Flying High on Winds of Change: Role of Wind Energy Legislation in Developing Economies
Sweta Ramchandran, Research Analyst Economic Research & Analytics Division
Energy & Power Systems October 07, 2009
2
Focus Points
Effects and Impact of Economic Downturn: Emerging Economies
Stimulus Measures: Emerging Economies
Effects and Impact of Economic Downturn: Global Wind Energy Market in 2009
Market Dynamics
Global Installed Wind Power Capacity
Need for Wind Energy Legislation
Asia
India
China Pakistan and Bangladesh East Europe Poland Czech Republic
Roadmap Beyond 2009
Global Wind Energy Market
Wind Legislation in Developing Economies
Ranking of Countries Based on Emerging Opportunities
Drivers Directing Global Wind Energy Market
Growth Opportunities in Global Wind Energy Market
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BrazilWithdrawal of Foreign Institutional Investors (FII) inflows, currency
depreciation, slowdown in export of oil and other commodities
BrazilWithdrawal of Foreign Institutional Investors (FII) inflows, currency
depreciation, slowdown in export of oil and other commodities
ChinaFall in exports, reduction in trade and
investment
PolandEuropean banks withdrew investments
from eastern Europe, diminished exports
RussiaDrop in oil prices due to slower growth in
Europe and US
IndiaIndustrial production slowed down, fall in
demand and exports
MexicoSlowdown of funds remittance from
US
Global financial and economic crisis results in recession
Global Economy: Effects and Impact of Economic Downturn in 2008-2009 on Emerging Economies
4
Global Economy: Emerging Economies and Stimulus Measures
ChinaStimulus package-$586 bn
Medical care and Education - $5.8 bnR&D and Innovative Projects - $23.4 bnNew Medical Reform Plan - $123.00 bn
Q1, 2009 - 7.1 % Q2,2009 - 7.9%
Brazil Increased lending by state banks, Central Bank support for corporate
foreign debt and monetary easing to partly offset impact of global slow
downQ1, 2009 (yoy) – (1.8%) Q2, 2009 (yoy)– (1.2%)
IndiaThree stimulus packages with tax cuts, Cut in
Reserve Bank of India repo rate and fall in Cash Reserve Ratio. June 2009 - Business
and investment improving. Economic growth to gain momentum in second half of 2009
Q1, 2009 - 5.8% Q2, 2009 - 6.0%
PolandFiscal measures- Additional fiscal spending, additional credit. June 2009- Unemployment
dropping and overall industry climate indicators and trade improving
Q1 2009 (yoy)- 1.7 % Q2 2009(yoy)-1.4%
RussiaFiscal measures – cuts in interest rates and
strengthening of financial sector and support to real economy. June 2009- Unemployment falling, investment and retail sales rising
Q1, 2009 (yoy) – (9.7%) Q2, 2009 (yoy) – (10.9%)
MexicoLower interest rates are less effective in jump-starting economy. Dramatic
fall in tourism.Q1 2009 (yoy)- (8.4%) Q2 2009 (yoy) – (9.7%)
More than $2.0 trillion in 2009 via fiscal stimulus injected by Governments worldwide to spur aggregate demand
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Effects and Impact of Economic Downturn: Global Energy Market in 2009
Eastern Europe• EU and Role of European
Economic Recovery Plan
Asia Pacific• China: To spend $585.5 billion stimulus by
2010. Specific to alternative energy, a *$440.0 billion has been planned to focus on boosting green energy via solar and wind
• India: No direct stimulus allocated for energy sector across the three stimulus packages aiming at monetary easing
• South Korea: $50.0 billion stimulus package supports expansion of the use of renewable energy and green technology
North America
• U.S: $787.20 billion includes varied grants, loan guarantees, and grants-in-lieu-of-tax-credits encouraging renewable energy including wind energy
• Canada: $62.0 billion stimulus under Canada’s Economic Action Plan includes resources for enhance energy efficiency, Green Infrastructure Fund (GIF) and carbon capture and storage (CCS) technologies
• High capital intensive energy industry faces dip in future flow of investment due to weakened conditions in credit availability and commodities market• Beyond 2009, the road to global economic growth and recovery to be muted due to growing fiscal deficits even as world economies take to development of renewable energy including wind
6
• Independent power owners • Independent project developers • Original equipment manufacturers• Component manufactures• Sub-suppliers
Global Wind Energy Market: Market Dynamics
• Energy security, climate change and oil and gas price volatility makes wind power one of the fastest growing forms of energy generation
• Long run demand for electricity high making wind energy a vital source for generation• Green energy production has been increasing post Kyoto Protocol
•For an investor,
• Investment in wind power market based on geo-political risk, growing energy demand and national greening initiatives
• Specifically, focus is to understand the greening legislative framework prevalent across: India, China, Bangladesh, Pakistan, Czech Republic, and Poland
• End of 2008 • Global total installed capacity: 120,798 MW• Global new installed capacity: 27,051MW • Investments in turbine installation increased to $47.00 billion (2008) from $37.00 billion
(2007)
Key
Features
Wind
Energy
Statistics
Key
Participants
Need of
the Hour
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`
United States:
25,170 MW
Denmark: 3,180 MW
Germany: 23,903 MW
United Kingdom: 3,241
MW
France: 3,404 MW
Portugal: 2,862 MW
Spain: 16,754 MW
Italy: 3,736 MW
India:9,645 MW
China:12,210
MW
Global Installed Wind Power Capacity in 2008
Key Observations• Beginning of 2009 saw United States, Germany, Spain, China, and India emerge as top nations in terms of total installed capacity• In 2010, Frost & Sullivan expects slower global growth in wind energy market due to tightened credit environment
Source: Global Wind Energy Council 2008 and Frost and Sullivan
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Wind Legislation in Developing Economies
Asia• India, China, Pakistan and Bangladesh
Eastern Europe• Poland and Czech Republic
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0
100,000
200,000
300,000
400,000
500,000
600,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Year
Tota
l Inst
alle
d C
apaci
ty (
MW
)
0
5
10
15
20
25
30
35
Gro
wth
Rate
(%)
Total Capacity (MW)Growth Rate (%)
Need for Wind Energy Legislation
Wind Energy Capacity, (Global), 2005- 2015
Key Observations• Frost and Sullivan predicts that wind power market is expected to grow from 2008 to 2015 at a compound annual growth rate• (CAGR) of 22.1 percent in terms of installed capacity, reaching 490,804 MW at the end of this period.• No uniform worldwide legislation exists to promote wind energy for electricity generation• Strong legislative and fiscal climates stimulate wind energy generation in US, EU, and China• At country level, wind energy generation seeks a legislative framework backed by fiscal incentives
Source: Frost & Sullivan
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Wind Legislation in India
Indian legislative framework does not define the amount of electricity that could to be generatedvia renewable energy
Legislative
Highlights
Nodal
Agencies
Incentives and Other
Policy Measures
Key
Players
• Section 3 (1) of the Electricity act of 2003 defines power development and encourages wind power generation• State Electricity Regulatory Commissions (SERCs) set Renewable Portfolio Standards• Indian Integrated Energy Policy of 2006
• At the Central level: Ministry of New and Renewable Energy (MNRE) • At the State Level: SERCs • Indian Renewable Energy Development Agency Ltd (IREDA), Centre for Wind Energy Technology (C-WET),
and Indian Wind Turbine Manufactures Association (IWTMA)
• Varying Incentives and tariff norms across states for wind energy generation• Unique renewable portfolio standards and feed-in-tariff systems in place• Open FDI, income tax breaks, concessional import duty on specified wind turbine parts, loans through IREDA• National Wind Power Program, Generation Based Incentive (GBI) Scheme, Small Wind Energy and Hybrid
Systems‘ promote wind energy development• National Action Plan on Climate Change and CERC in tariff regulations for electricity
• Suzlon, Enercon, Vestas RRB India Ltd
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Wind Legislation in China
The Chinese legal framework encourages wind energy generation via national level renewable energy law
Legislative
Highlights
Nodal
Agencies
Incentives and Other
Policy Measures
Key
Players
• NDRC organizes and implements the national, economic and social development strategies• NDRC-backed National Energy Commission (NEC) has been coordinating national energy-related policy
since 2008
• Differentiated wind energy tariffs in NDRC’s new program issued in July 2009, • RE law- backed varied incentives and tax status for wind especially for Chinese domestic producers • A ‘10 GW Size Wind Base Programme’ (Wind Base) developed by the NEC identifies potential wind energy sites
capable of generating more than 10 GW of installed capacity per site by 2020
• American Superconductor, Suzlon, GE, Goldwind Science and Technology, Sinovel Wind Co., Ltd., Xinjiang
Goldwind Science & Technology Co and Dongfang Electric Corp
• Chinese Renewable Energy (RE) Law passed in 2005 identifies non-fossil sources of energy including wind• Grid operators to purchase resources from registered renewable energy producers• National Development and Reform Commission (NDRC) had set a 2010 wind energy target of 5 GW,
which the country achieved in 2007• National Mid and Long-Term Development Plan and Clean Production Promotion Law and Renewable Energy
Law (2005) encourages renewable energy indirectly
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Wind Legislation in Pakistan
Pakistan’s weak energy policy for harnessing renewable energy for electricitygeneration makes wind energy incentive driven
Legislative
Highlights
Nodal
Agencies
Incentives and Other
Policy Measures
Key
Players
• AEDB • National Electric Power Regulatory Authority (NEPRA) • Pakistan Council of Renewable Energy Technologies (PCRET)
• Policy Framework and Package of Incentives for Private Sector Power Generation Projects in Pakistan (1994) • 'Policy for Power Generation Projects Year- 2002‘ suggests a two-part tariff structure consisting of fixed capacity and
variable energy component indirectly encouraging wind energy participants• 'Policy for Development of Renewable Energy for Power Generation' (issued in 2006) and concept 'Wind Risk
Coverage• Incentives for renewable energy based power projects include assured grid connection, a guaranteed market
offering, mandatory purchase of electricity. Production incentives include a production bonus payment to the IPP,
earning carbon credits by registering for CERs
• Zorlu Enerji Group
• 'Policy for Power Generation Projects Year- 2002'• Alternative Energy Development Board’s (AEDB) aim is to generate 9,700 MW through renewable energy
technologies by 2030• Medium-term Development Frame Work (MTDF), from 2005 to 2010, a five year plan that also covers
the importance of renewable energy)
13
Wind Legislation in Bangladesh
No separate legislation defines the need for wind energy for electricity generation in Bangladesh
Legislative
Highlights
Nodal
Agencies
Incentives and Other
Policy Measures
Key
Players
• Bangladesh Power Development Board (BPDB)• Dhaka Electricity Supply Authority (DESA) and Rural Electrification Board (REB)• A body called ‘Renewable Energy Development’
• Renewable energy project investors both in public and private sectors shall be exempted from corporate income
tax for a period of 15 years• Others include exemptions from corporate tax for 15 years, low-interest loans and a cap of 3.0 % on
import duty and value-added tax.
• High potential for existing wind power players
• National Energy Policy (NEP) (1996) ‘ensures’ optimum development of all the indigenous energy sources
including wind• Private Power Generation Policy (1996)• Renewable Energy Policy formulated in 2008
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Wind Legislation in Developing EU Countries: Poland and Czech Republic
At the EU level, complete flexibility is given to each Member State in deciding their preferred 'mix' of renewable energy including that of wind
Legislative
Highlights
Nodal
Agencies
Incentives and Other
Policy Measures
Key Players
Polish Energy Law Polish Building Law
• RES Directive on Electricity Production from Renewable Energy Sources • By March 2010, each Member State to prepare and present a National Action Plan (NAP) to EU Commission • By 2020, 20% of electricity generation from renewable energy (of which wind energy to contribute 12%) • EU directive requires Poland and Czech Republic to achieve 15% and 13% respectively of its final energy consumption
from renewable energy by 2020
Act No 180/2005 of the Czech Republic legislation implements the promotion of electricity produced from renewable energy source
Energy Regulatory Office’ (ERU) Ministry of Industry and Trade
Poland Czech Republic
Ministry of Economy
RES driven by green certificates rather than the Renewable Energy Feed-In Tariff (REFIT) system Subsidies and preferential credits for RES projects provided by the National Fund for Environment Protection and Water Management Role of Natura 2000 Poland’s Energy Policy up to 2030
Choice of selecting between a feed-in-tariff or a green bonus A guarantee of revenue per unit of electricity produced over
a 15-year period as of the date a plant is put into operation exists 100.0% property tax reduction on certain renewable
technologies ‘State program for energy saving and use of renewable energy
sources’ Onshore wind energy investors are entitled for 15 years of
support under feed in tariff mechanism
Enercon, GE Energy, Vestas, Gamesa
Role of EU
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Growth Opportunities in the Wind Energy Sector: Roadmap Beyond 2009
CEE• Europe's offshore installed wind power capacity to
grow from 1.9 GW (2009) to 40.0 GW (2020) • Poland and Czech Republic to look at enhancing wind power generation as:
• Poland to achieve minimum share of electricity from RES from 3.6% (in 2006) to 7.5% (in 2010), and 14.0 % (in 2020). Wind energy generation accounts for 463MW (Beginning of 2009)
• Czech Republic’s share of RES in electricity to grow from around 4.0 % (at the end of 2008) to 13.0 % (by 2020). Wind energy generation accounts for 150MW (Beginning of 2009)
Pakistan• 700.0 MW of wind power by 2010, 3,000.0 MW by
2020, and 9,700.0 MW by 2030• Overhaul of existing energy policy to solve load
shedding problem• Indirectly, greater exploitation of nations’ wind corridor
via incentives can be expected
Bangladesh• Expected to address issues concerning lack of regulation
defining the tariff norms as being a new entrant into the renewable energy market
Lower demand for energy, fluctuating energy prices, weak exchange rates, and less credit availability will make the economic recovery of the global wind energy sector sluggish in 2010
Lower demand for energy, fluctuating energy prices, weak exchange rates, and less credit availability will make the economic recovery of the global wind energy sector sluggish in 2010
India• From 9,645.0 MW (beginning of 2009) of installed wind
capacity, India to achieve a total wind power capacity of 10,500.0 MW (ongoing) by 2012
• Government to continue with fiscal incentives to encourage wind energy participants
China• Less than 1.0% of electricity supply comes from wind energy
in 2009• Installed wind capacity target to reach 30.0 GW by 2020
making renewable energy supply 40.0% of the energy market by 2050
• From being a world leader in the manufacturing of micro and small wind turbines in 2009, China to enter large
wind turbine production market to build its currently underdeveloped transmission system
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Ranking of Countries Based on Emerging Opportunities
Source: by Frost & Sullivan
Regions 2009 (in MW) Ranking
Asia PacificEuropeNorth AmericaRest of the World
37,49673,39834,1181,681
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3 4
Global Total Installed Wind Power Capacity, 2009*
Ranking of Specific Economies based on Qualitative Indicators**
Economies under Study
Business
Climate
National Legislative Prerogatives for Wind Energy Development
India
China
Pakistan
Bangladesh
Poland Czech Republic
Note:1.** Ranking based on economic growth expected
between 2010-2012, political and legislative environment supporting future wind energy development
2. Green indicates positive environment Orange indicates mixed environment Red indicates scope for major overhaul
Note: * The figures are estimates
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Drivers Directing Global Wind Energy Market
• Positive fiscal climate such as incentives for feed in tariffs, subsidies for wind power generation, programs (such as Foreign direct investment, income tax breaks, easy available credit)
• Drivers directing global wind energy market:
Assessing existing national electricity policies and electricity supply mixes in potential wind energy nations of Asia and East Europe
Increasing population levels in some Asian economies to change trends in energy demand- and supply mix
Growth in wind energy driven by increased global uncertainties regarding steady supplies of conventional and indigenous power resources like oil and natural gas
Globally, increased awareness concerning environmental, ecological, and geopolitical risks surrounding generating electricity to lead to drive wind energy market
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Growth Opportunities in Global Wind Energy Market
• Domestic manufacturing of turbines including design, installation, operation and associated wind energy services to emerge (Globally)
• Integration of the wind energy with electricity grids to cause increased demand for specialized manpower resources for operating grid systems (in East Europe and Asia)
• Demand for micro wind turbines and technological databases to emerge (in East Europe and Asia)
• Turbine and tower market to witness private sector collaboration and additional capital investments (in Asia)
• Innovation and development expected in turbine design, gearboxes, generators, and larger capacity machines (in Asia aiming at rural electrification)
• Demand for energy-efficient renewable energy technologies such as growth in technology option called compressed air energy storage (CAES) aiding large scale storage of wind energy (in Asia)
• Service offerings such as repairs, replacement, and other operations and maintenance related aspects concerning wind power component (in India and China)
• Reviewing investment in newer entrants such as Pakistan and Bangladesh that are low in energy supply when compared to actual electricity demand
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