Current issues in the renewables industry

• One of the current issues in Angola has been the lack of regulation in the renewable energy industry to attract investors.

In July 2022, Australia and USA joined forces forming the Net Zero Technology Acceleration Partnership aiming to accelerate development and deployment of zero emissions technology, and cooperate on critical minerals supply chains to reduce greenhouse gas emissions while supercharging economic growth. 

During the most recent UN climate summit – the 26th Conference of the Parties (COP26) held in Glasgow in  2021, a number of countries across the world (including Australia) pledged to achieve net-zero emissions by 2050 and take steps to transition a net zero energy system over the coming decades. However, despite Australia’s ambitions to transition to a clean energy future and readiness of a plan, Australia was confronted with a number of issues in the renewables industry such as: 

• network constraints in renewable energy generators, particularly in Queensland;
• delays with AEMO approving network connections;
• rising prices for key equipment;
• supply chain issues for key components arriving from China, Italy, Spain and Germany;
• increased shipping costs;
• skill shortages for key technical professionals due to travel bans domestically and internationally preventing them from attending site; and
• as a result of the above, lack of investor confidence in renewable energy projects due to market uncertainty. 

The Clean Energy Australia Report 2021 recognizes that significant investment, careful planning and a viable energy policy will be required to prepare Australia’s grid for the transition to a clean energy future. However, the announcement of renewable energy zones by state governments should alleviate the pressure on the grid, as well as Federal Government funding for future renewable energy projects.

• Consistent with international trends, there has been an increased interest in the Power Purchase Agreement (PPA) market in Austria, especially as a means to promote renewable energy generation and procurement in the light of Austria’s #mission2030 and 2040 target of climate neutrality. 
• Major Austrian energy and electricity companies such as Verbund AG and OMV AG are currently working on the development and implementation of P2X schemes to provide Austria with green or even blue hydrogen.
• Austria remains opposed to nuclear energy and continues to lobby against the qualification of nuclear energy as being “green” on EU level.

On a general level, it is noted that developers of renewable energy projects are faced with limited availability of sites due to spatial planning restrictions, as well as potential opposition from local residents (NIMBY). 

• One of the main issues currently being discussed in the context of Brazil’s renewables industry is the diversification of power sources. As mentioned above, 55% of the country’s power generation in 2021 was provided by hydro plants, which makes the country highly dependent on this source. Although Brazil has a great number of hydro assets, in the last few years the hydrological conditions have been constantly below average and, in some cases, reaching their lowest records ever registered, causing the risk of power outages.
  
  In this sense, other sources such as solar (including by means of distributed generation), wind and biomass are expected to have a significant increase of their share in Brazil’s energy matrix. One example of regulatory incentive for diversification is the newly enacted ANEEL’s Normative Resolution No. 954/21, which provides for the regulation of hybrid power plants, combining more than one power source.
• Up until 2021, Law no. 9,427/1996 granted a discount of at least 50% in the distribution/transmission system usage tariffs (known as “TUSD” and “TUST”) both for the power generator and for the energy consumers contracting renewable sources. Law no. 14,120/2021, however, provided for the end of such discounts, establishing a transition period and providing for the creation of a mechanism to assess the environmental benefits of each source. The Brazilian Ministry of Mines and Energy recently promoted a public hearing to discuss the guidelines for such mechanism –thus, further regulation is still under discussion.
• Regulation of offshore wind is still under discussion. Decree no. 10,946/2022 established guidelines for regulating offshore wind projects in Brazil – as such, it represents an important step towards the construction of a robust regulatory framework for offshore wind projects. However, according to the aforementioned Decree, the Ministry of Mines and Energy - MME must still publish supplementary rules until December 15, 2022.
• A main obstacle to the further development of renewable projects is the location of power plants, which are usually far from the main consumption centers, creating the need for major investments in transmission and distribution capacities. While most of the potential for hydro, wind and solar generation is located in Brazil’s north and northeast regions, the largest population centers, such as São Paulo and Rio de Janeiro, are located in the southeast region.

• Canada has committed to reconciliation with Indigenous Peoples and has committed to fully implementing the United Nations Declaration on the Rights of Indigenous Peoples, including seeking the full, prior and informed consent of Indigenous Peoples prior to development on their territories.  Any project proponent in Canada must, as part of the planning process, engage in meaningful consultation and accommodation with any Indigenous Peoples affected by the project.  
• In the remote northern territories of Canada, the historical presence of off-grid systems and limited infrastructure makes it difficult to adopt clean energy.   
• The federal government’s climate plan initiative from December 2020 that is mentioned above includes grants for homeowners for energy retrofits. 
• Alberta has faced issues with an overabundance of renewable generation in areas with significant wind resources, leading to transmission capacity constraints and temporary caps on new capacity
• Nuclear waste is an issue facing Ontario. The Nuclear Waste Management Organization (NWMO) is investigating safe steps to contain spent nuclear fuel through engineering studies at two locations in Ontario. 

The main issues and challenges are the following:

• Processing times to obtain environmental approvals: Projects that generate a relevant environmental impact (more than 3 MW), in accordance with Chilean Law need to be environmentally assessed by the competent authority.
• Relationship with local communities: Especially in the case of projects with an environmental impact that must be evaluated by the Environmental Impact Assessment System (SEIA), as referred above, it is possible that a project may be subject to a citizen participation process (PAC) depending on whether it entered via an Environmental Impact Statement (DIA) or go through a mandatory PAC if it entered via an Environmental Impact Study System  ("EIA"). In the latter case, and depending on the location and impact of the project, it may even be necessary to implement an indigenous people consultation process.
• Restrictions in the transmission system: Nowadays the main difficulty in the development of renewable energy projects is that once they are operational, they face problems offloading power into the grid system, given the restrictions in the transmission system of the Northern Zone of the country.

• The recourse to photovoltaic solar energy is not encouraged by a feed-in tariff guaranteed for a determined period of time, notably for reasons such as the worldwide decrease observed in recent years on the cost of construction of large-scale photovoltaic production facilities, and the eventual buy-back at a relatively high price due to the expected effects on the decrease in consumption of natural gas, whose depletion is apprehended in Côte d'Ivoire.
• The limitation of photovoltaic electricity production to the daytime, the inability to cope with direct power supply at night peaks, power variations during changes in sunshine that require adjustment capacities to cope with them are constants issues.

Solar boom

• In 2006, the Act No. 180/2005 Coll., on the Support of the Use of Renewable Sources came into force, by which the Energy Regulatory Office set the amount of the purchase price paid for 20 years after the construction of the power plant at 15 CZK/kWh. The aim was to guarantee the return on investment within 15 years. This law also included an amendment that introduced a limit of a maximum 5% year-on-year decrease in the feed-in tariff.
• Between 2009-2010, there was a “solar boom” in the Czech Republic. The main cause of this boom was the sharp drop in the price of photovoltaic technologies in 2008-2010 and the delayed response of the state, which did not adequately and quickly reduce the amount of support.
• The Czech government did not react to the critical situation of the solar boom until September 2010, when it passed an amendment to the law that significantly reduced support for other newly built solar power plants. The reduction of the solar feed-in tariff to about 6 CZK/kWh from January 1, 2011, was enforced. Thus, the limit of a maximum 5% year-on-year decrease in feed-in tariffs was removed.
• As a result of the unmanaged solar boom, the state then introduced a 26% solar tax on large photovoltaic power plants in 2011. This tax was in effect from 2011 to 2013. In 2013, a tax of 10% was introduced for power plants built in 2010, valid for their entire “lifetime.”
• However, the solar parks are currently the most efficient source of energy in Central Europe. The state set aside about CZK150 billion from the Modernisation Fund and investors’ plan for new projects: for example, land-based parks and unconventional solar farms on water, or over agricultural land or parking lots.
• The first solar farm over water is prepared by Sev.en Energy. The largest roof installation was built by Škoda Auto in Mladá Boleslav city in 2020. This installation is supposed to supply over 450 MWh of solar energy which is used by the carmaker for its own immediate consumption. 

Resistance of the inhabitants of the villages against the construction of wind power plants

• The inhabitants of villages often oppose building new power plants near their houses. One of the latest resistances was in Malešín (2021), which stopped construction of a new wind power plant.
• The plant was a huge project, and the wind power plants were supposed to be the highest in the Czech Republic. Each one of them would have had an installed capacity of 4 to 5 MW. They would reach a height of up to 220 m.
• The construction company needed to get a positive opinion from the council, but it was not granted.

• Regarding onshore renewable energy, opposition against new projects, both solar and wind, appears to be increasing, with the main focus being on visual pollution from solar parks and both visual and noise pollution from wind farms. It’s our experience that a strong focus from developers on stakeholders’ interests to a large extent can curb such issues.
• The process of obtaining zoning approval from municipalities for new projects can be lengthy.
• Development of grid capacity upstream from renewable projects in remote areas may delay the Commercial Operation Date (COD) for new projects.

Retroactive cut-off of solar tariffs

• In 2020, the government decided to reconsider the FIT rates for power purchase agreements (PPAs) entered into prior to a revision of the support scheme which occurred in 2011, based on their alleged excessive profitability. Accordingly, the 2021 Finance Law provided for the reduction of the amount of the FITs of these PPAs aimed at limiting the projects to a reasonable return on capital. The reduction of the FIT is intended to be applied to all projects with an installed capacity of more than 250 KW, irrespective of the technology used (photovoltaic or thermodynamic). The reduction affects 436 facilities. The average reduction of the tariff is 47%, while 4% of the projects would suffer a 95% reduction. Broadly speaking, for ground-mounted solar projects located in mainland France, the FIT will be reduced from EUR 570 per MwH to EUR 30 per MwH. The minimum FIT will be in the range of EUR 18 to EUR 50 per MwH, and the average FIT will be around EUR 30 per MwH.
• The 2021 Finance Law provides, in addition, for a safeguard mechanism allowing producers to request the CRE to grant a FIT higher than that which has been notified to them. This mechanism is available to producers who can demonstrate that the revised FIT is likely to endanger their economic viability. Producers will need to show that all available steps have been taken to mitigate the financial impact, including seeking support from their direct and indirect shareholders. Producers were required to submit requests for the safeguard mechanisms to be applied within three months of being notified of the new FIT. By 16 December 2021, 320 such requests had been submitted to the CRE. This means that 73% of the producers impacted by the measures took the position that the revised FIT are likely to endanger their economic viability. Once a request for the safeguard mechanism has been registered by the CRE, the application of the new FIT is suspended for a maximum period of 16 months. The CRE has 12 months to evaluate the request and make a proposal to the Ministers of Energy and Budget. If the producer’s request is accepted, a ministerial order, adopted within one month after the CRE’s proposal, will set out the new level of the FIT, its effective date and, as the case may be, the new duration of the PPA. If the request for the implementation of the safeguard mechanism is rejected, the revised FIT will apply retrospectively to the date set out in the ministerial order establishing the revised FIT. Given the timelines described above, the decisions rejecting or approving the implementation of the safeguard mechanism are expected to be issued between the end of 2022 and the first quarter of 2023.

Repayments under the FIP contracts

• In the context of the very significant rise in prices on the electricity market, renewable energy producers which entered into FIP contracts are liable for “negative premiums” to the State, i.e. the difference between the wholesale market price and the reference price set out in their contracts which is guaranteed by the State. Some of these contracts, however, set out mechanisms for capping these repayments which could create a windfall effect for these producers. The Amending Finance Law for 2022, enacted on August 16, 2022, provides for a removal of this cap, applicable retroactively to January 1, 2022. A ministerial order will set out, on a yearly basis, a “threshold price”, which will serve as a reference for either a full removal or a partial removal of the cap.

Early termination by renewable energy producers of FIT of FIP contracts

• In a deliberation of July 13, 2022, the CRE indicated that renewable energy producers holding FIT or FIP contracts for some 1.3 GW, notably wind and hydropower projects, applied for the early termination of their FIT or FIP contracts in order to be able to benefit from the high market prices. The CRE recommended that the State engage quickly in order to set out a specific taxation mechanism for these producers, since they benefitted from the State’s support in order to develop these projects.

Low power generation levels

• The nuclear output was of 154.1 TWh for the first half of 2022, which is 27.6 TWh less than in the same period in 2021. This is mainly due to a lower availability of the nuclear fleet following the detection of stress corrosion indications.
• Hydroelectric generation is also below the 2021 generation level, in a context of historically low water levels as a consequence of the drought in France.

• Nine years after the adoption of the Renewable Energy Act, the Renewable Energy Authority, whose absence was identified as a key hindrance to effective regulation of the renewable energy sector, has not been established.
• The Renewable Energy fund which was set up to provide financial support for activities to promote, develop and utilize renewable energy is not operational due to low cashflow into the fund. The delay in operation of the Renewable Energy Fund has negatively affected some provisions in the Renewable Energy Act, 2011 (Act 832), such as the off-grid electrification for remote communities, and research and development. For the Renewable Energy Fund to be operational, all the other sources of funding stipulated in the Renewable Energy Act should be exploited or the Energy Fund levy on petroleum products should be increased so that part can be set aside for the Renewable Energy Fund.
• There is insufficient experience in renewable energy development on all levels including the power sector entities, regulators, domestic investors, financiers and other stakeholders.
• Another barrier has been the lack of public awareness about the usefulness and socio-economic benefits that are derivable from renewable energy and its technologies.
• Investment in renewable energy in Ghana faces considerable challenges including the macroeconomic situation, perceived risk by the financial sector, financing terms and conditions, such as high commercial interest rates, limited tenor loans, high inflation and currency depreciation. Even though financial mechanisms such as equity finance, venture capital, debt financing and crowd financing among others are available to entrepreneurs, some of them are not fully developed in Ghana.

• Hong Kong has neither indigenous fuel sources nor the physical conditions favorable for large-scale development of renewable energy as it only has a land area of 1,106 square kilometers, much of which is hilly terrain.
• Although the technologies for renewable energy has advanced, there is concern about the cost of renewable energy being generally higher than that of conventional energy. For instance, studies show that it may take over HK$10 billion to build the two potential wind farms mentioned above but the electricity generated could only provide for less than 1.5% of Hong Kong’s total electricity consumption.
• It will depend on whether technology for renewable energy storage may allow large quantities of renewable energy to be stored in order for renewable energy to become a reliable source of energy production in Hong Kong.

Because of the requirements implemented by the Clean Energy Package and the appearance of prosumers and weather-dependent renewable energy sources on the market, significant investments and developments are necessary in order to prepare the distribution system for the upcoming challenges. The Hungarian energy sector is currently under transformation and beside the TSO, the DSOs will have any increasing role in the power system. 

The electricity storage capacities are low, which is quite a significant deficiency, as the balancing of the electricity network by the TSO cannot depend on these capacities. 

The so-called Robin Hood tax is also a big market entry issue. The scope of this tax includes – among others – DSOs, universal service providers, electricity trading licensees, electricity generators (except the KÁT and METÁR generators; described below). The Robin Hood tax is an income tax. The base of the tax is the domestic EBIT of the entities listed in the scope and the tax rate is 31%. The tax base may be decreased by certain items defined by law. 

The Hungarian Government has recently introduced a so- called "extra profit tax" via Govt. Decree no. 197/2022. (VI. 4.) on extra profit taxes ("Extra Profit Tax Regulation"). This tax (as every other tax which is regulated in the Extra Profit Tax Regulation) is intended to maintain the balance of the state budget. 

The tax is paid by renewable energy producers, who are entitled for KÁT or METÁR incentive schemes (detailed below), but they did not enter the relevant scheme or exited them before the expiry of their entitlement. A renewable energy producer that leaves (or does not enter) the KÁT or METÁR scheme must pay a kind of differential tax. The tax base for this can be calculated by deducting the hypothetical revenue that the producer would have generated by selling the electricity under the KÁT or METÁR scheme from the revenue generated on the market. The specific tax rate is 65%. 

This kind of tax means that the power plant either applies for an incentive scheme and enters it for the whole time period or does not enter/leaves it but in this case the power plant shall pay this extra profit tax. Power plants which do not apply for an incentive scheme are not affected by this tax, but they are exposed to market volatility as they are not entitled to any subsidies. 

The construction of wind farms in Hungary is nearly impossible at the moment as the law requires a 12 km wide protective distance from building zones (in Hungarian: építési övezet), which practically means that there is no place for wind farms to be implemented. This rule does not apply to residential wind turbines below 0,5 MW built-in capacity. According to the lawmaker the Hungarian wind conditions are not favourable enough to make wind farms profitable and wind farms do not fit into the landscape. An additional problem is that the blades of the wind turbines are hard to place after decommissioning.

The Act LIV of 2013 on the implementation of utility cost reduction regulates the residential prices of utility costs (gas, electricity, water and heat), which maximizes the household prices, therefore service providers can expect lower returns. As a result of that, limited number of service providers are on the residential market and in the near future there are no expected changes in this respect. 

Currently, the most significant risk for a new power plant development project is the obtainment of grid connection capacities. The Hungarian TSO, MAVIR Zrt. and the DSOs publish the available grid connection capacities (in total for all kinds of power plants) every six months. In their last publication (May 2022), they stated zero MVA available grid connection capacity for power plants. Simultaneously, there is also zero MVA grid connection capacity available for weather-dependent power plants, which amount is also stated by the TSO every six months.

This means that currently no new power plants are able to connect to the public grid, except if the investors undertake to bear the costs of the necessary public network development or the implementation of non-weather-dependent supplementary capacity besides the power plant.

• Italy wants to achieve the goal of decarbonization by closing all coal-fired power plants by 2025. At the same time, it must meet the country's electricity demand, including peaks. This means increasing use of clean energy sources.
• In Italy, there are plans to replace coal with other sources that are less polluting, but also capable of guaranteeing a programmable energy supply. From this perspective, natural gas today represents an effective alternative. Moreover, the switch from coal to gas allows greater agility in terms of utilization, improving the stability of networks.
• The share of plants operating competitively has decreased, as the market solution mechanism based on marginal price (all plants are remunerated at the price of the most expensive plant selected in the Day-Ahead Market) enables renewables to offer zero price and be remunerated at the price of the most expensive plant without participating in the market.

Renewables laws

• The Legislative Decree no. 387/2003, implementing EU Directive 2001/77/CE, provides for the so-called single authorization for the realization and the operation of renewable plants, including the related connection works. The single authorization is issued following the convening of a Local/Central Authorities meeting in order for all the competent authorities to examine contextually the various public interests involved in the relevant proceeding. The detailed standard discipline of the single authorization procedure at a national level is establishes by the National Guidelines adopted by means of the Ministerial Decree on 10 September 2010.
• The Renewable Energies Decree (Legislative Decree no. 28/2011) came into force on March 29, 2011. It incorporates Directive 2009/28/EC of the European Community and establishes the institutional framework, instruments and incentives for achieving the 2030 renewable energy targets.
• The Conto Energia (Energy Account) was introduced with the transposition of EU Directive 2001/77/EC, through Legislative Decree 387/2003, with the aim of improving the energy performance of buildings, premises and homes through the installation of photovoltaic systems: those who produce electricity by exploiting solar energy receive a sum of money from the electricity produced by their system. The incentive that the state provides is based on a 20-year period.
• The National Energy Efficiency Fund, established at the Ministry of Economic Development, is regulated by the Ministerial Decree of December 22, 2017. It economically supports energy efficiency interventions completed by companies and the Public Administration, on buildings, plants and production processes. It provides economic bonuses equal to 65% of the expenditure incurred for improving the efficiency and energy saving of buildings and to produce renewable energy, for Public Administrations and private entities.
• The National Integrated Energy and Climate Plan (PNIEC), presented by the Ministry of Economic Development to the European Commission in January 2019, gathers the guidelines to be followed and the objectives to be achieved in Italy in terms of energy and environmental protection, for the period 2021-2030.
• On November 30, 2021, Italy transposed Directive 2018/2001 (also called RED II – Renewable Energy Directive) on the promotion of the use of energy from renewable sources, which covers the use of renewable energy in the transport sector and the reduction of greenhouse gas emissions for biofuels, bioliquids and biomass fuels. Italy has set ambitious targets, such as achieving a 30% share of energy from renewable sources in gross final consumption (compared to the European target of 32%); adhering to the European target of reducing greenhouse gas emissions by at least 55% on 1990 levels by 2030; increasing the energy from renewable sources in gross final consumption for heating and cooling equal to 1.3% as an annual average in the periods 2021-2025 and 2026-2030.
  
  The so-called “Red II Decree” at issue, with the aim of establishing authorization simplifications for renewable plants, provides for the individuation of suitable areas ope legis and suitable areas to be identified by means of Regional Laws (in accordance with the criteria which will be identified by one or more ministerial decree(s)). In such areas, the following accelerated authorization procedures apply: (i) the mandatory non-binding opinion of the competent Landscape Authority: when the deadline for the expression of the landscape opinion expires, the proceeding Administration may issue the AU; (ii) the reduction by one third of the authorization procedures.
• The “Energy Decree”, adopted by means of the Decree Law 17/2022 (converted into Law 34/2022), also intervenes on the regulation of the cited “suitable areas” by raising the power thresholds for the application of the single authorization procedure up to 10 MW. Below this threshold: a) for plants – located in suitable areas – with power higher than 1 MW and up to 10 MW the simplified authorization procedure (“PAS”) applies; b) for plants – located in suitable areas – with power up to 1 MW, the sworn declaration of commencement of work (“DILA”) applies. Moreover, the Energy Decree provides for the possibility of installing, also by way of derogation from municipal planning instruments and existing coverage indices, photovoltaic plants in areas for industrial use within the maximum coverage limit of 60% of the same areas.
  
  The scope of application of the PAS is also extended to: a)  photovoltaic plants with power up to 20 MW and the relevant connection works to the high and medium voltage electricity grid where they are located in areas for industrial, productive or commercial use, in landfills or closed and restored landfill lots or in quarries or quarry lots that cannot be exploited further, for which the competent authority for the issuance of the authorization has certified the completion of the activities; b) photovoltaic plants  with power up to 10 MW, where they are located in “suitable areas”; c) agro-voltaic plants that meet the conditions for eligibility for the incentives established by the amended Art. 65, para. 1-quarter of the Decree Law 1/2012 where they are located at no more than 3 km from areas for industrial, artisanal and commercial use. For such plants, only if their power is higher than 20 MW the national Environmental Impact Assessment and the regional Environmental Impact Assessment screening will apply. Instead, the aforementioned plants are exempted from such environmental procedures if their power is up to 20 MW and provided that the proponent attaches to the declaration for the PAS procedure a self-declaration showing that the plant is not located within areas specifically listed and identified as unsuitable pursuant to the Annex 3, letter f) of the MD September 10, 2010.
  
  To be remarked the new regulation for the agrivoltaic plants, which are photovoltaic plants located in agricultural areas ensuring the integration between agricultural activity and power generation. For these plants it is introduced a derogation to the prohibition to have access to incentive regimes.
• The “Ter Support Decree”, adopted by means of the Decree Law 4/2022 (converted into Law 25/2022), provides for a two-way compensation mechanism on the price of energy, with reference to the electricity fed into the grid for the period from 1 February 2022 to 31 December 2022. The subjective scope of application of the measure refers to:  a) photovoltaic plants with power higher than 20 kW benefiting from fixed premiums deriving from the “Conto Energia” mechanism, which are not dependent on market prices; b) solar, hydroelectric, geothermal and wind power plants with power higher than 20 kW that do not benefit from incentive mechanisms, which came into operation prior to 1 January 2010. For these purposes, the GSE shall calculate the difference between the following values:
  • a "reference price" equal to that indicated in the table introduced in Annex I-bis to Decree-Law No. 4/2022 with reference to each market area
    
    CNOR       CSUD    NORD  SARD   SICI    SUD
    
    58              57        58        61        75        56
  • a "reference price" equal to that indicated in the table introduced in Annex I-bis to Decree-Law No. 4/2022 with reference to each market area
    • for the plants referred to in subparagraph (a) above, as well as for the plants referred to in subparagraph (b) above from solar, wind, geothermal and run-of-river water sources, at the hourly zonal market price for electricity, or, for supply contracts entered into before 27 January 2022 that are not excluded from the scope of application of the rule, at the price indicated in the contracts;
    • for the additional plants referred to in subparagraph (b), at the monthly arithmetic average of the hourly zonal electricity market prices, or, for supply contracts entered into before 27 January 2022 that are not excluded from the scope of application of the rule, at the price indicated in the contracts themselves.

In the event that the difference between the aforementioned values is positive, the GSE will pay the relevant amount to the producer; in the event that the difference is negative, the GSE will equalize or request the corresponding amount from the producer.

• The “Bis Ucraina Decree”, adopted by means of the Decree Law 21/2022 (converted into Law 51/2022), introduces measures aimed at increasing energy production from biogas plants: full utilization of the technical capacity of already operating biogas plants is now permitted, even if they are incentivized, up to a limit of 20% without authorization and subject to modification of the connection contract. Also the Ucraina Bis Decree intervenes on the regulation on the suitable areas set forth by the Red II Decree by means of the enlargement of the ex lege suitable areas (e.g., agricultural areas located at 500 metres from production/industrial areas; buffer areas at 300 metres from the motorway network). It is also established the extension of the type of variants/amendments to existing photovoltaic and wind plants subject to the sworn declaration of commencement of works (“DILA”).
  
  Moreover, the Decree introduces the extraordinary contribution against high bills on the subjects operating in the energy sector as identified by the provision (subjects who carry out in the territory of the State, for the subsequent sale of the goods, the activity of electricity production; subjects who carry out the activity of methane gas production or natural gas extraction, etc.). The taxable base for the contribution shall be the increase in the balance of asset and liability transactions for the period from 1 October 2021 to 30 April 2022 compared to the balance for the period from 1 October 2020 to 30 April 2021. In the event of a negative balance for the period from 1 October 2020 to 31 March 2021, a reference value of zero shall be used for the calculation of the tax base for this period. The contribution shall be applied at the rate of 25 per cent in cases where the said increase exceeds 5,000,000 euro. The contribution is not due if the increase is less than 10%.
• The “Aids Decree”, adopted by means of the Decree Law 50/2022 (converted into Law 91/2022), extends the advantageous regulation applicable to the photovoltaic plants located in the suitable areas set forth by the Red II Decree to: a) the interconnection works related to the plants, where they are also located within a suitable area; b) biomethane plants located within a suitable area. In order to speed up the environmental and single authorization procedures, it is established that the deliberation adopted by the Council of Ministers replaces the Environmental Impact Assessment final provision; in the event that the deliberation states for the issuance of the positive Environmental Impact Assessment, the single authorization shall be considered to be issued after the expiry of 60 days and in the face of the silence of the proceeding authority.
  
  For the first time, the time limit for the commencement of works authorized by means of the single authorization is regulated (three years from the issuance of the authorization title).
• The “Bis Aids Decree”, adopted by means of the Decree Law 115/2022 (converted into Law 142/2022), provides – inter alia - for measures aimed at reducing the effects of price increase in the electricity sector (measures for the protection of vulnerable customers in the natural gas sector;  the zeroing of general system charges in the electricity sector for certain users; the suspension up to 30 April 2023 of the unilateral modification of contracts  relating to the price definition by the electricity and gas supply and the ex lege ineffectiveness of any notice of termination exercised to that end.

Grid capacity and the cost of installation are the main obstacles to the development of renewable energy in Japan.

To increase the use of renewable energy, grid capacity in relation to the inflow of fluctuating power generated from solar and wind sources must be expanded. Under the FIT regime, the utility companies are allowed to implement output control (ie temporary compulsory curtailment of output from power stations) without limit and without compensation to generators if the supply from solar power to the grid exceeds the total grid capacity. It’s difficult for projects connected to grids covered by this rule to procure long-term project finance unless and until there’s a clearer outlook of the probability of future output control. METI is discussing new rules for output curtailment to expand the use of renewable energy sourced electricity.

In terms of the grid system, the OCCTO is considering a long-term plan to strengthen the grid and implement better practices for grid operation. Also, a Japanese-type "connect and manage" mechanism is being introduced to use the existing grid system more efficiently. On the technology front, the development of larger and more cost-efficient batteries is essential to expand interconnection with renewable energy power generation facilities.

As for the cost of installing generation facilities using renewable energy, it’s essential to control the rapid increase of the renewable energy surcharge payable by electricity users under the FIT regime. One of the major movements to address these issues was the amendment of the FIT Act, including the introduction of the FIP regime.

• In 2021, the Ministry of Energy issued The January 2021 Feed in Tariffs Policy (2021 FiT Policy) and The Renewable Energy Auctions Policy, January 2021 (REAP Policy). The 2021 FiT Policy is a revision of the 2012 FiT Policy with substantial changes introduced on the development of renewable energy projects in Kenya, in a bid to align with the Energy Act, 2019 and other recent developments in the Kenyan energy sector.
• Solar, wind and other renewable energy projects larger than 20 MW (except for geothermal power projects) will now be procured through power auctions under the REAP Policy. The objective of the REAP Policy is to enable the government to procure renewable energy on competitive terms. The REAP Policy marks a shift in the procurement of renewable energy capacity.
• Renewable energy power plants not exceeding 20 MW in biomass, biogas and mini hydro technologies will, on the other hand, be procured under the 2021 FiT Policy. Under the 2021 FiT Policy, all projects approved for implementation under it will not require any form of security or guarantee from government, including letters of support.
• In March 2021, the President of Kenya appointed a taskforce (PPA Taskforce) to review PPAs entered into by KPLC. The Taskforce made a raft of recommendations that may, if implemented, affect the renewable energy sector in Kenya. Some of the key recommendations include:
  • renegotiation of PPA tariffs within the existing contractual arrangements, to reflect price changes. This is likely to affect IPPs with renewable energy projects that were procured under the 2012 FiT Policy; and
  • captive power approvals should be granted for renewable energy technologies only. This will promote the reliance of renewable energy in Kenya.
• There’s been an increase in the uptake of self-generation among corporate entities in Kenya. These include:
  • Ecobank, which announced in February 2021 that it was rolling out solar power solutions in its branches across the country to reduce operation costs and ensure reliable power supply.
  • Kenya Tea Development Agency, which has set up various hydropower plants throughout the country to reduce the energy costs associated with processing and manufacturing tea.
  • East Africa Breweries Limited, which announced plans to completely stop relying on power from KPLC by 2030.
  • Devki Group which announced that it is in the process of commencing its own power supply by 2023. The company will start with the construction of a 64 MW power plant in the Pokot region. 
• While Kenya has an abundance of coal, plans to develop coal power plants have faced difficulty in attracting funding given the challenges coal poses in terms of climate change and the environment. This is in addition to the challenge of resistance from local communities and environmental activists. While the LCPDP contains plans for the development of coal power plants in the Mui basin, it’s unclear whether these will take off. In fact, at the COP26 Climate Conference in Glasgow, President Kenyatta stated that Kenya is determined and on course to achieving full transition to clean energy by the year 2030.
• KenGen is conducting a feasibility study on reconfiguring of thermal power plants to use liquefied natural gas by 2030. This is part of Kenya’s pursuit of a 100% climate-friendly grid.¹

Renewables laws

• The National Energy Policy, 2018 recognizes the potential of renewable energy in enhancing energy security, mitigating climate change, generating income, and creating employment in Kenya. The policy’s objectives include encouraging generation of electricity from renewable resources.
• The Energy Act, 2019 is the main legislation governing the renewable energy sector in Kenya. It requires the Cabinet Secretary responsible for energy to promote the development and use of renewable energy technologies, such as biomass, biodiesel, bioethanol, charcoal, fuelwood, solar, wind, tidal waves, hydropower, biogas and municipal waste. It also has established the Renewable Energy Resource Advisory Committee which is an inter-ministerial committee tasked with advising the Cabinet Secretary for Energy on matters pertaining to renewable energy resources in Kenya.
• The FiT Policy, 2012, promoted the generation of electricity from renewable energy sources by enabling power producers to sell electricity generated at a pre-determined tariff for a given period. The government recently published the 2021 FiT Policy, which is a revision of the 2012 FiT Policy  but whose application has been limited to renewable energy power plants not exceeding 20 MW in biomass, biogas and mini hydro technologies.  The 2021 Fit Policy shall only apply to renewable energy power plants developed after its publication.
• The REAP Policy 2021 governs the procurement of all renewable energy projects except for geothermal projects and renewable energy projects that fall under the proposed 2021 FiT Policy.

References

[1] Kenya to convert oil plants to LNG in climate-friendly grid push

• Given one of the government’s key objectives is to change the energy mix and lift renewables from 14% to 60%, a primary challenge remains as to whether the existing national electricity grid has the capacity to take up the increased power generated from renewable sources. A number of risks will need to be addressed by the government to achieve this target including the modernization of the country’s national electricity grid and the use of smart technologies.
• Because renewable energy is not entirely waste-free, the lack of a proper and efficient framework to safely dispose of used solar cells, batteries and PV panels could potentially hamper the country’s goal towards achieving environmental sustainability also.
• The proper expansion of renewable energy capacity will also require further supporting policies to allow for fair and transparent development from tariff setting to technical adaptation of the grid.

• The electricity law dates from 1997 and needs to be improved to accommodate the evolution of the sector. Significant steps have been taken in that regard, including an advanced draft which was expected to be approved by the end of 2021. It is anticipated that EDM will be maintained as the sole electricity offtaker.
• Given Mozambique hosts one of the biggest investments of natural gas from the Rovuma Basin, it is expected a strengthening of the domestic supply from natural gas to generate more electricity will stimulate more investments on the Gas-to-Power projects. 
• Mozambique intends to become an energy hub in southern Africa with the production of hydrogen. Cheap energy used to produce hydrogen would be a real motivator for the construction of Mphanda Nkuwa Dam on the Zambezi River, a project that exists since the colonial era.
• In September 2021 the Government approved the Regulation for Off-Grid Energy Access. This is a milestone as it provides greater clarity to all actors in the off-grid energy sector and ensures the necessary conditions for the private sector to develop its activities and protect its investments in a diverse set of technologies applicable to the off-grid context, such as solar home systems, mini-grids, and improved cooking solutions.

Grid capacity and congestion

• The rapid growth of renewable energy sources, such as wind and solar, has led to a strain on the existing electricity grid. Integrating these intermittent energy sources efficiently into the grid is a significant concern. The grid, once constructed based on a predictable production and offtake model, is unable to cope with large peaks, especially in the rural areas.
• Investments in grid infrastructure upgrades, smart grid technologies, and energy storage solutions are being pursued to alleviate grid capacity issues. 

Permitting

• Obtaining the necessary permits for the development of renewable energy projects, especially in densely populated areas or ecologically sensitive regions, can be a lengthy and complex process in the Netherlands. Streamlining and expediting the permitting process, while maintaining environmental safeguards, is a priority for the Dutch government. Clearer regulatory frameworks and policies should also facilitate renewable energy development. 

Local participation

• Since 2019, renewable energy developers and investors are obligated to include local citizens and businesses as participants in their Dutch wind, solar, geothermal, hydrogen and energy storage projects.
• In the 2019 Climate Agreement, the Dutch government, sector representatives and civil society organisations set a target of 50% local ownership for large-scale renewable energy projects. This fits the broader trend of democratising energy, where citizens and companies will eventually generate their own energy and use their own infrastructure.
• The Netherlands has already privatised both power producers and grid operators. The high percentage of rooftop solar installations and the rise of innovative solutions like closed distribution systems and energy hubs further reinforce local participation. This landscape poses an important challenge for developers and investors of renewable energy projects in the Netherlands.
• In addition, the defined purpose of local participation is still unclear and the legal framework to support it is lacking. The level of organisation, technical understanding and financial capabilities of participating citizens and businesses can vary widely. Overall, this can put the interests of developers and investors at risk. 

Hydrogen

• The government is aiming to invest in the transition to hydrogen-based energy for at least the five main industrial clusters and the transport sector. The government has decided to transform the grid supplying the five clusters with natural gas to a grid for hydrogen, thereby forcing the industries in these clusters to adapt and transform to hydrogen powered industries as well. This project is called HyWay27.
• Hydrogen is regarded as a solution to respond to the fluctuations in the availability of renewable energy, especially from the offshore wind farms. In the Rotterdam area, investments are announced to build several electrolyzers. The north of the Netherlands inhabits a strong alliance; on one hand it’s the local and regional governments and on the other hand several industrial corporations, which create the ‘Hydrogen Valley’. This is meant to build a green hydrogen ecosystem based on wind energy from on shore and offshore wind farms. The project aims not only to provide for demand in the Netherlands, but also for Belgium and Germany.

• In January 2021, it was announced that the Tiwai Point aluminium smelter, owned by Rio Tinto, would remain open until the end of 2024. Rio Tinto had announced plans in 2020 to close the smelter. The closure of the smelter, which represents 13% percent of New Zealand's electricity demand, would have created a significant demand shock in the electricity market. However, under an arrangement with Meridian Energy and Contact Energy in January 2021, Tiwai's operations have been extended until 2024. Tiwai has announced that it is currently in negotiations with generators with regards to another potential extension.
• In 2016, it was announced that New Zealand is phasing out all coal-fired power generation, with Genesis Energy advising it will permanently shut its last two coal-burning generators by December 2018 amid ample supplies of cheaper renewable energy generation and subdued demand. The New Zealand Commerce Commission announced that Transpower plans to invest around NZ$5 billion (approx. US$3.5 billion) in critical infrastructure upgrades.
• At the time of writing, coal-fired electricity generation is still used in New Zealand. In 2020, as for other years, coal was relied upon to meet the electricity supply shortfall during a time of low renewables sourced generation (e.g. dry hydrological years).
• In the electricity retail sector, a report released by the Electricity Authority, shows that small and medium sized electricity companies are gaining increasing market share. The Electricity Authority statistics show smaller companies have quadrupled their market share since 2009.
• Consistent with international trends, there has been significant attention to the Power Purchase Agreement (PPA) market in New Zealand as a means to promote renewable energy generation and procurement, although the domestic market is more nascent that the US and European PPA markets. The Major Electricity Users' Group's Renewable Electricity Generation Project, launched in 2020, provides an example of how some of New Zealand's major electricity users are looking to employ PPAs in their energy strategies. 

Renewables laws

• The Energy Efficiency and Conservation Act 2000 was the first legislative effort to promote renewable energy in New Zealand. The Act established the Energy Efficiency and Conservation Authority which produces regular reports on New Zealand’s energy use and energy targets. The Act largely sets out the ambit of the Authority’s reporting requirements.
• The National Policy Statement for Renewable Electricity Generation 2011 is the main government policy paper coordinating the renewable energy drive throughout New Zealand. The paper’s main objective is to “recognise the national significance of renewable electricity generation activities by providing for the development, operation, maintenance and upgrading of new and existing renewable electricity generation activities”.
• The Resource Management Act 1991, known as the RMA, is a key piece of legislation relevant to the development of renewable energy generation projects in New Zealand (and the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Act 2012 (EEZ Act) for offshore projects). The purpose of these Acts is to promote the sustainable management of natural and physical resources in New Zealand. The RMA requires that central and local government prepare environmental standards, policy statements and plans to aid in the management of the environment. Renewables projects will come into contact with the RMA where resource consents are required to undertake activities that are not permitted by the planning documents prepared in accordance with the RMA.  For offshore projects, the EEZ Act directs the types of consents required.
• Following a review in 2020, the RMA is set to be repealed and replaced by three separate pieces of legislation covering land use and environmental regulation, long-term regional spatial strategies, and climate change respectively.  Some of these new Acts are due for introduction to Parliament in October 2022, with the intention being the Act governing land use and environmental regulation being passed into law by the third quarter of 2023.

• Despite the growing interest in renewable energy production, the national grid still requires investment to transmit energy produced from Gencos to DisCos. While we note that there is a current contract between Siemens and the Federal Government to rehabilitate and expand the national grid, there is still a delay in implementation.
• Apart from the transmission chain of the supply network, a large percentage of Nigerians are still not connected to the national grid (i.e., rural communities) and for those connected, power supply is a serious problem. Around 90% of the total energy demanded is not supplied, hence, the DisCos are unable supply electricity to those communities. 
• Another issue is the huge metering gap that still exist in the Nigerian Electricity Supply Industry.  Despite the introduction of several mass metering programmes, only about 4.66 million end-users, representing 36 per cent of the entire pool has been fully metered at the end of November 2021. 
• Against this backdrop, NERC introduced the Independent Electricity Distribution Network 2012 which permits qualified operators and licensees to engage in electricity distribution, independent of distribution systems operated by the DisCos. It is envisaged that these private players will operate in unserved and underserved areas to increase delivery of power to consumers. 
• A major concern has been the tariff methodology which has been a key factor in developing bankable power projects. The most recent MYTO became effective in 2022, which according to industry players, is not cost-reflective.
• Macroeconomic issues such as inflation, currency fluctuation, COVID-19 pandemic etc. has limited the delivery of projects in the sector as well.

Please see comments for the specific renewable sources, but note in particular the restriction for foreign investors to only be allowed to invest up to 1/3 in a large hydropower plant (small scale hydropower does not have this restriction), and offshore wind industry/framework being under continuous development, including development of grid system (hybrids etc) by Statnett over the upcoming decade to commercialize offshore wind as the new major industry and an energy transition from the O&G segment/suppliers.

Statnett is working continuously on preparing and building the grid network out to prepare for the new offshore industry, and this may also take within a decade to build in order to meet the energy transition requirements. Please see links to Statnett's website summary and a fact-based report release by Statnett in March 2022:

• Offshore wind power in Norway
• Fagrapport om havvind i Sørlige Nordsjø II (PDF)

• Historically, only the urban population had the comfort and utility of guaranteed electricity. The rural population for the most part did not have access to the grid or the voice and strength to demand it. However, there were isolated successful initiatives to electrify rural populations with decentralized systems (eg Pozuzo and Acopalca), but they represented nothing more than a drop in the bucket in view of the great need. According to the poverty map of the Fondo Nacional de Cooperación para el Desarrollo (FONCODES), 70% of the rural population in 2007 did not have access to electricity, with large variations between different departments.
• Apart from a partial liberalization of customs duties for renewable energies, there are no concrete incentives for individual or private investment. With the exception of projects and programs of international cooperation and some NGOs, there are still no measures to promote renewable energy at the individual level.
• In practice, there’s a lack of easy access to favorable credits. Although there are funds for renewable energies through the Development Bank of Peru COFIDE (a second-tier bank), access to these credits through commercial banks for the majority of the population is in fact non-existent.
• The main critical points of the enabling conditions for the implementation of projects to combat climate change and GHG emissions are related to: i) the difficulty in intrasectoral, intersectoral and territorial articulation; ii) insufficient funds for the implementation of adaptation measures at the public, private and international cooperation levels; iii) moderate political will at the national and international levels that should allow the prioritization of climate change as a conditioning factor that influences public health in the country.
• An important milestone in the electric power industry was the use of natural gas electricity generation, when in August 2004 the exploitation of Camisea gas began, which increased thermal generation. The use of this resource caused changes in the Peruvian energy matrix, diversifying primary sources and lowering costs. 

Renewables laws

• Since 2008, the development of RERs began in Peru as a result of a new regulatory framework that contemplates the holding of competitive and periodic auctions to make the exploitation and participation of RER generation projects viable within the country's electricity sector matrix.
• The Legislative Decree for the promotion of investment for the generation of electricity with the use of renewable energies, Legislative Decree No. 1002, is the main government regulation for the renewable energy drive throughout Peru. This regulation declares of national interest and public necessity the development of new electricity generation through renewable resources and establishes incentives for the promotion of RER projects, such as: 
  • Priority for daily cargo dispatch by the Economic Operation Committee of the National Interconnected System (COES).
  • If there is capacity in the electricity transmission and distribution systems of the SEIN, RER generators will have priority to connect.
  • Long-term stable tariffs (20 years) determined through auctions.̶
  • Purchase of all energy produced.
  • Establishing a market mechanism based on auctions for the award of RER projects and states that the frequency of these auctions must be no less than two years.
• In 2010, through Resolution No. 289-2010-OS/CD, the Procedure for calculating the energy not injected due to causes beyond the RER generator's control was published. This procedure establishes the criteria and process for determining the Energy Not Injected due to causes beyond the control of the Generator with RER (applicable exclusively to the successful bidders of the Auctions for electricity supply with RER).
• In 2011, through Supreme Decree No. 012-2011-EM, the Peruvian government published the Regulations for the Generation of Electricity with Renewable Energies, to establish regulatory provisions (Auction, Definitive Concession, Planning) for the production of electric energy based on the use of RER.
• In 2013 the Peruvian government published the Regulation for the Promotion of Electricity Investment in Off-Grid Areas, approved by Supreme Decree No. 020-2013-EM, which has the objective of establishing the necessary regulatory provisions for the adequate application of the Law in order to promote the use of Renewable Energy Resources to improve the quality of life of the population located in Off-Grid Areas.

Challenges overview

Like many markets, the Polish Energy market faces tough challenges it needs to overcome to comply with obligations arising from Poland’s commitments to the EU Strategy and the Paris Agreement. Moreover, these challenges mainly arise from the pending issues on the Polish market.

The main source of these issues is the ongoing transformation of the whole energy sector in Poland. The majority of Polish electricity is still produced from coal or lignite in big power plants that were built in the late 20th century. Because of this, the transformation of the electricity market is necessary to satisfy the ever-growing needs of the economy and allow Poland to be self-sufficient in providing electricity to its branches.

The success in the energy transformation comes with the development of the renewable energy sector and the plans to commence construction of first nuclear power plant in Poland. As of this moment, the plans for the construction of the nuclear power plant are being made, however, with no real timeline regarding its construction. Additionally, the renewable energy sector is undergoing rapid development; however, this progress needs to be quicker if Poland is to fulfil its obligations with regard to the reduction of CO₂ emissions.

The following paragraph explains particular challenges that are identified by experts on the Polish market and sectors that need to change.

Main sectors overview

• One of the major CO₂ producers is the energy sector in Poland, which is still heavily dependent on coal and lignite. This can be done simultaneously by increasing the amount of electricity from renewable energy sources, mainly solar and wind energy (both offshore and onshore). Similarly, the majority of the Polish heating market is still dependent on coal.
• Another sector that requires reduction in CO₂ emissions is the transportation sector, in which the emissions of CO₂ grew three times in the last 30 years. As experts state, the reduction may take place on multiple fronts such as favoring mass transportation and reduction of the means of transport using combustion engines and favoring electrical means of transport (promotion of alternative transportation such as electric cars, hydrogen or hybrid motors).
• Industry is another sector that produces substantial amounts of CO₂. Polish industry is relatively old so the government, according to experts, should promote innovative and modern industry that consumes less electricity. Another issue is with the Polish mining sector – as, according to Ember thinktank, it produces 70% of the coalmine methane in Europe (reduction in that part may come from reduction of the coal-powered electricity plants and their share in the Polish energy mix). Another sector that produces major amounts of greenhouse gases in Poland is agriculture, mainly the livestock industry. Promotion of plants and plant-based production and a reduction in meat consumption in Poland is necessary, as the average annual consumption of meat in Poland per person is 80 kg annually. This adds to the greenhouse gases produced by this industry.
• In summary – Poland faces tough challenges to meet EU and worldwide goals, as described by the internal policy of the EU and the Paris Agreement. The current actions of the government are extensive but still inadequate as experts deem that much larger actions and policies need to be adopted for Poland to effectively tackle climate change and meet worldwide and European obligations.

National hydrogen strategy

Portugal sees a key role for hydrogen produced with renewable energy to support clean energy transitions in hard-to-decarbonize sectors and end uses and to achieve carbon neutrality by 2050. The National Hydrogen Strategy (EN-H2) indicates that by 2030, hydrogen should cover:

• 1.5-2% of Portugal’s energy demand;
• 2-5% of industry energy demand;
• 3-5% of domestic maritime shipping energy demand;
• 1-5% of road transport energy demand;
• 10-15% of the volume of gas delivered by the natural gas network. 

This would require the deployment of an estimated 2-2.5 gigawatts (GW) of electrolysis capacity powered by renewable electricity by 2030, along with enabling legislation, regulations, and standards. The EN-H2 also indicates that in the long term, renewable hydrogen could be used directly for electricity generation and energy storage.

Lithium prospection

The Portuguese Government has announced that public tenders for lithium prospection and research rights with respect to 6 areas will proceed in 2022, following the completion of viability assessments.

In recent years, besides the discussion around lack of PPAs, the main issue for Romania’s hopes of attracting investments into renewable projects has been the capacity of the national electrical grid to integrate the output of such projects. Developers looking towards larger, more ambitious projects often have to cover associated grid reinforcement costs in order to ensure that the energy to be produced by such projects could be adequately and safely integrated in the system. However, there are hopes that the influx of EU funds earmarked for energetic transition will allow the undertaking of larger strategic grid reinforcement and development projects, as recently underlined by the CEO of CNTEE Transelectrica S.A. (i.e. Romania’s electrical grid and system operator), who mentioned that the projects for which the grid operator will seek funding from the EU Modernization Fund may open up the grid capacity for integrating new projects of up to 2,300 MW within the next 5 years.

Also, it worth mentioning that Romania still has the highest balancing costs per MW in Europe.

In Senegal, according to the Ministry of Petroleum and Energy, the energy sector is being challenged by environmental, geopolitical, socio-economic and territorial issues. The environmental challenges include the reduction of greenhouse gas emissions, the fight against the risks of accidents linked to the exploitation of fossil fuels (oil spills, nuclear risks, etc.), the mitigation of pollution (air, water, soil and biosphere) and the preservation of ecosystems.

The socio-economic challenges include poverty reduction, increased energy security, job creation in the sector, the development of industrial sectors through the involvement of private promoters, and the establishment of modern, affordable and sustainable energy services capable of raising the country's economy to acceptable levels of development with the aim of improving the well-being of the population.

The geopolitical challenges include reducing dependence on fossil fuels, securing energy supplies, using renewable energy sources as much as possible in Senegal, and meeting national energy needs (electricity production, heating, transport, etc.).

As for the territorial challenges, they are mainly related to reducing the disparities between the rural and urban populations in terms of access to energy services.

Discussions regarding offshore wind power is ongoing. Some see the development of offshore wind power as complimentary to other renewable energy sources. However, the offshore wind farms have challenges, for example the Swedish Armed Forces often declines applications in relation to offshore wind farms as they deem that it has a negative impact on their ability to defend the country.  

Take-or-pay/deemed energy 

• In 2019, GOU issued a policy directive which (i) capped the tariff for new projects at USD8 cents per kilowatt hour and (ii) placed a blanket prohibition on take-or-pay clauses in power purchase agreements entered by the sole off-taker, UETCL.
• This policy was passed to control the economic burden that was being placed on the treasury because of, among other factors, electricity over-supply and the effects of an underdeveloped transmission and distribution infrastructure. This policy directive may prove to be a significant commercial disincentive as it will affect what private investors consider to be a competitive internal rate of return. In addition, the lack of take-or-pay assurance in power purchase agreements will have a considerably adverse effect on the ability of sponsors to secure limited recourse financing for projects. 

Proposed amendments to the Electricity Act 

• GOU is in the advanced stages of amending the Electricity Act and an amendment Bill was introduced before Parliament in late 2021. The Bill seeks to:
  • vary the current single-buyer electricity purchase model by allowing generation companies to supply electricity to not only the primary off-taker itself, but directly to a licensed distributor for a particular territory or directly to a specified class of consumers. This will provide a framework for corporate power purchase agreements in the Ugandan market. If this proposal is approved by Parliament, the Ministry of Energy and ERA will then prepare detailed regulations to address this issue;
  • specifically empower ERA to prescribe standardized feed-in-tariffs for renewable technologies generating up to a maximum capacity of 50 MW;
  • specifically empower ERA to invite applications for licences (for generation, distribution and transmission) through a competitive process; and
  • provide for the payment of royalties by generation companies to the local authority in which the generation facility is situated.

Each source of renewable energy faces its own set of unique issues. In the UK, solar energy has experienced a reduced rate of growth due to a significant cut in government subsidies. Solar power is intermittent in nature, so grid modernisation is critical to its growth in the UK. 

The challenges around geothermal energy are primarily economic and regulatory, with issues such as gaining planning permission as well as acquiring licenses/ownership over geothermal resources – which remains unclear under the current law. 

Issues around biomass energy production include environmental issues such as the combustion of certain biofuels, which may affect the UK’s commitments to air quality; as well as the expectation of short-term growth as more biowaste is used to produce fuel, whilst also potential long-term supply reductions due to collective conscience efforts to reduce waste. 

Prior to the COVID-19 pandemic, renewable energy consumption was expected to rise by around 3% in 2020. However, the pandemic led to a decrease in the production of renewables such as solar PV and wind energy, and a sharp decline in added capacity for renewable technologies. Capacity levels in Q3 2021 were less than a third of Q3 2020, which was during a peak period in the COVID-19 crisis, showing the detrimental impact of covid on the renewables industry. 

Social distancing guidelines and lockdown measures inevitably caused supply chain disruption and delays to the construction phase, meaning that commissioning renewable energy projects proved increasingly challenging. There was also less demand for renewable energy, as restrictions on travel and border closures to limit the spread of the virus led to reduced demand in the transport industry, causing the consumption of biofuel and other renewable energy sources to decline.

With these disruptions and reduced demand for renewable energy, there had been less need to procure new renewable energy projects. Nevertheless, following COP26 in 2021 and the broader push to meet UK climate and net carbon zero targets, demand has begun to rise again.