Solar energy sector development model for Lithuania on the basis of the experience of the EU

Table of Contents

List of Tables

List of Figures

List of Abbreviations

INTRODUCTION

1. THE RELEVANCE OF THE SOLAR ENERGY SECTOR
1.1. Securing the energy supply
1.2. Effect to the Economy
1.3. Protecting the environment
1.4. Solar energy technologies
1.5. The energy production
1.6. The use of the energy
1.7. Future solar energy demand
1.8. The overview of the Solar Energy sectors of the EU countries
1.9. Screening out the countries with the most advanced solar energy sector
1.10. The short overview of chosen countries and their solar energy sectors
1.10.1. Germany
1.10.2. The United Kingdom
1.10.3. Italy
1.11. Choosing the country for further examples and comparisons

2. THE OVERVIEW OF THE CHOSEN COUNTRIES
2.1. Case: Lithuania
2.1.1. Current situation
2.1.2. Prospects and forecasts
2.1.3. Current conditions for Business
2.2. Case: Germany
2.2.1. Current situation
2.2.2. Prospects and forecasts
2.2.3. Current conditions for Business
2.3. Comparison of the analysed countries

3. DEVELOPING THE MODEL FOR THE PROMOTION OF THE DEVELOPMENT OF THE SOLAR ENERGY SECTOR OF LITHUANIA
3.1. The description of the model
3.1.1. Adopting the Long-Term Strategy
3.1.2. Improving the Feed-In Tariff System
3.1.3. Improving the System of Limitation
3.1.4. Avoiding Making Sudden Changes
3.2. Evaluating the model

CONCLUSIONS AND SUGGESTIONS

BIBLIOGRAPHY

List of Tables

Table 1. PV tariffs for 2012 in Germany

Table 2. PV tariffs for 2011 and 2012 in the United Kingdom

Table 3. PV tariffs for 2012 in Italy

Table 4. PV tariffs for 2011 and 2012 in Lithuania

Table 5. PV tariffs for 3rd and 2nd quarter of 2013 in Lithuania

Table 6. Assessment of RES-E policies and measures: Lithuania vs. Germany

Table 7. PV tariffs of Lithuania and Germany

List of Figures

Fig 1. Estimate of renewable energy growth for the EU, 2006-2030, GWh

Fig 2. Evolution of European new grid-connected PV capacities

Fig 3. Renewable energy country attractiveness index scores and rankings at May 2013

Fig 4. Technology-specific indices and ranking of the countries

Fig 5. Direct payments to producers of electricity from renewable energy sources for electricity supplied to the grid in years 2005-2012 in millions of Litas (1 Litas = 0.289626196 Euros)

Fig 6. Forecast of power generation from renewable energies in Lithuania

Fig 7. Ease of doing business in Lithuania 2013 (ranks out of 185 economies)

Fig 8. The impact of EEG revision on PV electricity production (in GWh)

Fig 9. PV on the path to becoming a key pillar of a sustainable energy supply in Germany

Fig 10. CO2 Savings through PV systems

Fig 11. Most recent PV tariffs in Germany

Fig 12. Ease of doing business in Germany 2013 (ranks out of 185 economies)

Fig 13. Lithuania and comparator economies ranked by ease of doing business

Fig 14. Lithuania and comparator economies ranked by ease of starting a business

List of Abbreviations

illustration not visible in this excerpt

INTRODUCTION

Due to the renewable energies nowadays being of a great relevance in the European Union and recent solar energy sector issues in Lithuania and its relevance to investors and the country, the aim of this bachelor thesis is to create a model that would suggest the measures, actions, improvements for the solar energy sector of Lithuania in order to promote a better development of the sector and achieve more effective results, improve the current situation and future prospects of the solar energy sector in Lithuania and increase the attractiveness of investing in it.

The model is planned to be based on existing examples of one of the countries of the European Union or on a model created by combining the best features of several models that are proven to be successful in one or several countries of the European Union adjusting it to be eligible for solar energy sector of Lithuania. In order to create the model in this bachelor thesis it is foreseen to make an overview of several European Union countries analysing the more relevant to this topic aspects and futures, while intending to compare the information and come to the conclusions, which of the countries has a better or the best system of the solar energy sector, that could be used as an example for the creation of the model for this sector in Lithuania.

This bachelor thesis consists of the three main parts:

1) the overview of the literature on the relevance of the topic covering the overview of the most advanced solar energy sectors of the European Union as well as the importance of the field in the region and in general;
2) the analysis of the important and the most relevant to the topic aspects in the research covering the overview of Lithuania and Germany;
3) the practical part with a description of a created model for the better development of the solar energy sector of Lithuania that consists of the main ideas and suggestions for Lithuania how to increase the attractiveness of the sector for investors.

The aim of the thesis: analysis of the solar energy sector of Lithuania with the goal of screening out the main issues and finding the aspects with the need of improvement as well as conducting the research in order to find the best example of successfully functioning solar energy sector in the European Union to have a reasoned basis for following suggestions to improve solar energy sector development in Lithuania.

Tasks of the thesis:

- Make an overview and analysis of the scientific literature and other sources relevant to the topic of the thesis and structure the most relevant and important findings;
- Make a research in order to screen out the most advanced solar energy sector in the European Union to use for following examples;
- Conduct an analysis of the solar energy sector of Lithuania in order to screen out the main issues and get a better understanding of the current situation as well as importance and consequences of the recent changes;
- Compare the findings and results of the research and analysis of the chosen countries and screen out the most important aspects that have the biggest influence on the development of the solar energy sector and need an improvement for the better functioning of the sector in future and increase of the solar energy sector attractiveness for investors;
- Create a solar energy sector development model for Lithuania consisting of the reasonable suggestions for improvement of the most important aspects in order to increase the attractiveness of the sector for investors as well as the development of the sector in general;
- Draw the general conclusions of the analysis, research and the model and come up with general suggestions concerning the aim and tasks of this thesis.

Methods of research and analysis:

- Analysis of the most relevant scientific and other literature and sources;
- Analysis of the most relevant statistical data;
- Comparative analysis;
- Graphical representation of the relevant information;
- Practical calculations, comparisons and evaluations.

Practical use of the thesis: the research and analysis conducted in the thesis gives a better understanding of the relevance of the solar energy and the current situation as well as the importance of the recent changes in the sector in Lithuania. It allows screening out the main aspects of the sector that require improvement and, while comparing with good examples, come up with ideas for needed actions and present reasonable suggestions for the improvement of the sector development and the ways of increasing the investment attractiveness of the sector. Using the suggested method might help improving the current situation and create a better future for the sector.

1. THE RELEVANCE OF THE SOLAR ENERGY SECTOR

The Solar Energy sector is a part of the Renewable Energy sector. Therefore, to explain the importance and the relevance of the solar energy sector in the chosen countries of the European Union, it is essential to define the relevance of the Renewable Energy sector in this region.

Renewable Energy in the European Union is a very relevant subject. It is a high European Union priority to promote the electricity from renewable energy sources. This is based on several reasons such as aim of diversification and security of the energy supply as well as the goal to protect the environment. It is also an important factor in the influence to the social and economic cohesion.^[1]

The European Union aims to increase the share of electricity produced from the renewable energy sources. The main goal is to reach the amount of at least 20% of the final energy consumption provided by renewable energy sources by the year 2020.^[2] As a part of the EU climate strategy, this aim is highly relevant while complying with the commitments on reducing the greenhouse gas emissions.^[3]

Starting from the White Paper on the renewable energy sources in 1997, where the EU set the target of increasing the energy consumption from the renewable energy sources to 12% by the year 2010, through the years the goal of the EU grew and became 21%, that is set in the “Directive of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity from renewable energy sources in the internal electricity market” (Directive 2001/77/EC).^[4]

The general aims of the Directive were the promotion of an increase of the contribution of renewable energy sources to electricity production in the domestic market for electricity as well as the creation of the basis for a future Community foundation in this regard.^[5] It concerns electricity produced from non-fossil renewable energy sources for instance geothermal, tidal, wave, hydroelectric, sewage treatment gas, landfill gas, biomass, biogas, wind and solar energies.^[6]

From January 1st of the year 2012 the Directive 2001/77/EC is repealed by “DIRECTIVE 2009/28/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC” (Directive 2009/28/EC), which set new, more relevant, aims and conditions, improving the ones set in the earlier Directive and the Directive that was created in between of the mentioned two.^[7]

Directive 2009/28/EC sets a common structure for the promotion and the production of electricity from renewable energy sources. It is a part of the energy and climate legislation package that contributes a legislative foundation for Community goals for greenhouse gas emission savings. The Directive promotes energy efficiency, the improvement of energy supply, energy consumption from renewable sources and the economic stimulation of a dynamic sector.^[8]

Directive 2009/28/EC establishes mandatory national goals for the proportion of energy from renewable sources in transport and for the overall share of energy from renewable sources in gross final consumption of energy. It sets the rules for: the statistical transfers between European Union countries; joint projects between its member states and with third countries; information and training; administrative procedures; guarantees of origin; access to the electricity grid for energy from renewable sources. The Directive also sets the sustainability criteria for bioliquids and biofuels.^[9]

The Member States of the European Union are obliged to apply the provisions of the Directive on producing electricity from renewable energy sources. Each country sets the national indicative goals for the share of electricity produced from renewable energy sources the result of which has to meet the required amount. The Member States must, once in the established by the rules time period, publish reports that set the indicative targets of that particular country for future consumption of the electricity from renewable energy sources for the following ten years. The reports must also reveal the measures that are planned for meeting the targets or the measures used for the results achieved. The targets that every Member State of the EU sets must take account of the reference values set out in the documents attached to the Directive.^[10]

The Directive aims to boost the contribution of the renewable energies when respecting the principles of the European market. Meanwhile, among the world leaders in development of new technologies connected with electricity from renewable energy sources are European companies.^[11]

Concerning the relevance of the renewable energy and its sources it is explainable by its ability to fulfil all our energy needs, such as, producing electricity, heating houses and running transport. Based on the type of the renewable energy it can be used in different ways, for example, wind and hydro types of renewable energy are only used for generating electricity, when geothermal, biomass and solar energy is used for producing electricity as well as heat.^[12] At this point, biomass, geothermal and solar energy can be defined and selected out from other renewable energies as the ones, that are more useful, therefore, more relevant and important.

During the year 2011 the two dominant renewable energy sectors were wind and solar (photovoltaic). Both of these sectors had record levels of installations: 42GW of wind and 25GW of solar. In these technologies alone was deployed more than US$100 billion of capital across a growing number of countries. In the year 2012 solar photovoltaics jumped to the top spot.^[13]

As a conclusion from what was mentioned above, solar energy appears to be the most relevant part of the renewable energy sector in the EU from 2011-2012 years. Moreover, according to the data in 2013, solar energy reached more than 100GW of installed capacity through the year 2012. It is more than twice as much as it was two years ago.^[14] This shows the growing interest in the solar energy sector resulting to its relevance and importance in the EU in general as well as in Lithuania and the other countries that were chosen for this thesis.

After establishing the relevance of the renewable energies in the European Union and its future strategies and singling out the energies that are used for a bigger range of purposes and suitable for production of more energy products than others, and after looking into the dominant energy sectors and recent European market tendencies we came to the conclusions of solar energy sector being the most relevant at the analysed period of time. Solar energy (or in other terms - photovoltaics) became a significant part of the EU electricity market while producing 2% of the demand and around 4% of peak demand in the region. Photovoltaics, for example, in Italy reached 5% of the electricity demand and over 10% of peak demand. In Germanys’ southern federal state Bavaria the capacity of the solar energy installations resulted to 600W per habitant, which is an astonishing amount. As well as for the other energy sources in the past, for photovoltaics to reach such level of development policy support was a crucial help.^[15] In this chapter it is foreseen to analyse and describe this sector and its importance more thoroughly.

Firstly, it is important to reveal the reasons of such relevance of the solar energy, in order to understand its growing demand in the EU and the rest of the World. Some of the main reasons come from the features of solar energy that allow the absence of the noise, polluting gases or harmful emissions in the production. Furthermore, solar energy creates the possibility for the diversification of the energy supply and generates heat as well as electricity. Photovoltaics give an opportunity to create local jobs while stimulating the economy and the development of new technologies. Also one of the great features of the solar energy is its inexhaustibility and the fact that it is free. And last but not least, maintenance required for solar energy is minimal.^[16]

Continuing the list of the benefits coming from the solar energy it is important that photovoltaic technologies are small, highly modular and are suitable for exploitation in any chosen location, when most of other electricity generation technologies have certain limitations. Furthermore, solar power is one of the renewable resources that are available all around the world and photovoltaics coincident with peak electricity demand that raises from cooling needs all year round in countries with common high temperatures and seasonal cooling (in summer) demand in other countries. In addition to that, photovoltaics have no fuel costs and their operation and maintenance costs are generally low. This is a big advantage while comparing it with conventional power plants, because it allows photovoltaics to offer competitive prices.^[17]

1.1. Securing the energy supply

One of the most important reasons for the promotion of the development of solar energy sector in the EU is the need to secure the energy supply. The issue of the energy supply is highly important in this region based on its increasing dependency on fossil fuels (gas and oil) imports that are needed for the transport and electricity generation. Moreover, the EU relies on energy imports for almost half of its energy consumption. Based on the data collected in the 2011, fossil fuels stood for 79% of the regions’ energy consumption. Ergo, the European Union can really benefit from the new ways of energy production, such as electricity production from renewable energy sources, and a raising number of energy suppliers in the region. Solar energy sector, as well as other renewable energy sectors, allows diversifying the energy supply in the EU, this way reducing the risks of supply cuts, price volatility and stimulating efficiency while increasing the competitiveness in the energy sector. According to the European Commission, renewable energy share amounting to 20% could reduce the fossil fuel imports of the EU by nearly 200 million tonnes of oil equivalent per year.^[18]

1.2. Effect to the Economy

Another important reason for the solar energy sector development promotion in the EU is its effect to the economy. Solar energy, as well as other renewable energies, has a great potential for boosting the competitiveness of the European industry. It is highly important for the European Union to develop new low-carbon energy sources in order to avoid the substantial pollution and climate change costs. According to the European Commission, it is crucial for the economy of the EU to keep Europe between the leaders of such developments. Scientific know-how, technologies and development of renewable energy industry creates new value added jobs and strengthens the industry of the EU making it more competitive on a global scale. As mentioned earlier in this thesis, European companies dominate in the global renewable energy sector between manufacturers. According to the data of 2011, these companies employ more than 1.5 million people and have a turnover of more than 50 billion euro. If the strong growth of this sector continues, by the year 2020 it could provide an additional million jobs and might triple or at least double the mentioned turnover.^[19]

1.3. Protecting the environment

Additional reason for the promotion of solar energy sector, as well as other renewable energy sectors, is the aim to protect the environment. The EU has set the target to reduce the pollution and is putting plenty of effort to control the issues of climate change. Current energy supply of the EU mainly consists of fossil fuels that give off greenhouse gases in the process of energy production. Concerning this issue, solar energy emits no gases of such sort in the process of the production, which makes such energy “friendly to the environment”. Ergo, increasing the share of solar and other renewable energies in the total energy mix will result to reduction of greenhouse gas emissions and help in the process of the environmental protection. As an addition to that, solar energy also helps to reduce air pollution, which has a direct influence on our health.^[20]

1.4. Solar energy technologies

While analysing the solar energy sector, its relevance, advantages and other characteristics, one of the essential aspects appear to be the solar energy technologies. As mentioned earlier, solar energy technologies are also called photovoltaics. Photovoltaics (or solar cells) are electronic devices that produce electricity by converting sunlight directly into electric charge. In 1954 the modern form of such technologies was invented in Bell Telephone Laboratories. In the future global electricity generation mix the photovoltaic technologies are expected to play a major role based on it being the fastest growing renewable energy technologies in the present. The modular size of photovoltaic systems allows these technologies to be within the reach of small businesses, co-operatives and also individuals who seek for access to their own electricity generation and fixed electricity prices.^[21]

1.5. The energy production

Using the solar energy technologies solar power can be converted or concentrated and turned into electricity needed. The process of converting or concentrating the solar power is essential in order to produce the electricity, because the density at which the solar radiation reaches the Earth is not sufficient for generating the thermodynamic cycle that is required for electricity production.^[22]

Based on the way the electricity is being produced, whether it is by converting or by concentrating the solar power, the solar energy technologies are divided into different types. Photovoltaic solar cells are made to produce electricity by converting sunlight directly into the required electric charge. Electricity can also be produced using concentrating solar power, where electric charge appears from the turbine, which is driven by steam created from the heat, which is focused to a single point using solar towers or parabolic solar collectors. This technology allows producing the electricity during the absence of sunlight by storing the heat collected to maintain the power. Meanwhile, photovoltaic plants also have the capability to be connected not only to the electricity grid but to batteries as well, where the energy can be stored.^[23]

1.6. The use of the energy

Solar energy, coming from the world’s primary energy source - the sun, as a clean energy can be used for production of electricity or heat. Converting solar energy into energy used for heating and cooling purposes allows fulfilling the needs of heating in buildings and industrial processes, applying the results of production for domestic hot water, solar-assisted cooling, swimming pools, etc. Even the least advanced solar thermal systems are capable of providing sufficient energy for a (at times even substantial) part of domestic hot water needs. Despite the fact of such systems being noticeably more productive in sunny climates, the efficiency of new technologies allow contributing to hot water or space heating in any location within the EU. Solar energy can also be used by technologies that operate in some way similar to refrigerator technologies, which allow using the energy for cooling in air conditioning systems with heat absorption.^[24] And the electricity created from solar energy can be adjusted and used for all our electricity needs.

The fact of actually existing tendency and/or intentions to use the energy produced from the solar or any other renewable energy, in general, is proven by such companies like “Apple” announcing this year their plans to run their “iCloud” data centres exclusively on renewable energy. Supermarket “Walmart” also announced its intentions by the year 2020 to be running all of the stores only on the renewables. As an addition to that, company “Google” has installed a 1.7MW solar plant already in 2007. Another confirmation of existence and even growth of the mentioned tendency to use the solar and other renewable energies is the fact of such companies as Volkswagen, Nike, Renault, HSBC, PepsiCo and Sumitomo following the example set by the companies mentioned above.^[25]

1.7. Future solar energy demand

With a goal of confirming the relevance of the solar energy sector in the EU and while attempting to justify the promotion of development of the sector and the need of solar energy in general, it is important to establish the possibility and approximate matter of its future demand. Based on whether it will increase or decrease, or possibly not even arise at all, we can determine whether it is reasonable to invest in the solar energy sector or not.

Based on the data reflected in the figure 1, the solar energy in the EU (including photovoltaics, solar thermal electricity, solar thermal heating and hot water) has been growing in the analysed period of time and is expected to continue the growth in even larger portions during the next 17 years. According to the publications of the European Commission, solar energy is set to produce electricity in increasing amounts during the next several years and, based on projections, the output of the electricity produced could triple in the time from 2004 to 2020. This can also be observed in the figure 1.^[26]

[...]

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^[1]Europa.eu “Renewable energy: the promotion of electricity from renewable energy sources”, 20.01.2011, viewed on 20.06.2013, available online at URL:http://europa.eu/legislation_summaries/energy/renewable_energy/l27035_en.htm

^[2]Lehmann Paul / Creutzig Felix / Ehlers Melf-Hinrich / Friedrichsen Nele / Heuson Clemens / Hirth Lion / Pietzcker Robert “Carbon Lock-Out: Advancing Renewable Energy Policy in Europe”, 15.02.2012, p.324

^[3]Europa.eu “Renewable energy: the promotion of electricity from renewable energy sources”, 20.01.2011, viewed on 20.06.2013, available online at URL:

http://europa.eu/legislation_summaries/energy/renewable_energy/l27035_en.htm

^[4]Ibid

^[5]DIRECTIVE 2001/77/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market, Article 1, 2001, p.5, viewed on 23.06.2013, available online at URL:

http://europa.eu/legislation_summaries/energy/renewable_energy/l27035_en.htm

^[6]Europa.eu “Renewable energy: the promotion of electricity from renewable energy sources”, 20.01.2011, viewed on 20.06.2013, available online at URL:

http://europa.eu/legislation_summaries/energy/renewable_energy/l27035_en.htm

^[7]Ibid

^[8]Europa.eu “Renewable energy: Promotion of the use of energy from renewable sources”, 09.07.2010, viewed on 22.06.2013, available online at URL:

http://europa.eu/legislation_summaries/energy/renewable_energy/en0009_en.htm

^[9]DIRECTIVE 2009/28/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC, Article 1, 2009, p.11, viewed on 23.06.2013, available online at URL:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:140:0016:0062:EN:PDF

^[10]Europa.eu “Renewable energy: the promotion of electricity from renewable energy sources”, 20.01.2011, viewed on 20.06.2013, available online at URL:

http://europa.eu/legislation_summaries/energy/renewable_energy/l27035_en.htm

^[11]Ibid

^[12]European Commission, “Renewables make the difference”, Luxembourg: Publications Office of the European Union, 2011, p.6, viewed on 23.06.2013, available online at URL:

http://ec.europa.eu/energy/publications/doc/2011_renewable_difference_en.pdf

^[13]KPMG International Cooperative, Green power 2012: The KPMG renewable energy M&A report, 2012, p.13, p.29, viewed on 25.06.2013, available online at URL:

http://www.kpmg.com/CZ/cs/IssuesAndInsights/ArticlesPublications/Press-releases/Documents/KPMG-Green-Power-2012.pdf

^[14]Damian Carrington, Wind and solar power capacity surge, 14 February 2013, viewed on 29.06.2013, available online at URL:

http://www.euractiv.com/energy/wind-power-capacity-grew-20-glob-news-517720

^[15]European Photovoltaic Industry Association, Global Market Outlook For Photovoltaics Until 2016, 2012, viewed on 10.06.2013, available online at URL:

http://www.helapco.gr/ims/file/reports/Global%20Market%20Outlook%202016.pdf

^[16]European Commission, Renewables Make the Difference, 2011, p.15, viewed on 23.06.2013, available online at URL:

http://www.energy.eu/publications/Renewables-make-the-difference-2011.pdf

^[17]International Renewable Energy Agency, Renewable Energy Technologies: Cost Analysis Series. Solar Photovoltaics, 2012, viewed on 15.06.2013, available online at URL:

http://www.irena.org/DocumentDownloads/Publications/RE_Technologies_Cost_Analysis-SOLAR_PV.pdf

^[18]European Commission, Renewables Make the Difference, 2011, p.5, viewed on 23.06.2013, available online at URL:

http://www.energy.eu/publications/Renewables-make-the-difference-2011.pdf

^[19]European Commission, Renewables Make the Difference, 2011, p.4-5, viewed on 23.06.2013, available online at URL: http://www.energy.eu/publications/Renewables-make-the-difference-2011.pdf

^[20]Ibid

^[21]International Renewable Energy Agency, Renewable Energy Technologies: Cost Analysis Series. Solar Photovoltaics, 2012, viewed on 15.06.2013, available online at URL:

http://www.irena.org/DocumentDownloads/Publications/RE_Technologies_Cost_Analysis-SOLAR_PV.pdf

^[22]European Commission, Renewables Make the Difference, 2011, p.15-16, viewed on 23.06.2013, available online at URL: http://www.energy.eu/publications/Renewables-make-the-difference-2011.pdf

^[23]Ibid

^[24]European Commission, Renewables Make the Difference, 2011, p.14, viewed on 23.06.2013, available online at URL: http://www.energy.eu/publications/Renewables-make-the-difference-2011.pdf

^[25]Ernst & Young Global Limited, Renewable energy country attractiveness index : May 2013, Issue 37, 2013, viewed on 12.06.2013, p.11, available online at URL:

http://www.ey.com/Publication/vwLUAssets/Renewable_energy_country_attractiveness_indices_-_Issue_37/$FILE/RECAI-May-2013.pdf

^[26]European Commission, Renewables Make the Difference, 2011, p.23, viewed on 23.06.2013, available online at URL: http://www.energy.eu/publications/Renewables-make-the-difference-2011.pdf