Regulatory and policy options to encourage development of ...

MODULE 9: RENEWABLE ENERGY: REGULATORY AND POLICY OPTIONSpage 9.95. TYPES OF REGULATORY AND POLICYSUPPORT MECHANISMSThis section gives a brief overview of the different characteristics of some of themain regulatory and policy support mechanisms. This is a generalized overviewand it should be borne in mind that in reality the detail of different schemes canvary considerably. It should be read together with the more detailed descriptionsof individual programmes, which are given in the case studies. The types of regulatory/supportmechanisms are categorized into two: firstly, mechanisms thatare immediately applicable to sub-Saharan African countries; and secondly, othermechanisms implemented in the developed world that may be applicable to theAfrican region in the future.5.1. Short-term regulatory/support mechanismsThe mechanisms discussed under this section are those that have either beenimplemented in some African countries or in other developing countries. Thesemechanisms to a large extent are relatively straightforward for African regulatoryagencies to implement and may not need significant changes to the Electricity Act.These include: Establishing “standard” power purchase agreements (PPAs); Ensuring long-term electricity generation licences and PPAs; Developing a favourable tariff setting and adjustment formula; “Light-handed” regulation. Setting explicit targets for the share of renewables in the electricity generationmix; Enacting explicit regulations that encourage local private participation inrenewable energy development; Providing subsidies to renewable energy-based power systems especiallythose located in rural areas (e.g. tapping into rural electrification funds).Establishing “standard” power purchase agreements (PPAs)In principle, most sub-Saharan African countries are committed to private sectorsupply of power to the national grid. However, negotiations with the utility topurchase energy from small producers tend to be cumbersome and the tariffoffered unattractive to develop renewable energy projects to their full potential.