Country Case Studies: Thailand Tanzania Feed-in Tariffs and Small Power Producer Regulations Renewable Energy Policy

1. Country Case Studies: Thailand & Tanzania Feed-in Tariffs and Small Power Producer Regulations  Renewable Energy Policy Workshop World Resources International Washington DC 22 November 2010 Anastas Mbwala Chris Greacen 1:30 Anastas: introductory remarks: * SPP regulations allow small renewable energy and cogeneration facilities to connect and sell electricity to the grid, and can be useful in helping achieve a wide variety of development goals. * In Thailand these regulations have been successful in helping add substantial renewable energy generation capacity, consistent with Thailand�s goals of reducing fossil fuel imports, of fostering rural economic development, and encouraging clean energy. * Tanzania is a less wealthy country, and its energy challenges have to do with expensive emergency generation, blackouts, and low rural electrification. The Energy and Water Utilities Regulatory Authority, where I am in charge of electricity regulation, has been working to develop SPP regulations that address these somewhat different development goals. Chris has been helping on these, as part of a team from the World Bank that includes Bernard Tenenbaum and Dana Drysankova, both of whom are also attending this workshop. English language versions of the regulations from both countries are available on the internet, and we are hoping this presentation will spark interest by governments in countries represented here to adapt these regulations for their own use as a mechanism for encouraging efficient private sector participation in clean, small-scale electricity generation. The Thai regulations started in 2002, and Chris will discuss these. In Tanzania we began work on SPP regulations in 2008, and I�ll be discussing these.1:30 Anastas: introductory remarks: * SPP regulations allow small renewable energy and cogeneration facilities to connect and sell electricity to the grid, and can be useful in helping achieve a wide variety of development goals. * In Thailand these regulations have been successful in helping add substantial renewable energy generation capacity, consistent with Thailand�s goals of reducing fossil fuel imports, of fostering rural economic development, and encouraging clean energy. * Tanzania is a less wealthy country, and its energy challenges have to do with expensive emergency generation, blackouts, and low rural electrification. The Energy and Water Utilities Regulatory Authority, where I am in charge of electricity regulation, has been working to develop SPP regulations that address these somewhat different development goals. Chris has been helping on these, as part of a team from the World Bank that includes Bernard Tenenbaum and Dana Drysankova, both of whom are also attending this workshop. English language versions of the regulations from both countries are available on the internet, and we are hoping this presentation will spark interest by governments in countries represented here to adapt these regulations for their own use as a mechanism for encouraging efficient private sector participation in clean, small-scale electricity generation. The Thai regulations started in 2002, and Chris will discuss these. In Tanzania we began work on SPP regulations in 2008, and I�ll be discussing these.

3. Chris: My interest in these types of regulations was sparked by conversations I had nine years ago with people in Thai villages who had built micro-hydropower plants. When the national grid eventually arrived, some villagers asked, �why do we have to abandon our power plant if we want to use electricity from the national grid? Can�t we hook up and sell it back? That way we can make some money for the village, and help our country reduce its reliance on imported fossil fuels.� Fortunately, thoughtful people in the Thai government were thinking along the same lines. Chris: My interest in these types of regulations was sparked by conversations I had nine years ago with people in Thai villages who had built micro-hydropower plants. When the national grid eventually arrived, some villagers asked, �why do we have to abandon our power plant if we want to use electricity from the national grid? Can�t we hook up and sell it back? That way we can make some money for the village, and help our country reduce its reliance on imported fossil fuels.� Fortunately, thoughtful people in the Thai government were thinking along the same lines.

4. These Thai policymakers also knew that rice mills had a lot of waste rice husk. Pig farms have a lot of manure. Sugar factories have sugar cane bagasse. Sawmills have wood scraps. Each of these is a renewable energy source that can contribute to the national power mix, but only if generators have a market for their power. Selling to the national grid is a perfect market because it�s there 24 hours a day. Together we worked on drafting Very Small Power Producer �VSPP� that allowed for interconnection of generators using these renewable energy sources.These Thai policymakers also knew that rice mills had a lot of waste rice husk. Pig farms have a lot of manure. Sugar factories have sugar cane bagasse. Sawmills have wood scraps. Each of these is a renewable energy source that can contribute to the national power mix, but only if generators have a market for their power. Selling to the national grid is a perfect market because it�s there 24 hours a day. Together we worked on drafting Very Small Power Producer �VSPP� that allowed for interconnection of generators using these renewable energy sources.

5. VSPP regulations essentially have two components: a set of technical regulations that provide for a safe flow of electricity from these generators to the national grid; and a set of commercial regulations regarding the flows of money to the VSPP generators.VSPP regulations essentially have two components: a set of technical regulations that provide for a safe flow of electricity from these generators to the national grid; and a set of commercial regulations regarding the flows of money to the VSPP generators.

6. Technical regulations: Allowable voltage, frequency, THD variations Protective relays 1-line diagrams for all cases: Induction Synchronous Inverters Single/multiple Connecting at different voltage levels (LV or MV) Communication channels Commercial regulations: Definitions of renewable energy, and efficient cogeneration Cost allocation Principle of standardized tariff determination Invoicing and payment arrangements Arbitration Technical regulations include topics like allowable voltage, frequency variations and specify required protective relays. The commercial regulations focus on how costs are allocated, how tariff amounts are determined, and what happens in the event of disputes. A standardized PPA eliminates lengthy case-by-case negotiations with utilities.Technical regulations include topics like allowable voltage, frequency variations and specify required protective relays. The commercial regulations focus on how costs are allocated, how tariff amounts are determined, and what happens in the event of disputes. A standardized PPA eliminates lengthy case-by-case negotiations with utilities.

7. Evolution of Thai VSPP regulations 2002 VSPP regulations drafted, approved by Cabinet Up to 1 MW export, renewables only Tariffs set at utility�s avoided cost .5 min The Thai regulations were approved in 2002. Projects were allowed to come into the program as long as they used renewable energy and they exported less than 1 MW. The tariffs were essentially set at the cost per kWh that Thailand�s distribution utilities pay for power they buy from the country�s transmission and generation utility, EGAT..5 min The Thai regulations were approved in 2002. Projects were allowed to come into the program as long as they used renewable energy and they exported less than 1 MW. The tariffs were essentially set at the cost per kWh that Thailand�s distribution utilities pay for power they buy from the country�s transmission and generation utility, EGAT.

8. Biogas from Pig Farms Here are some of VSPP projects that came online soon after the VSPP regulations were approved.Here are some of VSPP projects that came online soon after the VSPP regulations were approved.

9. Biogas from Pig Farms A small domestic industry grew providing modified recycled toyota taxi engines and modified diesel engines to run on biogas to generate electricity.A small domestic industry grew providing modified recycled toyota taxi engines and modified diesel engines to run on biogas to generate electricity.

10. Micro hydropower This community run 40 kW micro-hydro project produces about $13,000 per year worth of electricity in the VSPP program.This community run 40 kW micro-hydro project produces about $13,000 per year worth of electricity in the VSPP program.

11. Uses waste water from cassava to make methane Produces gas for all factory heat (30 MW thermal) + 3 MW of electricity 3 x 1 MW gas generators Korat Waste to Energy � biogas� an early Thai VSPP project .5 min Thailand is the world�s second largest producer of Cassava, much of which is turned into tapioca flower. The process generates waste water that, when digested, makes a lot of methane. The digester is a covered lagoon the size of a couple football fields � here you can see the lagoon�s black plastic cover. Methane provides thermal energy and electricity for the tapioca factory and excess is sold to the grid under the VSPP program..5 min Thailand is the world�s second largest producer of Cassava, much of which is turned into tapioca flower. The process generates waste water that, when digested, makes a lot of methane. The digester is a covered lagoon the size of a couple football fields � here you can see the lagoon�s black plastic cover. Methane provides thermal energy and electricity for the tapioca factory and excess is sold to the grid under the VSPP program.

12. Evolution of Thai VSPP regulations 2002 VSPP regulations drafted, approved by Cabinet Up to 1 MW export, renewables only Tariffs set at avoided cost (bulk supply tariff + FT) 2006 Up to 10 MW export, renewables + cogeneration Feed-in tariff �adder� (premium payment) Paid by ratepayers If > 1 MW then utility only pays for 98% of energy (utility incentive to facilitate VSPPs) .5 In 2006 the utilities felt comfortable enough with the initial VSPP projects to allow an increase in project size to 10 MW export and efficient cogeneration was also allowed. The government also recognized that VSPP could play a larger role in meeting the nation�s commitment of 8% renewable energy by the year 2011 (recently raised to 20% by year 2022). The upgrade to the regulations also created a technology-specific feed-in tariff subsidy adder. The incremental cost of this adder is paid for by all electricity consumers in Thailand..5 In 2006 the utilities felt comfortable enough with the initial VSPP projects to allow an increase in project size to 10 MW export and efficient cogeneration was also allowed. The government also recognized that VSPP could play a larger role in meeting the nation�s commitment of 8% renewable energy by the year 2011 (recently raised to 20% by year 2022). The upgrade to the regulations also created a technology-specific feed-in tariff subsidy adder. The incremental cost of this adder is paid for by all electricity consumers in Thailand.

13. Rice husk-fired power plant 9.8 MW Roi Et, Thailand .16 min Soon after the VSPP regulations were expanded to 10 MW, projects like this one � a 9.8 MW rice-husk fired power plant � began to come online..16 min Soon after the VSPP regulations were expanded to 10 MW, projects like this one � a 9.8 MW rice-husk fired power plant � began to come online.

14. Bangkok Solar 1 MW PV Project size: 1 MW Uses self-manufactured a-Si .3 min Feed-in tariffs have helped strengthen a burgeoning solar electric manufacturing industry in Thailand. This 1 MW plant uses solar panels manufactured in Thailand. As of July there is the equivalent of 16 installations this size installed and operating..3 min Feed-in tariffs have helped strengthen a burgeoning solar electric manufacturing industry in Thailand. This 1 MW plant uses solar panels manufactured in Thailand. As of July there is the equivalent of 16 installations this size installed and operating.

15. Evolution of Thai VSPP regulations 2002 VSPP regulations drafted, approved by Cabinet Up to 1 MW export, renewables only Tariffs set at avoided cost (bulk supply tariff + FT) 2006 Up to 10 MW export, renewables + cogeneration Feed-in tariff �adder� If > 1 MW then utility only pays for 98% of energy 2009 Tariff adder increase, more for projects that offset diesel In 2009 the feed-in tariff was changed to provide additional payments for projects that offset diesel generation, which is still used in Thailand in some remote mountain and island areas. English versions of the Thai regulations are available at this website: In 2009 the feed-in tariff was changed to provide additional payments for projects that offset diesel generation, which is still used in Thailand in some remote mountain and island areas. English versions of the Thai regulations are available at this website:

16. Thai VSPP feed-in tariff adders This table shows the current VSPP tariffs. Tariffs have evolved to vary depending on: Fuel type Geographic location (more for provinces in 3 conflict-prone southern provinces) Whether or not the project offsets diesel Capacity The total tariff is equal to this adder pluse the utility�s avoided cost of power. Ultimately consumers pay for the adder through a per-kWh pass-through mechanism to all consumers. This table shows the current VSPP tariffs. Tariffs have evolved to vary depending on: Fuel type Geographic location (more for provinces in 3 conflict-prone southern provinces) Whether or not the project offsets diesel Capacity The total tariff is equal to this adder pluse the utility�s avoided cost of power. Ultimately consumers pay for the adder through a per-kWh pass-through mechanism to all consumers.

17. VSPP Capacity � before and after FIT ADDER

18. VSPP project pipeline as recorded in EPPO data .5 What have been the results? The government keeps data on how many applications are being considered, how many have received utility permission but are still awaiting a PPA, how many PPAs have been signed, and finally how many projects are generating electricity under the program. Along the way, there�s some project leakage where projects are abandoned at different stages. The next few slides show the MW of projects in the pipeline in these stages, by technology..5 What have been the results? The government keeps data on how many applications are being considered, how many have received utility permission but are still awaiting a PPA, how many PPAs have been signed, and finally how many projects are generating electricity under the program. Along the way, there�s some project leakage where projects are abandoned at different stages. The next few slides show the MW of projects in the pipeline in these stages, by technology.

19. Jun 2009 .15 min Here�s the situation in June 2009. We see a mostly biomass projects online � over 600 MW, with many applications pending for biomass, solar, and windpower, and a lot of PPAs signed for solar..15 min Here�s the situation in June 2009. We see a mostly biomass projects online � over 600 MW, with many applications pending for biomass, solar, and windpower, and a lot of PPAs signed for solar.

20. Dec 2009

21. Mar 2010

22. July 2010

23. Current VSPP challenges & responses PPA speculators. Some PPAs have been applied for by companies that appear to have done so with the sole intention of selling signed PPAs at a profit. This is especially apparent in the case of solar (1784 MW of PPAs signed, only 16 MW generating currently. There is concern that much of this is by companies that do not have capacity to build the solar farms, but intend to sell PPAs). Problem: clogs up substation capacity, creates uncertainty about impact to ratepayers. Not much diversity � nearly all the projects online currently in biomass, etc. Add�l finance measures VSPP not well integrated into planning process. On the one hand, many of the benefits of VSPP have yet to be quantified and included in the planning process. These benefits include peak load reduction, line loss reduction, GHG emissions reduction, deferral of new power plant construction, and deferral of T&D upgrades. On the other hand, the planning methodologies and software remain focused on large-scale power plant options (700 MW gas combined cycle, 1,000 MW coal plants, large hydro imports from Laos, and nuclear) and do no accommodate VSPP. This is both a computer software problem and a problem of the way that power sector planners in Thailand think. It�s not easy to accommodate distributed, non-firm energy sources into a planning process built on centralized, firm sources. A consequence has been overinvestment in generation capacity. PPA speculators. Some PPAs have been applied for by companies that appear to have done so with the sole intention of selling signed PPAs at a profit. This is especially apparent in the case of solar (1784 MW of PPAs signed, only 16 MW generating currently. There is concern that much of this is by companies that do not have capacity to build the solar farms, but intend to sell PPAs). Problem: clogs up substation capacity, creates uncertainty about impact to ratepayers. Not much diversity � nearly all the projects online currently in biomass, etc. Add�l finance measures VSPP not well integrated into planning process. On the one hand, many of the benefits of VSPP have yet to be quantified and included in the planning process. These benefits include peak load reduction, line loss reduction, GHG emissions reduction, deferral of new power plant construction, and deferral of T&D upgrades. On the other hand, the planning methodologies and software remain focused on large-scale power plant options (700 MW gas combined cycle, 1,000 MW coal plants, large hydro imports from Laos, and nuclear) and do no accommodate VSPP. This is both a computer software problem and a problem of the way that power sector planners in Thailand think. It�s not easy to accommodate distributed, non-firm energy sources into a planning process built on centralized, firm sources. A consequence has been overinvestment in generation capacity.

24. PPA speculators. Some PPAs have been applied for by companies that appear to have done so with the sole intention of selling signed PPAs at a profit. This is especially apparent in the case of solar (1784 MW of PPAs signed, only 16 MW generating currently. Over 500 MW of these PPAs have gone to one company that had only a single employee). Problem: clogs up substation capacity. Not much diversity � nearly all the projects online currently in biomass, etc. Add�l finance measures VSPP not well integrated into planning process. On the one hand, many of the benefits of VSPP have yet to be quantified and included in the planning process. These benefits include peak load reduction, line loss reduction, GHG emissions reduction, deferral of new power plant construction, and deferral of T&D upgrades. On the other hand, the planning methodologies and software remain focused on large-scale power plant options (700 MW gas combined cycle, 1,000 MW coal plants, large hydro imports from Laos, and nuclear) and do no accommodate VSPP. This is both a computer software problem and a problem of the way that power sector planners in Thailand think. It�s not easy to accommodate distributed, non-firm energy sources into a planning process built on centralized, firm sources. A consequence has been overinvestment in generation capacity. PPA speculators. Some PPAs have been applied for by companies that appear to have done so with the sole intention of selling signed PPAs at a profit. This is especially apparent in the case of solar (1784 MW of PPAs signed, only 16 MW generating currently. Over 500 MW of these PPAs have gone to one company that had only a single employee). Problem: clogs up substation capacity. Not much diversity � nearly all the projects online currently in biomass, etc. Add�l finance measures VSPP not well integrated into planning process. On the one hand, many of the benefits of VSPP have yet to be quantified and included in the planning process. These benefits include peak load reduction, line loss reduction, GHG emissions reduction, deferral of new power plant construction, and deferral of T&D upgrades. On the other hand, the planning methodologies and software remain focused on large-scale power plant options (700 MW gas combined cycle, 1,000 MW coal plants, large hydro imports from Laos, and nuclear) and do no accommodate VSPP. This is both a computer software problem and a problem of the way that power sector planners in Thailand think. It�s not easy to accommodate distributed, non-firm energy sources into a planning process built on centralized, firm sources. A consequence has been overinvestment in generation capacity.

25. PPA speculators. Some PPAs have been applied for by companies that appear to have done so with the sole intention of selling signed PPAs at a profit. This is especially apparent in the case of solar (1784 MW of PPAs signed, only 16 MW generating currently. Over 500 MW of these PPAs have gone to one company that had only a single employee). Problem: clogs up substation capacity. Not much diversity � nearly all the projects online currently in biomass, etc. Add�l finance measures VSPP not well integrated into planning process. On the one hand, many of the benefits of VSPP have yet to be quantified and included in the planning process. These benefits include peak load reduction, line loss reduction, GHG emissions reduction, deferral of new power plant construction, and deferral of T&D upgrades. On the other hand, the planning methodologies and software remain focused on large-scale power plant options (700 MW gas combined cycle, 1,000 MW coal plants, large hydro imports from Laos, and nuclear) and do no accommodate VSPP. This is both a computer software problem and a problem of the way that power sector planners in Thailand think. It�s not easy to accommodate distributed, non-firm energy sources into a planning process built on centralized, firm sources. A consequence has been overinvestment in generation capacity. PPA speculators. Some PPAs have been applied for by companies that appear to have done so with the sole intention of selling signed PPAs at a profit. This is especially apparent in the case of solar (1784 MW of PPAs signed, only 16 MW generating currently. Over 500 MW of these PPAs have gone to one company that had only a single employee). Problem: clogs up substation capacity. Not much diversity � nearly all the projects online currently in biomass, etc. Add�l finance measures VSPP not well integrated into planning process. On the one hand, many of the benefits of VSPP have yet to be quantified and included in the planning process. These benefits include peak load reduction, line loss reduction, GHG emissions reduction, deferral of new power plant construction, and deferral of T&D upgrades. On the other hand, the planning methodologies and software remain focused on large-scale power plant options (700 MW gas combined cycle, 1,000 MW coal plants, large hydro imports from Laos, and nuclear) and do no accommodate VSPP. This is both a computer software problem and a problem of the way that power sector planners in Thailand think. It�s not easy to accommodate distributed, non-firm energy sources into a planning process built on centralized, firm sources. A consequence has been overinvestment in generation capacity.

26. Reflections -- Thai VSPP Low-key, local approach kept utilities from being threatened Thailand�s path to full generation-cost FIT started successfully with tariffs based on avoided cost Initial trickle of applications gave utility time to build capacity to implement program Feed-in adder very successful in attracting projects Incentivize utility (utility pays for only 98% of energy from projects >1 MW) Challenges arising as program grows, largely being addressed

28. Evolution of Tanzania SPP regulations Approved by regulator August 2009 Up to 10 MW export, renewables & cogeneration SPP Tariffs at average of long run marginal costs (LRMC) and short run (SRMC) Grid-connected SPP tariff (2010): 110.3 TZS ($0.074)/kWh 132.36 TZS ($0.088)/kWh dry-season Aug-Nov 99.27 TZS ($0.0663)/kWh wet-season Jan-Jul, December In rural mini-grid areas offsetting diesel (2010): 368.87 TZS ($0.24.6)/kWh 4 PPAs signed by November 2010 Anastas: EWURA, which regulates the electricity sector, has been working to regulations similar in many respescts to Thailands�. The Tanzanian regulator approved them about a year ago. They allow both cogeneration and renewable energy, up to 10 MW export. Tanzania has power shortages, especially when there is drought. To help meet demand the Tanzanian utility purchased generation capacity and associated energy through emergency procurements. The tariff paid to SPPs connected to the main grid is about 6.6 US cents � lower than emergency energy costs, but sufficient for biomass to be profitable. In Tanzania only about 2% of the rural population has grid electricity. Some of the larger towns are served by 11 diesel mini-grids owned by the national utility. The national utility loses money for every kWh sold. The SPP tariffs are set lower than what the utility has to pay for diesel generation, but high enough to be attractive to small biomass and micro-hydro developers.Anastas: EWURA, which regulates the electricity sector, has been working to regulations similar in many respescts to Thailands�. The Tanzanian regulator approved them about a year ago. They allow both cogeneration and renewable energy, up to 10 MW export. Tanzania has power shortages, especially when there is drought. To help meet demand the Tanzanian utility purchased generation capacity and associated energy through emergency procurements. The tariff paid to SPPs connected to the main grid is about 6.6 US cents � lower than emergency energy costs, but sufficient for biomass to be profitable. In Tanzania only about 2% of the rural population has grid electricity. Some of the larger towns are served by 11 diesel mini-grids owned by the national utility. The national utility loses money for every kWh sold. The SPP tariffs are set lower than what the utility has to pay for diesel generation, but high enough to be attractive to small biomass and micro-hydro developers.

29. Pilot Sisal Biogas Plant 150 kW� HALE -TANGA - TANZANIA .3 Here�s an example of an early SPP power plant in Tanzania. It makes biogas from waste water from sisal production to generate 150 kW of electricity. .3 Here�s an example of an early SPP power plant in Tanzania. It makes biogas from waste water from sisal production to generate 150 kW of electricity.

30. Processing of Sisal Leaves .25 min When sisal fibres are extracted from the sisal plant, a lot of waste-water material is created that has high biogas potential..25 min When sisal fibres are extracted from the sisal plant, a lot of waste-water material is created that has high biogas potential.

31. 31 Tanzania has excellent water resources in rural areas, and small hydro power can be among the most cost-effective renewable energy options. The Tanzanian SPP regulations allow projects up to 10 MW. Here is a 1-MW project in Thailand. 0.9 meter diameter, 370 meters long. Flow 1.37 m3/sec. 100 meter head.Tanzania has excellent water resources in rural areas, and small hydro power can be among the most cost-effective renewable energy options. The Tanzanian SPP regulations allow projects up to 10 MW. Here is a 1-MW project in Thailand. 0.9 meter diameter, 370 meters long. Flow 1.37 m3/sec. 100 meter head.

34. Tanzania SPP Legislative Framework National Energy Policy, 2003 Rural electrification policy statement Energy and Water Utilities Regulatory Authority Act Establishing EWURA Rural Energy Act (2005) Establishing REA & REF The Electricity Act, 2008 These are the components of the Renewable energy legislative framework in Tanzania. The national Energy policy provides an umbrella for guidance on energy development and management. Rural electrification statement emphasizes importance of serving Tanzanian�s rural areas. Indicates all lower cost technical options should be considered including renewable energy EWURA act established EWURA with the duty to promote availability of energy services to all consumers including low income, rural and disadvantaged consumers. REA � promotion of improved access to modern energy services in the rural areas in Tanzania, and provide grants and subsidies to developers of rural energy projects Electricity Act A(2008) �Empowers EWURA to exercise light handed regulation to facilitate fast electrification and access in rural Tanzania These are the components of the Renewable energy legislative framework in Tanzania. The national Energy policy provides an umbrella for guidance on energy development and management. Rural electrification statement emphasizes importance of serving Tanzanian�s rural areas. Indicates all lower cost technical options should be considered including renewable energy EWURA act established EWURA with the duty to promote availability of energy services to all consumers including low income, rural and disadvantaged consumers. REA � promotion of improved access to modern energy services in the rural areas in Tanzania, and provide grants and subsidies to developers of rural energy projects Electricity Act A(2008) �Empowers EWURA to exercise light handed regulation to facilitate fast electrification and access in rural Tanzania

35. Legislative Framework, cont Energy Policy Statement No. 36 Establish norms, codes of practice, guidelines and standards for renewable energy technologies, to facilitate the creation of an enabling environment for sustainable development of renewable energy sources This is a self explanatory statement which is backing all of the current initiatives on standardizing the process for Small Power Development in TanzaniaThis is a self explanatory statement which is backing all of the current initiatives on standardizing the process for Small Power Development in Tanzania

36. Legislative Framework, cont The Electricity Act (2008) provides for SPPA and SPPT Definitions Standardized Small Power Purchase Agreement (SPPA): Means agreement between utility entity and a developer entered for pursposes of selling power to the grid not exceeding 10 MW but not less than 100 kW. Standardized Small Power Purchase Tariff (SPPT): Means the tariff agreed on in the SPPA License exemption for projects less than 1 MW (generation or distribution) This is a self explanatory statement which is backing all of the current initiatives on standardizing the process for Small Power Development in TanzaniaThis is a self explanatory statement which is backing all of the current initiatives on standardizing the process for Small Power Development in Tanzania

37. A goal: Light-handed regulation Minimize amount of information that is required. Minimize the number of separate regulatory requirements and decisions. Use standardized documents, and make use of documents used by other agencies, to the maximum extent possible (reduce need for case-by-case negotiation) The Electricity Act of 2008 calls for light-handed regulation, and the SPP guidelines have been written with that directive in mind. Specifically, light handed regulation means first, minimizing the amount of information that is required (annual reporting requirement is a small fraction of traditional generator); second, minimizing the number of different regulatory requirements and decisions (projects under 1 MW exempt from Ewura licensing); and third using standardized documents as much as possible to minimize the need for case-by-case negociation. Example of 1: Use of REA documents for cost of service and for EWURA license Example of 2: possibility of delegating monitoring functions to REA Example of 3: standardized power purchase agreements. The law provides that if one is using the SPPA and SPPT, there is a streamlined regulatory approval process.The Electricity Act of 2008 calls for light-handed regulation, and the SPP guidelines have been written with that directive in mind. Specifically, light handed regulation means first, minimizing the amount of information that is required (annual reporting requirement is a small fraction of traditional generator); second, minimizing the number of different regulatory requirements and decisions (projects under 1 MW exempt from Ewura licensing); and third using standardized documents as much as possible to minimize the need for case-by-case negociation. Example of 1: Use of REA documents for cost of service and for EWURA license Example of 2: possibility of delegating monitoring functions to REA Example of 3: standardized power purchase agreements. The law provides that if one is using the SPPA and SPPT, there is a streamlined regulatory approval process.

38. Table of SPP documents The regulatory machinery for the SPP program involves a number of documents. To minimize confusion, I have put these documents into a single table. The Guidelines for Developers is meant to be an overall roadmap for developers, a step-by-step guide to the approval process. It makes reference to all the other documents. The guidelines for grid interconnection focuses on the engineering side of things �what is required for a safe and reliable electrical connection so that power flows between the SPP and the buyer and no one gets hurt and no equipment gets burned up. You will notice that these documents are the same for the case of interconnection with the main national grid, and the case of interconnection with isolated mini-grids. Standardized Power Purchase Agreement or PPA is the legal agreement between the SPP and the utility. This document was written in 2007 and has already been through the approval process. (A check mark on the table indicates that the document has been approved). The Tariff Methodology discusses the procedure or methodology by which tariffs will be determined for each year. The next document is the tariff calculations for 2009. This document applies the tariff methodology to current electrical and economic figures and prices to calculate the SPP tariff for year 2009. Finally, EWURA will soon issue a set of process rules and interconnection rules that have legal standing. These rules documents will tie in closely with the Guidelines documents (yellow). All approved documents will be available at the EWURA website shown. The regulatory machinery for the SPP program involves a number of documents. To minimize confusion, I have put these documents into a single table. The Guidelines for Developers is meant to be an overall roadmap for developers, a step-by-step guide to the approval process. It makes reference to all the other documents. The guidelines for grid interconnection focuses on the engineering side of things �what is required for a safe and reliable electrical connection so that power flows between the SPP and the buyer and no one gets hurt and no equipment gets burned up. You will notice that these documents are the same for the case of interconnection with the main national grid, and the case of interconnection with isolated mini-grids. Standardized Power Purchase Agreement or PPA is the legal agreement between the SPP and the utility. This document was written in 2007 and has already been through the approval process. (A check mark on the table indicates that the document has been approved). The Tariff Methodology discusses the procedure or methodology by which tariffs will be determined for each year. The next document is the tariff calculations for 2009. This document applies the tariff methodology to current electrical and economic figures and prices to calculate the SPP tariff for year 2009. Finally, EWURA will soon issue a set of process rules and interconnection rules that have legal standing. These rules documents will tie in closely with the Guidelines documents (yellow). All approved documents will be available at the EWURA website shown.

39. Tariffs determined by SPP type 39 I�m going to briefly summarize the tariffs paid to SPPs. Tariffs are different whether the project is connected to the main grid, or to a mini-grid. They are also different depending on whether electricity is sold wholesale to a Distribution Network Operator (DNO), or whether it is sold at retail directly to end-users. All together, these form four cases. Case 2 might be a bit confusing � it refers to a case in Tanzania in which 11 isolated mini-grids where Tanesco is currently supplying consumers using diesel generators. It is possible for projects to be multiple cases at once � for example a main-grid-connected project selling both to Tanesco and to retail customers would be Cases 1 and 3. In the documents we use the term DNO rather than Tanesco so that it still applies in the case that in the future the grid operator is not Tanesco, or there is more than one regulated grid operator.I�m going to briefly summarize the tariffs paid to SPPs. Tariffs are different whether the project is connected to the main grid, or to a mini-grid. They are also different depending on whether electricity is sold wholesale to a Distribution Network Operator (DNO), or whether it is sold at retail directly to end-users. All together, these form four cases. Case 2 might be a bit confusing � it refers to a case in Tanzania in which 11 isolated mini-grids where Tanesco is currently supplying consumers using diesel generators. It is possible for projects to be multiple cases at once � for example a main-grid-connected project selling both to Tanesco and to retail customers would be Cases 1 and 3. In the documents we use the term DNO rather than Tanesco so that it still applies in the case that in the future the grid operator is not Tanesco, or there is more than one regulated grid operator.

40. Tariff Case 1: Selling Wholesale to Main grid 40 Case 1 is selling wholesale electricity to the main grid. It is a variant of an avoided cost calculation with no subsidy going to the SPP. The general principle is that the SPP tariff is the average of the long-run and short-run marginal costs. The long-run marginal cost is the cost of electricity from an additional power plant in Tanzania�s long-term power development plan. The short-run marginal cost is the budgeted cost of thermal generation in the next year. In practice the short-run marginal costs are higher than the long-run marginal cost because of emergency power plants and other factors. Case 1 is selling wholesale electricity to the main grid. It is a variant of an avoided cost calculation with no subsidy going to the SPP. The general principle is that the SPP tariff is the average of the long-run and short-run marginal costs. The long-run marginal cost is the cost of electricity from an additional power plant in Tanzania�s long-term power development plan. The short-run marginal cost is the budgeted cost of thermal generation in the next year. In practice the short-run marginal costs are higher than the long-run marginal cost because of emergency power plants and other factors.

41. Tariff Case 2: selling wholesale to a mini-grid 41 The proposed tariff for mini-grids has a similar methodology to the main-grid connected case. But here the short-run marginal cost is the marginal cost of new diesel generation for mini-grids. Note: the actual calculations are somewhat more complicated than this � and available in: Standardized Tariff Methodology for the Sale of Electricity to the Mini-grids Under the Standardized Small Power Purchase Agreements available from EWURA. The proposed tariff for mini-grids has a similar methodology to the main-grid connected case. But here the short-run marginal cost is the marginal cost of new diesel generation for mini-grids. Note: the actual calculations are somewhat more complicated than this � and available in: Standardized Tariff Methodology for the Sale of Electricity to the Mini-grids Under the Standardized Small Power Purchase Agreements available from EWURA.

42. Tariff Cases 3 (isolated) and 4 (main grid): selling at retail to end use customers Tariff is proposed by SPP generator, subject to EWURA review Less oversight demanded in cases in which community is in agreement with proposed tariff Where possible, EWURA draws on financial analysis submitted to REA for rural electrification subsidy 42 Cases 1 and 2 deal with wholesale tariffs (i.e., sales of electricity to an entity like TANESCO who will be reselling the power). Cases 3 and 4 deal with retail tariffs (i.e., sales to final or end use customers) In retail sales of rural electrification costs can vary considerably. This requires an approach in which the Seller will propose for EWURA approval a cost-based tariff based on its own actual or projected total costs. The information required for getting subsidy is essentially the same information required for tariff setting. Cases 1 and 2 deal with wholesale tariffs (i.e., sales of electricity to an entity like TANESCO who will be reselling the power). Cases 3 and 4 deal with retail tariffs (i.e., sales to final or end use customers) In retail sales of rural electrification costs can vary considerably. This requires an approach in which the Seller will propose for EWURA approval a cost-based tariff based on its own actual or projected total costs. The information required for getting subsidy is essentially the same information required for tariff setting.

43. Necessary permits, clearances and procedures for application 43 The sequence of necessary permits, clearances and procedures for application is shown. For example, in order to obtain a Letter Of Intent it is necessary to demonstrate both rights to land, and rights to the resource. This looks daunting, and is may appear inconsistent with light handed regulations. But if you look at it closely, the only step that requires regulatory involvement is the last step. These are regulations required by other agencies. EWURA is trying to simplify its processes, but EWUAR has no authority to remove dictate the other agencies Many of these steps � particularly the environmental and social clearance - take a while to complete, so it is advised to research all steps and proceed in parallel.The sequence of necessary permits, clearances and procedures for application is shown. For example, in order to obtain a Letter Of Intent it is necessary to demonstrate both rights to land, and rights to the resource. This looks daunting, and is may appear inconsistent with light handed regulations. But if you look at it closely, the only step that requires regulatory involvement is the last step. These are regulations required by other agencies. EWURA is trying to simplify its processes, but EWUAR has no authority to remove dictate the other agencies Many of these steps � particularly the environmental and social clearance - take a while to complete, so it is advised to research all steps and proceed in parallel.

44. Where we are now� Completed All documents passed public review and most are approved for use. Several PPAs signed with TANESCO and licenses applied 44

45. SPPs In Operation

46. SPPs in Preparation 18 additional project sites identified18 additional project sites identified

47. Where we are now� Completed All documents passed public review and most are approved for use. Several PPAs signed with TANESCO and licenses applied Ongoing TANESCO in process of establishing SPP cell 47

48. .25 Just last month, Thai utility engineers began a series of missions to work with Tanzanian utility counterparts to develop a SPP cell to address processing of SPP applications and integratoin of SPP systems into the grid..25 Just last month, Thai utility engineers began a series of missions to work with Tanzanian utility counterparts to develop a SPP cell to address processing of SPP applications and integratoin of SPP systems into the grid.

49. Where we are now� Completed All documents passed public review and most are approved for use. Several PPAs signed with TANESCO and licenses applied Ongoing TANESCO in process of establishing SPP cell SPP Working Group composition and function Discussions between EWURA and REA on how to coordinate better, done, but may be refined further. Determine tariff review methodology for projects selling electricity at retail 49

50. 5. Challenges / Opportunities 50 This 1 MW biomass project in Sri Lanka uses a fast-growing wood variety grown.This 1 MW biomass project in Sri Lanka uses a fast-growing wood variety grown.

51. Challenges Challenge Inadequate financial resources to support the initiative Inadequate private sector participation in investment High interest rates loans from commercial banks Land ownership and water rights for SPPs projects especially wind farms & mini-hydro plants Low Tariff and non-cost reflective Response WB has established a facility, engage interest of other financial institutions Conducive Environment, rules and publicize Promote other sources mix grant and loans Include land ownership & water rights in RE Policy Adapt policy in future?

52. Challenges �..cont. 2 Challenge Lack of experience of key project promoters with skills in project management Lack of Renewable Energy Policy Lack of interest on the part of potential Off-takers (TANESCO) Response Capacity building (REA) Government needs to set policy targets, etc. Improving through regular discussions with utility 

53. Reflections Renewable Small Power Projects can enhance efforts towards electrification of Rural areas Though generally expensive SPPs can be developed much faster hence increase capacity Private investments can be quickly organised and also benefit local entrepreneurs Light handed regulation will reduce regulatory burden hence benefit both investors and the country Good Policy, Cost reflective Tariff and well designed FiT can attract foreign and local investors 53

54. Thank you For more information, please contact mbawala@ewura.go.tz chrisgreacen@gmail.com Thai VSPP regulations available at: http://www.eppo.go.th/power/vspp-eng/ Tanzania SPP regulations available at: www.ewura.go.tz/sppselectricity.html

55. Thailand VSPP program features (slide 1 of 2)