ADB FINESSE Training Course on Renewable Energy

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ADB FINESSE Training Course on Renewable Energy
Energy Efficiency for Poverty Reduction

• 19th 23rd June 2006
• Nairobi, Kenya

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Module 10Policy and Regulatory Issues in
Developing and Promoting RE and EE in Africa

• Dr. Frederick Nyang

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Policy Barriers

• Inadequate Policy and Legal frameworks
• Often lack comprehensive/formal policy statements
  White Paper on energy
• Lack of harmony amongst existing policies
• Inconsistency in government policy
• Existing policies strongly biased towards non-RE
  and ignore REEE
• Sectoral investment and development plan
• Lack of comprehensive sectoral development plan

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Policy Barriers

• Weak policy formulation processes
• Non-inclusive elitist policy formulation
  processes which exclude marginalised groups
• Inadequate research backup for policy formulation
  and analysis
• Inadequate data-base to inform comprehensive
  policy making

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Policy Barriers

• Inappropriate incentive systems
• Fiscal policies non-supportive of RE/EE
• Weak support for local manufacture of RE/EE
  systems
• Poor funding for the development and promotion of
  RE/EE projects

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Policy Barriers

• Tariff policies
• Non-differentiated tariffs
• Tariff policies ignoring social and environmental
  benefits
• Science and technology policy
• Lack of awareness on existing opportunities,
  technology, and innovations for promoting RE/EE

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Regulatory Barriers

• Administrative procedures
• Onerous licensing and permitting requirements
• One size fits all approach
• High compliance costs
• Regulatory Communications
• Complex language of regulation
• Lack of, or poor consultations with publics
  including government, research institutions

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Regulatory Barriers

• Technical issues
• Outdated or inappropriate technology
• Performance standards including interconnection
  policy
• Trading arrangements
• Market power, tariffs and subsidies
• Bulk tariffs, PPAs

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Overcoming Policy Barriers

• Barrier
• Inadequate policy and legal framework

• Solutions
• Energy policy framework must explicitly recognise
  RE/EE and innovations such as Green Pricing
  RE Portfolio Standards Net Metering and
  Public Benefits Funds
• Formulate comprehensive energy policy framework
  appropriately harmonised with relevant existing
  policies

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Overcoming Policy Barriers

• Barrier
• Weak policy formulation processes
• Inappropriate incentive systems

• Solutions
• Adopt an all inclusive policy formulation process
  backed by good research based on good data and
  include marginalised groups
• Establish incentive systems that level the
  playing field and recognise the social and
  environmental benefits of RE/EE systems and
  innovations

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Overcoming Policy Barriers

• Barrier
• Poor funding

• Solutions
• Appropriate policies and government support
• Adopt innovative funding approaches such as the
  Public Benefits Fund
• Establish incentives for private sector
  participation and mobilisation of community
  resources

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Overcoming Policy Barriers

• Barrier
• Tariff policy
• Science Technology policy

• Solutions
• Adopt tariffs which capture economic, social, and
  environmental costs and where subsidies are
  required ensure transparent and efficient
  targeting
• Formulate ST policy to facilitate scientific and
  technological research, development and
  innovation RE/EE systems will benefit

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Overcoming Regulatory Barriers

• Barrier
• Administrative procedures

• Solutions
• Tailor regulatory procedures to suit key interest
  groups (market segments) e.g. light handed
  regulation where appropriate
• Fewer and simpler procedures minimise compliance
  costs (also investor friendly)

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Overcoming Regulatory Barriers

• Barrier
• Regulatory Communications

• Solutions
• Regulatory communications should involve
• public consultations and participation
  especially with government, marginalised groups
  and researchers
• simple everyday language

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Overcoming Regulatory Barriers

• Barrier
• Market power, tariffs, subsidies
• Technology
• Performance Standards

• Solutions
• Implementation of government social policy should
  be balanced with economic regulation objectives
  to achieve optimal outcomes
• Adopt technical innovations such as Net-Metering
  to promote RE/EE
• Localise standards (Mkt segment)

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Developing/promoting RE/EE optionsKey policy
and regulatory issues to consider

1. The policy and legal frameworks and the
   provisions for RE/EE
2. Sectoral investment and development plan and its
   provisions for RE/EE
3. Energy pricing policy, including tax compliance
   issues
4. Incentives structure
5. Local capacity to implement project

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Developing/promoting RE/EE optionsKey policy
and regulatory issues to consider

1. The regulatory framework and its provisions for
   RE/EE
2. Licensing and permitting requirements and
   procedures including scope of regulation
   (economic, technical, competition, EHS, public
   interest)
3. Trading arrangements and performance standards
4. Regulatory reporting and compliance
5. Regulators track record

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Case Study Geo-thermal Energy in Kenya

• Olkaria Geothermal Field
• Olkaria geothermal field is located in the Rift
  Valley
• In 1970 GoK and UNDP jointly funded
  investigations and exploratory drilling in
  Olkaria
• Olkaria I 45MWe plant installed 1985
• Olkaria III 12MWe IPP plant installed 2000
• Olkaria II 70MWe plant installed 2003
• The geothermal plant provides base-load
  generation and 10 of total installed capacity
  which is RE

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Case Study Geo-thermal power in Kenya

• Comprehensive legal and policy framework
  governing geothermal resource development and
  exploitation
• Geothermal Resources Act No. 12 of 1982
• The rolling 20-year electricity sub-sectoral
  investment and development plan incorporates
  geo-thermal power
• Indicative Update of the Least Cost Power
  Development Plan (Year)
• Sessional Paper No.4 recognises geothermal energy
  and has special provisions for its development
  and exploitation

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Case Study Geo-thermal power in Kenya

• The policy formulation process for geo-thermal
  power development took into account the rights
  and cultural heritage of the indigenous Maasai
  people domiciled in the project area.
• GoK and KenGen have developed a highly skilled
  human resource capacity in geothermal sciences
  who undertake high level applied research
  generating data and knowledge utilised by KenGen
  in the development of the geothermal resource and
  in operating the power plants

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Case Study Geo-thermal power in Kenya

• KenGen, now owned 70 by GoK which has fully
  supported, promoted and funded its geo-thermal
  activities through budgetary allocations and
  support from development partners
• KenGen receives a flat rate bulk tariff for
  energy from KPLC, however, GoK fully underwrites
  its geothermal exploration and development
  activities
• GoK recognises the environmental, social and
  economic benefits of geothermal energy
• Local geothermal research activities are governed
  by the Science and Technology Act Cap 250 laws of
  Kenya

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Case Study Geo-thermal power in Kenya

• geothermal power generation is comparable to
  non-RE generation sources hence receives the same
  treatment in terms of inter-connection and
  performance standards
• The trading arrangements are currently governed
  by an approved PPA
• GoK subsidises the cost of exploration, drilling
  and steam development
• The Electric Power Act, 1997 restructured the
  electric power sub-sector allowing private sector
  participation in electricity generation. IPP
  geothermal power plant installed in 2000

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Module 10Discussion Topics Questions

• What policy and/or regulatory barriers are
  affecting the development and promotion of RE/EE
  in your country?
• How can these barriers be overcome?