Solar Energy Perspectives - IEA

Solar Energy Perspectives: Policies
to bilateral, long-term contracts or be sold on the spot markets. To fulfil its RPS obligations,
an investor in PV can sell the electricity to the company that serves its community and also
sell the RECs directly or indirectly to another in greater need.
In the United States, out of 30 states having an RPS, at least 16 now have solar set-asides (or
carve-outs) or solar RECs (SRECs), i.e. specific targets given to utilities relative to solar energy
sources. Given the current technology costs, solar technologies benefit from RPS and certified
emission reduction (CER) systems only if these are completed with some form of “technologybanding”
or “resource-banding” such as SRECs. Another form of banding is to give solar kWh
a multiplier when it is counted torwards the RPS obligations, thus multiplying the market
value of associated RECs.
There is one important exception: California. It has a combination of an ambitious RPS (33%
of renewable electricity by 2020) with no solar set-aside. This approach is possible because
the state has good sunshine, a good match between sunshine and demand peaks reflected in
time of use electricity pricing, and other forms of support such as the federal Business Energy
Investment Tax Credit (ITC) and the Department of Energy’s loan guarantees. Together these
are expected to drive very significant solar deployment in the next few years – mostly CSP
and utility-scale PV plants. California also has a set of initiatives and programmes, including
FITs, which provide incentives to customers to install in particular distributed PV systems,
indirectly contributing to RPS by reducing demand on utilities.
Solar ambitions in RPS have been limited so far, except in New Jersey, the second-largest PV
market in the United States next to California, and possibly the only one that actually
develops on the basis of tradable RECs. Such schemes are progressively increasing, and so
will solar electricity investments in the United States. Some other countries have a general
preference for RPS and RECs, but not all have SRECs or solar multipliers, which means that
they have very little development of solar electricity. Of the six Member States of the
European Union that currently base the deployment of renewables in the power sector on
REC systems, three – Belgium, Italy and UK – also have FITs for small-scale projects that
benefit residential and commercial PV systems. Some RPS allow solar water heaters at
customers’ locations to be counted towards the RPS of utilities (e.g., in Australia and four US
States).
To be effective, RPS must not offer utilities a too easy or too low-cost way out with low price
caps (i.e. the possibility of not complying with the RPS against a payment or fee). One
interesting option to strengthen RPS is to link any authorisation to build new fossil-fuel plants
with the achievement of renewable capacities. If for example a country aims to achieve 5%
solar electricity generation in ten years while its overall electricity generation is expected to
increase by 10%, the government could require that all utilities build or contract for 1 TWh
of solar for each additional TWh of conventional power.
Requests for tenders
Requests for tenders are formal invitations to suppliers to bid for the opportunity to supply
products or services. Tenders are increasingly chosen in both industrialised and developing
economies as preferred support instruments for early deployment of renewable electricity.
They offer full control on the overall capacities, and allow for price discovery through
competitive bidding – provided competition exists. However, tenders entail transaction costs
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