#1Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina June 12, 2019 german cooperation DEUTSCHE ZUSAMMENARBEIT Implemented by giz Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH#2***** Working Group Members for the Reform of the RE Support Schemes in Bosnia and Herzegovina BOSNA I HERCEGOVINA MINISTARSTVO VANJSKE TRGOVINE I EKONOMSKIH ODNOSA BOSNA I HERCEGOVINA FEDERACIJA BOSNE I HERCEGOVINE FEDERALNO MINISTARSTVO ENERGIJE, RUDARSTVA I INDUSTRIJE Page 2 | BOSNA I HERCEGOVINA DRŽAVNA REGULATORNA KOMISIJA ZA ELEKTRIČNU ENERGIJU FERK REGULATORNA KOMISIJA ZA ENERGIJU U FEDERACIJI BOSNE I HERCEGOVINE 12 June 2019 DIE EK © FEDERACIJA BOSNE I HERCEGOVINE OPERATOR ZA OBNOVLJIVE IZVORE ENERGIJE I EFIKASNU KOGENERACIJU | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina CPICKA CENICKA EXPUBLICA ASEPSE Влада Републике Српске МИНИСТАРСТВО ЕНЕРГЕТИКЕ И РУДАРСТВА PUBLIKA SEPSE РЕГУЛАТОРНА КОМИСИЈА ЗА ЕНЕРГЕТИКУ РЕПУБЛИКЕ СРПСКЕ ОПЕРАТОР СИСТЕМА ПОДСТИЦАЈА РЕПУБЛИКЕ СРПСКЕ giz#3Motivation and Need for the Reform ◉ ☐ The "RE world" dramatically changed since existing support schemes were introduced О Tremendous development of RE generation installed capacities Extraordinary technology improvement Significant price drop per installed KW Challenges in networks related to higher feed-in of intermittent RE New EU regulation for RE reflects the recent developments RE targets for RES based electricity cannot be fulfilled through existing support systems in BIH BIH needs to continue RE support with the objective to reach point where support will not be needed in a near/mid future Future RE support scheme must be more cost-efficient and should be market-based / competitive Page 3 | 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#4Renewable Energy Auctions Reduce Support Cost Auction processes for renewable energy support level setting have reduced support cost worldwide Selected empirical evidence from the EU Page 4 12 June 2019 Selected empirical evidence from Latin America Country/ Technology Price Reduction Capacity / Volume Country/ Technology Price Reduction Capacity / Volume Denmark 2010-T (Wind) 70%↓ + 2.5 GW UK 2014-T (Offshore Wind) Brazil 2014-T Solar 11% + 3.5 GW 50%↓ + 4.3 GW Germany 2015-T 24% +1.5 GW Brazil 2009-T Wind 37% + 12 GW (Solar) Germany 2017-T (Wind) Peru 2010-T 17% + 2.5 GW 78% Solar + 740 GWh Italy 2013-T (Wind) 33% + 2 GW Peru 2010-T Wind 43% + 1,725 GWh Spain 2017-T (Solar) + 4 GW 23% Chile 2014-T Solar 50%↓ + 580 GWh Spain 2017-T (Wind) + 4 GW Chile 2015-T Wind 45% ↓ +4.400 GWh | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#5Basic Features of the New RE Support Schemes in BIH ◉ - - New RES support schemes are transparent and non-discriminatory – auctions are introduced instead of "allocation by the order of application" (first come – first serve) Different support schemes for small and large RES installations New RES support schemes provide: Either more projects, i.e. MW/MWh from RES than so far, for the same spent funds, Or the same amount of projects, i.e. MW/MWh from RES as so far, for less spent funds Significant improvements are proposed in legal/regulatory framework for consumers that produce electricity for own needs (Prosumers) Institution of so called community energy projects is introduced in legal-regulatory framework for RES Page 5 | 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#6Approach for Change of RES Support Shemes in BIH ◉ Usage of positive practice of others, predominantly European countries, during creation of concept of new RES support scheme Selective application of experiences of other countries, respecting specificity of electricity sector in BIH Starting points are: Existing legislation on RES, and linked to RES 。 Proposal of existing legal-regulatory framework modification and amendment Adaptation of the proposed model to specificities of the institutional set-up in BIH (model is developed as unique, while proposals for implementation are made and adjusted to individual entities and Brčko District) Modification of business processes of competent institutions for implementation of new support schemes - for all institutions, on different levels of authorities in BIH Page 6 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#7General Concept Large scale installations: Remuneration based on Feed in premium and Wholesale-Price/Reference Market Price Threshold is technology specific and between 250 and 500 kW (tbd) Small scale installations: Remuneration based on Feed in Tariff or Net Billing (up to defined capacity limit) Page 7 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#8Division of RES Support ◉ RES support in BIH is divided by: 。 RES capacity that is supported, on: Support for large installations*, and Support for small installations 。 Type of support, on: • Direct support (FIP, FIT and tax rebates), and Indirect support (participation in balancing costs, priority dispatching, network connection costs, etc.) ○ Allocation support methods, on: Auction (open or site specific auctions), and Administrative (based on expert estimation) Proposed support schemes are combination of these variants * → Threshold between large and small installations differ by RES technologies to be defined Page 8 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#9Support for Large RES Installations Technologies Parameter setting Support Scheme Generator (type) Auctions Wind, Solar & Hydropower Administrative Fixed Feed-in Premium Commercial Application Indirect Support Biomass Tax Incentives & Biogas Community Energy Page 9 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#10Support for Small RES Installations Technologies Parameter setting Support Scheme Generator (type) Administrative Page 10 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina Feed-in Tariff Small Generators Indirect Support Prosumers Net Billing Tax Incentives Community Energy giz#11Threshold between large and small RES Installations ☐ Threshold to be defined by the proposed modifications and amendments of the existing legal-regulatory RES framework It should be analyzed and defined separately for each technology Criteria for threshold definition should be: o techno-economic potential for certain technologies o technological limitations. o commercial limitations 。 determination to support certain technologies Threshold Technology (kW) Solar 250 Hydro 250 Wind 150 Biomass 500 Biogas 500 Page 11 | 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina Proposed threshold between small and large RE installations by categories giz#12Technology categories for small scale installations | (solar and hydro power) Technology Solar Rooftop and integrated Solar Ground mounted Hydro Power Plants Page 12 12 June 2019 | Category (kW) Support < 10 FIT fixed or net-billing 10-50 50-250 < 100 100-250 > 250 < 50 50-250 250 10 000 250-x FIT fixed or net-billing FIT linear decrease or net-billing up to X kW FIT fixed or net-billing up to X kW FIT linear decrease FIP - open auction Net-billing FIT linear decrease or net-billing up to X kW FIP - open auction FIP-site-specific auction, if of strategic interest for the government Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#13Technology categories for small scale installations II (wind and bioenergy) Technology Wind Power Plants Category (kW) < 150 Biomass (solid) from forestry, wood, industry and agriculture Biogas (Focus on farm and agro- industrial residues with a possible complementation share of energy-crops) 150 30 000 < 150 150-500 500 1 000 Support FIT or net-billing up to X KW FIP-open auction FIT fixed or net-billing up to X kW FIT fixed FIP linear decrease 1 000 10 000 FIP linear decrease <50 50-150 150-500 500-1000 FIT fixed or net-billing FIT fixed or net-billing up to X kW FIT linear decrease FIP linear decrease FIP linear decrease Landfill and sewage gas 1000 10 000 One size category FIT fixed or net-billing up to X kW Page 13 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#14Recommendation for open auction design I Auction design features Technology type and size Type of auction Type of awarded support Auction on the Entity level Periodicity Explanation Large scale installations, solar, hydro and wind Capacity based, Bidders are bidding for capacity Feed-in-premium added to the reference market price/day-ahead market price Entity level provides maximum geographical extension in current circumstances, which enhances competition Auctions are organized each two years (biannually), which should be an adequate period fitting to conditions in BIH 30 MW for solar Typical auction limit 50 MW for hydro Sealed bid, pay as bid Selection criteria in tie-break bids 50 MW for wind Winner selection based on price only guarantees efficiency Preference should be provided to the smaller projects, to enhance competition Page 14 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#15Recommendation for open auction design II Auction design features Prequalification for Bidders Open for prequalified Bidders Explanation Prequalification requirements enable participation of serious Bidders / Investors, on the basis of developed project plan and obtained licenses, permits and concessions (to be defined in Rulebook on auctions) Only Bidders / Investors that pass prequalification process are invited to participate in auction Requested submission of bid bonds Bid bond is secured by Bidders with objective to prevent non-installation Bid subject to capacity cap Retention of bid bonds for penalization Lead time for finishing installation Medium size cap allows for sufficient number of winners (competition!) and making use of economies of scale (to be defined in that way, that a competitive bidding of min. 3 bidders will be possible according to a prior market evaluation) In case of non-installation or delay in installation, bind bond is retained. Bid bond amount should be in range 1.5-2% of average upfront investment cost calculated per kW It is recommended to be two years, from the end of auction. In case there are known grid connection problems and delays in licenses, this period should be extender for half a year Page 15 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#16Recommendation for site specific auction design I Auction design features Technology type and size Type of auction Type of awarded support Auction on the Entity level Sealed bid, pay as bid Page 16 Explanation Large scale installations, hydro, project with specific strategic public interest Project based, Bidders are bidding for project which is pre-developed by the auctioneer Feed-in-premium added to the reference market price/day-ahead market price Entity level provides maximum geographical extension in current circumstances, which enhances competition Winner selection based on price only guarantees efficiency | 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#17Recommendation for site specific auction design || Auction design features Prequalification for Bidders Open for prequalified Bidders Explanation Prequalification requirements enable participation of serious Bidders / Investors, on the basis of developed project plan and obtained licenses Only Bidders / Investors that pass prequalification process are invited to participate in auction Requested submission of bid bonds Bid bond is secured by Bidders with objective to prevent non-installation Retention of bid bonds for penalization In case of non-installation or delay in installation, bind bond is retained. Bid bond amount should be in range 1.5 - 2% of average upfront investment cost calculated per kW Lead time for finishing installation It is recommended to be two years, from the end of auction. In case there are known grid connection problems and delays in licenses, this period should be extender for half a year Page 17 | 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#18Quantitative Analysis: Targets and Assumptions Quantitative analysis to investigate RE support cost for BIH Based on assumptions from official Framework Energy strategy & data on RE from international studies Price & demand development forecast based on World Bank study Tool provided to investigate support cost under different scenarios To achieve the 2030 target (48,1% of total RES in FEC, under discussion), an additional VRE capacity of around 2.500 MWel would be needed Results shown here are based on medium value scenario 2020-2030 from Framework Energy Strategy additional VRE capacity of around 700 MWel MW 1200 Targets 36 1000 84 287 800 600 400 162 200 145 0 2020 62 122 88 41 81 425 81 283 678 283 425 283 283 2030 - High value 2030 - Median value 2030 -1.5x Target 2030 - Biomass Full Potential Wind SHPP Solar Biomass/Biogas Page 18 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#19Indirect Support - Balancing ◉ ◉ RE sources should finally have complete balancing responsibility, as all other participants on the electricity market in BIH (except very small RES installations, for example Pi≤ 100kW) Changes and amendments of the Law on RES in entities are necessary: In RS current limitation should be „defrosted" and trajectory for achievement of 100% of balance responsibility should be defined through the period of the several years О In FBIH balance responsibility should be defined in the Law on RES Balance intervals and schedule intervals should be 1h and 15' Good solution is separated balance groups for RES on the level of entities, or on the level of network operators Legislations should introduce institution of Aggregator for small RES installations and Prosumers Key roles of Network Operators and Operators for RES in implementation Page 19 | 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#20Net Billing ■ • ☐ 4 Supplier #1 Excess generation Monetary compensation A Net billing for production for own needs should compensate excess (surplus) of delivered electricity based on energy component of retail price, decreased by suppliers expenses. In accordance with the Energy Community Guidelines, producers for own needs should have possibility to choose support scheme between net billing and FIT as alternative. Network tariffs for producers for own needs within net billing should have significant capacity component, and small energy component, with a purpose of charging for network connection. VAT, as well as other fees and taxes, if any, should be applied only on the net consumption (within predefined time period) Page 20 | 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#21Community Energy Projects (1) Definition of RE community energy according to RED: „Renewable energy community means a legal entity, including cooperatives İ. which, according to applicable national law, is based on open and ii. iii. voluntary participation, is autonomous, and is effectively controlled by shareholders or members that are located in the proximity of the renewable energy projects owned and developed by that community; whose shareholders or members are natural persons, local authorities, including municipalities, or SMEs; whose primary purpose is to provide environmental, economic or social community benefits for its members or the local areas where it operates rather than financial profits." Page 21 | 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#22Community Energy Projects (2) Through the benefits of the realization of the community energy projects, part of the RES support funds returns to the „place of origin" - end consumers of electricity in BIH. Implementation of Community Energy projects significantly increases awareness of the importance and value of the RES It is necessary to enable participation of community energy projects within foreseen main and complementary support schemes, such as: Page 22 O Net billing О FiT for small installations / FiP for large installations O Supplementary exemption of taxes and fees payment (not part of the reform) Community energy projects should be additionally supported through: Development of changes and amendments in relevant legal and regulatory framework Definition of quotas/upper limits for community energy projects, Inclusion of Community Energy projects in strategies, action plans and RES targets 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina giz#23Timetable of Reform Jun '19 Aug '19 Preliminary Consent of Policy Makers Oct '19 Jan '20 Final Consent of Policy Makers Preparation within Working Group of Final Working Package consisting in: ✓ Draft Legislation ✓ Draft PPA/FAA templates ✓ Cost calculation methodology ✓ Guidelines for institutions and investors ✓ Accompanying documents for definition of institutional set-up and processes Final review and adjustment of Reform (Levels of FIT/FIP, thresholds, roles, technology quotas & volumes) Preliminary Consultation Events Adoption of Legislation for Reform Final Consultation (institutions websites, events) Page 23 12 June 2019 | Reform of the Renewable Energy Support Scheme System in Bosnia and Herzegovina Jan '21 Reform in Place giz#24Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Registered offices Bonn and Eschborn Friedrich-Ebert-Allee 36 + 40 53113 Bonn, Germany T +49 228 44 60 - 0 F +49 228 44 60 - 17 66 E [email protected] I www.giz.de Dag-Hammarskjöld-Weg 1 - 5 65760 Eschborn, Germany T +49 61 96 79-0 F +49 61 96 79-11 15 giz Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH