Island states - Renewable Energy Policy Pioneers

Renewable Energy Policy Pioneers

Toby D. Couture Founder and Director

E3 Analytics

October 14 2014

BRIEF PROFILE: Toby Couture is Founder and Director of E3 Analytics, an international renewable energy consultancy based in Berlin. He has worked with over thirty countries around the world on the economic, financial, and policy aspects of renewable energy development, including in both island and mainland regions.

Outline

1.   Tradi/onal Policy Op/ons 2.   Islands as Renewable Energy Policy Pioneers 3.   Concluding Remarks

Traditional Policy Options

1. Net Metering

-  First introduced in the U.S. in the early 1980s!

-  Allowed individuals or businesses with customer-sited generation to connect to the grid and be credited for the excess power they fed into the system!

Formula:!Compensation rate = Retail rate!!

1. Net Metering

-  “Traditional” net metering does not result in a cash payment: it simply credits customer-sited generation at a rate equivalent to the retail rate!

-  Excess power is rolled over, typically up to 12 months!

Source: SolarCra,.com

2. Feed-in Tariffs !Three Key Elements:!!!1. Clear price for electricity sold to the grid!!2. Clear, long-term contract!!3. Guaranteed access to the grid!

!à Payment for 100% of generation!

à  100% export-oriented (no self-consumption; two separate meters; receive both a check and a bill)!

Source: h0p://www.nrel.gov/docs/fy10os=/44849.pdf

2. Feed-in Tariffs

Compensation rate typically based on the cost of generation.!!Residences and businesses become de facto IPPs!!!Formula:!Compensation rate != Technology-specific ! ! ! ! ! ! !!generation cost!

!

2. Feed-in Tariffs

!à Price locked in

irrespective of utility avoided costs, fuel costs, or retail prices!

à Provides a hedge against fuel price volatility!

!Source: Couture & Gagnon 2010

2. Feed-in Tariffs

Source: Ferroukhi et al. 2014, h0p://www.irena.org/rethinking/Rethinking_FullReport_web_view.pdf


Net Metering: !Allows customers to generate power on-site and export surplus to the grid

FITs: !Offer a cost-based

price for generation from RE sources, over a long-term

contract (10-20 yrs)


Net Metering! FITs!

à What about the space in between?


à  In island regions, par=cularly the Caribbean where

electricity subsidies are more limited and retail rates more closely reflect avoided costs, tradi/onal net metering may lead to “over-‐compensa/on” and even cost-‐shi,ing

à  Similarly, it may be difficult to determine an appropriate feed-‐in tariff in small island systems

The Challenge

à How to design appropriate policies for island

regions to allow distributed renewable energy development in a regulated way, while maintaining grid reliability, and without jeopardizing the solvency of incumbent u=li=es?

Note This Webinar focuses on the compensa/on mechanisms for distributed genera=on in island regions. However, price is only one factor. Important to consider the broader regulatory environment: -‐  Grid connec=on protocols (e.g. grid code) -‐  Metering rules -‐  Policy caps -‐  Permi[ng procedures -‐  Fixed charges and access fees -‐  Curtailment rules, etc.

Islands as RE Policy Pioneers

Solar PV: 1 Diesel Gensets: 0

Islands around the world are now beginning to innovate in this “space in between”, designing policies that are neither tradi=onal net metering, nor tradi=onal FITs.

1.  Kauai, Hawaii 2.  Ramea Island, Nfld 3.  Grenada, Caribbean 4.  Seychelles, Indian Ocean 5.  Cook Islands, Pacific Islands Region 6.  Palau, Pacific Islands Region 7.  Vanuatu, Pacific Islands Region

1. Kauai, Hawaii

1. Kauai, Hawaii

Pilot Program: Effec=ve June 2011 -‐  Applicable to solar PV, wind, biomass, and hydro -‐  Systems up to 200kW in size -‐  The total capacity allocated is capped for each project size

category: •  Projects 50kW – 200kW à 2MW total •  Projects 10kW – 50kW à 500kW •  Projects <10kW à 500kW

Source: h0p://kauai.coopwebbuilder.com/sites/kauai.coopwebbuilder.com/files/42_schedule_nem_effec=ve_june_3_2011.pdf

1. Kauai, Hawaii

Source: h0p://kauai.coopwebbuilder.com/sites/kauai.coopwebbuilder.com/files/42_schedule_nem_effec=ve_june_3_2011.pdf

Payment Structure: -‐  Projects receive a fixed payment of USD $0.20/kWh for the

system’s net excess genera/on at the end of each year.

-‐  Customers have the op=on to carry the genera=on over, upon request, or receive a cash payment for the net excess genera=on

-‐  This payment is offered for a period up to 20 years.

2. Ramea Island, Newfoundland


Source: Rickerson et al. 2012: h0p://iea-‐retd.org/wp-‐content/uploads/2012/06/IEA-‐RETD-‐REMOTE.pdf

Quick facts: •  354 electricity customers •  Peak demand: 1,078kW (2011) •  Annual genera=on: 4,200 MWh

•  Total 690kW of wind power capacity à No formal policy framework: case by case, and nego=ated with the u=lity, Nalcor


Source: Rickerson et al. 2012: h0p://iea-‐retd.org/wp-‐content/uploads/2012/06/IEA-‐RETD-‐REMOTE.pdf

Payment Structure: -‐  Linked to avoided fuel costs. Original formula was nego=ated

between wind power operator and Nalcor, the u=lity.

-‐  The principle is to strike a tariff that is between the u=lity’s full avoided diesel costs and the wind project’s genera=on costs, up to 90% of full avoided fuel costs

-‐  The 10% buffer is intended to cover unan=cipated addi=onal costs for the u=lity, including administra=on costs

3. Caribbean Region: Grenada

3. Grenada

Source: h0p://www.irena.org/documentdownloads/publica=ons/_caribbeancomplete.pdf

Quick facts: •  Peak demand: 30.8MW (2010) •  Installed Capacity: 33.2MW •  Annual genera=on: 203 GWh •  Electricity tariffs = approx. USD $0.40/kWh •  Electricity is unsubsidized

Grenada previously had a tradi=onal net metering policy (from 2006-‐2011). à However, it was thought to be over-‐compensa=ng producers,

due to the high retail rate.

3. Grenada

Source: h0p://www.grenlec.com/Portals/0/StandardOffer/Grenlec%20Renewable%20Standard%20Offer.pdf

“Renewable Standard Offer” Payment Structure: Two Op/ons 1.   Fixed Payment Op/on: Systems up to 100kW in size can

receive a fixed payment of EC $45/kWh (~USD $0.17/kWh) for 10 years

2.   Variable Payment Op/on: payment based on the avoided fuel cost over the previous 12-‐month period

4. Seychelles

4. Seychelles “Net Feed-‐in Tariff” Program (Jan 2014) Payment Structure: -‐  Onsite genera=on can be used

to offset onsite consump=on

-‐  Payment offered for excess genera=on only

-‐  Up to 88% of avoided fuel costs: USD ~$0.17/kWh currently

Source: Couture & Gagnon 2010

4. Seychelles “Net Feed-‐in Tariff” Program (Jan 2014) Payment Structure: -‐  Similar to Ramea (~90% of

avoided fuel costs), except that the payment is only for “excess genera=on”

-‐  It is designed to encourage some share of onsite consump=on

Source: Couture & Gagnon 2010

5. Cook Islands

5. Cook Islands: Pacific Islands Region Quick Facts: •  Popula=on: Approx. 15,500 •  Annual genera=on: 27.7 GWh •  Electricity tariffs = NZD $0.77/kWh (approx. USD $0.60/kWh)

Cook Islands has modified its RE policy a few =mes. Net metering (originally for systems up to 10kW) was considered to be over-‐compensa=ng producers, and led to more applica=ons than expected. Policy revised, and capped at 2kW. à Cook Islands now has three (3) different policy frameworks to support customer-‐sited or IPP genera=on.

5. Cook Islands: Pacific Islands Region Combined Policy Framework (as of December 2013) 1.   Net Metering Policy: Project <2kW -‐  Tradi=onal net metering: customer credited at full

retail rate (~USD $0.44/kWh) -‐  No cash payment for excess genera=on -‐  Roll over period: 12 months -‐  5-‐year contract agreement; poten=al to renew?

5. Cook Islands: Pacific Islands Region Combined Policy Framework (as of December 2013) 2. Gross Metering Policy: -‐  Project size: 2kW – 7kW (single phase) and 7kW -‐

21kW (three phase) -‐  100% power must be exported to the grid (i.e. FIT)

Payment Structure: -‐  Tariff fixed at NZD $0.45/kWh (~USD $0.355/kWh) -‐  Below avoided cost -‐  Minimum 5-‐year contract agreement

5. Cook Islands: Pacific Islands Region Combined Policy Framework (as of December 2013) 3. Feed-‐in Tariff for IPPs -‐  >21kW for three phase and >7kW for single phase -‐  100% power must be exported to the grid

Payment Structure: -‐  Payment rate ($/kWh) to be determined through “by

mutual agreement” -‐  Rate to be below avoided cost (i.e. no ‘subsidy’)

5. Cook Islands: Growth in RE Capacity

Source: Te Aponga Uira (TAU) U=lity 2014

6. Palau

Palau: Pacific Islands Region

Source: h0p://www.irena.org/DocumentDownloads/Publica=ons/Palau.pdf

Quick Facts: -‐  Popula=on: Approx. 20,000 -‐  Annual Genera=on: 89 GWh

(2011) -‐  Installed Capacity: Approx. 35MW -‐  Retail Electricity Tariffs (2013):

USD $0.405/kWh

Palau: Pacific Islands Region

Source: h0p://www.spc.int/edd/en/document-‐download/finish/11-‐reports/654-‐palau-‐energy-‐country-‐profile

Payment Structure: -‐ credited for any excess genera=on in a par=cular month at a rate no less than 50% of the tariff applicable during that monthly billing period. à in other words, excess genera=on is purchased at a significant discount to the retail rate paid by the customer. -‐ Rollover period is 12 months; TBD by the PPUC

7. Vanuatu

Vanuatu:

Source: h0p://www.ura.gov.vu/a0achments/ar=cle/100/U-‐0002-‐14%20Feed%20In%20Tariffs%20Final%20Decision%20-‐%20Office%20Gaze0e.pdf

New policy framework launched October 1 2014 Two components: 1.  Net metering for residen=al customers

2.  “Bi-‐direc=onal metering” policy for commercial and “high voltage” customers

Both compensate producers (offset onsite produc=on) at a rate significantly below retail (20% – 35% of retail rate).

Vanuatu:


Caps Project size cap: 19.8kW (based on size of grid =e) Total program capacity cap: ~500kWp •  50-‐70 small residen=al customers (~320kWp) •  10 commercial customers (~120kWp) •  3 high voltage customers (~60kWp) + Limit of 4 solar home systems per local loop or transformer

Vanuatu:


Retail rate in Vanuatu has three basic components: 1.   Fixed charge per subscribed kVA, per month 2.   Access fee for net metered systems (linked to

system size) 3.   Consump/on charge ($/kWh)

-‐  Residen=al: ~ USD $0.67/kWh -‐  Commercial: ~ USD $0.48/kWh -‐  Industrial: ~ USD $0.38/kWh

1. Net Metering in Vanuatu -‐  Producers export their excess power to the grid -‐  Targets residen=al customers -‐  One meter, provided by u=lity UNELCO

Payment Structure: -‐  No cash payment (“no nega=ve bills”) -‐  Excess genera/on offsets the fixed connec/on

charge and the access fee at a rate of 13 vatu (~USD 0.135/kWh) for each excess kWh

à  Compensa=on rate is different from retail rate paid; effec=vely an accoun=ng measure

2. “Bi-‐direc/onal Metering” in Vanuatu -‐  Producers export excess power output to the grid -‐  But, consump=on and produc=on metered separately -‐  Targets commercial and industrial customers Payment Structure: -‐  “No nega=ve bills” -‐  Like the NM policy, excess genera/on offsets the fixed

connec/on charge and the access fee at a fixed rate; in this case, 21 vatu/kWh (~USD $0.21/kWh)

-‐  These revenues can only offset money owed to the u=lity (i.e. fixed charge + consump=on charge)

Concluding Remarks

Concluding Remarks

-‐  By innova=ng in “the space in between”, island regions are opening up new ways of allowing, and regula=ng, the adop=on of distributed renewable energy technologies

-‐  This innova=on may also carry valuable lessons for mainland regions

Concluding Remarks

-‐  Do not be misled by policy labels.

à Look at the underlying policy design: what does it do? How is it structured? -‐  Where retail rates reflect genera=on costs,

tradi/onal net metering is increasingly seen as being too generous.

Concluding Remarks

à  Policies are being designed to compensate ‘net excess genera=on’ in a way that saves the u=lity money (i.e. at rates lower than avoided costs),

à Also designed to allow customers to become “prosumers”, saving money by offse[ng their own consump=on

Concluding Remarks

-‐  As highlighted at the outset, island u=li=es are o,en acutely concerned about solvency:

à the innova=ve hybrid policies explored here provide op=ons for compelling “win-‐wins”

Ques/ons?

Toby D. Couture Founder and Director

E3 Analy3cs

[email protected]

Rickerson, W., Couture, T., Barbose, G., Jacobs, D., Parkinson, G., Belden, A., Becker-‐Birck, C., Chessin, E., (2014). “RE-‐PROSUMERS”, IEA-‐RETD: Paris, France. Available at: h0p://iea-‐retd.org/wp-‐content/uploads/2014/06/RE-‐PROSUMERS_IEA-‐RETD_2014.pdf Couture, T., (2014). “The Role of Industrial Prosumers in Achieving Inclusive and Sustainable Industrial Development (ISID),” Policy Report, United Na=ons Industrial Organisa=on (UNIDO), Forthcoming. Couture, T., Leidreiter, A. (2014). “How to Achieve 100% Renewable Energy: A Policy Handbook,”, World Future Council: Hamburg, Germany. Available at: h0p://worldfuturecouncil.org/fileadmin/user_upload/Climate_and_Energy/Ci=es/Policy_Handbook_Online_Version.pdf Couture, T., Flannery, S. (July 11 2013). ‘Can Climate Bonds Advance Renewable Energy Finance?’, Renewable Energy World, Available at: h0p://www.renewableenergyworld.com/rea/news/ar=cle/2013/07/can-‐climate-‐bonds-‐advance-‐renewable-‐energy-‐finance Couture T., Jacobs, D., (2013). The Future of Electricity Markets, Renewable Energy World, February 18 2013, h0p://www.renewableenergyworld.com/rea/news/ar=cle/2013/02/the-‐future-‐of-‐electricity-‐markets Rickerson, W., Couture, T., Glassmire, J., Lillienthal, P., Peralta, M. S., (2012). Renewable Energies for Remote Areas and Islands, Interna=onal Energy Agency -‐ Renewable Energy Technology Deployment (IEA-‐RETD), Available at: h0p://iea-‐retd.org/wp-‐content/uploads/2012/06/IEA-‐RETD-‐REMOTE.pdf

Select Publica/ons

Couture, T., (2012). “FITs and Stops: Spain’s Renewable Energy Plot Twist and What it All Means,” Analy=cal Brief, Vol 4., No. 1, Available at: h0p://www.e3analy=cs.ca/wp-‐content/uploads/2012/05/Analy=cal_Brief_Vol4_Issue1.pdf Kreycik C, Couture T D, Cory K (2011) “Innova3ve Feed-‐in Tariff Designs to Limit Policy Costs,” Na=onal Renewable Energy Laboratory, Golden, CO, Available at: h0p://www.nrel.gov/docs/fy11os=/50225.pdf Couture, T., (2011). “Booms, Busts and Retroac3ve Cuts: Spain’s Solar Odyssey,” Analy=cal Brief, Vol. 3, No. 1, Available at: h0p://e3analy=cs.ca/documents/Analy=cal_Brief_Vol3_Issue1.pdf Kreycik C, Couture T D, Cory K, (2011) “Procurement Op3ons for New Renewable Electricity Supply,” Na=onal Renewable Energy Laboratory, Golden, CO, Available at: h0p://www.nrel.gov/docs/fy12os=/52983.pdf Couture, T., (2010). “Penny-‐wise or Pound Foolish: The Case of Electricity Policy,” Analy=cal Brief, Vol 2, No. 2, Available at: h0p://www.e3analy=cs.ca/wp-‐content/uploads/2012/05/Analy=calBrief2_2.pdf Couture, T., (February 2010). “Feed-‐in Tariffs: Arguments and Counterarguments”, Analytyical Brief, Vol 1, No. 1, Available at: h0p://www.e3analy=cs.ca/wp-‐content/uploads/2012/05/Analy=cal_Brief_Vol1_Issue1.pdf Cory K, Couture T (2009) “Feed-‐in Tariff Policy: Design, Implementa3on and RPS Policy Interac3ons,” United States Associa=on of Energy Economics (USAEE), Dialogue, Vol. 17, No. 1, pp. 21-‐28. Available at: h0p://www.usaee.org/pdf/Mar09.pdf

Select Publica/ons

Island states - Renewable Energy Policy Pioneers

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