- Category: Asia
10 Oct 2012
- Published on Wednesday, 10 October 2012 09:26
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A feed-in tariff policy, where renewable energy producers are guaranteed a set rate for power produced for a period of time, is credited for the rapid deployment of wind and solar power in countries such as Denmark, Germany and Spain. The policy typically includes guaranteed grid access and long-term contracts to buy the electricity produced at a fixed price per kilowatt-hour.
According to the REN21 2011 report, feed-in tariff is one of the most commonly used policies by which countries support the development of renewable power. FIT policies were in place in at least 65 countries and 27 states by early 2012.
The system ensures investors that they will be able to recover the initial high investment cost of a renewable power project. FIT payments are set at pre-established rates, often a little higher than market rates, to ensure that developers earn profitable returns. In successful cases, the FIT rates decrease over a designated period as the project starts to deliver energy at a competitive rate.
Because a FIT gives payment based on generation of power, it gives renewable energy producers an incentive to maximize the overall output and efficiency of their projects. This encourages them to develop projects using the best and most efficient technologies.
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Germany is one of the world’s leading renewable power producers and it adopted feed-in tariffs in the 1990’s. The German FIT policies are considered a success, contributing to solar capacity of around 24 gigawatts by the end of 2011. At the same time, the price of FIT has decreased from over .50 and .60 euros per kilowatt-hour to less than .20 euros/kWh, lower than the average retail electricity rate in Germany.
FIT in Asia
Feed-in tariff schemes are now either being adopted or contemplated all over the world, including Asia.
After the Fukushima incident, Japan began to push for safer means of power generation, approving a new law on feed-in tariffs for renewables starting July this year – at double the rate offered in Germany.
Japan’s new policy also requires utility companies in Japan to buy electricity from renewable sources such as solar, wind and geothermal at premium prices for the next 20 years. Initially, solar-generated electricity will be priced at 42 yen ($0.53) per kilowatt-hour while wind power will be priced at 23.1 yen ($0.6) for every kilowatt-hour.
Developing regions are also looking into the mechanism. Last year, the International Energy Agency released a working paper examining the trends and potentials of deploying renewable energy in Southeast Asia. The region’s rapid economic growth has led to an increasing energy demand and its traditionally heavy reliance on fossil fuels means that many countries are at the mercy of rising fossil fuel prices and imports.
Six of the ten countries that comprise the Association of Southeast Asian Nations – Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam – represent more than 95 percent of the region’s energy demand, and it is projected that they will account for more than 80 percent of energy demand growth by 2030.
In 2007, fossil fuels still accounted for 74 percent of the energy supply in these six countries while renewables accounted for 15 percent, a situation many say can still be improved.
Most Southeast Asian countries and other developing countries have started to implement policies to foster deployment of renewable energy technologies.
Thailand introduced a renewable feed-in tariff in 2007, while Indonesia introduced a FIT for geothermal energy in 2010.
Another recent development is the approval of feed-in tariff rates in the Philippines, with the Energy Regulatory Commission setting prices for solar, wind, biomass and hydropower generation.
The Philippines is said to have a renewable energy potential of 204,288 megawatts and according to the ERC, the feed-in tariffs are designed to encourage the development of projects to harness this potential.
If countries will seriously work toward decreasing fossil fuels, feed-in tariff and other policies to foster the deployment of renewable energy technologies are gravely needed. Having been proven effective for many countries, their adoption is vital for the growth of the renewable energy sector and for the development of a global low-carbon economy. – K.R. Jalbuena