Guide on How to Develop a Small Hydropower Plant
ESHA 2004
and (ii) a stable regulatory environment such that investors can enter the market without concern that the price support mechanism will be modified in a unprofitable way. x Infrastructure. Renewable generators have a number of important challenges that need to be addressed like planning or grid connection issues. The future of RES-E will most likely depend on a combination of prices and political support. Ending distortion by removing subsidies for conventional generation and internalising external costs would go a long way. The problem of external costs could be corrected within the EU e.g. by a carbon tax, at least with regard to fossil fuels. According to APPA (the Spanish Association of Renewable Independent Producers) the external costs of conventional electricity generating sources should be considered an essential element of reference in order to quantify the compensation that must be received by small hydropower electricity in terms of compensation for its environmental and social benefits Member States have been supporting RES in one or more ways, via Research and Development (R&D), tax reductions/exemptions, guaranteed prices, investment subsides and the like. The Commission itself has been supporting for over a decade R&D in the field of renewables in the scope of the different Framework Programmes for Research and Development (FPs), six up to now. Nevertheless, thanks to the White Paper and specially RES-E Directive, policy instruments to encourage investment in the production of electricity from RES have been developed in the EU. It is clear that without a tariff’s framework that could guarantee the predictability of the investment’s remuneration RES-E technologies, shall not achieve the targets indicated in the legislative framework .The RES-E directive defines renewable energy sources as non-fossil energy sources the original proposal limited hydropower to plants up to10 MW of installed capacity, but this provision was eliminated in the final draft. Some MS, like Spain, has a feed in tariff for the electricity generated in plants with an installed power from 10 to 50 MW, although the premium decreases with the increase of capacity. Other MS increase the support to the smaller plants by decreasing the value of the premium when production increases. An example is Austria, where the first GWh generated on a new plant is paid at 5.96 cts €, the next 3 GWh at cts € 4.58 and once exceeded the 24 GWh at 3.31 cts €. A complete detailed picture of the tariffs applicable for small hydropower in the EU is given in chapter 8. The EC Directive on common rules for the internal market in electricity also underlines the priority of generation installations using renewable energy sources. The policy instruments that are in place in the different Member States are all based on two main principles. As figure A.2 shows, the instruments either affect the supply or the demand of renewable electricity, and the focus either on the production of electricity or on the installed capacity of renewable electricity plants. Within this categorisation, there are basically three main instruments to promote renewable electricity. These instruments are (i) feed-in tariffs, (ii) quota obligations in combination with a green certificate system and (iii) tendering/bidding schemes. Besides the three main instruments there are complementary mechanisms possible, like investment subsidies and fiscal measures. At the time the RES-E Directive was drafted, the Commission was favourable to adopt the tendering scheme, made popular at that time by the UK NFFO programme but in the final proposal it decided to leave free the choice of support to the Member States. Therefore the Directive does not indicate which set of policy instruments would be favourable. As result, MS continue to develop their own national mix of policy instruments to stimulate renewable electricity.
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