Policy, implementation and financing of Renewable Energy

An increasing number and variety of RE policies - motivated by many factors have driven
escalated growth of RE technologies in recent years . Government policies play a crucial role in accelerating the deployment of RE technologies. Energy access and social and economic development have been the primary drivers in most developing countries whereas secure energy supply and environmental concerns have been most important in developed countries .The focus of policies is broadening from a concentration primarily on RE electricity to include RE heating and cooling and transportation RE specific policies for research, development and demonstration and deployment help to level the playing field for RE. Policies include regulations such as feed-in-tariffs, quotas, priority grid access, building mandates, bio-fuel blending requirements, and bio-energy sustainability criteria. Other policy categories are fiscal incentives such as tax policies and direct government payments such as rebates and grants; and public finance mechanisms such as loans and guarantees. Wider policies aimed at reducing GHG (greenhouse gas) emissions such as carbon pricing mechanisms may also support RE.
Policies can be sector specific and can be implemented on the local, state/provincial, national and in some cases regional level and can be complemented by bilateral, regional and international cooperation. Policies have promoted an increase in RE capacity installations by helping to overcome various barriers. . Barriers to RE deployment include:
 institutional and policy barriers related to existing industry, infrastructure and regulation of
the energy system;
 market failures, including non-internalized environmental and health costs, where
applicable.
 lack of general information and access to data relevant to the deployment of RE and lack of
technical and knowledge capacity; and
 barriers related to societal and personal values and affecting the perception and acceptance
of RE technologies.
Public research and development (R&D) investments in RE technologies are most effective
when complemented by other policy instruments, particularly deployment policies that
simultaneously enhance demand for new technologies. Together, R&D and deployment policies
create a positive feedback cycle, inducing private sector investment. Enacting deployment policies early in the development of a given technology can accelerate learning by inducing private R&D, which in turn further reduces costs and provides additional incentives for using the technology.
Some policies have been shown to be effective and efficient in rapidly increasing RE deployment.
However, there is no one-size-fits-all policy. Experience shows that different policies or
combinations of policies can be more effective and efficient depending on factors such as the level of technological maturity, affordable capital, ease of integration into the existing system and the local and national RE resource base.
 Several studies have concluded that some feed in tariffs have been effective and efficient at
promoting RE electricity, mainly due to the combination of long term fixed price or
premium payments, network connections, and guaranteed purchase of all RE electricity
generated. Quota policies can be effective and efficient if designed to reduce risk; e.g. with
long term contracts.
 An increasing number of governments are adopting fiscal incentives for RE heating and
cooling. Obligations to use RE heat are gaining attention for their potential to encourage
growth independent of public financial support.
 In the transportation sector, RE fuel mandates or blending requirements are key drivers in
the development of most modern bio-fuel industries. Other policies include direct government payments or tax reductions.

Some policies have been shown to be effective and efficient in rapidly increasing RE deployment.
However, there is no one-size-fits-all policy. Experience shows that different policies or
combinations of policies can be more effective and efficient depending on factors such as the level of technological maturity, affordable capital, ease of integration into the existing system and the local and national RE resource base.
 Several studies have concluded that some feed in tariffs have been effective and efficient at
promoting RE electricity, mainly due to the combination of long term fixed price or premium payments, network connections, and guaranteed purchase of all RE electricity generated. Quota policies can be effective and efficient if designed to reduce risk; e.g. with long term contracts.
 An increasing number of governments are adopting fiscal incentives for RE heating and
cooling. Obligations to use RE heat are gaining attention for their potential to encourage
growth independent of public financial support.
 In the transportation sector, RE fuel mandates or blending requirements are key drivers in
the development of most modern bio-fuel industries. Other policies include direct government payments or tax reductions. Policies have influenced the development of an international bio-fuel trade.The flexibility to adjust as technologies, markets and other factors evolve is important. The details of design and implementation are critical in determining the effectiveness and efficiency of a policy. Policy frameworks that are transparent and sustained can reduce investment risks and facilitate deployment of RE and the evolution of low-cost applications.
‘Enabling’ policies support RE development and deployment. A favourable, or enabling,
environment for RE can be created by addressing the possible interactions of a given policy with
other RE policies as well as with energy and non-energy policies (e.g., those targeting agriculture, transportation, water management and urban planning); by easing the ability of RE developers to obtain finance and to successfully site a project; by removing barriers for access to networks and markets for RE installations and output; by increasing education and awareness through dedicated communication and dialogue initiatives; and by enabling technology transfer. In turn, the existence of an ‘enabling’ environment can increase the efficiency and effectiveness of policies to promote RE.

Two separate market failures create the rationale for the additional support of innovative RE
technologies that have high potential for technological development, even if an emission market
(or GHG pricing policy in general) exists. The first market failure refers to the external cost of
GHG emissions. The second market failure is in the field of innovation: if firms underestimate the future benefits of investments into learning RE technologies or if they cannot appropriate these benefits, they will invest less than is optimal from a macroeconomic perspective. In addition to GHG pricing policies, RE specific policies may be appropriate from an economic point of view if the related opportunities for technological development are to be addressed (or if other goals beyond climate mitigation are pursued). Potentially adverse consequences such as lock-in, carbon leakage and rebound effects should be taken into account in the design of a portfolio of policies.

The literature indicates that long-term objectives for RE and flexibility to learn from experience
would be critical to achieve cost-effective and high penetrations of RE. This would require
systematic development of policy frameworks that reduce risks and enable attractive returns which provide stability over a time-frame relevant to the investment. An appropriate and reliable mix of policy instruments, including energy efficiency policies, is even more important where energy infrastructure is still developing and energy demand is expected to increase in the future.

Advancing knowledge about renewable energy

Enhanced scientificscientific and engineering knowledge should lead to performance improvements and cost reductions of RE technologies. Additional knowledge related to RE and its role in GHG emissions reductions remains to be gained in a number of broad areas include:
 Future cost and timing of RE deployment; Realizable technical potential for RE at all geographical scales;
 Technical and institutional challenges and costs of integrating diverse RE technologies into
energy systems and markets;
 Comprehensive assessments of socio-economic and environmental aspects of RE and other
energy technologies;
 Opportunities for meeting the needs of developing countries with sustainable RE services;
and
 Policy, institutional and financial mechanisms to enable cost-effective deployment of RE in
a wide variety of contexts.
Knowledge about RE and its climate change mitigation potential continues to advance. The existing scientific knowledge is significant and can facilitate the decision-making process

 Realizable technical potential for RE at all geographical scales;
 Technical and institutional challenges and costs of integrating diverse RE technologies into
energy systems and markets;
 Comprehensive assessments of socio-economic and environmental aspects of RE and other
energy technologies;
 Opportunities for meeting the needs of developing countries with sustainable RE services;
and
 Policy, institutional and financial mechanisms to enable cost-effective deployment of RE in
a wide variety of contexts.
Knowledge about RE and its climate change mitigation potential continues to advance. The existing scientific knowledge is significant and can facilitate the decision-making process

(Source : Final Plenary Special Report Renewable Energy Sources (SRREN) on May 2011 )