RE-CRI

Commercial Readiness Index (CRI) assessment – using the method as a tool in renewable energy policy design

Technical development of emerging RETs on their journey from basic technology research to proven function is generally assessed by the Technology Readiness Levels (TRLs) index. However, beyond technical development, RETs also need to prove their commercial viability. Responding to this challenge, the Australian Renewable Energy Agency (ARENA) developed a novel framework to evaluate commercial readiness of RETs: the Commercial Readiness Index (CRI).

In a study commissioned by the IEA-RETD, the commercial maturity of renewable energy technologies (RETs) is assessed using the Commercial Readiness Index (CRI) framework to identify appropriate policy approaches for stimulating RET deployment. The resulting report, prepared by the Carbon Trust, explores the use of the CRI framework through case studies with the aim of illustrating the commercialisation journey of two RETs in two different contexts: solar photovoltaics (PV) in Germany and offshore wind in the UK. These case studies included detailed interviews with 20 experts from 15 organisations and an internal workshop with Carbon Trust’s technology commercialisation experts. The report draws conclusions and provides recommendations on three main aspects:

Advantages and limitations of the CRI and its potential applicability to support policy makers

The CRI is an effective tool for communicating the importance of market conditions beyond technical performance for RETs and illustrating the historical commercialisation journey of a technology. The indicators assessed through the CRI help to prompt policy makers to consider a range of barriers faced by RETs and it can be used to show which historical policies were effective, or not, at addressing these commercialisation barriers. However, the CRI as a stand-alone tool does not direct policy makers towards the policy options that could be implemented to address these barriers.

Effective policies to support the commercialisation of RETs

The CRI emphasises, in the two case studies, that the most significant policies for scaling both emerging RET markets were subsidies for electricity production that were not limited by a capacity cap. However, the CRI analysis does not indicate why these policies were successful nor can it generalise lessons from various contexts given the unique set of individual circumstances in each case.

Opportunities to refine the CRI to address some of its limitations

The study proposes some modifications to the CRI which build on the existing framework to make it more useful and applicable for policy makers looking to scale-up renewable energy technologies. Suggestions include the introduction of new indicators that would capture or provide a more comprehensive view of additional commercialisation barriers faced by RETs, the creation of a traffic light system that could show the priority areas requiring policy support, or yet indicators linked to possible policy interventions that could address specific technology commercialisation barriers.

Download the report for the detailed findings of the project.

FIN-COMMUNITY

Cost and financing aspects of community renewable energy projects (FIN-COMMUNITY)

Community Renewable Energy Source (RES) projects are faced with particular barriers.
  • The skills, expertise and technical capabilities of community groups to plan, develop, negotiate contracts, finance, build and then operate RES projects;
  • The challenges of setting up a community organisation and securing the wider support of other local residents that are not members or investors in the community organisation;
  • The difficulties in obtaining finance for the project.
How do community-owned RES projects compare to commercial RES projects in terms of costs and corresponding financial impacts?

Five case studies in Australia, Canada, Denmark, Germany and the UK were analysed, with particular focus on two of the most common renewable energy technologies, namely solar PV projects and wind projects.

Although community projects are often supported by goodwill and a lot of volunteer time, development costs tend to be higher for community projects than commercial projects;

  • The construction and operating costs prices tend to be similar to the prices quoted to commercial developers;
  • Debt finance is more expensive for communities, or if not more expensive, there is anecdotal evidence that banks will lend smaller amounts (a lower debt: equity ratio) to community developers;
  • Offsetting the higher debt costs, equity can often be cheaper to secure as community investors are often happy to receive a rate of return slightly above bank saving rates;
  • Depending on the financial structure of community projects the overall financing cost message is that often commercial and community investors end up having a similar weighted average costs of capital.
Community-owned RES projects require additional policy support.

a) Acknowledge that communities are different and need financial assistance and certainty. Governments could consider offering grants to cover early stage feasibility work, and ensure there are entities that can provide finance for all the development stages after early feasibility work. Governments should also provide policy certainty, and with that certainty over levels of electricity support if the project proceeds.

b) Reduce community development costs through knowledge enhancement. Renewable projects should provide government paid development experts to reduce costs, prepare standardised legal contracts for shared ownership projects to reduce legal fees, provide clear, easy to read guidance on what different legal community entities can and cannot do, and work with the community sector to ensure there are authoritative ‘how to’ guides available.

With some targeted development stage support, possibly some revenue support, and a leveled playing field even if community projects can only be viable in those areas with optimal environmental locations, they will find ways to compete with commercial developers, whilst also generating the many extra social and wider economic benefits community projects deliver.

For more information download the final report, the presentation, the financial model, the five case studies and the policy recommendations.

RE-DELAYS

Documenting the costs of regulatory delays (RE-DELAYS)

Regulatory delays undermine the growth and economic potential of the renewable energy (RE) industry:

  • Barriers for permitting are a primary source of delay and result in significant costs for developers and society
  • Lack of clarity and transparency in existing regulation or development of new policies continues to result in significant costs and delays to entry for (new) renewable technologies. This is caused by uncertainty surrounding implementation of governments’ commitments towards support for RE, competing government objectives at times, as well as costly and lengthy consultation processes
  • Grid connection costs and grid access uncertainty are key issues

The RE-DELAYS project, commissioned by IEA-RETD to 3E together and London Economics International (LEI), investigates the cost of regulatory delays in the development of new renewable energy projects. The report presents country case studies for France, Ontario (Canada), Australia, Norway, the United Kingdom (UK) and the United States of America (USA), accompanied by an economic cost model and user guide. This allows users to perform their own project-specific assessments with individual parameters/assumptions.

The report has the following recommendations for policy makers:

  • Streamline the regulatory processes by creating a one-stop shop with simplified rules for applications
  • Increase accountability for decision making processes at the regulatory/governmental level, for example in the form of pre-determined fines associated with not achieving set milestones
  • Link the level of incentive such as a feed in tariff (FIT) to regulatory delay
  • Define clear procedures and cost impact assessment of appeal processes
  • Inform the public about benefits and risks of RE and encourage consultative mechanisms to share concerns

Dive into the detailed results of the study by downloading the full report.

Showcases of successful renewable energy financing

 

Innovative financing tools for renewable energy solutions

Along with the boost in global renewable energy financing levels in the last five years, many new approaches are invented. In its latest brochure, IEA-RETD adds 21 showcases of renewable energy projects with innovative and successful financing. This extension of the toolboxes of project developers and investors will support a further growth in renewable energy.

map

The showcases cover:

  • Four categories of innovative financing: community funding, crowd funding, private funding and public-private cooperation
  • 21 renewable energy projects
  • Bio-, geothermal-, solar-, tidal- and wind energy technologies
  • Project sizes ranging from 0.2 MW to 600 MW
  • OECD countries

 

Project developers, project owners, consultants, investors, financiers can draw inspiration from these showcases. The cases show how creative, innovative approaches meet challenges in financing, under different policy regimes. In addition, they policy makers how to improve their policy instruments and measures, in particular by removing investor risks. Matching these policies with financing approaches will expectedly accelerate the deployment of renewable energy technologies.

RENBAR

More deployment of renewable energy technologies (RET) could potentially result in negative side effects like visual or noise impacts, or increased local transport for biomass. The integration of renewables in societies asks for institutional solutions that take the concerns of citizens and other stakeholders seriously. Fortunately, many good practices exist that have demonstrated that renewables can be integrated in the ‘backyards’ of modern societies. The IEA-RETD has prepared a guidebook with many of these institutional solutions. Examples are: stakeholder involvement, -participation and even -compensation, or clear spatial planning and legal procedures that are trusted by all stakeholders. Project developers and both national and local policy makers can learn examples in other countries.

The RETs addressed in the guidebook include: wind energy (onshore and offshore); solar thermal and solar electric energy; biomass and biogas; wave and tidal energy; and geothermal energy. The best practices are described according to the following three dimensions:

  • spatial planning;
  • integration of RETs into the local environment; and
  • stakeholder involvement.

A key to successful RET deployment is proper spatial planning, which balances the many interests surrounding a RET project. National authorities can make a major difference by creating a legal framework that supports effective spatial planning. Local authorities also play a crucial role in being responsible for the planning process itself. Developers can do a lot to respond to local concerns by carefully integrating the technologies into the local context, respecting the local landscape and other natural assets and seeking ways to harmoniously integrate the RET into the surrounding environment.
The involvement of – and communication with – the stakeholders that are directly affected by the projects should be carefully considered throughout all phases of the project. Stakeholder involvement and communication is principally the responsibility of the project developers, but local authorities can also play an important role.

RE-COMMUNICATE

Communication Best-Practices for Renewable Energies – Scoping Study

An identified barrier to the widespread use of renewable energy technologies (RET) is the (mis-) perception in the public, at a political level and within the industry sector about the benefits, opportunities and capabilities of RET. One reason is that the communication of the RE sector may not be convincing enough. In November 2011 IEA-RETD organised a workshop in Berlin that discussed the topics of ‘sending clear messages’, and ‘getting the RE cost perception right’. One of the conclusions was that renewables need a better positioning, which could be achieved through improved communication (see the workshop conclusions here).

Therefore IEA-RETD commissioned a scoping study with the objective to provide ideas, techniques and case studies on how the benefits of renewable energies can be better communicated to and by policy makers, decision makers and other stakeholders. The study concluded that more targeted, effective renewable energy communications campaigns can be achieved through the use of more consistent, holistic and rigorous approaches to pre- and post-campaign development.
It also invites stakeholders to contribute to a “communications knowledge platform for RE” which would pool information, experiences and knowledge for improved RE communications (if you are interested, please contact iea_retd@ecofys.com ).

The project has been carried out by a consortium consisting of the International Institute for Sustainable Development (IISD), Green Budget Germany / Forum Ökologisch-Soziale Marktwirtschaft (FÖS), and the global renewable energy communications agency Collings & Monney.

Workshop, 29 November 2012 in Brussels

IEA-RETD and its partners from IISD, FÖS and Collings Monney organised on 29 November a workshop in Brussels that brought together experts in communication and renewable energy from governmental and non-governmental organizations. The workshop focused on the challenges for developing successful communication strategies for the renewable energy sector through a series of presentations and interactive sessions.

Please find the agenda and presentations here.

Workshop, 12 February 2013 in Brussels

In the 2nd workshop the preliminary results of the study as well as additional case studies were presented and discussed. Please find the agenda and presentations here.

Workshop, 7-9 October 2013 in Abu Dhabi

On 7-9 October 2013 IEA-RETD joined a workshop hosted by IRENA on “Social Acceptance of Renewable Energy” in Abu Dhabi and presented the results of the RE-COMMUNICATE project. The presentation can be found here and more information here.

FINANCE-RE

FINANCE-RE

Financing Renewable Energy – Key challenges for large-scale deployment

Background

The FINANCE-RE project was launched to address the key finance challenges related to the large-scale deployment of renewable energy. The report provides insight into the current practice and trends in financing renewable energy and presents the key challenges that need to be faced when following a large-scale RE deployment scenario. It addresses the current, the mid-term (2020) and longer-term (2050) financing needs. It also outlines what is needed to attract this capital and to improve the investment climate. Policies and key policy design aspects which can facilitate this process are discussed and complemented with the experiences and lessons so far. The report contains a couple of directions for actions, especially for policy makers but also for players in the financial sector.

Main conclusions and recommendations from the report

The report states that new policy approaches are key in attracting huge private financing for renewable energy. Governments should consider scaling up of renewable energy as part of their robust economic development strategy, rather than as an environmental strategy with the secondary benefits of job creation. Such an approach is fundamental to attracting new private-sector investment to finance renewable projects at a scale that is needed to address climate change. Proven mechanisms should not be abandoned, but new policies have to target ways to reduce the risk-to-reward ratio in order to enhance private sector investor confidence for investment in large scale renewable energy.

Extra information

LINK

Implementing national policies may threaten the eligibility of renewable energy projects for CDM/JI, thus reducing international development financing. Therefore countries need to be very careful when crafting their national promotion policies. The objectives of the IEA-RETD project were to perform a scoping study on the interplay between national RE promotion policies and international carbon trade. The study summarizes the ongoing discussion, describes the main barriers that may hinder – or at least not sufficiently support – the implementation of national RE promotion policies, and provides suggestions for removing these barriers.

EVENT

ADORET

ADORET PresentationThe overall objective of the project was to assist policy makers and project developers in a better understanding of the specifics of offshore renewable energy and to give them practical guidelines in how to foster their deployment.
Hence, this project focused on the following objectives:

  • Technical: Providing an overview of technologies, potentials and current status of wind, wave and tidal energy technologies
  • Economic/ financial: Providing a compendium of capital structure, costs of energy and financing schemes for offshore renewable energy projects, where available, to improve the understanding of economic and financial issues of offshore renewable energy projects and their dependence on perceived and real risks through relevant case studies
  • Barriers: Improving the understanding of non-technical barriers
  • Good practices: Giving an overview of world-leading countries’ experiences and good practices as a way to provide sound background information on the deployment; develop guidelines for project design and development to prevent delays, cost overruns or the abandonment of the projects.
  • Regulatory framework: development of a generic regulatory policy framework as “best case” that would include the allocation of seabed rights and permitting.
  • Recommendations: Providing recommendations on how to avoid the most common barriers, risks and issues in offshore energy project development and overcome the economic and financial challenges facing the deployment of offshore renewable energy technologies by developing guidelines for regulatory policies and project development.

The project results are available in the following documents:

The project will be presented at different events and published in a book format by EarthScan in 2011.

RISK

A key challenge in obtaining financing at a reasonable cost is the ability to quantify and manage the different elements of risk (i.e. organisational, political, technical, commercial) associated with RE projects. IEA-RETD commissioned a study to Altran which provides RE-specific guidelines in classification, assessment and management of different risk elements associated to support project valuation.