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On the Road to Success

Our colleagues at WWF Finland are committed to help their government onto the path to a low carbon future. A recent initiative is to share Smart Climate Solutions case studies with them with the objective of influencing their climate and energy strategies and actions. I thought I’d share them with you as well to provide leverage for your own lobbying work.

First up is the German Feed-in Tariff System for wind and other renewable energy

The German feed-in system, the German Law on Renewable Energy (Das Erneuerbare-Energien-Gesetz, 2000, hereafter EEG) laid down the framework conditions for rapid growth of renewable energy sources (RES) in Germany during the 21st century. The feed-in system, which guarantees the RES producers a fixed price per kWh fed into the grid, has been at the core of the German renewables success story – over tripling the amount of renewable energy since 2000. The leading renewable energy source in 2006 – wind power provided 30,7 TWh or some 5 % of total electricity production (see picture below, Mrd. kWh = TWh).

 

In practice the EEG legislation (amended in 2004 and regularly reviewed) obligates electric utility companies to purchase renewable energy at set rates over the next 20 years. These in turn are allowed to redistribute the additional cost to the general public in the form of higher electricity rates – hereby there is an equalization of additional costs from RES between all grid operators and electricity suppliers. The feed-in system, building on substantial R&D as well as market simulation programmes during the 1980s and 1990s introduced two innovative aspects to RES policy implementation, in particular i) a degression of tariffs, supporting technology learning, and ii) a stepped nature of tariffs, supporting financial efficiency.

 

While in Germany the tariff (in 2006 ranging from ca 5 to 57 €cent/kWh) is guaranteed for approved renewable energy projects for a 20-year period from the plant commissioning, from 2002 onwards new installation have received lower tariffs (degression rate ranging from 1-6,5%/year depending on RES technology) in order to retain the incentive for manufacturers to systematically reduce production costs and offer more efficient products each year. The stepped tariffs, by defining the tariffs for different technologies based on yield/generation costs of each plant (e.g. for wind power depending on site-specific wind yield) the price of the tariff mirrors the cost resource curve of the technology, which results in a reduction of the producer profit and therefore in lower transfer costs for society.

 

Key challenges in implementation and drivers/reasons of success

 

The international experiences of feed-in tariffs in several countries point to rapid increase of renewable technologies on energy markets unless hampered by major barriers (e.g. administrative, grid access). In Germany, a well suited additional support mix has been crucial for the overall success of the feed-in system. The complementary policy measures have included soft loans and investment incentives by the market incentive programme for biomass CHP, small hydropower, PV in schools, tax incentives (reduction of income tax granted in the federal tax law especially for wind energy investments) as well as soft loans by a federal investment bank. This framework has been administratively well coordinated on federal level by three key ministries, received strong political and financial backing on state level and catalyzed active cooperation in different technology sectors.

 

Assessment of CO2-emission reductions and if available any preliminary estimates of emission reduction costs (euro ton/CO2ekv)

 

The EEG has considerably contributed to annual GHG reductions in the order of tens of millions of tons. In 2006 the reduced GHG emissions, due to RES in electricity production was estimated to some 44 million CO2- tons. Looking at the economic costs of this energy sector transformation, the additional costs for consumers has been estimated to a mere € 0.007 per kilowatt-hour (kWh), corresponding to less than 4 % of the average consumer price for German rate payers.

 

Presentation of existing estimates concerning ancillary effects and benefits

 

With regards to economic ancillary effects the EEG has been the key contributor to the growth of the renewables sector into a over 20 billion euro business in Germany proper with in addition considerable export – in 2006 the export share of the German wind power industry raising to above 70%. Likewise the EEG has contributed to rapid employment growth in the renewables, approaching a total 250 000 employed. Even taking into account the negative transitional and structural effects in other economic sectors (incl. losses in purchasing power), the total positive employment effects reach some 70 000-80 000, with wind power leading the employment growth numbers. In addition, the EEG has contributed to improved energy security and cost-savings through avoided coal and gas imports.

 

Preliminary assessment of feasibility and any required modifications for similar policy measures in Finland

 

As the feed-in system can support a broad portfolio of RES technologies a system specifically tailored for the Finnish conditions could be rapidly introduced – taking into account the maturity and competitiveness of available technologies in Finland as well as the open energy markets. As in Germany the feed-in system could become a key policy measure in the Finnish national climate and energy strategy implementation.

 

The key criteria for success lie in the high price security and market stability, which creates the long term planning security for investors. The Finnish feed-in system could guarantee a dynamic market based premium and be differentiated in order to promote technology learning and market success in specific areas of global RES market growth, be it wind power in cold & arctic regions or distributed bioenergy based CHP solutions.

 

In this respect the German system with a stepped nature and degression of tariffs may provide some useful guidance for a Finnish system that should adapt to technological development and foster innovation. The international feed-in experiences from over 40 countries[6], covering close to 20 EU countries provide a solid basis for designing a Finnish system with lean administrative costs and coordinated network management with high stability and solid grid integration. The Finnish supporting policy mix will also need to be adjusted and diversified to allow rapid deployment of available renewable technologies.

 Erfahrungsbericht 2007 zum Erneuerbare-Energien-Gesetz (EEG-Erfahrungsbericht), November 2007.

 Feed-In Systems in Germany and Spain and a comparison. Dr. Mario Ragwitz (corresponding author), Dr. Claus Huber. Fraunhofer Institut für Systemtechnik und Innovationsforschung, 2005

 Through the use of renewables, in total (covering electricity, heat and fuels) some 100 million tons of CO2 emission were avoided. Almost 50% of this emission cut can be attributed to the EEG.

 Looking at the electricity price increases 2002-2006 in Germany, the EEG has contributed to some 13% of the total price increase during the same period. Erfahrungsbericht 2007.

 Erfahrungsbericht 2007 zum Erneuerbare-Energien-Gesetz (EEG-Erfahrungsbericht), November 2007

 Se e.g. International Feed-In Cooperation, http://www.feed-in-cooperation.org/content/view/24/36/

Exciting things already happening in Copenhagen

Earlier this week a number of interesting people gathered to develop the idea of a low carbon city development index. Objective: to accelerate development towards a low carbon society.

Copenhagen Declaration for a Low Carbon City Development

For the first time in human history more than half of the world’s population now lives in cities. This has amongst other things created a strong demand for sustainable urban development across the globe. It has become evident that this need can not be met through traditional development as there is growing evidence of the adverse effects caused by the emission of greenhouse gases and intensive use of natural recourses to provide a high quality of life.

Therefore the cities of tomorrow must be fundamentally different than the cities of today in order to ensure sustainability. In this transition it is important to focus on service needed, not the ways they have been provided previously. For example, instead of only improving cars and roads the service of mobility and transportation should be in focus encourage smart solutions and IT-solutions that reduce the need of energy consuming trips and thereby also buildings.

This service perspective is especially important when we look at cities in regions like China and India where more than half of the world’s building will be build over the coming years and where more than 10 million people are moving into cities every year in China alone.

In order to ensure that economic development, a low carbon economy and a resource efficient development go hand in hand we should approach this transition as an opportunity.

A global approach to cities
As all cities are integrated parts of national, regional and global economies it is important not to view the transition to a low carbon city in isolation. Cities should be seen as living entities that through import and export interact with the rest of the world. No city can be seen as sustainable without considering the consequences of the import and export. With the need for low carbon solutions cities that provide these solutions are particularly important and sustainable import should be encouraged where possible.

A low carbon city development index
“What you can’t measure you can’t manage” is an old truth that also applies to cities. A low carbon index for cities would make it possible to measure the progress towards a low carbon society and support three important aspects of low carbon development
• Development of a low carbon city development policies, capturing the global impacts of the city
• Dialogue and exchange of best practice between cities around the world
• Comparison of various cities development paths and how far they are in the transformation from a carbon intensive city to a low carbon city

In order to achieve this, a commonly accepted global index that in a meaningful way can measure a city’s progress towards a low carbon future is needed. Several indices attempt to do this at the national level but no index exists at the global level, and none of the existing indices so far include import and export as relevant factors. The new “low carbon city development index” will address this gap through the development of a global index for low carbon cities and by identifying policy measures that efficiently foster and facilitate the above mentioned transition.

The index will be based on the concept of a carbon budget, accounting for equity a the ecological limits for the global CO2 emissions in order to avoid dangerous climate change, and will be divided into three different parts covering the effects from direct measures as well as measures related to export and import:

1. Indicators assessing the direct carbon emissions in the city
To which degree does the city directly contribute to increased or decreased carbon emissions and impact the environment?

2. Indicators assessing the carbon footprint from export
To which degree do products and services originating from the city result in increased or decreased carbon emissions and impact the environment impacts at place of consumption?

3. Indicators assessing the carbon footprint from import
To which degree do the city sources, materials and services contribute to increased or decreased carbon emissions and impact the environment at place of origin?

We, the undersigned, support the development of a low carbon city development index and will pay extra attention to the needs in emerging countries such as China and India. We will encourage all relevant stakeholders to support this effort.

John Kornerup Bang
Head of Globalization Programme, WWF Denmark

Tom Carnac
Programme Manager, Public Sector, Carbon Disclosure Project, UK

Rajendra Kumar
Senior District Collector, Tiruvallur District, India

Mr. Lei Hongpeng
Programme Officer, Climate Change and Energy Programme, WWF China

Christine Loh
Founder and CEO, Civic-Exchange, HongKong, China

Mr. Ma XueLu
Former Director General, Administration of Baoding National New and Hi-tech Industrial Development Zone

Jorgen Lund Madsen
Development Manager, Technical and Environmental Committee, Copenhagen City, Denmark

Dennis Pamlin
Global Policy Advisor, WWF Sweden

Mr. Pan Haixiao
Director, Transportation Planning Program Department of Urban Planning, College of Architecture and Urban Planning, Tongji University

Mr. Pan Jiahua
Executive Director, Research Centre for Urban Development and Environment (RCUDE), Chinese Academy of Social Sciences(CASS)

Peter Rathje
Managing Director, Project Zero, Denmark

Kaarin Taipale
Urban researcher and Chair, Marrakech Task Force for Sustainable Buildings and Construction, Helsinki School of Economics, Finland