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16
Workshop on Policies to AccelerateRenewable Energy Market Deployment
Highlights and findings of the Workshop – Emerging markets and specific policy measures
1.
 
The numerous policy and project case studies presented and discussed during the Workshop wereused to formulate and/or to diffuse the following messages, conclusions and recommendations (seealso
 Annex 2
).2.
 
The enlargement of renewable energy markets provides a source of energy security, reduces climatechange emissions and responds to energy needs that cannot be supplied by other means (at leastwhere grid extension or development would not be feasible).3.
 
There is a need for international co-operation with countries beyond the IEA borders, at least in theform of converging visions and perspectives on the global natural resource availability and use,capital and technology requirements as well as market segments that could be captured by renewableenergy. Common and co-ordinated actions will accelerate the pace of unit cost decreases, helping thediffusion of renewable energy in the total world energy mix, and in particular in countries such asIndia.4.
 
Policies carried out in IEA Member Countries already provide insights on the policy direction tofollow. Typically, IEA countries with active renewable market development have started out withfinancial assistance to R&D and demonstration projects, thereafter encouraging larger market takeoff through tax schemes, preferred tariffs, and soft interest rates. More recently, the financial incentiveshave been complemented by legislation for mandatory purchase of electricity from renewable power.As an early application in Germany, Spain and the US, for example, electricity feed laws have beenused to require mainstream suppliers to purchase renewable power at a predefined rate. In the UK,the non-fossil fuel obligation mandated suppliers to buy renewable power from independent powerproducers that have successfully bid for a particular amount of capacity required by the government.Most recently, renewable portfolio standards have emerged as a third generation policy route,adopted e.g. by Australia, Denmark, Italy, Netherlands, and 10 of the US states. Under this scheme,utilities are required to purchase a certain percentage of the electricity from renewable sources, eitherdirectly or through trading of renewable certificates if more efficient, providing strong incentives formarket-based portfolio optimisation. Although it is still too early to fully judge the efficiency of thisnewer policy mechanism, it does seem to have obvious advantages in the form of flexibilitycompatible with market deregulation as well as a relatively low levels of administration.
 
5.
 
At only 2.5% (1998, including hydro) of the total commercial primary energy, renewable energy inIndia still represents a niche market share. Nonetheless, this is a growing share and translates intolarge absolute numbers, given the size of the Indian energy sector. As a result, India is emerging as aworld leader in the diffusion and development of several renewable energy technologies. This is thecase for wind power, biomass-based power (mainly co-generation in the sugarcane industry),biomass gasifiers (with a successful export of Indian technology to Switzerland), solar photovoltaics,or more specific applications such as biogas plants and solar cookers (see
annex
). India is also settingup one of the four solar thermal plants in the world funded – partly – by the GEF (Mathania Project,140MW dual-fuel solar-naphta thermal power plant).6.
 
Policy goals designed to accelerate market deployment of renewable energy to support this growthare being formulated. Highlights of the
Policy Statement on Renewable Energy
being drafted by theMinistry of Non-conventional Energy Sources were presented during the workshop. This is the firstattempt by India to develop a comprehensive renewable energy policy. The
Policy statement 
willencompass policy goals, as well as identify mechanisms to achieve them and investmentrequirements. The objectives of the
Policy Statement 
are to meet the minimum rural energy needs;provide decentralised / off-grid energy supply for agriculture, industry, commercial and householdsectors in rural and urban areas; and, generate and supply grid quality power. The medium-termgoals, to 2012, envisage:
½
 
10% of new power capacity addition projected to come from renewables
½
 
progressive electrification by renewables of the 18,000 villages that are considered non-electrifiable by conventional means
½
 
coverage of 30 million households through improved woodstoves
½
 
setting up of a further three million family size biogas plants
½
 
deployment of five million solar lanterns and two million solar home lighting systems
½
 
deployment of solar water heating systems in one million homes7.
 
The Workshop concluded on the importance of such policy goals. It also emphasised on the need fora market approach to renewable energy development, recognising the financial benefits of renewableenergy development, as well as moving away from a purely product-based approach to one that is ledby the delivery of specific services.8.
 
Reflecting this trend, the debates in the workshop were purposely structured around three differentrenewable energy markets segments. The differentiation among them was useful for highlightingdifferent market dynamics (with regards to the demand for example). This differentiation isimportant. It helps reflect the many degrees of maturity of each of the market segments. It facilitatesthe identification of each expective needs in terms of technology development to reduce cost andimprove the reliability of delivered renewable energy. It improves the appraisal of investments andthe design of specific mechanisms that can be used to stimulate the market expansion. These threemarket segments are:
½ 
 
Grid power
½ 
 
Decentralised power (distributed generation)
½ 
 
Rural energy needs (often off-grid, and often with limited solvable consumption)9.
 
Accordingly, policy measures will differ for each of the market segments. Renewable powerconnected to the grid needs to benefit from a policy environment linked to the liberalisation of thepower sector industry, particularly when it comes to tariff determination. The Workshop served as aplatform to call for the inclusion of provisions on renewable energy market deployment in the draft
 Electricity Bill
led by the Indian Ministry of Power, a bill expected to provide an integrating legalframework for power development in India. So far, the policy implications of renewable energy are
 
not clearly identified in the
 Electricity Bill
. Indian regulators operating at both central and state levelsare yet to take full account of renewable power requirements in their tariff orders or in the norms.10.
 
For rural energy, India expects to need a certain amount of public financial support, an acceptablemeasure provided it for a given period of time and well targeted towards very-low incomehouseholds. This may be called subsidies if one looks at the consumption side of the issue, butamounts to learning investments from the supply side as the financial support will facilitate unit cost-reduction. Similarly, for marginally higher income groups, the workshop highlighted the enormouspotential existing in India for the diffusion of certain renewable energy technologies (such as solarphotovoltaics for home or outdoor lighting), provided both that the government eliminates marketdistortions and that innovative financing mechanisms are implemented. Similar remarks were madeon the potential of renewable energy diffusion in the small-scale industry (for power and heat), butthe requirement for this market segment is more information and again, innovative financing.
Lessons from other developing countries
11.
 
Five representatives of developing countries participated in the Workshop as invited speakers (see
annex 3
), thanks to the financial support from the CTI. Each of them was useful in highlighting thefollowing policy aspects.
 Brazil
12.
 
A representative from the electricity regulatory agency presented the Brazilian policy requirementfor companies participating in the emerging Brazilian liberalised power market to invest a share of their returns in renewable energy development and energy conservation. This can be done eitherthrough R&D investments or through direct renewable energy supply or energy savings. Thishighlighted the importance of Energy Service Companies (ESCOs) in accelerating theimplementation of energy saving measures.
 Malaysia
13.
 
The Malaysian delegate from PTM (Malaysia Energy Centre) highlighted the importance of adequateresource assessments for renewable energy potentials, as these are often very local. The publicauthorities have an important role to play in facilitating the match between market identification andsupply potentials based on local resources.
Thailand 
14.
 
In addition to the insights from the contribution of the Malaysian delegate, the Thai representativefrom the National Energy Policy Office emphasised on the need to work out mechanisms that wouldenable final market pricing of renewable energy to fully reflect the benefits from their positiveenvironmental externalities.
 Bangladesh
15.
 
Bangladesh has been successfully applying the micro-credit methodology developed by the nowworld-wide known Grameen Bank to solar power development in rural areas successfully, a conceptthat is now being also experiencing with in India and elsewhere.
China
16.
 
The Chinese representative brought the recent experience of China in boosting renewable energymarket development (as demonstrated at the IEA workshop organised in Guilin in 2000). The factthat China has been able to mobilise any long-term multilateral sources of financing national forrenewable energy programme activities (GEF) has not gone unnoticed in India.
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