As the cost of renewable energy technologies (RETs) has declined in recent years, many jurisdictions around the world are now faced with a market in which customer-sited generation is cheaper than power from the grid, a transformation that will have significant implications for renewable electricity (RE) development in the years ahead. Rather than paying a cost-based price for RE generation (as under many feed-in tariffs), or allowing onsite generation to be credited at the full retail rate (as under net metering) – two common approaches in mainland markets – island jurisdictions are beginning to introduce new kinds of policies to adapt to a world in which customer-sited RETs can generate power more cost-effectively than centralized supply options. Nowhere is this transformation more apparent than in island grids, where imported diesel and/or heavy fuel oil often result in generation costs above USD $0.50/kWh. As this innovation advances, island jurisdictions are becoming policy laboratories, showcasing new ways of attempting to balance the solvency of the electricity system (including generation, transmission, and distribution) with the rapid rise of customer-sited generation. In the process, this webinar will examine whether island jurisdictions are indeed pointing the way forward, and if so, what it could mean for the future of renewable electricity policy. http://www.leonardo-energy.org/webinar/island-states-renewable-energy-policy-pioneers

1. Renewable Energy Policy Pioneers
Toby D. Couture
Founder and Director
E3 Analytics
October 14 2014

2. BRIEF PROFILE:
Toby Couture is Founder and Director of
E3 Analytics, an international renewable
energy consultancy based in Berlin. He has
worked with over thirty countries around
the world on the economic, financial, and
policy aspects of renewable energy
development, including in both island and
mainland regions.

3. Outline
1. Tradi/onal
Policy
Op/ons
2. Islands
as
Renewable
Energy
Policy
Pioneers
3. Concluding
Remarks

4. Traditional Policy Options

5. 1. Net Metering
- First introduced in the U.S. in the early 1980s!
- Allowed individuals or businesses with customer-sited
generation to connect to the grid and be credited for
the excess power they fed into the system!
Formula:!
Compensation rate = Retail rate!
!

6. 1. Net Metering
- “Traditional” net
metering does not
result in a cash
payment: it simply
credits customer-sited
generation at a rate
equivalent to the
retail rate!
- Excess power is rolled
over, typically up to
12 months!
Source:
SolarCra,.com

7. 2. Feed-in Tariffs
!
Three Key Elements:!
!
!1. Clear price for electricity sold to the grid!
!2. Clear, long-term contract!
!3. Guaranteed access to the grid!
!
à Payment for 100% of generation!
à 100% export-oriented (no self-consumption; two
separate meters; receive both a check and a bill)!
Source:
h0p://www.nrel.gov/docs/fy10os=/44849.pdf

8. 2. Feed-in Tariffs
Compensation rate typically based on the cost of
generation.!
!
Residences and businesses become de facto IPPs!
!
!
Formula:!
Compensation rate !
= Technology-specific ! ! ! ! ! ! !
!generation cost!
!

9. 2. Feed-in Tariffs
!
à Price locked in
irrespective of utility
avoided costs, fuel costs,
or retail prices!
à Provides a hedge against
fuel price volatility!
!
Source:
Couture
&
Gagnon
2010

10. 2. Feed-in Tariffs
Source:
Ferroukhi
et
al.
2014,
h0p://www.irena.org/rethinking/Rethinking_FullReport_web_view.pdf

11. Traditional Policy Options
Net Metering: !
Allows customers to
generate power on-site
and export
surplus to the grid
FITs: !
Offer a cost-based
price for generation
from RE sources,
over a long-term
contract (10-20 yrs)

12. Traditional Policy Options
à What
about
the
space
in
between?
Net
Metering! FITs!

13. Traditional Policy Options
à In
island
regions,
par=cularly
the
Caribbean
where
electricity
subsidies
are
more
limited
and
retail
rates
more
closely
reflect
avoided
costs,
tradi/onal
net
metering
may
lead
to
“over-­‐compensa/on”
and
even
cost-­‐shi,ing
à Similarly,
it
may
be
difficult
to
determine
an
appropriate
feed-­‐in
tariff
in
small
island
systems

14. The Challenge
à How
to
design
appropriate
policies
for
island
regions
to
allow
distributed
renewable
energy
development
in
a
regulated
way,
while
maintaining
grid
reliability,
and
without
jeopardizing
the
solvency
of
incumbent
u=li=es?

15. Note
This
Webinar
focuses
on
the
compensa/on
mechanisms
for
distributed
genera=on
in
island
regions.
However,
price
is
only
one
factor.
Important
to
consider
the
broader
regulatory
environment:
-­‐ Grid
connec=on
protocols
(e.g.
grid
code)
-­‐ Metering
rules
-­‐ Policy
caps
-­‐ Permi[ng
procedures
-­‐ Fixed
charges
and
access
fees
-­‐ Curtailment
rules,
etc.

16. Islands as RE Policy Pioneers

17. Solar
PV:
1
Diesel
Gensets:
0

18. Islands
around
the
world
are
now
beginning
to
innovate
in
this
“space
in
between”,
designing
policies
that
are
neither
tradi=onal
net
metering,
nor
tradi=onal
FITs.

19. 1. Kauai,
Hawaii
2. Ramea
Island,
Nfld
3. Grenada,
Caribbean
4. Seychelles,
Indian
Ocean
5. Cook
Islands,
Pacific
Islands
Region
6. Palau,
Pacific
Islands
Region
7. Vanuatu,
Pacific
Islands
Region

20. 1.
Kauai,
Hawaii

21. 1.
Kauai,
Hawaii
Pilot
Program:
Effec=ve
June
2011
-­‐ Applicable
to
solar
PV,
wind,
biomass,
and
hydro
-­‐ Systems
up
to
200kW
in
size
-­‐ The
total
capacity
allocated
is
capped
for
each
project
size
category:
• Projects
50kW
–
200kW
à
2MW
total
• Projects
10kW
–
50kW
à
500kW
• Projects
<10kW
à
500kW
Source:
h0p://kauai.coopwebbuilder.com/sites/kauai.coopwebbuilder.com/
files/42_schedule_nem_effec=ve_june_3_2011.pdf

22. 1.
Kauai,
Hawaii
Payment
Structure:
-­‐ Projects
receive
a
fixed
payment
of
USD
$0.20/kWh
for
the
system’s
net
excess
genera/on
at
the
end
of
each
year.
-­‐ Customers
have
the
op=on
to
carry
the
genera=on
over,
upon
request,
or
receive
a
cash
payment
for
the
net
excess
genera=on
-­‐ This
payment
is
offered
for
a
period
up
to
20
years.
Source:
h0p://kauai.coopwebbuilder.com/sites/kauai.coopwebbuilder.com/
files/42_schedule_nem_effec=ve_june_3_2011.pdf

23. 2.
Ramea
Island,
Newfoundland

24. 2.
Ramea
Island,
Newfoundland
Quick
facts:
• 354
electricity
customers
• Peak
demand:
1,078kW
(2011)
• Annual
genera=on:
4,200
MWh
• Total
690kW
of
wind
power
capacity
à
No
formal
policy
framework:
case
by
case,
and
nego=ated
with
the
u=lity,
Nalcor
Source:
Rickerson
et
al.
2012:
h0p://iea-­‐retd.org/wp-­‐content/uploads/2012/06/IEA-­‐RETD-­‐REMOTE.pdf

25. 2.
Ramea
Island,
Newfoundland
Payment
Structure:
-­‐ Linked
to
avoided
fuel
costs.
Original
formula
was
nego=ated
between
wind
power
operator
and
Nalcor,
the
u=lity.
-­‐ The
principle
is
to
strike
a
tariff
that
is
between
the
u=lity’s
full
avoided
diesel
costs
and
the
wind
project’s
genera=on
costs,
up
to
90%
of
full
avoided
fuel
costs
-­‐ The
10%
buffer
is
intended
to
cover
unan=cipated
addi=onal
costs
for
the
u=lity,
including
administra=on
costs
Source:
Rickerson
et
al.
2012:
h0p://iea-­‐retd.org/wp-­‐content/uploads/2012/06/IEA-­‐RETD-­‐REMOTE.pdf

26. 3.
Caribbean
Region:
Grenada

27. 3.
Grenada
Source:
h0p://www.irena.org/documentdownloads/publica=ons/
_caribbeancomplete.pdf
Quick
facts:
• Peak
demand:
30.8MW
(2010)
• Installed
Capacity:
33.2MW
• Annual
genera=on:
203
GWh
• Electricity
tariffs
=
approx.
USD
$0.40/kWh
• Electricity
is
unsubsidized
Grenada
previously
had
a
tradi=onal
net
metering
policy
(from
2006-­‐2011).
à However,
it
was
thought
to
be
over-­‐compensa=ng
producers,
due
to
the
high
retail
rate.

28. 3.
Grenada
“Renewable
Standard
Offer”
Payment
Structure:
Two
Op/ons
1. Fixed
Payment
Op/on:
Systems
up
to
100kW
in
size
can
receive
a
fixed
payment
of
EC
$45/kWh
(~USD
$0.17/kWh)
for
10
years
2. Variable
Payment
Op/on:
payment
based
on
the
avoided
fuel
cost
over
the
previous
12-­‐month
period
Source:
h0p://www.grenlec.com/Portals/0/StandardOffer/
Grenlec%20Renewable%20Standard%20Offer.pdf

29. 4.
Seychelles

30. 4.
Seychelles
“Net
Feed-­‐in
Tariff”
Program
(Jan
2014)
Payment
Structure:
-­‐ Onsite
genera=on
can
be
used
to
offset
onsite
consump=on
-­‐ Payment
offered
for
excess
genera=on
only
-­‐ Up
to
88%
of
avoided
fuel
costs:
USD
~$0.17/kWh
currently
Source:
Couture
&
Gagnon
2010

31. 4.
Seychelles
“Net
Feed-­‐in
Tariff”
Program
(Jan
2014)
Payment
Structure:
-­‐ Similar
to
Ramea
(~90%
of
avoided
fuel
costs),
except
that
the
payment
is
only
for
“excess
genera=on”
-­‐ It
is
designed
to
encourage
some
share
of
onsite
consump=on
Source:
Couture
&
Gagnon
2010

32. 5.
Cook
Islands

33. 5.
Cook
Islands:
Pacific
Islands
Region
Quick
Facts:
• Popula=on:
Approx.
15,500
• Annual
genera=on:
27.7
GWh
• Electricity
tariffs
=
NZD
$0.77/kWh
(approx.
USD
$0.60/kWh)
Cook
Islands
has
modified
its
RE
policy
a
few
=mes.
Net
metering
(originally
for
systems
up
to
10kW)
was
considered
to
be
over-­‐
compensa=ng
producers,
and
led
to
more
applica=ons
than
expected.
Policy
revised,
and
capped
at
2kW.
à
Cook
Islands
now
has
three
(3)
different
policy
frameworks
to
support
customer-­‐sited
or
IPP
genera=on.

34. 5.
Cook
Islands:
Pacific
Islands
Region
Combined
Policy
Framework
(as
of
December
2013)
1. Net
Metering
Policy:
Project
<2kW
-­‐ Tradi=onal
net
metering:
customer
credited
at
full
retail
rate
(~USD
$0.44/kWh)
-­‐ No
cash
payment
for
excess
genera=on
-­‐ Roll
over
period:
12
months
-­‐ 5-­‐year
contract
agreement;
poten=al
to
renew?

35. 5.
Cook
Islands:
Pacific
Islands
Region
Combined
Policy
Framework
(as
of
December
2013)
2.
Gross
Metering
Policy:
-­‐ Project
size:
2kW
–
7kW
(single
phase)
and
7kW
-­‐
21kW
(three
phase)
-­‐ 100%
power
must
be
exported
to
the
grid
(i.e.
FIT)
Payment
Structure:
-­‐ Tariff
fixed
at
NZD
$0.45/kWh
(~USD
$0.355/kWh)
-­‐ Below
avoided
cost
-­‐ Minimum
5-­‐year
contract
agreement

36. 5.
Cook
Islands:
Pacific
Islands
Region
Combined
Policy
Framework
(as
of
December
2013)
3.
Feed-­‐in
Tariff
for
IPPs
-­‐ >21kW
for
three
phase
and
>7kW
for
single
phase
-­‐ 100%
power
must
be
exported
to
the
grid
Payment
Structure:
-­‐ Payment
rate
($/kWh)
to
be
determined
through
“by
mutual
agreement”
-­‐ Rate
to
be
below
avoided
cost
(i.e.
no
‘subsidy’)

37. 5.
Cook
Islands:
Growth
in
RE
Capacity
Source:
Te
Aponga
Uira
(TAU)
U=lity
2014

38. 6.
Palau

39. Palau:
Pacific
Islands
Region
Quick
Facts:
-­‐ Popula=on:
Approx.
20,000
-­‐ Annual
Genera=on:
89
GWh
Source:
h0p://www.irena.org/DocumentDownloads/Publica=ons/Palau.pdf
(2011)
-­‐ Installed
Capacity:
Approx.
35MW
-­‐ Retail
Electricity
Tariffs
(2013):
USD
$0.405/kWh

40. Palau:
Pacific
Islands
Region
Payment
Structure:
-­‐
credited
for
any
excess
genera=on
in
a
par=cular
month
at
a
rate
no
less
than
50%
of
the
tariff
applicable
during
that
monthly
billing
period.
à
in
other
words,
excess
genera=on
is
purchased
at
a
significant
discount
to
the
retail
rate
paid
by
the
customer.
-­‐
Rollover
period
is
12
months;
TBD
by
the
PPUC
Source:
h0p://www.spc.int/edd/en/document-­‐download/finish/11-­‐reports/654-­‐palau-­‐energy-­‐country-­‐profile

41. 7.
Vanuatu

42. Vanuatu:
New
policy
framework
launched
October
1
2014
Two
components:
1. Net
metering
for
residen=al
customers
2. “Bi-­‐direc=onal
metering”
policy
for
commercial
and
“high
voltage”
customers
Both
compensate
producers
(offset
onsite
produc=on)
at
a
rate
significantly
below
retail
(20%
–
35%
of
retail
rate).
Source:
h0p://www.ura.gov.vu/a0achments/ar=cle/100/
U-­‐0002-­‐14%20Feed%20In%20Tariffs%20Final%20Decision%20-­‐
%20Office%20Gaze0e.pdf

43. Vanuatu:
Source:
h0p://www.ura.gov.vu/a0achments/ar=cle/100/
U-­‐0002-­‐14%20Feed%20In%20Tariffs%20Final%20Decision%20-­‐
%20Office%20Gaze0e.pdf
Caps
Project
size
cap:
19.8kW
(based
on
size
of
grid
=e)
Total
program
capacity
cap:
~500kWp
• 50-­‐70
small
residen=al
customers
(~320kWp)
• 10
commercial
customers
(~120kWp)
• 3
high
voltage
customers
(~60kWp)
+
Limit
of
4
solar
home
systems
per
local
loop
or
transformer

44. Vanuatu:
Retail
rate
in
Vanuatu
has
three
basic
components:
1. Fixed
charge
per
subscribed
kVA,
per
month
Source:
h0p://www.ura.gov.vu/a0achments/ar=cle/100/
U-­‐0002-­‐14%20Feed%20In%20Tariffs%20Final%20Decision%20-­‐
%20Office%20Gaze0e.pdf
2. Access
fee
for
net
metered
systems
(linked
to
system
size)
3. Consump/on
charge
($/kWh)
-­‐ Residen=al:
~
USD
$0.67/kWh
-­‐ Commercial:
~
USD
$0.48/kWh
-­‐ Industrial:
~
USD
$0.38/kWh

45. 1.
Net
Metering
in
Vanuatu
-­‐ Producers
export
their
excess
power
to
the
grid
-­‐ Targets
residen=al
customers
-­‐ One
meter,
provided
by
u=lity
UNELCO
Payment
Structure:
-­‐ No
cash
payment
(“no
nega=ve
bills”)
-­‐ Excess
genera/on
offsets
the
fixed
connec/on
charge
and
the
access
fee
at
a
rate
of
13
vatu
(~USD
0.135/kWh)
for
each
excess
kWh
à Compensa=on
rate
is
different
from
retail
rate
paid;
effec=vely
an
accoun=ng
measure

46. 2.
“Bi-­‐direc/onal
Metering”
in
Vanuatu
-­‐ Producers
export
excess
power
output
to
the
grid
-­‐ But,
consump=on
and
produc=on
metered
separately
-­‐ Targets
commercial
and
industrial
customers
Payment
Structure:
-­‐ “No
nega=ve
bills”
-­‐ Like
the
NM
policy,
excess
genera/on
offsets
the
fixed
connec/on
charge
and
the
access
fee
at
a
fixed
rate;
in
this
case,
21
vatu/kWh
(~USD
$0.21/kWh)
-­‐ These
revenues
can
only
offset
money
owed
to
the
u=lity
(i.e.
fixed
charge
+
consump=on
charge)

47. Concluding
Remarks

48. Concluding
Remarks
-­‐ By
innova=ng
in
“the
space
in
between”,
island
regions
are
opening
up
new
ways
of
allowing,
and
regula=ng,
the
adop=on
of
distributed
renewable
energy
technologies
-­‐ This
innova=on
may
also
carry
valuable
lessons
for
mainland
regions

49. Concluding
Remarks
-­‐ Do
not
be
misled
by
policy
labels.
à
Look
at
the
underlying
policy
design:
what
does
it
do?
How
is
it
structured?
-­‐ Where
retail
rates
reflect
genera=on
costs,
tradi/onal
net
metering
is
increasingly
seen
as
being
too
generous.

50. Concluding
Remarks
à Policies
are
being
designed
to
compensate
‘net
excess
genera=on’
in
a
way
that
saves
the
u=lity
money
(i.e.
at
rates
lower
than
avoided
costs),
à Also
designed
to
allow
customers
to
become
“prosumers”,
saving
money
by
offse[ng
their
own
consump=on

51. Concluding
Remarks
-­‐ As
highlighted
at
the
outset,
island
u=li=es
are
o,en
acutely
concerned
about
solvency:
à
the
innova=ve
hybrid
policies
explored
here
provide
op=ons
for
compelling
“win-­‐wins”

52. Ques/ons?
Toby
D.
Couture
Founder
and
Director
E3
Analy3cs
toby@e3analy3cs.eu

53. Select
Publica/ons
Rickerson,
W.,
Couture,
T.,
Barbose,
G.,
Jacobs,
D.,
Parkinson,
G.,
Belden,
A.,
Becker-­‐Birck,
C.,
Chessin,
E.,
(2014).
“RE-­‐PROSUMERS”,
IEA-­‐RETD:
Paris,
France.
Available
at:
h0p://iea-­‐retd.org/wp-­‐content/uploads/2014/06/RE-­‐PROSUMERS_IEA-­‐RETD_2014.pdf
Couture,
T.,
(2014).
“The
Role
of
Industrial
Prosumers
in
Achieving
Inclusive
and
Sustainable
Industrial
Development
(ISID),”
Policy
Report,
United
Na=ons
Industrial
Organisa=on
(UNIDO),
Forthcoming.
Couture,
T.,
Leidreiter,
A.
(2014).
“How
to
Achieve
100%
Renewable
Energy:
A
Policy
Handbook,”,
World
Future
Council:
Hamburg,
Germany.
Available
at:
h0p://worldfuturecouncil.org/fileadmin/user_upload/Climate_and_Energy/Ci=es/
Policy_Handbook_Online_Version.pdf
Couture,
T.,
Flannery,
S.
(July
11
2013).
‘Can
Climate
Bonds
Advance
Renewable
Energy
Finance?’,
Renewable
Energy
World,
Available
at:
h0p://www.renewableenergyworld.com/rea/news/ar=cle/2013/07/can-­‐climate-­‐bonds-­‐advance-­‐
renewable-­‐energy-­‐finance
Couture
T.,
Jacobs,
D.,
(2013).
The
Future
of
Electricity
Markets,
Renewable
Energy
World,
February
18
2013,
h0p://www.renewableenergyworld.com/rea/news/ar=cle/2013/02/the-­‐future-­‐of-­‐electricity-­‐markets
Rickerson,
W.,
Couture,
T.,
Glassmire,
J.,
Lillienthal,
P.,
Peralta,
M.
S.,
(2012).
Renewable
Energies
for
Remote
Areas
and
Islands,
Interna=onal
Energy
Agency
-­‐
Renewable
Energy
Technology
Deployment
(IEA-­‐RETD),
Available
at:
h0p://iea-­‐retd.org/wp-­‐content/uploads/2012/06/IEA-­‐RETD-­‐REMOTE.pdf

54. Select
Publica/ons
Couture,
T.,
(2012).
“FITs
and
Stops:
Spain’s
Renewable
Energy
Plot
Twist
and
What
it
All
Means,”
Analy=cal
Brief,
Vol
4.,
No.
1,
Available
at:
h0p://www.e3analy=cs.ca/wp-­‐content/uploads/2012/05/Analy=cal_Brief_Vol4_Issue1.pdf
Kreycik
C,
Couture
T
D,
Cory
K
(2011)
“Innova3ve
Feed-­‐in
Tariff
Designs
to
Limit
Policy
Costs,”
Na=onal
Renewable
Energy
Laboratory,
Golden,
CO,
Available
at:
h0p://www.nrel.gov/docs/fy11os=/50225.pdf
Couture,
T.,
(2011).
“Booms,
Busts
and
Retroac3ve
Cuts:
Spain’s
Solar
Odyssey,”
Analy=cal
Brief,
Vol.
3,
No.
1,
Available
at:
h0p://e3analy=cs.ca/documents/Analy=cal_Brief_Vol3_Issue1.pdf
Kreycik
C,
Couture
T
D,
Cory
K,
(2011)
“Procurement
Op3ons
for
New
Renewable
Electricity
Supply,”
Na=onal
Renewable
Energy
Laboratory,
Golden,
CO,
Available
at:
h0p://www.nrel.gov/docs/fy12os=/52983.pdf
Couture,
T.,
(2010).
“Penny-­‐wise
or
Pound
Foolish:
The
Case
of
Electricity
Policy,”
Analy=cal
Brief,
Vol
2,
No.
2,
Available
at:
h0p://www.e3analy=cs.ca/wp-­‐content/uploads/2012/05/Analy=calBrief2_2.pdf
Couture,
T.,
(February
2010).
“Feed-­‐in
Tariffs:
Arguments
and
Counterarguments”,
Analytyical
Brief,
Vol
1,
No.
1,
Available
at:
h0p://www.e3analy=cs.ca/wp-­‐content/uploads/2012/05/Analy=cal_Brief_Vol1_Issue1.pdf
Cory
K,
Couture
T
(2009)
“Feed-­‐in
Tariff
Policy:
Design,
Implementa3on
and
RPS
Policy
Interac3ons,”
United
States
Associa=on
of
Energy
Economics
(USAEE),
Dialogue,
Vol.
17,
No.
1,
pp.
21-­‐28.
Available
at:
h0p://www.usaee.org/pdf/Mar09.pdf