RE-DELAYS: Documenting and analising the cost of regulatory delays

RE-DELAYSDocumenting the cost of regulatory delays

www.iea-retd.org 2

The mission of IEA-RETD is to accelerate the large-scale deployment of renewable energies

• Created in 2005, the IEA currently has 8 member countries: Canada,Denmark, France, Germany, Ireland, Japan, Norway, UK.

• IEA-RETD commissions annually 5-7 studies bringing together theexperience of some of the world’s leading countries in RE with the expertiseof renowned consulting firms and academia.

• Reports and handbooks are freely available at www.iea-retd.org.

• IEA-RETD organizes workshops and presents at international events.

RETD stands for “Renewable Energy Technology Deployment”.

IEA-RETD is a policy-focused, technology cross-cutting platform (“Implementing Agreement”) under the legal framework of the International

Energy Agency

Background IEA-RETD

http://www.iea-retd.org/

www.iea-retd.org 3

Agenda

• Context, objectives and approach for analysis

• Qualitative analysis: insights from developers and literature

• Quantitative analysis: Identification regulatory costs/delays and illustrative NPV estimates

• Measures to move towards a more stable and mature RE industry

Documenting the cost of regulatory delays: RE-DELAYS

www.iea-retd.org 4

Regulatory delays in RE project development can result in additional costs for investors and the economy

Context, objectives and approach for analysis

• They can undermine the growth and economic potential of the renewable energy industry

• They can impede the entry of nascent energy technologies

Source: OECD

www.iea-retd.org 5

How can we understand and quantify the impact of these regulatory delays?


Project RE-DELAYS

Assessment of 4 RE technologies in 6 different countries

• Considering market size, maturity and resource diversity

• Desk research and interviews with project developers and industry associations

Technological and geographical scope

• Undertaken by 3E and LEI

• Two-fold objective

• Quantifying the cost of delays to developers

• Quantifying the cost of delays to the broader economy

www.iea-retd.org 6

RE-DELAYS: an approach with a focus on interviews

• A qualitative and quantitative analysis of regulatory delays including interviews with 37 project developers and industry associations and desk research:


www.iea-retd.org 7

What kind of regulatory delays are we covering?


Delays related to renewable energy policy decisions at

the national, regional and local level

These delays create an uncertain climate forinvestors who may, as a result, hesitate to moveforward with project investments. The targetaudience for these delays are local, regional andnational governments

Delays related to administration and

regulation

These include delays in disclosing or implementingregulation related to the renewable energy projectdevelopment life cycle, such as building consents,environmental assessments and grid connection.

www.iea-retd.org 8

Agenda



• Quantitative analysis: identification of regulatory costs/delays and illustrative NPV estimations



www.iea-retd.org 9

Qualitative analysis

Sources of delay vary between technologies and countries and can be very project-specific• Interviews with developers and desk research: identification of barriers

• Project developers in different (as well as in same) jurisdictions may face very different delay terms and costs in their specific experience

Barriers for permitting

• Redundancies in approval processes and disclosure requirements

• Duplication of information requirements

• Long and expensive permitting and appeal processes

Lack of transparency and clarity

• Unclear commitment of governments towards RE

• Competing government objectives

• Costly and lengthy consultation processes in the development of policy/legislation

Grid connection issues

• Obligation to pay high fees to access and stay on grid connection queues

• Potential unavailability of grid capacity

www.iea-retd.org 10

Agenda






www.iea-retd.org 11

Step 1: identification of 4 categories of regulatory delays for the purpose of modelling

Quantitative analysis

Political delays

• Related to changes in policy and regulation including missed support scheme opportunities

• Long and expensive permitting and appeal processesSite access delays

• Related to procedures to obtain approvals from local communities, businesses and landowners

Permitting delays

• Related to procedures to obtain environmental (including impact assessment) and other permits

Grid connection delays

• Related to procedures to obtain approval for grid connection

www.iea-retd.org 12

Step 2: identification of 4 categories of regulatory costs and estimation of costs through interviews for illustration purposes


• Through interviews and desk researchPermitting costs

• Onshore wind and hydro: USD 300-400K

• PV solar: USD 100-200K

• Offshore wind: up to several million USD

Grid connection costs

• Onshore wind: Up to USD 300K

• PV solar: Up to USD 100K

• Hydro and offshore wind: less important

Site access costs

• Onshore wind and PV solar: Up to USD 100K

• Hydro and offshore wind: less important

Political costs

• Impact can be assessed by changing cost of debt/WACC due to political uncertainty

• Impact can also be assessed by varying delay terms

www.iea-retd.org 13

Step 3: development of a flexible financial model for quantifying the impact of regulatory delays


NPV calculation

Input sources

Data sets

Previous research and reports

Industry surveys

Statistical information collected by government agencies

Interviews with 37 project developers

Cost of technology

Economic impact of investments

Economic impact of permanent jobs

Economic benefits of avoided CO2

• Developing a model and estimating a project NPV value

Regulatory costs

Regulatory delays

www.iea-retd.org 14


• Illustrative change in NPV for a 5 year grid connection delay in a jurisdiction

The macroeconomic impact associated with delays is often more significant than the developer cost alone

www.iea-retd.org 15

The impact on NPV can be highly project specific


Main drivers of change in NPV are:

• Large investment multiplier (0.62), high capital costs (1910 USD/kW) and local content (69%)

• Long and expensive permitting and appeal processes


• High carbon intensity of the electricity sector (0.55 CO2 tons/MWh)


• High local content (80%) and relatively high carbon intensity of the electricity sector (0.18 CO2 tons/MWh)


• High local content (100%) and high carbon intensity (0.55 CO2 tons/MWh)

Country with highest impact• 3E-LEI modelled the impact with results from the

interviews for illustration purposes

www.iea-retd.org 16

Agenda






www.iea-retd.org 17

The following measures can be used for reducing regulatory delays and for evolving towards a more mature RE industry

Measures to move towards a more stable and mature RE industry

• Set clear timelines for decisions

• Make regulation as independent as possible by investing in cross-national regimes

• Increase accountability for decision making process at the regulatory/governmental level

• Hold decision making authorities accountable for decisions within their control

• This can come in the form of pre-defined fines for not achieving set milestones

• Provide clarity and avoid confusing legislations

• Harmonize local procedures, create simple rules for smaller-scale projects and pre-define geographical areas

www.iea-retd.org 18

The following measures can be used for reducing regulatory delays and for evolving towards a more mature RE industry

Measures to move towards a more stable and mature RE industry

• Streamline regulatory processes

• Create a one stop shop with simplified rules for applications

• Define responsibilities upfront and make responsible actors

pay compensations

• Link the incentive such as FiT to delay

• More delays could potentially lead to a higher incentive

provided to the project developer making the government

more accountable

• Define cost impact assessment of appeal processes

• Parties responsible for the delay can potentially indemnify

the affected party

• Inform the public about benefits and risks of RE and

encourage consultative mechanisms to share concerns

www.iea-retd.org 19

• Brussels

• London

• Toulouse

• Milan

• Beijing

• Istanbul

• Cape Town

• www.3E.eu

Ruben [email protected]

Pieter Joseph [email protected]

• Boston

• Toronto

• www.londoneconomics.com

Amit [email protected]

Lance [email protected]

Bat-Erdene [email protected]

mailto:[email protected]





For additional information on RETD

Online: www.iea-retd.orgContact: [email protected]

THANK YOU!

http://www.iea-retd.org/


RE-DELAYS: Documenting and analising the cost of regulatory delays

Environment

Transcript of RE-DELAYS: Documenting and analising the cost of regulatory delays