The importance of learning when supporting emergent technologies for energy efficiency—A case study on policy intervention for learning for the development of energy efficient windows in Sweden

The role of policy instruments to promote the development and diffusion of energy efficient technologies has been repeatedly accentuated in the context of climate change and sustainable development. To better understand the impact of policy instruments and to provide insights into technology change, assessments of various kinds are needed. This study analyzes the introduction and development of energy efficient windows in Sweden and the policy incentives applied to support this process. The study focuses on the assessment of technology and market development of energy efficient windows in Sweden; and by applying the concept of learning, it assesses how conditions for learning-by-searching, learning-by-doing, learning-by-using and learning-by-interacting have been supported by different policies. The results show successful progress in technology development and an improvement in best available technology of Swedish windows from 1.8 W/m² K in the 1970s to 0.7 W/m² K in 2010; in the same time period the market share of energy efficient windows increased from 20% in 1970 (average U-value of 2.0 W/m² K) to 80–85% in 2010 (average U-value of 1.3–1.2 W/m² K). The assessment shows that various policy instruments have facilitated all four learning processes resulting in the acknowledged slow but successful development of energy efficient windows.     

Biofuel support policies in Europe: Lessons learnt for the long way ahead

Biofuel consumption in the EU is growing rapidly but major efforts will need to be undertaken if the EU's objectives for 2010 and beyond are to be achieved. This article analyses the strengths and weaknesses of different biofuel support policies based on the experiences gained in pioneering countries and explores scenarios for their possible impacts in the long-term. It comes to the conclusion that important pre-conditions such as fuel standards and compatibility with engines are in place or being introduced on an EU-wide basis. Current and future policy support therefore focuses on creating favourable economic or legal frameworks to accelerate the market penetration of biofuels. The ambitious targets endorsed in terms of biofuel market shares require the implementation of efficient policy instruments. At the same time, large consumption volumes and the advent of innovative production technologies make it possible for Member States to promote specific types of biofuels, depending on their main objectives and natural potentials. This will require complementary instruments such as subsidies for production facilities, user incentives or feedstock subsidies.     

The effect of financial constraints,technological progress and long-term contracts on tradable green certificates

Tradable green certificates (TGCs) have recently become a diffuse instrument to support renewable electricity in OECD countries. Although it is perhaps too early to draw a conclusive judgement on the effectiveness of this instrument in increasing renewable capacity and decreasing the price of certificates, one view in the literature maintains that long-term contracts are of particular importance for TGCs to be effective. This paper contributes to this debate by analysing how financial constraints and technological progress can induce investors to hold pessimistic expectations of their ability to sell green certificates and still make a profit. Clearly, these expectations will prevent investors from building new capacity to fulfil the quota comprised in TGCs and will keep the price of certificates traded in the market high. As this kind of expectation is not influenced by most design features of TGCs, one can conclude that long-term contracts are particularly important in determining the effectiveness and cost-effectiveness of these instruments. Some attention should therefore be paid to the features of the TGCs, which induce obliged parties to offer long-term contracts to renewable generators.     

Analysis of the market penetration of clean coal technologies and its impacts in China's electricity sector

This paper discusses policy instruments for promoting the market penetration of clean coal technologies (CCTs) into China's electricity sector and the evaluation of corresponding effects. Based on the reality that coal will remain the predominant fuel to generate electricity and conventional pulverized coal boiler power plants have serious impacts on environment degradation, development of clean coal technologies could be one alternative to meet China's fast growing demand of electricity as well as protect the already fragile environment. A multi-period market equilibrium model is applied and an electricity model of China is established to forecast changes in the electricity system up to 2030s. Three policy instruments: SO₂ emission charge, CO₂ emission charge and implementing subsidies are considered in this research. The results show that all instruments cause a significant shift in China's electricity structure, promote CCTs’ competitiveness and lead China to gain great benefit in both resource saving and environment improvement. Since resource security and environment degradation are becoming primary concerns in China, policies that could help to gain generations’ market share of advanced coal-based technologies such as CCTs’ is suitable for the current situation of China's electricity sector.     

Renewable energies heat act and government grants in Germany

In Germany renewable energies in the heat market are promoted by the Renewable Energies Heat Act (EEWärmeG) and by government grants. Ultimately, these two instruments are not only about short-term market success, but rather about the perspectives of climate protection and resource conservation. The focus of this report is therefore on the long-term significance of the current design of government grants and EEWärmeG. We will introduce and discuss the quantitative goals and structural changes strived for as well as – on a slightly shorter time horizon – the quality assurance regulations which must accompany the steady and stable growth of renewable energies. In the process, we will elaborate in particular on heat pumps, which have recently been added to the government support programme, along with solar collectors. Some explanations regarding the structural relationships between EEWärmeG and government grants round off this contribution.     

One size fits all? Policy instruments should fit the segments of target groups

In order to meet the Kyoto CO₂ reduction targets, technical innovations in the field of energy-efficiency must diffuse more rapidly into a larger market. However, markets develop gradually, especially if innovations are involved. Diffusion starts with the early market (innovators and early adopters), followed by the mainstream market (the early and late majority), and ends with the laggards. The actors in these markets differ in their willingness to adopt innovations; the early market actors have a visionary attitude, and the mainstream market actors are more pragmatic. In order to choose policy instruments that will most effectively influence these two markets within the target group of housing association, we addressed the following two questions. (1) What are the differences between the early and mainstream market actors from a behavioural-change point of view? (2) In what way do existing policy instruments differ in influencing the behaviour of these actors? We analyzed early market and mainstream decision-making behaviours, and how the active ingredients in policy instruments specifically target the characteristics of the two markets. Mainstream instruments should intervene as early as possible in the decision-making process and emphasize communication about advantages such as comfort and quality in addition to money and energy savings. Furthermore, they should present energy conservation as a solution to an actual problem. Instead of bureaucratic subsidy systems for the mainstream, the motto should be “cash on the barrel-head”. Early market actors are highly internally motivated, implying that early market interventions have to be challenging and facilitating.     

National strategies for stimulating the use of bioenergy: policy instruments in Sweden

This study examines strategies of national energy policy, focusing on measures taken from the 1970s onwards for increasing the use of bioenergy in the Swedish energy system. Emphasis is given to analyses of how administrative policy instruments such as the Building Act, which regulates the use of natural resources, and the Wood Fibre Act have affected the woodfuel market for the district heating sector. The government can influence changes in three principal areas of the energy system: energy use, industrial structure, and energy production. The tools the government may use to exert its influence are: support to research and development, support to demonstration and information dissemination, administrative policy measures, and economic incentives. These instruments may be applied separately or in combination. Knowledge about how these instruments affect the development of the energy sector is fragmentary; it derives more from empirical observation than from analysis. A systematic evaluation of the separate and combined instruments that have been used would increase the possibility of correctly assessing the national energy policy. Nevertheless, practical experience and the analyses that do exist indicate that: (1) research and development are necessary prerequisites for developing the energy system even though results can not always be achieved in time to meet the need for fast results; (2) economic policy measures are comparatively easy to administer, and energy taxation has largely met its goals. With investment support, markets can be skewed and development can be hindered if existing technology is subsidised; (3) administrative policy instruments are cumbersome to administer and frequently do not achieve their purpose.     

Bond financing for renewable energy in Asia

Addressing the financing gap for renewable energy (RE) projects in Asia is critical to ensure that the rapidly increasing energy needs could be met sustainably. This paper explores the cause of the financing gap in Asia and proposes the use of bond financing to address the financing gap. Specifically, three fixed income instruments, namely local currency denominated (LCY) corporate bonds, asset backed project bonds and financial green bonds, will be assessed. Whilst the potential for these three instruments to mobilize large flows of private sector financing is great, key supportive policies aimed at reducing the capital market bias for conventional power generation technologies and supportive RE policies are required. Another key aspect would be the necessary deepening of local and regional fixed income markets before such capital market instruments are able to play a big role.     

Green electricity market development: Lessons from Europe and the US

This study compares the development and implementation of green electricity policies in Germany, the Netherlands, Sweden, and the United States, a set of countries applying a range of policy instruments to encourage electricity from renewable energy sources. A general tendency is identified that policies shift emphasis from R&D stimulation towards dissemination and market application of renewable energy technologies. We argue that in light of the long term nature of policy goals on energy security, mitigation of climate change, and environmental protection, the applied range of policy instruments may be lacking in providing incentives for the long term development of new technologies. Clarifying policy objectives would allow careful selection of policy instruments, including support for R&D. Improved capacity building for policy implementation is also important.     

Investments into forest biorefineries under different price and policy structures

Increasing scarcity of oil reserves and the high CO₂ emissions from using oil have contributed to the development of renewable biofuels. Pulp and paper mill integrated forest biorefineries offer one important means to increase biofuel production. This study analyzes the effects of policies to support biofuel production in the pulp and paper sector. We study the relative effectiveness of three biofuel supporting policy instruments, namely production subsidy, input subsidy and investment subsidy. We present a partial equilibrium pulp and paper market model with a biorefinery investment option. A numerical model is used to evaluate the impacts of policy instruments on wood prices, as well as input choices and investment strategies of pulp and paper industries. The data represent the Finnish pulp and paper sector. We evaluate the values and direct costs of the policy instruments in a situation of exogenous biofuel production targets. The direct costs of input and investment subsidies are higher than those of a production subsidy. With all the policy instruments, Finnish pulp and paper mills would invest in wood-gasifying technology, instead of black liquor based one. The number of biorefinery units is dependent on the subsidy type — investment and input subsidies are likely to result in more numerous but smaller biofuel production units than a production subsidy. With all the policy instruments the demand for wood increases in Finland leading to higher wood prices. This, in turn, could reflect negatively on the profitability of the pulp and paper industries. To a significant degree, the model and the results can be generalized to other countries and markets where integrated pulp and paper mills are operating.     

Value chain analysis of bio-coal business in Finland: Perspectives from multiple value chain members

The purpose of this study is to provide a comprehensive outline of the Value Chain (VC)¹ of bio-coal in Finland, define the proper business models of bio-coal business, and investigate the interrelationships between VC activities. The major findings are: 1) the study found significant interrelationships between support and primary activities in the bio-coal VC which suggest that we should not emphasis only the core value/primary activities of the bio-coal business, but pay more attentions to the “side values”/support activities; 2) The study identified political and environmental factors as the effective drivers, while technology and cost-profit uncertainty as major restrictions for the Finnish bio-coal business. The authors would like to suggest that instead of purely “environmental concerns”, the term “sustainability credentials” should be emphasized, which means value creating and adding items should not limit to monetary values, but consider social and environmental value propositions. 3) The study identified “low competition” in the current bio-coal business in Finland, which implies opportunities of market entrance for Finnish and international companies; 4) The study identified that the current Finnish bio-coal model is the decentralized model at the local level. However, the future Finnish bio-coal model will be a large scaled model, with a focus on export sales.     

Domestic offset projects in the built environment

Emission reduction activities in the European Union (EU) in- and outside the European Trading System (ETS) thus far have largely taken place separately. One possibility to combine the two is through linking Non-ETS offset project-based crediting schemes in the form of Joint Implementation or domestic offset (DO) projects with the EU ETS. Linking would allow non-ETS offset project-based CO₂ credits to be traded within the ETS market. This paper discusses the merits and drawbacks of the implementation of a DO scheme in the built environment in the Netherlands. The built environment can be characterised as a sector with a great diversity and significant energy savings potential. Emphasis is paid on the modalities for estimating energy savings under DO projects. The authors discuss if next to existing EU, national or regional policies in the Netherlands, DO could spur initiatives in sub-sectors or market areas that are difficult to reach with conventional policy instruments. Thus, despite the existing policy framework in this sector, there could be still space for DO to reach the untapped energy savings potential. DO can support activities and technologies that are not covered by other policy instruments, either because they are not part of the instruments focus or are above the minimum requirements of the incumbent policy targets. It is expected that some lessons from this study in the Netherlands can be taken into account also by other countries facing similar market circumstances, which have implemented several policy instruments and are considering DO schemes as an alternative for capturing part of the untapped energy saving potential in their end use sectors. Another possible advantage of DO is that is has the potential to reduce public spending on existing policy goals, when it is considered in conjunction with existing public financing instruments. In order to tap into this potential, there are a series of hurdles in place, like additionality and the current CO₂ price levels, while transaction and administration costs must be kept low.     

Wind energy in Vietnam: Resource assessment,development status and future implications

The aim of this study is to estimate the technical potential of wind energy in Vietnam and discuss strategies for promoting the market penetration of wind energy in the country. For the wind resource assessment, a geographical information system (GIS)- assisted approach has been developed. It is found that Vietnam has a good potential for wind energy. About 31,000 km² of land area can be available for wind development in which 865 km² equivalents to a wind power of 3572 MW has a generation cost less than 6 US cents/kWh. The study also proves that wind energy could be a good solution for about 300,000 rural non-electrified households. While wind energy brings about ecological, economic and social benefits, it is only modestly exploited in Vietnam, where the main barrier is the lack of political impetus and a proper framework for promoting renewable energy. The priority task therefore is to set a target for renewable energy development and to find instruments to achieve such a target. The main instruments proposed here are setting feed-in tariff and providing investment incentives.     

Evaluating potential policies for the UK perennial energy crop market to achieve carbon abatement and deliver a source of low carbon electricity

The electricity infrastructure in many developed countries requires significant investment to meet ambitious carbon emissions reduction targets, and to bridge the gap between future supply and demand. Perennial energy crops have the potential to deliver electricity generation capacity while reducing carbon emissions, leading to polices supporting the adoption of these crops. In the UK, for example, support has been in place over the past decade, although uptake and the market development have so far been relatively modest. This paper combines biophysical and socio-economic process representations within an agent-based model (ABM), to offer insights into the dynamics of the development of the perennial energy crop market. Against a changing policy landscape, several potential policy scenarios are developed to evaluate the cost-effectiveness of the market in providing a source of low carbon renewable electricity, and to achieve carbon emissions abatement. The results demonstrate the key role of both energy and agricultural policies in stimulating the rate and level of uptake; consequently influencing the cost-effectiveness of these measures. The UK example shows that energy crops have the potential to deliver significant emissions abatement (up to 24 Mt carbon dioxide equivalent year⁻¹, 4% of 2013 UK total emissions), and renewable electricity (up to 29 TWh year⁻¹, 8% of UK electricity or 3% of primary energy demand), but a holistic assessment of related policies is needed to ensure that support is cost-effective. However, recent policy developments suggest that domestically grown perennial energy crops will only play a niche role (<0.2%) of the UK energy balance.     

Biomass gasification in district heating systems – The effect of economic energy policies

Biomass gasification is considered a key technology in reaching targets for renewable energy and CO₂ emissions reduction. This study evaluates policy instruments affecting the profitability of biomass gasification applications integrated in a Swedish district heating (DH) system for the medium-term future (around year 2025). Two polygeneration applications based on gasification technology are considered in this paper: (1) a biorefinery plant co-producing synthetic natural gas (SNG) and district heat; (2) a combined heat and power (CHP) plant using integrated gasification combined cycle technology. Using an optimisation model we identify the levels of policy support, here assumed to be in the form of tradable certificates, required to make biofuel production competitive to biomass based electricity generation under various energy market conditions. Similarly, the tradable green electricity certificate levels necessary to make gasification based electricity generation competitive to conventional steam cycle technology, are identified. The results show that in order for investment in the SNG biorefinery to be competitive to investment in electricity production in the DH system, biofuel certificates in the range of 24–42 EUR/MWh are needed. Electricity certificates are not a prerequisite for investment in gasification based CHP to be competitive to investment in conventional steam cycle CHP, given sufficiently high electricity prices. While the required biofuel policy support is relatively insensitive to variations in capital cost, the required electricity certificates show high sensitivity to variations in investment costs. It is concluded that the large capital commitment and strong dependency on policy instruments makes it necessary that DH suppliers believe in the long-sightedness of future support policies, in order for investments in large-scale biomass gasification in DH systems to be realised.     

Hydrogen economy in Taiwan and biohydrogen

This study analyzed how production technology advances and how economic structure reformation affects transition to a hydrogen economy in Taiwan before 2030. A model, called “Taiwan general equilibrium model-energy, for hydrogen (TAIGEM-EH)”, was the forecast tool used to consider steam reforming of natural gas, the biodegradation of biomass and water electrolysis using nuclear power or renewable energies of hydrogen production industries. Owing to increase in the prices of oil and concern for global warming effects, hydrogen will have a 10.3% share in 2030 when demands for hydrogen production could be met if strong technological progress in hydrogen production were made. With reformed economic structure and strong support to progress in production technologies, hydrogen's share can reach 22.1% in 2030 and become the dominating energy source from then onwards. In the four scenarios studied, including developing country with three levels of effort and developed country with strong effort, the biohydrogen production industry can become a main supplier of hydrogen in the market if its technological progress can be competitive to other _CO2${\mathrm{CO}}_2$-free alternatives.     

Renewable electricity production costs—A framework to assist policy-makers' decisions on price support

Despite recent progress, the production costs for renewable electricity remain above those for conventional power. Expectations of continuous reductions in production costs, typically underpin governments' policies for financial support. They often draw on the technology-focused versions of the Experience Curve model. This paper discusses how national-contextual factors also have a strong influence on production costs, such as geographic, infrastructural, institutional, and resource factors. As technologies mature, and as they reach significant levels of diffusion nationally, sustained increases in production costs might be recorded, due to these nationally contextual factors, poorly accounted for in policy-making decisions for price support. The paper suggests an analytical framework for a more comprehensive understanding of production costs. Based on this, it recommends that the evolution of specific cost levels and factors be monitored to locate ‘sources of changes’. The paper also suggests policy instruments that governments may use to facilitate cost decreases, whenever possible. The application of the framework is illustrated for the diffusion of wind power in Spain during the past three decades.     

Cooperation mechanisms to achieve EU renewable targets

There are considerable benefits from cooperating among member states on meeting the 2020 renewable energy sources (RES) targets. Today countries are supporting investments in renewable energy by many different types of support schemes and with different levels of support. The EU has opened for cooperation mechanisms such as joint support schemes for promoting renewable energy to meet the 2020 targets. The potential coordination benefits, with more efficient localisation and composition of renewable investment, can be achieved by creating new areas/sub-segments of renewable technologies where support costs are shared and credits are transferred between countries.Countries that are not coordinating support for renewable energy might induce inefficient investment in new capacity that would have been more beneficial elsewhere and still have provided the same contribution to meeting the 2020 RES targets. Furthermore, countries might find themselves competing for investment in a market with limited capital available. In both cases, the cost-efficiency of the renewable support policies is reduced compared to a coordinated solution.Barriers for joint support such as network regulation regarding connection of new capacity to the electricity grid and cost sharing rules for electricity transmission expansion are examined and examples given. The influence of additional renewable capacity on domestic/regional power market prices can be a barrier. The market will be influenced by for example an expansion of the wind capacity resulting in lower prices, which will affect existing conventional producers. This development will be opposed by conventional producers, whereas consumers will support such a strategy.A major barrier is the timing of RES targets and the uncertainty regarding future targets. We illustrate the importance of different assumptions on future targets and the implied value of RES credits. The effect on the credit price for 2020 is presented in an exemplary case study of 200 MW wind capacity.     

Fostering the use of renewable energies in the European Union: the race between feed-in tariffs and green certificates

Fostering the use of renewable energies for power generation is at the heart of the EU's long term energy policy. Accordingly, the European Commission and literally all member states have set up ambitious installations targets for alternative energy sources. These aims can only be reached by recurring to support systems that help covering the cost disadvantages faced on liberalised electricity markets. Currently, a dichotomy of support models exists: Feed-in tariffs on the one side and green certificates on the other side seem promising tools to foster renewable energies. In this contribution we look closely at the concepts of both models as well as their advantages and disadvantages in terms of ecological effectiveness and economic efficiency. It becomes obvious that in the context of the liberalised power markets and the rush for the harmonisation of the instruments it will depend very much on in-detail regulations whether the installation targets will be met-regardless of the basic choice of model.     

Support systems for the diffusion of renewable energy technologies—an investor perspective

Concern over climate change impacts and the projected depletion of fossil fuels has urged more governments to adopt policies that stimulate the diffusion of renewable energy technologies (RET). With an increasingly diverse suite of support instruments, the question emerges as to which instruments or combinations are able to achieve faster, more substantial diffusion results. Although various support instruments were extensively addressed in policy studies, there is still no consensus. This is partly because many policy studies take a policy-maker approach in comparing support instruments, leaving relationships between policy design and policy results as a black box. This paper proposes an investor-oriented perspective to analyze the diffusion potential of support systems for RET. The main argument is that it is not the type of support instrument but rather its risk/profitability characteristics that influence investor behavior and the rate of diffusion. The two instruments most frequently discussed and compared are the feed-in-tariff and the quota model. The analysis in this paper concludes that policy design is crucial: while often feed-in tariffs are applauded and quota system feared, feed-in tariffs may also bring about disappointing diffusion results when poorly designed while quota systems may be also conceived as attractive instruments for independent power producers.