Regulatory and policy options to encourage development of ...

SUSTAINABLE ENERGY REGULATION AND POLICYMAKING TRAINING MANUALpage 9.4The main focus is on mechanisms used in electricity systems, as this is wherethe use of such mechanisms is currently most common. They can be used to drivecapacity increases for electricity from renewable energy sources and combinedheat and power (CHP), although in practice most schemes to date have beenrestricted to renewable energies. They could also be used to encourage the productionof heat from renewable energy and CHP, although again to date, the focushas been on electricity. Finally, in theory the mechanisms could also be used todrive the adoption of sustainable energy technologies in other energy areas, forexample the use of a quota obligation to promote renewable fuels in transport,or the provision of heat.Although different examples of each mechanism have characteristics in common,it should be emphasized that no two schemes are identical. Differences arisebecause of different markets, energy systems and political intentions in differentcountries. The descriptions concentrate on the general characteristics of themechanisms, rather than on specific details of how they are implemented in differentcountries (some of these country specific details are covered in the casestudies).In addition, each type of mechanism has different strengths and weaknesses,and will tend to encourage the development of sustainable technologies in a particularway. The extent to which weaknesses become serious defects depends toa great extent on the interaction between the mechanism and other policy efforts.These include for example, R&D support, capital grants, production tax creditsand soft loans, as well as broader measures such as changes to planningregimes. Therefore where appropriate, the importance of other supportive mechanismsis also highlighted.Many sustainable energy regulatory/support mechanisms—especially those discussedhere—are relatively new policy and regulatory areas, so the evidence ontheir performance is not yet definitive. This is particular of sub-Saharan Africawhere many of the regulatory options widely deployed in industrialized countriesare yet to be tried. The purpose here is not to argue that a specific mechanismis the most effective model for any given country, or that the weaknesses demonstratedin the design of some support mechanisms in some countries mean thatthe actual mechanism is not a viable way of promoting the development of sustainableenergy. Instead, the purpose is to give a broad overview of the differentmain mechanisms, and highlight some of the more significant generic strengthsand weaknesses. The accompanying case studies enable specific issues to befollowed up in more detail.