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Status of feed-in tariffs in Europe 2010

The use of feed-in tariffs (FiTs) to pay for renewable generation now overwhelmingly dominates European renewable energy policy, according to the most recent meeting of the International Feed-in (tariff) Cooperation council (IFIC).

By Paul Gipe

The council was founded by Germany, Spain, and Slovenia and holds workshops annually to discuss issues surrounding the use of feed-in tariffs. The 2010 meeting was in Berlin.

There are now 27 countries in the European Union since the accession of several former East Bloc countries.

Below is a summary of the findings of the 8th International Feed-in Cooperation Workshop on 18 and 19 November 2010.

  • 20 of 27 EU states use feed-in tariffs as the main renewable energy programme;
  • Three of 27 EU states also use feed-in tariffs for certain technologies, such as solar PV in Italy;
  • Only four of 27 EU states don't use feed-in tariffs at all;
  • 85% of all new wind systems since 1997 have been installed with feed-in tariffs in the EU;
  • Nearly 100% of all new solar PV systems since 1997 have been installed with feed-in tariffs in the EU;
  • 68% of all new biomass generation since 1997 in the EU have been installed with feed-in tariffs;
  • Feed-in tariffs are the most cost-effective renewable policy in Europe; and
  • Feed-in tariffs remain the most important measure for EU nations to meet EU renewable targets.

In 1997, there were some 5 GW of wind generating capacity installed in Europe. By the end of 2009 there was 77 GW. Thus, there has been as much as 60 GW of wind capacity installed in Europe with feed-in tariffs. A fleet of this size is capable of generating more than 120 TWh per year and represents a private investment of more than US$120 billion.

The Fraunhofer Institute reported to the workshop that for onshore wind energy feed-in tariffs were more cost-effective than other policy mechanisms and especially more so than quota systems, such as renewable energy standards.

For example, Fraunhofer found that in the UK, consumers were paying far more for wind energy than necessary to build profitable projects. Similarly, Italians were paying more than necessary, as were Belgians. The UK's Renewable Obligation uses a quota system with tradable green certificates. Italy and Belgium use similar policies.

In contrast, says Fraunhofer, Germany, France, and Spain pay only what's necessary to develop a profitable project. The Fraunhofer findings were an update of a similar study that was published by the EU in 2005. The previous study found the same results.

Fraunhofer's Mario Ragwitz also explained how the French system of differentiated tariffs for wind energy based on resource intensity works, and how it reduces the cost of wind energy to consumers.

Differentiated wind tariffs are used in France, Germany, and Switzerland.

In France, wind turbines are paid 0.082/kWh for the first ten years of a 15-year contract. During the years 11 through 15, the tariff varies based on the productivity of the wind turbine. Highly productive wind turbines, for example at windy sites, are paid as little as 0.028/kWh whereas turbines at less windy sites are paid up to 0.082/kWh. This limits excessive profits at windy sites, that is, higher payments than necessary to develop profitable projects.

In a related report to the European Parliament titled Renewable Energy: Progressing towards the 2020 target, Fraunhofer found that some member states reformed their renewable energy policy to enable more local ownership and in so doing increase local acceptance of renewable energy. According to the report, an "element of reform in some Member State has been to develop private financing mechanisms that both attract capital and increase local acceptance of renewable energy projects (thus helping to overcome other barriers such as planning permission). The most common instrument used for this is 'local ownership' whereby local communities can take a financial share in the investment of the project in return for cheaper electricity or a share in the profit of the project."

Historically, there has been more local ownership of renewable generation in jurisdictions that use feed-in tariffs. More than half of the 43 GW of renewable generators in Germany are owned by farmers or local investors.

This feed-in tariff news update is partially supported by An Environmental Trust and David Blittersdorf in cooperation with the Institute for Local Self-Reliance. The views expressed are those of Paul Gipe and are not necessarily those of the sponsors.

Paul Gipe
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