Transcript Transitioning to Renewable Energy:

Transitioning to
Renewable Energy
Policies, Programs and Institutions that
Support Long-term Transformation of Emerging
Renewable Energy Markets
Presented at the Workshop on
Financing Sustainable Electricity:
Policy and Governance Obstacles
World Resources Institute
Washington, DC, USA
April 21, 2004
Transitioning towards Sustainability
“…the key tasks of the coming years include
encouraging and supporting the transition
towards sustainability, involving both
public and private stakeholders, and
building alliances for the next crucial
steps.”
From “Changing Course: A Contribution to a Global Energy Strategy”
Heinrich Böll Foundation Paper No 22, 2002
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“Fossils Today, Renewables
Tomorrow” - Has it Worked?
• Many Policies, Programs and Institutions
(PPI) created to support renewable energy
(RE) do not account sufficiently for macro
economic and energy systems
– The result, often, is a “false” market for RE
that survives only as long as the PPI is in
place, and/or program failure over time.
• Many PPI do not focus on creation of the
market conditions that support sustained
penetration and expansion of RE.
– Many focus on RE to the exclusion of broader
issues which often have more impact on RE
scale up
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Current Funder View of
Central Role of RE…
A New Bank Energy Business
Strategy Framework
Direct Poverty
Alleviation
Environmental
Sustainability
Energy
Macro/
Fiscal
Stabilization
Governance /
Private Sector
Development
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…But, How Does RE Fit into these
Larger Societal Goals?
Direct Poverty
Alleviation
Environmental
Sustainability
Energy
Macro/
Fiscal
Stabilization
Governance /
Private Sector
Development
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Transitional PPI Create the
Enabling Environment for RE
• Successful RE PPIs focus on MWs installed
AND on creating the proper markets
conditions for sustained, “organic” growth.
• The creation of the proper “enabling
environment” requires a long-term, multisectoral collaboration between Gov’t,
NGO, int’l institutions and private sector.
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Elements of Transitional PPI
• Accounts for existing macro and energy
systems and either overcomes barriers or
takes advantage of opportunities.
• Supports “market-like” adoption and
maintenance of RE. Promotes “operational
sustainability”.
• Provides catalytic incentives to energy
actors, such as utilities, entrepreneurs,
IPPs, cities, communities, etc.
• Receives participation and ongoing
support from end-users.
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Diffusion=Supply Push+Demand Pull
• Traditional RE PPI development focused on
Tech Transfer or Dissemination –
– Connotes a “Supply Push” focus
• Transition focused on Tech “Diffusion”:
– Connotes an Equal Focus on “Demand Pull”
– Must expand idea of “technology” to include
the human and institutional “software”
required to sustain tech.
– Transition requires ongoing “buy-in” from all
parts of value chain (from government to
utility to entrepreneur to consumer) for
sustained success.
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Transition as Evolution
RE Diffusion
Time
From Jan Rotmans, et al.
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RE Transition within Rings of Influence
Transitional PPI Address All “Rings of Influence”
Macro Conditions
Market, Economic,
Political Context
Meso Conditions
Energy Market
Environment
Micro Conditions
Sustainable Energy
Market Specifics
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The “Transition” Model
Model focuses on relationship between
markets defining “Rings of Influence” on RE
• Macro – The larger national and international
context within which all economic activity takes
place, e.g., Uganda (legal, political, economic),
East Africa, the international oil market, etc.
• Meso – The market or sector in which specific
economic activity takes place, e.g., The Ugandan
Energy Sector or regional energy markets
• Micro – The specific marketplace in which the
specific economic activity takes place, e.g., RE
market in Uganda.
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Examples of the Role of PPI within
Rings of Influence
• Macro: A poor legal environment impedes ALL
investment, including RE. A PPI which creates a
mitigates legal risk for RE counters this barrier.
• Meso: A lack of utility willingness to allow for
IPP interconnection hurts ALL energy producers.
A regulatory change which removes this barrier
helps ALL energy projects.
• Micro: RE is more expensive than conventional
power. A production tax credit increases value of
each KWh.
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How does Transition Model help in
Development of RE PPI?
• When RE promoters view their “market”
within a larger context, they can craft
more effective PPI strategies and alliances
within each Ring of Influence so as to:
– Include elements in PPI which create bridges
or buffers against macro-dysfunctions
– Find and create non-traditional alliances
around mutual interests to advance RE cause
– Find mutual benefits that can be leveraged
(community development) in PPI
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Transition Model Application for RE
Objectives
Macro/
“National”
Meso/
Energy
Micro/ RE
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Barriers
Mechanisms
Kyoto/CO2,
Oil dependence,
Rural Economic
Development
Financial
markets, legal
system, political
resistance
Promote
Economic
Development
initiatives
Diversify fuel
sources; extend
energy to remote
areas
Utility
connection;
small customer
base
Regulatory
reform
Energy Access;
SE for SD
Technical limits,
capital cost,
high production
Transitioning tocosts
Renewables
Technical
assistance; Risk
mitigation; tax
incentives
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PPI at the Macro (Economic) Ring
of Influence
Macro: Market,
Econ, legal, Political
Barriers
• Legal – 3rd country
arbitration, legal
reforms, new laws
• Finance – Counterguarantees, IFI funds
• Taxation – changes
in tariffs, taxes,
including carbon tax
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PPI at the Meso (Energy Sector)
Ring of Influence
Meso: Energy
Market Context
• Utility Reform
• DG connectivity
• RPS/Feed-in
Tarrifs/ PTC
• Legal/political
reforms for PPA,
IPP or
entrepreneurship
• Carbon Taxes
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PPI at the Micro (RE) Ring of
Influence
Micro:
•Risk Finance specific to RE
• Technical
Assistance
• Public Awareness
• Project Level
support such as
production tax
incentives, invest
subsidies, etc
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IIEC/Boell Study
• Using this transition model, IIEC and
Boell have undertaken an exploratory
study of Transitional PPI in five target
markets: South Africa, Philippines,
Brazil, Philippines, and Thailand (SEA).
• Purpose is to evaluate each nation’s
unique challenges and opportunities,
and to quickly evaluate RE PPI which
are “transitional”.
• Provide lessons learned and framework
for stakeholder dialogue
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Transitional PPI Case Study
Evaluation Process
• Review state of energy and national
development goals
• Review specific “transitional” PPI, with
focus on:
– Goals, Barriers and Mechanisms, including
implementing agents
– Funding sources and funder’s objectives
– Beneficiaries/markets – needs, roles, barriers (NIMBY)
– Outputs – expected and actual
– Integration with other PPI
• Results and Lessons Learned
– Replicability, applicability
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India Case Study - MEDA
• MEDA, instituted by the Ministry of Nonconventional Energy Sources (MNES);
initiated Wind Energy Program in
Maharashtra by creating an investor
friendly enabling environment
• Invested in Wind Energy to promote, sell
electricity to the grid, generate revenue
stream and resources to promote RE
• Demonstration of power wheeling system
with Maharashtra State Electricity Board
• Operationalized Power Purchase
Agreements and created favorable tariff
recovery for wind energy
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The Transition Model & PPIs in India
-MNES
-State Energy
Development
Agencies
-IREDA
-Power Purchase
Agreements
-Preferential
electricity tariff
Macro:
Market, Econ,
Political
Conditions
Meso: Energy
Market
Conditions
Micro: Sustainable
-Solar water heating
systems
-Wind energy
projects
-Sugar COGEN
Energy Market
Conditions
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Transition in India - MEDA
Barrier
Goal
Macro
Meso
Micro
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Integration with the
(Electricity)
infrastructure
Evolve Renewable
Energy Policy
Utilizing RE &
Demonstrate Wind
Energy Potential
Regulatory Issues
Higher First-Costs
Higher lead times for
Power Purchase
Agreements
Transitioning to Renewables
Mechanism
Promotion of Open Access
Policies
Offer Tariff
Reductions,
Accelerated
Depreciation
Regulatory Intervention
for Fast=tracking PPAs
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Brazil Case Study: PROINFA
• PROINFA – Program for Alternative
Sources for Electricity was launched in
April 2002 by a Federal Law.
• Expects in the 1st phase to authorize
3,300MW of renewable generation, and
for a second phase reach 10% of
electriciy generation.
• Only grid connected systems can be
included at PROINFA.
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The Transition Model & PPIs in Brazil
Unstable
economy, lack
of investments
Macro:
Market,
Econ,
Political
Conditions
Meso:
Energy
Market
Conditions
No PPAs
available
Micro:
Industry lack
of awareness
Sustainable
Energy Market
Conditions
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Transition in Brazil: PROINFA
Barrier
Goal
Macro
Meso
Micro
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Political changes
High interest rates
Environmental authorization
Public perception (high tariffs)
Governance
10% Renewables in 2020
Capacity building
No PPA available
No normative value
Industry lack of awareness
Transitioning to Renewables
Mechanism
Private/Public partnership
Accelerate environmental
analysis
Public campaign
GOB offers long-term PPA
Definition of normative
value
Focused training
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Thailand Case Study: RE PPIs
• SPP regulation of 1992 allows co-gen and
renewable SPPs (< 90MW) to sell power to
the grid. Due to low buy-back tariff, many
projects were not financially feasible
• In 2001, EPPO introduced a subsidy from
ENCON fund for qualified renewable SPPs.
43 proposals, 31 biomass SPPs approved,
~500MW with 3B Baht in ENCON subsidy
• New problems: Public perception
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The Transition Model & PPIs in
Thailand
Macro: Market,
- ENCON fund
Econ, Political
Conditions
- RE SPPs
- RE VSPPs
Meso: Energy
Market
Conditions
- Solar Home System
- COGEN3
Micro: Sustainable
Energy Market
Conditions
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Transition in Thailand: RE SPPs
Barrier
Goal
Gain public acceptance
Nationwide TV campaign
Macro
Utilizing RE &
Less dependent
On imported fuel
Public environmental
Concerns
Meso
Increase RE Mix
No PPA mandate for RE
Micro
Create financial viability
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Mechanism
No financial feasibility
Transitioning to Renewables
Set out RE SPP
regulation
Financial incentives from
The ENCON Fund
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Philippines Case Study: CBRED
• RE Support for Existing Programs
– Poverty Alleviation Program
– Rapid Rural Electrification Program
– WB Rural Power Project
• There have been a number of RE demo
projects in the past; most not sustainable
• CBRED Project has been designed to
address institutional, financial, technical,
market, information and training barriers
through capacity building.
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The Transition Model & PPIs in the
Philippines
-Poverty
Alleviation
Program
Macro:
Market, Econ,
Political
Conditions
-Rapid Rural
Electrification
Program
Meso: Energy
Market
Conditions
Micro:
-Capacity Building
for Renewable
Energy
Development
(CBRED)
Sustainable
Energy Market
Conditions
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Transition in Philippines: CBRED
Goal
Barrier
Macro
Economic Growth
& Poverty
Alleviation
Meso
Increase widespread
use of RE
Micro
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Increase NRE loan
portfolio
Lack of Supporting
Infrastructure
Difficulty in accessing
traditional financing
windows
Lack of bankable
projects
Insufficient collateral
Transitioning to Renewables
Mechanism
Rapid Rural Electrification
Capacity Building of
Financial
InstitutionsFINESSE program
Set up a Project
Preparation Fund
Set up a Loan
Guarantee Fund
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South Africa Case Study – RE
White Paper
• Prior to 2003, RE PPI were not well
coordinated and impacts were few
• Government recently approved a RE White
Paper in which was first attempt to set
meaningful targets and create an enabling
environment for RE development
• PPI under White Paper may include rate
set asides, guarantee purchases, rural
electrification Programs, etc.
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The Transition & PPIs in South
Africa
Macro:
RDP “Electricity
for all’, NEPAD,
BEE
Market, Econ,
Political
Conditions
Meso:
Service delivery:
electrification
including off-grid
Energy
Market
Conditions
Micro:
Sustainable
Energy Market
Conditions
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RE white paper (P)
only PPI, PI still in
development
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Transition in South Africa: RE
White Paper
Goal
Macro
Service
Delivery
Barrier
Mechanism
Large
un-serviced constituency
RDP 1994,
‘electricity for all’
Economic viability
uncertain
Increased electrification
Meso
Long distances imply high
cost
Set RE target
contribution
RE White Paper
Micro
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Economic analysis for
RE Target
Electrification including
off-grid
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Thank you for your attention
Any Questions?
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