Sanjay Kumar INDIA Renewable Energy Costs Policy Imperatives for Developing Countries

Summary of Average Levelised Cost of Electricity Generation (In service 2009)

Range of Levelised Cost of Electricity Generation (Merchant Power 2009) Source: ibid

Average Instant Cost Trend (source: ibid)

Levelised Cost of Electricity: Cost Reduction Curve (Source: Lazard 2010)

PV Module Experience Curve (Log Linear Relationship: Source C Handleman; Heliotronics 2005)

POLICY INSTRUMENTS TO REDUCE INVESTMENT RISKS FOR RENEWABLE ENERGY DEPLOYMENT IN DEVELOPING COUNTRIES

1. Enunciate a good Policy: 1. Passed by the Parliament  stability 2. Set ambitious targets  attract multiple stakeholders 3. Emphasize promotional targets  fixed targets with penal clauses often counterproductive and costly to administer 4. Harmonise state and federal laws/ policies and establish incentive programmes at federal level to support harmonisation

2. Prioritise detailed renewable energy mapping 1. Detailed and comprehensive mapping of the potential of all RE sources and RE technologies in a locality 2. Put maps in the public domain 3. Install a mechanism to monitor performance of RE generating plants at a given locality against the maximum potential 2. Prioritise detailed renewable energy mapping 1. Detailed and comprehensive mapping of the potential of all RE sources and RE technologies in a locality 2. Put maps in the public domain 3. Install a mechanism to monitor performance of RE generating plants at a given locality against the maximum potential

3. Give “infrastructure” status to RE projects 1. Allows longer term lending by banks 2. Allows renewable energy companies to raise public money through long-term bonds 3. Allows enhanced tax credits 3. Give “infrastructure” status to RE projects 1. Allows longer term lending by banks 2. Allows renewable energy companies to raise public money through long-term bonds 3. Allows enhanced tax credits

4. Establish a “Risk Guarantee Fund” 1. Assures generators/ distributors for the returns 2. Should be simple to operate and located conveniently 3. In-built mechanism for quantitative and qualitative check to be available 4. Replenishable fund 4. Establish a “Risk Guarantee Fund” 1. Assures generators/ distributors for the returns 2. Should be simple to operate and located conveniently 3. In-built mechanism for quantitative and qualitative check to be available 4. Replenishable fund

5. Establish a combination of Obligations and Market Instruments 1. FiTs most sought after but costly for Governments 2. Right level of FiT difficult to determine 3. Hence, combine FiT with open market mechanism (e.g. Renewable Energy Certificates) 5. Establish a combination of Obligations and Market Instruments 1. FiTs most sought after but costly for Governments 2. Right level of FiT difficult to determine 3. Hence, combine FiT with open market mechanism (e.g. Renewable Energy Certificates)

6. Establish an ambitious R&D Fund 1. R&D reduces costs faster than experience curves suggest 2. Matching development and developing country funds 6. Establish an ambitious R&D Fund 1. R&D reduces costs faster than experience curves suggest 2. Matching development and developing country funds

7. Establish programme for capacity building of Regulators 1. Electricity markets highly complex, changing fast 2. Able to embed a policy/ regulation in other policies and regulations at state and federal levels 3. Independent 7. Establish programme for capacity building of Regulators 1. Electricity markets highly complex, changing fast 2. Able to embed a policy/ regulation in other policies and regulations at state and federal levels 3. Independent

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