IEEE Power & Energy Magazine - March/April 2014 - 72

We have developed six scenarios, each of which
relies either on a single policy instrument or on a mix of up
to three instruments.
We propose a new ner 300 scheme in which 50% of the
raised ets revenues-or co2 taxes-are directly retained
and disbursed by the ec. Furthermore, we propose an equaldistribution rule for the funds so that resources are allocated to
all types of low-carbon projects (ccs, res projects, energy
efficiency, and storage). We therefore accept that the types of
instruments within the ner 300 would differ depending on
what they are designed to support. But all the instruments in
use (risk-sharing facilities, project bonds, and contracts for
difference) should be backed by the funds of the ner 300
and should therefore be limited to the actual amount of funding available. to improve its functioning, the new ner 300
scheme would operate within minimal and maximal limits so
as to be able to allocate a sufficient amount of funds for new
investments each year, based on the varying revenue streams.
this would need to be further investigated, but the objective
should be to safeguard a limited amount of funding to avoid
the complete emptying of the fund when co2 prices are temporarily too low to support it adequately.
the brand-new instrument introduced in our scenarios is
the so-called eU res quota. this scheme would basically
reside in a given quota obligation of res production placed
on europe's energy suppliers to meet a given target for res by
2030, which could translate into a 45% or 50% res share in
electricity generation, up from 34% in 2020. suppliers would
be obligated to meet the quota on their own or buy certificates
from other generators. suppliers would have to surrender a
certain amount of certificates to demonstrate their compliance with the established quota, and this would create a market demand for such certificates. Under this regime, suppliers
are likely to adopt the cheapest res technologies to achieve
their targets at the lowest cost to their customers and would be
unlikely to develop technologies only for the sake of technology development, as occurs with the current ner 300 scheme.
res support schemes 2030 is the last instrument relied
on in our analysis, but it is not a new one. it resides in the
prolonging of res support schemes as we know them in
2013 and in their diversity of design (including feed-intariffs, feed-in-premiums, green certificates, and auctions)
and of the technologies they cover (including onshore wind,
offshore wind, small- and large-scale pV, biomass, and
small hydro).

The Scenarios' Main Features
Based on the above, we have developed six scenarios, each of
which relies either on a single policy instrument or on a mix
of up to three instruments. each is described briefly below.
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scenario 0, called today, is unsurprisingly the least
novel scenario, as it simply continues the current situation
following the adoption of the 2009 eU energy and climate
package that set various objectives (the 20/20/20 targets on
co2, res, and energy efficiency) along with the instruments to be used to reach these targets (the ets, the res
national binding targets, and the plethora of instruments
stemming from the recently adopted energy efficiency
directive).
scenario 1, called co2-only, is based on the idea that
european decarbonization can rely only on the ets price
to deliver investments in the most cost-efficient way (mostly
with gas turbines and onshore wind in the short- to mediumterm). this means that no other forms of technology support
should intrude on its functioning. this scenario prioritizes
the free market principle and the cost-efficiency principle
(ranked very high) and sees technology development as secondary. given the assumed co2 prices, neither nuclear nor
ccs will be able to stand on its own feet in this scenario,
unless the allowance price picks up strongly beyond 2020
and operators of such plants take the bullish view that their
investments will be hedged going forward.
scenario 2, called co2 + new ner 300, is a variation on
scenario 1. it tries to address that scenario's narrow technology focus by allowing for some forms of technology development (for all forms of low-carbon technologies, however,
not only for res technologies) through the reformed ner
300 mechanism. this is likely to drive the costs of those
technologies down closer to market uptake, thus decreasing
the overall cost to taxpayers and ensuring fair burden sharing among private operators and governments.
scenario 3, called co2 + new ner 300 + eU res
Quota, is a variation on scenario 2 but with a stronger preference for res technology development and a decreased
emphasis on the free market.
scenario 4, called res support schemes 2030, is simply
a rerun of the 2009 res directive ten years after. it puts a
high priority on res technology development and on import
independency.
scenario 5, called co2 tax + new ner 300 + eU res
Quota, is a variation on scenario 3 that substitutes the eU
ets with a uniform co2 tax that applies to all emitting fuels
and sources. note that while the ets is a quantity-based
mechanism-that is, the resulting co2 price stems from the
progressive reduction of the co2 cap-a co2 tax is a pricebased mechanism that does not implicitly set the amount of
co2 that can be emitted.
march/april 2014

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