ENCOURAGING RENEWABLE ENERGY DEVELOPMENT: A Handbook for International Energy Regulators January 2011 This publication is made possible by the generous support of the American People through the United States Agency for International Development (USAID). The contents are the responsibility of NARUC and do not necessarily reflect the views of USAID or the United States Government. Prepared by Isabel Bjork Catherine Connors Thomas Welch Deborah Shaw William Hewitt The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. www.naruc.org/international (cover photo credit: Julie Taylor, NARUC 2009) ACKNOWLEDGEMENTS The United States Agency for International Development (USAID), the National Association of Regulatory Utility Commissioners (NARUC) and their consultant, Pierce Atwood LLP, would like to thank all the regulators that contributed their time and expertise to this Handbook. In particular, we would like to thank the regulators and experts who helped us build and research case studies. Without the contribution and support of the following organizations these case studies would not have been possible: Armenian Public Services Regulatory Commission (PSRC), Comisión Nacional de Energía Eléctrica de Guatemala (CNEE), Egyptian Electric Utility & Consumer Protection Regulatory Agency (EgyptEra), Electricity Control Board of Namibia (ECB), Electricity Regulatory Commission of Jordan (ERC), Energy Regulatory Commission of the Philippines (ERC), Philippines Energy Regulatory Commission (ERC), , Renewable Energy & Energy Efficiency Institute (REEEI) Polytechnic of Namibia and Superintendencia General de Electricidad y Telecomunicaciones de el Salvador (SIGET). We would like to extend a special note of gratitude to the regional regulatory associations that provided outreach to national regulators in support of this Handbook: Asociación Coordinadora de Entidades Reguladoras de Energía Eléctrica de América Central (ACERCA), Regional Electricity Regulators Association of Southern Africa (RERA), African Forum for Utility Regulators (AFUR), Organization of Caribbean Utility Regulators (OOCUR), and Asociación Iberoamericana de Entidades Reguladoras de la Energía (ARIAE). NARUC member State Commissioners and Commission Staff also provided strong leadership to ensure the successful publication of this Handbook. In particular we thank Commissioner Jim Gardner, Mr. John Rogness and Ms. Gretchen Gillig of the Kentucky Public Service Commission, and Mr. Nathan Phelps of the Massachusetts Department of Public Utilities for their guidance on this publication. NARUC would like to express its strongest appreciation to the Bureau for Economic Growth, Agriculture, and Trade at USAID, especially to Ms. Simone Lawaetz, our Agreement Officer’s Technical Representative. In addition, we would like to acknowledge the excellent work of our colleagues and NARUC staff, including Ms. Erin Skootsky, Mr. Matthew Gardner, Ms. Barbara Kosny and Ms. Bevan Flansburg. Acknowledgements {W2166181.1I II TABLE OF CONTENTS ACKNOWLEDGMENTS .......................................................................................................................................... I ACRONYMS ......................................................................................................................................................... V EXECUTIVE SUMMARY ......................................................................................................................................... 1 INTRODUCTION ................................................................................................................................................10 PART I: COMMON ISSUES IN RENEWABLE ENERGY PROMOTION ...............................................................12 CHAPTER 1: DEFINITIONS AND RATIONALE FOR RENEWABLE ENERGY ....................................12 CHAPTER 2: UNDERSTANDING THE CHALLENGES TO RENEWABLE ENERGY EXPANSION: TECHNOLOGY AND ECONOMICS ...............................................................................19 NAMIBIA: OPTIMIZING DOMESTIC RESOURCE POTENTIAL ..........................................................25 CHAPTER 3: OVERVIEW OF CONSIDERATIONS FOR INVESTORS .................................................31 CHAPTER 4: POLICY AND REGULATORY MECHANISMS IN SUPPORT OF RENEWABLE ENERGY ...........................................................................................................................35 THE PHILIPPINES: THE REGULATOR ADOPTS THE COUNTRY’S FIRST FEED-IN TARIFF RULES........................................................................................................................................47 CHAPTER 5: INTERNATIONAL AGREEMENTS, REGIONAL PARTNERSHIPS AND NATIONAL PLANS ................................................................................................................................53 CHAPTER 6: THE REGULATORY ENVIRONMENT ..........................................................................60 EGYPT: BUILDING THE FOUNDATION FOR RENEWABLE ENERGY INVESTMENT .........................71 PART II: SPECIFIC TYPES OF RENEWABLE ENERGY AND CASE STUDIES .....................................................78 CHAPTER 7: HYDROPOWER ...........................................................................................................78 ARMENIA: REGULATORY SUPPORT FOR SMALL HYDROPOWER DEVELOPMENT .......................82 CHAPTER 8: WIND POWER ............................................................................................................87 JORDAN: RECENT STEPS TO BRING RENEWABLE ENERGY TO MARKET ......................................90 CHAPTER 9: SOLAR ENERGY ..........................................................................................................95 CHAPTER 10: BIOMASS ...................................................................................................................98 Table of Contents {W2166181.1}III CHAPTER 11: GEOTHERMAL ENERGY ........................................................................................ 102 EL SALVADOR: GEOTHERMAL DEVELOPMENT .......................................................................... 105 CHAPTER 12: DISTRIBUTED GENERATION ................................................................................ 112 GUATEMALA: DISTRIBUTED GENERATION................................................................................ 118 CONCLUDING COMMENTS ........................................................................................................................... 127 BIBLIOGRAPHY ................................................................................................................................................ 129 IV ACRONYMS ACERCA – Asociación Coordinadora de Entidades Reguladoras de Energía Eléctrica de América Central ACP – Alternative Compliance Payment AFUR – African Forum for Utility Regulators ARIAE – Asociación Iberoamericana de Entidades Reguladoras de Energía – Latin America and Spain BOOT – build, own, operate and transfer CAFTA – Central American Free Trade Agreement CDM – Clean Development Mechanism CIDA – Canadian International Development Agency CNEE – Comisión Nacional de Energía Eléctrica CSP – concentrating solar power DANIDA – Danish International Development Agency DFID – United Kingdom's Department for International Development DG – distributed generation DNA – Designated National Authority DOE – Department of Energy DRG – Distributed Renewable Generation EAPIRF – East Asia and Pacific Infrastructure Regulatory Forum ECB – Electricity Control Board ECG – Electricity Cooperation of Ghana EE – energy efficiency EEHC – Egyptian Electricity Holding Company EgyptEra – Egyptian Electrical Utility and Consumer Protection Regulatory Agency Acronyms {W2166181.1}V ENTSO-E – European organization of transmission system operators ERC – Electricity Regulatory Commission ERRA – Energy Regulators Regional Association – Central, Eastern Europe and Eurasia ESMAP – Energy Sector Management Assistance Program EU – European Union FIT-All – Feed-in Tariffs Allowance FITs – feed-in tariffs GDP – gross domestic product GEDAP – Ghana Energy Development and Access Project GEF – Global Environment Facility GHG – greenhouse gas GO – Guarantees of Origin GPOBA – Global Partnership on Output-Based Aid GPRS – Growth and Poverty Reduction Strategy GREENfund – Ghana Renewable Energy Fund INDE – National Electrification Institute (Guatemala) IPPs – Independent Power Producers JEA – Jordan Electricity Authority lcoe – levelized cost of electricity MEMR – Ministry of Energy and Mineral Resources (Jordan) MME – Ministry of Mines and Energy (Namibia) NAMAs – Nationally Appropriate Mitigation Actions NAP – National Action Plan NAREA – New and Renewable Energy Authority (Egypt) NARUC – National Association of Regulatory Utility Commissioners (US) NED – Northern Electrification Department (Ghana) VI Acronyms NEPCO – National Electric Power Company (Jordan) NGCP – National Grid Corporation of the Philippines NGOs – non-governmental organizations NPC – National Power Corporation (Philippines) NREB – National Renewable Energy Board (Philippines) NTGDR – Norma Técnica para la Conexión, Operación, Control y Comercialización de la Generación Distribuida Renovable (Guatemala) PEMC – Philippine Electricity Market Corporation PPAs – power purchase agreements PSALM – Power Sector Asset and Liabilities Management