©OECD/IEA 2013 1

Low Carbon Technology Policy and Planning

Renewable Energy Strategies

11 April 2013

Workbook

©OECD/IEA 2013 2

Contents

Low Carbon Technology Policy and Planning .................................................................................................... 1

Renewable Energy Strategies ............................................................................................................................ 1

Workbook ...................................................................................................................................................... 1

Contents ............................................................................................................................................................ 2

Course Participants ............................................................................................................................................ 4

Case Study - The Potential for Renewable Energy in New Relandia ................................................................. 5

New Relandia ................................................................................................................................................. 5

The Energy Situation ...................................................................................................................................... 5

A New Energy Strategy .................................................................................................................................. 6

Your Task ....................................................................................................................................................... 6

Renewables Resources .................................................................................................................................. 6

Renewable Energy Technology Prioritisation .................................................................................................... 9

Policy Tools Glossary ....................................................................................................................................... 10

Financial Incentives ..................................................................................................................................... 10

Tax and customs incentives ......................................................................................................................... 10

Contractual .................................................................................................................................................. 10

Quantitative ................................................................................................................................................. 10

Pricing policies ............................................................................................................................................. 11

Key Actions ...................................................................................................................................................... 12

Personal Notes ................................................................................................................................................. 13

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Course Participants

Country Name Organization Brazil Mr. Carlos Pires Ministry of Mines and Energy

Colombia Mr. Mauricio Vargas Corporation for Energy and Sustainable Development - CORPOENERGY

Ethiopia Mr. Dessalegn Berhanu Tiruneh GIZ/ECO Energy Project

Ghana Mr. Andrew Tonto Barfour Ministry of Energy India Shri Pranay Kumar Ministry of Power India Mr. Arun Kumar Jain Ministry of New and Renewable Energy Indonesia Mr. Iskandar Ameruddin Coordinating Ministry for Economic Affairs INTERNATIONAL Mr. Eduardo Piquero UNEP Mexico INTERNATIONAL Dr. Pradeep Perera Asian Development Bank (ADB), Philippines

INTERNATIONAL Miss Assel Sakibzhanova ADB, CAREC, Regional Environmental Centre for Central Asia

INTERNATIONAL Mr. Daniele Quaggiotto EBRD, UK Kenya Ms. Grace Nyaguthii Energy Regulatory Commission Kenya Mr. Shammah Kiptanui Geothermal Development Company (GDC) Kuwait Mr. Fareed Alghimlas Kuwait Institute for Scientific Research (KISR)

Malaysia Mr. Mohammad Amran Abdul Rahman Tenaga Nasional Berhad (TNB)

Mexico José María Valenzuela Robles Linares SENER

Nigeria Mr. Usman Muhammad Centre for Renewable Energy and Action on Climate Change (CREACC Nigeria –CAC/IT/NO: 54245)

Nigeria Mr. Gabriel Etim Nigerian National Petroleum Corporation Qatar Mrs. Marina Mateski Qatar Petroleum Saudi Arabia Mr. Zaour Israfilof Saudi Basic Industries Corporation (SABIC) Senegal Mr. Gora Niang Ministry of Energy and Mines South Africa Ms Lebogang Nkhwashu Department of Energy

Switzerland Ms. Ingrid Jegou International Centre for Trade and Sustainable Development (ICTSD)

Turkey Mrs. Bahar Akyel Energy Market Regulatory Authority UAE Mrs. Nida Qafisheh Abu Dhabi University

Ukraine Mr. Sergiy Dubovyk State Agency on Energy Efficiency and Energy Saving (SAEE)

Ukraine Mr. Oleksandr Kyrychok State Agency on Energy Efficiency and Energy Saving (SAEE)

Vietnam Mr. Nguyen Ninh Hai Ministry of Industry and Trade, General Directorte of Energy

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Case Study - The Potential for Renewable Energy in New Relandia

New Relandia

New Relandia is a beautiful temperate country bordered by the ocean on one side. It is an agricultural

country and has little heavy industry. It exports agricultural products and some timber and has a rapidly

developing tourist sector. GDP per capita is relatively small (2800$) but growing at 4% per year.

The population of the country is 25 million people and is growing at the rate of 1.5% per year. 55% of the

population live in urban areas – principally the capital Solare and in smaller cities close to the coast such as

Marea, Galesville and Cold Springs. About 70% percent of population has access to electricity,

predominantly those in the urban areas where electricity supply is largely reliable. Traditional biomass

plays a dominant role in the rural areas with no access to modern energy.

The Energy Situation

New Relandia has some oil and gas reserves but these have not yet been exploited. Coal is abundant

enough to feed the existing two coal-fired power generation. Gas infrastructure is almost non-existent.

Total electricity production is currently around 28Twh/y. Electricity is generated from coal (50%), oil (20%)

and large hydro (30%). Installed capacity is 5.5GW, of which 2.5GW are coal fired plants, 2GW are large

hydro plants and 1GW is oil-based generation. Some of oil generation is larger scale but in rural areas diesel

generators are currently used to supply electricity since the grid is not extensive, and 30% of the people of

New Relandia still have no access to mains electricity.

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A New Energy Strategy

The President has decided that the current energy situation is holding back the economic development of

the country. 7% of GDP goes to pay for oil imports. The cost of these imports has risen dramatically in the

last year and is very volatile. He also wants to expand the availability of modern energy services to all the

population to act as a spur to further economic development. He is also mindful of the likely impacts of

climate change on the country, and wants to ensure that the country moves towards a sustainable energy

future. He has therefore decided to develop a new national energy plan.

Your Task

As a senior official in the New Relandia Ministry of Energy, you have been asked to prepare a review of the

potential for renewable energy to contribute to the electricity sector within this overall strategy and to

answer the following questions.

Which renewable energy technologies could make a significant contribution to New Relandia’s

electricity needs within the next 10 years?

How much electricity might these technologies be able to supply by the end of that period, and

what would the costs of the electricity be?

How would renewable electricity production help meet the overall energy goals of the country?

What are the issues that might hold back the deployment of the most important technologies?

What policy measures would the Government need to put in place to ensure that renewables

played an appropriate role in meeting the country’s goals?

Renewables Resources

Some preliminary studies have been made of the potential for renewables in the country, carried out by

the National Renewable Energy Centre, a Government funded institution in the capital, Solare.

Solar: the country enjoys very good insolation levels with 1700-2000 yearly hours of sunshine on the entire

territory. In terms of direct normal insolation (DNI), needed for concentrated solar thermal technologies,

Relandia achieves levels of 1600-1800 hours.

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Figure 1: Insolation map (hours/year)

Wind: Wind speeds are typically 5-6m/s achieving 8m/s in coastal areas (representing 20% of the territory

with high concentration of population, since 50% of population lives by the coast). One particularly

interesting area is the large coastal plain which stretches north of the capital and which is used for grazing

animals.

Wind speeds off shore are strong – averaging 10 m/s. The sea bed shelves steeply and 2 km offshore

exceeds 50m in depth.

Figure 2: Wind speeds over land (m/s)

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Hydro: The major opportunities for large scale hydro potential lie within the basin on the country’s major

river, the Runalong and has already been exploited by three major dams which provide 800MW, 720MW

and 480MW respectively. There is some potential for smaller scale hydro projects but this is not well

understood and has not been properly surveyed.

Bioenergy: the climate in New Relandia is warm and moist and crops grow well in most seasons. The land

is used to produce staple food crops and surpluses are exported . There is a large area of forest in the

north east of the country that supports three large sawmills that produce timber for building products,

some of which is transported by rail to Solare and exported. Each of the three sawmills produces around

100,000 tonnes/year of off-cuts and sawmilling residues which present a disposal problem and which are

currently burned in the open.

Geothermal: The country has no high-temperature geothermal resources. Low-temperature resources are

available.

Costs of different technologies are as follows:

Generation costs for solar PV are characterized by the following curve:

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

USD

/kW

h

Generation cost of PV as s function of resource

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Generation costs for onshore wind are characterized by the following curve:

Renewable Energy Technology Prioritisation

Technology Priorities

o Resource

o Technology status and risk

o Costs

o Potential

o Other factors

Policy

o How would this help the national energy goals?

o Barriers?

o Policy Options?

0

0.05

0.1

0.15

0.2

0.25

0.3

USD

/kW

h

Generation cost of wind as s function of resource

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Policy Tools Glossary

Financial Incentives

Soft loans/ one-time subsidy:

Loans or subsidy granted to RE generators, both households and commercials. The state guarantees low

interest loans or one-time cash subsidy to support initial investments and installation costs.

Tax and customs incentives

Related to production:

Rewards RE power producers with annual tax credit based on the amount of electricity generated, or

provides RE investors with the possibility to partially or fully deduct RE investments from income or other

obligations tax.

Related to consumption:

Renewable energy users and consumers are rewarded a VAT or income tax reduction in proportion to their

renewable electricity consumption.

Contractual

Power Purchase Agreement

In the case of a Public Private Partnership, the public utility grants a Power Purchase Agreement (PPA) to

an Independent Power Producer (IPP) that assumes responsibility for production, operation and

maintenance when the utility would manage metering, tariff and distribution in most cases. PPAs are

tailored on a case-to-case basis and responsibilities may vary.

TPA with priority dispatching

Access to the electricity grid is granted to Third Party and electricity from renewable energy sources, in the

case of capacity shortages, will be granted priority access to the grid over conventionally generated power.

When no priority applies, the system operator is to be treated in a non-discriminating way

Quantitative

Quotas

Quotas policies are known as Renewable Energy Obligations (REOs) or Renewable Portfolio Standard (RPS).

In 2010, 56 states/provinces had adopted RPS. These require utilities to meet a minimum share of

electricity sold or generation capacity installed to be provided by renewable energy sources. They can also

set obligations that a minimum of electricity purchased comes from renewable energy sources.

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Green Certificates

Green and renewable energy certificates represent the certified generation of one unit of RE, generally one

MWh. Certificates provide a tool for trading and meeting renewable energy obligations among consumers

and/or producers, and also are a mean for voluntary green power purchases.

Tendering models

States have adopted public competitive bidding for fixed quantities of renewable power capacity, e.g.

onshore wind in Brazil or Biomass in France. Companies compete in being the lowest bidder. The state and

the company there after agree on specific financial or fiscal support and power price to make sure return

on investment are sustainable. Latvia and France allocate special tariffs through tendering procedures for

the feed-in of electricity from certain technologies.

Pricing policies

Feed-in tariffs

This tariff is a premium rate paid for each unit of electricity from a designated RE electricity generation

source fed into the grid. By early 2010 at least 50 countries and 25 states/provinces had adopted a FIT

system. Recently Uganda adopted a general FIT scheme, but some countries implement technology-

specific FITs as did China with onshore wind in 2009.

Premium

Refers to a fixed premium provided per kWh on top of market price. The premium seeks to bridge the gap

between market electricity price and generally higher cost of generating power from renewable sources.

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Key Actions

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Personal Notes