…
Towards Light Handed Regulations for
Small Power Producers (SPP) in Tanzania
and Thailand
The Infrastructure Regulation Thematic Group
and the PPP-Global Expert Team,
in collaboration with the AFR SDN Energy Team
World Bank
Washington, D.C.
24 June 2009
Chris Greacen
[email protected]
Outline
– Small Power Producer (SPP)– project examples
– Overview of Tanzania SPP regulations
•
•
•
•
Tanzania Legislative Framework
Goals, definitions
Table of SPP documents
Tariffs for different SPP cases
– Main grid, mini grid, wholesale and retail sales
• Required permissions and approvals, procedures for application;
process rules
– Comparison: Tanzanian SPP with Thai VSPP
– Evolution of Thai VSPP program
Small
hydropower
• 1 MW
• Mae Ya, Thailand
3
Small hydropower
• 2 MW
• Sri Lanka
4
Micro hydropower
•40 kW
•Mae Kam Pong, Chiang Mai,
Thailand
Rice husk-fired power plant
• 9.8 MW
• Roi Et, Thailand
Biomass (wood chips)
• 1 MW
• Landhanavi, Sri Lanka
• Wood is grown specifically for electricity
production
7
Biogas from Pig Farms
•8 x 70 kW generator
•Ratchaburi, Thailand
Wind
9
Solar Photovoltaic (PV)
• 1 MW
• Bangkok Solar, Thailand
Tanzania SPP Legislative
Framework
• National Energy Policy, 2003
• Rural electrification policy statement
• Energy and Water Utilities Regulatory
Authority Act
– Establishing EWURA
• Rural Energy Act (2005)
– Establishing REA & REF
• The Electricity Act, 2008
Legislative Framework, cont
Energy Policy Statement No. 36
Establish norms, codes of practice,
guidelines and standards for renewable
energy technologies, to facilitate the
creation of an enabling environment for
sustainable development of renewable
energy sources
A goal: Light-handed regulation
1. Minimize amount of information that is required.
2. Minimize the number of separate regulatory
requirements and decisions.
3. Use standardized documents, and make use of
documents used by other agencies, to the
maximum extent possible (reduce need for caseby-case negotiation)
Definitions
• DNO: the licensee responsible for the operation of a
distribution network in Tanzania. (Currently Tanesco)
• SPP: a power plant using a renewable energy source
or waste heat, or cogeneration of heat and
electricity, with an export capacity of up to ten (10)
MW
• Embedded Generator: a single generator or a group
of generating plant of total export capacity between
100 kW and 10 MW, connected to a Distribution
Network in Tanzania, at 33 kV or below.
14
Table of SPP documents
Main grid
Process Guidelines
(roadmap)
Process rules
Interconnection
Guidelines
Interconnection
rules
Mini-grid
Guidelines for Developers of Small Power Projects (SPP) in Tanzania (under consultation)
In draft form, under consultation
Guidelines for Grid Interconnection of Small Power Projects in Tanzania (Parts A, B, C)
(under consultation)
In draft form, under consultation
Standardized PPA
 Standardized Power Purchase
Agreement for Purchase of Grid-Connected
Capacity and Associated Electric Energy
Between Buyer and a Small Power Project
 Standardized Power Purchase
Agreement for Purchase of Off-Grid
Capacity and Associated Electric Energy
Between Buyer and a Small Power Project
Tariff methodology
 Standardized Tariff Methodology for the
sale of Electricity to the Main Grid in
Tanzania Under the Standardized Small
Power Purchase Agreements.
Standardized Tariff Methodology for the
Sale of Electricity to the Mini-grids Under
the Standardized Small Power Purchase
Agreements
Tariff calculations
for year 2009
Detailed Tariff Calculations under the
SPPA for the Main Grid for year 2009
Detailed Tariff Calculations under the
SPPA for the Mini-grids for year 2009
15
 = “Approved”. Approved and proposed SPP documents will be made available at: www.ewura.go.tz/sppselectricity.html
What are the Guidelines for Developers of
Small Power Projects in Tanzania?
• Audiences: SPP developers, EWURA, Tanesco, REA,
bankers…
• Purpose: Guide to steps necessary to acquire
necessary permits and clearances to develop and
operate a SPP
– Selling electricity to the DNO (Tanesco) main grid
– Selling to an isolated mini-grid and/or
– Selling directly to retail customers (main grid-connected & isolated
SPPs)
• Guidelines: roadmap to rules. There will be a separate
‘rules’ document.
Contents of Guidelines for Developers of
Small Power Projects in Tanzania
Tariffs determined by SPP type
Connected to
main grid
Connected to
isolated mini-grid
Selling wholesale
(to DNO*)
Case 1
Case 2
Selling retail
(directly to final
customers)
Case 3
Case 4
* DNO: Distribution Network Operator (currently TANESCO)
18
Tariff Case 1: selling wholesale to main grid
C case 1 
C lrmc  C srmc
2
Where Clrmc is the long run marginal cost as defined by Tanesco’s long-term power plan;
and Csrmc is the budgeted cost of thermal generation in the next year.
Note: the actual calculations are somewhat more complicated, taking into account:
• Transmission losses
• Seasonality
•Price floor & cap
They are available in: Standardized Tariff Methodology Under the Standardized Small
Power Purchase Agreements available from EWURA. Order 08-015 on Dec 30.2008
Tariff – case 1 (2009)
Tariff (TZS/kWh)
Annual Average
85.49
Dry season (Aug – Nov)
102.58
Wet season (Jan-Jul and Dec)
75.94
19
Tariff Case 2: selling wholesale to a minigrid
C case 2 
C LmrcGrid  C AveMini
2
Mini-grid SPP receives the average of Tanesco’s main grid and mini-grid
avoided costs.
CLmrcGrid = long run marginal cost for grid-power (adjusted for losses)
CAveMini = average incremental cost of mini-grid power (levelized cost of
electricity from a new mini-grid diesel generator).
Tariff – case 2 (2009)
Tariff (TZS/kWh)
Tariff (no seasonal variations)
334.83
20
Tariff Cases 3 (isolated) and 4 (main grid):
selling at retail to end use customers
• Tariff is proposed by SPP generator, subject to
EWURA review
– Less oversight demanded in cases in which
community is in agreement with proposed tariff
– Where possible, EWURA draws on financial
analysis submitted to REA for rural electrification
subsidy
21
Necessary permits, clearances and procedures for application
Land title or lease
Resource Rights (e.g. water rights from River Basin Water Office)
Letter of Intent (LOI) with DNO (Tanesco)
Business license, tax registration, etc.
Building Permit
Sequence is
important to
avoid
competing
claims on
project sites
Environmental and Social Clearance (NEMC)
SPPA
EWURA license
22
Land title or lease
Resource Rights (e.g.
water rights from River Basin Water Office)
LOI with DNO (Tanesco)
Business license, tax registration, etc.
Building Permit
Environmental and Social Clearance (NEMC)
PPA
LOI request to TANESCO
EWURA license
1.
2.
3.
4.
Name and Address
Locations
Fuel type (hydro, biomass, wind, gas, etc.)
Power capacity (MW), planned power export
(MW), annual energy generation (GWh).
5. Copy of deed of title or lease agreement
6. Rights to resource
23
Proposed rules regarding LOI process: response
times, cost estimates
• Acknowledgement of receipt: The rules require that within seven days of
receiving the LOI request, the DNO will acknowledge receipt of the request.
• Notice of decision: Within 30 days of receiving the complete LOI request, the
DNO will send the project developer notice of its decision.
• Reasons for disapproval by DNO stated: If DNO disapproves of the project,
the reasons for disapproval must be clearly stated in writing.
• Reservation of Network Capacity: The LOI in the case of sites operating on
hydroelectric or wind power, or any other primary source of energy which is
site-specific by way of its availability, will also imply the exclusivity of the
interconnection to the Developer, within the period of validity of the LOI.
• Estimate of interconnection costs: Within 30 days of sending the LOI, the
DNO shall send the Seller a rough initial estimate of the interconnection
costs.
24
Land title or lease
Resource Rights (e.g.
water rights from River Basin Water Office)
LOI with DNO (Tanesco)
Business license, tax registration, etc.
Building Permit
Environmental and Social Clearance (NEMC)
PPA
EWURA license
Standardized Power Purchase
Agreement (PPA)
• To initiate the PPA agreement process, the Seller
completes and submits to TANESCO an
“Application for Interconnection and Sale of
Electricity”
– technical engineering information (one-line diagrams,
specifications of key equipment) that DNO needs in order to
determine if the proposed project is in compliance with the
Interconnection Rules and Guidelines
25
Granting/rejecting a PPA based solely
on technical considerations
• The rules specify that the DNO’s decision to sign or reject the
standardized PPA is based solely on its evaluation of whether
the design of the Seller’s facility is in compliance with the
“Guide for Grid Interconnection of Embedded Generators to
the Main Grid and Isolated Mini-Grids in Tanzania”.
26
Land title or lease
Resource Rights (e.g.
water rights from River Basin Water Office)
LOI with DNO (Tanesco)
Business license, tax registration, etc.
Building Permit
EWURA license
Environmental and Social Clearance (NEMC)
PPA
EWURA license
• SPPs up to 1 MW are exempt from EWURA’s
licensure requirements
– Must submit completed registration form
• Location, business registration, capacity of facility, GWh/yr, date of
planned construction
• Non-exempt (>1 MW)
– Submit license application
• Same as registration, plus
–
–
–
–
Section on managerial competence
Feasibility study
Business plan
Permits and clearances (NEMC, water rights, etc.)
– Where possible, EWURA draws on financial analysis submitted
27
to REA for rural electrification subsidy
Where we are now…
• Completed
– Tariffs and tariff methodology and Standardized Power
Purchase Agreement have all been approved.
– Process Guidelines and Interconnection Guidelines are
finishing public review
• Ongoing
– discussions between EWURA and REA on how to
coordinate better, done, but may be refined further.
– Study tours to Sri Lanka (done) and Thailand (planned) to
visit SPP programs in action
– First PPA applications to Tanesco submitted. At least one
SPP developer discouraged by delays in signing PPA.
– application for license for first project has been received28
Comparison of Tanzania & Thai
regulations
Tanzania
Thailand
Name of regulation
SPP
VSPP
Year in effect
Expected 2009
2002 (1 MW)  2006 (10 MW)
Types of generation
Renewable energy, cogeneration
Capacity
Up to 10 MW export
MW as of Dec 08
Selling power
Approved
Applied
0
0
Approx 30 (?)
576 MW
2101 MW
4765 MW
Utility
Tanesco
PEA and MEA
Term of PPA
15 years
1 year (renewable)
LOI (SPP & utility)
Required
Not required
License
Required if >1 MW
Will probably be required
Comparison of Tanzania & Thai
regulations
Tanzania
Thailand
Tariff basis
Average of LRMC and SRMC
SRMC (gen + trans) + fuel
volatility charge + adders
On-grid Tariff
(2009)
120.5 TZS/kWh (dry) = $0.094
90.4 TZS /kWh (wet) = $0.071
$0.088 to $0.344 depending on
technology, time of day
Utility incentive
(Cheaper than SRMC)
Utility only pays for 98% of
electricity when > 1MW
Key documents
Model PPA
Model PPA
25 pages
http://tinyurl.com/TZ-PPA
5 pages
http://tinyurl.com/Thai-PPA
Guide for Interconnection of
Embedded Generators
Technical regulations
54 pages
Guidelines/rules for Developers of
Small Power Projects (SPP) in
Tanzania
54 pages
Standardized Tariff methodology
http://tinyurl.com/TZ-tariff-meth
6 pages + not including one-line diagrams
http://tinyurl.com/TH-Tech-Reg
Commercial Regulations
11 pages
http://tinyurl.com/TH-Commercial-Reg
Context and evolution of Thailand’s Very Small Power
Producer (VSPP) regulations: Success through low-key
and local approach
Thai VSPP MW applied, permission, and
selling – as of December 2008
1,400
1,200
1,000
800
MW
600
400
200
0
applied
permission selling
Thai electricity supply industry structure
Source: EPPO 2006
SPP: early history of private-sector
renewable energy in Thailand
• 1992 Small Power Producer (SPP) program
– Based on PURPA
– Fossil-fuel cogeneration and renewables up to 90
MW
– Low tariff offered for “non-firm” generators made
it difficult for most renewables. (In practice >75%
SPPs are fossil cogeneration)
VSPP evolution 2000-1
• 2000: EPPO politically powerful, pushing for
greater private participation in power sector
– Main focus = formation of Power Pool (spot market)
– EPPO also got verbal agreement that PEA & MEA would develop VSPP
regulations
• 2001: California crisis, utility & labor
opposition sink Power Pool prospects
– PEA & MEA also stall on VSPP regulations
– EPPO asks mid-level bureaucrat and volunteer graduate student,
“want to draft VSPP regs?”
• Technical: Delaware Net Metering laws + SPP
• Commercial: simplification of SPP
• Tariffs: Based on existing “Bulk Supply Tariff” (Gen + Trans) for purchases by
PEA/MEA from EGAT.
VSPP evolution 2002
• 2002: VSPP working group goes
line-by-line through regulations
– Chaired by Power Engineering
Professor from Chulalongkorn University
– All discussion in Thai language
– 3-4 representatives each from MEA, PEA, EPPO
– Utilities largely perceive 1 MW non-threatening
• May 2002 Cabinet approval
Net metering study tours to USA
• 2002 and 2004.
– CA (SMUD, PG&E, CEC, CPUC, Powerlight,
Kenetech Wind)
– OR (PGE, Ashland Muni, Home Power, Gridconnected micro-hydro)
– WA (Seattle City Light, PSE, OPALCO)
• Peer-to-peer exchange
• Target mid-level Thai utility
& government people in
charge of VSPP
implementation
After study tours, invite US utility
practitioners to Thailand
• Experts from Sacramento Municipal Utility
District (SMUD) and PG&E
• Main message:
“Our hardest part
was simply setting
up administrative
machinery to
process the flood
of applications”
VSPP expansion 2006
•
•
•
•
December 2006:
1 MW 10 MW
Efficient Cogeneation permitted (PSE > 10%)
Feed-in “adder” tariffs
VSPP Tariffs (as of 2006)
• VSPP tariff = Bulk Supply Tariff (TOU) + FT + Adder
– Bulk Supply Tariff = price EGAT sells bulk electricity to PEA/MEA.
• Onpeak: 2.9 baht/kWh = $0.085 /kWh
• Offpeak: 1.1 baht/kWh = $0.032 / kWh
– FT – fuel price volatility.
• Currently: 0.628 baht = $0.018/kwh
– Adder:
Biomass
Biogas
Mini-hydro (50-200 kW)
Micro-hydro (<50 kW)
MSW
Wind
Solar
Adder (per kWh)
THB
0.3
0.3
0.4
0.8
2.5
2.5
8
For 3 southern provinces
$
THB
0.0088
1.3
0.0088
1.3
0.0117
1.4
0.0235
1.8
0.0733
3.5
0.0733
4
0.2346
9.5
Solar = $0.085 + $0.018 + $0.2346 = /kWh = $0.34/kWh
Micro-hydro (<50 kW): $0.0963/kWh
Biomass: $0.088/kWh
$
0.0381
0.0381
0.0411
0.0528
0.1026
0.1173
0.2786
Lessons from Thai VSPP
• Low-key, local approach kept utilities from
being threatened
• Peer-to-peer exchange
– Build mid-level relationships across bureaucracies
– Utility folks like to listen to other utility folks
– Status, recognition, travel
• Incentivize utility
• Feed-in adder very successful in attracting
projects
Thank you
For more information, please contact
[email protected]
This presentation available at:
www.palangthai.org/docs/WorldBankSPP-TZ&Thai-Greacen24Jun09.ppt
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Comparison of Tanzania & Thai regulations