Day 1 Renewable Energy (RE) Policy Evaluation 2

Economical, Technological and Environmental Impact Assessment of National Regulations
and Incentives for Renewable Energy and Energy Efficiency
A project financed by the Ministry of Foreign Affairs of Denmark

RE & EE National Policies Evaluation Workshop

Cairo, December 19 – 20, 2010

Renewable Energy (EE) Policy Evaluation

Page 1 Cairo – RE & EE Policy Evaluation December 19 - 20, 2010


Overview of the Presentation

• Energy consumption – Reliance upon the market
• EE investments – Direct use by the owner
• Market failures and impediments for EE technologies
• RE Taxonomy - Correction and Compensation
• Case study – Demand side management programmes
• Triple win situation - Economic and financial analysis
• Incentives and avoidance of transaction costs
• Compliance and free-riders
• Overview of EE policy instruments
• EE policy instruments in RCREEE countries



Energy consumption – Reliance on the Market Principle

• Energy consumers are deciding:
– Consumers know best what to do
– Consumption decision are based on energy prices
– Energy consumers decide about energy using equipment
– Equipment supplier provide the necessary products and the
required information

• Exception:
– Load shedding
– Rationing of energy supplies



EE projects – Direct Use by the Owner

• Classification of EE investments:
– Identity of user/beneficiary / investor
– High number of energy consumers
– „Behind the meter“ - Reduction of commercial energy demand
– Reducing purchase of commercial energy
– No real market for the EE products
– High number of market participants

• Exception:
– Energy service companies (ESCO)
– Performance contracting
– Facility management



Market failures and impediments

• The user does not know what would be the best to do !
• No real rational decision preparation – live cycle analysis
• Energy prices provide wrong incentives
• Principle-agent issue
• Transaction / information costs are very high
• Lack of market transparency
– Technology information
– Market overview
– Benefit – cost assessment
– Legal and administrative transaction costs
• Rational use of energy and energy efficiency



Taxonomy for EE Promotion Instruments

EE policy measures and instruments to achieve the “second best”:

• Corrective Measures
• Energy price reform (reflecting economic costs)
• Targets and strategy
• Legal reform
• Energy agency
• Information campaigns
• Industrial policy – standards
• Energy efficiency obligations – white certificates

• Compensating methods
• Financial incentives (Capital support - subsidies)
• Grant programme



Egypt – Energy Efficiency Obligation

• The obligation is stated in the electricity law:
– The transmission / distribution concession holders are obliged to
implement demand side management programme as a conditions
for their concession licences
– The operators are obliges to prepare and to implement annual
DSM programmes
• Area of applications_
– Electricity demand shaping
– Improvement of the electricity efficiency at the usage level
– Amélioration de l’efficacités d’utilisation d’électricité
– Promotion of RE use equipment
– Information and promotion programmes



Egypt – Energy Efficiency Obligation

• Costs for the electricitiy efficiency equipmnet
• Analyse under the point of view of the national economy
– Cost of a new thermal power plant (CCGT)
– Total costs of the energy saving measures – investment &
programme
• Analyse under the point of view of the electricity supply company
– Cost of electricity generation with subsidised natural gas
– 50% of the EE programme costs are covered by the electricity
company
• Analysis under the point of view of the residential el. Consumer
– Tarif by tarif category and cost of electricity consumption
– 50% of the EE Programme costs



The perspective of the country (100% of the EE Programme Costs)

0.06

0.05
Euro-cent / kWh

0.04

0.03
EE measure
0.02 Supply cost

0.01

0.00

machines
Freezers
Insulation of

Refrigerators
fluorescent

freezers

Washing

Solar water
Compact

Fridge
hot water

heating
lamps
tanks

Energy efficiency m easure



Electricity company (50% of the EE programme costs)

0.06

0.05
Euro-cent / kWh

0.04
EE measure
0.03
Supply cost
0.02
Tariff-low
0.01 Tariff-high

0.00

machines
Freezers
Insulation of

Refrigerators
fluorescent

freezers

Washing

Solar water
Compact

Fridge
hot water

heating
lamps
tanks

Subsidised
elecricity
generation cost



Electricity consumer (50% of the EE programme costs)

0.05
0.05
0.04
Euro-cent / kWh

0.04
EE measure
0.03
Tariff-high
0.03
0.02 Tariff low

0.02
0.01
0.01
0.00

machines
Freezers
Insulation of

Refrigerators
fluorescent

freezers

Washing

Solar water
Compact

Fridge
hot water

heating
lamps
tanks




Triple/multiple win situation

• Triple win-situation
• Energy user – Energy supply company - Country
• Partners in the EE market (shared savings principle)
– National economy / country
– Energy user
– Energy supply company
– Equipment supplier
– Energy service company
– EE agency – EE funding programme



Incentives and reduction of transaction costs

• Key – element : Promoting the rational use of energy at the user level
– Energy pricing
– Promotion of rational behaviour – lables !
– Information and demonstration programmes
– Assistance in installing equipment
– Audit programmes
• Overcoming barriers and impediments / high transaction costs
– Subsidies and rebates
– Financing facilities – financing and credit gurantees
– Certification of equipment


Po

Policy impacts - Compliance and free-rider

• Compliance:
– Monitoring of programmes
– Measuring of the impacts
– Measurable indicators
• Free-rider:
– Energy users are just taking benefits for measures they had
ben considering in any case



EE Policy Instruments

• Enabling measures (1) Work has begun;
– Strategy and targets (2) The instrument is operational;
– Legal reform – energy efficiency law (3) Positive impacts have been
– Economic pricing obtained

– Energy Efficiency Agency

• Instruments
– Standards and labels
– Financial incentives
– Energy efficiency obligations
– Audits and support for energy service companies (ESCOs)
– Transport and spatial planning
– Dissemination of information



Overview of components of energy efficiency (EE) policy

Enabling Framework Instruments and intervention

Countries Energy Energy Energy Audits and Transport & Disse-
Strategy and Economic Standards & Financial
Efficiency Efficiency Efficiency Promotion Spatial mination of
Targets Pricing Labels Incentives
Law Agency Obligation of ESCOs Planning information

ALG          
EGY          
JOR          
LEB          
LIB          
MOR          
PAL          
SYR          
TUN          
YEM          


Day 1 Renewable Energy (RE) Policy Evaluation 2

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