implementing the energy [r]evolution in developing countries
This chapter outlines a Greenpeace proposal for a feed-in tariff system in developing countries whose additional costs are financed by a combination of new sectoral emissions trading mechanisms and direct finance from technology funds to be developed in the Copenhagen climate deal.
The Energy [R]evolution scenario shows that renewable electricity generation has huge environmental and economic benefits. However its investment, and hence total generation, costs, especially in developing countries, will remain higher than those of existing coal or gas-fired power stations for the next five to ten years. To bridge this investment and cost gap between conventional fossil fuel-based power generation and renewables, a support mechanism is needed.
The Feed in Tariff Support Mechanism (FTSM) is a concept conceived by Greenpeace International10. The aim is the expansion of renewable energy in developing countries with financial support from industrialised nations – a mechanism to rapidly deploy renewable energy technologies via a new sectoral no-lose Mechanism or Technology Transfer fund under the UNFCCC. With the Kyoto countries currently negotiating the second phase of their agreement, covering the period from 2013-2017 a FTSM mechanism could be built around new sectoral no-lose Mechanisms for developing countries. Emission units could generated for sale from a sectoral no- lose Mechanism in a developing country power sector and proceeds used to fund the additional costs of the Feed in Tariff system in that country. For some countries a directly funded Feed in Tariff Support Mechanism may be more appropriate than a sectoral no-lose.
need for bankable renewable energy support schemes
Since the early development of renewable energies within the power sector, there has been an ongoing debate about the best and most effective type of support scheme. The European Commission published a survey in December 2005 which provides a good overview of the experience so far. According to this report, feed-in tariffs are by far the most efficient and successful mechanism. Globally more than 40 countries have adopted some version of the system.
Although the organisational form of these tariffs differs from country to country, there are certain clear criteria which emerge as essential for creating a successful renewable energy policy. At the heart of these is a reliable, bankable support scheme for renewable energy projects which provides long term stability and certainty11. Bankable support schemes result in lower cost projects because they lower the risk for both investors and equipment suppliers. The cost of wind-powered electricity in Germany is up to 40% cheaper than in the United Kingdom12, for example, because the support system is more secure and reliable.
For developing countries, feed-in laws would be an ideal mechanism for the implementation of new renewable energies. The extra costs, however, which are usually covered in Europe, for example, by a very minor increase in the overall electricity price for consumers, are still seen as an obstacle. In order to enable technology transfer from Annex 1 countries to developing countries, a mix of a feed-in law, international finance and emissions trading could be used to establish a locally based renewable energy infrastructure and industry with the assistance of OECD countries.
The four main elements for successful renewable energy support schemes are:
• Clear, bankable pricing system.
• Priority access to the grid with clear identification of who’s responsible for what in terms of interconnection and transition, and how it is incentivised.
• Clear, simple administrative and planning permission procedures.
• Public acceptance/support.
The first is fundamentally important, but it won’t help if you don’t have the other 3.
learning from experience
The FTSM program brings together three different support mechanisms and builds on the experience from 20 years of renewable energy support programmes.
experience of feed in tariffs
• Feed-in tariffs are seen as the best way forward and very popular, especially in developing countries.
• The main argument against them is the increase in electricity prices for households and industry, as the extra costs are shared across all customers. This is particularly difficult for developing countries, where many people can’t afford to spend more money for electricity services.