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Decentralized energy1 is showing ever-increasing promise as a cost-effective method of electricity supply resulting in significant environmental benefits. Though every sector of the DE industry is showing impressive growth, the total share of DE in overall global electricity capacity remains only about 7.2%.2 Lack of clear policy in the energy sector is one of the main barriers that prevents more DE investment. It is clear that adopting policies, which ensure an independent regulator combined with open markets that reward investors for noneconomic benefits of DE will be essential in driving future growth in the sector.3

In June 2004, the largest renewables energy event to date was held in Bonn, Germany. More than 3000 attendants from 154 nations attended. Although the conference dealt only with renewables, to a large extent the recommendations would also hold true for all forms of DE, including cogeneration. Arising from that event were some guidelines for policy makers as to what must be put in place in order for DE policy to be effective. Therefore, in order for DE to become an integral part of the energy mix, policymakers must:4

1. Integrate DE into overall energy policy

2. Establish clear goals

3. Establish transparent market conditions

4. Reduce or eliminate subsidies for conventional centralized energy

5. Address cost issues

6. Create incentives that are eventually phased out

7. Ensure energy issues form part of the basis of decisions in "nonenergy" sectors, such as urban planning and infrastructure, etc.

8. Educate the public on the benefits and costs of DE

9. Promote DE jobs and training

10. Develop public organizations to promote DE

11. Strengthen regional and international cooperation on DE matters

12. Secure grid access for DE

13. Not omit thermal energy in decision-making

14. Support research and development in DE

15. Involve a range of actors in promoting DE, including local governments, financiers, international bodies, and multi and bilateral banks and institutions

16. Harness the power of public procurement

1DE technologies consist of the following forms of power generation systems that produce electricity at or close to the point of consumption:

• High efficiency cogeneration/combined heat and power

• On-site renewable energy systems

• Energy recycling systems, including the use of waste gases, waste heat, and pressure drops to generate electricity on-site

WADE classifies such systems as DE regardless of project size, fuel or technology, or whether the system is on-grid or off-grid.

2World Survey of Decentralized Energy. 2005. WADE.

3Seven Guiding Principles for Effective Electricity Market Regulation. 2003. WADE.


In general, it is important that a policy be stable enough in the long term to foster confidence to everyone that the rules will not change after they have committed to one plan of action. Involving locals in the establishment of DE policies is the other key to both garnering public support and establishing a basis of shared experience on which future policy revisions can be made.

The above list illustrates some of the goals of policies to promote DE. There are a multitude of approaches that can be used to achieve these goals and the following section provides many examples from all over the world. For each of the nations covered in this chapter, there will be a short summary paragraph followed by a table with three major headings: Technical, Financial, and Other.

The Technical heading will discuss policies that address technical issues, such as mandated technologies, interconnection procedures, manufacturing and interconnection standards, and safety rules. Technical policies if designed carefully can be important drivers for DE investment just as poorly designed policies or lack of policies can stifle investment in DE.

The Financial heading will cover policies that exist in the area, which are based on economic incentives, such as rebates for investing in certain technologies, tax breaks for eligible investments and pricing arrangements for power produced by onsite generators. Although project economics is affected by a multitude of factors (including fuel prices, capital expenditures, opportunity costs, etc.), financial policies can often make the difference between a project that is feasible and one that is not.

The Other section will discuss all remaining issues relating to DE policy, including more general policy guidance and legislation mandating DE use or energy efficiency/renewables.

The general organization of each section will take the form of the table below.

In some cases, no examples for the specific category of policy/technology were found for a given jurisdiction, in which case the given cell was left blank (Table 2.7).

It is very difficult to separate policies that aim to promote renewables and efficiency in general from those aimed at promoting DE. For example, many policies aim to promote renewables in general including large-scale wind farms, which should not necessarily be considered DE. Likewise, some policies are aimed at only cogeneration and do not affect renewables. In other cases, for example, in the case of rooftop PV, renewable and DE policies are one and the same. In most cases, however policies

TABLE 2.7 General Organizational Structure for Country Policy Summaries


DE in general Large-scale cogeneration Domestic cogeneration PV Wind Hydro Financial

DE in general Large-scale cogeneration Domestic cogeneration Onsite PV Onsite wind Small hydro Other

DE in general

Large-scale cogeneration

Domestic cogeneration

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