The document summarizes key aspects of renewable energy policy and regulatory frameworks based on global experiences. It outlines the global policy landscape for renewable energy including countries with targets and support policies. It then discusses what constitutes an enabling policy and regulatory framework, including adequate policies and regulations, government capacity, and financially viable utilities. Finally, it examines lessons from Peru's renewable energy auctions and identifies some open questions regarding Uzbekistan's renewable energy framework.
The Policy and Regulatory Framework for Renewable Energy
1. The Policy and Regulatory Framework
Pedro Sanchez
World Bank Group Energy & Extractives
What has worked?
2. Outline
• Who is doing what: Global policy landscape
• What is an “enabling” policy and regulatory
framework: preconditions for successful PSP
• How have policies worked?
• Where does Uzbekistan stand?
5. Global policy landscape
• Nearly all countries directly supported RE development and deployment through
some mix of policies as of 2016. 176 countries have renewable energy targets,
some of which are included in their NDCs.
• Countries also have a mix of policies aimed at attracting investment, driving
deployment, fostering innovation and encouraging greater flexibility in energy
infrastructure (such as energy storage).
176
110
100
34
Countries with POLICY TARGETS
States/provinces/countries with FEED-IN policies
States/provinces/countries with RPS/QUOTA policies
Countries with tendering/public COMPETITIVE BIDDING
6. What is an “enabling” policy and regulatory
framework: preconditions for successful PSP
7. Enabling Environment for RE Development
• Adequate policy and regulatory instruments:
o Permit procedures
o Connection procedures (grid codes, rules to allow access to the grid, etc.)
o Support mechanisms for RE
o Tailored to the target sector (eg, solar, wind, biomass, etc)
• Government capacity for efficient and transparent public
procurement of private power generation and for contractual
negotiations
• Financially viability of utilities – reduce off-taker risk
• Allocation of responsibilities and accountabilities
• Coordination of generation and transmission expansion planning
• Government and utility capacity for RE deployment
8. What is a “good” framework?
Key principle Examples
Legal consistency Consistency of regulatory requirements with primary
legislation; no retroactive changes
Transparency Availability and reliability of information consistently
applied to all cases
Institutional capacity Clear division of responsibilities; adequate technical
capacity in approving agencies ; independence of
the regulator
Public consultation Mandatory stakeholder consultation on key decisions
Monitoring and
evaluation
Regular evaluation; external reviews of the
regulatory regime; adjustments if necessary
Enforcement Provisions to enforce compliance with
laws/regulations and deadlines for authorities and
the project developers.
9. Procedures should reflect goals
• Well-designed, investor-friendly procedures can:
o drastically reduce transaction costs (which can be up to 36% of the
generation cost for small off-grid projects!)
o lower uncertainty and shorten development time: allow for better
returns on investment
o reduce conflicts with different stakeholders
o allow public authorities to make sure that RE resources are
developed within an expected timeframe and in a sustainable and
responsible way
• Strong government commitment and institutional capacity
are essential to support sustainable renewable energy
deployment
10. Institutional structuring options for RE projects
Public Project State (state entity, utility, public enterprise)
Public-Private Partnership (PPP)
State (state entity, utility) and a private entity
(Independent Power Producer - IPP)
Private Project IPP
PLAYERS (responsible for development of the project)
11. Institutional structuring options for RE projects
Public Project Simplified control over energy production
Public-Private Partnership (PPP)
(i) Mitigation of country-specific political risks
perceived by the private sector (ii) promotion of
development of a new/complex technology in
the country (e.g. CSP)
Private Project
(i) Introduction of experienced actors in the
market and (ii) price competition
ADVANTAGES
12. Institutional structuring options for RE projects
Public Project
(i) Capability to quickly increase solar capacity
is limited by the fiscal envelope of the country
and (ii) limited internal technical capacity of
public entities
Public-Private Partnership (PPP)
(i) Complex roles for government and IPP in the
project development and (ii) risk that project will
be more expensive for the IPP than in pure IPP
development
Private Project
(i) Long development of the project by the IPP
and (ii) extensive negotiations of the PPA
RISKS
13. Institutional structuring options for RE projects
Public Project
Internal costs for the Government (there is no
PPA)
Public-Private Partnership (PPP) Average price
Private Project Low price, if competition is well organized
PRICE OF PPA
14. Institutional structuring options for RE projects
Public Project
Project development following the pace of the
government
Public-Private Partnership (PPP)
Risks of delays in development due to the need
to establish guiding principles of the relationship
between the government and the IPP
Private Project
Risks of delays due to PPA negotiations and
time of development of IPP projects from
scratch
TIMELINES
16. 2008 : Law Enacted
2009 : Regulations
2010: First Auction
2011: Second Auction
2013: Third Auction (hydro only)
2016: Fourth Auction
The
Auctions
Implementation: process
1
2
3
4
5
6
17. Renewables Auctions
17
Legal Framework Law adopted in 2008 (Legislative Decree 1002)
Authorities in charge
Ministry of Energy and Mines (MEN)
Energy and Mines Regulator (OSINERGMIN)
Eligible technologies Technology-specific: solar,wind,biomass,small hydroand geothermal
Target 5% of the energy production based on solar, wind, biomass and geothermal
Selection process
One round based on price and quota of energy;
Ceiling price defined by OSINERGMIN (undisclosed) and quota defined by MEN.
The bidder must submit:
• Technical requirements, including resource assessments for minimum one year
• A pre-feasibility study for each project
Agenda of auctions First: 2009-2010; Second: 2011; Third: 2013; Fourth: 2016
Duration of tariff 20 years PPA
Compliance
• Bid and Performance bonds to guarantee seriousness and construction
• Penalties for compliance with volume of energy generation contracted
• Extension can be granted subject to increasing performance bonds
• Contract is terminated if failure to complete.
22. Good progress but questions remain
?
Resource assessment Regulations and institutional set-up
Government commitment Support for RE
RE target Credit-worthiness of the off-taker
RE law (draft)
Currency exchange risk and inflation
risk
Possible grid connection and system
integration issues
23. Some issues for consideration under the RE law
• Land tenure defined for small and mini-hydro but not for others (solar,
wind, for example). It will be good to clarify this.
• Incentives include the formation of a price policy aimed at stimulating the
production of energy from RE. Tariffs for energy produced from RE are
also to be established in accordance with the legislation, taking into
account the return on investment. Is the idea to use FiTs? Auctions are
preferred these days.
• Draft law establishes a Foundation for the Development of Renewable
Energy Sources as well as an entity for RE development. This will play
an important role in bridging the gap between public stakeholders and
private investors. Under which arm of government will the new entity
perform?
• Levies on hydrocarbon fuels (natural gas, oil products, coal) and energy
(electric, thermal). It will be important for funds to the RE fund to be ring-
fenced from the cash flow of entities in charge of collection (for example
UE)
24. Key issues need to be progressively addressed
Issue Comments Possible solutions
Institutional
setup
- No clear institutions responsible
for RE policy and its deployment
- Finalize and pass RE law to set
up responsible institutions
Regulations - Secondary legislations and
regulations needed to translate
presidential decrees on RE to
actual implementation
- Finalize and pass RE law to
allow for follow up regulations
(for example, grid code,
preferred approach for private
sector participation, etc.)
Currency
exchange
risk and
inflation
risk
- Linking of official exchange rate
with the curb market rate and
established a framework to allow
it to flow is a step in right
direction.
- Inflation rate is currently at 10%.
PPA must contain provisions to
deal with inflation
- The offtake tariff under the new
PPA should include a formula
for regular adjustments of the
tariff in line with indexation to
FOREX fluctuations and
inflation.
25. Key issues need to be progressively addressed
Issue Comments Possible solutions
Sustainability
of support to
RE
- RE looks expensive against
the background of low input
prices in the energy sector (in
particular, gas)
- Tariff reforms; gradual move
towards cost-recovery in the
energy sector.
- Introduction of an RE Fund with
mechanism to allow the
recovery of the RE support
costs through the tariffs
Credit-
worthiness of
Uzbekenergo
if off-taker
- Uncertainty whether
Uzbekenergo will have the
financial robustness and
capacities to fulfil its payment
obligations during the whole
period of the PPAs if they are
mandated as off-takers.
- In the short term: government
guarantee or other
arrangements to make the PPAs
bankable (backing of the PPA by
a solid creditworthy institution)
- Implement financial recovery
plans of energy sector entities to
improve the financial health of
the sector.
26. Key issues need to be progressively addressed
Issue Comments Possible solutions
Possible
grid
connection
and system
integration
issues
- Information about the grid
capacity and possible
connection points is not readily
available.
- Technical regulations are
underdeveloped to address the
peculiarities of connecting
variable RE (solar and wind).
- Unknown exposure on risks to
the grid (balancing and
forecasting).
- Undertake studies to
understand gaps in
infrastructure and operations
- Develop a detailed Grid Code
addressing the specifics of grid
connection and system
integration (including balancing
and forecasting) of variable RE
plants when significant
saturation is reached
- Make information about grid
across the country (including
network development pans)
more transparent
- Power system modernization,
including rehabilitation, and
automation of the grid
operations using ICT
Notas del editor
Figure shows countries with Renewable Portfolio Standards, feed-in tariffs/premium payments and net metering policies. Countries are considered to have policies when at least one national-level policy is in place; these countries may have state/provincial-level policies in place as well. Diagonal lines indicate that countries have no policies in place at the national level but have at least one policy at the state/provincial level. It is interesting to see that there are countries that have launched auctions without specific RE policies.
Policies include:
REGULATORY POLICIES
Feed-in tariff/ premium payment
Electric utility quota obligation/ Renewable Portfolio Standards (RPS)
Net metering
Tradable RE certificates
Tendering
FISCAL INCENTIVES AND PUBLIC FINANCING
Investment or production tax credits
Reductions in sales, energy, VAT or other taxes
Energy production payment
Public investment, loans, grants, capital subsidies or rebates
Renewable energy targets and financing mechanisms must be backed by dedicated policies and regulatory frameworks.
Strong government commitment and institutional capacity are essential to support sustainable renewable energy deployment
Renewable energy targets and financing mechanisms must be backed by dedicated policies and regulatory frameworks.
Strong government commitment and institutional capacity are essential to support sustainable renewable energy deployment
