Legal and Financial Incentives for Renewable Energy in the Middle East. Joe Huse January

Transcription

1 Legal and Financial Incentives for Renewable Energy in the Middle East Joe Huse January

2 Overview What is renewable energy? International and Regional Legal Frameworks Country analysis: Turkey, Jordan, UAE Future of nuclear energy in the Middle East?

3 Definition of renewable energy EU definition (Directive 2001/77/EC) renewable energy sources shall mean renewable non-fossil energy sources (wind, solar, geothermal, wave, tidal, hydropower, biomass, landfill gas, sewage treatment plant gas and biogases) biomass shall mean the biodegradable fraction of products, waste and residues from agriculture (including vegetal and animal substances), forestry and related industries, as well as the biodegradable fraction of industrial and municipal waste International Energy Agency definition renewables include the following categories; Combustible Renewables and Waste, Hydro Power, Geothermal Energy, Solar Energy, Wind Energy, Tide/Wave/Ocean Energy

4 Nuclear Energy? In 2005 President Bush says nuclear power is a renewable source of energy. Nuclear power is one option available for reducing GHG emissions. Kyoto Protocol obliges Annex I countries to promote research and develop new and renewable forms of energy, of carbon dioxide sequestration technologies and environmentally sound technologies. Kyoto Protocol does not specifically mention nuclear energy. European Parliament resolution of 25 September 2007 on the Road Map for Renewable Energy in Europe 2007/ Considers that each Member State must be free to choose the most appropriate renewable energy sources given the differences in potential to develop certain renewable energies which are inherent in the geological, hydrological and climatic conditions in the Member States; insists, however, that the target of 20% of energy from renewables [by 2020] means the contribution from renewable energy sources, not other low carbon energy sources [emphasis added]. The European Climate Change Programme research and development budget allocated in billion for nuclear research, to be increased to 4.2 billion in Potential that nuclear energy could be inexhaustible use of breeder reactor.

5 International Legal Framework Kyoto Protocol adopted in 1997 at Third Conference of Parties to the UNFCCC, entered into force on 16 February 2005 GHG emission reduction targets promotion of renewable energy. Principle of common but different responsibilities developed countries identified as Annex 1 Countries - able to more easily meet costs of GHG emission reduction and historically have emitted the largest amount of GHG per person. Note: in 2004, for the first time, CO2 gas emissions greater in non-oecd countries and by 2030 projected to exceed OECD countries production levels by 57% (International Energy Outlook 2007, International Energy Agency). Annex 1 Countries to reduce their GHG emissions below the levels specified in the Protocol within a 5 year period between 2008 and Developing countries to formulate programs to improve emissions, cooperate in research, cooperate at the international level and give full consideration to the Protocol. No Middle Eastern countries in Annex 1. Bahrain (accession 31/1/06), Egypt (ratification 12/01/05), Iran (accession 22/08/05), Jordan (accession 17/01/03), Kuwait (accession 11/03/05), Lebanon (accession 13/11/06), Oman (accession 19/01/05), Saudi Arabia (accession 31/01/05), UAE (accession 26/01/05), Yemen (accession 15/09/04). Turkey has not signed Bali Roadmap adopted in December 2007 and sets framework for new protocol to be negotiated by No emissions goals set to date. Developing countries only expected to be urged to track emissions and report.

6 European Union Regime A future framework for the Middle East? Directive 2001/77/EC on the promotion of electricity produced from renewable energy sources in internal electricity market To promote an increase in contribution of renewable energy sources to electricity production and to create a basis for a future Community framework. Member States to take steps to encourage greater consumption of electricity produced from renewable energy sources in conformity with national indicative targets (set out in the Annex) and global indicative targets of 12% of gross national energy consumption by 2010 and 22.1% indicative share of electricity produced from renewable energy sources in total Community electricity consumption by Member States to evaluate existing legislative framework. Member States to take measures to ensure that transmission/distribution system operators guarantee the transmission/distribution of electricity produced from renewable sources. May provide for priority of transmission/distribution of electricity from renewable sources. Directive 2003/96/EC restructuring the Community framework for the taxation of energy products and electricity Member States to impose taxation on energy products and electricity. Minimum levels of taxation prescribed in Annex 1. Member States may apply fiscal control policies or partial exemptions or reductions in the level of taxation on electricity produced by solar, wind, wave, tidal or geothermal, biomass sources.

7 European Union Regime (continued) Directive 2003/30/EC on the promotion of the use of biofuels or other renewable fuels for transport To promote use of biofuels or other renewable fuels to replace diesel or petrol for transport purposes. Member States to ensure a minimum proportion of biofuels and other renewable fuels is placed on their markets by setting national indicative targets reference base of 5.75% by the end of Road Map for renewable energy in Europe, September 2007 Calls on Commission to present a proposal for renewable energy legislative framework. Deplores the fact that EU target of 12% renewable energy contribution to EU energy mix by 2010 will in all likelihood not be met.

8 Middle East Middle East Oil reserves: Haves: Middle East counties in world s top oil producing countries: Saudi Arabia, Iran, Iraq, Kuwait, UAE (over 90% in Abu Dhabi) and Qatar. Dwindling reserves: Bahrain, Dubai, Egypt, Oman, Yemen. Have nots: Israel, Jordan, Lebanon, Syria, West Bank and Gaza.

9 Turkey Electricity Market Law 2001 and Electricity Market Licence Regulation 2005 Energy Market Regulatory Authority is authorised to take measures to utilise renewable energy resources. Licence fee for generation of electricity from renewable energy sources nominal licence application fee and licence fee exemption for first 8 years (Reg Art 12(4)). Auto-producers that generate electricity from renewable energy are entitled to purchase electricity from private sector wholesale companies under certain conditions (other auto-producers are restricted) (Reg Art 17). Turkish Electricity Transmission Company and other entities holding a distribution licence are to give priority to facilities generating electricity from renewable sources in terms of connection to transmission/distribution systems (Art 38).

10 Turkey (continued) Law on Utilisation of Renewable Energy Resources for the Purpose of Generating Electrical Energy Law No. 5346, enacted 18 May Introduced as part of Turkey s EU membership bid. Key provisions: Defines renewable energy resources: non-fossil energy resources such as hydraulic, wind, solar, geothermal, biomass, biogas, wave current and tidal energy. Facilities that generate electricity from renewable energy sources to be granted a renewable energy resource certificate (Art 5). Certificate holders benefit from the Law. Retail sale license holders are obliged to purchase a certain percentage of the amount of electricity that they sold in the previous year from certificate holders. Until 2011, the price of electricity purchased under the Law is the average electricity wholesale price of the previous year, as determined by the Energy Market Regulatory Authority (subject to potential 20% annual increase) (Art 6). Service fees not collected from certificate holders and leases or rights granted over land discounted by 50% (Art 8). Sanctions: fine of TL 250 billion (approx US$180,000), followed by heavier fines and loss of relevant license in energy market (Art 10).

11 Jordan Government has set a target of 5% of all energy produced to be from renewable energy by Draft Renewable Energy Law No Based on a study prepared by German consultancy company Lahmeyer International. Initial study funded by a Japanese grant. Draft was reviewed by all institutions related to energy sector in Jordan (Electricity Regulatory Commission, Electricity National Company and Jordanian National Centre for Energy Studies). Draft currently being processed by the Legislation and Opinion Bureau before being submitted to Parliament. Draft expected to be passed as law quickly as the Parliament is under pressure to take immediate action to combat rise in price of oil. Key provisions: Defines renewable energy sources: the energy produced by natural and non-traditional sources including the solar energy, wind energy, underground energy, hydrogenic energy, bio-energy (bio fuel) and energy saving. Ministry to locate and protect for development suitable land areas for renewable energy technology (Art 5). Ministry to receive and approve offers to develop renewable energy plants on the land and issue a Renewable Energy Source Certificate to Qualified Renewable Energy Plants (Art 11).

12 Jordan (continued) Key provisions (continued): Licensees authorised to carry out wholesale or retail supply or distribution, as well as main consumers, shall accept uploading of the electricity produced from a Qualified Renewable Energy Plant, as long as it is offered as per the Law s tariff provisions in Art 14, notwithstanding the priority order specified in the Network Code or any other uploading rules (Art 13). Incentives: 75% income tax exemption for the first 10 financial years on the profits of Qualified Renewable Energy Plants (Art 15); design, engineering, construction, financing, operation, maintenance, licensing agreements and contracts, as well as sale agreements exempted from revenue stamps and university fees (Art 16). Expropriation of land permitted and leased at an encouraging fee (Art 17). Government investment and proceeds from Clean Development Mechanism of Kyoto Protocol allocated to reduce tariff on electrical power produced by Qualified Renewable Energy Plants (Arts 19 and 20). Fund for Renewable Energy and Rationalisation of Energy established to take part in developing renewable energy sources (Art 21). Potential shortcomings: Minimum 5 year experience threshold. Insufficient incentives.

13 Future of nuclear energy in the Middle East? Iran Nuclear program, launched in the 1950s as part of Atoms for Peace; temporarily abandoned after revolution in 1979; July 2006 UN Security Council demanded Iran suspend all uranium enrichment related activities. Iran s Initial National Communication to the UNFCCC included nuclear power as a renewable energy source and stated that 10-20% of the country s electrical energy was to be nuclear. Rest of the region? Bahrain, Egypt, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, Syria, Turkey, Yemen and the UAE have approached the International Atomic Energy Agency regarding development of nuclear power. GCC and International Atomic Energy Agency entered into an agreement in February 2007 to work together on a nuclear power plan for the Gulf States. IAEA is preparing a draft feasibility study to be adopted by the GCC in March Study includes infrastructure required, regulatory framework and workforce technological capabilities.

14 Future of nuclear energy in the Middle East? (continued) France and nuclear power in the Gulf: Since the presidential elections in May 2007 France has signed nuclear cooperation agreements with Morocco, Algeria and Libya (in the form of training and assistance for regulatory frameworks and ultimately nuclear power plant construction). France is reportedly looking to pursue discussions regarding nuclear cooperation with Egypt, Jordan and the Gulf countries.

15 Freshfields Bruckhaus Deringer 2008 The information and opinions contained in this presentation are not intended to be a comprehensive study, nor to provide legal advice, and should not be relied on or treated as a substitute for specific advice concerning individual situations. This presentation speaks as of its date and does not reflect any changes in law or practice after that date. LON