Regional overview lucas

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

A regional Review
Nigel Lucas

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RCREEE Regional Renewable Energy Conference
Thursday, February 4, 2010, Kempinski Hotel, Amman, Jordan


Aim of presentation

• To review the importance of energy
efficiency and renewable energy in the EU-
Mediterranean partnership
• To examine the policy content in EU and
Mediterranean countries to determine to
what extent it matches the needs

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Scope

•Main drivers of the future for EU-MEDA
partnership
•The importance of energy
•The key critical policy issues (case studies)
•The policy offer from EU and the region
•Recommendations

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Drivers

•There are many important drivers of the future on which we must
take a view if we are to achieve some degree of foresight. The set
includes:

–Geopolitics and governance (including conflicts)
–Cultural and religious changes
–Education, science, research and development
–Demographic change and movement of people
–Macroeconomic growth
–Access to resources (energy, water, clean environment)

•The most important for us are the last four
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Energy

•Declining access to indigenous fossil-fuels
•Increased imports and vulnerability
•Inadequate attention to energy efficiency leading to
inefficient and non-competitive capital stock
•Large renewable resources at high cost
•Increasing (but small) impact on climate change
•Misallocation of resources from North to South
•Poorly managed system – inefficient practices and
poor price signals
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Water

•Ambiguity of rights/ownership
•Low efficiency of use
•Contradictions between politics and market
•Contradiction between political and physical
boundaries
•Proximity to limits of exploitation (resource and
quality)
•Erosion of old cultural habits of conservation
•Need for effective common management of basins
and for regional, international management
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Demography/MacroEconomy

•Increasing numbers of people of working age – demands for
education, jobs, resources – impact on migration
•Unmet expectations and social unrest
•Increase in the population above 65 – impacts on state
finances
•Insufficient economic growth and innovation
•The attraction of non-democratic models of industrialisation
•Increase in GDP largely offset by population increases –
convergence not achieved
•Divergence of urbanised littoral and impoverished hinterland –
population pressure on resources

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Energy in EU Mediterranean partnership

•Energy policy: Potential for EU to improve diversity of supply,
reduce GHG emissions, meet renewable targets. For Med it offers
new export market
•Demography: Complementary demographics; job creation in
renewable energy, impacts on migration
•Water: desalination by renewable energy offers prospects to
extend access
•MacroEconomy and innovation: Med has potential to be a world
leader in renewable energy technologies, water management,
arid zone agriculture
•Rural development: renewable energy can restrict urbanisation
and reduce pressure on biomass resources

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The case studies

•TOR for our study require:
–Methodologies for evidence-based RE&EE policies
and for theory based evaluation
–Methodology for economic evaluation of energy
policy instruments
–Proposals for how the economic value GHG
reductions can integrated into the economic-cost-
benefit analysis
•We have made such recommendations and
integrated them into a range of case studies
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The list of case studies
Energy Efficiency
•Efficiency Obligations on power companies (Egypt)
•Energy Efficiency Fund (Jordan, Palestine)
•Labelling (Syria)
•Efficient lighting in the CDM (Lebanon, Yemen)
•Energy Audits (Tunisia)

Renewable Energy
•Support instruments for wind with gas as alternative (Egypt, Libya)
•Support instruments for wind with coal as alternative (Morocco)
•Support instruments for wind with HFO as alternative (Jordan, Syria)
•Landfill gas (Jordan)
•Dedicated wind (Palestine)
•Energy Solar Water Heating (Lebanon)
•Concentrated Solar Power (Libya, Morocco, Tunisia)
•PV for rural electrification (Yemen)

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Findings of the case studies

•The case studies bring out the importance of:
–Opportunity cost where there are subsidies
–The negative impact of consumer subsidies on energy
efficiency and many policies (labels, mandatory audits)
–The financial benefits to the state of energy efficiency where
there are subsidies
–The need to lower risk perceptions for IPPs in developing
renewable energy (FIT, concessions)
–The unpredictable and probably under-estimated price of
carbon (transaction costs in the CDM)

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The regional review

•The TOR require:
–Overall comparative synthesis report evaluating the
status of RCREEE member state planning processes,
regulations and incentives for RE&EE and their
impact; including recommendations for follow-up
RCREEE initiatives
•For this purpose we have created a
categorisation of policy instruments according to
the market failures that they address
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Market failures

Public policy intervenes to correct market failures, in
the case of energy efficiency and renewable energy
the most common failures are:
•distorted energy prices
•external costs
•poor access to technical information
•agent-principal problems
•budgetary constraints and excessive risk aversion
•poor skills of investment appraisal.
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Correction and compensation

Policy instruments are intended to correct or compensate for
market failures.

Correcting measures try to correct the perception of costs in the
market, so that the decisions of the market participants lead to a
result that is close to the economic optimum.

Compensating measures accept that there is a market failure that
cannot be corrected. Therefore, the government introduces
measures to change (or regulate) decision making.

Corrective measures least disturb the working of market processes
so all the advantages of the competitive system are maintained.

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Taxonomy for EE

The taxonomic structure for energy efficiency used in the project is:

•Corrective Measures
Taxonomy is the practice and
–Price Reform
science of classification.
–Institutional and legal reform
–Labelling
–Dissemination of information
–Research, development and demonstration
–Financial incentives
–Support for energy service companies (ESCOs)
•Compensating Measures
–Standards
–Mandatory measures (e.g. compulsory audits and management obligations)
–Corporate agreements
–Efficiency obligations
–Transport and spatial planning

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Taxonomy for RE

The taxonomic structure for renewable energy used in the project is:

•Corrective Measures
–Targets and strategy
–Legal reform
–Institutional reform
–Financial incentives (Capital support)
–Feed-in tariffs (Operating support)
–CDM Finance
–Information
–Industrial policy

•Compensating methods
–Standards and /or labels
–Obligations

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The Regional Review

•For each of these policy instruments we have
assessed the status as we see it in tables by
instrument and country
•Final summary tables compare the status of
each instrument across the region

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Conclusions (EE) - 1

All countries have made some effort to implement energy efficiency
projects. Most of the instruments in the taxonomy have been tried or
are intended somewhere.
–The most popular instruments are strategy, agency and audits.
–Most countries have a strategy, but qualitative; numerical targets
are often vague
–Three countries have functioning energy efficiency agencies. Most
of the rest have some centralised inter-Ministerial group for
decisions
–Mandatory audits have been in operation for many years in Tunisia;
they are stipulated now in Syria. Other countries have voluntary
audits of varying degrees of success

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Conclusions (EE) - 2

•Relatively few countries have an energy efficiency law and
this absence limits the possible scope of policy.
•Labelling and standards are being developed in most
countries, but slowly and often along different paths. Access
to testing facilities is often an obstacle .
•Only two countries have systematic fiscal incentives. This is
surprising as where prices are subsidised the state also
benefits from incentives to efficiency.
•The practice of evidence-based policy is uneven; acquisition
of documented experience is costly
Generally, the importance of the sector is recognised, but its
priority in the legislative and administrative agendas is only
moderate
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Opportunities for RCREEE

•Policy-making
–Develop evidence for policy making as a common good
(source of first resort)
–Structuring, compilation and processing of evidence
–Development of indicators for the region
•Benchmarking of policy
–Annual benchmarking within the RCREEE member states
•A common policy for standards and labels
–Towards a common label in the long-term
–Strengthening regulatory compliance
–Sharing assets
Page 20


Conclusions (RE) - 1

•Most countries have strategies (often very ambitious) and
wind atlases (information), sometimes also solar
•Financial and legal commitments to the strategies are often
not present
•For essence of the problem is cost and risk.
•IPPs factor in high risk premiums; countries should work to
reduce them
•FITs are a possibility, but there are none in the region;
concessions are more comfortable for countries. The Moroccan
and Tunisian schemes are interesting options, but limited in
application.
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Conclusions (RE) - 2

•Costs (except perhaps for some very favourable wind
sites and prices for CERs) are generally higher than
alternatives. Inadequate values are attributed to the
“renewable value”.
•The implicit renewable value in EU schemes is very high;
the same advantages in environmental and industrial
policy can be obtained operating in the Mediterranean at
a lower cost.
•Needs revised EU policy on renewables and a strong
debate on fairness in the industrial side
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Opportunities for RCREEE - 1

•RCREEE has a great opportunity to be a useful
interlocutor to stimulate cooperation between the EU
and the Mediterranean on renewable energy
•It can contribute to the creation of an open,
transparent, non-discriminatory, efficient system of
financial transfers to the RCREEE countries to
compensate the higher costs of renewable energy,
especially in solar
•This system has to function both with and without
physical flows of electricity. It also has to be coherent
with whatever may arise from international negotiations
on climate change
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Opportunities for RCREEE - 2

•RCREEE can similarly help define a “fair” industrial
policy, taking also into account the wider demographic
issues and their relevance for employment. It can
organise some common reflection on how to maximise
local content in large-scale renewable developments. In
particular:
–What are the industrial needs?
–What are the unit operations required?
–What investment in fixed capital and human resources would
be necessary?
–What political tools are available to maximise local content?

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