1. POLICY FRAMEWORK The policy rests on a technology agnostic feed-in-tariff has been designed to incentivize the integration of a pool of dispatchable plants of min 1MW to max 10 MW with a minimum 60% to maximum 150% of solar PV capacity. We name this license PV-X license, as X describes any dispatchable/storage technology that the private sector is free to choose under our proposed feed in tariff and the legal framework of the contract. We describe the key elements of the policy: Size of the PV-X plant: The license will be given to a pool of dispatchable/storage technology in an area is of 1 MW, this pool of dispatchable/storage technology owners will need at year 1 to build a PV plant of minimum 0.6 MW up to maximum of 2.5 MW. If the owners chose to build the minimum, then by contract signature they are mandated at each following year to increase the PV capacity by 0.5 MW until they reach the maximum allowed. If the pool of dispatchable/storage technology comes to 10 MW, then the min PV capacity that should be built is 6 MW up to 25 MW. Feed-in tariff: The feed-in tariff is designed such that it ensures for the PV-X license that is choosing a minimum of Solar PV installments per year an Internal Rate of Return of 16% with a Return on Investment of 20-35% over a period of ten years. The tariff for the contract signed on year 1 will be at 15 ct/kWh for ten years. This tariff will remunerate the X generator/storage technology for the first five years, while the minimum solar PV capacity will continue to be be remunerated until year 10. The additional minimum PV capacity coming online every year, the tariff will be gradually decreasing every year from 8 ct/kWh, 7.5 ct/kWh, 7.0 ct/kWh to 6.5 ct/kWh. These tariffs are purely remunerating solar energy in the PV-X license and are extended by year+1, year+2, year+3, year+4 to the original contract signed on year 1. If now the investor chooses to invest more than the minimum solar PV capacity, than his internal rate of return will increase. If the substation capacity permits it and the investor succeed in submitting the first pass application with a maximum solar PV, the internal rate of return of the investment on year 1 will go up to 32%. As such the tariff incentivizes investors to maximize solar PV in their portfolio while minimizing Diesel to the strict minimum as every kWh produced with diesel is a loss (18 ct/kWh), but every kWh produced with PV (5.6 ct/kWh) compensate that loss and is an over profit. All our financial calculations are based on the results of our hourly techno economic simulation model. Snapshots illustrated in figure 2 and figure 3. Legal framework: In our PV-X contract there will be three main conditions. A) Solar PV contracts will be signed on a take or pay basis B) generation/storage X technology contracts will be signed on a pay as you go under extension of law 129 C) the PV-X plant needs to come online within the time of construction of the PV plant. Take or pay contracts will guarantee secure returns to the investors as solar PV plants will get paid even if they need to be curtailed. Pay as you go for technology X will mean that EDL via the interim of the VPP operator, will only pay technology X when it needs it to balance its pool over the course of a day. There is no obligation to use technology X. The constraint on the time of construction of X is put as the goal of the policy is to aggressively push PV and not delay its integration. Payments: The PV-X contracts will be paid 80% in $ and 20% in LBP. The central bank will guarantee a fixed exchange rate against the $ for PV investments. 20% will be paid in LBP as this represents the local value of producing one kWh with a PV plant built by a local developer. Social equity: The PV-X contract will incentivize community investment through a tax relief to maximize the social welfare impact of the policy. That means, the more diluted the investment capital is with respect with the number of investors, the higher the tax relief will be on earnings and in turn the higher the return on investment.
Figure 7 Comparison of the current plan of the MEW vs the Alternative: Impact on BDL $ reserves
