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An Overview of ICER’s Renewables & Affordability Report
COMPETITIVENESS AND AFFORDABILITY
RENEWABLES & NEW TECHNOLOGIES - COMPETITIVENESS & AFFORDABILITY ISSUES
ICER’s rationale for addressing competitiveness and affordability issues related to renewables
O
ver the past decade, many jurisdictions have sought to transform their electricity system by shifting out of carbon-based (e.g. coal and gas) forms of
generation and towards more clean and renewable sources (e.g. solar and wind). The most common motivation for such a shift across nations is climate change policy.
There are other drivers for recontribute case studies from junewables deployment, such as risdictions, that have either exhealth (which first motivated perienced the recent introducOntario, Canada to phase out tion of renewable generation coal-fired electricity generaor at least readied themselves tion), energy security and afby developing various policies fordability (the UK’s renewable designed to manage the transigeneration strategy includes tion to these new forms of enthe goal of achieving a fuel mix ergy supply to contribute case to make consumer fuel bills less studies. susceptible to global price flucThe result is four comprehentuations in fossil fuels) or sive (standalone) case stud“green jobs”. ies, and an overview The Internationreport which al Confederaprovides some tion of Energy helpful obserCompetitiveness and Regulators vations. affordability are impor(ICER) conICER hopes tant issues which arise cerns itself, this will proin relation to the recent inter alia, with vide reguwidespread introducmatters relators and lated to affordpolicy makers tion of renewables ability and comwith tangible expetitiveness. These amples of regulatotwo important issues ry and legislative tools arise in relation to the recent and frameworks that have been widespread introduction of redeveloped in different jurisdicnewables and the development tions and that address affordof smarter grids required to faability and competitiveness iscilitate these often intermittent sues related to the introduction energy sources. of renewable electricity genICER has asked its members to eration and new technologies.
The four markets which have been examined through case studies are: Guatemala The case study on the development of new infrastructure and the integration of new technologies in Guatemala’s electricity sector looks at the practical lessons learned by a regulator in a developing country that is considering the introduction of new technologies in the context of a massive grid expansion initiative. It is of special interest to those jurisdictions that are focused on grid development of the first order.
United States The US case study is a compilation of strategies and programs from federal, state, local and regulatory initiatives throughout the United States of America. Canada – Ontario The Ontarian case study is about new forms of electricity supply and grid functionality, as well as measures taken to address affordability issues. United Kingdom This case study examines the policy and strategy aimed at enabling the UK to meet its target of delivering 15% of energy from renewable sources by 2020, and the role of the regulator (Ofgem) in administrating certain government programs, including the Renewables Obligation and Feed-in Tariffs.
PICTURE
Main findings from the experiences reflected in the case studies: PICTURE
• Procurement: Jurisdictions have deployed a wide-range of procurement models to acquire renewable generation assets. Feed-in tariff (FIT) programs, offering fixed prices (typically above “market” rates) for renewable electricity and offering different prices for different technologies have been most popular. Others have relied on more market-based and competitive procurement regimes, such as renewable portfolio standards (in the US), where the amount of renewable generation to be procured (rather than the price paid) by utilities has been specified by the government or regulator. The UK’s Renewables Obligation (RO) scheme places an obligation on licensed electricity suppliers to source a specific proportion of their electricity sales volume from renewable sources. This proportion increases annually and suppliers must pay a penalty in the event of failure to meet RO targets. The UK also uses a FIT program for procurement of smaller scale low-carbon generation. In Ontario, prior to adopting a FIT program, some renewable generation was procured through competitive requests for proposals (RFPs).
Main findings from the experiences reflected in the case studies
VIP
• Incentives and Cost-Burden: The experiences illustrated essentially two methods of funding assistance and/or incentives for increasing renewable generation. Both involved shifting risk and cost from renewable generation project proponents onto (1) ratepayers and/or (2) taxpayers. • Price Impact and Mitigation: The switch to renewable generation has resulted in price increases to varying degrees, resulting in extensive debates about renewable policies. Many jurisdictions have sought to mitigate the impact of increasing electricity rates, using tax-based and ratepayer-funded tools. The United Kingdom predominately offers mitigation to specific vulnerable customers (e.g. elderly and low income consumers), rather than the wider population more widely as seen in Ontario.
• ICER’s Renewables and Affordability review has found that those jurisdictions that have adopted ratepayerfunded FIT programs have been successful in promoting renewable deployment quickly. However, this quick deployment has had the impact of putting upwards pressure on electricity rates. In some cases, this increase has come at an unexpectedly fast rate, resulting in the adoption of mitigation measures. In contrast, the more market-based and tax-based regimes have resulted in slower renewable deployment with a corresponding less pronounced impact on electricity rates. • ICER’s Renewables and Affordability review shows that there are many different policy instruments available to jurisdictions seeking to implement large-scale renewable generation deployment. The experiences catalogued by ICER to date will be helpful in assisting jurisdictions tailor specific policies to achieve a rate of deployment and corresponding price increases in an orderly and stable manner.
International Confederation of Energy Regulators (ICER) The International Confederation of Energy Regulators (ICER) was created at the Fourth World Forum on Energy Regulation (WFER), in 2009. It is a voluntary framework for the cooperation of energy regulators from around the globe. Its aim is to improve public and policy maker awareness and understanding of energy regulation, and to play a role in addressing a wide spectrum of socio-economic, environmental and market issues. Through ICER, energy regulatory issues transcending regional and national boundaries can be addressed through dialogue and cooperation on a global scale. ICER’s membership includes over 200 regulatory authorities over six continents.
The virtual work of ICER ICER is a virtual organisation, the backbone of which is its website (www.icer-regulators.net) and its four virtual working groups (VWGs):
VWG1: Opening & Integration of Regional Markets VWG2: Technology Change VWG3: Consumers Issues VWG4: Education, Training & Best Practices
ICER Reports:
Publications
• Examples of Methodologies Utilized to Manage Competitiveness and Affordability Issues related to the Introduction of Renewable Forms of Electricity Generation and New Technologies: An Overview Report of a Compilation of Four Case Studies, April 2012, Ref. I12-C&A-11-04 • Experiences on the Regulatory Approaches to the Implementation of Smart Meters, April 2012, Ref. I12-C&A-08-01 • Role of Energy Regulators in Guaranteeing Reliability and Security of Supply - National, Regional and Global Dimensions, March 2012, Ref. I12-SoS-08-03 • Renewable Energy and Distributed Generation: International Case Studies on Technical and Economic Considerations, February 2012, Ref. I12-CC-17-03 • ICER Response to the European Commission Public Consultation on the External Dimension of the EU Energy Policy, Ref. I11-SC-05-05, 21 February 2011 • ICER Energy Efficiency Report, Ref. I10-SC-02-04, June 2010 • ICER Work Plan 2010-2012 • ICER 2010 Annual Report • World Energy Regulators’ Statement on Climate Change, 20 October 2009
ICER Factsheets:
The full report, as well as all others listed here, can be found at
http://bit.ly/ICERreports
• ICER’s Renewables and New Technologies Report, Ref. FS-12-04, August 2012 • ICER’s Security of Supply Report, Ref. FS-12-01, May 2012 • ICER’s Renewable Energy and Distributed Generation Report, Ref. FS-12-02, May 2012 • ICER’s Smart Metering Report, Ref. FS-12-03, May 2012 • Brochure on the International Confederation of Energy Regulators (ICER), Ref. FS-12-05, May 2012 • Regulatory Practices for the Promotion of Energy Efficiency, Ref. FS-11-01, April 2011
The content of this leaflet does not necessarily reflect the opinion of the individual members of ICER. Photos: stockfresh.com
www.icer-regulators.net
Designed
by:
Factsheet Ref: FS-2012-04
Valentina CalĂ
office@icer-regulators.net
With the support of the European Commission. This publication reflects the views only of the author(s), and
the
Commission
cannot be held responsible for any use which may be made of the information contained therein.