Reform of the Renewable Energy Support Scheme System in ... · (solar and hydro power) Page 12 12 June 2019 Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina

June 12, 2019

Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina

Working Group Members for the Reform of the RE Support Schemes in Bosnia and Herzegovina

12 June 2019 Reform of the Renewable Energy Support Scheme System in Bosnia and HerzegovinaPage 2

▪ The “RE world” dramatically changed since existing support schemes were introduced

o Tremendous development of RE generation installed capacities

o Extraordinary technology improvement

o Significant price drop per installed kW

o Challenges in networks related to higher feed-in of intermittent RE

o New EU regulation for RE reflects the recent developments

▪ RE targets for RES based electricity cannot be fulfilled through existing support

systems in BIH

▪ BIH needs to continue RE support with the objective to reach point where support will

not be needed in a near/mid future

▪ Future RE support scheme must be more cost-efficient and should be market-based /

competitive

Motivation and Need for the Reform


Renewable Energy Auctions Reduce Support Cost


Auction processes for renewable energy support level setting have reduced support cost worldwide

Selected empirical evidence from the EU Selected empirical evidence from Latin America

▪ New RES support schemes are transparent and non-discriminatory – auctions are

introduced instead of “allocation by the order of application” (first come – first serve)

▪ Different support schemes for small and large RES installations

▪ New RES support schemes provide:

o Either more projects, i.e. MW/MWh from RES than so far, for the same spent funds,

o Or the same amount of projects, i.e. MW/MWh from RES as so far, for less spent funds

▪ Significant improvements are proposed in legal/regulatory framework for consumers

that produce electricity for own needs (Prosumers)

▪ Institution of so called community energy projects is introduced in legal-regulatory

framework for RES

Basic Features of the New RE Support Schemes in BIH


▪ Usage of positive practice of others, predominantly European countries, during

creation of concept of new RES support scheme

▪ Selective application of experiences of other countries, respecting specificity of

electricity sector in BIH

▪ Starting points are:

o Existing legislation on RES, and linked to RES

o Proposal of existing legal-regulatory framework modification and amendment

▪ Adaptation of the proposed model to specificities of the institutional set-up in BIH

(model is developed as unique, while proposals for implementation are made and

adjusted to individual entities and Brčko District)

▪ Modification of business processes of competent institutions for implementation of

new support schemes - for all institutions, on different levels of authorities in BIH

Approach for Change of RES Support Shemes in BIH


▪ Large scale installations: Remuneration based on Feed in premium and Wholesale-Price/Reference Market Price

Threshold is technology specific and between 250 and 500 kW (tbd)

▪ Small scale installations: Remuneration based on Feed in Tariff or Net Billing (up to defined capacity limit)

General Concept


▪ RES support in BIH is divided by:

o RES capacity that is supported, on:

• Support for large installations*, and

• Support for small installations

o Type of support, on:

• Direct support (FIP, FIT and tax rebates), and

• Indirect support (participation in balancing costs, priority dispatching, network connection costs, etc.)

o Allocation support methods, on:

• Auction (open or site specific auctions), and

• Administrative (based on expert estimation)

▪ Proposed support schemes are combination of these variants

* → Threshold between large and small installations differ by RES technologies to be defined

Division of RES Support


Support for Large RES Installations


Wind,

Solar &

Hydropower

Biomass

& Biogas

Support for Small RES Installations


▪ Threshold to be defined by the proposed modifications and amendments of the existing

legal-regulatory RES framework

▪ It should be analyzed and defined separately for each technology

▪ Criteria for threshold definition should be:

o techno-economic potential for certain technologies

o technological limitations

o commercial limitations

o determination to support certain technologies

Threshold between large and small RES Installations


TechnologyThreshold

(kW)

Solar 250

Hydro 250

Wind 150

Biomass 500

Biogas 500

Proposed threshold between small and large RE installations by categories

Technology categories for small scale installations I (solar and hydro power)


Technology Category (kW) Support

Solar – Rooftop and integrated < 10 FIT fixed or net-billing

10 – 50 FIT fixed or net-billing

50 – 250 FIT linear decrease or net-billing up to

X kW

Solar – Ground mounted < 100 FIT fixed or net-billing up to X kW

100 – 250 FIT linear decrease

> 250 FIP – open auction

Hydro Power Plants < 50 Net-billing

50 – 250 FIT linear decrease or net-billing up to

X kW

250 – 10 000 FIP – open auction

250-x FIP - site-specific auction, if of strategic

interest for the government


Wind Power Plants < 150 FIT or net-billing up to X kW

150 – 30 000 FIP – open auction

Biomass (solid) from forestry,

wood, industry and agriculture

< 150 FIT fixed or net-billing up to X

kW

150 - 500 FIT fixed

500 – 1 000 FIP linear decrease

1 000 -10 000 FIP linear decrease

Biogas

(Focus on farm and agro-

industrial residues with a

possible complementation

share of energy-crops)

Recommendation for open auction design I


Auction design features Explanation

Technology type and size Large scale installations, solar, hydro and wind

Type of auction Capacity based, Bidders are bidding for capacity

Type of awarded support Feed-in-premium added to the reference market price/day-ahead market price

Auction on the Entity levelEntity level provides maximum geographical extension in current circumstances, which enhances

competition

PeriodicityAuctions are organized each two years (biannually), which should be an adequate period fitting to

conditions in BIH

Typical auction limit

• 30 MW for solar

• 50 MW for hydro

• 50 MW for wind

Sealed bid, pay as bid Winner selection based on price only guarantees efficiency

Selection criteria in tie-break bids Preference should be provided to the smaller projects, to enhance competition

Recommendation for open auction design II



Prequalification for Bidders

Prequalification requirements enable participation of serious Bidders / Investors, on the basis of

developed project plan and obtained licenses, permits and concessions (to be defined in Rulebook on

auctions)

Open for prequalified Bidders Only Bidders / Investors that pass prequalification process are invited to participate in auction

Requested submission of bid bonds Bid bond is secured by Bidders with objective to prevent non-installation

Bid subject to capacity cap

Medium size cap allows for sufficient number of winners (competition!) and making use of economies

of scale (to be defined in that way, that a competitive bidding of min. 3 bidders will be possible

according to a prior market evaluation)

Retention of bid bonds for

penalization

In case of non-installation or delay in installation, bind bond is retained. Bid bond amount should be in

range 1.5 – 2% of average upfront investment cost calculated per kW

Lead time for finishing installationIt is recommended to be two years, from the end of auction. In case there are known grid connection

problems and delays in licenses, this period should be extender for half a year



Technology type and size Large scale installations, hydro, project with specific strategic public interest

Type of auction Project based, Bidders are bidding for project which is pre-developed by the auctioneer

Type of awarded support Feed-in-premium added to the reference market price/day-ahead market price

Auction on the Entity levelEntity level provides maximum geographical extension in current circumstances, which

enhances competition

Sealed bid, pay as bid Winner selection based on price only guarantees efficiency

Recommendation for site specific auction design I



Prequalification for BiddersPrequalification requirements enable participation of serious Bidders / Investors, on the

basis of developed project plan and obtained licenses

Open for prequalified BiddersOnly Bidders / Investors that pass prequalification process are invited to participate in

auction

Requested submission of bid bonds Bid bond is secured by Bidders with objective to prevent non-installation

Retention of bid bonds for penalizationIn case of non-installation or delay in installation, bind bond is retained. Bid bond amount

should be in range 1.5 – 2% of average upfront investment cost calculated per kW

Lead time for finishing installationIt is recommended to be two years, from the end of auction. In case there are known grid

connection problems and delays in licenses, this period should be extender for half a year

Recommendation for site specific auction design II

Quantitative Analysis: Targets and Assumptions


▪ Quantitative analysis to investigate RE support cost

for BIH

▪ Based on assumptions from official Framework

Energy strategy & data on RE from international

studies

▪ Price & demand development forecast based on

World Bank study

▪ Tool provided to investigate support cost under

different scenarios

▪ To achieve the 2030 target (48,1% of total RES in

FEC, under discussion), an additional VRE capacity

of around 2.500 MWel would be needed

▪ Results shown here are based on medium value

scenario 2020-2030 from Framework Energy Strategy

additional VRE capacity of around 700 MWel

145

678

283

425

283

162

287

283

425

283

21

84

81

122

81

21

36

41

62

88

0

200

400

600

800

1000

1200

2020 2030 - High value 2030 - Median value 2030 - 1.5x Target 2030 - Biomass FullPotential

MW

Wind SHPP Solar Biomass/Biogas

Targets

▪ RE sources should finally have complete balancing responsibility, as all other

participants on the electricity market in BIH (except very small RES installations,

for example Pi ≤ 100kW)

▪ Changes and amendments of the Law on RES in entities are necessary:

o In RS current limitation should be „defrosted“ and trajectory for achievement of 100%

of balance responsibility should be defined through the period of the several years

o In FBIH balance responsibility should be defined in the Law on RES

▪ Balance intervals and schedule intervals should be 1h and 15’

▪ Good solution is separated balance groups for RES on the level of entities, or on

the level of network operators

▪ Legislations should introduce institution of Aggregator for small RES installations

and Prosumers

▪ Key roles of Network Operators and Operators for RES in implementation

Indirect Support - Balancing


Net Billing


Net billing for production for

own needs should

compensate excess (surplus)

of delivered electricity based

on energy component of retail

price, decreased by suppliers

expenses.

▪ In accordance with the Energy Community Guidelines, producers for own needs should have

possibility to choose support scheme between net billing and FIT as alternative.

▪ Network tariffs for producers for own needs within net billing should have significant capacity

component, and small energy component, with a purpose of charging for network connection.

▪ VAT, as well as other fees and taxes, if any, should be applied only on the net consumption

(within predefined time period)

Definition of RE community energy according to RED:

„Renewable energy community means a legal entity, including cooperatives

i. which, according to applicable national law, is based on open and

voluntary participation, is autonomous, and is effectively controlled by

shareholders or members that are located in the proximity of the

renewable energy projects owned and developed by that community;

ii. whose shareholders or members are natural persons, local authorities,

including municipalities, or SMEs;

iii. whose primary purpose is to provide environmental, economic or social

community benefits for its members or the local areas where it operates

rather than financial profits.“

Community Energy Projects (1)


▪ Through the benefits of the realization of the community energy projects, part of the

RES support funds returns to the „place of origin“ - end consumers of electricity in BIH.

▪ Implementation of Community Energy projects significantly increases awareness of the

importance and value of the RES

▪ It is necessary to enable participation of community energy projects within foreseen

main and complementary support schemes, such as:

o Net billing

o FiT for small installations / FiP for large installations

o Supplementary exemption of taxes and fees payment (not part of the reform)

▪ Community energy projects should be additionally supported through:

o Development of changes and amendments in relevant legal and regulatory framework

o Definition of quotas/upper limits for community energy projects ,

o Inclusion of Community Energy projects in strategies, action plans and RES targets

Community Energy Projects (2)



Jun‘19 Oct‘19Aug‘19

Preparation within Working Group of Final

Working Package consisting in:

✓ Draft Legislation

✓ Draft PPA/FAA templates

✓ Cost calculation methodology

✓ Guidelines for institutions and investors

✓ Accompanying documents for definition

of institutional set-up and processes

Preliminary Consultation Events

Jan‘20 Jan‘21

Final Consent of Policy Makers

Final review and adjustment of Reform

(Levels of FIT/FIP, thresholds, roles,

technology quotas&volumes)

Adoption of Legislation for

Reform

Final Consultation (institutions websites, events)

Reform in

Place

Preliminary Consent of Policy Makers

Timetable of Reform

Deutsche Gesellschaft für

Internationale Zusammenarbeit (GIZ) GmbH

Registered offices

Bonn and Eschborn

Friedrich-Ebert-Allee 36 + 40

53113 Bonn, Germany

T +49 228 44 60 - 0

F +49 228 44 60 - 17 66

E [email protected]

I www.giz.de

Dag-Hammarskjöld-Weg 1 - 5

65760 Eschborn, Germany

T +49 61 96 79 - 0

F +49 61 96 79 - 11 15

Documents

Reform of the Renewable Energy Support Scheme System in ... · (solar and hydro power) Page 12 12 June 2019 Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina