
\newcommand{\thistitle}{Lecture 8: Support for Renewables}

\input{title.tex}


\section{Why renewables require support}



\begin{frame}
  \frametitle{Questions we want to answer}
  \begin{itemize}
  \item Why do renewables require support?
   \item Why can't solar and wind survive from electricity market revenue alone?
  \item What types of support are there?
  \item What are the pros and cons of direct payments, premiums, taxes and quotas?
  \item What should support look like once wind and solar are mature?
    \item What is the most efficient way of reaching greenhouse gas reduction targets?
  \end{itemize}

\end{frame}


\begin{frame}
  \frametitle{Motives for renewable support}
  \begin{itemize}
  \item reducing carbon dioxide emissions
    \item reducing air pollution (particulate matter, NOx, SO$_2$ from fossil fuel combustion)
   \item reducing dependence on finite resources (fossil fuels, uranium)
   \item creating energy system with decentralised structure and ownership (reduces market power)
   \item reducing cost through knowledge spillovers (leading to lower overall cost energy system)
   \item developing an export industry by early specialisation
   \item energy security: limiting dependence on fossil fuels imports
   \item ancilliary benefit: generating employment
  \end{itemize}

\end{frame}

\begin{frame}
  \frametitle{Why is support necessary?}

  Why not just rely on \alert{market revenues}?

  Or on \alert{carbon pricing} to make low-carbon generation attractive?

  The reasons for support are varied, depend on technology, maturity and the penetration of the technology in the market.
  \begin{itemize}
  \item The technology is at the beginning of its learning curve and is \alert{expensive} but there is an \alert{expectation of cost decline} that will make it competitive in the future
  \item The technology is competitive but not being built because of \alert{price risk}
  \item The technology penetration is so high that in the absence of other policy (e.g. carbon pricing) there is \alert{cannibalization of market value}
  \end{itemize}


\end{frame}




\begin{frame}
  \frametitle{Wind and solar cost developments}

  Project and global weighted-average LCOE and PPA/auction prices for 2010-2023:

  \centering
  \includegraphics[height=7cm]{IRENA-2020-summary.png}


  \source{\hrefc{https://www.irena.org/publications/2021/Jun/Renewable-Power-Costs-in-2020}{IRENA Renewable Power Generation Costs in 2020}}

\end{frame}




\begin{frame}
  \frametitle{Global weighted costs for solar PV}

  \centering
  \includegraphics[height=7.5cm]{IRENA-2020-pv.png}


  \source{\hrefc{https://www.irena.org/publications/2021/Jun/Renewable-Power-Costs-in-2020}{IRENA Renewable Power Generation Costs in 2020}}

\end{frame}


\begin{frame}
  \frametitle{Global weighted costs for onshore wind}

  \centering
  \includegraphics[height=7.5cm]{IRENA-2020-onshore_wind.png}


  \source{\hrefc{https://www.irena.org/publications/2021/Jun/Renewable-Power-Costs-in-2020}{IRENA Renewable Power Generation Costs in 2020}}

\end{frame}


\begin{frame}
  \frametitle{Global weighted costs for offshore wind}

  \centering
  \includegraphics[height=7.5cm]{IRENA-2020-offshore_wind.png}


  \source{\hrefc{https://www.irena.org/publications/2021/Jun/Renewable-Power-Costs-in-2020}{IRENA Renewable Power Generation Costs in 2020}}

\end{frame}


\begin{frame}{Market value}

  VRE have the property that they cannibalise their own market, by
  pushing down prices when lots of other VRE are producing through the \alert{merit order effect}.

  They reduce their own revenue by producing in a correlated way.

  To quantify this effect, we can define the \alert{market value} of a
  technology by the average market price it receives when it produces,
  i.e. for technology $s$ and production at time $t$ of $g_{s,t}$ MWh
  when the market price is $p_t$ \euro/MWh:

  \begin{equation*}
    MV_s = \frac{\sum_{t} p_t g_{s,t}}{\sum_{t} g_{s,t}}
  \end{equation*}

  We can compare this to the average market price,
    defined either as the simple average $\frac{1}{T} \sum_t p_t$ or the demand-weighted average $ \frac{\sum_{t} p_td_t}{\sum_{t}d_t}$.

\end{frame}



\begin{frame}{Historic market values in Germany}

  \centering

  \includegraphics[width=11cm]{market_value-historical}



  \source{\href{https://doi.org/10.1016/j.eneco.2013.02.004}{Lion Hirth, 2013}}
\end{frame}

\begin{frame}{Market value at higher shares}


  At low shares of VRE the market value may be higher than the average market price (because for example, PV produces a midday when prices are higher than average), but as VRE share increases the market value goes down.

\begin{columns}[T]
\begin{column}{6.5cm}



  \centering

  \includegraphics[width=6cm]{market_value_us}


\end{column}
\begin{column}{4cm}

  The effect is particularly severe for PV, since the production is highly correlated; for wind smoothing prevents a steeper drop off. The bigger the catchment area, the longer wind preserves its market value.

  \source{Mills \& Wiser, 2014}
\end{column}



\end{columns}


\end{frame}



\begin{frame}
  \frametitle{Taxing bad versus subsidising good}

  In general if you have two competing technologies and you want to encourage the more expensive one, you can either \alert{tax} the disfavoured technology until the favoured technology is preferred, or you can \alert{subsidise} the favoured technology.


  \begin{tikzpicture}[
    scale=1.3,
    demand/.style={blue, thick},
    supply/.style={red, thick},
    axis/.style={very thick, ->, >=stealth', line join=miter},
    important line/.style={thick}, dashed line/.style={dashed, thin},
    every node/.style={color=black},
    dot/.style={circle,fill=black,minimum size=4pt,inner sep=0pt,
      outer sep=-1pt},
  ]
  % axis
  \draw[axis,<->] (2.5,0) node(xline)[right] {} -|
  (0,2.5) node(yline)[above] {cost};

  \draw[draw=none,fill=black] (0.5,0) rectangle ++(0.3,1);
  \draw[draw=none,fill=lime] (1.5,0) rectangle ++(0.3,1.7);
  \node[below] at (0.65,0) {fossil};
  \node[below] at (1.65,0) {clean};

  \node[above] at (1,3) {initial situation};

  \begin{scope}[xshift=4cm]
  % axis
  \draw[axis,<->] (2.5,0) node(xline)[right] {} -|
  (0,2.5) node(yline)[above] {cost};

  \draw[draw=none,fill=black] (0.5,0) rectangle ++(0.3,1);
  \draw[draw=none,fill=gray] (0.5,1) rectangle ++(0.3,0.7);
  \draw[draw=none,fill=lime] (1.5,0) rectangle ++(0.3,1.7);
  \node[below] at (0.65,0) {fossil};
  \node[below] at (1.65,0) {clean};

  \node[right] at (0.8,1.3) {tax};

  \node[above] at (1,3) {tax bad};

  \end{scope}


  \begin{scope}[xshift=8cm]
  % axis
  \draw[axis,<->] (2.5,0) node(xline)[right] {} -|
  (0,2.5) node(yline)[above] {cost};

  \draw[draw=none,fill=black] (0.5,0) rectangle ++(0.3,1);
  \draw[draw=none,fill=lime] (1.5,0) rectangle ++(0.3,1);
  \draw[draw=none,fill=green] (1.5,1) rectangle ++(0.3,0.7);
  \node[below] at (0.65,0) {fossil};
  \node[below] at (1.65,0) {clean};

  \node[right] at (1.8,1.3) {subsidy};

  \node[above] at (1,3) {subsidise good};

  \end{scope}


  \end{tikzpicture}

\end{frame}


\begin{frame}
  \frametitle{Taxing bad versus subsidising good example: electric vehicles}


  To encourage electric vehicles (EV) over internal combustion engine vehicles (ICEV), we do both in Germany:
  \begin{itemize}
    \item \alert{energy tax} and \alert{CO$_2$ tax} on diesel and petrol
    \item \alert{vehicle sales tax} (Pkw-Steuer) only applies to ICEV
    \item \alert{subsidy} (Elektro-Auto-Kaufprämie) for electric vehicles of up to \euro 9000 (sinks to \euro 6750 in 2023, zero in 2024)
    \item \alert{state regulatory and financial support} for charging stations
  \end{itemize}

\end{frame}

\begin{frame}
  \frametitle{Price versus volume}

  Alternative to taxes and subsidies: set target for \alert{volume} instead of \alert{price}, e.g. fixed \alert{quotas} (e.g. for biofuels in transport fuels, renewable power in generation, maximum emission standards) or regulation banning technologies (coal exit, ban on gas boilers).

  Example 1: to limit carbon dioxide emissions: set \alert{volume limit} then trade certificates for this emissions volume (like EU Emissions Trading System (ETS)) OR set \alert{carbon price} determined administratively.

  Example 2: to raise share of renewables: set \alert{renewable share target} with tradeable certificates for generation (like Renewable Portfolio Standard (RPS) in some US states) OR set \alert{feed-in tariff} determined administratively.

\end{frame}

\begin{frame}
  \frametitle{Types of support schemes for renewables}
  \begin{itemize}
  \item \alert{Public financing} - public investments, loans, grants
  \item \alert{Corporate financing} - Power Purchase Agreements (PPAs)
  \item \alert{Fiscal incentives} - subsidies and tax reductions for RES or taxes on carbon
  \item \alert{Quotas for consumers} - required shares for renewables or clean energy
  \end{itemize}

\end{frame}


\begin{frame}
  \frametitle{Fossil fuel subsidies should also be removed}

  The Federal Environmental  Agency (UBA) estimates that in 2018 in Germany there were environment-damaging subsidies of \euro65.4 billion, of which \euro 60.6 billion damage the climate.

  \begin{columns}[T]
    \begin{column}{7cm}

      \vspace{.5cm}

Major factors include EEG exceptions, lower tax on diesel relative to petrol, energy-tax-free kerosene for aviation, VAT-free international flights, commuter tax allowance, subsidies for coal, lower VAT for animal products, free distribution of ETS CO$_2$ certifications.

      \vspace{.5cm}

  NB: This does NOT include indirect subsidy of not taxing fossil fuel externalities for climate and air pollution.
  \end{column}
  \begin{column}{7cm}
  \includegraphics[width=7cm]{uba-subsidies.png}
  \end{column}
  \end{columns}
  \source{\hrefc{https://www.umweltbundesamt.de/publikationen/umweltschaedliche-subventionen-in-deutschland-0}{UBA, 2021}}

\end{frame}


\section{Policies}

\begin{frame}
  \frametitle{Worldwide policies}

  As of mid-Nov 2021 (after COP26 in Glasgow) 74 nations have net-zero emissions targets.

    \centering
  \includegraphics[height=7cm]{year-countries-pledged-net-zero-emissions.png}

  \source{\hrefc{https://www.wri.org/insights/how-countries-net-zero-targets-stack-up-cop26}{World Resources Institute, 2021}}
\end{frame}

\begin{frame}
  \frametitle{European Union's climate and energy targets}

  2030 energy and climate framework

  Key targets for 2030 in `Fit For 55' programme (RES regulated in Renewable Energy Directive (RED) III from 2023):
  \begin{itemize}
  \item At least 55\% cut in greenhouse gas emissions (from 1990 levels; NB: not just CO$_2$, also other five Kyoto GHG)
  \item RED III: At least 42.5\% share of renewables in final energy consumption (aiming for 45\%)
  \item RED III: 42\% of hydrogen should be renewable; 5.5\% of transport fuels to be advanced biofuels or renewable fuels of non-biological origin (RFNBO); minimum 1\% RFNBO
  \item Revised Energy Efficiency Directive: reduce final energy consumption by 11.7\% compared to projections made in 2020
  \end{itemize}

  European Green Deal
  \begin{itemize}
  \item carbon-neutral economy by 2050 (i.e. net-zero greenhouse gas emissions)
  \end{itemize}

  \source{\hrefc{https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/delivering-european-green-deal/fit-55-delivering-proposals_en}{European Commission, 2023}}

\end{frame}


\begin{frame}
  \frametitle{REPowerEU: Response to Russian invasion in 2022}

  In March 2022 the European Commission proposed the REPowerEU plan to reduce dependence on Russian fossil fuels:

  \begin{itemize}
  \item Raise 2030 renewables target from 40\% to 45\% (weakened to 42.5\% subsequently)
  \item Increased ambition on energy efficiency (to reduce gas demand by 15\% this winter)
  \item Faster permitting of renewables
  \item Renewable hydrogen target in 2030 raised to 10 million tonnes per year (Mt/a) domestic, 10 Mt/a imported from outside EU
  \item Joint LNG purchases; double biomethane by 2030
  \item Targets for industry decarbonisation and raw material access
  \end{itemize}

  NB: Must be approved by European Council and Parliament.

  \source{\hrefc{https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/repowereu-affordable-secure-and-sustainable-energy-europe_en}{REPowerEU, 2030}}

\end{frame}

\begin{frame}
  \frametitle{Germany Klimaschutzgesetz (2019, updated 2021 and 2023)}

  In 2021 the Germany Climate Protection Law (Klimaschutzgesetz) was updated after the Federal Consistitution Court (Bundesverfassungsgericht) ruled that the original 2019 targets would infringe on the rights of future generations.

  New targets:
  \begin{itemize}
  \item Reduction of greenhouse gas (GHG) emissions in 2030 by 65\% versus 1990 levels
  \item In 2040 by 88\%
  \item Climate neutrality (zero net GHG emissions) by 2045
  \item Sector-specific targets for 2030, including for land use and forestry
  \item Expertenrat für Klimafragen monitors progress (modelled on Committee for Climate Change in UK); Sofortprogramm for ministries if targets not met
  \item 2023 Novelle: sector-specific targets abolished, replace with overall target
  \end{itemize}

  \source{\hrefc{https://www.umweltbundesamt.de/daten/klima/treibhausgasminderungsziele-deutschlands}{UBA, 2022}}

\end{frame}

\begin{frame}
  \frametitle{Germany Klimaschutzgesetz (2019, updated 2021)}


  \centering
  \includegraphics[height=7.5cm]{2_abb_thg-emissionen-zielpfade-de_2022-02-09.png}

  \source{\hrefc{https://www.umweltbundesamt.de/daten/klima/treibhausgasminderungsziele-deutschlands}{UBA, 2022}}

\end{frame}


\begin{frame}
  \frametitle{German Renewables Act (2021)}

  EEG 2021 had targets:

  \begin{itemize}
  \item At least 65\% share of renewable energy in gross electricity demand in 2030
\item    100\% CO2-neutral electricity generation and consumption by 2050
\item     Continuous, cost-efficient and grid-adjusted RES expansion.
  \end{itemize}

\end{frame}

\begin{frame}
  \frametitle{New targets in 2021-3 from the Traffic Light Coalition}

  The coalition raised the ambition of previous targets; renewables regulated in EEG 2023.

  \begin{itemize}
  \item gross electricity consumption assumed to rise to  750~TWh/a in 2030
  \item 65\% $\to$ 80\% renewable electricity target by 2030 (600~TWh/a RES)
  \item 100~GW $\to$ 215~GW solar PV target by 2030
  \item 71~GW $\to$ 115~GW onshore wind, 20~GW $\to$ 30~GW offshore wind target by 2030
  \item 50\% climate-neutral heating
  \item coal exit ideally by 2030
  \item need hydrogen-ready gas turbines
  \item 6 million heat pumps, 15 million electric cars by 2030
  \item 10~GW of electrolysers by 2030
  \item abolished EEG-Umlage on 01.07.2022
  \end{itemize}

  \source{\hrefc{https://www.diw.de/de/diw_01.c.841560.de/ampel-monitor_energiewende.html}{DIW Ampel-Monitor Energiewende}, 2022}
\end{frame}



\begin{frame}
  \frametitle{Are the targets being met?}

  Checkout \hrefc{https://www.diw.de/de/diw_01.c.841560.de/ampel-monitor_energiewende.html}{DIW Ampel-Monitor Energiewende}.

\end{frame}

\section{Support mechanisms}


\begin{frame}
  \frametitle{Renewable Electricity Support Schemes in Europe}

  \centering
  \includegraphics[height=7.5cm]{chapter8_figure2.png}

  \source{\hrefc{http://www.open-electricity-economics.org/book/text/08.html}{Open Electricity Economics}}
\end{frame}


\begin{frame}
  \frametitle{Renewable Electricity Support Schemes in Europe}

  EU Clean Energy Package (2018): binding target of 32\% for renewable energy sources in EU's energy mix by 2030.

  \centering
  \includegraphics[height=6.5cm]{eu_policies.png}
\end{frame}



\begin{frame}
  \frametitle{RES support mechanisms: Administered fees (all-inclusive or premium)}

  \begin{itemize}
   \item The government fixes the price for each MWh produced or injected into the grid from RES.
 \item  Normally, the fee depends on renewable source and size of power plant.
\item  \alert{Feed-in tariff (FIT)} provides fixed amount of money per produced MWh.
\item  A \alert{market premium} pays the difference between the market price and a strike price, giving incentives for selling RES output directly on the wholesale market.
\item  If the premium or tariff is coherent with the production cost, the government's RES output target can be met; otherwise it would be not reached or exceeded.
\item  The charges linked to the support system are paid by final electricity customers.
  \end{itemize}


\end{frame}




\begin{frame}
  \frametitle{Feed-In Tariff versus Market Premium}

  Market premium covers difference between average monthly \alert{market value} of technology and pre-determined strike price, so that total payment is the same as the FIT for average generator. Direct marketing provides an incentive to produce more during times of high prices.

  \centering
  \includegraphics[height=6cm]{fit.png}

\end{frame}

\begin{frame}
  \frametitle{Market Premium Calculation}

  To calculate the \alert{market premium} the TSOs in German are
  obliged to calculate for each month what the \alert{market value}
  was for a reference PV or wind turbine. The market value is the
  price $p_t$ in each hour $t$ averaged over each generated MWh $g_t$
  \begin{equation*}
    MV = \frac{\sum_{t\in\textrm{month}} p_t g_{t}}{\sum_{t\in\textrm{month}} g_{t}}
  \end{equation*}

  The market premium paid to the generator for each MWh is
  the \alert{strike price} (fixed when generator approved) minus the market value, assuming market value $<$ strike price.

  If the market value is \alert{above} the strike price, there is no payment (strike price is a \alert{floor price}).

  Since the market value is based on a reference generator, the
  generator has an incentive to maximise its own market value to
  maximise its actual market revenue (e.g. east-west orientation for
  PV panel to capture morning/evening prices, or a low-wind-speed
  turbine).

  \hrefc{https://www.netztransparenz.de/de-de/Erneuerbare-Energien-und-Umlagen/EEG/Transparenzanforderungen/Marktpr\%C3\%A4mie/Marktwert\%C3\%BCbersicht}{Transparency website with monthly market values}

\end{frame}

\begin{frame}
  \frametitle{Feed-In Tariff versus market premium}

  The market premium includes a fee for management costs.

  \centering
  \includegraphics[height=6.5cm]{fit-market_premium.png}

  \source{Next Kraftwerke}
\end{frame}


\begin{frame}
  \frametitle{Market premium versus contract for difference}

  \begin{columns}[T]
    \begin{column}{7cm}
      With a \alert{contract for difference} (CfD), left picture, as used in the UK for nuclear and offshore wind, the state pays the generator when the market price is below the \alert{strike price}, and the generator pays back the state when the market price is higher than the strike price. Good for consumers when prices are high!

    \end{column}
    \begin{column}{7cm}
  The German \alert{market premium}, like the right picture but based  on a monthly average, only provides a \alert{floor price} - the generator does not pay back when the market price exceeds the strike price, which leads to a lower strike price. The generator is thus incentivised to feed in power when prices are high.
    \end{column}
  \end{columns}
\includegraphics[width=14cm]{cfd-floor-mechanism.png}

\end{frame}


\begin{frame}
  \frametitle{Auctions for market premium reference value}

\begin{columns}[T]
  \begin{column}{7cm}
    EEG 2017:
    \begin{itemize}
      \item   Predetermined auctioned capacity for RES new build
        \item Prequalified projects bidding their reference value (guaranteed revenue)
          \item Installation-specific reference value
    \end{itemize}

    Auction requirement for
    \begin{itemize}
      \item     Offshore wind
        \item Onshore wind and solar PV from 750 kW
\item     Biomass from 150 kW
    \end{itemize}
  \end{column}
  \begin{column}{7cm}
      \centering
  \includegraphics[height=6.5cm]{market_premium.png}
  \end{column}
  \end{columns}
  \source{Next Kraftwerke}
\end{frame}

\begin{frame}
  \frametitle{Market integration objectives of RES}

  \centering
  \includegraphics[height=6.5cm]{market_integration.png}

  \source{Purkus et al., Energy, Sustainability and Society (2015) 5:12}
\end{frame}


\begin{frame}
  \frametitle{Renewables support levy (green fee)}

  Renewables support levy levied on customers (like German EEG-Umlage until July 2022)
  \begin{equation*}
    \textrm{RES levy} = \frac{\textrm{RES support payments} - \textrm{RES marketing revenue}}{\textrm{Adjusted non-preferred final electricity consumption}}
  \end{equation*}

  Adjusted final electricity consumption is equal to total final electricity consumption minus:
  \begin{itemize}
    \item Share of electricity consumption of energy intensive industries, which are exempted from the levy
      \item Own generation (self-consumption), which is partly exempted from the levy
  \end{itemize}
\end{frame}

\begin{frame}
  \frametitle{Expenditures for Electricity}

  In 2020 \euro 29.6 billion was paid in subsidies in Germany for RES.

  \centering
  \centering
  \includegraphics[height=6.8cm]{stromausgaben.png}

  \source{\hrefc{https://www.bmwk.de/Redaktion/DE/Publikationen/Energie/achter-monitoring-bericht-energie-der-zukunft.html}{Monitoring-Kommission, 2021}}
\end{frame}



\begin{frame}
  \frametitle{RES support mechanisms: Green Certificates (GC)}

  For countries with quotas for RES share (either government mandated like the Renewable Portfolio Standard (RPS) in the US) or voluntary corporate targets), they can trade \alert{green certificates (GC)} or \alert{guarantees of origin (GoO)}.

    \begin{itemize}
    \item Fossil fuel-fired generators are required to replace every year a certain percentage of their energy production with RES or to purchase GC from suppliers with excess RES.
\item The balance between demand (from generators and importers under the GC obligation) and supply (RES generators) determines the GC price.
\item The charges linked to the GC are translated to the final customers through the electricity price (on wholesale or retail market). NB: No external subsidy required!
    \end{itemize}

    Guarantees of Origin are a certificate or a piece of
    paper, that provide proof that electricity has been
    generated from renewable energy sources. It specifies
    the generation type, the year it was produced, the
    location and type of the asset and country and date
    of issuance. Typically one GoO corresponds to 1~MWh.

    %Engie slide (most are from Norwegian hydro, cannot include subsidised plants)

\end{frame}

\begin{frame}
  \frametitle{Green certificates}

  \centering
  \includegraphics[width=14cm]{green_certificates.png}
\end{frame}


\begin{frame}
  \frametitle{Corporate green goals: via green certificates or PPAs}

  For corporate buyers who want to show they cover their demand with
  green or clean energy, they can purchase \alert{guarantees of
    origin} for green electricity and show they cover their demand.

  But this doesn't necessarily lead to new capacity being built - they
  could just relabel electricity that is otherwise subsidised.

  For true \alert{additionality} they can buy \alert{Power Purchase
    Agreements (PPAs)} where they either build their own plant or
  offer a wind or solar developer a fixed \euro/MWh price for their
  electricity, removing the generator's price risk (like a CfD or
  swap).


  But this only meets demand on an \alert{annual basis} and might be in a different grid.

  New ideas circulating for \alert{local, hourly matching}, e.g. with wind,
  solar and storage/CCS/geothermal. Would lead to \alert{hourly
    guarantees of origin}.

\end{frame}


\begin{frame}
  \frametitle{Yearly versus hourly matching}

  For example, internet firm Google currently matches their data centre demand on a \alert{yearly} basis with renewable energy, but on an \alert{hourly} basis they still have hours when they rely on the fossil-powered grid.

  \centering
  \includegraphics[width=14cm]{google-year.png}

  \source{\hrefc{https://www.gstatic.com/gumdrop/sustainability/247-carbon-free-energy.pdf}{Google 24/7 CFE}}

\end{frame}


\begin{frame}
  \frametitle{Yearly versus hourly matching}

  \begin{columns}[T]
\begin{column}{9.5cm}

  \centering
  \includegraphics[height=7.5cm]{google-improve.png}
\end{column}
\begin{column}{4.5cm}

  By combining wind and solar, or using storage or dispatchable low-carbon resources, they can improve the hourly matching.
\end{column}


  \end{columns}

  \source{\hrefc{https://www.gstatic.com/gumdrop/sustainability/247-carbon-free-energy.pdf}{Google 24/7 CFE}}

\end{frame}


\section{Green hydrogen}

\begin{frame}
  \frametitle{Colours of hydrogen}

    \begin{columns}[T]
\begin{column}{7.5cm}

  \centering
  \includegraphics[height=7.5cm]{blue-green-hydrogen-graphic.jpeg}

\end{column}
\begin{column}{6.5cm}

  \begin{itemize}
  \item Almost all hydrogen today is \alert{grey hydrogen} produced by steam reformation of methane or coal, releasing CO$_2$ into the atmosphere.
  \item If the CO$_2$ is captured and sequestered we have \alert{blue hydrogen} (methane leaks and imperfect capture still mean there is a greenhouse impact).
   \item Hydrogen produced by electrolysis of water with electricity from renewables is called \alert{green hydrogen} and has no greenhouse emissions.
  \end{itemize}
\end{column}
    \end{columns}
\end{frame}



\begin{frame}
  \frametitle{Hydrogen: the backstop of the energy transition}

  Hydrogen could help decarbonise sectors where direct electrification is difficult.
 Some
  say \alert{champagne of energy transition}; could also say
  \alert{backstop} for what efficiency and electrification don't reach.


  \includegraphics[width=14cm]{liebreich-ladder.jpg}

\end{frame}



\begin{frame}
  \frametitle{Green hydrogen in Europe: overview}

  In 2020 the European Commission introduced a target for 40~GW of
  electrolysers for producing green hydrogen by 2030, both to decarbonise
  hard-to-abate sectors like steel and heavy-duty transport, and to
  stimulate Europe's worldwide-leading electrolyser producers.

  In 2023 the Renewable Energy
  Directive III (RED III)  set a new sub target for renewable fuels from
  non-biological origin (RFNBO) of 1\% (single counted), and a new
  target for a 42\% share of renewable hydrogen consumption in
  industry (including non-energy uses) by 2030.


  \alert{But how do we define green hydrogen?}

  \source{\hrefc{https://ec.europa.eu/energy/topics/energy-system-integration/hydrogen_en\#eu-hydrogen-strategy}{European Hydrogen Strategy, 2020}, \hrefc{https://ec.europa.eu/info/news/commission-presents-renewable-energy-directive-revision-2021-jul-14_en}{RED reform, 2021}}
\end{frame}


\begin{frame}
  \frametitle{Green hydrogen in Europe: definition}


  There are several factors that have to be addressed in the definition:
  \begin{itemize}
    \item \alert{Renewable}: What do we define as renewable generation?
    \item \alert{Additionality}: Should the renewable generation be newly built, or can we use capacity built in the past that has already been subsidised? What about generation that has fallen out of subsidy period (like wind and solar older than 20 years in Germany)?
    \item \alert{Location}: Do the electrolyser and renewable generation have to be co-located, at same grid node, same bidding zone, same country or just same continent? What if there is congestion in the grid?
    \item \alert{Timing}: Does the electrolyser only consume the same energy as the renewable generation supplies per hour, month or year? Is it sufficient that they just run at the same time?
  \end{itemize}
\end{frame}


\begin{frame}
  \frametitle{Green hydrogen in Europe: debate}

  There is a \alert{big debate} about the definition of green hydrogen, with environmental NGOs on one side and renewable and gas lobbyists on the other.

  If the definition is too \alert{loose}, then some hydrogen could be produced from fossil generators, leading to an increase in emissions compared to hydrogen reformed from fossil gas.

  If the definition is too \alert{tight}, green hydrogen installations will be expensive and take years to get built.

  Possible \alert{compromise}: for first 5 years allow to co-locate in bidding zones, allow wind and solar from outside subsidy regime, for timing allow it to be green if they run simultaneous and there is monthly energy-matching. Then tighten!


  This was regulated in a \hrefc{https://ec.europa.eu/commission/presscorner/detail/en/qanda_23_595}{Delegated Act} from RED II on renewable fuels of non-biological origin (RFNBO), finalised in 2023.

\end{frame}


\begin{frame}
  \frametitle{Worldwide trade in synthetic fuels}

  Today fossil fuels are traded across the globe. Electrolytic-hydrogen-based synthetic fuels (e.g. hydrogen, ammonia, methane, liquid hydrocarbons and methanol) could also be piped/shipped worldwide.  Possible future scenario for hydrogen trade from Helmholtz colleagues at FZJ IEK-3:

  \centering
  \includegraphics[width=12cm]{h2_worldwide.png}


\source{\hrefc{https://www.preprints.org/manuscript/202002.0100/v1}{Heuser et al, 2020}}
\end{frame}



\begin{frame}
  \frametitle{German H2Global scheme}

  The German H2Global scheme provides support for the production of renewable hydrogen in non-EU countries, to be imported and sold in the EU.

  It makes available over \euro 4 billion over 10 years to cover the difference between production costs and what consumers are willing to pay.

  This difference is determined by a double auction: producers bids for \alert{hydrogen purchase agreements (HPA)} that run for 10 years, providing investment security, while consumers bid for hydrogen service agreements (HSA) of duration one year.


  H2Global was \hrefc{https://ec.europa.eu/commission/presscorner/detail/en/ip_21_7022}{approved} by the European Commission to comply with EU state aid rules in December 2021. It was topped up from \euro 900 million to \euro 4 billion in 2022.  See \hrefc{https://h2-global.de/}{H2Global website}.

  The EU will also start a \euro 3 billion \hrefc{https://www.rechargenews.com/energy-transition/from-niche-to-scale-eu-launches-3bn-european-hydrogen-bank-with-a-bang-but-keeps-quiet-about-the-details/2-1-1299131}{European Hydrogen Bank} in 2023.


  \source{\hrefc{https://www.argusmedia.com/en/news/2205541-german-h2-import-scheme-shapes-up?backToResults=true}{ArgusMedia, 2021}}

\end{frame}


\end{document}
