Feed-in remuneration triggers boom in green energy investments
Bern, 07.07.2008 - Producers of renewable electricity from hydro power (up to 10 Megawatts), photovoltaic energy, wind power, geothermal power and biomass energy have been able to register their facilities for the compensatory feed-in remuneration since May 2008. To date around 5,000 applications have been received, 3,500 of which were received on 1 and 2 May alone. This rush to register reflects the enormous interest in renewable energy in Switzerland and points to an emerging investment boom. From the middle of August 2008, registered producers will receive official notification informing them whether their facilities are eligible for feed-in remuneration.
swissgrid ag, which handles compensatory feed-in remuneration on behalf of the federal government, is currently in the process of thoroughly checking and evaluating the applications. This detailed evaluation is essential in order to ensure the correct administration of the statutory cap prescribed for the different technologies. A meticulous check is also necessary because multiple applications have been submitted for numerous facilities, and applications have been received for large-scale installations without planning or located in nature conservation areas. Many of these plants are not expected to ever be realised.
Next steps
On the basis of the evaluation, swissgrid ag will issue the first decisions from mid-August 2008 onwards, notifying producers whether their plants are eligible or to be placed on a waiting list.
All correctly registered plants that have been connected to the grid between 1 January 2006 and 30 April 2008 should receive a positive decision and consequently be eligible for feed-in remuneration.
Photovoltaic cost cap likely to have been exhausted
Since the Energy Act (EnG, Article 7a, Paragraph 4) stipulates a specific cost cap for each technology, the SFOE must closely follow the development of applications for feed-in remuneration. If, on the basis of the applications, it appears likely that a technology cost cap will be exhausted, the SFOE must order swissgrid not to issue any more positive decisions from then on.
Even now it looks as if the first technology cost cap for photovoltaic (PV), amounting to 5 percent (approximately CHF 16 million) of the total available cost cap, may be exhausted (EnG, Article 7a, Paragraph 4 b). This means that in a first phase only the following PV plants will be eligible:
- Correctly registered PV plants commissioned between 1 January 2006 and 30 April 2008.
- Other correctly registered PV plants, until the PV cost cap is reached. The date of registration is decisive. Large plants will take precedence over small ones if registered on the same date.
All other registered plants will be placed on a waiting list. Under the Energy Act, the freeze on photovoltaic can only be lifted if and when this technology is more cost-effective and the additional costs (see box) of photovoltaic fall below 50 cents per kilowatt hour.
Overall picture not yet possible
The rush for feed-in remuneration is gratifying and demonstrates the enormous level of interest in renewable electricity among the Swiss population. However, projections show that due to the unexpectedly high number of registrations the total cost cap already appears to be largely exhausted, at the start of feed-in remuneration. Nevertheless, such projections assume that all currently registered plants will actually be realised, which - on the basis of the aforementioned multiple registrations and virtually unrealisable projects - is not to be expected.
Consequently, the 5,000 or so applications offer a current snapshot only. It remains to be seen how many of the registered plants can be realised and commissioned on schedule. Only then will concrete figures for effective electricity production in these plants be available and only then will it be possible to determine the extent to which the total cost cap is used up. Furthermore, the latter is not a fixed sum but is influenced by various dynamically changing factors:
- Market price of electricity: the additional costs of each technology which are not covered by the market price are to be financed with the feed-in remuneration. Hence the higher the market price, the lower the costs to be covered by the feed-in remuneration (see box).
- Electricity consumption: To finance the compensatory feed-in remuneration costs, a maximum of 0.6 cents per kilowatt hour will be levied on Swiss electricity end consumption. The greater the volume of electricity consumed, the higher the total cost cap.
- The number of plants registered but subsequently unrealised: if the deadlines for plant realisation are not observed, swissgrid will revoke the decision and reallocate the place to another plant.
- Number of "changeover plants": Producers can switch from the compensatory feed-in remuneration system (EnG, Article 7a) to the free green electricity market (EnG, Article 7b) and vice versa. On the free green electricity market producers do not receive a fixed feed-in remuneration; instead, they are at liberty to market the electricity themselves, for example to a green electricity exchange. In so doing, changeover plants can relinquish their place to another plant.
Compensatory feed-in remuneration
On 23 March 2007, as part of the passage of the Electricity Supply Act (StromVG) the Swiss parliament also revised the Energy Act (EnG). The revised Energy Act stipulates that electricity production from renewable energies must be increased by at least 5.4 billion kilowatt hours by 2030. This corresponds to around 10% of current electricity consumption (2007: 57.4 billion kilowatt hours). To this end the Energy Act contains a package of measures aimed at promoting renewable energies and energy efficiency in the electricity sector, the mainstay of which is the compensatory feed-in remuneration scheme for electricity generated from renewable energies.
Compensatory feed-in remuneration enables producers of renewable electricity from hydro power (up to 10 megawatts), photovoltaic, wind power, geothermal power and biomass to feed in their supplies to the Swiss electricity grid from 1 January 2009 at fixed compensation rates in order to finance the additional costs not covered by market prices (additional costs = reference price - market price). The term of remuneration is between 20 and 25 years, depending on the technology. Compensation rates are based on the production costs of reference facilities, corresponding to the most efficient technology in the year of construction. The annexes to the Swiss Energy Ordinance define the compensation rates for each technology, plant type and performance class as well as the documents to be submitted for registration (EnV: http://www.admin.ch/ch/d/as/2008/1223.pdf).
The plants can be registered for compensatory feed-in remuneration with national grid company swissgrid ag (www.swissgrid.ch) from May 2008. swissgrid carries out the registration and decision process on behalf of the federal government.
To finance the compensatory feed-in remuneration costs, with effect from 1 January 2009 a maximum surcharge of up to 0.6 cents per kilowatt hour will be levied on Swiss electricity end consumption. The amount of the surcharge is determined annually by the Swiss Federal Office of Energy according to demand and taking into account market prices. In the case of current end consumption in Switzerland, approximately CHF 344 million are available per year to finance all measures under the revised Energy Act.
Address for enquiries
Michael Kaufmann, Deputy Director SFOE, Tel. 031 322 56 02 / 079 592 91 80
Publisher
Swiss Federal Office of Energy
http://www.bfe.admin.ch
