SUPPORT SCHEMES FOR SMALL HYDRO. Medellin, November 2017 Brian Glover Associate professor NTNU Bærekraftig Investering AS

Transcription

1 SUPPORT SCHEMES FOR SMALL HYDRO Medellin, November 2017 Brian Glover Associate professor NTNU Bærekraftig Investering AS

2 Support schemes for small hydro 1 Role of Government 2 Role of regulator and system operator. El-certificates in Norway 3 Feed-in Tariffs, GET FiT

3 1. ROLE OF GOVERNMENT IN SMALL HYDRO

4 Role of Government Study and understand how the regional power system functions Predict demand growth both domesitic and the need for neighbours to import Understand issues of power security and determine any political limitations to power exchange Identify hydropower resources Identify and avoid major environmental and social conflicts at an early stage. Make own pre-feasibility assessments of how each resource can be developed optimally and fully

5 Resource identification assessment

6 Water utilisation, water laws and regulations Hydropower affects many other local and national interests (biodiversity, fisheries, flood control, water availability for irrigation, water supply, recreation) Determine a mandatory consultation process and ensure it is followed Issue licenses for abstraction and utilisation of the river Environmental and social scoping of affected interests and environmental impacts Clarify conflicts in water allocations and use

7 Project suitability assessment Some project sites are suitable for private investors, while others are not. Typical suitable sites: Type of hydro development suits system needs No conflicting water use No problems of land rights and ownership Limited potential for negative environmental impacts Social acceptance of development projects in local community Proximity to transmission grid Fits in well to the power demand forecast

8 Beware optimistic demand forecasts (the Philippines). Over-investment in large hydro

9 Why overoptimistic forecasts? One natural human weakness is over-optimism. Plans for industrialisation and GDP economic growth are overoptimistic Historic demand growth is often based on subsidised tariffs which cannot be sustained as No. of consumers grows. Reluctant to publish plans which do not follow the politicians ambitions Plans based on low risk of unserved energy, unnecessarily expensive. High standby capacity is needed, high security of supply ( fuel storage, reservoirs etc) Lack of consideration as to how grid and generation expansion can realistically be financed. Plans based on assumed unlimited capital access.

10 2. ROLE OF REGULATOR DIFFERENT IN MONOPOLY OR DE- REGULATED MARKETS

11 NVE Norwegian energy and water resources directorate and regulator (over 400 staff)

12 Markets need regulation, preferably independent Liberated markets need regulation by an independent regulator. In UK; Office of Gas and Electricity Markets (Ofgem) see Ofgem regulates feed-in tariffs for small hydro up to 5MW (and other REs) Transmission is a monopoly regulated by the regulator Distribution is an area licence regulated by the regulator In Norway the regulator (NVE) is currently not independent, but part of a government directorate. Latest proposal is to spin-off an independent regulator unit Consumer choice competion on sales for which consumer segments?

13 The Nordic Power System Red lines indicate major interconnecting cables and transmission lines Green dotted areas are supply regions for separate market pricing Mid Norway (NO3) is currently a region with supply deficit Hydro resources supplying reliable energy to Region NO3 get fast track priority

14 Small hydro usually needs subsidies In UK and many countries there is a feed-in tariff system determined by government policy In Norway/ Sweden it is a market-based system of eligible (green) el-certificates for all renewables. Objective is to get 28,4 TWh of fresh renewable energy into Nordic power system by 2021 (ca. 10% increase)

15 Drivers for small hydro in Norway EU Renewable Energy Directive, 2009 «20% by 2020» Applies in both Sweden and Norway 20% renewable share by 2020

16 Nordic countries ahead of target

17 Subsidy system for small hydro in Norway and Sweden: El-certificates Sweden required to increase renewable portion to 49%. Norway required to increase renewables to 67.5 % of all energy consumption by 2020 (was 56% in 2005) Norway agreed a joint market for el-certificates with Sweden, subsidising all renewable additions up to 2021 (and later for Sweden only) The power consumer ultimately pays for the subsidy through an addition to energy bills levied by power suppliers. The market decides the cost of the subsidy, the supplier passes on costs to the consumer. The mechanism is a tradable certificate for 1 MWh produced by certified renewable projects commissioned between 2012 and the El-certificate

18 El-certificates in Norway/Sweden market based model for subsidy to all renewables

19 El certificates in Norway & Sweden progress so far (accumulated from 2012) Norway Sweden About 3-4 TWh of renewable energy has been commissioned each year

20 Sweden will continue after 2021, Norway not Norways contribution (mainly from small hydro)

21 TWh Mostly wind power, very little hydro (light blue below dark blue), and all small hydro is from Norway Vind Vann Annet Kvotekurveøkning

22 Volatile pricing of El-certs, falling since Excess supply over energy demand Sweden SEK/ MWh Norway NOK/ MWh Bottom at 1,5 US cents/ kwh

23 Legal and tax relief for small hydro Firstly, foreign ownership control of small hydro is permitted, while large hydro licenses are only given to companies with min 70% public ownership (state or council) Alle hydro with less than 10 MVA capacity exempt from ground rental tax Alle hydro with less than 10 MVA capacity exempt from natural resource exploitation tax

24 Legal and tax relief for small hydro Previously limit was 5MW Consequence was no new applications between 5-12 MW! Of 700 recent small hydro licenses, only a handfull >5 MW. Poor use of limited hydro resources Changed to 10 MVA (not MW!). Now no applications from 9,5 to 15 MW! Still poor use of resources, but on a larger scale! Many projects downsized to 9,5MW to become financially attractive to owner

25 Results for small hydro in Norway 673 hydropower projects approved for elcerts to date. 95% small hydro<10 MW, mostly <5 MW Average size 1.6 MW Average new energy 10 GWh per project

26 Single buyer can determine the fate of small hydro. Willingness of the buyer to pay for small hydro. Will they publish a common tariff for all hydro? The technical requirements they set. Single tariff for all energy suplied? Seasonal or peak hour tariffs? Take or pay contract in cases where grid is down? Cross-border trade can be complex. Is the buyer in the same country as the plant?

27 The transmission system owner and operator (TSOs) is very important Responsible for maintaining the frequency, voltage, reactive power, reliable supply etc. according to stipulated limits over whole system. They plan and develop the main grid and set tech. requirements for distributors to follow Statnett in Norway National Grid in the UK, USA, Sweden etc

28 Norway is the firm power security for the Nordic power system But small hydro has very few seasonal reservoirs and contributes almost nothing when system demand is peaking

29 3. FEED IN TARIFFS FOR SMALL HYDRO GET FIT

30 What is GET FiT? Global Energy Transfer Feed-in-Tariff The main objective of the GET FiT Program is to assist East African nations in pursuing a climate resilient low-carbon development path resulting in growth, poverty reduction and climate change mitigation. 30

31 Where is GET FiT now and in future? Uganda: Full implementation Zambia: Launch-ready Mozambique: Full feasibility study Others: Screened Vietnam: Full feasibility study 31

32 GET FiT Uganda: Achievements by the numbers and geography 32

33 GET FiT Governance Structure 33

34 The GET FiT Project Cycle Familiarity with a «a challenge fund»? 34

35 GET FiT Toolbox Challenges and barriers to investments: Insufficient incentives Patchy enabling environment Capacity of the Government of Uganda and the energy sector institutions How does GET FiT address these challenges? GET FiT premium payments (top-up tariffs) PPA and IA support (legal) Technical Assistance Facility - Tariff modelling and review - Interconnection code and wheeling agreement - ERA compliance monitoring of TRANSCO & DISCOs - Electronic regulatory system for the regulator ERA 35

36 Many countries utilize unsolicited proposals What makes them so appealing? 36

37 How Tanzania is trying to streamline its unsolicited process

38 FiTs generally an effective means to promote UnSolicited Proposals for small hydros Historical avoided cost SPP tariffs v. new small hydro tariff in TZ

39 How Tanzania. and..uganda present their FiTs

40 SUPPORT SCHEMES Thank you! Bærekraftig Investering AS