Dirk Volkmann presented on evaluating the development and impact of feed-in tariffs (FITs). He began by defining FITs as a policy mechanism that provides renewable energy producers a guaranteed fixed rate for the electricity they generate. Volkmann then discussed several benefits of FIT programs, including that they have proven highly effective in accelerating renewable energy development in Germany. He also noted that FIT programs pay for themselves in less than one year through avoided fossil fuel and external costs. However, integrating renewable energy into the market poses challenges for transmission system operators given fluctuations in renewable production. Overall, Volkmann argued that FITs are superior to other policy mechanisms and have been very successful in promoting renewable energy growth in Europe.

1. Evalua&ng the Development and
Impact of FIT
2nd Annual Renewable Energy Project Finance
London, 12 Febr 2013
Dirk Volkmann
30 min.

2. what we do
• ConsulEng and Interim Management Services
for the Renewable Energy Industry
• Project Management
• Project Development
• Project Finance and Sales
• Strategy Development
• InternaEonalizaEon

3. recent projects
• Interim Head of Project Finance and Sales,
German solar PV EPC company (2010‐11 for 9
months)
• Interim Segment Manager UEliEes, German
cell and module producer/EPC (2011 for 10
months)
• Interim Head of O&M, internaEonal solar PV
EPC company (2011 for 8 months)

4. Agenda
1. Feed in tariffs as part of renewable energy program
2. ImplementaEon and cost effecEveness of feed in
tariffs in Europe
3. The use of feed in tariffs for certain technologies
4. Are there alternaEves ?
5. How changes in feed in tariffs influence the market
in certain countries

5. What is an FIT ?
• a policy mechanism designed to accelerate investment
in renewable energy technologies.
• the world’s most popular renewable energy policy
mechanism
• a set rate for the electricity for producers, usually
differenEated according to the technology used (wind,
solar, biomass, etc.) and the size of the installaEon.
• PV system on a home in Germany: the uElity buys the
power you produce at a fixed FIT rate for a period of 20
years. When you buy power from the uElity the retail
power price is lower than the FIT, this allows you to get
a stable return on your investment.

6. why to implement an FIT program (1)
1. FIT concept is proven and above expectaEons in
Germany for the past 20 years.
2010 target: 12.5 % share of RE in electric generaEon in 2000
late 2007: 15.1 % share
2. FIT’s pay for themselves in less than one year:
€9.2 billion Expenditures in 2008 for the German FIT
program.
a. €7.8 billion from reduced amounts of fossil and
nuclear fuels purchased (of total €87 billion spent in
2011)
b. €9.2 billion saved from the avoidance of external
costs

7. why to implement an FIT program (2)
• External costs are:
– damage resulEng from climate change
– health related costs related to air polluEon and toxic
wastes
– costs of cleanup of rivers and other bodies of water
as a result of polluEon etc.
• Some countries ignore external costs and these
are not included in project or technology analysis
• huge long‐term negaEve for the taxpayer and will
result in a significant burden for the taxpayer
(paying many Emes over for the problem)

8. producEon cost of electricity in comparison
(taking into consideraEon different cost of CO2 cerEficates,
new plants, commissioning 2010 or later)
€/MWh
lignite
coal capex
opex
natural gas fuel cost
cost of cerEficates (8$/to CO2)
nuclear add. cost at 38€/to CO2
min. back up cost
biomass
add. back‐up cost (max.)
hydro
wind onshore 5.5 m/s
wind onshore 6.5 m/s
wind offshore 25 %
wind offshore 40 %

9. World subsidies to fossil fuel consumpEon
vs. renewables in 2009 (billion USD)

10. benefits of an FIT program ? (1)
• FITs do not depend on taxpayer contribuEons (it is not a subsidy)
and no new public debt is needed to fund it.
• The FIT has proven superior to any other program currently in use
around the world, such as subsidies with public money, tendering
models and quota models.
• FITs encourages private investment, which results in more taxable
income from new companies and jobs in the industry. This is a basic
financial concept that some countries have failed to understand.
• FITs dramaEcally reduces bureaucracy and move the process along
at a much faster and cheaper rate. Typical power purchase
agreements in the U.S. are incredibly complex and require an army
of lawyers and engineers — which is both Emely and costly for
developers/owners.

11. benefits of an FIT program ? (2)
• example: in the U.S. the typical agreement
between a producer and a uElity is a minimum
of 85 to 100 pages long, in Germany the
comparable contract is only two to four pages.
• FITs, by acceleraEng the development of the
renewable energy industry, enhance naEonal
security by lessening dependence on foreign
oil and helping to decrease the huge cash
from buying foreign oil.

12. disadvantages ?
• Transmission System Operator (TSO) has to
integrate the renewable energy into the
market
• RE does not react to demand fluctuaEons or
spot market prices (yet)
– new development of direct markeEng
– green power privilege (bonus)
– remote shut‐off bonus

13. 2012 Selected Indicators
source: REN21 Renewables 2012 Global Status Report

14. 2012 Top 5 RE countries
source: REN21 Renewables 2012 Global Status Report

15. 2012 Top 5 countries
source: REN21 Renewables 2012 Global Status Report

16. esEmated Jobs in Renewable Energy
Worldwide, by Industry
source: REN21 Renewables 2012 Global Status Report

17. ImplementaEon and cost effecEveness
of feed in tariffs in Europe
2005 and 2010, with Targets for 2020 (1)
EU Renewable Shares of Final Energy,
source: REN21 Renewables 2012 Global Status Report

18. ImplementaEon and cost effecEveness
of feed in tariffs in Europe
2005 and 2010, with Targets for 2020 (2)
EU Renewable Shares of Final Energy,
source: REN21 Renewables 2012 Global Status Report

19. Map of EU countries according to their
support mechanisms for RES‐E

20. Added capacity and ROI values for some
EU member countries, 1992 ‐ 2008
source: Assessing the Strength and EffecEveness of Renewable Electricity
Feed‐In Tariffs in European Union Countries, diw, Berlin 2011

21. Added capacity and ROI values for some
EU member countries, 1992 ‐ 2008
source: Assessing the Strength and EffecEveness of Renewable Electricity
Feed‐In Tariffs in European Union Countries, diw, Berlin 2011

22. roof top installaEons minus 66% since 2006
average final customer price for
turn‐key roof top installa&ons
up to 10 kW (excl. VAT)
source: BSW‐Solar

23. The use of feed in tariffs for certain
FIT payments for a range of renewable Energy
Technologies, selected countries, 2011/2012 technologies
source: REN21 Renewables 2012 Global Status Report

24. AlternaEves for the promoEon of
Renewable Energy
promo&on programs for RE
price rule quota rule tender
Feed‐In‐Tariff (FIT) Renewable Energy Price‐Quota‐Mechanism
• fixed price per kWh Standards (RES) / RO / RPS • government organizes
• financed by public • uEliEes are obliged to public bid for fixed amount
authoriEes and private generate a fixed porEon of electricity
sector with renewable energy. • the winner gets a limited
• in some cases • ImplementaEon with green
feed‐in guarantee for the
implemented by cerEficates and PPAs power produced
net‐metering
+ Net Metering
+ PPA Power Purchase Agreements

25. Net metering
source: Wikipedia

26. Power Purchase Agreement (PPA)
Buyer

27. promoEon of Renewable Energy – strengths
and weaknesses
strengths weaknesses countries
Feed‐In‐ • high TSS (transparency, • burden on consumers/ Germany, Spain,
stability, security) taxpayers Italy, France,
Tariff • guarantees price and volume • long term commitment (up to Czech Republic,
• ‘pull incenEve’ 25 years) UK, India (state
• design of a balanced FIT is level)
difficult
Renewable • simplifies the compeEEon • low TSS Australia, USA, UK
between RE technologies • price fluctuaEons
Energy • Exact target achievement • unfavorable for certain RE
Standard (theoreEcal) technologies
• complex contracts
• bureaucraEc
Tender • combinaEon of market • high transacEon cost favors • ArgenEna, Peru.
efficiency and price guarantee large companies India
leads to cost efficient soluEons • inconsistent tenders lead to • offshore wind:
(theoreEcal) incerEtude France, Denmark
• longing for lowest bid holds
back serious business models

28. development of FIT and prices
for convenEonal energy sources
feed‐in tariff for new plants
© Bundesverband erneuerbare Energien
produc&on cost
delivery cost power exchange

29. FIT and grid parity
extra margin
FIT for 20 years
power price
2011 2015

30. How changes in feed in tariffs influence the market in
certain countries
• for solar PV FIT’s change more frequently, as
jurisdicEons adjust their tariffs for new contracts to
reflect falling
panel prices
and naEonal
targets

31. opposiEon to FIT’s:
opposiEon is talk, FIT’s are fact
• FIT’s major opponent is the local electric uElity. They are
monopolies — monopolies do not respond to market
forces.
• If one looks at FIT results, especially in another
developed country like Germany, the numbers speak for
themselves.
• FIT’s are far more market‐oriented than monopolies.
• Lack of poliEcal courage to try something new or allow
something that powerful stakeholders (uEliEes, fossil fuel
companies) do not want to jeopardize their businesses.

32. Expected development of the EEG cost fracEon unEl 2030,
depending on the development of electricity prices
source: Brief Analysis on the Current Debate about Costs and Benefits of Expanding the
Use of Renewable Energies in Electricity GeneraEon, Wuppertal InsEtute 2011

33. Comparison of EEG cost for 2008 unEl 2010 and for 2030 and
support for environmentally damaging acEviEes in 2008
source: Brief Analysis on the Current Debate about Costs and Benefits of Expanding the
Use of Renewable Energies in Electricity GeneraEon, Wuppertal InsEtute 2011

34. conclusions
• FIT is essenEal for the introducEon and development
of renewable energy capaciEes in a country, unless
you already have reached grid parity
• the less interesEng or favorable the IRR for investors
gets, the more important the quality and efficiency
of the equipment is (premium brand technology)
• without a granted grid access the development will
be very low
• FITs are not only vital for the development of RE
capaciEes but also for the development of an
industry and employment if well done

35. hrp://green.wiwo.de/solarindustrie‐warum‐sie‐in‐deutschland‐kaum‐eine‐zukuns‐hat/
Joachimstrasse 55
40547 Düsseldorf
Germany
T +49 – 172 – 24 23 240
e info @ volkmann-consult.de
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