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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.
MODULE 9: RENEWABLE ENERGY: REGULATORY AND POLICY OPTIONSpage 9.53. WHY SUPPORT RENEWABLE ENERGY?The adoption of sustainable energy policies can bring advantages to both a countryand an energy system: Renewable projects in particular can aid security of supply—both by reducing theneed for imported fuels, and by increasing the diversity of a national generatingportfolio—a key benefit to many sub-Saharan countries that are dependant onlarge-scale hydropower and thus exposed to drought-related energy risks. Small-scale sustainable projects—CHP or renewable—can contribute to a government’ssocial agenda, for example by reducing fuel poverty, or by increasingaccess to electricity. Distributed generation (renewable electricity and CHP not connected to longdistance transmission networks) offers benefits in terms of reduced lossesover transmission wires and, in countries without major distribution and transmissionnetworks, the possibility of avoiding the costs of building such infrastructure.This can increase the economic efficiency of systems, although thisbenefit is not always reflected in the prices offered for sustainable energy. On a broader social and political level, the development of a sustainableenergy industry can create jobs and enhance technical expertise. Building aviable domestic energy supply chain can also offer export opportunities in arapidly expanding international market. Renewable energy deployment can deliver additional local, regional and globalenvironmental benefits.However, many renewable energy technologies are relatively new, and still developing.Although costs of some technologies (especially wind) have fallen dramatically,they still need financial support to compete with established, conventionalgeneration in most situations.This problem is exacerbated by the fact that there is not a “level playing field”in the treatment of conventional and renewable energy technologies. Thisinequality notably includes the failure to take account of the costs of risks (higheroil prices and drought-related hydropower crises) associated with conventionalgenerating technologies when costing generation. Conventional generators benefitfrom the failure to take these risks into account.In addition, the different operating characteristics of some renewable energytechnologies—for example, the intermittency of wind or some CHP projects—meanthat they can conflict with the operating characteristics of established systems,which are designed for constant, predictable output from large-scale, centralizedgenerating plants. The differences can, for example, lead to increased operating
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