Policy Instruments in Facilitating Renewable

Energy Off-grid (REOG) Investment in ASEAN:

Lessons from International Experiences

Dr. Shi Xunpeng, Dr. Liu Xiying, Dr. Yao Lixia

Workshop on Energy for Off-grid Village in South East Asia Programme 29 January 2015, Kuching, Sarawak, Malaysia

Research Question

• What are the appropriate policy instruments that can be used to

facilitate the REOG Investment in ASEAN?

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Policy framework for policy makers in ASEAN

Outcome

Methodology

• Literature review

• Comparative study

• Case study

• Expert survey

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Expert survey

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Objectives

1. Target the major challenges/risks which REOG projects are facing at, especially from the perspective of investment and finance.

2. Select and category the policy instruments that are widely used in facilitating REOG projects.

3. Build up a instrument assessment index to assess the performance of these instruments.

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REOG project: Supply-side & Demand-side

Stage 1 Stage 2 Stage 3 … Long-term

Sustainability

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…

Plan Feasibility study

Establishment Total life-cycle

Project stage Risks to be addressed Policy instruments

Plan,

development &

establishment

Provide financial support at start-up phase, including both feasibility research and establishment of the project

Start-up grant

Cover part of the capital costs during installation phase Capital subsidy

Help reduce equipment purchase expenses Import duty exemption for equipment

Increase the access to finance Crowd-funding (bottom-up solution)

Ensure investment return/reduce project uncertainties Feed-in tariffs/premiums

Help manage market risk to reduce uncertainty and ensure return on investment Power purchase agreement (PPA)

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Policy instruments – Table 1

Project stage Risks to be addressed Policy instruments

Operation &

maintenance

Target to cover part of the operational/ maintenance costs and eventually profit gaps

Fixed grant/ Variable grant

Operational subsidy

Tax concession & Exemption

Encourage equipment purchase Accelerated depreciation

Reduce external cost on maintenance and operation

Local community engagement in ownership, operation and maintenance (cost saving and income generation)

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Policy instruments – Table 2

Project stage Risks to be addressed Policy instruments

Total life cycle

Implement de-politicization of rural electrification, attract private investors, implementation of priority projects and efficient allocation of capital subsidies

Private Public Partnerships (PPP)

Provide electricity service by engaging both private sector and local stakeholders

Build Operate and Transfer (BOT), Built-Owned-Operated-Maintained (BOOM), Built-Operate-Maintain (BOM), Built & Maintain (BM)

Help offset market and political risks Loan guarantee

Help cover maintenance and operational expenses and part of capital investment Concessional finance (soft loan)

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Policy instruments – Table 3

Risks to be addressed Policy instruments

Demand-side

Support consumers’ purchase power, thus help ensure investment return

End-user subsidy

End user financing /Microfinance /Consumer credit

Leasing

Revolving fund

Improve energy efficiency on the user-side and strengthen their payback capability Tiered electricity tariff

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Policy instruments – Table 4

Instruments Assessment Index

Index Explanation Weight

Feasibility Establish the project and realize the

project viability within a short-term

[ ] %

Sustainability Achieve long-term commercial viability

(beyond support phase)

[ ] %

Replication Potential to be replicated in other projects [ ] %

Others (please specify): [ ] %

Sum up 100%

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Primary findings

1. Government’s support is crucial for REOG, and policy mechanisms need to be set up with diversified instruments and strategic thinking.

2. In order to increase the access to finance, industry needs to be more engaged.

3. Financial support from outside foundations/donors plays very important role.

4. Community funding is a self-sustained source for financing REOG projects, it should always be included in the financial plan.

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Next steps

• Further literature review

• Case study & comparative study

• Conduct surveys (need your cooperation)

• Policy implications on ASEAN

• Research results will be shared

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Thank you for your attention!

Energy Studies Institute 29 Heng Mui Keng Terrace Block A, #10-01 Singapore 119620

http://www.esi.nus.edu.sg/

For enquiries:

Dr. Liu Xiying Tel: (65) 6516 5360 Fax: (65) 6775 1831 Email: esilx@nus.edu.sg

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