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Renewable Energy Support Policies

05.08.2017 — 0

Renewable energy support policies and how Solar DAO use them to achieve Project goals. World’s renewable energy support policies overview.

Solar DAO is a closed-end, blockchain-based investment fund created to finance construction of PV solar plants around the world.

Solar DAO offers a new financial tool that allows everyone to participate in financing the construction and management of solar parks worldwide, constantly expanding their capacity. Solar DAO will be financed through the ICO for tokens that will grant access to the project’s 100% profit through dividends distribution. The preliminary ICO closes on August 31st.

A significant part of the Solar DAO opportunity is renewable energy support policies that are currently implemented in the most countries of the world. These policies include governmental regulations and fiscal incentives that make investing into PV solar plants construction so attractive.

This brief overview will guide you through the world’s renewable energy support policy landscape, stressing the most relevant policy measures.

Support policy measures

Most nation-states in the world support renewable energy through different policy measures. These may include, for example, public funding of R&D to encourage the development of enabling technologies, like smart grids or energy efficient homes. On the demand side, governments attempt to regulate energy behavior of businesses and individual consumers, by introducing energy consumption quotas and net metering.

The most important and widespread measure, however, is to support renewable energy generation through regulations and direct financial incentives (e.g. subsidies, tax credits etc). According to the recent report by REN21, in 2016, like in past years, most of the global policy efforts in support of renewable energy were targeted at power generation. This aspect is also the most relevant in the case of PV solar plants.

(A) Solar panels. (B) Inverter system. (C) Central grid.

A classification of policies

Depending on the authority that designs and implements policies, the latter could be national or subnational (regional, city-level, etc). Accordingly, all such policies can be roughly divided into two broad categories.

  1. First, there is** regulation,** implying the state’s rule-making activities. These may include designing tariffs, setting energy consumption quotas, net metering, etc.
  2. Second, states or subnational authorities may provide direct financial incentives to change energy behavior of businesses and individuals, as well as subsidize renewable energy producers.
  3. Third, there are energy efficiency targets — official commitments in the form of a plan or a set of goals to be achieved by a government at the local, national, or regional level. Energy efficiency targets imply that certain amount of energy efficiency is to be achieved by a predetermined future date. This can be done by different means and can sometimes be backed by specific compliance mechanisms or policy support measures.

The following list summarizes different kinds of policies currently being implemented across the world.

Regulatory policies, fiscal incentives, and energy efficiency targets

1. Feed-in tariff / Feed-in premium payment

The most important policy instrument in the field of PV solar plants construction. A feed-in tariff, also known as FiT, typically guarantees renewable energy generators specified payments per unit over a fixed period of time. For example, a PV solar plant selling electricity to the grid will be guaranteed a specific amount of USD per kWh generated. Accordingly, feed-in tariffs may also establish regulations which allow energy generators to connect and sell power to the grid. The payment may be structured as a guaranteed minimum price or as a premium paid on top of the wholesale electricity price (feed-in premium).

2. Electric utility quota obligation/ RPS Net metering

A measure that requires designated parties (consumers, suppliers, generators) to meet a certain energy efficiency target (initially set up at a specific minimum and gradually increasing). Similar quota obligations also exist in different other spheres, such as transport and heat generation. Mandates may include certain specific energy efficiency portfolio standards (EEPS) or renewable energy portfolio standards (RPS). These refer to the obligations to use a predetermined minimum targeted renewable share of installed capacity, or electricity or heat generated or sold, and may also include penalties for non-compliance.

3. Tradable REC

The RECs are renewable energy certificates awarded to certify the generation of one unit of renewable energy (typically 1 MWh of electricity or heat). Certificates can be accumulated to meet renewable energy obligations and also provide a tool for trading among consumers and/or producers. They also are a means of enabling purchases of voluntary green energy.

4. Tendering / Reverse auctions

Tenders are procurement mechanisms whereby energy supply or capacity is competitively solicited from sellers. The sellers offer bids at the lowest price acceptable for them. Bids may also be evaluated by other factors (i.e. not related to the price)

Fiscal incentives and public financing

  1. Investment or production tax credits
  2. Reductions in sales, energy, VAT or other taxes
  3. Energy production payment
  4. Public investment, loans, grants, capital subsidies or rebates

Energy efficiency targets

Energy efficiency targets are the primary means for a government to express its commitment to energy efficiency and renewable energy generation. As of year-end 2016, renewable energy targets were in place in 176 countries. Compared to policies or fiscal incentives, targets are a “softer” means to promote renewable energy. However, they do provide important signals to investors, producers and other market participants, implying the country’s readiness to support renewable energy. In some cases they work so well that become outdated too quickly: for example, in Europe solar photovoltaics has already exceeded its both 2014 and 2020 targets.

From the point of view of energy efficiency targets, the most important international policy document is the Paris Agreement United Nations Framework Convention on Climate Change (UNFCCC) dealing with global environmental issues and starting in the year 2020. The Agreement was adopted consensually by 196 countries in December 2015. As of yet, 195 UNFCCC members have signed the document and 158 have ratified it.

Upon the adoption of the Paris Agreement many countries communicated their Nationally Determined Contributions (or NDCs, 117 at the end of 2016), half of which included targets for increasing renewable energy. Prior to the Paris Conference, participants have also submitted draft plans called Intended Nationally Determined Contributions (INDCs). Both NDCs and INDCs are important signals about the country’s willingness to support renewable energy, including solar photovoltaics.

Which policies matter for solar photovoltaics?

Experience of the past decade shows that the most important policy measures implemented in support of renewable energy are focused on the supply side, that is, on energy generation.

Feed-in policies — feed-in tariffs (FITs) and feed-in premiums (FIPs) — remained the most prominent form of regulatory policy support for renewable power promotion in 2016. Policy makers continue to adjust FIT rates as the technologies become more cost-competitive in ever more areas.

By 2016, feed-in policies were adopted by 104 countries, including Portugal (1988), Germany (1990), Italy (1992), Slovenia (1999), France (2001), Israel (2004), Ukraine (2009), UK (2009), Kazakhstan (2013).

Across the world, FiTs are increasingly implemented along with tenders. Tenders for renewable energy are the most rapidly expanding form of support for renewable energy project deployment and are becoming the preferred policy tool for supporting deployment of large-scale projects. At least 34 countries issued new tenders in 2016; most renewable energy tenders were for solar PV.

Solar DAO expansion plan: policy aspects

Solar DAO has an ambitious expansion plan, including construction of the new PV solar plants in Portugal, Israel, Kazakhstan, and Ukraine. These four countries will be the targets for the first stage of the project’s expansion. Still, it is worth taking a look at their policies to support solar energy generation.

Israel is a home for the entire spectrum of renewable energy generation support policies. Israeli officials have submitted INDCs and NDCs to the Paris Conference, thus aligning themselves with the UN commitment to support renewable energy. At the national level, Israel uses Feed-in tariffs (since 2004), electric utility quotas and net metering, as well as heat obligation mandates. Moreover, the Israeli state is also supporting renewable energy generators through public investing in and loans to renewable energy producers, and also reduces sales, energy and other taxes for them. In addition, tendering is also used on sub-national level. Thus, in 2016 tenders were held to generate at least 1GW, as well as 500 MV in the Negev desert and 40 MW in Ashalim, to be generated from solar photovoltaics.

Portugal is also among the leaders in terms of renewable energy support policies. Portugal’s NDC feature targets for renewable energy generation increases, and the government also implements feed-in tariffs and premiums, electric utility, transport and heating quotas, as well as public financial support of renewable energy generation and tax reductions. Tradable RECs are also in circulation.

Policy landscape is somewhat less diverse in Kazakhstan. The country has also expressed commitment to the UN policy for renewable energy support in its NDC and INDC, and uses feed-in tariffs, as well as tradable RECs. Public investments and subsidies are also in place.

Ukraine stands close to Kazakhstan with respect to regulations, but offers more measures of financial incentivizing renewable energy producers. Theses include public investments, tax reductions, and other similar measures. In 2016, the country has also changed its FiT policies, having reduced the rates from EUR 0.16 per kWh to EUR 0.15 per kWh for commercial solar power installations greater than 10 MW.

Targets for the future

In Israel, the targets are in place to achieve the share of 13% of primary energy generated from renewable sources by 2020, and 17% by 2025. More specifically, in terms of electrical energy, Israel’s goals are to increase its 2015 level of 3% of renewable electricity up to 10% in 2020, and 17% in 2030.

Portugal’s plan is even more ambitious: with its 28% of final energy generated from renewable sources, the government plans to build on this success and expand up to 31% by 2020 and 40% by 2030. In terms of renewable electricity, by 2015 Portugal has already achieved the spectacular 53% of electricity generated from renewable sources. Its plan for the next decade is to climb up to 60% by 2020.

Ukraine starts from a more modest background, with only 2.7% of primary energy generated renewably, but aspires to achieve as much as 18% of primary energy by 2030, and 11% of final energy by 2020, to be generated from renewable sources. Ukraine also plans to have 11% of its electricity generated from renewable sources by 2020, and increase this level up to 20% by 2030.

The situation is similar in terms of the targets for Renewable Power Installed Capacity and/or Generation. Thus, Kazakh government aims to achieve solar power generation level of 713.5 MW at 28 solar electric plants by 2020. In Portugal, the government plans to achieve 670 MW by 2020 in solar photovoltaics.

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