Feed-in Tariff: Driving Innovation & Cost Reductions?

Ir. Ahmad Hadri Haris

hadri(a)mbipv.net.my

Chief Technical Advisor (Renewable Energy)

Ministry of Energy, Green Technology & Water

21st June 2011

DRAM Moores Law

Source: Applied Materials

Flat Panel Displays

Source: Applied Materials

Photovoltaic (RE)

Source: Applied Materials

RE Learning Curves & Cost Reduction

What are the differences?

Consumer Goods Mobiles Laptops Flat panel displays Automobiles Etc. Only need global trade fair because consumers want the new products Strategic Goods The way electricity is produced The way transportation is done The way people are living in urban environment Do need initial political and public support

In summary: New technologies in the beginning always have high costs (prices) Cost (price) can only reduce with large demands (Price Experience Curve) Only market pull with technology drive (innovation) will create the Price Experience Curve, not technology push by its own Q: What is the best market pull mechanism for RE?

Grid Parity

Driver: Environment & Energy Security Electricity Prices ($/kWh)

GRID PARITY

2010
Source: BP, REC

2020 Europe, USA, Japan Asia

Years

Market Pull Mechanism: Effectiveness Indicator

FiTs are more effective and cost-efficient

Historically observed efficiency of support for onshore wind: Effectiveness indicator compared to the expected profit for the year 2006
Source: European Commission (2008): The support of electricity from renewable sources 8

FiT rates significantly influence market reaction (pull)

Conducive FiT rates

2011

FiT Degression

Promote prices reduction towards grid parity Promote early commissioning and reward early birds Point of control for high FiT rates
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FiT is the best Market Pull for RE Eg. Solar PV: Opportunity for Households
House type Electricity bill/month (RM/month) BIPV capacity (kW) BIPV space requirement (m2) BIPV capital cost (RM) Down-payment for BIPV - 10% (RM) FiT rates (RM/kWh) FiT revenue/month (RM) Bank loan - 90% Loan repayment/month: 3%, 9yrs (RM/month) Loan repayment/month: 4%, 12yrs (RM/month) Loan repayment/month: 5%, 15yrs (RM/month) Balance: FiT revenue - loan repayment, 9 yrs (RM/month) Balance: FiT revenue - loan repayment, 12 yrs (RM/month) Balance: FiT revenue - loan repayment, 15 yrs (RM/month) Total revenue (21 years) - 15% total performance loss Total repayment - 9 yrs (RM) Total repayment - 12 yrs (RM) Total repayment - 15 yrs (RM) terrace 80 3 30 54,000 5,400 1.74 522 48,600 514 426 384 8 96 138 111,812 55,512 61,344 69,120 semi-d 350 6 60 102,000 10,200 1.71 1,026 91,800 971 804 726 55 222 300 219,769 104,868 115,776 130,680 bungalow 800 14 140 224,000 22,400 1.71 2,394 201,600 2,133 1,765 1,595 261 629 799 512,795 230,364 254,160 287,100
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Thank You