WORLD ENERGY [R]EVOLUTION A SUSTAINABLE WORLD ENERGY OUTLOOK
1 climate & energy policy | FTSM: A SPECIAL FEED IN LAW PROPOSAL FOR DEVELOPING COUNTRIES
1.5 ftsm: a special feed-in law proposal for developing countries
The first is fundamentally important, but it is no good if you don’t have the other three elements as well.
This section outlines a Greenpeace proposal for a feed-in tariff system in developing countries whose additional costs would be financed by developed nations. The financial resources for this could come from a combination of innovative sources and could be managed by International Climate Mitigation Funds or other available financial resources.
1.5.1 the feed-in tariff support mechanism
Energy [R]evolution scenarios show that renewable electricity generation has huge environmental and economic benefits. However its investment and generation costs, especially in developing countries, will remain higher than those of existing coal or gas-fired power stations for the next five to ten years. To bridge this cost gap a specific support mechanism for the power sector is needed. The Feed-in Tariff Support Mechanism (FTSM) is a concept conceived by Greenpeace International.14 The aim is the rapid expansion of renewable energy in developing countries with financial support from industrialised nations. Since the FTSM concept was first presented in 2008, the idea has received considerable support from a variety of different stakeholders. The Deutsche Bank Group’s Climate Change Advisors, for example, have developed a proposal based on FTSM called “GET FiT”. Announced in April 2010, this took on board major aspects of the Greenpeace concept. For developing countries, feed-in laws would be an ideal mechanism to boost development of new renewable energies. The extra costs to consumers’ electricity bills are an obstacle for countries with low average incomes. In order to enable technology transfer from Annex 1 countries under the Kyoto Protocol to developing countries, a mix of a feed-in law, international finance and emissions trading could establish a locally-based renewable energy infrastructure and industry with help from the wealthier countries. Finance for renewable energy projects is one of the main obstacles in developing countries. While large scale projects have fewer funding problems, there are difficulties for small, community-based projects, even though they have a high degree of public support. The experiences from micro credits for small hydro projects in Bangladesh, for example, or wind farms in Denmark and Germany, show how economic benefits can flow to the local community. With careful project planning based on good local knowledge and understanding, projects can achieve local involvement and acceptance. The four main elements for successful renewable energy support schemes are therefore: • A clear, bankable pricing system. • Priority access to the grid with clear identification of who is responsible for the connection, and how it is incentivised. • Clear, simple administrative and planning permission procedures.
The basic aim of the FTSM is to facilitate the introduction of feedin laws in developing countries by providing additional financial resources on a scale appropriate to local circumstances. For those countries with higher potential renewable energy capacity, it could be appropriate to create a new sectoral no-lose mechanism generating emission reduction credits for sale to Annex I countries, with the proceeds being used to offset part of the additional cost of the feed-in tariff system. For others there would need to be a more directly-funded approach to paying for the additional costs to consumers of the tariff. The ultimate objective would be to provide bankable and long term stable support for the development of a local renewable energy market. The tariffs would bridge the gap between conventional power generation costs and those of renewable generation. The FTSM could also be used for rural electrification concepts such as the Greenpeace-energynautics “RE cluster concept” (see Chapter 2). The key parameters for feed in tariffs under FTSM are: • Variable tariffs for different renewable energy technologies, depending on their costs and technology maturity, paid for 20 years. • Payments based on actual generation in order to achieve properly maintained projects with high performance ratios. • Payment of the ‘additional costs’ for renewable generation based on the German system, where the fixed tariff is paid minus the wholesale electricity price which all generators receive. • Payment could include an element for infrastructure costs such as grid connection, grid reinforcement or the development of a smart grid. A specific regulation needs to define when the payments for infrastructure costs are needed in order to achieve a timely market expansion of renewable power generation. A developing country which wants to take part in the FTSM would need to establish clear regulations for the following: • Guaranteed access to the electricity grid for renewable electricity projects. • Establishment of a feed-in law based on successful examples. • Transparent access to all data needed to establish the feed-in tariff, including full records of generated electricity. • Clear planning and licensing procedures. The design of the FTSM would need to ensure that there were stable flows of funds to renewable energy suppliers. There may therefore need to be a buffer between fluctuating CO2 emission prices and stable long term feed-in tariffs. The FTSM will need to secure payment of the required feed-in tariffs over the whole lifetime (about 20 years) of each project.
• Public acceptance/support. reference 14 IMPLEMENTING THE ENERGY [R]EVOLUTION, OCTOBER 2008, SVEN TESKE,GREENPEACE INTERNATIONAL.
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