Transcript Regional Greenhouse Gas Initiative

Building a Renewable
Energy Tariff Framework:
Best Practices & Moldova
Isabel Bjork
SWECO/Pierce Atwood LLP Consortium
Technical Assistance to ANRE
Republic of Moldova
September 2008
Outline
1. Purpose of an RE Tariff Framework
2. Types of RE Support Schemes Used in EU
3. Evaluation of Effectiveness of Different
Support Schemes
4. Market Perception of RE Support Schemes
5. Reducing Barriers to Investment in RE
6. Conclusions on Best Practices
2
Purpose of RE Tariff
Framework
 To reduce obstacles to RE deployment
 Requires initial support mechanisms to
compete with large hydro and thermal plants

(incumbents, existing framework)
 Requires policy supports that reduce
investors’ perceptions of risks

Moldova passed the Law on Renewable
Energy in late 2007 (draft tariff methodology
first step in creating secondary framework)
3
RE Support Schemes
 Feed-in tariffs (FT), quotas, green certificate
training, tender, fiscal measures
 FT most common & efficient, esp. for young
markets
 Moldova’s
Law on Renewable Energy
envisions special pricing structure for
renewable energy; similar to FT structure but
fundamental differences too
4
RE Support Schemes
 Most countries supplement with fiscal
measures (grants, tax incentives, etc.)
 Moldova’s Law on Renewable Energy
envisions tax and crediting incentives for
individuals and business entities that produce
or improve technical equipment and devices
functioning on the basis of renewable energy
sources (Art. 15), the establishment of an
Energy Efficiency Fund (Art. 16)
5
Differences between schemes
 Fixed tariff = pricing law: RE producers are paid a
set rate for their electricity (fuel) over a long term
period; price usually differentiated by technology
and size. (18 of 27)

Market determines capacity and generation

www.optres.fhg.de/OPTRES_FINAL_REPORT.pdf:
Conclusion: feed-in tariffs are effective at relatively
low investor profit
6
Differences between schemes
 Quota = government mandates a minimum share of
capacity or generation comes from RES. Usually
combined with green cert. (7 of 27)
Market decides price – viewed as more market based
Primarily supports low-cost technology (if absent
other support systems)
 Ex. Of UK – high prices, not much capacity, estimate
5-6% higher cost, grants required to assist stimulation




Generally unproven because young
Greater suitability for mature markets
7
Best practices: Feed-in Tariffs
 A fixed or premium tariff structure
 Support level differentiated across technologies 
 Stepped tariff designs – differentiation within same




technology based on site, plant size, conditions that
affect the yield 
Process and period for tariff revision, including tariff
degression 
Long duration (usually in the 15-20 year range) 
Purchase obligation 
Strong government role, with regulatory support
8
Best practices: Feed-In Tariffs
The rationale:
Creates security for investors:
 guaranteed payment for RE
 guarantee comes from fixed price set by Government
(usually) for each defined type of renewable energy over
a long period of time (calculated a priori)
 giving investors stable, predictable policy and legal
frameworks they desire
 requires working through issues of secondary
legislation such as regulations regarding supply,
licensing, etc.
9
Ex. Germany: Feed-in tariffs
 Law sets price (range) - quantity determined by market
 Long term fixed price of 20 years (per site, the date of
expiration is 20 years after the date of installation)
 Staggered tariff regime for new technologies; later
installations receive lower tariffs to reflect expected
progress, create efficiency
 Rate of decrease based on empirically derived progress
ratios for different technologies and site, yield/generation
costs of each particular plant, with periodic review to
assess price in light of technological and market
developments
10
Ex. Germany: Feed-in tariffs
Gives a minimum fee by type of technology, at a certain capacity.
Article 81 gives fees paid for electricity produced in plants with a
capacity up to and including 20 megawatts using biomass:
1. at least 11.5 cents per kw-hr up to capacity of 150 kilowatts;
2. at least 9.9 cents per kw-hr up to capacity of 500 kilowatts;
3. at least 8.9 cents per kw-hr up to capacity of 5 megawatts
and
4. at least 8.4 cents per kw-hr for capacity over 5 megawatts…
the fee shall be 3.9 cents per kw-hr if plant also uses waste
wood classified in categories…set out in the Waste Wood
ordinance
11
Ex. Germany: Feed-in tariffs
Important:
 German structure took a long time to be
refined (and under constant refinement)
 Other schemes were used to create initial
investment
 Tried and tested since 1991, with several
revisions of the primary legislation
12
Ex. Germany: Feed-in tariffs
13
Market perceptions of
RE support schemes
 Perceived investment risks have more of an
impact on effectiveness of RE policies than
potential profits or costs
 Most important issue identified was stability
 regardless of type of instrument used
 Critical because of long lead-time
14
Best Practices: Renewable
energy is a multi-sector approach



Government must establish and follow a long-term policy for
RE with strong continuity over period of years
 Targets (have these in Moldova - %6 to 2010, %20 to 2020)
 Clear priorities (have indications in Moldova – biomass,
wind)
Need dedicated institution devoted to implementing and
managing policy and providing continuity

Ministry/arm of government

Regulator
Need reasonable financial commitments

Support mechanisms (envisioned in the Moldovan Law,
some tax incentives, support fund)
15
Moldovan framework


Adjustment of national legal framework to the European Union
and international standards (Art. 5(3))
Law envisions a pricing support scheme (Art. 12)
 Producer’s costs are to be covered in the methodology
 Connection fee and support of the grid/networks to
accommodate RE & fuel incorporated in cost analysis
 Return on investment included in methodology must not
exceed 2 times corresponding rate for traditional energy
 Duration of the tariff shall not exceed 15 years
 Annual review by ANRE (Art. 24) – changes
 Consideration of prices on international market
(Art. 24, 12a)
16
Moldovan framework
 Non-discriminatory access and connection to grid
and networks
 Purchase obligations placed on suppliers

Of a pre-determined share of electricity produced
from renewable energy sources
 Importers of petrol products and the internal suppliers
of electrical energy shall purchase the established
volumes of fuel and energy from the authorized
producers in compliance with the share-part
determined by ANRE, given the share held by these
of the electricity and petrol products markets
17
Thank You!
Isabel M. Bjork
Pierce Atwood LLP
One Monument Square
Portland, Maine USA 04101
Tel: +44-1904-426271
Fax: +207-791-1350
Email: [email protected]