kWh meter

This is a very well written piece by Toby Couture on developments in Spanish energy policy, re-blogged from Renewable Energy World. It has some resonance with the decision last year by ESB networks to rescind the 19c per unit FIT for the first 3000 units exported. The tariff is now at 9c per unit flat rate and is proving to be ineffectual in encouraging investment in the sector. The current cost of electricity is 19.28c/unit (Electric Ireland 24hr rate). Richard Kingston.

The most recent energy sector reforms passed in Spain represent the fourth time that a sweeping set of retroactive changes has rocked the country’s renewable energy (RE) industry. This new Royal Decree Law modifies billions of Euros worth of renewable energy contracts in a move that, when added to previous retroactive measures, will almost undoubtedly trigger insolvencies across the sector.
Instead of looking at the new Law in detail, this article takes a step back, and looks at the key lessons that policymakers around the world should draw from the Spanish experience.
As highlighted in previous analyses, the underlying problem that legislators in Spain are trying to address is the rapid growth of the electricity system deficit, which now stands at €26 billion.
This deficit has been created over the last fifteen years as the costs of generating electricity have risen faster than what utilities can lawfully recover from rates. The root cause of this is ultimately that Spain limits the amount by which electricity prices can increase.
While most commentators have attributed the deficit to the growth of renewable energy, the origins of the tariff deficit pre-date the rise of renewable energy in Spain. In the early 2000s, and again between 2005 and 2008, rising natural gas costs also contributed significantly to its growth, as utilities were not allowed to fully pass on the rising cost of fuel.
Second, despite countless articles and commentaries to the contrary, the problems in Spain’s electricity system are not caused solely by its feed-in tariff (FIT) policy.
To understand why, an analogy is instructive: to attribute Spain’s electricity system deficit to its FIT is similar to blaming an airline’s bankruptcy on its latest purchase of airplanes. A firm’s bankruptcy is always and everywhere driven by the failure to keep revenues ahead of costs. Buying planes is fine, as long as you have customers to fill them.
In Spain’s case, it is not the investment in wind turbines and solar power that represent the root of the problem: like many of its European partners, Spain encouraged private investment in wind and solar power partly to meet binding EU climate and energy targets, partly to improve its energy security, and partly to encourage the development of new economic sectors.
Moreover, numerous studies from major research institutes and think tanks around the world continue to find that FITs are the most cost-effective means of accelerating investment in renewable energy.
The problem is therefore not with wind and solar per se, nor with the policy that encouraged investment in them (though Spain’s FIT policy had a number of important design flaws): it is that the government, through regulations dating back decades, prevented utilities from recovering the true costs of the electricity system through rates.
In other words, Spain tried to have it both ways: it set out to transform its electricity system, but failed to establish a credible mechanism to pay for it.
Which brings us to the core lesson for policymakers:
FITs are a powerful mechanism to attract investment in renewable energy, and to accelerate the transition to a cleaner and lower carbon power sector. They do this by providing long term, performance based contracts for electricity generated from renewable energy sources. This helps attract private investment, and engages citizens, farmers, businesses and investors directly in the transformation of the electricity system. They have been implemented in over 80 jurisdictions around the world, and despite all the criticism they have received over the years, they remain one of the most widely used renewable energy policies.
However, if one is going to launch a comprehensive policy to scale-up privately financed renewable energy investment, one needs to establish a credible, long-term mechanism to ensure that those costs will be recovered over time. This includes ensuring that the overall framework has the broad support of citizens and that it will be robust to changes in governments, and overall economic conditions.
A fundamental transition in the energy system can only be sustained if it is built on a sound financial footing, and if it has the broad support of the population. This consensus is now being tested even here in Germany, as parties fine-tune their positions ahead of national elections in September.
It is one of the tragedies of the Spanish situation that a policy mechanism that is premised on providing long-term investment certainty, and that has proven uniquely successful at scaling-up renewable energy investment worldwide has become associated with policy and regulatory uncertainty, and with imposing unsustainable costs on ratepayers.
As highlighted here, it is not the policy that is the problem, nor is it the desire to transition to a more sustainable and lower carbon energy system: it is attempting to accomplish this without introducing credible mechanisms to ensure that these investments will be paid for in time.

Advertisements

About kingstonrenewableenergy

Kingston Renewable Energy (KRE), Hydropower products, wind energy, renewable energy products, We manufacture, supply and install. Richard Kingston KRE is the home of Fluxy, a beautiful Irish made wind turbine designed to last several life-times, and a host of other Hydro products branded under KRE hydro. KRE HYDRO- KRE are currently installing a range of Hydro products including high head low flow systems and low head high flow. These are pelton and Turgo types for high head, crossflow Banki turbines for medium to low head and Powerpal for Ultra low head. We also plan to introduce a custom timber/steel/aluminium waterwheel service for those of you who are lucky enough to have disused mills on their land and who would like to restore them to their former glory (and make a healthy profit in the process). All hydro installations are custom designed. This is necessary because everybody's land and water resource is different and to benefit from the highest efficiency and lowest payback time the hydro system must be customized according to what flow, penstock length required, and what head is available. Hydropower is currently by far the most cost effective renewable resource in Ireland under the existing Feed in tariff structure and export rate of 9c per unit (wholesale rate for bigger systems is €0.087/kWh). It is surprising how much energy is to be harvested from even a small stream and we are offering 4 to 7 year payback times on average and high profits thereafter. KRE FLUXY- It has been a long journey from when I originally set out to buy a wind turbine to power my own house in 2007 and discovered that the existing machines on offer in the market failed to meet my desires as a customer; that is, to possess an aesthetically designed machine with a low embodied carbon footprint and a long design lifespan. This led to my resolve to make this a possibility as I knew there were other like minded folks out there who had the same needs when buying into renewable energy. I have always been a keen environmental activist and had a strong understanding of engineering and material sciences which enabled me to see failings in the high tech electronically controlled machines commonly available today. These weaknesses come from over complicating the wind system with servo motors, sensors, gear trains, relays and logic circuits; fine for large utility scale turbines which are constantly monitored and have continual maintenance on site but not for a small wind turbine in the back yard to run the house. I could see that wind turbines needed to be brought back to a less complicated yet modern design that would withstand time and the turbulent and violent winds we see in Ireland and fulfilling the old engineers adage of ‘KISS’ or ‘keep it simple stupid’. With less component parts, there are less things to go wrong. My vision was to create a machine that offered the benefits of being an economic investment, a positive for the environment and also to be a design piece that our customers are proud to have flying in their grounds. And so, I present you with the fully mechanical Kingston Renewable Energy Fluxy wind turbine. Please feel free to contact us at any time if you have any questions or think you may have a good wind site. We will happily do a site assessment come rain or shine. Stay posted for the monthly blogs from our inspirational team here at KRE. Check out our latest installments in our crusade to get higher feed-in tariffs in Ireland so that we can compete with the rest of Europe in the micro-generation stakes. The Hydro section of our website will be updated shortly to show our newest installations and showcase our products. Yours sincerely, Richard Kingston

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s