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.

 

 

RE-P2G

Non-individual transport – Paving the way for renewable Power-to-Gas (RE-P2G)

Should power-to-gas technology be pursued as an option for decarbonising the non-individual transport sector and if so, how can policy makers economically promote its development?

The answer is yes – but in order to be environmentally sound, power-to-gas must be based on fully, or close to fully, renewable electricity. This is particularly true for power-to-SNG, which is at a disadvantage when compared to the hydrogen path from a CO2 footprint point of view.

Detailed modelling of various options reveals that compared to other non-individual transport options, captive fleets of long range light duty vehicles are the most promising market segment for early adoption of power-to-gas technology, due to lower total cost of ownership (TCO) difference to diesel, potential for high volumes being reached faster and synergies with fuel cell electric vehicles (FCEVs) for individual uses.

Whatever the market segment, renewable power-to-gas mobility will hardly compete with fossil options or with the cheapest renewable options (i.e. battery electric vehicles (BEVs) and biomethane) without significant policy support. Therefore, setting an ambitious and binding regulation in favour of renewable mobility is a prerequisite to the development of renewable power-to-gas in the transport sector. The regulation on renewable fuels in transport should at least include higher requirements in terms of share of renewable fuels at the distribution infrastructure level.

In parallel, an exemption of taxes on electricity consumed and on fuel produced should be granted to power-to-gas plants running on renewable electricity. Subsidies for hydrogen distribution infrastructure, Green Public Procurement and direct financial support to private fleet operators are other recommended policy measures for P2G deployment at larger scale.

The preliminary project results were presented at the P2G conference in Berlin in June 2016. The final report will be presented at the European Transport Conference in Barcelona on 5-7 October 2016.

 

RE-COM-PROSUMERS

 

Tapping the potential of Commercial Prosumers – Drivers and policy options (RE-COM-PROSUMERS)

PV prosumers have the potential to transform the current electricity generation model and accelerate the transition to a more decentralized and interactive electricity system. The potential for commercial prosumers -with their large and unused rooftops and parking space near densely populated areas- is widely seen as a serious game changer. And yet, even in the light of a massive deployment and cost reductions of PV in recent years, the significant potential of commercial prosumers remains largely untapped. But as technological and market conditions for commercial prosumers continue to improve, policy makers – and other stakeholders – will need to think more carefully about how best to govern their rise.

These and other findings are detailed on the new IEA-RETD report on commercial prosumers, the third of a series that started with the residential and remote prosumers segments. The report analyses the various economic, behavioural, and technological drivers as well as national conditions that are either supporting or constraining the growth of prosumers in the commercial building sector. Through four detailed case studies on commercial prosumers in France, Germany, the UK, and the U.S. the report highlights how country-specific drivers influence the business case for commercial PV prosumer at representative com-mercial facilities such as supermarkets or large retail stores. As confirmed through all four case studies, the growth of commercial prosumers has been – and remains – slow, but opportunities exist for policy makers, industry associations and other stakeholders to lend support such as designing new policies for net excess generation, facilitating improved data on national commercial building stock, and developing programs that address the commercial sector’s specific needs and decision making.

RE-STORAGE

Policies for Storing Renewable Energy – a scoping study of policy considerations for energy storage (RE-STORAGE)

Energy storage is currently en vogue in the energy world, and sometimes presented as a silver bullet in meeting the challenges on the path to a low carbon energy system. Storage technologies could indeed help address the structural changes our energy system is facing and smooth the transition. They can contribute to balancing mismatches between supply and demand, and can support the deployment of renew-ables. However, deployment of storage aimed at facilitating renewables integration has, thus far, been limited.

This study identifies and discusses in detail four policy-relevant issues relating to renewables and storage that could affect the transition to a largely renewable energy system:

1. An effective energy system transition requires system approaches

2. The legacy system drives current market frameworks

3. Uncertainty around the performance of storage technologies affects adoption

4. System operators have a privileged position in storage deployment

As things stand, many storage technologies are immature and cannot compete on cost in current markets, but can provide valuable services that are currently poorly rewarded. Mechanisms to allow these technol-ogies to compete fairly, by valuing the services they do provide, would enable them to come down the cost curve and ultimately be fully cost-competitive.

While deployment and use of storage can inevitably support deployment of renewables, supporting it in a way that is fair, transparent, cost-effective and coherent with much larger energy system considerations is a complex and lengthy undertaking, with implications that ripple throughout that system.

This study provides recommendations for how stakeholders can engage around energy storage to ensure that decisions and policies regarding the energy system transition are informed by a clear and consistent systems perspective, and that barriers to the deployment of storage are reduced or eliminated.

RE-TRANSITION

 

Transitioning to policy frameworks for cost-competitive renewables (RE-TRANSITION)

As rapidly scalable renewable energy technologies, such as solar and wind energy, are increasingly becoming the least-cost options for new electricity supply, we are entering a new phase of RE policy.

The cost-competitiveness of RET with conventional technologies, however, does not indicate that policymakers can withdraw all forms of policy that support investment in these technologies and still achieve sustained growth. This report presents a novel, overarching framework to help policymakers understand the evolution of RE policy, one that attempts to outline a number of potential pathways forward to adapt to the rise of renewables.

The new phase is called “Policy Framework Phase”. It follows the Early Commercialization Phase and the current Policy Support Phase and is based on three key pillars that are critical to ensure the continued scale-up of RE projects: projects will need to remain bankable; the power system as a whole will need to become more flexible; and policymakers will need to provide long-term signals to investors and other stakeholders by establishing a clear long-term vision for the development of the power system.

The report provides an extensive set of new policy solutions and examples for each of those pillars for different types of jurisdictions, allowing policy makers to choose the most appropriate ones for their current and future energy system.

The comprehensive, future-oriented approach and the clear definition of terms and concepts make this report an important cornerstone of the ongoing policy debate on transitioning towards energy systems based on high shares of renewables.

 

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.

RE-InnovationChain

 

Best Practice Innovation Policy for Emerging Renewable Energy Technologies

 

Each step of the technology innovation chain, from basic research to deployment of mature technologies, requires a different set of policy incentives. The RE-InnovationChain study looks into best practice innovation policy for emerging renewable energy technologies.

The report presents international best practice for strategic innovation policy delivery, synthesising proven methods from around the world. It also makes new recommendations to improve the delivery of on-going policy tools, focusing on reducing risk for private sector investment earlier along the innovation chain, and pursuing an increasingly international innovation policy. By following these principles, governments that can unlock renewable energy technology deployment at lowest cost and also seed technology driven economic growth and exports.

The project led by the Carbon Trust and supported by Element Energy, involved extensive input through workshops and interviews with leading international policymakers and industry experts.

On 13 September 2013 a workshop has been organised, for more information click here. A second workshop was held on 13 March 2014.