WRI Publications Feed: Low-Carbon Energy Technology

Is the Fit Right? Considering Technological Maturity in Designing Renewable Energy Policy

Kevin Lustig — Thu, 11 Aug 2011 14:20:52 -0400

Recent studies suggest that the United States can greatly expand its deployment of renewable energy resources beyond current levels. This would reduce emissions of harmful pollutants and enhance energy security by diversifying the nation’s domestic energy supply. This brief describes a number of policy tools that can be employed to drive investment in renewable energy technologies and discusses which policy options may be the best fit based on the commercial maturity of a targeted technology. We examine several policy tools to describe where they have been most effective to advance technology progress along the innovation chain. The findings and recommendations presented are based on a study of the literature on technology innovation and policy best practices, as well as on discussions with experts in the field, policymakers, and private sector companies involved in renewable energy projects.

Key findings:

Grants can be used to fund technologies in their earliest stages—research and development (R&D) and early-stage demonstration. The R&D stage involves significant uncertainty as to whether the concept will ever lead to a viable technology application. Grants help overcome this risk because they provide an important cost share for investment to research and develop the technology further. Technologies in the demonstration stage typically have difficulty accessing commercial investment due to uncertainty on technical performance and the inability to provide performance warranties. It is unclear whether they will eventually be financially profitable, particularly in the near-term. Demonstration grants allow commercial investors time to pilot and evaluate a new technology with appropriate due diligence. This can reduce risk perception and facilitate further investment.
Loan guarantee programs are well suited for technologies in the commercialization and early deployment stages. In these stages, project performance remains uncertain, making it difficult to attract investors. Loan guarantees help attract private investors by sharing the risk of technical failure with a financially secure and credible entity (namely, a government agency).
Tax credits and feed-in tariffs (FITs) can help advance technologies in the later stages of innovation, namely commercialization and early deployment. These policies allow projects to earn more profit for electricity produced so that they earn the revenues needed to offset higher upfront investment costs.
Renewable electricity standards (RES) are most effective for more mature technologies that are in early deployment. An RES creates demand for renewable electricity and allows the market to determine how to most efficiently supply it; thus the market sets the premium paid to renewable resources. RES mandates can allow for open competition among a range of different technologies, or can be tailored with a carve-out to promote specific technologies that are not yet cost competitive with other renewables. The carve-out option can be a good fit for technologies that are still in the commercialization phase.
A favorable regulatory environment is important to ensure that renewable energy technologies do not face inherent disadvantages due to interconnection standards, utility pricing structures, and other legal hurdles. Failing to address regulatory barriers to renewables can increase their cost of deployment and reduce the effectiveness of incentive programs.

Grounding Green Power: Bottom-Up Perspectives on Smart Renewable Energy Policy in Developing Countries

Maggie Barron — Tue, 24 May 2011 12:51:13 -0400

Watch the summary interview with Lead Author Lutz Weischer

This paper was published by the German Marshall Fund of the United States in cooperation with the Heinrich Boell Foundation and the World Resources Institute.

Developing Countries in the Renewable Energy Transformation

In order to meet the intensifying climate challenge, the global energy system must undergo a fundamental transformation, with a rapid increase of renewable energy worldwide. Developing countries are at the forefront of this challenge, since they are expected to add around 80 percent of all new electric generation capacity worldwide in the next two decades.

The deployment of energy from renewable sources is accelerating in developing countries, and already accounts for a higher percentage of electricity generation than in the developed world. In 2008, non-OECD nations generated 21 percent of their electricity from renewable sources including large-scale hydroelectric power (compared with 17 percent in OECD countries), according to International Energy Agency (IEA) statistics. However, this figure must more than double by 2035, to 46 percent, in order to meet the IEA’s “450 scenario,” which outlines a climate friendly pathway for meeting global energy demands.

Transforming the energy system on this scale will require significantly increased support from developed countries, channeled through both bilateral assistance and multilateral institutions, as well as philanthropic initiatives. Our conclusions, derived from a series of case studies and a comprehensive review of existing literature, suggest that donors should deploy financial support more effectively by moving beyond a project-by-project approach to one that creates the right environment for investments in scaled-up, nationwide deployment.

This working paper seeks to assist in this process, by identifying key components of smart renewable energy policy in developing countries, focusing on the power sector. It also provides recommendations for maximizing the effectiveness of international support for deployment of renewable energies, drawn from these on-the-ground experiences in developing countries.

About this Working Paper

Chapter 1 introduces the approach and methodology taken in this paper and describes the key concepts we address. The second chapter discusses what developing countries are already doing to deploy renewable energy sources, and how they can be supported in scaling up such efforts. It also introduces a set of principles of smart renewable energy policy to propel such a transformation, developed by the World Resources Institute. These are based on insights drawn from case studies of existing renewable energy policies in 12 countries in Africa, Asia, and Latin America as well as from existing literature.

The following five chapters each examine one key element of smart renewable energy policy, discuss lessons learned, and identify needs for international support. These cover planning and strategy (Chapter 3), well-designed generation-based incentives (Chapter 4), an enabling policy and regulatory framework (Chapter 5), attractive financing conditions (Chapter 6), and the necessary technical environment (Chapter 7). Our findings and recommendations are summarized in Chapter 8.

Principles of Smart Renewable Energy Policy

We define smart renewable energy policy as the set of rules, regulations, and government actions that lead to an increased share of renewables in total electricity consumption in line with a country’s development objectives. Smart renewable energy policy encourages private investment, achieves its objectives in a cost-effective way, promotes continuous innovation, and is designed through transparent, accountable, and participatory processes.

Presentation

Download Slides (PDF, 839 Kb)

Purchasing Power: Best Practices Guide to Collaborative Solar Procurement

Maggie Barron — Mon, 25 Apr 2011 13:30:59 -0400

Executive Summary

Background

Solar photovoltaics (PV) is a commercially proven technology and, in markets with incentives, can compete with traditional fossil fuel-based power. Wider adoption and decreases in manufacturing costs are driving down the cost of solar electricity. As the industry grows and matures, it will optimize and standardize its practices to further reduce costs and make solar energy accessible to a mainstream market. The crucial role of policy in accelerating this industry growth and maturation cannot be understated. Today, however, several barriers remain to bringing solar PV to scale:

Transaction costs can be high. Because the industry is fragmented and installation processes are not standardized around the country, each developer has different procedures and negotiated contracts. Allocating internal staff resources to research solar power and to negotiate fair contracts for each potential site can be expensive.
Learning takes time and effort. Potential buyers have to learn on their own about the solar market, financing, and technology, while building internal consensus for moving forward.
Demand is fragmented with many individual sites being developed opportunistically. The current patchwork approach of designing, permitting, contracting, and installing systems for one facility at a time is inefficient.

These barriers help explain the slow pace of solar PV adoption among commercial and government consumers. However, collaborative purchasing can help overcome these barriers and scale up solar PV deployment. By organizing interested consumers (and their potential installation sites) into groups, collaborative purchasing can reduce transaction costs, educate potential buyers, and aggregate demand so that solar panels can be installed at lower-than-average costs.

Purpose

This Best Practices Guide is intended to assist commercial and government entities in the process of organizing and executing a collaborative solar purchase. A measure of success will be the number of readers who use this guide in purchasing solar power to meet their electricity needs more sustainably and at an affordable price. The guide outlines a list of best practices, which together constitute a 12-step process to capture the economic and practical benefits of a joint purchase. The starting point for participating in such an effort is simply an interest in purchasing solar electricity. The best practices are intended as a resource for project planning and decision making. They provide specific actions in chronological order, with milestones to indicate when to move from one step to the next. The end goal is that regional groups of participants will have solar PV installed on their facilities at competitive prices.

Experts in the solar energy field, including those specializing in regional collaboration, helped to develop the best practices presented here. They are based on extensive research and real-world experiences, and are supported by case studies (one a private sector collaborative and one with public-sector participants). These two cases were unique models of regional collaboration, among the first in the country at this scale. Like all new approaches to a problem, both efforts encountered challenges along the way. Throughout the guide, we illustrate the lessons learned from these challenges, point out pitfalls to avoid, and highlight ways to streamline the process. We also provide resources, such as solicitation and procurement documents, participant questionnaires, and evaluation criteria.

By promoting the use of this guide and sample documents, we hope to encourage the use of these models for regional collaborative efforts. Successful collaboration can lead to lower costs, increased competition and vendor performance, and better projects with higher visibility.

Twelve Steps for Collaborative Solar Purchasing

1 Early regional recruiting

RESULTS: Initial participants indicate interest and agree to proceed with site identification and assessment in next stage.

2 Initial participant questionnaire

RESULTS: List of potential participating organizations with site opportunities and considerations documented.

3 Solar project workshop

RESULTS: All participants share common understanding about the basics of collaborative purchasing, key metrics to evaluate, timeline, and expectations of them. Lead organization has been identified.

4 Consolidated analysis of sites

RESULTS: Compelling technical overview of total purchase size and individual bundles. This initiative overview is consolidated into packet including talking points explaining expected benefits for participants and lead organization.

5 Internal decision maker consultation

RESULTS: Buy-in to proceed in procurement process to drafting RFP is obtained from decision makers in each participant/lead organization.

6 Design of procurement process & documents

RESULTS: All participants agree to procurement process, template contracts, and standard terms with understanding of risks and opportunities.

7 Request for proposals

RESULTS: RFP issued with compelling bids received from potential vendors.

8 Proposal evaluation

RESULTS: Winning bidder is selected for each bundle through competitive process that ensures best-value vendor selection.

9 Negotiations and award

RESULTS: Negotiations are complete with successful award and signed contracts with a qualified vendor for each bundle, within agreed timeline.

10 Installation project management

RESULTS: Solar PV systems are properly built to meet or exceed specifications and safety standards.

11 Commissioning and operations

RESULTS: Successful solar installations demonstrate energy production and savings as planned for 25 years or more.

12 Celebration of success

RESULTS: Participants’ internal and external stakeholders, regional community, and government are aware of the positive impact of this effort and support future projects.

High Wire Act: Electricity Transmission Infrastructure and its Impact on the Renewable Energy Market

Maggie Barron — Fri, 08 Apr 2011 16:37:13 -0400

Executive Summary

Context

Renewable energy (RE)—electricity from wind, solar, and other naturally renewing energy sources— has drawn increasing attention in the quest to reduce greenhouse gases on a scale commensurate with the dictates of climate science. Renewables have the potential to substitute for a significant proportion of the conventional fossil fuels prevalent in today’s electricity generation. However, two key features of renewable energy complicate this promise. First, renewable energy resources are location constrained and often available only in remote areas. Their energy must therefore be transported via connected transmission lines (the grid) to demand centers, such as cities. Second, because RE resources are typically intermittent, this energy must be stored or managed with other generation sources to provide a stable and reliable service to consumers. One effective way to address this intermittency is widespread interconnection to diverse resource areas so that low production in one location can be balanced by high production in another. These two important attributes, location-constrained generation and intermittency, mean that transmission is critical to unlocking the promise of renewable energy.

About this Paper

This paper examines transmission developments and challenges in the European Union (EU), China, and the United States—three regions that present entirely different pictures in terms of governance structures, institutions, and traditions for making decisions about transmission.

Transmission infrastructure can be either a roadblock or an enabling technology for meeting renewable energy deployment goals and thus presents a poorly understood risk to RE investment. To provide context for renewable energy investors, this report examines the policy challenges of providing transmission to:

Move electricity from large-scale renewable energy generation in remote areas to distant demand centers; and
Facilitate regional grid interconnections necessary to manage intermittency. Because transmission is highly dependent on government decisions at both the political and administrative level, this paper emphasizes the regulatory trends in transmission that in turn affect renewable energy investments.

Key Findings

The transmission challenges impacting RE investment in China, the EU, and the United States have some commonality but occur in three unique regulatory and governance landscapes that establish different incentives and roadblocks to reform. Financing new or upgraded transmission capacity faces the difficult task of allocating cost across users (RE generators, power consumers in various jurisdictions, and society broadly) while ensuring low-cost energy and profitable business models that attract private investment. In all three markets examined, transmission planning and siting is primarily constrained by ongoing tension between national (or in the case of Europe, pan-European) interests and local, state, and member-state interests. In all cases, unlocking greater RE potential through improved transmission is highly dependent on government and regulatory decisions that try to steer through these challenges.

European Union

The European Union uses a mix of private and public investment for grid development, has aggressive targets for developing renewable energy, and is making progress toward those goals. It is also using Directives and other policy tools to push member states to integrate their grids and make the necessary technical and policy changes for cross-border transmission that will allow the flow of renewable energy. The challenges to reaching these objectives can be seen in the still fragmented planning processes and the resistance of member states to fully integrate, making the EU efforts a work in progress. Member states also currently retain the authority to determine whether projects will have a net benefit or cost to domestic customers, and thus to thwart crossborder objectives that do not yield enough local benefit.

The differences among member states in determining cost allocation for transmission expansion, preferential regimes for network usage charges, or the technical grid connection requirements creates additional complexities for planning generation projects across Europe.

China

China has aggressive plans to continue the grid spending surge of the past five years in an effort to keep pace with growing electricity generation. The central government is planning for a likely doubling of electric power generation capacity by 2020 (from 2009 levels), driven by a large increase in electricity demand. Wind farms that are largely located in northwest China, where grid coverage is currently sparse, will provide a large part of anticipated new renewable energy. China recognizes the compelling need to transfer energy from such remote locations conducive to wind and solar generation to its growing megacities and is focusing on new approaches such as investing in ultra high voltage (UHV) transmission research.

Despite a clear commitment to renewable energy, China faces several challenges when integrating RE into the grid, including a lack of connection standards for generators to follow, uncoordinated build-out of new generation, inflexible dispatching, and a lack of financial incentives for grid operators to take up RE power. The central government attempted to resolve several of these issues through the 2009 amendments to the Renewable Energy Law, but it will take time for the effects to be widely felt.

United States

Even more so than the other two markets, United States electricity generation and transmission planning and siting are managed in a highly local and fragmented manner. Renewable energy goals are currently set by states, rather than by the federal government, complicating broader regional planning for renewable electricity generation and supporting transmission. Whether the 112th Congress will set national goals, move transmission siting responsibility (in whole or in part) from states and local authorities to the federal government, or facilitate multi-state transmission project approvals is highly uncertain after the power shift during the 2010 midterm elections.

Cost allocation negotiations are also a significant challenge for proposed transmission projects, particularly those that cross utilities and/or states. Methods for allocating costs exist but cost allocation disputes between transmission companies or their regulators jeopardize large-scale transmission projects, particularly those not directly related to improved system reliability. The Federal Energy Regulatory Commission (FERC) is considering new federal rules for cost allocation, but reform would face both legal and legislative challenges.

**Table 1. Incentives Driving Transmission Action**
	RE Goals	Coordination Efforts	Innovations
European Union	EU Renewable Energy Directive (June 2009) sets goal of 20 percent power from RE sources by 2020 and mandates grid connectors to provide access to new RE to achieve EU climate policy	The European Network of Transmission System Operators for Electricity (ENTSO-E) and the Agency for the Cooperation of Energy Regulators (ACER) have transmission coordinating missions	EU Priority Projects defined and assigned an EU coordinator to push the project forward
China	Renewable Energy Law (2005, 2009) obligates power grid companies to connect all RE generation sites that fall in their grid coverage	Renewable Energy Law Amendments (2009) require coordinated RE and transmission planning	Development of UHV infrastructure with $59.7 billion in investment
United States	Thirty-one state Renewable Portfolio Standards	Federal efforts encourage regional transmission planning, though there are no requirements	Innovative cost allocation resolutions such as the Tehachapi and Southwest Power Pool projects

**Table 2. Roadblocks to Sufficient Transmission Action**
	Local Interests	Costs
European Union	Transnational coordination and enforcement powers of EU institutions remain unproven while local opposition to large-scale infrastructure projects is significant in some areas	Transmission investment will be difficult in an era of austerity and slow economic growth
China	Disagreement between the grid operators and wind developers on technology standards and planning complicate RE generation connection	Vast distances between generation and load sites and chronic grid congestion necessitate massive transmission expansion
United States	Weak jurisdictional coordination in the transmission siting and approval process slows or stops transmission projects	Transmission cost allocation issues remain largely unresolved or are resolved at local level, reflecting narrow local interests

Looking Forward: Signposts for Investors

Transmission siting and construction in general may be marginally easier to approve in the EU than in the United States; therefore, RE expansion may be more likely if the current European cooperative efforts succeed on schedule by 2014. This will depend on whether the controlling nature of the relevant EU directives and policies can prevail over local interests in practice. The potential generation that could be unlocked through transmission expansion in the United States and China may, however, be relatively greater, due to the large domestic tracts of land with significant RE generation potential that are currently inaccessible because of transmission constraints.

These opportunities could prove tougher to capture in the United States as a result of difficult-to-resolve regulatory and political uncertainties. If reform efforts bring greater certainty to the United States, investors will be able to respond and shape renewable energy projects accordingly. Even if not all roadblocks are addressed with legislation or regulatory reform, any increase in certainty regarding transmission siting coordination, cost allocation, and national energy policy would unlock new potential in the United States. Perhaps the market most likely to remove transmission barriers and unlock the real potential of RE is China, as the central government methodically works to reform transmission to support its national renewable energy goals. China faces primarily technical and capacity barriers rather than the paralyzing political debate seen in the United States. China’s future market depends on its ability to overcome the resistance of grid companies in a regulatory environment that at least appears more opaque than those in the United States or EU.

CCS Demonstration in Developing Countries: Priorities for a Financing Mechanism for Carbon Dioxide Capture and Storage

Maggie Barron — Mon, 04 Apr 2011 10:54:35 -0400

Executive Summary

Climate Change and CCS

In facing the challenge of mitigating global climate change, world leaders have acknowledged that no single solution exists, and therefore, a portfolio of carbon dioxide (CO2) reduction technologies and methods will be needed to successfully confront rising emissions. Due to their dependency on fossil fuels, the energy supply and industrial sectors are the greatest contributors to CO2 emissions, accounting for 25.9 percent and 19.4 percent of the total respectively.

In addition to efficiency improvements and enhancing clean energy use, one key option for limiting future CO2 emissions from fossil fuel energy use is carbon dioxide capture and storage (CCS). CCS is a suite of technologies integrated to capture and transport CO2 from major point sources to a storage site where the CO2 is injected down wells and then permanently trapped in porous geological formations deep below the surface. Candidates for CCS technology include fossil fuel power plants; steel, cement, and fertilizer factories; and other industrial facilities.

CCS in Developing Countries

Despite often-aggressive programs to promote energy efficiency and deploy nuclear, renewable, and other low-carbon energy sources, many developing countries will still rely heavily on fossil fuel energy to power their development for decades to come. There is therefore a need for developing countries to create strategies that address fossil fuel emissions in a way that minimizes the costs of doing so, and consequently minimizes impacts to their national development goals.

CCS is currently the only near-commercial technology proven to directly disassociate CO2 emissions from fossil fuel use at scale. Its deployment could potentially allow developing countries to gradually shift away from fossil fuels for energy and industrial needs with relatively little disruption to their long-term development strategies. If deployed as an interim measure, it could allow time for other alternative low-carbon technologies to be developed and deployed, permitting fossil fuels to be gradually phased out. This strategy could assist developing countries to transition to a low-carbon economy in the next 15–50 years.

While CCS is potentially attractive to some developing countries, there has been limited development of demonstration projects in Africa, Asia, or Latin America due mainly to their high cost in the absence of expected profits or significant carbon financing. The International Energy Agency (IEA) estimates the total cost for a new average-sized coal-fired power plant that captures up to 90 percent of its CO2 emissions to be US$1 billion over 10 years.

Existing financing for CCS is grossly insufficient to enable demonstration projects in developing countries. The few available funds are either spread over the full array of low-carbon technologies, or fall short of the magnitude or the mandate needed to propel commercial-scale CCS demonstrations forward. Current carbon offset mechanisms are not sufficient to spur CCS deployment in developing countries in today’s context either. Overall, existing CCS financing mechanisms help grow capacity, but their support is insufficient to leverage enough funding from capital markets to implement projects in a non-OECD context.

The IEA CCS Roadmap proposes 50 CCS projects in developing countries in the next 10 to 20 years. As well as reducing the developing world’s greenhouse gas emissions, accelerating CCS demonstration efforts in non-OECD countries can likely also improve technologies, increase efficiency, reduce uncertainty and risk, and initiate learning-by-doing at a lower cost than would be possible in OECD countries. The captured benefits from doing so will be more significant the sooner acceleration in CCS development in developing countries begins.

About this Paper: Topics of Discussion for Financing CCS in Developing Countries

This paper seeks to promote the effective deployment of CCS demonstration projects in developing countries. Aimed at international policymakers and agencies engaged in CCS funding and deployment negotiations and discussions, the paper explores some of the key issues emerging around this critically important topic, and it presents a series of options and recommendations to international policymakers. WRI’s aim is to assist the initial design of an effective approach for financing CCS demonstration projects in developing countries over the next 10 years. Below is a summary of the key topics and options explored in the paper.

Topic 1: Aims of Financing CCS Demonstrations in Developing Countries

The main goal for developed countries to provide financing for early-stage CCS demonstrations in developing countries should be to support non-OECD countries in fulfilling their share in global climate change mitigation efforts.
A financing mechanism for CCS in developing countries should aim to foster tangible CO2 emission reductions through a clear focus on storage goals. The level of ambition for CO2 storage should support current CCS deployment requirements in developing countries. While it is impossible to objectively ascertain what proportion of this total a dedicated OECD country–funded CCS financing mechanism should support, it is evident that developing countries will need support for a significant share of these projects.
Implementing CCS demonstrations that lead to the storage of 45–60 million tons carbon dioxide (MtCO2) over 10 years could significantly spur the research and deployment rates needed for CCS development to take off in developing countries.

Topic 2: Eligible Costs for Financing

Most CCS demonstration projects will operate in conjunction with new or existing power plants or industrial facilities that may also function without the technology. Funding for CCS demonstrations can therefore be structured around whole projects—including the non-CCS components of the facility under consideration—or just the specific CCS components that would enable the facility to effectively capture and store its carbon dioxide emissions.
Funding should only be eligible to finance incremental costs incurred as a result of CO2 capture, transport, and storage efforts—not the full cost of the project.

Topic 3: Project Eligibility Criteria

Project objectives: Finance should be primarily directed toward projects that either actively store CO2 or directly provide the basis for near-future CO2 storage locally, avoiding duplication with other existing funding mechanisms.
Project scales and types: To maximize both near-term and future storage, eligible project types should cover geological site characterization and integrated CCS projects, both at the pilot and commercial demonstration scales.
Project sectors: CCS projects in fossil fuel power plants are likely to be the largest recipients of funding. However, some industrial CO2 sources may present advantages that could facilitate timely and cost-effective development of CCS projects in developing countries. “Low-hanging fruit” projects in industrial facilities with high-purity CO2 streams can advance infrastructure and technologic know-how in developing countries at a fraction of the cost of implementing CCS at a power plant. Funding criteria should therefore not discriminate against industrial sources of CO2.
EOR and other CCUS projects: Enhanced oil recovery (EOR) and other carbon capture, usage and storage (CCUS) projects have multiple advantages for early CCS development and can result in the net storage of CO2, warranting their inclusion in financing opportunities. However, awarding of CCS financing to CCUS projects should occur only where projects are managed and monitored with the aim of permanent CO2 storage.
Additional project requirements: Funding criteria should stipulate that awarded projects employ sound procedures for CCS site selection, operation, and stewardship. Site selection must be based on specific geologic characteristics. Awarded projects must also have monitoring plans in place for both the operational and the post-closure stewardship phase and ideally demonstrate local government support and local community buy-in.

Topic 4: Project Selection Process

In order to make the selection process as equitable and objective as possible while maximizing CCS deployment goals, projects that meet funding demonstration objectives should be awarded on a competitive basis under a points-based system to judge applications. Such system should reward, among other factors, storage efficiency, geographic diversity, and contribution to wider CCS advancement in developing countries.
The selection system should also favor improving knowledge of storage opportunities through projects implemented in deep saline formations, since they represent the largest knowledge gap and the largest storage potential in the future.

Topic 5: Financing Mechanism Characteristics

Significant attention has been focused on creating an international public fund solely dedicated to CCS, or a CCS window within a larger fund that may also finance other pre-commercial, low-carbon technologies in developing countries. Additional research is needed to ascertain the pros and cons of different structures in a developing country environment. However, there are several advantages of adopting a CCS-only mechanism for the early demonstration phase, instead of having CCS in direct competition with other technologies for the same pool of funds.
In order to meet the IEA-recommended storage goal of 45–60 million tons of CO2 in 10 years, a CCS fund needs to be able to invest or leverage total investments of US$5– 8 billion and have the capacity to disburse its resources effectively over the same period.
A CCS fund should employ strong early-mover and CO2 storage incentive provisions to leverage its goals. A 10-year storage incentive on a rising scale could be applied to ensure project operators act to permanently reduce emissions.

Bottom Line on Emerging Solar Metering Policies

admin — Thu, 27 Jan 2011 13:25:16 -0500

Inflexible metering procedures limit the types of customers who can invest in solar electric power, and the scale of systems. New policies for virtual net metering, community solar, and meter aggregation can make solar more economical and accessible.

Virtual Net Metering

What is virtual net metering (VNM)?

Net metering allows utility customers with on-site renewable electricity generating systems to receive credits for excess electricity that is sent to the grid and to later use those credits to offset their electricity bill, or receive outright payment for them.1 In contrast, virtual net metering (VNM) allows multiple customers (with their own discrete meters) to share the net metered credits from a system without rewiring to physically link their meters to the system. Specific rules vary by state, and even by utility. Virtual net metering policies are currently most often available to owners and/or operators of multi-tenant buildings, or to a group of buildings within a small contiguous geographic boundary. Typically, the system must located “behind” (on customer side of) the meter of at least one of the utility customers credited and/or the customers credited must be located within the same facility where the system is installed.

For example, a low-income housing building owner could install a solar PV system where the power flows through a single meter and feeds directly back into the grid. The utility would allocate the credits for the kilowatt-hours received to each tenant’s individual utility account based on a pre-agreed percentage sharing scheme. While VNM customers sharing an electricity generation source do need to be in the same utility territory, they do not need to be under the same rate schedule in most states.

Which states allow for virtual net metering?

California
Colorado
Delaware
Maine
Massachusetts
Rhode Island
Vermont

How does virtual net metering facilitate new customer participation?

Currently, virtual net metering is most often available for occupants of multi-tenant buildings, low-income housing, municipal buildings, and to groups of buildings in contiguous proximity to the solar installation. Without VNM, separate tenants with a solar investment on their building’s roof would each have to be physically connected to the system to receive net metered credits on their separate utility bills. This is cost-prohibitive and logistically difficult.

What is “community solar”?

Community solar programs and policies facilitate joint ownership or sponsorship of a generating system, and sharing of the benefits even when the power itself cannot be physically shared. It can make solar accessible to owners of property that cannot accommodate a solar PV array and those prohibited from entering into legal ownership structures typically used for solar, among others.

Policies and incentives vary from state to state, thus there is no one standard community solar model. According to a publication of the National Renewable Energy Lab, three project models are currently the most common:

Utility-Sponsored Model: a utility owns or operates a project that is open to voluntary ratepayer participation;
- United Power, an electric co-op in Colorado, offers the option to lease panels at its Sol Partners Cooperative Solar Farm for a fixed upfront fee. In return, payment for the kilowatt-hour (kWh) production is credited to their account at a “community solar” rate higher than the retail rate.
Special Purpose Entity (SPE) Model: individual investors join in a business enterprise to develop a community solar project;
- In Maryland, a group of investors formed the University Park Community Solar LLC to invest jointly in a system located on the roof of a local church. Owners share the revenues from power sales to the church, as well as from incentives.
Non-Profit “Buy a Brick” Model: donors contribute to a community installation owned by a charitable non-profit corporation. [Donations may be tax deductible, but there are no financial benefits shared, and in fact this does not require special policy.]
- The East Portland Community Center project was funded by local businesses through the “Solar 4R Schools” program. The non-profit program installs solar systems and uses them to educate communities about solar power.

Community solar models often aim to reduce the high upfront costs of solar, sometimes allowing participants buy into the program’s installation(s) monthly or per kWh. Their contribution then entitles them to receive payments for the system’s production, and can fix the price for a portion of their bill to protect against future price increases.

Where is community solar allowed?

The following states allow at least one of the community solar models listed above:

Arizona
California
Colorado
Delaware
Florida
Illinois
Maine
Maryland
Massachusetts
Utah
Washington

Meter Aggregation

What is “meter aggregation”

Meter aggregation allows for allocation of the credits from a solar electric system to meters in buildings separate from where the actual power is produced, if they are on the same customer’s utility account. It is usually reserved for buildings located in a tight geographical boundary, either adjacent to one another or located no more than a few miles from one another. It can be done physically, which may require additional equipment, or virtually.

Often, net metering policies limit the amount of power that a customer can sell back to the grid to less than a set percentage of their annual consumption. The benefit of meter aggregation is that several facilities’ metered annual consumption is aggregated; thus the owner can install a larger system and sell more power back. Meter aggregation is often used in agricultural operations or business campuses where there are multiple separate facilities with the same owner.

Summary

In summary, net metering, virtual net metering, community solar, and meter aggregation can be characterized as follows:

Net metering: allocation of benefits to one customer via one meter;
Virtual net metering: allocation of net metered energy credits denoted in kWh to multiple customers with separate meters, often system located on their site or nearby;
Community solar: allocation of benefits across meters of multiple customers who may or may not be near and/or own some part of the generating system, and
Meter aggregation: allocation of system benefits to multiple meters of one customer.

Innovation and Technology Transfer: Supporting Low Carbon Development with Climate Finance

Maggie Barron — Sun, 16 Jan 2011 15:47:02 -0500

Overview

Meeting the ambitious goal of limiting global warming to 2° Celsius or less will require significant innovation - the improvement of technologies and processes to drive down their cost and improve their performance. Public climate finance is essential to spurring innovation and creating the conditions that attract private investment. Investing in innovation also makes the most efficient use of the limited financial resources available and takes advantage of the developing world’s growth to improve technologies.

Countries like the UAE have an opportunity to play a pioneering role in this expanded international innovation system. Innovation will be underpinned by international cooperation that supports:

priority setting and coordination,
joint research, development and demonstration,
sharing information and knowledge,
capacity building,
provision of finance and
supporting hubs and networks.

Several international forums can fulfill portions of these functions, but each faces its own limitations and risks. In this context the UAE could uncover opportunities to be an innovation leader. For example:

How can IRENA and Masdar develop into a world-class innovation hub and then effectively link into the international innovation system?
How can the UNFCCC’s Climate Technology Center and Network function effectively?
How can other forums such as the Clean Energy Ministerial develop to support the international innovation effort?
How can public climate finance be used to support innovation while deploying clean technology in the developing world?

Carbon Dioxide Capture and Storage and the UNFCCC: Recommendations for Addressing Technical Issues

Maggie Barron — Mon, 29 Nov 2010 16:07:04 -0500

Summary

Achieving cuts in energy-related carbon dioxide (CO2) emissions is critical to avoiding more than a 1.5 degree Celsius (°C) (2.7 degree Fahrenheit [°F]) rise in global temperatures by 2050 and the irreversible and damaging impacts such a temperature rise would have on people and ecosystems. Meeting this challenge will require the international community to implement a portfolio of clean energy technologies and energy efficiency efforts. Most credible analyses project that among these technologies, carbon dioxide capture and storage (CCS) may need to play a substantial role in achieving the necessary emissions reductions. CCS encompasses a suite of existing and emerging technologies for capture, transport, and storage of CO2 that together can be used to reduce the greenhouse gas (GHG) emissions from fossil fuel power generation and other industrial sources.

CCS and the UNFCCC

A number of countries - including the United States, China, and 27 members of the European Union (EU) - are putting significant resources into the development of CCS technologies, and four commercial-scale projects are in operation in Norway, Canada, and Algeria. At the international level, the role of CCS in new technology mechanisms under discussion at the ongoing United Nations-led negotiations is not yet clear. In an effort to inform the negotiations, this policy brief provides context, concise analysis, and recommendations to Parties for addressing CCS issues raised to date in the twin track United Nations Framework Convention on Climate Change (UNFCCC) and Kyoto Protocol (KP) processes. These issues include:

Non-permanence, including long-term permanence;
Measuring, reporting and verification (MRV);
Environmental impacts;
Project activity boundaries;
International law;
Liability;
Safety; and
Insurance coverage and compensation for damages caused due to seepage or leakage.

In addition, the authors explore a broad range of current and future mechanisms and regulatory frameworks whereby the UNFCCC and national governments can consider CCS technologies. The report does not presuppose the successful implementation of CCS around the world. Nor does it make recommendations on whether CCS should be included in specific existing or future UNFCCC mechanisms (such as the Clean Development Mechanism [CDM] or technology mechanisms) or in countries’ climate change mitigation commitments and actions (e.g., Nationally Appropriate Mitigation Actions [NAMAs], etc.). Instead, the report focuses on technical issues, with the aim of helping Parties evaluate a robust strategy for CCS as part of international negotiations and establish CCS best practice criteria for governments and the international process, thereby enhancing transparency and ensuring that CCS deployment is safe and effective.

The analysis draws heavily from the World Resources Institute (WRI) report the Guidelines for Carbon Dioxide Capture, Transport, and Storage and draws to a lesser extent from WRI’s Guidelines for Community Engagement in Carbon Dioxide Capture, Transport, and Storage Projects. The report also benefits from the 2005 Intergovernmental Panel on Climate Change (IPCC)’s Special Report on Carbon Dioxide Capture and Storage, the 2006 IPCC Guidelines for National Greenhouse Gas Inventories’ methodology for carbon dioxide transport, injection and geological storage, and the UNFCCC Experts’Report on CCS, Implications of the Inclusion of Geological Carbon Dioxide Capture and Storage as CDM Project Activities (UNFCCC/CCNUCC EB 50).

Guidelines for Community Engagement in Carbon Dioxide Capture, Transport, and Storage Projects

Maggie Barron — Wed, 17 Nov 2010 06:41:48 -0500

Executive Summary

CCS and Climate Change Mitigation

Carbon dioxide capture and storage (CCS) encompasses a suite of existing and emerging technologies for capture, transport, and storage of carbon dioxide (CO2) that together can be used to reduce the greenhouse gas emissions from fossil fuel power generation and other industrial sources. Achieving cuts in energy-related CO2 emissions is critical to avoiding more than a 1.5 degree Celsius (°C) (2.7 degree Fahrenheit [° F]) rise in global temperatures by 2050 and the irreversible and damaging impacts such a temperature rise would have on people and ecosystems. The scale of the climate change challenge requires a portfolio of clean energy technologies and energy efficiency efforts, and most credible analyses project that CCS will have to play a substantial role in achieving the necessary emissions reductions (see Appendix 3).

CCS has been tested at a small scale, and there are a few industrial operations around the world, including in North America and Europe, which already capture and store small quantities of CO2 emissions underground. However, the technology has not yet been demonstrated at the scale required for application to commercial power and industrial plants. To address this gap, governments of many major economies have announced plans to support commercial-scale CCS demonstration projects that store more than 1 million metric tons of CO2 annually. Several are currently being built in Europe, China, Australia, and Canada, and many more are in the planning stages, including in the United States. Leading industrial nations, through the G8, have called for 20 such demonstration plants to be launched by 2010, with a view toward broad deployment by 2020.

Actions taken to demonstrate transformational clean energy technology over the next decade will define the solutions available to help solve the climate problem. Commercial-scale CCS demonstration projects are required to demonstrate whether or not the technology should play a major role in bridging today’s fossil fuel–driven world and tomorrow’s low- or zero-carbon economy. Yet, as with the introduction of many new technologies, proposed CCS projects have been met with mixed reactions from the public, and in particular from the local communities asked to host them.

Community Engagement in the CCS Context

Project developers and technical experts in CCS often cite the public as a “barrier” to CCS deployment, because decisions on whether individual projects move forward often significantly depend on the local community’s acceptance or opposition. The case studies from the United States, the Netherlands, and Australia featured in this report suggest that communities often have more concerns and questions about CCS than about more established industries and technologies. The guidelines for community engagement, however, were written with the belief that decisions on individual demonstration projects ultimately hinge on site-specific factors, including the needs of the local community. While much social science research around CCS to date has focused on gauging public attitudes toward the technology or on education and outreach best-practices for project developers (see Appendix 2), we focus instead on providing recommendations for creating a culture of effective, two-way community engagement around CCS projects.

In addition to project developers and host communities, there is a third partner essential to effective community engagement around CCS: regulators. In some countries, regulatory frameworks governing CCS development and deployment, including rules for community engagement, are already in place (see Appendix 1). In others, an environmental regulatory framework for CCS does not yet exist, and the advent of demonstration plants is forcing regulatory policymakers to make real-time decisions about how to ensure projects move forward safely, and what level of public participation should be required in the decisionmaking processes. The engagement around any one project, therefore, is contingent on the interactions of three primary groups: local decisionmakers (typically on behalf of those in the community), regulators, and project developers. All three groups are addressed in this report. It is important to underscore upfront, however, that effective community engagement is measured by the success of the engagement process, and is not contingent upon agreement between the project developer, regulator, and community on the outcome or the design of the CCS project. Nevertheless, effectively engaging communities can help move CCS projects forward and foster continuing constructive relationships between project developers and communities. Such relationships can help ensure that commercial-scale CCS demonstrations and any subsequent commercial projects progress in such a way that local economies, values, ecosystems, and people are respected, and the potential of the technology in helping to mitigate climate change is fully realized.

About the Guidelines

The Guidelines was drafted by authors at WRI in close consultation with an international group of stakeholders (see inside front cover) with specific expertise and experience in engaging local communities regarding deployment of CCS technology. This effort builds on WRI’s previous 2-year consensus-building stakeholder effort that resulted in the Guidelines for Carbon Dioxide Capture, Transport, and Storage, a set of technical guidelines for how to responsibly proceed with safe CCS projects. The community engagement guidelines for CCS are intended to serve as international guidelines for regulators (including those in both regulatory policy design and implementation capacities); local decisionmakers (including community leaders, citizens, local advocacy groups, and landowners); and project developers to consider as they plan and seek to implement CCS projects.

The Guidelines begins with an introduction that describes their intent, a working definition of community engagement, and why effective engagement is an essential element of CCS deployment. It then provides an overview of relevant CCS technology issues, including the status of CCS technology, regulatory and permitting processes, and the timeline and various stages of a representative CCS project. The report then reviews existing relevant experience in community engagement, presented in six case studies from CCS projects. These studies were drafted by stakeholders engaged in the development of the Guidelines who had a hands-on role either in engaging the local community or in decisionmaking around the featured project. Chapter 4 of the report presents the guidelines for community engagement on CCS.

This effort was initiated with a hope of providing a set of best practices to guide the engagement of future commercial CCS projects, if the demonstration projects prove successful. The guidelines for regulators are designed to guide regulatory authorities responsible for overseeing CCS projects but also offer recommendations for improving the public participation rules as new regulations are drafted. The guidelines for local decisionmakers highlight how, in some cases, communities can take a proactive role in shaping the engagement around a potential CCS project, rather than a passive role as purely receiver of information. Finally, the guidelines for project developers highlight principles and activities that can be employed to promote effective community engagement and involve the local community in the CCS project.

The guidelines are separated into five categories as summarized in the table above. The full text of the guidelines follows, presented by audience. In Chapter 4, the guidelines are presented by engagement principle, with an introductory overview of each issue.

For more information, contact Sarah Forbes, Francisco Almendra, or Micah Ziegler

The Clean Technology Fund: Insights for Development and Climate Finance

admin — Fri, 12 Nov 2010 14:15:11 -0500

Over the past year, the Clean Technology Fund (CTF) administered by the World Bank in partnership with Regional Development Banks has begun financing clean technology deployment projects in fast growing developing countries. The objective of the CTF is to use the minimum level of concessional finance necessary to realize investment opportunities that will have transformative effects on the greenhouse gas (GHG) emissions of the recipient country over the long term. As of March 2010, US$4.35 billion –nearly the entirety of the $4.405 billion in funds pledged to the Clean Technology Fund (CTF)– have been earmarked to support investment plans in 12 countries, and a regional concentrating solar program in North Africa. $888 million dollars in financing for 15 projects in 8 countries has been approved to date.

This working paper reviews recent developments at the CTF, including the status of contributions to the fund, its governance structure, and evolving results framework. Its focus is on the projects for which CTF financing has been approved to date. It analyzes the Mexico and South Africa investment plans and projects as case studies to illustrate some of the challenges and opportunities of addressing policy, regulatory and governance issues in project design and implementation. It is part of a series of working papers WRI has produced analyzing evolving developments at the CTF. Our March 2010 Working Paper, The Clean Technology Fund: Insights for Development and Climate Finance, reviewed the basic mechanics of the Fund and the Clean Technology Investment Plans approved.

Note: This version of the Working Paper was updated on 30 November 2010 from the version posted on 11 November 2010. Corrections were made on page 4 regarding the role of private sector observers, and on pages 9 and 13 regarding the implementing modalities of the Turkey Commercializing Sustainable Energy Financing Program. A revised paper reflecting on developments at the November 2010 meeting of the CTF governing committee will be released in early 2011.