Post on 15-Aug-2019
World Bank/IFC
Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Regulatory and Financing Mechanisms for
Scaling-up Energy Efficiency
Dilip R. LimayeSRC Global Inc.
World Bank and IFC Workshop:
Appropriate Incentives to Deploy Renewable Energy
and Energy Efficiency
2World Bank/IFC
Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Introduction
Barriers to EE
Regulatory and Financing Mechanisms
Acquisition of EE Resources
Approaches for EE Resource Acquisition
Examples of EE Resource AcquisitionU.S.
Portugal
South Africa
Concluding Remarks
Presentation Outline
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Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Importance of Energy Efficiency
Energy EfficiencyMost Cost-Effective
Solution
Mitigating
Climate Change
Impacts
Economic
DevelopmentWithout
Compromising
Reducing the
Energy
Supply/Demand Gap
Enhancing
Energy
Security
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Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Role of Energy Efficiency in Mitigating
Climate Change
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Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Barriers to Energy Efficiency
Policy/Regulatory
Barriers
End-User
Barriers
Barriers Related to
Equipment &
Service Providers
Institutional
Barriers
Financing
Barriers
Low or subsidized
energy prices
High cost of energy-
efficient products
Limited development of
EE services marketSmall project size
Distorted fiscal and
regulatory policies
Consumer preferences
for non-EE attributes
High project
development and
transaction costs
High transaction costs
Rigid procurement and
budgeting proceduresSplit incentives
Limited risk management
skills
Emphasis on increasing
energy supplies; not on
reducing consumption
Limited availability of
funds
Limitations of public
financing
Low management
priority on EE
Limited access to equity
capital
Lack of confidence in EE
improvements to deliver
savings
High perceived risks
Ad hoc planningLimited technical
knowledge of EE
Lack of credibility with
consumers and financial
institutions
Lack of "champions" for
promoting EE
Lack of interest on the part
of banks and financial
institutions
Limited data availability
and quality
Lack of internal funds
for EE investmentslimited M&V capacity
Limited knowledge and
understanding of EE by
consumers
Limited development of
targeted financial
products for EE
Lack of formal institutional
framework for developing
and implementing energy
efficiency strategies,
policies and programs
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Incentives to Deploy Renewable Energy & Energy Efficiency
Policy Instruments
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Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Regulatory Initiatives for EE
Integrated Reource Planning
Innovative Tariffs
EE Portfolio Obligations
Public Benefit Funds
Energy Efficiency Utilities
Utility Shareholder Incentives
EE Resource Acquisition
Decoupling Utility Revenues & Profits
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Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Financing Mechanisms for EEP
ub
lic-
Pri
va
te
Part
ner
ship
s
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Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Public-Private Partnerships
Public-Private Partnerships (PPPs) are mechanisms
that use public policies, regulations or financing to
leverage private sector financing for EE projects
Key Characteristics of PPPs:
A contractual relationship (or agreement) between a
public entity and a private organization
Fair allocation of risk between the public and private
partner to encourage the private partner to mobilize
financing
Mobilization of increased private sector project
financing for EE
Payments to the private sector for delivering services to
the public sector.
World Bank/IFC
Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Acquisition of Energy Efficiency
Resources
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Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
What is EE Resource Acquisition
Mechanism to reduce energy consumption
and peak load, and improve utility system
efficiency
Through implementation of energy efficiency
program/projects by customers, ESCOs,
NGOs, equipment manufacturers & suppliers,
or other private sector parties
Payments made to them by the utility or
other agency for the resulting energy and
load reductions
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Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Why EE Resource Acquisition?
Treats energy efficiency as a valuable resource analogous to
conventional power, IPPs, and RE (“level playing field”) –
Builds the “Energy Efficiency Power Plant (EPP)”
Scales up EE project implementation by providing
customers and ESCOs an incentive similar to payments
made to IPPs or renewables
Economically efficient as the payments are based on
resource value
Facilitates leveraging of commercial financing
Minimizes resource risk by paying only for delivered performance verified by a credible organization
Most of the technical and financial risk for the project is borne by the project developers.
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Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Approaches for EE Resource Acquisition
EE Acquisition Options
Competitive Bidding Standard Offer
• Utility issues RFP to acquire
KW and KWh savings
• Selection done though
evaluation of technology,
proposed M&V and Rs/KW and
Rs/KWh rate structure
• Payment terms usually linked to
verified savings
• Implementers may get different
$/KW and $/KWh rates
• Utility pre-determines price
that is affordable to pay
implementers
• Provides standardized M&V
protocols for certain classes of
programs
• Payment terms usually linked
to verified savings
• Implementing organizations
get same $/KW and $/KWh
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Incentives to Deploy Renewable Energy & Energy Efficiency
Competitive Bidding
Implemented by Utility or designated Agency
Issue a competitive Request for Proposals (RFP) seeking delivery of resources
Eligible bidders include all organizations interested in implementing projects
Bidders define facilities, technologies, end uses, implementing strategies/mechanisms, M&V protocols
Bidders also define the proposed payments from the utility
Select the most attractive and beneficial proposals using pre-defined criteria approved by the regulator
Payments may vary substantially among bidders
Payments made after verification of savings
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Incentives to Deploy Renewable Energy & Energy Efficiency
Standard Offer
Determine the amount to be paid (“Standard Offer”) for energy and demand savings per kW and kWh (by season and time period)
Specify standardized M&V protocols
Eligible bidders include all organizations interested in implementing EE projects
Bidders define facilities, technologies, end uses, implementing strategies/mechanisms
All implementers receive the same payment per kW or kWh
Payments are made for verified savings based on the Standard Offer
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Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Standard Offer ProcessProject Sponsor Utility of Implementing Agency
Identify project and negotiate with
customer
Issue Request for Applications
Submit initial application Approve initial application
based on defined criteria
Finalize measures and prepare
M&V plan
Request final application and
M&V plan
Submit final application Approve or reject final application
Implement project Sign Standard Offer agreement
Submit installation report (IR) Approve or reject IR
Conduct M&V activities Make installation payment
Submit savings report (SR) Approve or reject SR
Receive Standard Offer payment Make Standard Offer payment
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Incentives to Deploy Renewable Energy & Energy Efficiency
U.S. Experience
Early programs in 1990s:
Public Service Company of Colorado (Competitive
bidding)
Public Service Electric and Gas of New Jersey
(Standard Offer)
Recent program examples:
New York
Texas
California
Payments for Standard Offers well below
long-term generation costs and RE costs
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Incentives to Deploy Renewable Energy & Energy Efficiency
The Early Programs
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Incentives to Deploy Renewable Energy & Energy Efficiency
Texas Standard Offer Program
Senate Bill 7 established State energy efficiency goals
Implemented by Public Utility Commission of Texas
All utilities have to meet 10% reduction in annual growth in system demand through EE programs
Establish rules for sponsor, project and measure eligibility
Encourage private sector delivery of EE products and services
Achieve energy and cost savings to customer
Stimulate strong participation form EE service providers
Create a simple streamlined process for participation and M&V
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Incentives to Deploy Renewable Energy & Energy Efficiency
EE Resource Acquisition in Portugal
Regulatory Authority (ERSE) launched the Plan for
the Promotion of the Electrical Energy Consumption
Efficiency (PPEC)
Program solicits reductions in end-use electricity
consumption through market tenders for EE
Resulted in bids five times the budget, providing
strong competition among proponents of EE projects
Evaluation criteria include for economic cost-
effectiveness, environmental benefits and other goals
Long term funding commitment provided by regulator
& national climate change program
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Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
South Africa’s Standard Offer Program
Rationale – Existing EE/DSM process was not working.
DSM group was understaffed and overburdened.
Eskom evaluation process was very cumbersome,
slow, and non-transparent.
Evaluation criteria appeared to be unclear and
inconsistently applied.
Substantial misunderstanding, poor communication,
and insufficient feedback.
Too much time spent on details of the energy savings
calculations and costs of the EE/DSM measures.
Eskom’s contract negotiation process was very
complex, time-consuming, and adversarial.
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Incentives to Deploy Renewable Energy & Energy Efficiency
Advantages of South Africa SOP
Streamline approval process and implementation
Facilitate ESCOs to generate projects
Simplify contracts between ESKOM and ESCOs
Reduce burden on ESKOM staff of for evaluation of the technical & cost elements
Allocate project risk to ESCOs.
Payments based on delivered performance
Facilitate commercial financing of ESCOs
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Incentives to Deploy Renewable Energy & Energy Efficiency
Implementing SOP in South Africa
Ministerial Order and DOE Policy Statement on
EE/DSM
Designated SOP as the mechanism for EE/DSM
Long-term implementation by S.A. National
Energy Development Institute (SANEDI)
Near-term action by Development Bank of South
Africa
ESKOM pilot programs – Standard Offer and
Standard Products – launched in 2011
Eskom toolkits for the SOP and SPP
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Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Concluding Remarks
SOP is analogous to RE Feed-in Tariffs (FIT)
Can result in EE resource delivery at a lower cost
than RE or conventional generation
For developing countries
SOPs can be implemented in parallel with FITs
SOPs simpler to implement than competitive
bidding for EE resources
Need strong regulatory agencies
Utilities may not be the best implementing agents
– independent agency or trust may be designated
M&V capacity building is critical
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Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
What Can WB do to Promote the SOP Concept?
Educate regulators to treat EE on a “level
playing field” with RE
Provide detailed information and case studies to
regulators on the SOP approach and its benefits
Build regulatory capacity to develop and
implement SOP rules and regulations
Adapt protocols (such as IPMVP for measurement
and verification, build capacity of independent
M&V organizations, and develop an accreditation
scheme for M&V agents
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Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Suggested Action Items
Prepare a strategy paper on the Standard Offer
Program (SOP) concept, applications and results, with
case studies of major programs
Organize international workshop with regulators to
discuss the SOP and its potential applications
Engage stakeholder such as energy users, NGOs,
ESCOs, manufacturers/suppliers of EE equipment,
etc., in a dialog on the SOP approach
Implement a pilot SOP in one or more of the member
countries with a progressive and aggressive regulator
World Bank/IFC
Workshop
Incentives to Deploy Renewable Energy & Energy Efficiency
Thank you
Dilip R. Limaye
SRC Global Inc.
dlimaye@attglobal.net