1. Country Case Studies: Thailand & Tanzania Feed-in Tariffs and Small Power Producer Regulations Renewable Energy Policy Workshop World Resources International Washington DC 22 November 2010 Anastas Mbwala Chris Greacen

2. Thailand

3. Cant we hook it up and sell power back?

5. $

6. Technical regulations: Allowable voltage, frequency, THD variations Protective relays – 1-line diagrams for all cases: Induction Synchronous Inverters Single/multiple Connecting at different voltage levels (LV or MV) Communication channels Commercial regulations: Definitions of renewable energy, and efficient cogeneration Cost allocation Principle of standardized tariff determination Invoicing and payment arrangements Arbitration $ + Standardized Power Purchase Agreement (PPA)

7. Evolution of Thai VSPP regulations 2002 – VSPP regulations drafted, approved by Cabinet – Up to 1 MW export, renewables only – Tariffs set at utilitys avoided cost

8. Biogas from Pig Farms Reduces air and water pollution Produces fertilizer Produces electricity 8 x 70 kW generator Ratchaburi

9. Biogas from Pig Farms

10. 40 kW Mae Kam Pong, Chiang Mai, Thailand Micro hydropower

11. Uses waste water from cassava to make methane Produces gas for all factory heat (30 MW thermal) + 3 MW of electricity 3 x 1 MW gas generators Korat Waste to Energy – biogas … an early Thai VSPP project

12. Evolution of Thai VSPP regulations 2002 – VSPP regulations drafted, approved by Cabinet – Up to 1 MW export, renewables only – Tariffs set at avoided cost (bulk supply tariff + FT) 2006 – Up to 10 MW export, renewables + cogeneration – Feed-in tariff adder (premium payment) Paid by ratepayers – If > 1 MW then utility only pays for 98% of energy (utility incentive to facilitate VSPPs)

13. Rice husk-fired power plant 9.8 MW Roi Et, Thailand

14. Bangkok Solar 1 MW PV Project size: 1 MW Uses self-manufactured a-Si

15. Evolution of Thai VSPP regulations 2002 – VSPP regulations drafted, approved by Cabinet – Up to 1 MW export, renewables only – Tariffs set at avoided cost (bulk supply tariff + FT) 2006 – Up to 10 MW export, renewables + cogeneration – Feed-in tariff adder – If > 1 MW then utility only pays for 98% of energy 2009 – Tariff adder increase, more for projects that offset diesel http://www.eppo.go.th/power/vspp-eng/http://www.eppo.go.th/power/vspp-eng/ for English version of regulations, and model PPA

16. Thai VSPP feed-in tariff adders Assumes exchange rate 1 Thai baht = 0.029762 U.S. dollars FuelAdderAdditional for diesel offsetting areas Additional for 3 southern provinces Years effective Biomass Capacity <= 1 MW $ 0.015 $ 0.030 7 Capacity > 1 MW $ 0.009 $ 0.030 7 Biogas <= 1 MW $ 0.015 $ 0.030 7 > 1 MW $ 0.009 $ 0.030 7 Waste (community waste, non-hazardous industrial and not organic matter) Fermentation $ 0.074 $ 0.030 7 Thermal process $ 0.104 $ 0.030 7 Wind <= 50 kW $ 0.134 $ 0.045 10 > 50 kW $ 0.104 $ 0.045 10 Micro-hydro 50 kW - <200 kW $ 0.024 $ 0.030 7 <50 kW $ 0.045 $ 0.030 7 Solar $ 0.238 $ 0.045 10 Tariff = adder(s) + bulk supply tariff + FT charge Biomass tariff = $0.009 + $0.049 + $0.027 = $0.085/kWh

17. VSPP Capacity – before and after FIT ADDER

18. VSPP project pipeline as recorded in EPPO data Application under consideration Permission received, awaiting PPA PPA signed Generating & selling electricity Leakage (Project abandoned)

19. Jun 2009 Thailand VSPP Status

20. Dec 2009 Thailand VSPP Status

21. Mar 2010 Thailand VSPP Status

22. July 2010 Thailand VSPP Status 847 MW online PPAs signed for additional 4283 MW

23. Current VSPP challenges & responses ChallengeResponse 1. PPA speculatorsBid bond (200 baht/kWh) ($6/kW). No adder if >1 yr past Scheduled Commercial Operations Date. Solar online: 16 MW online Solar PPAs: 1784 MW

24. ChallengeResponse 2. Little diversity (generators online mostly >1 MW biomass owned by sugar, rice mills) 4% interest loans up to 50 million baht ($1.6 million) per project. Government loaned 4 billion baht ($133 million) to 13 banks at 0.5% interest.

25. ChallengeResponse 3. VSPP not well integrated into Power Development Planning (PDP) process Not much yet, but Thai NGOs have developed/advocate alternative PDP GWh Fuel mix in power generation Power Development Plan 2007 20112012201320142015201620172018201920202021

26. Reflections -- Thai VSPP Low-key, local approach kept utilities from being threatened Thailands path to full generation-cost FIT started successfully with tariffs based on avoided cost Initial trickle of applications gave utility time to build capacity to implement program Feed-in adder very successful in attracting projects Incentivize utility (utility pays for only 98% of energy from projects >1 MW) Challenges arising as program grows, largely being addressed

27. Tanzania

28. Evolution of Tanzania SPP regulations Approved by regulator August 2009 Up to 10 MW export, renewables & cogeneration SPP Tariffs at average of long run marginal costs (LRMC) and short run (SRMC) – Grid-connected SPP tariff (2010): 110.3 TZS ($0.074)/kWh 132.36 TZS ($0.088)/kWh dry-season Aug-Nov 99.27 TZS ($0.0663)/kWh wet-season Jan-Jul, December – In rural mini-grid areas offsetting diesel (2010): 368.87 TZS ($0.24.6)/kWh 4 PPAs signed by November 2010 www.ewura.go.tz/sppselectricity.htmlwww.ewura.go.tz/sppselectricity.html for English versions of regulations, and model PPAs

29. Pilot Sisal Biogas Plant 150 kW– HALE -TANGA - TANZANIA

30. Processing of Sisal Leaves Production of 1 ton of dry fibre generates about 24 tons of sisal waste Fibre 4% Sisal waste 96%

31. 31

34. Tanzania SPP Legislative Framework National Energy Policy, 2003 Rural electrification policy statement Energy and Water Utilities Regulatory Authority Act – Establishing EWURA Rural Energy Act (2005) – Establishing REA & REF The Electricity Act, 2008

35. Legislative Framework, cont Energy Policy Statement No. 36 Establish norms, codes of practice, guidelines and standards for renewable energy technologies, to facilitate the creation of an enabling environment for sustainable development of renewable energy sources

36. Legislative Framework, cont The Electricity Act (2008) provides for SPPA and SPPT Definitions Standardized Small Power Purchase Agreement (SPPA): Means agreement between utility entity and a developer entered for pursposes of selling power to the grid not exceeding 10 MW but not less than 100 kW. Standardized Small Power Purchase Tariff (SPPT): Means the tariff agreed on in the SPPA License exemption for projects less than 1 MW (generation or distribution)

37. A goal: Light-handed regulation 1.Minimize amount of information that is required. 2.Minimize the number of separate regulatory requirements and decisions. 3.Use standardized documents, and make use of documents used by other agencies, to the maximum extent possible (reduce need for case- by-case negotiation)

38. Table of SPP documents Main gridMini-grid Process Guidelines (roadmap) Guidelines for Developers of Small Power Projects (SPP) in Tanzania Process rules Rules for Developers of Small Power Projects (SPP) in Tanzania Interconnection Guidelines Guidelines for Grid Interconnection of Small Power Projects in Tanzania (Parts A, B, C) Interconnection rules Rules for Grid Interconnection of Small Power Projects Standardized PPA Standardized Power Purchase Agreement for Purchase of Grid-Connected Capacity and Associated Electric Energy Between Buyer and a Small Power Project Standardized Power Purchase Agreement for Purchase of Off-Grid Capacity and Associated Electric Energy Between Buyer and a Small Power Project Tariff methodology Standardized Tariff Methodology for the sale of Electricity to the Main Grid in Tanzania Under the Standardized Small Power Purchase Agreements. Standardized Tariff Methodology for the Sale of Electricity to the Mini-grids Under the Standardized Small Power Purchase Agreements Tariff calculations for year 2009 Detailed Tariff Calculations under the SPPA for the Main Grid for year 2010 Detailed Tariff Calculations under the SPPA for the Mini-grids for year 2010 = Approved and available at: www.ewura.go.tz/sppselectricity.htmlwww.ewura.go.tz/sppselectricity.html = Awaiting final approval and gazetting (public consultation completed)

39. Tariffs determined by SPP type 39 Connected to main grid Connected to isolated mini-grid Selling wholesale (to DNO*) Case 1Case 2 Selling retail (directly to final customers) Case 3Case 4 * DNO: Distribution Network Operator (currently TANESCO)

40. Tariff Case 1: Selling Wholesale to Main grid 40 Where C lrmc is the long run marginal cost as defined by Tanescos long-term power plan; and C srmc is the budgeted cost of thermal generation in the next year. Note: the actual calculations are somewhat more complicated, taking into account: Transmission losses Seasonality Price floor & cap They are available in: Standardized Tariff Methodology Under the Standardized Small Power Purchase Agreements available from EWURA. Order 08-015 on Dec 30.2008 Tariff – case 1: Main Grid Tariff 2009 (TZS/kWh Tariff 2010 (TZS/kWh) Annual Average85.49110.30 Dry season (Aug – Nov)102.58132.36 Wet season (Jan-Jul and Dec)75.9499.27 Note: $1 US = 1497 TZS (November 2010)

41. Tariff Case 2: selling wholesale to a mini- grid 41 Mini-grid SPP receives the average of Tanescos main grid and mini-grid avoided costs. C LmrcGrid = long run marginal cost for grid-power (adjusted for losses) C AveMini = average incremental cost of mini-grid power (levelized cost of electricity from a new mini-grid diesel generator). Tariff – case 2 (2009)Tariff 2009 (TZS/kWh) Tariff 2010 (TZS/kWh) Tariff (no seasonal variations)334.83368.87 Note: $1 US = 1497 TZS (November 2010)

42. Tariff Cases 3 (isolated) and 4 (main grid): selling at retail to end use customers Tariff is proposed by SPP generator, subject to EWURA review – Less oversight demanded in cases in which community is in agreement with proposed tariff – Where possible, EWURA draws on financial analysis submitted to REA for rural electrification subsidy 42

43. Necessary permits, clearances and procedures for application 43 EWURA license Business license, tax registration, etc. Power Purchase Agreement (PPA) Land title or lease Resource Rights (e.g. water rights from River Basin Water Office) Letter of Intent (LOI) Environmental and Social Clearance (NEMC) Building Permit Sequence is important to avoid competing claims on project sites

44. Where we are now… Completed – All documents passed public review and most are approved for use. – Several PPAs signed with TANESCO and licenses applied 44

45. SPPs In Operation ProjectMWType of ResourceStatus ACRA Tanzania0.3HydroIn Operation / Community based TANWAT2.34Biomass -woodSelling 1 MW (2010) TPC Co-Generation15BagasseSelling 10 MWe to TANESCO (2010) Katani Power Plant0.3Biomass - WasteOperation - Pilot

46. SPPs in Preparation ProjectMWType of Resource Status Sao Hill Energy15Biomass -woodApplied Licence Chipole – Own use & sell to the grid 0.4HydroIn operation – additional 3MW planned Mwenga3.36HydroPPA Signed with TANESCO Ngombeni Mafia1.4BiomassPPA Signed with TANESCO. Under construction Kilombero Sugar Co.10.6BagasseApplied Licence Tanzania Sisal Board0.5BiogasApplied License Kitonga Mini Hydro10HydroApplied License Andoya Hydro Electric Co. 0.5HydroBusiness plan Kilocha Hydro12HydroIn discussion with REA Kilombero Mngeta3HydroIn discussion with REA

47. Where we are now… Completed – All documents passed public review and most are approved for use. – Several PPAs signed with TANESCO and licenses applied Ongoing – TANESCO in process of establishing SPP cell 47

49. Where we are now… Completed – All documents passed public review and most are approved for use. – Several PPAs signed with TANESCO and licenses applied Ongoing – TANESCO in process of establishing SPP cell – SPP Working Group composition and function – Discussions between EWURA and REA on how to coordinate better, done, but may be refined further. – Determine tariff review methodology for projects selling electricity at retail 49

50. 5. Challenges / Opportunities 50

51. Challenges Challenge Inadequate financial resources to support the initiative Inadequate private sector participation in investment High interest rates loans from commercial banks Land ownership and water rights for SPPs projects especially wind farms & mini-hydro plants Low Tariff and non-cost reflective Response WB has established a facility, engage interest of other financial institutions Conducive Environment, rules and publicize Promote other sources mix grant and loans Include land ownership & water rights in RE Policy Adapt policy in future?

52. Challenges …..cont. 2 Challenge Lack of experience of key project promoters with skills in project management Lack of Renewable Energy Policy Lack of interest on the part of potential Off-takers (TANESCO) Response Capacity building (REA) Government needs to set policy targets, etc. Improving through regular discussions with utility

53. Reflections Renewable Small Power Projects can enhance efforts towards electrification of Rural areas Though generally expensive SPPs can be developed much faster hence increase capacity Private investments can be quickly organised and also benefit local entrepreneurs Light handed regulation will reduce regulatory burden hence benefit both investors and the country Good Policy, Cost reflective Tariff and well designed FiT can attract foreign and local investors 53

54. Thank you For more information, please contact mbawala@ewura.go.tz chrisgreacen@gmail.com Thai VSPP regulations available at: http://www.eppo.go.th/power/vspp-eng/ Tanzania SPP regulations available at: www.ewura.go.tz/sppselectricity.html

55. Design issueOptionsLow-risk option Eligibility All generator types eligible Eligibility restricted to specific technologies, sizes, ownership types, etc. N/A Interconnection and purchase requirements Guaranteed interconnection Priority interconnection Guaranteed purchase Priority dispatch All, where applicable Contracts No contracts Standard contracts Contracts negotiated on a case-by-case basis Standard contracts Contract length Short-term (1-7yrs) (1-yr automatic renewal) Medium-term (8-14yrs) Long-term (15-20yrs) Long-term, matched to service life to extent possible Rate setting basis Generation cost-based Value-based (e.g. avoided costs) Generation cost based Payment structure Fixed price schedule Premium payment Spot market gap payment Fixed price schedule Tariff differentiation Differentiated Undifferentiated N/A Thailand VSPP program features (slide 1 of 2) Source: MCG Research, 2010

56. Design issueOptionsLow-risk option Purchasing entity Utility Transmission system operator Government entity Creditworthy counterparty Commodities purchased Electricity RECs Emissions credits Capacity Commodities bundled and purchased for a reasonable rate of return Amount purchased 100% (solar only) Partial purchase (e.g. only net excess) 100% Adjusting the payment Periodic review Automatic adjustment after set period of time Automatic adjustment triggered by capacity Adjustment based on prior market performance Transparent, scheduled, and clearly defined adjustment mechanism Caps and queuing No Cap Cap on capacity Cap on generation Cap on ratepayer impact No cap preferable. If cap in place, it should be transparent, clearly defined, and stable, with clear queuing procedures Thailand VSPP program features (slide 2 of 2) Source: MCG Research, 2010

57. Design issueOptionsLow-risk option Eligibility All generator types eligible Eligibility restricted to specific technologies, sizes, ownership types, etc. N/A Interconnection and purchase requirements Guaranteed interconnection Priority interconnection Guaranteed purchase Priority dispatch All, where applicable Contracts No contracts Standard contracts Contracts negotiated on a case-by-case basis Standard contracts Contract length Short-term (1-7yrs) (1-yr automatic renewal) Medium-term (8-14yrs) Long-term (15-20yrs) Long-term, matched to service life to extent possible Rate setting basis Generation cost-based Value-based (e.g. avoided costs) Generation cost based Payment structure Fixed price schedule Premium payment Spot market gap payment Fixed price schedule Tariff differentiation Differentiated Undifferentiated N/A Tanzania SPP program features (slide 1 of 2) Source: MCG Research, 2010

58. Tanzania SPP program features (slide 2 of 2) Design issueOptionsLow-risk option Purchasing entity Utility Transmission system operator Government entity Creditworthy counterparty Commodities purchased Electricity RECs Emissions credits Capacity Commodities bundled and purchased for a reasonable rate of return Amount purchased 100% Partial purchase (e.g. only net excess) 100% Adjusting the payment Periodic review Automatic adjustment after set period of time Automatic adjustment triggered by capacity Adjustment based on prior market performance Transparent, scheduled, and clearly defined adjustment mechanism Caps and queuing No Cap Cap on capacity Cap on generation Cap on ratepayer impact No cap preferable. If cap in place, it should be transparent, clearly defined, and stable, with clear queuing procedures Source: MCG Research, 2010