SOLAR PV EXPERIENCE,

CHALLENGES AND OPPORTUNITIES IN

ESTONIAAndres MeesakAndres MeesakAndres MeesakAndres Meesak

Estonian PV Energy AssociationEstonian PV Energy AssociationEstonian PV Energy AssociationEstonian PV Energy Association@AndresMeesak@AndresMeesak@AndresMeesak@AndresMeesak

Topics:

■ Background / statistics

■ Estonian electricity market

■ Estonian PV sector

■ Challenges and opportunities

■ Conclusions

• 9 kW peak power• Comissioned August 2012• Generated > 35 000 kWh electricity

Estonian Development Fund – Coop energy mentor

Research topic:Small scale RE feasibility and economics

Statistics...

Generation of hazardous Generation of hazardous Generation of hazardous Generation of hazardous waste per capita in EUwaste per capita in EUwaste per capita in EUwaste per capita in EU

>90% of hazardous waste >90% of hazardous waste >90% of hazardous waste >90% of hazardous waste generated in Estonia originates generated in Estonia originates generated in Estonia originates generated in Estonia originates from oilfrom oilfrom oilfrom oil----shale industry (energy shale industry (energy shale industry (energy shale industry (energy

industry)industry)industry)industry)

Statistics...

Statistics...

Statistics...

■ Fully liberalized market since Jan. 1st 2013

■ Grid regulated, „natural“ monopoly

– TSO – Elering

– DSO – Elektrilevi (87,5% of dist. grid); Imatra, VKG

■ NordPoolSpot area

■ AC frequency controlled from Russia („BRELL area“)

■ AC links to Latvia and Russia

■ 1000 MW HVDC links to Finland (average consumption 1000 -1200 MW, peak 1600MW)

■ RE generation has Feed-In-Premium (FIP) in amount of 53,7 53,7 53,7 53,7 €€€€/MWh /MWh /MWh /MWh (12 years12 years12 years12 years)

■ Average cost of electricity:

– HouseholdHouseholdHouseholdHousehold ((((municipalitymunicipalitymunicipalitymunicipality) ) ) ) 125-130 €/MWh incl all taxes and fees (VAT non-deductable)

– SmallSmallSmallSmall////mediummediummediummedium commercialcommercialcommercialcommercial 100-105 €/MWh (low voltage customers, VAT deductable)

– LargeLargeLargeLarge industrialindustrialindustrialindustrial 80-90 €/MWh (medium voltage customers, VAT deductable)

Electricity market setup

Electricity spot price and price for household

2012201220122012 2013201320132013 2014201420142014 2015201520152015

Market Market Market Market liberalisationliberalisationliberalisationliberalisationin Estoniain Estoniain Estoniain Estonia

600MW EstLink2600MW EstLink2600MW EstLink2600MW EstLink2HVDC HVDC HVDC HVDC cablecablecablecable launchlaunchlaunchlaunch

Market liberalisation01.01.2013.

EstLink2 launch

Household consumer price per kWh:

Solar PV sector in Estonia■ Total installed capacity ~ 6MW

■ First grid-connected installations 2012 summer– 1 M€ kick-off investment subsidy for households– No regulation for pro-sumer

■ Grid regulation■ Tax regulation

■ Households with PV installation ~ 500

■ Average power of household installation ~ 7,5kW

■ Annual revenue of the PV sector ~ 4,5 M€ (2015 estimate)

■ Largest installations 300 – 400 kW

■ Several MW-scale projects in pipeline

■ 2015 2015 2015 2015 –––– historically significant year historically significant year historically significant year historically significant year –––– only capacities comissioned in Estonia only capacities comissioned in Estonia only capacities comissioned in Estonia only capacities comissioned in Estonia was solar PVwas solar PVwas solar PVwas solar PV

- Regulative

- Informational

- Financial

Main barriers for implementing PV

Regulative

Informational

Financial

0

500000

1000000

1500000

2000000

2500000

Co1 Co2 Co3 Co4 Co5 Co6 Co7 Co8

Revenue €

2013 2014

€ 2,6 M

€ 3,7 M

Market size

Market size €

2013 2014

Solar PV market in Estonia

Challenges and opportunities: Regulation...Regulation...Regulation...Regulation...

■ FeedFeedFeedFeed----in Premium (FIP) 53,7 in Premium (FIP) 53,7 in Premium (FIP) 53,7 in Premium (FIP) 53,7 €€€€/MWh/MWh/MWh/MWh

■ Simplified connection to grid up to 11kW

■ Grid fee only on consumption

■ Microgrids not allowed

■ Strict direct line regulations

■ Administrative barriers > 100kW

– Operating licence

– Minimum equity requirement (33k€)

– Limited company requirement

CURRENT regulation:CURRENT regulation:CURRENT regulation:CURRENT regulation: Governing Acts:Governing Acts:Governing Acts:Governing Acts:

• Electricity Market Act• Grid Regulation• Alcohol, Tobacco, Fuel and Electricity Excise Duty Act• State Duty Act• Construction Act

Regulator: Competition Regulator: Competition Regulator: Competition Regulator: Competition AuthorityAuthorityAuthorityAuthority

Challenges and opportunities: Ever Changing Regulation...Ever Changing Regulation...Ever Changing Regulation...Ever Changing Regulation...

Challenges:Challenges:Challenges:Challenges:

■ Technology neutralityTechnology neutralityTechnology neutralityTechnology neutrality

■ Introduction of auction system for FIPIntroduction of auction system for FIPIntroduction of auction system for FIPIntroduction of auction system for FIP

■ NPS + FIP capped at 93 €/MWh

Opportunities:Opportunities:Opportunities:Opportunities:

■ Capacities < 200 kW exempt from FIP auctionCapacities < 200 kW exempt from FIP auctionCapacities < 200 kW exempt from FIP auctionCapacities < 200 kW exempt from FIP auction

■ Simplified connection to grid < 200 kW

■ No capping

■ Non-discriminative grid fee system

■ Possibility to run microgrids

■ Lifting administrative barriers

– Operation licence > 100kW

– Minimum equity requirement (33k€)

– Type of legal entity (coop)

The cost of equity cost of equity cost of equity cost of equity for onshore wind projects ranged between 6% (Germany) and more than 15% in Estoniamore than 15% in Estoniamore than 15% in Estoniamore than 15% in Estonia, Greece, Latvia, Lithuania, Romania and Slovenia in 2014.

Across all EU Member States, the risks Across all EU Member States, the risks Across all EU Member States, the risks Across all EU Member States, the risks induced by policy designs is perceived as induced by policy designs is perceived as induced by policy designs is perceived as induced by policy designs is perceived as most pressing. most pressing. most pressing. most pressing.

Source: The impact of risks in renewable energy investments and the role of smart policies. Final Report

More challenges...More challenges...More challenges...More challenges...

Source: The impact of risks in renewable energy investments and the role of smart policies. Final Report

Energy supply mix with rooftop PV forhousehold

Electricity from grid

Energy generated

Feed to grid 60-80% Own consumption 20-40%

ValueValueValueValue of of of of energyenergyenergyenergy fedfedfedfed totototo gridgridgridgrid::::

SpotSpotSpotSpot pricepricepriceprice + FIP (12 + FIP (12 + FIP (12 + FIP (12 yearsyearsyearsyears))))

ValueValueValueValue of of of of energyenergyenergyenergy consumedconsumedconsumedconsumed on on on on sitesitesitesite::::

EnergyEnergyEnergyEnergy gridgridgridgrid pricepricepriceprice forforforfor householdhouseholdhouseholdhousehold inclinclinclincl all all all all taxestaxestaxestaxes and feesand feesand feesand fees

Solar investment and IRR

Household

< 10 (11) kW

Appartmenthouse

SME

10 - 99 kW

Industrial

Commercial

101 – 500 kW

Utility scale

0,5 - ... MW

DimensioningDimensioningDimensioningDimensioning accordingaccordingaccordingaccording totototoconsumptionconsumptionconsumptionconsumption

IRR: 4,5 ... 8%IRR: 4,5 ... 8%IRR: 4,5 ... 8%IRR: 4,5 ... 8%

NPS Market NPS Market NPS Market NPS Market pricepricepriceprice (+FIP)(+FIP)(+FIP)(+FIP)

IRR: 3 ... 5%IRR: 3 ... 5%IRR: 3 ... 5%IRR: 3 ... 5%

1,3 – 2 €/W 1,1 – 1,5 €/W 0,9 – 1,1 €/W

RooftopRooftopRooftopRooftop PV PV PV PV perspectiveperspectiveperspectiveperspective forforforfor EEEEstoniastoniastoniastonia

Directive of energy efficiency in buildings (2010/31/EL2010/31/EL2010/31/EL2010/31/EL):

01.01.2019 01.01.2019 01.01.2019 01.01.2019 all state-owned new buildings

01.01.2021 01.01.2021 01.01.2021 01.01.2021 ALL new buildings

NearNearNearNear----zero or net zerozero or net zerozero or net zerozero or net zero----energy buildingsenergy buildingsenergy buildingsenergy buildings

Issued annually in Estonia1300 - 1500 residential building permits2300 - 2400 non-residential building permits3000 buildings X 10 kW = 30 MW peak power = ~ 30 GWh produced electricity per annum

2015 in Estonia ~ 4 MW PV installed capacity

From From From From 2021 2021 2021 2021 onwards added ~ onwards added ~ onwards added ~ onwards added ~ 30MW 30MW 30MW 30MW PV capacity in form of new PV capacity in form of new PV capacity in form of new PV capacity in form of new buildings, generating ~ buildings, generating ~ buildings, generating ~ buildings, generating ~ 30 GWh 30 GWh 30 GWh 30 GWh electricity per annumelectricity per annumelectricity per annumelectricity per annum

Utility scale PV opportunities

■ Continued focus on own consumption

■ Environmental projects (closed landfill PV parks – 2 X 5MW in development)

■ Combined on-shore wind + PV (pilot Aburi 0,7MW in 2016?, Saaremaa)

– Supplemental resources

– Maximum utilisation of available grid connection capacities

Conclusion

■ Policy consistency needed

– Main barrier for investment uncertainty

■ Fossile divestment plan not existing

■ Rather modest growth till early 2020-s

■ Energy efficiency targets are important trigger

■ DSR and storage technologies will also bring boost

– Yet, we need storage 6 months, not 6 hours...

Estonian PV Energy Estonian PV Energy Estonian PV Energy Estonian PV Energy AssociationAssociationAssociationAssociation

“I’d put my money on the sun and solar energy.

What a source of power! I hope we don’t have to

wait until oil and coal run out before we tackle

that.”

Thomas A. Edison, 1931

TÄNAN!TÄNAN!TÄNAN!TÄNAN!andres.meesak@gmail.com

Ph: +3725014711