Feed-in Tariff Methodologies and Financing: Options for GMS Countries 5 th Meeting of the GMS Subregional Energy Forum (SEF-5) 9-11 November 2011 Ho Chi.

Feed-in Tariff Methodologies and Financing: Options for GMS

Countries

5th Meeting of the GMS Subregional Energy Forum (SEF-5)

9-11 November 2011Ho Chi Minh City, Vietnam

Dr. Romeo PacudanSenior Energy Specialist/Team Leader ADB TA 7679

Lahmeyer International GmbH

Structure of Presentation

• RE Promotion Policies• Feed-in Tariff Design Options• Funding Options• Final Remarks

test

test

• Subsidy and grants

• Tax incentives• Energy

payments

Fiscal incentives

• Feed-in tariff• Quota and

Obligations• RE

Certificates• Net Metering

Regulatory policies

1. RE Promotion Policiesfrom fiscal incentives to regulatory policies

SWBHAUSNE ITA

DKA J

DK E HL

AUSACH

D

FI B NEITA SW

LJCAUS

DCH PUS ITA

HFALITAUK

PUS K NEDKE

B SWD

GRCH NOIR C

CZ

F UKNONEGR

LTUSC DK

SWAIR ITA P E

NZ

DK US ITAH

A PNE

C UKT K GR

SWD CH J NOF

LB

CBD K T H

NZGR

IRF L

USFI PAAUSITADK

UKJ

NZ F

IR

NOUK

EU

GR

CZ

J

K

NONECH

SWE

CZ KB

EFI

AUS

CZ

FID

FI K

NO UK

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003

Tradable

Certificates

Obligations

Incentive

Tariffs

Tax

Measures

Investment

Incentives

RD&D

Voluntary

Programs

AUS - Australia C - Canada FI - Finland GR - Greece ITA - Italy L - Luxembourg NO - Norway SW - Sweden UK - United Kingdom

A - Austria CZ - Czech RE F - France H - Hungary J - Japan NE - Netherlands P - Portugal CH - Switzerland US - United States

B - Belgium DK - Denmark D - Germany IR - Ireland K - Korea NZ - New Zealand E - Spain T - Turkey

SWBHAUSNE ITA

DKA J

DK E HL

AUSACH

D

FI B NEITA SW

LJCAUS

DCH PUS ITA

HFALITAUK

PUS K NEDKE

B SWD

GRCH NOIR C

CZ

F UKNONEGR

LTUSC DK

SWAIR ITA P E

NZ

DK US ITAH

A PNE

C UKT K GR

SWD CH J NOF

LB

CBD K T H

NZGR

IRF L

USFI PAAUSITADK

UKJ

NZ F

IR

NOUK

EU

GR

CZ

J

K

NONECH

SWE

CZ KB

EFI

AUS

CZ

FID

FI K

NO UK

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003

Tradable

Certificates

Obligations

Incentive

Tariffs

Tax

Measures

Investment

Incentives

RD&D

Voluntary

Programs

AUS - Australia C - Canada FI - Finland GR - Greece ITA - Italy L - Luxembourg NO - Norway SW - Sweden UK - United Kingdom

A - Austria CZ - Czech RE F - France H - Hungary J - Japan NE - Netherlands P - Portugal CH - Switzerland US - United States

B - Belgium DK - Denmark D - Germany IR - Ireland K - Korea NZ - New Zealand E - Spain T - Turkey

1970 1980 1990 2000

RD & D

Investment Incentives

Tax Measures

Feed-in Tariffs

Voluntary Programs

Obligations

TradableCertificates

Source: IEA 2005

1. RE Promotion PoliciesRE Policy Evolution in Developed Countries: Shift to regulatory policies supported by fiscal incentives

test

Policy Instruments

Tax Measures

Investment Incentives

Feed-in Tariffs

Obligations

Tradable Certificates

Power Sector Reforms

Monopoly Purchasing Agency

Wholesale Competition

Retail Competition

1. RE Promotion PoliciesRE Policy Evolution and Power Market Reforms

In Europe,regulatory policies were introducedwhen power industries wereliberalized

Monopoly Purchasing Agency

• India• Sri Lanka• Malaysia• Myanmar• Thailand• China• Cambodia• Lao PDR• Vietnam

Wholesale Competition

• Philippines

• Singapore

• R of Korea

Retail Competition

• EU countries

• US• Canada• Japan

1. RE Promotion PoliciesPower Industry Market Structure

• power market reforms are slow in Asia• various variants exist for purchasing agency model• increasing role of the private sector in the generation segment

FEED-IN TARIFFS

TRADABLE CERTIFICATES

ITALY

JAPAN

AUSTRALIA

US UK

FINLANDFRANCE

IRELAND SLOVENIA

SPAIN CZECH

DENMARK

SWEDEN

ROMANIA

POLAND

OBLIGATIONS

BELGIUM

NETHERLANDS

BULGARIA GERMANYLATVIA

CYPRUS GREECE LITHUANIA

ESTONIA HUNGARYLUXEMBOURG

PORTUGAL SLOVAKIA

1. RE Promotion Policies (DEVELOPED COUNTRIES)Combination of Regulatory Policies Consistent with Market Structures

Complex Market-Based Measures

FEED-IN TARIFFS

TRADABLE CERTIFICATES

INDIA

OBLIGATIONS

ALGERIA ARGENTINA DOMINICAN SOUTH AFRICA

ECUADOR INDONESIA KENYAUGANDA

MALAYSIA MONGOLIA NICARAGUATURKEY

PAKISTAN SRI LANKA THAILAND

1. RE Promotion Policies (DEVELOPING COUNTRIES)Combination of Regulatory Policies Consistent with Market Structures

CHILE

URUGUAY

PR CHINA

PHILIPPINES

Simpler Market-Based Instruments

2. Feed-in Tariff Design OptionsFeed-in Tariff as Guaranteed Price over Fixed Period of Time

Guaranteed Access to the Grid

Stable and Long-term Purchase Agreement

• Purchase Obligation• Clear Interconnection

Rules

2. Feed-in Tariff Design Options Payment differentiation and supplementary design options

2. Feed-in Tariff Design Options Solar PV Projects

India Single, Fixed Tariff

Tariff for 2010-2011 25 years

Malaysia* By project size

Bonus payments

Tariff degr (8% per year)

21 years

PR China Single, Fixed Tariff

R of Korea By project size

Tariff deg (4% per year since 2009)

20 years

Philippines* Single, Fixed Tariff

Tariff degr (6% after 1 year)

20 years

Thailand* Single, Fixed Tariff

Bonus payments 10 years

Mongolia

Single, FixedGrid, Off-grid

Chinese Taipei

By location, By project size

20 years

2. Feed-in Tariff Design Options Evolution of Solar PV wholesale price

US$/Wp

2. Feed-in Tariff Design Options Solar PV FITs

18.015.0

17.715.4

17.7

41.0

37.0

30.0

24.0

37.0

18.0

39.538.637.936.6

30.5

27.3

42.7

35.5

31.630.427.5

25.2

39.438.9

34.4

78.2

69.5

61.9

52.6

43.2

24.0

42.5

39.0

35.1

44.0

36.735.535.5

49.8

43.340.4

0

10

20

30

40

50

60

70

80

90

Mon

golia

(hig

h)

Mon

golia

(low

)

CN (p

reJu

l201

1)

CN (p

ostJ

ul20

11)

CN (T

ibet

)

KR <

30kW

KR <

200k

W

KR <

3MW

KR >

3MW

JP h

h

JP o

ther

s

ML

<4kW

p

ML

>4-2

4 kW

p

ML

>24-

72 k

Wp

ML

>72k

Wp

- 1M

W

ML

>1-1

0MW

ML

>10-

30M

W

PH (a

bove

500

kW)

TW <

10kW

TW >

10 <

100

kW

p

TW <

500k

W

TW >

500k

W

TW g

roun

d

SA IN TH*

CAN

<10k

W

CAN

<25

0kW

roof

CAN

<500

kWro

of

CAN

>500

kWro

of

CAN

<10M

Wgr

ound

US V

T

ES <

20kW

roof

ES >

20kW

roof

ES <

20M

W g

roun

d

D 30

-100

kWro

of

D 0.

1-1M

Wro

of

D gr

ound

1

D gr

ound

2

UK 4

-10k

W

UK 1

0-10

0kW

UK 0

.1-5

MW

USc

ents

/kW

h

2. Feed-in Tariff Design Options Wind Power Projects

India By location, zones

Capital cost indexation (2010-2011)

13 years

Malaysia

PR China By location, zones

R of Korea Single, fixed

Tariff deg (2% per

year since 2009)

15 years

Philippines* Single, fixed

Tariff deg (0.5% after

2 years)20 years

Thailand* By project size

Bonus payment 10 years

Mongolia

Single, FixedGrid, Off--grid

Chinese Taipei

Onshore, off-shore; by project size

20 years

2. Feed-in Tariff Design Options Evolution of Wind Power Investment Costs

2. Feed-in Tariff Design Options Wind Power FITs

9.58.0

24.1

7.8 8.3 8.9 9.4

25.3

9.0

19.2

11.09.6

8.2 7.3

23.4

20.3

12.513.211.8

21.5

11.4

6.2

9.27.7

10.3

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Mon

golia

(hig

h)M

ongo

lia (l

ow)

PHCN

Z1

CN Z

2CN

Z3

CN Z

4TW

< 1

0kW

on

shor

eTW

>10

kW o

nsho

reTW

off

shor

eIN

Z1

IN Z

2IN

Z3

IN Z

4TH

<50

kW*

TH >

50kW SA CA

NUS

VT

>100

kWUS

VT

<100

kWD

1-5y

D 6-

20y

ES 1

-20y

ES 2

1y FR

US

cent

s/kW

h

2. Feed-in Tariff Design Options Biomass Power Projects

India By stateCapital Cost indexation 2010-2011

13 years

Malaysia* By project size

Bonus payments

Tariff degr (0.5% per year)

16 years

PR China Single, Fixed Tariff

R of Korea Single, Fixed tariff 5 years

Philippines* Single, Fixed Tariff

Tariff degr (0.5% after 2 years)

20 years

Thailand* By project size

Bonus payments 7 years

Mongolia

Single, FixedGrid, off-grid

Chinese Taipei

Single, Fixed 20 years

2. Feed-in Tariff Design Options Biomass Power FITs

11.5

10.09.3

8.77.5

4.1 3.9

10.910.3

16.3

11.8

13.512.712.5

14.6

11.510.3

9.7

16.8

14.4

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

CNM

L <1

0MW

ML

10-2

0MW

ML

20-3

0MW TW

IN h

igh

IN lo

wTH

<1M

W*

TH >

1MW

*PH

ILS SA

CAN

<10M

WCA

N >1

0MW

US V

TD

<150

kWD

150-

500k

WD

0.5-

5MW

D 5-

20M

WES

<2M

W a

gES

>2M

Wag

US

cent

s/kW

h

2. Feed-in Tariff Design Options Hydropower Power Projects

India By state, by project size

Capital Cost indexation 2010-2011

35 yrs <5MW)13 yrs 5-25MW

Malaysia* By project size 21 years

PR China

R of Korea Single, Fixed tariff 5 years

Philippines* Single, Fixed Tariff

Tariff degr (0.5% after 2 years)

20 years

Thailand* By project size

Bonus payments 7 years

Mongolia

Single, FixedGrid, off-grid

Chinese Taipei

Single, Fixed 20 years

2. Feed-in Tariff Design Options Hydropower Power FITs

6.04.5

7.7 7.4 7.5

14.3

7.86.7

9.37.9

14.1

11.9

9.4

12.811.9 12.3

15.8

10.89.6 10.0 10.4

7.4

13.9

19.7

0.0

5.0

10.0

15.0

20.0

25.0

Mon

golia

(hig

h) <

5 M

W

Mon

golia

(low

) <5M

W

ML

<10M

W

ML

10-3

0MW

TW R

oR PH

IN1

<5M

W

IN1

5-25

MW

IN2

<5M

W

IN2

5-25

MW

TH <

50kW

*

TH 5

0-20

0kW

*

SA

CAN

<10M

W

CAN

10-5

0MW

US V

T

D <5

00kW

D 0.

5-2M

W

D 2-

5MW

Gc

<15M

W

ES <

10M

W

UK 1

-5M

W

UK 0

.1-1

MW

UK 1

0-10

0kW

US

cent

s/kW

h

Fixed Feed-In Tariff /Lowest Tariff Tender for MW / Negotiated Tariff

Season Dependent Feed-In Tariff

Time of Day Dependent Feed-In Tariff

Feed-In Tariff Benchmarked Against Retail Price + Premium

RE-Generator Selling Electricity to Retail Consumers

Power Pool Price + Premium

Renewable Portfolio Standard with RE Certificate

Merchant RE-plants selling into Pool

Type of Tariff Setting Regime

Degree ofconformitywith marketrules for liberalizedelectricitymarket

High

Low

2. Feed-in Tariff Design Options Tariff Regime and Electricity Market Compatibility

Source: kfW 2005

Ratepayer Funding• Equivalent Distribution• Customer

Differentiation• System Benefit Charge

Taxpayer Funding

Supplementary Funding• Greenhouse gas

revenue• Utility tax credit

Inter-Utility Cost Sharing

Feed-in Tariff

Funding

3. Feed-in Tariff Funding OptionsDual objectives: funding stability and minimize consumer impacts

Key Issue:consumer impacts

Key Issue:politicallysensitive

Key Issue:Sufficiencyof funding

Key Issue:disagreementsfrom constituencies

Ratepayer Funding• Thailand* – adder

charge• Philippines – FIT All• Malaysia – RE Fund

Ratepayer Funding• Japan – Solar Charge• China – RE Premium

• Chinese Taipei• India and Sri Lanka

Taxpayer Funding

• Republic of Korea – Government Budget

Supplementary Funding• Mongolia

Feed-in Tariff

Funding

3. Feed-in Tariff Funding OptionsFIT Funding in Asian Countries

4. Options for GMS countries

Combination of policy instruments• FIT supported with fiscal incentives• FIT policy combined with other regulatory

measuresFIT policy design consistency with• Electricity markets• Regulatory and institutional frameworks

FIT Funding• Long-term funding stability• Burden sharing and transparency• Social and economic impacts considerations