Climate protection and energy efficiency in Poland: the impact of White Certificates

SPOŁECZNA RADA NARODOWEGO PROGRAMU REDUKCJI EMISJI Climate protection and energy efficiency in Poland: the impact of White Certificates Prof. Krzysztof Żmijewski Secretary General Public Board of the National Programme for Emissions Reduction Workshop on White Certificates 9.11.2011 Brussels

New Marshall Plan Marshall Plan 13,5 billions $ 1948 90 billions 2009 22,5 billions per year Modernisation and Emissions Reduction Plan 265 320 billions 13,5 16 billions 2/25

Program s dimension billions sector 90 100 Electroenergetics 15 20 Gas 80 100 Heating and buildings 80 100 Transport 265 320 Total by 2030 13,5 per year 16 per year anually 3/25

Energy savings targets National energy saving targets: 2% by 2010 9% by 2016 (Directive 2006/32/EC) The ambitious target of EU s energy consumption reduction by 20% in relation to 2020 Support mechanisms: Energy efficiency certificates + Voluntary commitments Other mechanisms + 4/25

White certificates Three dimensions Value-related foundation Redemption obligation Substitution fee Financial penalty Price ceiling Liquidityrelated foundation Registration Tradability: power exchange or OTC Index creation possibility Sales guarantee Efficiencyrelated foundation Emission tender Three packages Energy audit Regulation of quality 5/25

System s organization Investor Preparation of investment Automatic registration Registration for trading Taking part in tender Power Exch. Buying OTC Tender result Selling Redemption/ Remission 6/25

Primary energy savings level corridor 3 Mtoe Ep 2 1 0 2008 2012 20132010 2014 20152012 2016 20172014 2018 20192016 2020 2021 2018 2022 2023 2020 2024 scenariusz Low scenario niski scenariusz High scenario wysoki 7/25

Low scenario 3 000 2 500 2 000 1 500 1 000 500 Savings based on investments cost and substitution fee forecast Mtoe Ep 1,2 1 0,8 0,6 0,4 0,2 0 2009 2013 2010 2014 2011 2015 2012 2016 2013 2017 2014 2018 2015 2019 2016 2020 2017 20212018 20222019 20232020 2024 0 koszt opłata zast. oszczędności scenariusz niski cost (mln. PLN) substit. fee (PLN/toe) savings, low scenario 8/25

Certified vs. saved energy non-winners winners fi 0,79 0,84 0,89 0,91 0,93 0,98 1,07 1,12 1,18 1,24 0 20 40 60 80 φ gr = 0,96 644 Mtoe 693 Mtoe Savings payed < Savings obtained 9/32

Shortened investment payback time Years 2½ 2 2700 635 1½ 1 1150 270 ½ 0 0 115 235 350 470 590 700 0 500 1000 1500 2000 2500 3000 Average value of of the white certificate PLN/toe Euro/toe 10/25

Simulation of savings rate compared to BasU Simulated incr. rate % GDP baseline increase rate % (BasU) GDP Cons.Prim E 3% 4% 5% 3 1,5 24,64% 37,10% 4 2,0 11,10% 26,39% 39,63% 5 2,5-6,67% 12,05% 28,26% 6 3,0-29,61% -6,73% 13,08% 7 3,5-58,08% -30,55% -6,78% 8 4,0-95,84% -61,81% -32,35% 50% 0% Actual average increase rate 1,02 1,03 1,04 1,05 1,06 1,07 1,08 1,09-50% Aim is 20% BasU 1,03 1,04 1,05-100% 11/25

Issued certificates volume Mtoe 3,5 3 2,5 2 1,5 1 0,5 0 500 115 1000 235 1500 350 2000 470 2500 590 3000 700 fee Euro/toe fee PLN/toe 12/25

Brought of value of savings 2 500 590 2 000 470 1 500 350 1 000 235 500 115 0 115 500 235 1000 350 1500 470 2000 590 2500 700 3000 Substitution fee Euro/toe PLN/toe electricity brought value of savings per 1MWh heat; brought value of savings per 10GJ coal; brought value of savings per 1tpu gas; brought value of savings per 1000m3 13/25

Overall savings value 1/2 Average primary energy cost 205 900 Euro/toe PLN/toe mln Euro PLN 8 000 1900 6 000 1400 4 000 950 2 000 470 0-2 000-470 -4 000-950 0 500 115 1235 000 1350 500 2470 000 2590 500 3700 000 PLN/toe Euro/toe savings million PLN Euro system balance million Euro PLN 14/25

Average primary energy cost 1400 330 PLN/toe Euro/toe Overall savings value 2/2 mln 8 000 Euro 1 900 61 000 400 4 000 950 470 2 000 0 0-470 savings million Euro PLN system balance million million Euro PLN -2-950 000 0 115 235 350 470 590 700 0 500 1 000 1 500 2 000 2 500 3 000 Euro/toe Pln/toe 15/25

System results 1/3 Mtoe 18 16 14 12 10 8 6 4 2 0 2700 650 4,596 2500 600 fee PLN/toe Euro/toe 2300 550 2100 500 1900 450 1700 400 2009 2012 2011 2014 2013 2016 2018 2015 2020 2017 2022 2019 Fast track t a r g e t primary energy Mtoe annual savings Mtoe primary energy target 2020 17,0 Mtoe final energy cumulatively final energy target 2016 4,596 Mtoe 16/25

System results 2/3 Mtoe 2800 700 2600 660 2400 620 2200 570 2000 520 1800 470 1600 425 18 16 14 12 10 8 6 4 2 0 4,596 2012 2008 2014 2010 2016 2012 2018 2014 2020 2016 2022 2018 2020 2024 Slow track fee fee PLN/toe Euro/toe t a r g e t primary energy Mtoe annual savings Mtoe primary energy target 2020 17,0 Mtoe final energy cumulatively final energy target 2016 4,596 Mtoe 17/25

System results 3/3 Poland s perspective IMPROVED ENERGY EFFICIENCY OF THE POLISH ECONOMY ACHIEVEMENT OF SIGNIFICANT SHORTENING OF SPBT Investor s perspective SYNERGY! 18/25

New paradigm of energy sector NPRE by 2020!!!? National Energy Efficiency Programme National Programme for Grid Enhancement National Programme of RES & Energyoriented Agriculture National Clean Coal Programme Availability of emission allowances becomes more important and expensive (30 /MWh) than availability of fuels (20 /MWh). Variable cost dominates over fixed cost, and product cost dominates over service cost 19/25

Conclusion 1/4 A & We are not the richest but B We want to develop = We have to optimise development costs 20/25

Conclusion 2/4 A & B Everybody should have a chance to try but The best ones should win = The winning criteria should be publicly discussed 21/25

Conclusion 3/4 A & B The competitors are market companies but There is nothing wrong in openly seeking profit = The process should be open (transparent) 22/25

Conclusion 4/4 A & We expect 500 mln /a for support of energy efficiency so B = This generates investments worth 2 3 bln 0,8 1,0 Mtoe 4 6 year SPBT 23/25

www.rada-npre.pl 24/25

Thank you Krzysztof Żmijewski Secretary General the Public Board of the National Programme for Reduction of Emissions 25/25