengths, Weaknesses, Opportunities and Threats (SWOT). The study concludes with recommendations for policy makers and other market actors.

BOOK: Business Models for Renewable Energy in the Built Environment

RE-BIZZ publication

The report is also available as book, which can be ordered via the publisher for GBP 49.99 (excl shipping costs, incl VAT) or directly via IEA_RETD@ecofys.com for EUR 45 (excl shipping costs, incl VAT).