COMPETITIVENESS AND AFFORDABILITY

4 AN OVERVIEw OF

ICER’S RENEwABLES & AFFORDABILITY

REPORT

RENEWABLES & NEW TECHNOLOGIES - COMPETITIVENESS & AFFORDABILITY ISSUES

ICER’s rationale for addressing compet-itiveness and afford-ability issues related to renewables

Over the past decade, many jurisdictions

have sought to transform their elec-

tricity system by shifting out of car-

bon-based (e.g. coal and gas) forms of

generation and towards more clean and renewable

sources (e.g. solar and wind). The most common

motivation for such a shift across nations is climate

change policy.

Competitiveness and affordability are impor-tant issues which arise in relation to the recent widespread introduc-

tion of renewables

There are other drivers for re-newables deployment, such as health (which first motivated Ontario, Canada to phase out coal-fired electricity genera-tion), energy security and af-fordability (the UK’s renewable generation strategy includes the goal of achieving a fuel mix to make consumer fuel bills less susceptible to global price fluc-tuations in fossil fuels) or “green jobs”.The Internation-al Confedera-tion of Energy R e g u l a t o r s (ICER) con-cerns itself, inter alia, with matters re-lated to afford-ability and com-petitiveness. These two important issues arise in relation to the recent widespread introduction of re-newables and the development of smarter grids required to fa-cilitate these often intermittent energy sources. ICER has asked its members to

contribute case studies from ju-risdictions, that have either ex-perienced the recent introduc-tion of renewable generation or at least readied themselves by developing various policies designed to manage the transi-tion to these new forms of en-ergy supply to contribute case studies.The result is four comprehen-

sive (standalone) case stud-ies, and an overview

report which provides some

helpful obser-vations. ICER hopes this will pro-vide regu-lators and

policy makers with tangible ex-

amples of regulato-ry and legislative tools

and frameworks that have been developed in different jurisdic-tions and that address afford-ability and competitiveness is-sues related to the introduction of renewable electricity gen-eration and new technologies.

The four markets which have been examined

through case studies are:

GuatemalaThe case study on the development of new infrastructure and the integration of new technologies in Guatemala’s electricity sector looks at the practical lessons learned by a regulator in a developing country that is considering the introduction of new technologies in the context of a massive grid expansion initiative. It is of special interest to those jurisdictions that are focused on grid develop-ment of the first order.

United States The US case study is a compilation of strategies and programs from fed-eral, state, local and regulatory initiatives throughout the United States of America.

Canada – OntarioThe Ontarian case study is about new forms of electricity supply and grid functionality, as well as measures taken to address affordability issues.

United Kingdom This case study examines the policy and strategy aimed at enabling the UK to meet its target of delivering 15% of energy from renewable sources by 2020, and the role of the regulator (Ofgem) in administrating certain government programs, including the Renewables Obligation and Feed-in Tariffs.

• Procurement: Jurisdictions have deployed a wide-range of procurement models to acquire renewable generation assets. Feed-in tariff (FIT) programs, offering fixed prices (typically above “market” rates) for renewable electricity and offering different prices for different tech-nologies have been most popular. Others have relied on more market-based and competitive procurement regimes, such as renewable portfolio standards (in the US), where the amount of renewable generation to be procured (rather than the price paid) by utilities has been specified by the government or regulator. The UK’s Renewables Obligation (RO) scheme places an obligation on licensed electricity suppliers to source a specific proportion of their electricity sales volume from renewable sources. This proportion increases annually and sup-pliers must pay a penalty in the event of failure to meet RO targets. The UK also uses a FIT program for procurement of smaller scale low-carbon generation. In Ontario, prior to adopt-ing a FIT program, some renewable generation was procured through competitive requests for proposals (RFPs).

PICTURE

PICTURE

Main findings from the experiences

reflected in the case studies:

Main findings from the experiences reflected in

the case studies

VIP • Incentives and Cost-Burden: The experiences illustrat-ed essentially two methods of funding assistance and/or incentives for increasing renewable generation. Both in-volved shifting risk and cost from renewable generation project proponents onto (1) ratepayers and/or (2) taxpay-ers.

• Price Impact and Mitigation: The switch to renewable generation has resulted in price increases to varying de-grees, resulting in extensive debates about renewable policies. Many jurisdictions have sought to mitigate the impact of increasing electricity rates, using tax-based and ratepayer-funded tools. The United Kingdom predomi-nately offers mitigation to specific vulnerable customers (e.g. elderly and low income consumers), rather than the wider population more widely as seen in Ontario.

• ICER’s Renewables and Affordability review has found that those jurisdictions that have adopted ratepayer-funded FIT programs have been successful in promoting renewable deployment quickly. However, this quick de-ployment has had the impact of putting upwards pres-sure on electricity rates. In some cases, this increase has come at an unexpectedly fast rate, resulting in the adoption of mitigation measures. In contrast, the more market-based and tax-based regimes have resulted in slower renewable deployment with a corresponding less pronounced impact on electricity rates.• ICER’s Renewables and Affordability review shows that there are many different policy instruments available to jurisdictions seeking to implement large-scale renewable generation deployment. The experiences catalogued by ICER to date will be helpful in assisting jurisdictions tai-lor specific policies to achieve a rate of deployment and corresponding price increases in an orderly and stable manner.

The International Confederation of Energy Regulators (ICER) was created at the Fourth World Forum on Energy Regulation (WFER), in 2009. It is a voluntary framework for the co-operation of energy regulators from around the globe. Its aim is to improve public and policy maker awareness and understanding of energy regulation, and to play a role in ad-dressing a wide spectrum of socio-economic, environmental and market issues. Through ICER, energy regulatory issues tran-scending regional and national boundaries can be addressed through dialogue and co-operation on a global scale. ICER’s member-ship includes over 200 regulatory authorities over six continents.

The International Confederation of Energy Regulators (ICER) was created at the Fourth World Forum on Energy Regulation (WFER), in 2009. It is a voluntary framework for the co-operation of energy regulators from around the globe. Its aim is to improve public and policy maker awareness and understanding of energy regulation, and to play a role in ad-dressing a wide spectrum of socio-economic, environmental and market issues. Through ICER, energy regulatory issues tran-scending regional and national boundaries can be addressed through dialogue and co-operation on a global scale. ICER’s member-ship includes over 200 regulatory authorities over six continents.

The International Confederation of Energy Regulators (ICER) was created at the Fourth World Forum on Energy Regulation (WFER), in 2009. It is a voluntary framework for the co-operation of energy regulators from around the globe. Its aim is to improve public and policy maker awareness and understanding of energy regulation, and to play a role in ad-dressing a wide spectrum of socio-economic, environmental and market issues. Through ICER, energy regulatory issues tran-scending regional and national boundaries can be addressed through dialogue and co-operation on a global scale. ICER’s member-ship includes over 200 regulatory authorities over six continents.

The International Confederation of Energy Regulators (ICER) was created at the Fourth World Forum on Energy Regulation (WFER), in 2009. It is a voluntary framework for the co-operation of energy regulators from around the globe. Its aim is to improve public and policy maker awareness and understanding of energy regulation, and to play a role in ad-dressing a wide spectrum of socio-economic, environmental and market issues. Through ICER, energy regulatory issues tran-scending regional and national boundaries can be addressed through dialogue and co-operation on a global scale. ICER’s member-ship includes over 200 regulatory authorities over six continents.

International Confederation of Energy Regulators (ICER) The International Confederation of Energy Regulators (ICER) was created at the Fourth World Forum on Energy Regulation (WFER), in 2009. It is a voluntary framework for the co-operation of energy regulators from around the globe. Its aim is to improve public and policy maker awareness and understanding of energy regulation, and to play a role in ad-dressing a wide spectrum of socio-economic, environmental and market issues. Through ICER, energy regulatory issues tran-scending regional and national boundaries can be addressed through dialogue and co-operation on a global scale. ICER’s member-ship includes over 200 regulatory authorities over six continents.

VWG1: Opening & Integration of Regional MarketsVWG2: Technology ChangeVWG3: Consumers IssuesVWG4: Education, Training & Best Practices

The virtual work of ICER

ICER is a virtual organisation, the backbone of which is

its website (www.icer-regulators.net) and its four virtual

working groups (VWGs):

PublicationsICER Reports:

• Examples of Methodologies Utilized to Manage Competitiveness and Af-fordability Issues related to the Introduction of Renewable Forms of Electric-ity Generation and New Technologies: An Overview Report of a Compilation

of Four Case Studies, April 2012, Ref. I12-C&A-11-04

• Experiences on the Regulatory Approaches to the Implementation of Smart Meters, April 2012, Ref. I12-C&A-08-01• Role of Energy Regulators in Guaranteeing Reliability and Security of Supply - National, Regional and Global Dimensions, March 2012, Ref. I12-SoS-08-03• Renewable Energy and Distributed Generation: International Case Studies on Technical and Economic Considerations, February 2012, Ref. I12-CC-17-03• ICER Response to the European Commission Public Consultation on the Ex-ternal Dimension of the EU Energy Policy, Ref. I11-SC-05-05, 21 February 2011• ICER Energy Efficiency Report, Ref. I10-SC-02-04, June 2010• ICER Work Plan 2010-2012• ICER 2010 Annual Report• World Energy Regulators’ Statement on Climate Change, 20 October 2009

ICER Factsheets:

• ICER’s Renewables and New Technologies Report, Ref. FS-12-04, August 2012• ICER’s Security of Supply Report, Ref. FS-12-01, May 2012• ICER’s Renewable Energy and Distributed Generation Report, Ref. FS-12-02, May 2012• ICER’s Smart Metering Report, Ref. FS-12-03, May 2012• Brochure on the International Confederation of Energy Regulators (ICER), Ref. FS-12-05, May 2012• Regulatory Practices for the Promotion of Energy Efficiency, Ref. FS-11-01, April 2011

ThE ConTEnT of ThIs lEaflET doEs noT nECEssaRIly REflECT ThE oPInIon of ThE IndIvIdUal mEmbERs of ICER.

The full report, as well as all others listed here, can be found at

http://bit.ly/ICERreports

PhoTos: sToCkfREsh.Com

www.icer-regulators.net

office@icer-regulators.net

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With the suppoRt oF the euRopean commission. this publication ReFlects the vieWs only oF the authoR(s), and the commission cannot be held Responsible FoR any use Which may be made oF the inFoRmation contained theRein.

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