8th European Conference on Green
Power Markets – Europe’s Forum for Renewable Energies
Conference Summary – The State of Green Power
With a proven record of seven
successful conferences over the last twelve years, tracing in detail the
development of a booming sector, participants at the 8th European Conference on
Green Power Markets on 10 and 11 October 2013 in Geneva were sure what to
expect from the event they attended: hands-on experience and market information
delivered by a carefully selected line-up of political and commercial
stakeholders.
There is no denying that
renewable energy sources (RES) have entered the electricity mainstream. Across
the European Union, total RES-E output grew by 40% in the last ten years,
reaching an impressive 34 % of installed capacity as early as 2011. PV and
onshore wind, moreover, are predicted to outstrip hydropower in terms of
capacity additions by the end of 2013. Second-generation RES, and the most
volatile at that, have by now reached technological and market maturity,
covering essential shares of electricity production! Though expansion needs to
continue, nay, accelerate, if the ambitious EU 2020 targets are to be met, a
certain optimism is warranted. Europe has been the starting point, and still is
the pacemaker, of a global transition. Indeed, RES growth may have been
stronger than politics expected, and both the grid and the market can readily
digest.
“Feed-in tariffs [FIT] have been
too successful”, Adam Brown from IEA was quick to tell delegates in one of the
opening speeches at the event. The results: spiralling costs – 0.3 % of
Europe’s GDP in 2013! – and governments backpedalling on their previous
commitments, such as Spain with its drastic PV subsidy cuts. Instead, a gradual
adaptation of support schemes to better reflect the learning curves of
technologies and align prices to market developments seems in order. Mario
Ragwitz of Fraunhofer Institute for Systems and Innovation Research (ISI)
expects Germany to make its optional feed-in premium a mandatory one or
introduce reverse auctions as part of the price-conscious reforms surrounding
its Renewable Energy Act (EEG), the forerunner, incidentally, for many FIT
support schemes around the world. Guidelines on support design and reform from
the European Commission are in the pipeline, too, and will aid in making the
power sector less “un-investable”, as Beatrice Widmer of EURELECTRIC put it.
Despite the political drive to
cost-efficiency and market compatibility, however, the basic technical
constraints of large-scale distributed RES feed-in remain and need to be
tackled as well. Balancing fluctuating loads is indeed nothing new to energy
system management, and neither is the quadruplet of its implements.
Dispatchable generation, storage, interconnection, and demand-side management
are all well-established measures to foster flexibility; they only have to be
scaled up and optimized to meet the renewables’ challenge. Here as elsewhere, a
higher level of coordination, both vertically and across borders, promises to
raise effectiveness. TSOs, as Mark Vogel of Swissgrid pointed out, are strongly
calling for a step-up in European harmonisation efforts. Yet, some of the
obstacles to the flexibility response lie within the market itself, it seems.
Plant operation in the
energy-only market is based on marginal cost. Variable RES, for obvious
reasons, are at the very bottom of merit order and will in the long run drive
prices down and oust more expensive conventional plants – with or without
containment by market signals! This not only leaves little economic incentive
for much needed flexible production and storage facilities, but also puts
market participants under huge financial strain. Traders have to cope with spot
price unpredictability and shrinking profit margins, while utilities are
groaning under unamortized assets and dwindling equity. With grid parity on the
horizon, moreover, there is a new formidable foe – the self-supplying
“prosumer”, who reduces distribution volumes and threatens the financiability
of the entire system. Under these conditions, is a simple shift towards more
market exposure, towards quota systems and green certificates trading, as
marketers like Domenico De Luca of Axpo Trading recommend, the cure-all
solution?
When it comes to Guarantees of
Origin (GoOs), the voluntary market seems to have come to a halt. Trading
companies and retailers are vying for new USPs to reinvigorate sales and make
up for lost credibility in the face of sweeping policy-driven growth. Linking
certificates with incremental production, as in the ECOHZ GO2 business model,
is one such move. Additionality has actually become commonplace in the market.
The opening in December 2012 of the first energy exchange for trading green
power at Austria’s EXAA, where certificates are tied to physical delivery, is a
telltale sign. Given these impulses, there is indeed some hope that “Grid and
Market Integration” in “The Age of Renewables” will be financed not against but
with and through the environmentally aware consumer. The last presentation in
the programme went to prove the point: with its “Vitale Vert” offer, Geneva’s
municipal utility SIG has successfully managed to both boost and balance solar
power consumption and production, and thus even surpass cantonal expansion
objectives!