EgyptEra Regulatory Framework to Develop RES Projects in Egypt

Transcription

1 Regulatory Framework to Develop RES Projects in Egypt Hatem Waheed Managing Director Egypt ERA

2 Contents Electricity Law RE Law and Regulations Current Situation

3 Introduction The main objectives of the energy strategy are Ensure the security of supply by diversify energy mix, optimize the utilization of resources, sufficient interconnections and capacity Ensure sustainability focus on supply and demand, smart meters, awareness, civil society, environmental protection. Establish of competitive market attract investments, improve the efficiency, cost reduction.

4 Electricity law

5 New Electricity Law New electricity law has been issued, The law has been designed to reflect the planned market reform as well as to strengthen the regulatory agency Main features of the new law: Establishment of competitive electricity market which is based on bilateral contracts and adoption of the concept of eligible customers. Third Party Access (TPA). Establishment of Transmission System Operator (TSO) and provide assurances for its independence and full unbundling from other sector participants. Tariffs are ratified by the regulatory agency Support cogeneration and power generated from secondary resources as well as energy efficiency and demand side management

6 New MARKET STRUCTURE

7 Transition phase Legal Issues Issuing of the by-laws Adoption of Supply code Adoption of Market Rules and updated Network Codes Regulatory Issues Tariff reform of regulated market and relevant tariff calculation Calculation of transmission and distribution tariffs Set Ancillary Services rules, tariff methodology and tariffs Set the balancing service tariff methodology Regulation of Wholesale Public Trader (WPT) defining its specific role especially during the transition period Formulation of last resort contract Preparation and signing of contracts for ancillary services Set the criteria for selecting the Competitive Market Generators

8 WHY MARKET SEGMENTATION? Need to maintain favorable economic conditions, which may not comply with cost reflectiveness, for parts of the consumption due to social and economic policies Have also to protect fair competition conditions and real market operation for all eligible customers Create project viability conditions for private investors, who take decisions under long-term horizon and pure techno-economic criteria Re-organize institutions and functions within the existing system, capable to operate efficiently

9 ERA Role Eligible Consumers Consumers Contracts approval pricing Contracts approval Generation Establishment, constructing Authorization & License Granting Monitoring PENALTIES Suspension revocation ** Interim License for FIT projects Contracts approval Contracts approval Pricing Dispute Resolution supplier Awareness Distribution Establishment, constructing Authorization & License Granting Monitoring PENALTIES suspension revocation

10 ERA Role EETC & TSO The agency shall approve all market documents transmission rules (grid code) Market rules ( commercial code) Annual adequacy report Monitoring the implementation of: DSM programs EE programs RE programs Customer awareness

11 ERA Role Market The agency shall conduct a study to define the stages of market opening including: the expected duration of each stage, monitoring and evaluating the performance of the market periodically to ensure fair competition and the efficiency of market operation, and the required procedures for the implementation and the criteria to move from one stage to another. Propose and define the targeted eligible customer for each stage.

12 RE Law and Regulations

13 The Legal Framework: In December 2014, Egypt has issued a law that promotes RE resources and ratifies the four mechanisms for establishing RE projects. It has adopted the quota system that would support all mechanisms. It ratifies the regulations for availing the state-owned lands through usufruct agreements. Other articles related to the generation licenses and different responsibilities of relevant entities A prime minister decree endorsed the values of the FiT, the capacity cap of the FiT program, and the payment methodology.

14 RE Mechanisms in place in Egypt Electricity generation plants using renewable energies shall be established according to the following mechanisms: 1-State owned projects (NREA) 2-Competitive Bidding (EETC) 3-Feed in Tariff 4- Commercial Projects 14

15 RE Law 203 NREA Bidding FIT NREA shall call for establishment of renewable energy power plants for electricity generation, that will be operated by NREA Electricity generated to be sold to EETC Price proposed by ERA and approved by the cabinet ERA to license Approve contracts EETC shall call for RE biddings to work as BOO Electricity generated to be sold to EETC Prices upon the tender output PPA to be signed ERA to license Monitor PPA approval the investors shall have the right to build, own and operate Re power plants accordance to the declared FIT prices which shall be valid for two yrs. or obtaining the required capacity generated to be sold to EETC PPA to be signed FIT design Interim License Construction Authorization Permanent license PPA approval Commercial projects Investors shall have the right to sign bilateral contacts with potential consumers, Connection agreement with EETC or Discos Contractual prices Construction Authorization Permanent license Contracts approval

16 GoO Once, RE projects come into commercial operation, GoO market will exist GoO is for the benefit of the generator and the end customer; the generator shall benefit from selling the certificate, the end customer can market his labeled "green" product. Generators that benefit from their "renewable" attribute (like FiT projects) shall not get double benefit from GoO.

17 FiT current situation FIT Design Grid Code : Wind Code, small PV code, large PV. processing License procedures Granting Licenses 10 granted, 35 applied license processing GOO Process Design processing

18 Qualification FiT Unit RE FIT Projects: Above 500 kw SPV Establishment GAFI Land Allocation NREA/Land Owner Interim License EgyptERA Grid Connection Contract EETC Measurement, EIS and EEAA s Approval EEAA 3 6 Months for PV, and 1 Year for Wind Conducting all Relevant Approvals & Permits Relevant Authorities Usufruct Agreement Relevant Authority Land Owner Grid Connection Study EETC Within 14 days Power Purchase Agreement EETC Financial Closure Financing Bodies Within 1 year from the PPA signing date Construct ion Bond Investor Direct Agreement Investor, MoF, EETC and lender Generation License EgyptERA Valid of the Project s Lifetime First Disbursement lender Fit Commitment Commercial Operation Within 180 Days from the Required Commercial Operation Date All Agreements and Contracts Come into Action Construction

19 Connection procedures for projects below 500kW

20 Granted Interim License

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22 Technology Total Solar Power 89% 11%

23 Egyptian / Foreign Investments Total Number of companies Number of Egyptian companies (11 Companies ) Number of Foreign Companies (9 Companies) Total issued capital of all the companies 215 Million Total Egyptian Capital ( Million) Total Foreign Capital (78.45 Million) 55% 45% 36% 64%

24 Alfa Wind Energy 19,12% Egyptian / Foreign Total Belton Sun Infinite 4,78% Benban 0,25% Shams Egypt 22,31% Companies Ocapital Energy 12,82% Total Belton 8,24% Sun infinite Benban 14,50% Alfa Solar Energy 19,12% Phladelphia 19,12% Benchmark Sun Edison 15,30% TK for solar Energy 51,26% Bench Mark Sun Edison 2,20% Taqa Arabia 10,98% Total Foreign Capital Million Total Egyptian Capital Million

25 Total Capital of other companies (23.95 Million) 31% Total Capital of Foreign companies (78.45 Million) Jordan 20% Gersy 11% Saudi Arabia 38% France 5% Total Capital of Gulf Companies (30 Million) 38% Holland 11% Total Capital of European Companies (24.5 Million) Italy 15% 31% Companies from other regions 44% (4 companies) Gersy 17% Jordan 17% Foreign Companies 9 Companies Saudi Arabia 33% France 11% Gulf Companies 22% (2 Companies ) European Companies 33% (3 Companies) Holland 11% Italy 11%

26 Newly applied

27 Technology Total Solar Power (1526MW) Total Wind Power (450 MW) 77% 23%

28 Egyptian / Foreign Investments Total Number of companies (42 Companies) Number of Egyptian companies (16 Companies ) Number of Foreign Companies (26 Companies) Total issued capital of all the companies 605 Million Total Egyptian Capital ( Million) Total Foreign Capital (396.3 Million) 62% 34,5% 65,5% 38%

29 Challenges The challenges could be legislative, regulatory, financial, technical, or economic. Usually, any of these challenges are shared between and faced by the developer and the government, at the same time. It is important to have a common agreement on the way solutions are developed; they should also be shared as well. Legislative: no challenges so far

30 Regulatory Challenges Major regulations are developed during the planning phase, other regulations are developed along with the progress of the process, This causes: delays in the procedures (contracts and agreements,.) Continuous need for more regulations to reach a mature regulatory framework Regulations should be clear and consolidated.

31 Other Challenges Financial: o Sovereign Guarantees o Pre-requisites to financial closure o Convertibility Economic: o Feasibility exists where the grid is the off taker o A problem for the commercial scheme due to poor demand on RE o Electricity subsidies a reform is taking place to mitigate this challenge. Technical: o Technical studies for specific sites o codes o Grid Reinforcements

32 Conclusion The RE law introduces several incentives such as: quota system reduces the financial burden on the electricity sector due to the feed-in tariff, availing state lands for investors, providing sovereign guarantees for large projects, offering low interest loans for small projects, and providing finance for upgrading the transmission and distribution infrastructure. RE is considered a solution to some challenges facing the development energy market in Egypt, Although being a challenge in itself, It is understood that developing credible and effective RE market and regulation take time and need much iteration and it has a learning curve.

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