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Renewable Energies in Hungary- Legislative Framework, Regulation, Support-
Tamás Tóth
Hungarian Energy Office
EU Fundamentals – Expectations to Hungary
• White Paper on Renewable Sources of Energy (1998): – Double the share of Renewable Energy Sources (RES) in the primary energy portfolio by 2010
(6%>>12%)• RES-E Directive (2001):
– Increase the share of Electricity from Renewable Energy Sources (RES-E) in the electricity consumption up to 21% by 2010 (EU-25 total)
• RF (Renewable Fuels) Directive (2003): – Set minimum market share of fuels (bio-diesel, alcohols, and hydrogen) from renewable sources.
Target for 2010 is 5.75 %.• Biomass Actionplan (2005)
– Priority of biomass on the utilization of RES• RE Roadmap by 2020 (2006)and Strategy Goals of the EU (7-8. march 2007)
– Increase the share of RES up to 20% in the primary energy portfolio by 2020– Share of biofuels 10% by 2020
>>> Hungary is supposed to fulfill the directives: – Double the present share of 3.6 % of renewable sources in the primary energy consumption.– Increase the share of RES-E up to 3.6 % in the electricity consumption.– Bio-fuels: share expressed in energy content in the fuel market in Hungary shall be 5,75% by end
2010
RES Support Scheme in Hungary
KIOP(2004-2006)
Support Scheme
Investment subsidy
KEOP(2007-2013)
Production support
Obligatory taking over of RES-E
and feed-in-tariff
Green Certificate
Bio fuels Heat generation RES-E generation
?
Tax exemption
Investment Subsidies for RES in Hungary
KIOP (Operative Programme for Environmental Protection and Infrastructure)1. Period: 2004-20062. Financed by EU Funds 3. 3 main fields: environmental protection, energetics and transport4. For Renewable Energies: 12 million EUR
• Supported projects: 18 • Planned total RES-E generation / year: 442 TJ• Installed capacity: 19,4 MW• Saved CO2: 2 million tons (for a whole life cycle)
KEOP (Operative Programme for Environment and Energy)1. Period: 2007-20132. Financed by EU Funds3. 2 main fields for Energetics: Energy savings and Renewables4. For Renewable Energies (RES-E and heat generation): 200 million EUR5. Supported projects: biomass, biogas, geothermal, small scale wind turbines6. For Biofuels: 53 million USD
• Supported projects: biofuel factories middle- and large scale capacities
Production Support for RES-E generation in Hungary
I. Period (2001-2007)• Legal framework:
– Act No CX (2001) on Electricity, its Amendment (Act No LXXIX, 2005) and associated Government Decrees of Execution (180/2002 [VIII.23] and 246/2005 [XI. 10])
– Decree No 78/2005 (X. 7) of Ministry of Economy and Public Transportation, amending Decree No 56/2002 (XII. 29) on Rules of pricing and obligatory taking over of RES-E
Production Support for RES-E generation in Hungary
I. Period (2001-2007) 1. Subsidized renewables:
• wind• PV• geothermal• hydro (up to 5 MW)• biomass (purely fireing, in a case of co-fireing the share of biomass have to be
over 10%)2. Subsidies: obligatory taking over and feed-in-tariff for RES-E (only for the licensed
period and amount)3. Hungarian Energy Office (HEO) sets the amount of RES-E and the period of the
obligatory taking over in the license• Individually project inquiry• Period and amount depend on the submitted business plan (depend on the
return period of the investment)4. Feed-in-tariff is set by the Act (VET): average tariff 9 EURcent/kWh*k (k= last year
inflation rate)• By wind, PV at all day periods the same tariff• By the others depend on the electricity demand at day periods the tariffs are
different, but the averege tariff is the same5. Possibility of introducing green certificates
Generator Wholesale Trader Public Supplier
Support scheme based on regulated public market
Trader
Functioning of the Hungarian RES-E Support Scheme
(I. Period)
= Electricity (kWh)
The functioning of The functioning of the feed-in-tariff model the feed-in-tariff model
(2001-2007)(2001-2007)
Public Wholesale Trader or Public Suppliers are
obliged to take over RES-E at subsidized price
obligatory taking over period and the amount of yearly feeded RES-E is set in the
license by the HEO
Free Market
Generator can sell RES-E on a free market (on market conditions)
KÁPKÁP
Consumer
Public SupplierWholesale Trader(MVM)
TSO (MAVIR)
= compensation for RES-E purchasing
KÁPK
ÁP
fee
KÁP Fund
1. KÁP =money to make amendments to suppliers for RES-E support, paid from a fund wich is handled by the Hungarian TSO (MAVIR)
2. KÁP-fee =part of the system operation fee, paid by all consumers
Money flow of the RES-E Support Scheme (I. Period)
Generator
9
HU
NG
AR
IAN
EN
ER
GY
OF
FIC
EInternet: www.eh.gov.hu
Results of the I. Period (2001-2007)
2 029,0
2 567,4
3062,63179
724,0
1184,5
47,1 101,4 135,8 136
1 574,4 1547
60,7
40,7
64,3
121,4 120,7
52,152,1
21,4
3,63,62,91,4
0,0
500,0
1 000,0
1 500,0
2 000,0
2 500,0
3 000,0
3 500,0
2004 2005 2006 2007 predicted
pu
rch
ased
ele
ctri
city
un
der
ob
ligat
ory
tak
ing
over
(G
Wh
)
0,0
20,0
40,0
60,0
80,0
100,0
120,0
140,0
KÁ
P (
M E
UR
)
CHP generation (GWh) Renewable generation (GWh)
Waste + Pressure drop (GWh) CHP KÁP (M EUR)
Renewable KÁP (M EUR) Waste + Pressure drop KÁP (M EUR)
0,6%
2,2%
4,3%
3,8%
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
3,5%
4,0%
4,5%
5,0%
2003 2004 2005 2006
Proportion of RES-E generation to Domestic Consumption
Results of the I. Period (2001-2007)
Return period of investment
Type of RES-E generation Year
New biomass 8-9
Wind <7
Waste 10
Biogas 11
PV 40-50
Geothermal 1-10
Main problems of the I. Period
-9,64
-15,71
-47,86
-28,57
-50,00
-40,00
-30,00
-20,00
-10,00
0,00
mill
ion
EU
R
2003 2004 2005 2006
Annual (cumulated) KÁP balance
Technical problems1. some RES (e.g. wind) means growing volatility of generation, which cannot be sufficient
regulated (the TSO has not any fast running-up and this fact limits the permissible maximum gradient (MW/min) of the load regulation >> limited wind capacity can be installed (330 MW by 2010) Regulation problems
1. Long-term contracts: obligatory purcase of RES-E based on long term contracts between RES-E generators and Public Wholesale Trader or Public Suppliers >>may create stranded cost, if support scheme is changing
2. Feed-in-tariff: the price of RES-E is specified by the Act (fixed increasing prices) >> no possibility of technical distinction
3. Quota: administrative quota allocation >> may result non transparent allocation procedure (investors who submit an application for HE license are facing with the risk losing planning costs if application is not accepted, or the license is not eventually given for the planned amount of RES-E or for the planned capacity)
Financing difficulties1. The feed-in-tariff of RES-E is financed
through the public market (paid by consumers in the system operation fee). The paid amount of the KÁP increased year by year, but the KÁP-fee remaind approx. the same (KÁP-fee was set by the ministry it fall under political influence) >> deficit of KÁP fund increased year by year
Production Support for RES-E generation in Hungary
II. Period (2008- )• Legal framework:
– Act No LXXXVI (2005) on Electricity, and associated Government Decrees of Execution (under preparation)
– Statutory orders (under preparation):• over rules of obligatory taking over and feed-in-tariffs of
Renewables and Waste
Production Support for RES-E generation in Hungary
II. Period (2008- ) 1. Subsidized renewables (only for new entrants, for old players the old
competences remaind): • all renewables• except:
– RES-E from firewood (or higher section of wood)– Heat production from RES
2. Subsidies: • Obligatory taking over • Obligatory taking over and feed-in-tariff (only for the licensed period
and amount)• Chanche to make different feed-in-tariffs (but maximal average price
remained in the Act)• For wind (over the licensed 330 MW limit) tender (subject:
support period or price??) 3. Hungarian Energy Office (HEO) sets the amount of RES-E and the period
of the obligatory taking over in resoultion• Period and amount depend on the return period of the investment
4. Possibility of introducing green certificates in the future
TSO (MAVIR)
Generator1
Generator2
Generator1
Generator2
Generatorn
Generatorn+1
Feed-in tariff set by statutory order, obligatory taking over period and amount of yearly feeded RES-E set by HEO resolution
Feed-in tariff set by statutory order, obligatory taking over period and amount of yearly feeded RES-E set by HEO resolution
Feed-in tariff set by statutory order, obligatory taking over period and amount of yearly feeded RES-E set by HEO resolution
Market playerk
Market player1
Market player2
Market player according to the Act (VET)
Based on principles in the ministerial decree the allocation process is set in the business code (fluctuation obligatory taking over at fluctuating price, like German and Austrian examples)
The functioning of the feed-in-tariff model (II. Period)The functioning of the feed-in-tariff model (II. Period)
TSO (MAVIR)
TSO (MAVIR) tasks (based on German and Austrian examples)
1. Payments from/to separate account (as set by ministerial decree). Aim is transparency, financial separation from other activites.
2. Price formula/calculation of energy taken by traders, suitable to cover all payments (credits may only drawn to be liquid, and not to be operational)
3. KÁP fee will be leave off due to lack of function4. The mechanism based on German and Austrian precedents that was
accepted by the EU
Payments to Generators Payments by the Traders
Money flow of the RES-E Support Scheme (II. Period)
The functioning of the feed-in-tariff model (II. Period)The functioning of the feed-in-tariff model (II. Period)
3,71%4,39%
6,72%8,02%
9,37%10,36%
11,36%12,38%
13,44%14,50%
15,20%15,90%
16,60%17,31%
18,02%
0,00%
2,00%
4,00%
6,00%
8,00%
10,00%
12,00%
14,00%
16,00%
18,00%
20,00%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
expected RES-E share
Expected RES-E share of Hungary (according to RES-E strategy)
Future regulationFuture regulation
Characteristic of future RES-E Decree
1. Feed-in-tariff: different tariffs (over 20 MW only market price)2. Efficiency: increase the efficiency of power plant (biomass 30-40%)3. Technical regulation: regulated power plants (balancing costs)4. Co-fireing: min. 50% RES5. Guarantee of Origin (controll function)
Thank You for your Attention!