Day 2Energy Efficiency Policy Assessment: Case studies from the region


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Regional Workshop: National Energy Efficiency Action Plans Kempinski Hotel, Amman, Jordan 5 - 6 December, 2010

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Day 2Energy Efficiency Policy Assessment: Case studies from the region

  1. 1. Energy Efficiency Policy Assessment Case studies from the region Regional Workshop: National Energy Efficiency Action Plans Amman, 5-6 December, 2010 Amel BIDA Ashraf KraidyRegional Center for Renewable Energy and Energy Efficiency
  2. 2. Policy Assessment PerspectivesCost-benefit analyses of the impacts of policies and measures for EEimprovement and energy saving can be conducted from differentperspectives:• perspective of society or economy, with or without consideration of external costs• perspective of the state (government)• perspective of the actors implementing energy efficiency activities (e.g. Energy companies, energy agencies)• perspective of the end-users, differentiated between beneficiaries of the measures and end-users who do not make use of the measures.
  3. 3. Evaluation Methodology• Evidence Based Policy Making: 1. Alternative forms of intervention 2. Base-case 3. Impacts 4. Consultation 5. Compliance 6. Indicators 7. Economic Cost benefit analysis
  4. 4. Case Study 1:Evaluation of Standards and Labels Program for Refrigerators in Syria
  5. 5. Assumptions of the study• 3.8 million households in Syria with 100% penetration of refrigerators (approximately true)• 1% growth per year in the refrigerator stock per year• 1% growth in the size and consumption of the average appliance• Lifetime of 15 years for appliances and that the age profile is flat so that 1/15 of the stock is replaced every year
  6. 6. Engineering Parameters for BaselineRefrigerators and Efficiency Improvements
  7. 7. Residential electricity tariff
  8. 8. Optimal Design by Tariff LevelAt 12 Usc/kWh the optimal design at a discount rateof 15% is level 5, which gives a saving of about 24%with respect to the base case
  9. 9. Study Results• Impacts over the country are a reduction by 51 GWh per year of electricity use and 40,000 tonnes of CO2.• After 15 years the annual impact would be some 750 GWh, roughly corresponding to a 100 MW power plant..
  10. 10. Case Study 2:The Evaluation of the Jordan Renewable Energy and Energy Efficiency Fund
  11. 11. The Evaluation of the Jordan Renewable Energy and Energy Efficiency Fund• The fund have been established through the renewable energy and energy efficiency law no.3 for the year 2010• In this case study we therefore focus in this instance on the energy efficiency tasks of the Fund.
  12. 12. Economic Cost Benefit Assessment
  13. 13. Economic Cost Benefit AssessmentEE Investment subsidy program
  14. 14. Results of cost-benefit AnalysisGovernment Budget ImpactGovernment Impact without CERs RevenuePay-Back Period Years 4.5Net Present Value Million $ 5.32IRR % 19Government Impact with CERs RevenuePay-Back Period Years 3.2Net Present Value Million $ 12.18IRR % 29
  15. 15. Case Study 3:Mandatory Audits in Tunisia
  16. 16. Most frequent measures
  17. 17. Mandatory Audits in Tunisia  Industry : all consumers using more than 800 toe / yearDecree  for other sectors : 500 toe / yearThe size of the consumer. - 100 000TND for establishments consuming less than 4000toe/year, - 200 000 TND for a threshold of 4000 toe/year, - 250 000 TND for still larger consumersThe scope of the audit must cover· A description of the establishment and its principle characteristics that pertain toenergy use,· An evaluation of the energy performance,· An evaluation of the management system for energy efficiency,· Recommendations to improve performance, accompanied by economic evaluation,· An action program
  18. 18. Economic cost-benefit assessment.- the national economy (standard economic analysis)- the Government budget,- the investor (standard financial analysis)Data Base for the Case Study
  19. 19. Assumptions - total investment volume of 1 million EURO - Energy saving : 600 toe - Total economic value of energy saving : 250 000 Euros (600 toe*600$) Avoided subsidy payment : 50 000 Euros- Energy subsidies : 20% Total market value of energy saving : 200 000Euros financial incentivesavailable only in the framework of a contract between theorganization and the ANME and only after the investment hasbeen made
  20. 20. Data projectTotal investment : 1080 000 Euro - Inv : 1000 000 - Audit cost : 40 000 - feasibility study: 40 000The investors are reimbursed : - 70% (audit and feasibility study costs) 256 000 Euro - 20% (investment costs)The net investment costs : 824 000 EurosEconomic Value of energy saving : 250 000 Euros (600 toe*600$)Subsidies on fuel : 20%  the Government subsidies amount to 50 000 Euro. the market value of the fuel savings are 200 000 Euro
  21. 21. Result of the program and investment appraisal Investor level Assessment criteria Economy Gov.Bud Investment Program RoE Pay-back period 5.3 6.4 5.6 5 1.2 Return on invest/equity 13% 10% 12% 15% 92% Net present value 155 529 -1655 -204 463 -116 319 321 104Economy  The audit program is highly beneficial for Tunisia.The IRR = 13% > the assumed threshold for the economic assessment of 10%.Government budget  The audit program is quite non beneficial The NPV < 0 - Project assessment: IRR = 12% < the investors required (20%)Investor level  - Program sponsored: IRR = 15% < 20% threshold of the investors - Return on equity: IRR = 92% > 20%
  22. 22. Case Study 4:Energy Efficiency Obligation in Egypt
  23. 23. Energy Efficiency Obligation in EgyptElectricity law in Article 55:Owners of transmission and distribution licenses have to carry out projects orprograms in energy efficiency, especially in: • Management of demand for electric power • Improvement of the electric power utilization efficiency • Promotion of equipment used for renewable energy • Raising consumer awareness with respect to power utilization efficiency Discount rate : 10%General Data for Exchange rate: 7.8 Egypt Pound /Eurothe Analysis Split program/ total cost : 50% AssumptionThat network operators are obliged to demonstrate cumulative annualenergy savings equal to 160 GWh per year.The utility implements a program to induce the consumers to use certain typesof equipment and will be responsible for 50 % of the total cost for the EEmeasures.
  24. 24. Perspective of the whole country: - Cost for a new gas fired power station (CCGT unit) - Total cost for the energy efficiency measure the unit costs are lower than the marginal cost of electricity supply all measures are cost efficient. IRR 17% NPV 3.3 million Eurothe average cost for the EE measures is 0.024 Euro/kWhthe marginal cost of electricity supply is 0.050 Euro/kWh.
  25. 25. Perspective of the Utility- Cost for a new gas fired power station (CCGT unit)- Total 50% cost for the EE measure, which have to paid by the utility The utility - has probably little or no interest in applying its obligation to consumers on high tariffs, - may gain financially from targeting consumers on low tariffs. the quantity "Supply Cost - Lost Revenue“ : - is large for the consumers on low tariffs. It exceeds by a comfortable margin the cost of the measures. - is not true in the case of the consumers on higher tariffs.
  26. 26. Perspective of the electricity user (residential sector):- Tariff according to the consumption class- Total 50% cost for the EE measure, which have to paid by the utility all of the EE measures are cost efficient for the electricity user for the two tariff levels considered. Only the solar water heater is not cost efficient for the lower tariff. IRR (low tariff) 6% IRR (High tariff) 61% NPV (million Euro) 14.23
  27. 27. OutcomeOnce the economic feasibility of EE measures isproven, it is necessary to develop and appropriateincentive scheme (tariffs and grants) so that foreach party (user &utility) there will be a gain inimplementing the EE program.
  28. 28. Subsidy grants worldwide Subsidies by type of equipment
  29. 29. ConclusionEnergy audit :the real impact can be achieved only if the EE investors will haveaccess to loans to finance their identified investments.EE obligation :Once the economic feasibility of EE measures is proven- The utility should focus its efforts as far as practical on consumers enjoyingconcessionary tariffs, where its lost revenue is least.-It is necessary to develop and appropriate incentive scheme (tariffs andgrants), so that for each party (user &utility) there will be a gain in implementingthe EE program.
  30. 30. Thank you for your attention.Regional Centre for Renewable Energy and Energy EfficiencyNasr City, Cairo, EgyptTel. +2 02 241 54 691Fax +2 02 241 54