7/17/2019 1

Regulatory Incentives to Promote RE Investment

International Forum on Unlocking Investment Opportunities in

Renewable Energy for the ASEAN Region

July 22, 2019

Sima Thani Hotel, Nakhon Ratchasima, Thailand

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USAID CLEAN POWER ASIA

• USAID Clean Power Asia Overview

• Policies and regulatory incentives for RE

– Existing incentives in ASEAN

– Barriers for RE adoption

– Supporting regulations

• Supporting activities

– Solar pilot auction in Lao PDR

– DPV economic and technical impacts and policies in Southeast Asian countries

– Energy storage system application in Vietnam

• Looking forward to the future – Emerging trends

Content

7/17/2019 2

USAID Clean Power Asia – Overview

5 years: June 2016 – June 2021

Regional clean energy program

Focus on Lower Mekong countries

(Lao PDR, Thailand, Vietnam and

Cambodia) + SE Asian countries

(the Philippines, etc.)

Goals:

15 laws/policies/regulations

$750 M USD investment

mobilization

500 MW of installed RE

3.5 M tCO2e reduction

Implemented by Abt Associates and

partners

Funded by USAID (United States

Agency for International

Development)

Provide market signal

Establish market

Scale up market

Aims to increase deployment in ‘grid-connected’ renewable energy in SE Asia

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• Improved data and tools

• Consideration of RE in power sector planning

• Incentivizing RE and removing policy and regulatory barriers

• Mobilizing investment through improved bankability and facilitating financing

Focused on individual country (LM and Southeast Asia)

• Promote RE Data Explorer and other planning tools

• ASEAN Interconnection Masterplan Study 3rd update (AIMS III)

• Scaling up data, planning approaches and tools, policies and regulations and investment mobilization regionally

Regional Activities

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USAID Clean Power Asia – Overview

• Improved data and tools

• Consideration of RE in power sector planning

• Incentivizing RE and removing policy and regulatory barriers

• Mobilizing investment through improved bankability and facilitating financing

Focused on individual country (LM and Southeast Asia)

• Promote RE Data Explorer and other planning tools

• ASEAN Interconnection Masterplan Study 3rd update (AIMS III)

• Scaling up data, planning approaches and tools, policies and regulations and investment mobilization regionally

Regional Activities

USAID Clean Power Asia – Overview

7/17/2019 5

Policy and regulatory incentives for RE

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Feed-in Tariff (FIT)

• Administratively set the price to promote development

• Provide incentives to increase return on investment

• Typically use in the early stages for RE promotion

Competitive Procurement

• Competitive bidding or tenders for energy

• Scaling up capability

• Transparency and typically lower cost

Net Metering

• Net metering/billing

• Self consumption

• Buy all sell all

Renewable Portfolio

Standards (RPS) and Tradeable

RECs

• Increase RE in portfolio of generators/distributors

• Create market for RECs (Renewable Energy Credits)

Other Incentives

• Tax incentives (tax/import duty exemptions)

• Soft loan

• Capital subsidy

Policies supporting RE

Source: Smithsonianmag.com

7/17/2019 7

Existing RE targets and incentives in ASEAN

Source: USAID Clean Power Asia (2017). DESIGNING RENEWABLE ENERGY INCENTIVES AND AUCTIONS: LESSONS FOR ASEAN

7/17/2019 8

Barriers for RE investment

Lack of understanding and awareness of RE

• Technical know-how

• Impact understanding

• Capacity

Funding and resources

Technical limitation• RE resource availability

• Equipment/Supply availability

• Grid access

Financial risks• Lack of financing options

• Off-taker risks

• Country risks

Lack of / unclear / inconsistent supporting regulations

Permitting and Approval Processes

Policy Uncertainties

7/17/2019 9

Supporting regulation to promote RE investment

Supporting Regulations

Power Offtake

Grid Connection

Technical Standards

Permitting• Offtaker

• Tariff regime

• Contract terms

• Grid code

• Distribution code

• Grid connection check

• Grid impact study

• Equipment standards

• Installation standards

• Technology specific

• Standard process

• Approval time

• Website/Online

platform

• Inspections

7/17/2019 10

Cambodia Lao PDR Thailand VietnamSupporting

regulations

related to power

purchasing

Need supporting

regulations for solar

development

Need supporting

regulations for VRE

development

Inconsistency among utilities

Tariff for rooftop is still being

decided (ERC)

Least acceptable contract term – 20 years

Limited time for PPA regime – until June 2019

(waiting for new/revised Decision)

Offtaker risk

Grid connection

regulations

Need distribution

code

Out-of-date

transmission code

(since 2009)

Need update for

national grid code (since

2014 and focused

mostly for hydro)

Need distribution code

Inconsistent grid connection

requirements between EGAT, MEA,

PEA

Need detail regulation of performance standards

and technical connection requirements (such as

real-time communication for capacity >1MW) in

grid code

Technical

standards

Need installation

standards

Need technical and

installation standards

Current LEPTS* focused

on hydro

Need revision to building and fire

code to accommodate solar rooftop

Need installation standards

Need revision to building and fire code to

accommodate solar rooftop

Permitting

process

Need permitting

process for solar

Need permitting

process for solar

Much paperwork needed

Difficult to track application status

Lack of support to answer questions

Unclear permitting process

Need convenient platform and clear guidelines

Involves many government authorities and varies

across the different provinces

Summary of regulation gap analysis in LM countries

Source: Review of Supporting Regulations (USAID Clean Power Asia, 2017), Why are grid code important (ERAV)*LEPTS – Lao Electrical Power Technical Standards

7/17/2019 11

Supporting activities of USAID Clean Power Asia

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Supporting activity – Solar pilot auction in Lao PDR

Policy Support

Regulation Support

Coordination

Capacity

Building

Auction Design

Auction

Documents

Auction

Process

Assess

Requirements

Technical Connection

Requirements for

solar

Technical Standards

for solar

Term of Reference

for Pre-Feasibility

Study for solar

Term of Reference

for Final-Feasibility

Study for solar

Lao Grid Code (2014)LEPTS (Lao Electrical Power

Technical Standards)

New

Existing

Auction PackageBidding documents

Auction

Implementation

Legend

Bid Requirements Bid Evaluation

Site Selection Assessment

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Study of DPV impact on utility revenue and rate

Report - DPV impact on utility revenue and rate (Nov 27, 2017)

Policy Brief (Aug 17, 2017)

NREL, ERI (Chula)

Proposed net billing policy (DEDE)

Thailand

Previous activities

Study three DPV impact analyses

Report – DPV economic and technical impacts for the Philippines (Mar 15, 2019)

NREL, LBN

Revised net-metering policy (DOE, ERC)

Philippines

International review

Customer Economics

Report – Chapter 1 on international review (Jan 17, 2019)

Report – Chapter 4.2 on customer economics (Mar 13, 2019)

USAID V-LEEP, NREL

Revised net-metering policy to replace Decision 11 (EREA)

Vietnam

DPV impact studies

Customer economics

Utility revenue and rate

Technical impact

International review

Current activities

1. Technical input to DC (May-July 2019)

2. Experts for public consultation events (Aug 2019)

3. Post-public consultation support (Aug-Sep 2019)

Activities: Support Department

Circular (DC) on NM policy

Philippines

Technical input to DC (similar to policy brief) – July 2019

Output

Supporting activity – DPV economic and technical impacts and policies in

Southeast Asian countries

Activities

Output

Partners

Policy

Impact

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Supporting activity – Energy Storage System in Vietnam (1/2)

USAID Clean

Power Asia

EREA/MOIT

USAID V-LEEP

Chapter 1 - Overview of

Energy Storage System

Chapter 3 - Developing the

Energy Storage Market in

VietnamChapter 4 –Assessment of the value of

battery energy storage projects in Vietnam

Technical

Analysis

Chapter 2 - Role of Energy

Storage in Vietnam Economic

Analysis

ESS Study

Subcontract

Input

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Supporting activity – Energy Storage System in Vietnam (2/2)Identify Issues and Refining Scope

•Many solar projects coming online

•Limited grid capacity causing congestion and curtailment

•Determine base case and scenarios

Data Collection

•Existing and upcoming solar projects

•Load demand/profile

•Single Line Diagram

•Substation and distribution transformers

•SCADA

•Grid expansion plan

Grid Modeling

•Using grid modeling tool and data to develop model

•Verify and validate model accuracy from SCADA data

Run Simulation and Optimization

•Quantify grid congestion

•Curtailment to reduce congestion

•Apply BESS to alleviate congestion and curtailment

•Optimize BESS sizing and lifespan

Analyze Result -Technical

•Applicability of BESS to address grid congestion and curtailment

•Limitations and shortfalls

•Recommendations

Technical

Analysis

Economic

Analysis

Data Collection

•1 week data points for substation capacity

•Hourly load data

•Capital Cost

•Financial Assumptions

•Tariff/FiT

Economic Evaluation

•Determine Payback Period, NPV, IRR for solar PV and solar PV + BESS

Analyze Result -Economic

•Cost effectiveness

•Value stream of BESS

•Recommendations

Policy and

Regulatory

Recommendations

BESS = Battery Energy Storage System

Result from Technical Analysis is used in the Economic Analysis

7/17/2019 16

Looking forward to the future – Emerging trends

7/17/2019 17

DER Management

and DRP

Energy Storage

Microgrids and Community

Energy

Data Analytics, IoT and AI

Energy Blockchain and

Prosumers

Grid Parity and Declining

RE Prices

Renewable energy emerging trends

Source: blueandgreentomorrow.com

• Management and planning of distributed

resources or decentralized generators (rooftop

PV, energy storage, wind, behind-the-meter

generation, etc.)

DER – Distributed Energy Resources

DRP – Distributed Resource Planning

AI – Artificial Intelligence

IoT – Internet of Things

• Storage prices are declining

• Technology is improving for charging

and discharging

• Deployment at project site or grid

level

• Backup for commercial/industrial

(replacing diesel engine)

• Small home use + rooftop

• Grid connected microgrid for

community with self generation (PV,

wind, storage, etc.)

• Reduce loss in transmission

• Self managed, secure driven by

consumer

• Smart Grid

• Declining prices for RE generation

• Energy storage allowed

dispatchability

• Becoming more competitive with

fossil fuel

• Digital ledger used for decentralized

transaction

• Enable peer-to-peer energy trading

• Facilitate prosumer growth

• Machine learning to help with

optimization and efficiency

• Automation and forecasting

7/17/2019 18

Additional information

7/17/2019 19

International best practices for VRE integration

Power offtake Grid connection Technical standards Permitting > 20 years contract term

Local utilities should be regulated

to buy electricity from electricity

producers

Take and pay all electricity

Determine a fixed tariff

Denominate in a foreign currency

Offtaker takes risk if law changes

Exempt producers from force

majeure

Allow offshore arbitration

Limit termination by offtaker

Allow collateral assignment

Offtaker payment support

Offtaker bears risk of

interconnection

Grid connection rules are

required at first stage of solar

integration

A basic grid code rather than

a complex one at the first

stage

Learn and adapt grid codes

from experienced countries

Grid code often comes closely

with supporting mechanisms

Each stage of VRE penetration

needs different grid

connection requirements

Modify building code, fire

code, electrical code to

accommodate VRE facility

Refer to international

practice for technical

specific equipment

standards, installation

standards, etc.

Online permit processing

Website for information

Reasonable permit fees

Expedited permit process

Permitting checklists

Permitting templates

Consistency process

across jurisdictions

Eliminate excessive

inspections

Train permitting staff in

VRE

Set point of contact

Source: Review of Supporting Regulations (USAID Clean Power Asia, 2017)7/17/2019 20

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Ms. Amanda Van den Dool

USAID Regional Development Mission for Asia

AtheneeTower, 25th Floor

63 Wireless Road

Patumwan, Bangkok

Tel: +66 2257 3000

Email: avandendool@usaid.gov

USAID CLEAN POWER ASIA

Ms. Dana Kenney

USAID Clean Power Asia

Abdulrahim Place, Suite 501

990 Rama IV Road

Bangrak, Bangkok 10500

Tel: +66 2026 3065

Email: Dana_Kenney@abtassoc.com