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Downloaded from orbit.dtu.dk on: Apr 11, 2021Barriers and Critical Success Factors for the Implementation of CooperationMechanismsHansen, Lise-Lotte Pade; Klinge Jacobsen, HenrikPublication date:2012Document VersionPublisher's PDF, also known as Version of recordLink back to DTU OrbitCitation (APA):Hansen, L-L. P., & Klinge Jacobsen, H. (2012). Barriers and Critical Success Factors for the Implementation ofCooperation Mechanisms. RES 4 Less.General rightsCopyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyrightowners and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights. Users may download and print one copy of any publication from the public portal for the purpose of private study or research. You may not further distribute the material or use it for any profit-making activity or commercial gain You may freely distribute the URL identifying the publication in the public portalIf you believe that this document breaches copyright please contact us providing details, and we will remove access to the work immediatelyand investigate your claim.
Cost-Efficient and sustainable deployment ofrenewable energy sources towards the 20% targetby 2020, and beyondD3.1Barriers and Critical Success Factors for the Implementation of CooperationMechanismsJune 2012
D3.1 Barriers and critical success factorsi
Projectno.:IEE/09/999/SI2.558312Deliverable number:Deliverable title:Work package:Lead contractor:Logo of the contractorD3.1Barriers and Critical Success FactorsWP3DTUAuthor(s)NameLise-Lotte PadeHenrik Klinge u.dkDissemination LevelPUPPRECOPublicRestricted to other programme participants (including the Commission Services)Restricted to a group specified by the consortium (including the Commission Services)Confidential , only for members of the consortium (including the Commission Services)The sole responsibility for the content of this report lies with the authors. It does notnecessarily reflect the opinion of the European Communities. The European Commissionis not responsible for any use that may be made of the information contained therein.D3.1 Barriers and critical success factorsii
PREFACE/ACKNOWLEDGEMENTSThis document reports activities and results of Task 3.1 of the Intelligent Energy Europesupported project RES4Less. This work is the initial analyses and survey of barriers forimplementing cooperation mechanisms in the EU countries. This work builds on earlierIntelligent Energy Europe projects and is the result of literature surveys and discussions in theproject group. Furthermore, fruitful inputs have been obtained in the stakeholder workshopscarried out within the RES4Less project. Additionally, the topic has been presented anddebated at two international conferences.The preliminary results were also shared and enriched by comments from other members ofthe RES4Less Team during internal meetings of the project.D3.1 Barriers and critical success factorsiii
EXECUTIVE SUMMARYThe RES Directive 2009/28/EC set legally binding targets for EU Member States on energyconsumption from renewable sources – the 2020 RES targets. A part of this can be achievedthrough the use of cooperation mechanisms: statistical transfer, joint project and joint supportscheme. The intention of the cooperation mechanisms is to provide the flexibility needed toachieve Europe’s renewable energy targets in a more cost-efficient way. In Task 3 of theRES4Less project we analyse the barriers for two of the cooperation mechanisms: jointproject and joint support schemes. This report is the outcome of the work in task 3.1 with thepurpose of analysing the barriers for cooperation mechanisms and the critical success factorsthat ensure the removal of the most important barriers. The general barriers identified andcovered in this report will be used as input for further analysis in the specific case studies inTask 3.3 to 3.5 of this work package.Cooperation mechanisms have the potential to reduce the compliance costs of reaching the2020 RES targets for EU member states. The initiation of cooperation mechanisms isdependent on addressing a range of barriers. This report examines the barriers associated withdifferent structures, power markets, regulation and policies in member states. Critical barriersfor the implementation of cooperation are identified and the possible link with the corecompensation issue is discussed.The precondition for establishing cooperation is that the participating countries all need tohave a net benefit from cooperation. This will in most cases require that a compensationscheme/RES price can be designed to reduce the barriers.The first category of barriers identified here is within the direct support for renewables andcovers both the type of support, the objective of support scheme as well as the level ofsupport/financing. The objective for support can be such domestic priorities asdevelopment/protection of infant industries, employment, and diversification of energysources or reduction of negative externalities such as emissions/pollution. One of theimportant examples is connected to the existence of a high level of technology-specificsupport for industrial development reasons that would be abolished if engaging in full jointsupport schemes with one common support level.Power market differences are the source of other important barriers, as widespreadcooperation would imply that power market price levels and composition are affected. Sucheffects would benefit some and draw on others. For example existing power generators in ahost country would suffer from expanding considerably generation capacity with lowmarginal cost technologies. On the other hand consumers in the host country would benefitthrough reduced power prices.Institutional barriers, especially regarding the entities regulating investment in renewables,network infrastructure and financing principles for renewable can also be substantial.Within our analysis, barriers are characterized in two dimensions, namely their importanceand the difficulty to overcome (see Figure 1).D3.1 Barriers and critical success factorsiv
Figure 1 Categorisation of barriersDifficulty to overcomeInstitutional barriers– complying:Clearconsequencesof non-compliancePower price:Loss for energy producersreducing the incentives forfuture investmentsin necessary capacity.Generation mix:Necessary adjustmentwith respect toless profitablebase load plants andvulnerability toprice changes.Network regulation:Agree onthe terms ofcost sharing.Indirect benefits:Assessment and sharingof secondary economiccosts and benefits.Direct benefits:Assessment and sharingPost 2020 targets:of primary economicSet clearcosts and benefits.targets forpost 2020Support schemes:Dealing withseveral differentsupport schemesand levels and technologies.Agreeing on thesupport schemetaking account ofsupport schemesalready in place.Institutional barriers– legislation:Establishment ofthe structureof legal agreementsImportanceSupport schemes and power prices are among the most important barriers. Of these thesupport scheme barriers seem the easiest to overcome. For more concrete conclusions on howto overcome the barriers the constellations of specific countries, technologies and type ofcooperation have to be addressed.D3.1 Barriers and critical success factorsv
TABLE OF CONTENTSPage1INTRODUCTION. 12BARRIERS . 42.1 Different RES support systems . 42.1.1 Different support schemes . 52.1.2 Combinations of support systems.72.1.3 Technology-specific support versus general support .92.1.4 Different support levels . 102.1.5 Concluding remarks. 112.2 Power markets . 112.2.1 Market price. 112.2.2 Investment incentives . 122.2.3 Generation mix . 122.3 Network regulation . 122.4 Institutional barriers. 122.4.1 Legislation . 122.4.2 Political acceptance . 132.4.3 EU policy . 132.5 Compensatory challenges . 132.5.1 Direct benefits. 142.5.2 Indirect benefits . 142.5.3 Concluding remarks. 172.6 Uncertainty regarding the post 2020 targets. 173CRITICAL SUCCESS FACTORS . 183.1 Support schemes . 183.2 Network regulation . 193.3 Power markets . 193.3.1 Market price and investment incentives . 193.3.2 Generation mix . 193.4 Institutional barriers. 203.5 Allocation of costs and benefits. 203.5.1 Direct benefits. 213.5.2 Indirect benefits . 213.5.3 Compensation scheme and critical success factors .223.6 Post 2020 targets. 224CONCLUSIONS . 24D3.1 Barriers and critical success factorsvii
1INTRODUCTIONThe RES Directive 2009/28/EC (European Commission 2009) sets legally binding targets for EUMember States on energy consumption from renewable sources – the 2020 RES targets. A part ofthis can be achieved through the use of cooperation mechanisms: statistical transfer, joint projectand joint support schemes. The intention of cooperation mechanisms is to assure the flexibilityneeded to achieve Europe’s renewable energy targets in the most cost-efficient way.Cooperation mechanisms do have potential benefits, but there are a number of barriers for theirsuccessful implementation. This report reviews and categorises the barriers and illustrates whichbarriers have to be addressed specifically for all types of cooperation mechanisms. The report willdraw on literature studies, especially the previous projects in IEE dealing with cooperationmechanisms and RES support and system integration issues.The EU 2020 member state (MS) targets for renewable energy are based on the national shares in2005. The required total addition of renewable energy for the EU has been distributed among themember states taking very few parameters into account (Klessmann et al 2010). One parameterconsidered is the income level, thereby putting a slightly higher burden on wealthier countries.However, the differences in costs of implementing renewable investments for member states hasnot been directly included in setting the targets, so there is no consideration for cost efficientimplementation. Therefore potential benefits through reduced compliance costs for countries existif they can implement their targets jointly. These benefits can be realised by using cooperationmechanisms. Current EU legislation has opened for using joint support schemes, joint projectsand statistical transfers as support for promoting renewable energy to meet the 2020 targets, butthe details for these mechanisms have not been laid out.The least complicated mechanism is statistical transfer, an ex-post transfer of virtual REScertificates that can be used for target compliance. This mechanism depends directly ongovernmental involvement and can also be associated with the other mechanisms at the final stageof transferring the achieved RES certificates from one country to another. It does not by itselfinduce additional RES development since no prior agreements assure the sale of the credits andtherefore it has limited use as promoting a more efficient distribution of RES development. Due tothe incentive structure behind this mechanism, it is expected that only very limited ‘statisticaltransfer’-volumes will be available to MS for complying with their target in 2020 (Klessman et al2010). The reason being that, if this mechanism should be used as strategic instrument rather thanas an ad-hoc means of ‘filling the gaps’, MS would have to guarantee the delivery of REScertificates under a statistical transfer several years prior to 2020, so that the receiving MS canavoid the development of own RES production. However, many MS, especially those using Feedin tariffs or other non quantity-driven support systems, will not be able to guarantee delivery longbefore 2020, as they will be uncertain in regards to their own target compliance. Therefore sharingof compliance risk would be a critical issue in agreements on statistical transfers ex ante.The mechanism of joint projects gives those MS that lack sufficient low-cost RES potential (usercountry) the possibility to develop projects in another MS (host country). In this case the usercountry would support investors in undertaking the project or investors are supported jointly bythe two countries and then the total costs are balanced via a compensation scheme. MS can eithercooperate on a project-to-project basis or agree on a special support framework for a number ofprojects. These special support frameworks can be defined for a certain technology or a certainarea, and can be implemented in parallel to existing national support schemes. In the medium toD3.1 Barriers and critical success factors1
long term, the cooperation on special support frameworks might lead to a further expansion of thecooperation itself (i.e. through standardisation), and therewith lead to the development of jointsupport schemes.The mechanism of joint support schemes is a broad cooperation of MS on a national level andmay pave the path towards harmonisation in the long run. In this case the MS agree on a commonsupport scheme. The introduction of a common support scheme gives the greatest potential toefficiently utilise RES potential in the involved MS, as the establishment of equal incentives willensure the development of RES at the most beneficial sites in the cooperation area. A lessambitious option is that the MS partially coordinate their national support schemes, such that thecommon support scheme only applies to specific technologies, or to specific areas. Thesepossibilities will be dealt with in more detail in Task 3.2 of the RES4Less project, but the barriersare treated in this report.In Table 1 the main characteristics of the three cooperation mechanisms are summarized.Table 1 Cooperation mechanisms and their main characteristicsStatistical TransferEx-post transfer of virtualRES certificatesDoes not induce additionalRES developmentJoint ProjectGivesMSthatlacksufficient low-cost RESpotential the possibility todevelop projects in anotherMSMS can either cooperateonaproject-to-projectbasis or agree on a specialsupport framework for anumber of projectsSupport frameworks can bedefined for a certaintechnology or a certainareaJoint support schemeBroad cooperation of MSon a national levelMS agree on a commonsupport scheme – fully(cover all technologies andareas) or partially (onlycoversspecifictechnologies, or to specificareas)Gives the greatest potentialto efficiently utilise RESpotential in the involved MSThe cooperation mechanisms actually implemented might be somewhere in between, as they maycontain elements from both types. If, e.g., two countries agree on a common tender for an offshorewind farm supported by a price premium are we then dealing with a joint support scheme or ajoint project? The fact that it is a limited project – the offshore wind farm – makes it a jointproject, whereas the support scheme – the price premium – makes it a joint support scheme.In Task 3 of the RES4Less project we analyse the barriers for two of the cooperation mechanisms:joint projects and joint support schemes. We do not address the Statistical Transfers since thebarriers and the complexities related statistical transfers initially in the project definition wereassumed to be very limited. Furthermore, transfers do not provide more efficient RESdevelopment but only exploit ex post surpluses. This report is the outcome of the work in Task 3.1with the purpose of analysing the barriers for cooperation mechanisms and critical success factorsthat ensures the removal the most important barriers. We consider barriers existing due todifferences in types of support schemes and level of support, as well as barriers associated withdifferences in power market regulation and power prices. Furthermore, we consider the barriersarising due to the costs and benefits connected to cooperation.D3.1 Barriers and critical success factors2
One general barrier for implementing RES jointly among member states is related to gridconnection and transmission capacity. These issues are beyond the scope of this report and will bediscussed in work package 4.D3.1 Barriers and critical success factors3
2BARRIERSThe purpose of cooperation mechanisms is to achieve the EU 2020 RES target in a more efficientway, compared to the individual country solution. However, cooperation between countries doesnot seem to come along automatically, due to the presence of several barriers.The overall precondition for the countries to engage in cooperation is that member states will onlyagree on a cooperation mechanism if they all benefit from it. This means that the overall benefitsfrom cooperation for all MS have to exceed the overall costs from cooperation. Therefore, ingeneral, main barrier is the challenge relating to identifying, quantifying as wel
D3.1 Barriers and critical success factors iii PREFACE/ACKNOWLEDGEMENTS This document reports activities and results of Task 3.1 of the Intelligent Energy Europe supported project RES4Less. This work is the initial analyses and survey of barriers for implementing cooperation mechanisms in the EU countries. This work builds on earlier
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