Evaluating the International Renewable Energy Market for the Creation of a Longstanding and Secure Energy Policy GCC Solar Power Meeting 13-14 Dec 2010 Doha, Qatar US Keynote Presentation Prof. Saifur Rahman Virginia Tech, Washington, DC Wind Energy Off-shore Wind turbines, Blyth, U.K. 2 1
Global Cumulative Installed Wind Capacity Source: Global Wind Energy Council, 2009 http://www.gwec.net Expected Installed Wind Power Capacity (MW) Year 1997-2020 MW World Wind Energy Association, World Wind Energy Report 2008 2
Cumulative Wind Turbine Capacity Country Breakdown in 2009 MW Source: USA Germany China Spain India France UK Portugal Denmark Rest of World Source: Global Wind Energy Council, 2009 http://www.gwec.net New Wind Power New Installed Capacity in 2009 Source: Source: Global Wind Energy Council, 2009 http://www.gwec.net 3
Annul Installed Wind Turbine Capacity by Region 2003-2009 Source: Source: Global Wind Energy Council, 2009 http://www.gwec.net Top Five Countries Wind Power Installations n n n n n United States Germany China Spain India What do they have in common? - All of them have robust domestic wind power turbine generator manufacturing industries 8 4
Challenges are: Environmental Impact Evacuation of Power Power System Operation and Control Evacuation of Power In the US market there is an aspirational target of 20% capacity from wind power generation by 2030 The biggest challenge is not land, not technology, or the manpower availability, it is transmission access 5
12/29/10 Solar Photovoltaics 11 World and EU PV markets in 2009 (MW) Source: Global Market Outlook for Photovoltaics Until 2014. May, 2010 http://www.epia.org/fileadmin/epia_docs/public/global_market_outlook_for_photovoltaics_until_2014.pdf 6
Regional PV distribuaon in the World (Policy- Driven scenario) Annual Additions Source: Global Market Outlook for Photovoltaics Until 2014. May, 2010 http://www.epia.org/fileadmin/epia_docs/public/global_market_outlook_for_photovoltaics_until_2014.pdf Solar PV ApplicaAons n Grid connected applications n Remote area applications n Building Integrated PV (BIPV) 14 7
12/29/10 100 kw Grid- connected Project in China 15 Remote Area PV Project in Bangladesh 16 8
12/29/10 Roof- top solar photovoltaic panels, Japan Source: Energybiz Magazine 17 BIPV in Thailand Source: Solartron, Thailand 18 9
Solar Thermal Energy Project California, USA Project: Genesis Solar Energy Project Location: Riverside County, Ca, U.S.A. Capacity: Land: Cost: 250 MW (for 150,000 homes) 800 hectares Slightly over US $1 billion In service: 2012 (expected) www.doi.gov/news/pressreleases 19 World Installed Concentrating Solar Thermal Power Capacity, 1980 - March 2010 900 800 Megawatts 700 600 500 400 300 200 100 0 1980 1985 1990 1995 2000 2005 2010 2015 Source: EPI Earth Policy Institute - www.earthpolicy.org Source: Plan B 4.0 Solar Energy Data - Updated. Mar. 11 th, 2010 http://www.earth-policy.org/index.php?/data_center/c23/ 10
Why some countries are more successful than others? Source: Interna-onal Energy Agency (IEA Sta-s-cs 2007 data, available as of September 2010) 21 Programs to encourage renewables penetraaon Renewable Portfolio Standards (RPS) Feed-in Tariff (FIT) Source: Interna-onal Energy Agency (IEA Sta-s-cs 2007 data, available as of September 2010) 22 11
Renewable Portfolio Standards (RPS) State regulators mandate certain percentage of renewables mix in generation For Example, California 2020: 20% nonhydro renewables mix by 2020 Source: Interna-onal Energy Agency (IEA Sta-s-cs 2007 data, available as of September 2010) 23 Feed- in Tariff (FIT) FIT is a renewable energy policy that offers guaranteed payments to renewable energy developers for the electricity they produce FITs are responsible for approximately 75% of global PV and 45% of global wind deployment Source: Interna-onal Energy Agency (IEA Sta-s-cs 2007 data, available as of September 2010) 24 12
Key Provisions of FIT Payment FIT policies typically include three key provisions: Long-term purchase agreements for the sale of electricity Specified price for every kwh of electricity produced Structured with contracts ranging from 10-25 years There are three broad approaches used to set the FIT payment to RE developers: Levelized cost of RE generation, plus a targeted return Estimating the value of the RE generation either to society or to the utility Auction-based price discovery mechanisms Source: Interna-onal Energy Agency (IEA Sta-s-cs 2007 data, available as of September 2010) 25 Basic FIT Payment Choice Fixed FIT policies - Guaranteed price for a fixed period of time FIT Purchase Price (c/kwh) Time FIT Price (c/kwh) Electricity Price (c/kwh) Premium FIT policies - Either a sliding or a constant premium payment on top of the spot market price FIT Premium (c/kwh) FIT Premium (c/kwh) Electricity Price Actual FIT Premium Amount (c/kwh) Time Source: Interna-onal Energy Agency (IEA Sta-s-cs Source: 2007 data, NREL, available Feed-in-Tariffs: as of September A Policy and Economic 2010) Analysis, 2009 26 13
United States Incentives/Policies for Renewable Energy Federal and few state programs 27 US Federal IncenAves for RE Renewable Electricity Production Tax Credit (PTC): Commercial and industrial sectors Amount: 2.2 /kwh for wind; 1.1 /kwh for other eligible technologies. Generally applies to first 10 years of operation. Carryover Provisions: Unused credits may be carried forward for up to 20 years following the year they were generated U.S. Department of Treasury - Renewable Energy Grants: Amount: 30% of capital subsidy for solar and small wind Ends 12/31/2010 Source: Interna-onal Energy Agency (IEA Sta-s-cs 2007 data, available as of September 2010) 28 14
US Federal IncenAves for RE Renewable Energy Production Incentive (REPI): Amount: $0.021/kWh Term: 10 years Corporate - Modified Accelerated Cost-Recovery System (MACRS) + Bonus Depreciation (2008-2010): 50% first-year bonus depreciation (remaining 50% of the adjusted basis of the property is depreciated over the ordinary MACRS depreciation schedule) Residential - Renewable Energy Tax Credit: Amount: 30% Expires: 12/31/2016 Source: Interna-onal Energy Agency (IEA Sta-s-cs 2007 data, available as of September 2010) 29 US Loan Programs U.S. Department of Energy - Loan Guarantee Program: Amount: Varies. Program focuses on projects with total project costs over $25 million USDA - Rural Energy for America Program (REAP) Loan Guarantees: Amount: Varies; Sectors: Commercial, Agricultural Maximum Incentive: $25 million per loan guarantee Source: Interna-onal Energy Agency (IEA Sta-s-cs 2007 data, available as of September 2010) 30 15
California IncenAves and Policies California Incentives/Policies for Renewable Energy Source: Interna-onal Energy Agency (IEA Sta-s-cs 2007 data, available as of September 2010) 31 California IncenAves and Policies California Feed-In Tariff - Performance-Based Incentive (time-differentiated, market-based prices): Example: FIT for Southern California Edison: At 1 PM on a weekday in June is $0.32/kWh (baseline grid supplied electricity costs about $0.20/kWh at this time). 32 16
California IncenAves and Policies Other examples: Property Tax Exclusion for Solar Energy Systems: 100% of system value; No maximum cap California Solar Initiative - PV Incentives - Performance-Based Buy-downs for systems under 30 kw at $2.50/W Performance-Based Incentives (PBI) for systems 30 kw and larger at $0.39/kWh for the first five years 33 New Jersey IncenAves and Policies New Jersey Incentives/Policies for Renewable Energy Source: Interna-onal Energy Agency (IEA Sta-s-cs 2007 data, available as of September 2010) 34 17
New Jersey IncenAves and Policies New Jersey Board of Public Utilities - Solar Renewable Energy Certificates (SRECs): Approximately $0.56/kWh as of December 2009 Property Tax Exemption for Renewable Energy Systems: 100% of value added by renewable system Solar Energy Sales Tax Exemption : Full exemption from the state's sales tax (currently 7%) for all solar energy equipment Clean Energy Capital Investment Loan/Grant Program: Grant: 50% of project cost; Loan: 0% interest for 10 years 35 Virginia IncenAves and Policies Virginia Incentives/Policies for Renewable Energy Source: Interna-onal Energy Agency (IEA Sta-s-cs 2007 data, available as of September 2010) 36 18
Virginia IncenAves and Policies Tenn Valley Authority - Generation Partners Program: $1,000 plus $0.12/kWh above the base rate for Solar PPA: 10 years Property Tax Exemption for Renewable Energy Systems: Allows any county, city or town to exempt or partially exempt solar energy equipment Virginia - Net Metering: Net excess generation credited to next bill at retail rate 37 Colorado IncenAves and Policies Colorado Incentives/Policies for Renewable Energy Source: Interna-onal Energy Agency (IEA Sta-s-cs 2007 data, available as of September 2010) 38 19
Colorado IncenAves and Policies Property Tax Exemption for Renewable Energy Systems: Allows any county, city or town to exempt or partially exempt solar energy equipment Residential Renewable Energy Rebate Program: PV: Up to $1.50/W; Wind: Up to $1.00/watt for the first 5kW and up to $0.50/watt for the next 5-10kW 39 European Union Incentives/Policies for Renewable Energy 40 20
Germany: Feed- In Tariffs Cost plus profit model (Fixed FIT Policy): - Average grid-supplied domestic electricity price: $0.29/kWh 41 UK: Feed- In Tariffs (April 2010) Cost plus profit model (Fixed Tariff): Energy FIT Duration Scale Source (USD/kWh) (years) Solar PV < 4kW (New) 0.58 25 Solar PV < 4kW (Retrofit) 0.67 25 Solar PV > 4-10 kw 0.58 25 Solar PV > 10-100 kw 0.51 25 Solar PV > 100kW - 5 MW 0.47 25 Wind < 1.5kW 0.56 20 Wind > 1.5-15 kw 0.43 20 Wind > 15-100 kw 0.39 20 Wind > 100-500 kw 0.30 20 Wind > 500kW - 1.5 MW 0.15 20 Wind > 1.5 MW - 5 MW 0.07 20 - Average grid-supplied domestic electricity price: $0.30/kWh 42 21
Italy: Feed- In Tariffs 2010 Feed-in Tariff Peak Power/Type Grid connection Upto 31.12.2010 Field Plant Partially Integrated Fully Integrated (BIPV) [kw] [USD/kWh] [USD/kWh] [USD/kWh] 1-3 kw 0.53 0.58 0.65 3 kw to 20 kw 0.50 0.56 0.61 > 20 kw 0.48 0.53 0.58 Average grid-supplied domestic electricity price: $0.35/kWh! 43 Italy: Feed- In Tariffs, contd. 2011 Feed-in Tariff (Expected) Grid connection between Dec- 2010 and Apr- 2011 Peak capacity Rooftop Ground- mounted [kw] [USD/kWh] [USD/kWh] 1 P 3 0.55 0.50 3<P 20 0.52 0.47 20<P 200 0.49 0.44 200<P 1000 0.49 0.43 P>1,000 0.48 0.43 Average grid-supplied domestic electricity price: $0.35/kWh 44 22
Spain: Feed- In Tariffs - Retroactive reduction in subsidies in 2010 - Average grid-supplied domestic electricity price: $0.19/kWh 45 Asia Incentives/Policies for Renewable Energy 46 23
India: Feed- In Tariffs (Launched - 2009) Cost plus profit model: Examples: West Bengal: Solar PV @ $0.25/kWh; PPA for 15 years Haryana: Solar PV @ $0.34/kWh; PPA for 5 years Rajasthan: Solar PV @ $0.35/kWh; CSP @ $0.31/kWh Tamil Nadu: CSP @ $0.27/kWh; Wind @ $0.08/kWh Average grid-supplied domestic electricity price: $0.08/kWh 47 China: Feed- In Tariffs BIPV capital subsidy (> 50 kw): 2009-2011 - PHASING OUT Roof- top $ 2.26/Watt BIPV $3.01/Watt Golden Sun capital subsidy (> 300 kw): 2009-2011 - PHASING OUT Grid- connected 50% of total project cost Off- grid 70% of total project cost FIT for Solar PV - 2010 Auction- based price discovery - Wind tariffs based on resource intensity $0.08 0.09/kWh - Average grid-supplied domestic electricity price: $0.05/kWh 48 24
Japan: Feed- In Tariffs Residential Solar - Net" feed-in tariff - A variant of netmetering where only excess generation receives payment Year 2009 (USD/kWh) Year 2010 (USD/kWh) Rooftop PV - "Net" FIT 0.58 0.58 Large scale PV 0.29 0.29 Wind - 0.17 - Term: 15-20 years - Average grid-supplied domestic electricity price: $0.23/kWh 49 Thailand: Feed- In Tariffs (Launched 2006) Avoided cost + Premium (called an adder ): Energy Source Adder Additional for diesel offsetting areas Additional for 3 southern provinces Duration (Years) Wind [USD/kWh] [USD/kWh] [USD/kWh] <= 50 kw 0.13 0.05 0.05 10 > 50 kw 0.10 0.05 0.05 10 Solar 0.24 0.05 0.05 10 - Total FIT = 0.12 +0.34 = $0.46/kwh - Average grid-supplied domestic electricity price: $0.12/kWh 50 25
Feed- In Tariffs Best PracAces - Payments based on the cost of generation - Payments differentiated by technology type, project size, location, and resource quality - Contracts are based on lifetime of the project - Policy stability is as important to investors as initial price - Clear interconnection rules and cost allocation procedures (e.g. for T&D) - Larger projects need to provide daily/hourly forecasts to facilitate grid balancing Source: NREL, A Policymaker s Guide to FIT Policy Design 51 Key Market Strategies n Price Support/Policies Tax Subsidies Min Fixed Payment Prices Mandates (Renewable Portfolio Standards) n Cost Reductions/Balance of Systems n New Technologies 26
12/29/10 Thank You Saifur Rahman www.saifurrahman.org 53 Thank You Saifur Rahman www.saifurrahman.org 54 27