Role of Governments in Renewable Energy Development and Deployment

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1 Role of Governments in Renewable Energy Development and Deployment Ron Benioff International Program Manager November 17, 2011 UNECE Sustainable Energy Conference Slides from Mike Mendelhson, Karlynn Cory, Mackay Miller, Joyce McLaren, and Sarah Truitt of NREL NREL is a national laboratory of the U.S. Department of Energy Office of Energy Efficiency and Renewable Energy operated by the Alliance for Sustainable Energy, LLC

2 The Role for Clean Energy A Decade of Real Progress Wind power capacity increased by more than a factor of 10 to more than 200 GW. Solar PV global installed capacity grew by factor of almost 30 to about 35 GW in Biofuels emerged as a major global industry (~28 billion gallons/year) LEED-certified commercial buildings grew to more than 10,000 Costs have been significantly reduced and are approaching grid parity Clean energy grew from $1B/year to a $211B/year market 9/1/11

3 Five Key Governments Roles in Advancing Renewable Energy Use (U.S. Examples) Direct Technology Research, Development, and Deployment Support Federally-Funded R&D Centers & Universities Cooperative R&D Agreements (CRADAs); Small-Business Innovation Research (SBIR) & Tech Transfer (STTR) grants Deployment Programs (Wind Powering America, Solar America Cities, etc.) Federal R&D Tax Credit Preferential Tax Treatment Low Capital Gains Tax on Venture Capital Manufacturing & State Payroll and RE Production Tax Credits Intellectual Property & Commercialization Regime patent/ip protection, open IP licensing process, strong venture capital market, enterprise growth forums, Education, Labor, and Immigration Policy K-16 funding, fluid labor market rules, H1-B skilled worker visa program, workforce training programs Basic R&D Applied R&D Demonstration Pre- Commercial Commercial Adoption (GW) Stage of Development Commercial Diffusion

4 Renewable Energy Innovation Successes Achieving breakthrough innovations through fundamental science and linking to market Reducing system costs near to grid parity through sustained RD&D with industry Collaborative multi-year roadmaps Cost-shared RD&D with industry & international partners (186 NREL CRADAs in FY11) Holistic programs across innovation spectrum yield speed and scale

5 Impact: Partnering is Key 5

6 Governments Have Vital Role in Reducing Investment Risks Required Return on Investment Source: Deutsche Bank Climate Change Advisors, Get Fit Plus: Derisking Clean Energy Business Models in a Developing Country Context Values are illustrative National Renewable Energy Laboratory 6 Innovation for Our Energy Future

7 Potential Risk Factor Mitigants National Renewable Energy Laboratory 7 Innovation for Our Energy Future

8 Market View of Policy Deutsche Bank calls it TLC:* How do different policies impact financing and transaction costs? Policy Financing Impact Transaction Costs LCOE Impact Tax Credits Good High TBD Loan Guarantees Excellent Very high TBD Cash Grants Good-excellent Low TBD Production Grants Good? Moderate? TBD * Source: Deutsche Bank Climate Change Advisors, Get Fit Plus: Derisking Clean Energy Business Models in a Developing Country Context National Renewable Energy Laboratory 8 Innovation for Our Energy Future

9 A Portfolio of Policies is Required Source: Deutsche Bank Climate Change Advisors, Investing in Climate Change 2011, The Mega-Trend Continues: Exploring Risk and Return, February 2011 National Renewable Energy Laboratory 9 Innovation for Our Energy Future

10 U.S. Renewable Energy Policy Lessons Federal incentives and financing support (tax incentives, grants, loan guarantees, etc.) are necessary, but not sufficient to overcome market barriers Need a broader portfolio of policies and programs RE mandates (e.g. portfolio standards) Feed-in-tariffs or other production or capacity based payments Innovative financing programs to overcome consumer issues Deployment programs to assist with market adoption 10

11 EX: What Drives Solar Installations? (Beyond Federal Incentives) While solar resources are important, a number of other factors are involved including State-level policies, incentives and electricity prices #1 #3 #5 #4 #6 #7 #10 (MA) #9 (CN) #2 (NJ) #8 Top ten ranking for cumulative installed capacity as of National Renewable Energy Laboratory 11 Innovation for Our Energy Future

12 Consumer Behavior: Will They Buy PV? Quicker payback does not necessarily correlate with higher market penetration/ market share 12

13 Consumers Will Buy if Barriers Removed EX: 3 rd party PV financing removes key barriers to consumer purchasing Low / no upfront cost and no maintenance responsibilities Expectation of beating utility bills now, in future NEED: to quantify the impact of uptake resulting from 3 rd party financing ISSUE: 3 rd party financing legality is not clear (most states) UT: limited to certain sectors VA: limited to certain sectors Source:DSIRE ( updated Oct 2011 AZ: limited to certain sectors TX: effective 09/2011 Authorized by state or otherwise currently in use, at least in certain jurisdictions within in the state Apparently disallowed by state or otherwise restricted by legal barriers Status unclear or unknown Puerto Rico Note: This map is intended to serve as an unofficial guide; it does not constitute legal advice. Seek qualified legal expertise before making binding financial decisions related to a 3rd-party PPA. See following slides for additional important information and authority references. 13 At least 21 states + PR authorize or allow 3 rd -party solar PV PPAs

14 Solar America Cities Partnerships Barriers Addressed: Lack of Financing Options Complex Permitting Processes Lack of Trained Workers and Key Trades Inconsistent Net Metering, Interconnection Rules Accomplishments: Added 180MW PV 23% Decrease IC Time Over ½ with OTC Permitting 22% Decline in Installed Cost

15 NREL Contributions Technical Assistance: Utility Rate Analysis PV System Procurement Technology and Site Assessments Community Solar Program Design Interconnection Feasibility Analysis Workforce Development and Training Net Metering and Interconnection Rules Tools and Publications: PACE Financing Analysis Guide to Community Solar Guide for Local Governments Solar Ready Building Practices Solar and Historic Preservation PV/SWH Rooftop Optimization Tool Interconnecting PV on Network Grids

16 Renewable Energy Policy Resources Clean Energy Solutions Center UN-Energy REN 21 IRENA Leonardo Energy NREL Renewable Energy Finance Team National Renewable Energy Laboratory 16 Innovation for Our Energy Future

17 NREL Feed-in Tariff Analysis What is a FIT? What are the payment design options? What are the implementation options? How to control FIT policy costs? Lessons applicable to other RE policies National Renewable Energy Laboratory 17 Innovation for Our Energy Future

18 Global Portal for Clean Energy Policy Resources, Assistance, and Peer Learning

19 Potential Collaboration with the Clean Energy Solutions Center Engage expert teams in consultation and analysis for country specific policy requests Establish and foster peer learning across regional policy networks on specific topics of most interest (e.g. FITs, RE grid integration, etc.) Participate in global RE policy dialogues e.g. current dialogue on high RE penetration policies Conduct and join webinars and blogs on key policy topics at a country, regional, and global level Strengthen regional policy and deployment data, including sub-national policy data Other ideas? 19

20 Thank You Ron Benioff Manager, International Programs