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Study on Renewable Energy Resources, Oman - authority for ...

Study on Renewable Energy Resources, Oman - authority for ...

Renewable Energy Resources in Oman 7 Financing mechanisms 7.1 Revenue by Renewable Energy production The costs of most renewable energy technologies are higher than conventional power generation. This is also the case in Oman, as demonstrated in the previous chapter. The cost difference is however decreasing and will further decrease in the future. Due to this, renewable energy should receive special attention and support in order to find a place in the power production portfolio. The objective of this section is to introduce commonly used economic incentives tools to introduce and develop renewable energy production. There are a number of models that have been introduced in different countries and in this section the mechanism and the experience with these models are summarised. Many of these models are designed to work in a liberalised power sector and attempts to make use of the market mechanism to select the most efficient technology and producer of renewable energy. However none of them are perfect in this respect - all of them have their advantages and drawbacks. This chapter will try to identify these. This section will also make an attempt of relating these models to an Omani context where the power sector is unbundled, not liberalised and the network organised in three (nearly) independent supply systems with limited interconnections and limited international interconnection. Page 106 of 134 .

Renewable Energy Resources in Oman 7.2 Environmental Taxes 7.2.1 External Costs No electricity generation technology exists that is completely devoid of pollution or negative environmental impacts. Energy supply has impacts on the environment, e.g. from emissions of chemical pollutants into air, water and soil both at construction and during operation. Many of these emissions cause accountable damage, such as to human health, natural ecosystems and the built environment. This is termed external effects and is not paid by owners of the energy system, and not passed on to the consumers. However there is true expenditure involved in these impacts, which has to be paid by those affected. Such costs represent a cost to society that are not paid for by the polluter that causes the emissions. If the polluter does pay adequately for the damage caused, then this is referred to as 'internalisation of external cost'. As long as the external costs are not internalised the market mechanism cannot secure an optimal allocation of resources. The prices of goods with high associated external costs, are less than if such costs were internalised, so there is overconsumption of these goods, as compared to the optimal consumption for the welfare of the society. The fossil fuels that represent the largest specific costs are: coal, HFO, diesel oil, and natural gas; of which gas has the lowest environmental costs. Electricity generated from renewable energy has less specific external cost compared to natural gas generation. The external cost imposed on society differs from country to country, and they must be specifically evaluated in a national context. The following external cost estimates are from industrialised countries and China and provided by the World Bank. • Average abatement cost in the industrialised countries is 20 USD per tonne CO 2 • Abatement cost of SO 2 emissions are estimated to 100 USD per tonne • Abatement cost Particles emissions are estimated to 35 USD per tonne • NOx emission abatement costs are 240 USD per tonne, but emission is very plant specific and difficult to generalise 7.2.2 Environmental Tax An environmental tax is a tax on electricity production that reflects the environmental impact of the various fuels and technologies; it can be imposed on the producers or the purchasers of the electricity. It will in any case have to be brought forward to the end-users, who will pay the tax at the end of the day. Based on emission factors for the various fuels a levy corresponding to the abatement cost per unit of fuel is imposed. Page 107 of 134 .

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