Renewable energy policy

Md. Mizanur Rahman MEng(Sweden), PhD (Finland), CEng Chartered Energy Engineer (EI, UK) Certified Energy Manager School of Mechanical Engineering Universiti Teknologi Malaysia Email: mizanur@mail.fkm.utm.my

1. Implicit and explicit subsidies for fossil fuels and nuclear

power

Distort level playing field

Examples: Direct budgetary transfers, tax incentives, liability

insurance, leases, land rights-of-way, waste disposal,

guarantees to mitigate project financing or fuel price risks.

WB put 100-200 billion US$ per year as subsidy for fossil

fuel globally against 1 trillion US$ for annual fossil fuel

purchase.

Current challenges for renewable energy

2. High initial capital costs

More risked upfront than same capacity fossil plant

More premium on borrowing money

USD/MWh

3. Ignorance of fuel price fluctuation risk

Risk of severe fossil fuel price fluctuation is ignored

Risk has high costs.

The benefit from risk reduction premium for renewables are

often ignored

4. Unfavorable power pricing rules for distributed generation

Ignore benefit for locational value of power/transmission

losses

Zero price for capacity value (due to intermittent nature)

Lower value than the utility price

5. High transaction costs

Unfamiliarity with the technologies

Resource assessment

Long negotiating process

6. Avoiding environmental and social externalities

Cost associated with health, infrastructure decay (acid

rain), decline in forests and fisheries, ultimate climate

change are often ignored at the bottom line while taking

decision.

7. Lack of legal framework for Independent Power Producers

Absence of RAPSS in many developing countries

Monopoly

8. Restrictions on siting and construction

Restriction on height, noise, aesthetics, safety etc.

Land use competition with recreational, scenic, agriculture

etc.

9. Transmission access

While power is generated away from load

Transmission access dispute with utility or land owners

10. Utility interconnection requirements

Interconnection policy and technical, and legal

standards are often absent

11. Liability insurance-

requirements

Back-feeding risks

Require insurance

Market performance

12. Lack of access to credit due to perceived uncertainty and risk on technology performance

• Lack of micro-credit

• Only short term loan available

• Banks relaxed due to uncertainty

• Limited visible examples

• Poor past performance

13. Lack of technical or commercial skills and information

Lack of skilled managers, engineers, architects, planners

• Determining the economic value of renewable energy allows for a concrete assessment of the economically viable optimum quantity of renewable energy by accounting for its environmental, energy security and price stability benefits

1. Electricity Feed-in Laws • Utilities are obligated to buy power

• Right feed-in- tariffs

2. Renewable Energy Portfolio Standards (RPS) • Certain power from renewables for a company

Promotion policy mechanisms

3. Emission trading A. Emission caps (renewable energy (green) certificates)

B. Taxation

C. Technology standards

Promotion policy/mechanisms

Currently operating carbon trade markets

– EU

– USA

– New Zealand

– Japan

– Kazakhstan

– China

– Canada

– Australia

Promotion policy mechanisms

CCS in carbon trade/tax policies Cap-and-trade policy CO2 captured = CO2 not emitted

CCS can be used in emission offsetting

Generates emission allowances ∝ carbon captured

Carbon tax policy

If CO2 is taxed -> operations using CCS should be paid equally to do so

In case of total negative emissions, the amount paid > tax revenues

4. Subsidies and rebates

• Well-targeted-efficient

soundly based

• Practical

• Transparent

• Limited in time-

– Grants

5. Tax Relief

• Investment tax credits

• Accelerated depreciation

• Production tax credits

• Property tax incentive

• Personal Income tax

Incentives

• Sales tax incentives

• Pollution tax Exemption

• Other tax Policies

6. Renewable energy set-asides

7. Greenhouse gas mitigation policies

8. Renewable resources obligation in bidding

Enabling elements Net metering

Real time pricing

Interconnection regulations

Dymanic generation and transmission scheduling

Elimination of rate pancaking

16

Feed-in Tariffs (FIT)

What is FIT?

FIT is a mechanism/tool that allows RE electricity producer to sell their

electricity to utility company at a fixed price.

Some wining features of FIT

• Priority grid access

• Costs shared to all

consumers

• Regular evaluation

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Malaysia has enforced the Renewable Energy Act 2011 and Sustainable Energy

Development Authority Act 2011.

Establish SEDA to oversee the implementation and management of RE

RE Act provides a mechanism for individuals or non

individuals to sell RE based electricity (up to 30MW) to

power utility firms at FIT rates for a specific time.

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Renewable energy quota limit in Malaysia (+/-)