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Renewable energy policy
Md. Mizanur Rahman MEng(Sweden), PhD (Finland), CEng Chartered Energy Engineer (EI, UK) Certified Energy Manager School of Mechanical Engineering Universiti Teknologi Malaysia Email: mizanur@mail.fkm.utm.my
1. Implicit and explicit subsidies for fossil fuels and nuclear
power
Distort level playing field
Examples: Direct budgetary transfers, tax incentives, liability
insurance, leases, land rights-of-way, waste disposal,
guarantees to mitigate project financing or fuel price risks.
WB put 100-200 billion US$ per year as subsidy for fossil
fuel globally against 1 trillion US$ for annual fossil fuel
purchase.
Current challenges for renewable energy
2. High initial capital costs
More risked upfront than same capacity fossil plant
More premium on borrowing money
USD/MWh
3. Ignorance of fuel price fluctuation risk
Risk of severe fossil fuel price fluctuation is ignored
Risk has high costs.
The benefit from risk reduction premium for renewables are
often ignored
4. Unfavorable power pricing rules for distributed generation
Ignore benefit for locational value of power/transmission
losses
Zero price for capacity value (due to intermittent nature)
Lower value than the utility price
5. High transaction costs
Unfamiliarity with the technologies
Resource assessment
Long negotiating process
6. Avoiding environmental and social externalities
Cost associated with health, infrastructure decay (acid
rain), decline in forests and fisheries, ultimate climate
change are often ignored at the bottom line while taking
decision.
7. Lack of legal framework for Independent Power Producers
Absence of RAPSS in many developing countries
Monopoly
8. Restrictions on siting and construction
Restriction on height, noise, aesthetics, safety etc.
Land use competition with recreational, scenic, agriculture
etc.
9. Transmission access
While power is generated away from load
Transmission access dispute with utility or land owners
10. Utility interconnection requirements
Interconnection policy and technical, and legal
standards are often absent
11. Liability insurance-
requirements
Back-feeding risks
Require insurance
Market performance
12. Lack of access to credit due to perceived uncertainty and risk on technology performance
• Lack of micro-credit
• Only short term loan available
• Banks relaxed due to uncertainty
• Limited visible examples
• Poor past performance
13. Lack of technical or commercial skills and information
Lack of skilled managers, engineers, architects, planners
• Determining the economic value of renewable energy allows for a concrete assessment of the economically viable optimum quantity of renewable energy by accounting for its environmental, energy security and price stability benefits
1. Electricity Feed-in Laws • Utilities are obligated to buy power
• Right feed-in- tariffs
2. Renewable Energy Portfolio Standards (RPS) • Certain power from renewables for a company
Promotion policy mechanisms
3. Emission trading A. Emission caps (renewable energy (green) certificates)
B. Taxation
C. Technology standards
Promotion policy/mechanisms
Currently operating carbon trade markets
– EU
– USA
– New Zealand
– Japan
– Kazakhstan
– China
– Canada
– Australia
Promotion policy mechanisms
CCS in carbon trade/tax policies Cap-and-trade policy CO2 captured = CO2 not emitted
CCS can be used in emission offsetting
Generates emission allowances ∝ carbon captured
Carbon tax policy
If CO2 is taxed -> operations using CCS should be paid equally to do so
In case of total negative emissions, the amount paid > tax revenues
4. Subsidies and rebates
• Well-targeted-efficient
soundly based
• Practical
• Transparent
• Limited in time-
– Grants
5. Tax Relief
• Investment tax credits
• Accelerated depreciation
• Production tax credits
• Property tax incentive
• Personal Income tax
Incentives
• Sales tax incentives
• Pollution tax Exemption
• Other tax Policies
6. Renewable energy set-asides
7. Greenhouse gas mitigation policies
8. Renewable resources obligation in bidding
Enabling elements Net metering
Real time pricing
Interconnection regulations
Dymanic generation and transmission scheduling
Elimination of rate pancaking
16
Feed-in Tariffs (FIT)
What is FIT?
FIT is a mechanism/tool that allows RE electricity producer to sell their
electricity to utility company at a fixed price.
Some wining features of FIT
• Priority grid access
• Costs shared to all
consumers
• Regular evaluation
17
18
Malaysia has enforced the Renewable Energy Act 2011 and Sustainable Energy
Development Authority Act 2011.
Establish SEDA to oversee the implementation and management of RE
RE Act provides a mechanism for individuals or non
individuals to sell RE based electricity (up to 30MW) to
power utility firms at FIT rates for a specific time.
19
Renewable energy quota limit in Malaysia (+/-)
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