…

Towards Light Handed Regulations for Small Power Producers (SPP) in Tanzania and Thailand

The Infrastructure Regulation Thematic Group and the PPP-Global Expert Team, in collaboration with the AFR SDN Energy Team

World Bank Washington, D.C.

24 June 2009 Chris Greacen [email protected]

–

Outline

Small Power Producer (SPP)– project examples – Overview of Tanzania SPP regulations • Tanzania Legislative Framework • • • Goals, definitions Table of SPP documents Tariffs for different SPP cases – Main grid, mini grid, wholesale and retail sales • Required permissions and approvals, procedures for application; process rules – Comparison: Tanzanian SPP with Thai VSPP – Evolution of Thai VSPP program

• •

Small hydropower

1 MW Mae Ya, Thailand 3

Small hydropower

• • 2 MW Sri Lanka 4

Micro hydropower

•40 kW •Mae Kam Pong, Chiang Mai, Thailand

Rice husk-fired power plant

• • 9.8 MW Roi Et, Thailand

Biomass (wood chips)

• • • 1 MW Landhanavi, Sri Lanka Wood is grown specifically for electricity production 7

Biogas from Pig Farms

• 8 x 70 kW generator • Ratchaburi, Thailand

Wind

9

Solar Photovoltaic (PV)

• • 1 MW Bangkok Solar, Thailand

Tanzania SPP Legislative Framework

• • • • • National Energy Policy, 2003 Rural electrification policy statement Energy and Water Utilities Regulatory Authority Act – Establishing EWURA Rural Energy Act (2005) – Establishing REA & REF The Electricity Act, 2008

Legislative Framework, cont

 Energy Policy Statement No. 36 

Establish norms, codes of practice, guidelines and standards for renewable energy technologies, to facilitate the creation of an enabling environment for sustainable development of renewable energy sources

A goal: Light-handed regulation

1. Minimize amount of information that is required. 2. Minimize the number of separate regulatory requirements and decisions. 3. Use standardized documents, and make use of documents used by other agencies, to the maximum extent possible (reduce need for case by-case negotiation)

Definitions

• • • DNO: the licensee responsible for the operation of a distribution network in Tanzania. (Currently Tanesco) SPP: a power plant using a renewable energy source or waste heat, or cogeneration of heat and electricity, with an export capacity of up to ten (10) MW Embedded Generator: a single generator or a group of generating plant of total export capacity between 100 kW and 10 MW, connected to a Distribution Network in Tanzania, at 33 kV or below.

14

Process Guidelines (roadmap) Process rules

Table of SPP documents

Main grid Mini-grid

Guidelines for Developers of Small Power Projects (SPP) in Tanzania (under consultation)

In draft form, under consultation

Interconnection Guidelines Interconnection rules Standardized PPA

Guidelines for Grid Interconnection of Small Power Projects in Tanzania (Parts A, B, C) (under consultation)

In draft form, under consultation

Tariff methodology Tariff calculations for year 2009



Standardized Power Purchase Agreement for Purchase of Grid-Connected Capacity and Associated Electric Energy Between Buyer and a Small Power Project

 Standardized Tariff Methodology for the sale of Electricity to the Main Grid in

Tanzania Under the Standardized Small

Power Purchase Agreements.



Detailed Tariff Calculations under the SPPA for the Main Grid for year 2009



Standardized Power Purchase Agreement for Purchase of Off-Grid Capacity and Associated Electric Energy Between Buyer and a Small Power Project



Standardized Tariff Methodology for the Sale of Electricity to the Mini-grids Under the Standardized Small Power Purchase Agreements



Detailed Tariff Calculations under the SPPA for the Mini-grids for year 2009

 15 = “Approved”. Approved and proposed SPP documents will be made available at: www.ewura.go.tz/sppselectricity.html

What are the Guidelines for Developers of Small Power Projects in Tanzania?

• • • Audiences: SPP developers, EWURA, Tanesco, REA, bankers… Purpose: Guide to steps necessary to acquire necessary permits and clearances to develop and operate a SPP – – – Selling electricity to the DNO (Tanesco) main grid Selling to an isolated mini-grid and/or Selling directly to retail customers (main grid-connected & isolated SPPs) Guidelines: roadmap to rules. There will be a separate ‘rules’ document.

Contents of Guidelines for Developers of

Small Power Projects in Tanzania

Tariffs determined by SPP type

Connected to main grid Connected to isolated mini-grid Selling wholesale (to DNO*) Selling retail (directly to final customers)

Case 1 Case 3 * DNO: Distribution Network Operator (currently TANESCO) Case 2 Case 4 18

Tariff Case 1: selling wholesale to main grid

C case

1 

C lrmc

 2

C srmc

Where C lrmc is the long run marginal cost as defined by Tanesco’s long-term power plan; and C srmc is the budgeted cost of thermal generation in the next year. Note: the actual calculations are somewhat more complicated, taking into account: • Transmission losses • Seasonality •Price floor & cap They are available in:

Standardized Tariff Methodology Under the Standardized Small Power Purchase Agreements

available from EWURA. Order 08-015 on Dec 30.2008

Tariff – case 1 (2009)

Annual Average Dry season (Aug – Nov) Wet season (Jan-Jul and Dec)

Tariff (TZS/kWh)

85.49

102.58

75.94

19

Tariff Case 2: selling wholesale to a mini grid

C case

2 

C LmrcGrid

2 

C AveMini

Mini grid SPP receives the average of Tanesco’s main grid and mini-grid avoided costs.

C LmrcGrid = long run marginal cost for grid-power (adjusted for losses) C AveMini = average incremental cost of mini-grid power (levelized cost of electricity from a new mini-grid diesel generator).

Tariff – case 2 (2009)

Tariff (no seasonal variations)

Tariff (TZS/kWh)

334.83

20

Tariff Cases 3 (isolated) and 4 (main grid): selling at retail to end use customers

• Tariff is proposed by SPP generator, subject to EWURA review – Less oversight demanded in cases in which community is in agreement with proposed tariff – Where possible, EWURA draws on financial analysis submitted to REA for rural electrification subsidy 21

Necessary permits, clearances and procedures for application Land title or lease Resource Rights (e.g. water rights from River Basin Water Office) Letter of Intent (LOI) with DNO (Tanesco) Business license, tax registration, etc.

Building Permit Environmental and Social Clearance (NEMC) SPPA EWURA license Sequence is important to avoid competing claims on project sites 22

Land title or lease Resource Rights (e.g. water rights from River Basin Water Office) LOI with DNO (Tanesco) Business license, tax registration, etc.

Building Permit Environmental and Social Clearance (NEMC) PPA EWURA license

LOI request to TANESCO

1. Name and Address 2. Locations 3. Fuel type (hydro, biomass, wind, gas, etc.) 4. Power capacity (MW), planned power export (MW), annual energy generation (GWh).

5. Copy of deed of title or lease agreement 6. Rights to resource 23

Proposed rules regarding LOI process: response times, cost estimates •

Acknowledgement of receipt: The rules require that within seven days of receiving the LOI request, the DNO will acknowledge receipt of the request.

•

Notice of decision: Within 30 days of receiving the complete LOI request, the DNO will send the project developer notice of its decision.

•

Reasons for disapproval by DNO stated: If DNO disapproves of the project, the reasons for disapproval must be clearly stated in writing.

•

Reservation of Network Capacity: The LOI in the case of sites operating on hydroelectric or wind power, or any other primary source of energy which is site-specific by way of its availability, will also imply the exclusivity of the interconnection to the Developer, within the period of validity of the LOI.

•

Estimate of interconnection costs: Within 30 days of sending the LOI, the DNO shall send the Seller a rough initial estimate of the interconnection costs.

24

Land title or lease Resource Rights (e.g. water rights from River Basin Water Office) LOI with DNO (Tanesco) Business license, tax registration, etc.

Building Permit Environmental and Social Clearance (NEMC) PPA EWURA license

Standardized Power Purchase Agreement (PPA)

• To initiate the PPA agreement process, the Seller completes and submits to TANESCO an “Application for Interconnection and Sale of Electricity” – technical engineering information (one-line diagrams, specifications of key equipment) that DNO needs in order to determine if the proposed project is in compliance with the

Interconnection Rules and Guidelines

25

Granting/rejecting a PPA based solely on technical considerations

•

The rules specify that the DNO’s decision to sign or reject the standardized PPA is based solely on its evaluation of whether the design of the Seller’s facility is in compliance with the

“Guide for Grid Interconnection of Embedded Generators to the Main Grid and Isolated Mini-Grids in Tanzania”. 26

Land title or lease Resource Rights (e.g. water rights from River Basin Water Office) LOI with DNO (Tanesco) Business license, tax registration, etc.

Building Permit Environmental and Social Clearance (NEMC) PPA EWURA license • • –

EWURA license

SPPs up to 1 MW are exempt from EWURA’s licensure requirements Must submit completed registration form • Location, business registration, capacity of facility, GWh/yr, date of planned construction Non-exempt (>1 MW) – Submit license application • Same as registration, plus – Section on managerial competence – Feasibility study – – Business plan Permits and clearances (NEMC, water rights, etc.) – Where possible, EWURA draws on financial analysis submitted to REA for rural electrification subsidy 27

• •

Where we are now…

Completed – Tariffs and tariff methodology and Standardized Power Purchase Agreement have all been approved.

– Process Guidelines and Interconnection Guidelines are finishing public review Ongoing – discussions between EWURA and REA on how to coordinate better, done, but may be refined further.

– Study tours to Sri Lanka (done) and Thailand (planned) to visit SPP programs in action – First PPA applications to Tanesco submitted. At least one SPP developer discouraged by delays in signing PPA.

– application for license for first project has been received 28

Comparison of Tanzania & Thai regulations

Name of regulation Year in effect Types of generation Capacity MW as of Dec 08 Selling power Approved Applied Utility Term of PPA LOI (SPP & utility) License Tanzania

SPP Expected 2009

Thailand

VSPP 2002 (1 MW)  2006 (10 MW) Renewable energy, cogeneration Up to 10 MW export 0 0 Approx 30 (?) Tanesco 15 years Required Required if >1 MW 576 MW 2101 MW 4765 MW PEA and MEA 1 year (renewable) Not required Will probably be required

Tariff basis

Comparison of Tanzania & Thai regulations

Tanzania Thailand On-grid Tariff (2009) Utility incentive

Average of LRMC and SRMC 120.5 TZS/kWh (dry) = $0.094

90.4 TZS /kWh (wet) = $0.071

(Cheaper than SRMC) SRMC (gen + trans) + fuel volatility charge + adders $0.088 to $0.344 depending on technology, time of day

Key documents Model PPA

25 pages http://tinyurl.com/TZ-PPA

Guide for Interconnection of Embedded Generators

54 pages

Guidelines/rules for Developers of Small Power Projects (SPP) in Tanzania

54 pages

Standardized Tariff methodology

http://tinyurl.com/TZ-tariff-meth Utility only pays for 98% of electricity when > 1MW

Model PPA

5 pages http://tinyurl.com/Thai-PPA

Technical regulations

6 pages + not including one-line diagrams http://tinyurl.com/TH-Tech-Reg

Commercial Regulations

11 pages http://tinyurl.com/TH-Commercial-Reg

Context and evolution of Thailand’s Very Small Power Producer (VSPP) regulations: Success through low-key and local approach

Thai VSPP MW applied, permission, and selling – as of December 2008

1 400 1 200 1 000 MW 800 600 400 200 0 applied permission selling

Thai electricity supply industry structure

Source: EPPO 2006

SPP: early history of private-sector renewable energy in Thailand

• 1992 Small Power Producer (SPP) program – Based on PURPA – Fossil-fuel cogeneration and renewables up to 90 MW – Low tariff offered for “non-firm” generators made it difficult for most renewables. (In practice >75% SPPs are fossil cogeneration)

VSPP evolution 2000-1

• • 2000: EPPO politically powerful, pushing for greater private participation in power sector – – Main focus = formation of Power Pool (spot market) EPPO also got verbal agreement that PEA & MEA would develop VSPP regulations 2001: California crisis, utility & labor opposition sink Power Pool prospects – – PEA & MEA also stall on VSPP regulations EPPO asks mid-level bureaucrat and volunteer graduate student, “want to draft VSPP regs?” • • Technical: Delaware Net Metering laws + SPP Commercial: simplification of SPP • Tariffs: Based on existing “Bulk Supply Tariff” (Gen + Trans) for purchases by PEA/MEA from EGAT.

VSPP evolution 2002

• 2002: VSPP working group goes line-by-line through regulations – Chaired by Power Engineering Professor from Chulalongkorn University – All discussion in Thai language – 3-4 representatives each from MEA, PEA, EPPO – Utilities largely perceive 1 MW non-threatening • May 2002 Cabinet approval

Net metering study tours to USA

• • • 2002 and 2004.

– CA (SMUD, PG&E, CEC, CPUC, Powerlight, Kenetech Wind) – OR (PGE, Ashland Muni, Home Power, Grid connected micro-hydro) – WA (Seattle City Light, PSE, OPALCO) Peer-to-peer exchange Target mid-level Thai utility & government people in charge of VSPP implementation

After study tours, invite US utility practitioners to Thailand

• Experts from Sacramento Municipal Utility District (SMUD) and PG&E • Main message: “Our hardest part was simply setting up administrative machinery to process the flood of applications”

VSPP expansion 2006

• • • • December 2006: 1 MW  10 MW Efficient Cogeneation permitted (PSE > 10%) Feed-in “adder” tariffs

VSPP Tariffs (as of 2006)

• VSPP tariff = Bulk Supply Tariff (TOU) + FT + Adder – Bulk Supply Tariff = price EGAT sells bulk electricity to PEA/MEA.

• Onpeak: 2.9 baht/kWh = $0.085 /kWh • Offpeak: 1.1 baht/kWh = $0.032 / kWh – FT – fuel price volatility.

• Currently: 0.628 baht = $0.018/kwh – Adder:

Adder (per kWh) For 3 southern provinces

THB

$

THB

$

Biomass 0.3

0.0088

1.3

0.0381

Biogas Mini-hydro (50-200 kW) Micro-hydro (<50 kW) MSW Wind Solar 0.3

0.4

0.8

2.5

2.5

8

0.0088

0.0117

0.0235

0.0733

0.0733

0.2346

1.3

1.4

1.8

3.5

4 9.5

0.0381

0.0411

0.0528

0.1026

0.1173

0.2786

Solar

= $0.085 + $0.018 + $0.2346 = /kWh = $0.34/kWh

Micro-hydro

(<50 kW): $0.0963/kWh

Biomass

: $0.088/kWh

Lessons from Thai VSPP

• • • • Low-key, local approach kept utilities from being threatened Peer-to-peer exchange – Build mid-level relationships across bureaucracies – Utility folks like to listen to other utility folks – Status, recognition, travel Incentivize utility Feed-in adder very successful in attracting projects

Thank you

For more information, please contact [email protected]

This presentation available at: www.palangthai.org/docs/WorldBankSPP-TZ&Thai-Greacen24Jun09.ppt