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Institutional Barriers to Distributed Energy: Understanding and Overcoming

Institutional Barriers to Distributed Energy: Understanding and Overcoming . Chris Dunstan Institute for Sustainable Futures, UTS 21 November 2008. I-Grid Research Program Structure. CSIRO. Management Committee. P2: Market & Economic Modelling. P3: Optimal Siting & Dispatch of DG.

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Institutional Barriers to Distributed Energy: Understanding and Overcoming

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  1. Institutional Barriers to Distributed Energy:Understanding and Overcoming Chris DunstanInstitute for Sustainable Futures, UTS 21 November 2008

  2. I-Grid Research Program Structure CSIRO Management Committee P2: Market & Economic Modelling P3: Optimal Siting & Dispatch of DG P5: I Grid Social Impacts P6: I Grid in New Housing Development P7:Operational Control & Energy Management P1: Control Methodology of DG P4: Instit Barriers, Stakeholder Engagement & Economic Modelling UniSA Uni of Qld Uni of Qld QUT UTS Curtin Uni QUT Institutional Barriers Business deliberation on I Grid & DE DANCE Model Economic regulatory barriers & Solutions D-CODE Model

  3. Why study Institutional Barriers to DE?

  4. Global average temperature

  5. Permanent Arctic ice may disappear by 2030

  6. Scientist warn that if we do not quickly reduce greenhouse pollution, the melting of Greenland ice cp will be unstoppable and raise global sea level by 7 metres

  7. Politics demands Response Problem

  8. A very senior Australian bureaucratonce said, when advising junior bureaucrats: “as a bureaucrat, the most important thing you can do … is to stop things from happening” (not Sir Humphrey Appleby)

  9. Politics demands Response “Market Intervention” Problem “Market Failure” Policy demands

  10. A licence to act. "Climate change is a result of the greatest market failure the world has seen.” – Sir Nicholas Stern, Nov 2007 "the greatest market failure ever seen". – Prof Ross Garnaut, July 08

  11. “once we have an effective price on carbon through an Emissions Trading scheme, we can do away with a range of inefficient policies and programs…” MRET, PV Rebate, EEOA, VEET, REES, NEET, etc,

  12. Barriers to Distributed Energy “Non-Institutional” Barriers include: • Technical barriers • Economic (cost) barriers Some Institutional Barriers (and market failures) • Imperfect Information • “Regulatory failure” and inefficient incentives • External Costs excluded • Inefficient pricing (not cost reflective) • Split Incentives (landlord/tenant problem) • High transaction costs • Lack of access to finance • Cultural norms • Underdeveloped market for Distributed Energy

  13. Barriers to Distributed Energy Institutional Barriers What slows it down Economic Barriers What it costs Technology Barriers What it does

  14. Distributed Energy is crucial to carbon abatement “United States could reduce emissions by 31% to 46% by 2030”

  15. “Best practice” Technology Frontier Current practice Institutional Barriers Institutional Barriers: A framework Economic outcomes Environmental/ Social outcomes

  16. Barriers to Distributed Energy: “The Seven D.E. Sins” Disinterest Disarray Confusion Lack of information Ignorance Split Incentives: landlord/ tenant etc Cultural barriers Impatience Maladministration High discount rates Regulatory barriers Mispricing Externalities and price structures

  17. Indicative Impact of Institutional Barriers on Costs “Real” Costs Current Costs

  18. Demand1 a c c Supply1 b q1 Tool 4: Market transformation analysis Price Demand0 Supply0 p0 q0 Quantity

  19. Push Pull Lift Overcoming Institutional Barriers: “Moving the Market”

  20. Information Regulation Incentives The Policy Palette Primary Instruments

  21. Pricing Targets Facilitation The Policy Palette Information Regulation Incentives + Secondary Instruments

  22. Pricing Pricing Coordination Targets Targets Facilitation Facilitation Culture The Policy Palette - “PIRFICT” Information Information Regulation Regulation Incentives Incentives

  23. Regulation • Mandatory Audits and Plans • Mandatory information disclosure • Minimum Energy Performance Standards

  24. Targets • Mandated Targets (regulated) • Policy target (adaptive management) • Aspirational targets (report and review)

  25. Information • Benchmarking • Performance labelling • Performance Reporting (no target) • Education and Awareness campaigns • Case studies

  26. Facilitation • High Level Commitment • Accreditation • Training • Audits, Advice and Assistance • Case Studies • Networking • Community Engagement

  27. Incentives • Cash Rebates • Competitive Subsidies • $ support for Research and Development • Loans and Financial guarantees • Expedited Planning • Public recognition and awards • Prizes

  28. Pricing • Price in Externalities (Carbon Tax) • Cost reflective tariffs • Dynamic Pricing • Fixed cost vs Variable Cost pricing

  29. Coordination • Strategic Planning • Plan, Act, Report, Review • Interagency and intergovernmental cooperation • Coordinating Agency

  30. Example: Residential Energy Efficiency

  31. Conclusions • Understanding institutional barriers important • for good policy and program design • to create a “licence to act” • to build the case for a suite of actions • Not just about complementing Emissions Trading but also about making it work • This analysis is a work in progress • Forthcoming Discussion Paper and Industry Forum • Adelaide, 5 December

  32. www.igrid.net.au

  33. Thank you. For more information on the I Grid Research program: Web: www.igrid.net.au Tel: 02 9514 4950 (ISF) Email: Chris.Dunstan@uts.edu.au

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