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Experience in Conducive RE & EC Policies for
Project Implementation from Various
Countries
EBTKE CONEX 2012
INDONESIA
17TH JULY 2012
RAVI KRISHNASWAMY
VICE PRESIDENT
ENERGY PRACTICE
FROST & SULLIVAN
2
Annual Power and Energy Outlook
Agenda
• Top 10 Global Energy Trends for 2020
• Global and Asia Pacific Renewable Energy Trends
• Global Policy Primer
• Policy and Regulations in various countries including
Malaysia, Thailand, India and China
• Status and Outlook for Indonesia
3
The 10 Most
Critical Trends
that Will
Shape the
Global Power
& Energy
Industry till
2020
Source: Frost & Sullivan
Power Demand
Growth
New Age for
Natural Gas
Clean Coal
Commercial-
isation
Power Plant Decommissioning
Smart Energy Nuclear Power?
Energy
Efficiency
Energy Storage
Continued Investment in Renewables
Market
Liberalisation
Annual Power and Energy Outlook
Top 10 Energy Market Trends for the Decade
4
China Leads the World in terms of Renewable Energy
Investments
• Global investment in
renewable energy increased
17% in 2011 to $257 billion,
which is 94% higher than
the pre-crisis levels in 2007
• China was still the market
leader in 2011 with US$52.2
billion investments even
though US closed the gap
at US$50.8 billion
• India was the fastest
growing market at 62% year
on year 2011, with a total
investment of US$12 billion
New Investments in Renewable Energy 2007-2011
Source: UNEP
20…
20…
20…
20…
20…
0
20
40
60
80
100
120
USA Rest of Americas
Europe MEA India China Rest of Asia
2007 2008 2009 2010 2011
5
Whilst wind and hydro will still be the leading
technologies, the growth in solar will be dramatic
North America Asia Pacific Europe
2009 2015 2009 2015 2009 2015
Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan
34 127 73
153 37
198
2 15 13 80 3 23
9 16 21 10 15
Rest of the World
2009 2015
2 12
2 10
18 25
Wind
Power, GW
Solar Power
(PV + CSP),
GW
Biomass
Power, GW 11
Note: The graph is illustrative and is not drawn to scale.
*- Islandsbanki estimates based on data by IGA, Bertani, GEA
^- Geothermal Energy Association
**- Frost & Sullivan estimates
171 174 178 190 237 308 299 329
Large
Hydropower,
GW
Outlook for the Energy & Power Industry: Evolution of Renewable Installed Capacity (World), 2009 and 2015
6
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
1990 1995 2000 2005 2010 2015 2020 2025 2030
MT
OE
Asia Pacific
Europe
NA
LA
ME
Africa
Clean Energy Consumption by Region
Asia will lead in clean energy consumption by 2020
Source: BP Statistical Review of World Energy
7
Global Policy Primer
Source: Frost & Sullivan analysis.
Renewable Energy
Financial Incentives Incentive Provided
Applied in
Europe Asia USA
Capital cost rebates Provide money to customers based on
the size of a customer‟s solar power
system
Italy Taiwan,
China
California
Feed-in tariffs Utilities to pay customers for solar
power system generation based on
kilowatt hours produced, at a rate
generally guaranteed for a period of
time.
Germany,
France,
Italy,
Spain, UK
Japan,
South
Korea,
China,
Malaysia
California
(Performance
Based
Incentives),
Hawaii
Tax credits USA
Net metering Power generated by the solar power
system in excess of a consumer‟s
power consumption will spin the existing
home or business electricity meter
backwards by such excess amount,
effectively reducing the customer‟s
electricity bill.
Thailand California,
Oregon
8
JAPAN – Policies and Regulations
Japan has introduced its FiT scheme effectove July 2012. Proposed rates for the program are $0.53/kWh (JPY 40/kWh) for PV plants larger than 10 kW, and $0.52/kWh (JPY 42/kWh) for residential PV plants smaller than 10 kW. PV plants larger than 10 kW would be eligible for 20-year contracts, and smaller than 10 kW would be eligible for 10-year contracts, with the FIT paid for excess power production in smaller systems
Renewables Portfolio Standards is a special measures law on the Use of New Energy by Electric Utilities. Introduced in April 2003, this law obliges electric utilities to use a fixed amount of new energy toward the aim of promoting the introduction of new energies. Utilization target (electricity to be produced from new energy) was established for the fiscal year 2014 at 16.00 billion kWh.
The country has set a target to improve EE by 30.0 percent relative to 2003 levels by 2030. To achieve this, the government offers diverse incentive mechanisms for both the industrial and commercial sector through the National Energy Plan, Government Direct Transfers, financial incentives, and voluntary measures.
Feed-in
Tariff
RPS
EE
Policies
9
MALAYSIA – Policies and Regulations
In April 2011, Malaysia adopted a system of Advanced Renewable Tariffs and renewable energy targets differentiated by technology by year on a first come basis. For instance, 2011 Malaysia's quota for solar PV is 29 MW and in 2012 the target is an additional 46 MW. A lot of interest is shown for Solar PV and biomass projects in Malaysia.
• Pioneer Status - Tax exemption of 100.0 percent of statutory income for 10 years.
• Investment Tax Allowance (ITA) -ITA of 100.0 per cent on the qualifying capital expenditure within a period of five years
• Import duty and sales tax exemption are provided for equipment used in such RE activities. For locally produced equipment, sales tax exemptions are given.
Green Technology Financing Scheme (GTFS) is a fund amounting to RM1.5 billion set up as an effort to improve the supply and utilization of Green Technology in Malaysia. The scheme is managed by Malaysian Green Technology Corporation (MGTC) and aims to benefit companies who are producers and users of green technology.
Advanced
Renewable
Tariffs
Renewable
Energy
Incentives
GTFS
10
MALAYSIA – Growth Forecasts
Feed-in Tariff Rates
RM 1.23 (US cents 40.5)/kWh for solar (up to 4 kW);
RM 0.31 (US cents 10.2)/kWh for biomass (up to 10 MW);
RM 0.32 (US cents 10.5)/kWh for biogas (up to 4 MW).
Tariffs reduce for higher capacity
BIOMASS FORECAST
SOLAR FORECAST BIOGAS FORECAST
11
CHINA – Policies and Regulations
Golden Sun
Feed in Tariff
12
CHINA – Policies and Regulations
Feed in Tariff
• First nationwide feed-in tariff incentive scheme for photovoltaic (PV) solar installations introduced in Aug 2011
• Solar PV projects approved before 1 July 2011 or completed by the end of 2011 will receive 1.15 yuan per kilowatt hour
• Those approved after the above date will be paid 1 yuan per kilowatt-hour
• China has set a new target of 21 GW of solar installations by 2015
Golden Sun Program
•In July 2009, the PRC Ministry of Finance announced the Golden Sun Program to support the demonstration and application of the PV industry in China.
•Under this program, on-grid PV systems will be subsidized at 50.0% of total investment costs while off-grid PV systems installed in remote regions with no access to grid will be subsidized at 70.0% of total investment costs. However the government has been making changes to the program to make it viable based on current market conditions
•The tariffs will be reduced to 5.5 yuan ($0.87) a watt, down from the 7 yuan set in February, because of the huge drop in module prices
•Developments under this year‟s (2012) programme had to be a minimum size of 2MW compared with 300kW in previous years
•The government has approved 1.7GW of solar projects, well above 600MW approved in 2011
13
China Market Forecasts
14
China Market Forecasts
15
India
INDIA - Policies and Regulations
National Solar Mission
The National Solar Mission (NSM) under India‟s National Action Plan (NAP) for climate change aims to
make the country a leader in the field of solar energy. The targets or outlays, according to the plan, are in
three phases:
•Phase one: 2009 – 2012
•Phase two: 2012 – 2017
•Phase three: 2017 – 2022
Primary Goals Application Funding Requirements till 2030
Increase installed solar power
capacity to 20 GW by 2022, 100
GW by 2030 and 200 GW by
2050.
Increase solar PV domestic
production to 4 GW – 5 GW per
year by 2020.
Achieve grid parity by 2022
Achieve parity with coal-based
power in 2030.
• Utility scale grid connected ground
mounted systems – 12,000 MW.
• Off-grid, on-grid building mounted –
3,000 MW.
• Off-grid rural and industrial – 5,000
MW.
• Solar lighting for 20 million
households and 20 million square
meter for solar heating applications
• Incentive for 18,000 MW of solar power
– INR 819,830 million.
• Grant for demo projects – INR 45,000
million.
• Grant for R&D and R&D capacity
building – INR 48,000 million.
• Grant for rural electrification/ solar
lighting – INR 12,000 million.
16
INDIA - Policies and Regulations
National Tariff Policy, 2006
Grid-interactive renewable power projects based on wind power, biomass, small hydro and solar are mainly
private investment driven, with favourable tariff policy regimes established by State Electricity Regulatory
Commissions (SERC), and almost all-renewable power capacity addition during the year has come through
this route.
State Electricity Regulatory Commissions (SERCs) to fix minimum percentage for purchase of energy from
renewable energy sources taking into account availability of such resources in the region and its impact on
retail tariffs.
Rural Electrification Policy, 2006
The policy recognized that non-conventional energy sources can be appropriately and optimally utilized to
make reliable supply of electricity to each and every household.
State Policies
Several states in India have RE policies that focuses either on one renewable energy technology or a
combination of RE technologies and these are revised on a periodical basis.
17
India Energy Demand to Grow to 429 GW by 2020;
Renewables to account for 72 GW
18
THAILAND – Policies and Regulations
ADDERS
Thailand market offers tariffs that
are called „adders‟ that are paid
over the retail price of the
electricity. The eligible
participants enter into long-term
contracts with the local utility to
sell renewable electricity at a
pre-specified tariff for a pre-
specified period of time. The
program is implemented through
Thailand‟s three electric utilities:
EGAT, MEA, and PEA.
• Very Small Power Producers
(VSPP) regulations: for generators
sized less than or equal to 10 MW
• Small Power Producers (SPP)
regulations: for generators sized
greater than 10 MW and less than
90 MW
The existing adder for solar in
Thailand is $0.3 per Kilowatt hour
(kWh) (8.0 baht/kWh) for 10 years.
However, currently, the government
is contemplating on introducing a
new conservative FiT with an adder
of $0.2/kWh (5.94 Baht/kWh) for 20
years. It is estimated that this new
tariff would be effective for a number
of new application proposals.
What are Adders? Incentive Programs
19
South Africa - Policies and Regulations
South Africa
South Africa's (SA) National Energy Regulator (NERSA) introduced Renewable Energy Feed-In Tariffs
(REFITs) in 2009. SA aimed to produce 10 TWh of electricity per year by 2013. However, in 2012, a new
REFIT was introduced with significant cuts. The tariffs for all technologies are proposed to be reduced,
and in some cases the reduction is more than 40 per cent (landfill gas and photovoltaic).
2009 REFIT and 2011 Revised REFIT with project consumer price index adjustments for years 2012-13 for solar
PV:
REFIT
2009
REFIT
2011
REFIT
2012
REFIT
2013
Percentage change
2011/20091
Technology R/kWh R/kWh R/kWh R/kWh
Photovoltaic ≥ 1 MW
ground mounted 3.94 2.311 2.325 2.338 -41.3%
Although this project is large and shows initiative within South Africa to harvest the great amount of sun
energy it receives, it is actually the first major solar project in this country. Up until recently solar energy
had been neglected as the economy uses coal to generate 90% of its power.
South Africa is therefore waiting for the technology to advance to the stage where the price of PV
equipment, installation and purchase is much lower, and the price of coal is much higher. This will make
solar electricity a much more attractive proposition in the country in comparison to coal.
20
GERMANY
Source: Deutsche Bank Group
21
Germany - Policies and Regulations
Germany
The German parliament passed the bill for revised solar feed-in-tariff (FIT) at the end of March 2012.
The policy went into effect on April 1, 2012.
Decrease %age FIT 2012 (EUR/kWh)
Rooftop solar PV Systems
Less than 10 kW 20% 0.195
10 kW to 1 MW 25-30% 0.165
Above 1 MW 0.135
Ground-Mounted Systems 0.135
• From May-October 2012, FITs for all systems will be reduced by 1% every month.
• The new policy includes limits to the FITs. For systems smaller than 10kW, only 80% of the electricity
generated can obtain subsidies. For systems larger than 10kW and smaller than 1MW, only 90% of
electricity generated can be eligible for subsidies. All electricity generated by systems larger than
1MW is eligible for subsidies.
• The policy indicates that the target for new installations in 2012-2013 is 2.5-3.5GW. After 2013, the
targets for new installations are to fall by 400MW every year. By 2017, the annual new installation
target is 900-1,900MW.
22
Germany - Policies and Regulations
• The amended Renewable Energy Sources Act (EEG) entered into force in January 2009, including an
increased initial tariff for onshore wind energy - EUR 9.2 cent/kWh (USD 12.5 cent), up from 8.7
cent/kWh. The basic tariff was set at 5.02 cent/kWh. There is an annual digression of 1% for new
installations. Hence, since 1 January 2010, the initial tariff for onshore wind was 9.02 cent/ kWh.
• The tariff for offshore wind energy was increased to 13 cent/ kWh, plus an additional “sprinter bonus” of
2 cents/kWh for projects which start operation before the end of 2015. The initial 15 cents/kWh will be
paid for a period of 12 years, and then decreased to 3.5 cent/kWh. There is an additional prolongation if
the offshore site is located in deep waters and at a large distance from the coast. Offshore tariffs will
annually decrease by 5% for new installations starting in 2015
• The new government announced that it will shorten the periods between EEG amendments from four to
three years, and a new amendment is now expected in 2012.
23
USA
USA - Policies and Regulations
• The country does not have a national feed-in-tariff (FiT) policy for renewable energy but has state-wise
renewable portfolio standards and other state specific programs.
Renewable Portfolio Standards (RPS)
State-level renewable portfolio standards (RPS) mandate utilities to generate a certain percentage of their
electricity generation from RE sources by a certain time period. Currently, 29 states have an RPS in place
and 6 additional states have non-binding state level renewable portfolio goals. Some states have a solar
“carve-out” that requires a certain percentage of a utility‟s generation is derived from solar power. RPS
policy designs vary significantly among the states. RPS allows flexibility to choose whichever RE sources
are most appropriate for their states.
11 states undertook several modifications to their RPS programs in 2007 mainly to strengthen pre-
existing RPS requirements by increasing RE targets, removing supplier exemptions, or adding resource–
specific set asides. RPS is the major driver for utility scale solar power plants in the USA.
Investment Tax Credit (ITC)
The solar tax credits were originally enacted in 2005. In Oct 2008, the ITC for solar got an extension for a
8-year period till the end of 2016, providing a medium-term deadline to invest. The 30.0 percent tax credit
on the capital cost of a PV project installation applies to both residential and commercial solar
installations. The solar ITC provisions will -
24
USA - Policies and Regulations
•· Eliminate the $2,000 monetary cap for residential solar electric installations, creating a true 30-percent
tax credit (effective for property placed in service after December 31, 2008);
•· Eliminate the prohibition on utilities from benefiting from the credit;
•·Allow Alternative Minimum Tax (AMT) filers, both businesses and individuals, to take the credit;
•·Authorize $800 million for clean energy bonds for renewable energy generating facilities, including solar.
California Solar Initiative (CSI)
• The CSI program has a total budget of $2.167 billion between 2007 and 2016 and a goal to install
approximately 1,940 MW of new solar generation capacity.
• The CSI-Thermal portion of the program has a total budget of $250 million between 2010 and 2017, and
a goal to install 200,000 new solar hot water systems.
• The CSI program is funded by electric ratepayers and the CSI-Thermal portion of the program is funded
by gas ratepayers. The CSI program is overseen by the California Public Utilities Commission and
rebates are offered through the Program Administrators.
25
Indonesia Per Capita Electricity Consumption – Way to Go!
The power consumption per capita is the lowest in the region despite the abundant
natural resources present
0
2000
4000
6000
8000
10000
12000
14000
Indonesia Vietnam Philippines Thailand Malaysia Singapore India China USA
kWh per capita
Source: World Bank
26
Indonesia - Geothermal dominates RE sourced power
electricity production and will continue doing so up to 2016
Source: Frost & Sullivan
78% 76%72% 72% 69%
65% 62%
9% 11%12% 12%
13%15% 16%
12%14% 13% 15%
16% 17%
1% 1% 1% 2% 2% 2% 2%1% 1% 1% 2% 2%1% 1%12%
2010
Solar 100%= 1537 1728 1932 2390 2608
2011 2012 2013 2014 2015 2016
Geothermal
2914 3256
Electricity Generation Mix Using Renewable Energy:
Total Installed Capacity (MW)
Biomass
Biogas
Co-
generationl
Wind
• Geothermal usage is
expected to increase and
would become the
Indonesia‟s largest
renewable energy electricity
source that connected to
the main grid
• Biomass and cogeneration
is in second and third place
providing significant
electricity renewable energy
source to Indonesian main
grid
• Wind ,Solar and Biogas is
not yet connected to main
grid and each capacity is
below 2 % of total national
RE capacity as it is in early
stage of development.
27
The interconnection will drive more efficiency into the system and help to better
manage the discrepancies in demand supply with the anticipated growth
Java Bali
Sumatra
interconnection
Indonesia - Implications for Market Participants
Since it is impossible to extend the grid to all far flung regions of Indonesia, small
scale off grid renewable energy generation should form a key part of Indonesian policy
Disbursed
Renewables
With average project cost at $2.4 to $3.2 per MW, which is lower than the
international costs, Indonesia can attract significant investments with more favorable
government policy support
Geothermal
power
development
Other regional markets like Vietnam and now Myanmar are vying for international
financing in power sector. Without more liberalization of the power sector Indonesia risks
loosing out to other countries.
Other
Regional
Markets
28
Summary of Opportunities for Indonesia
2 Capital expenditure on T&D expansion
about US$11.1 billion
3 Increasing bilateral cooperation for
renewable energy development (i.e.
Finland and New Zealand)
4
With a 30% renewable energy
objective by 2030, the medium term
opportunity us about US$12.4 billion by
2020
5 Country investment rating upgrades
generating more interest among global
investors
1 Potential investment for power
generation is about US$33.5 billion by
2017
Source: Frost & Sullivan analysis.