Provision of Technical Support/Services for an Economical ......GJ Giga Joule GWh Giga Watt hours HV High Voltage IBRD International Bank for Reconstruction and Development (Worldbank)

A project financed by the Ministry of Foreign Affairs of Denmark

Provision of Technical Support/Services for an

Economical, Technological and Environmental Impact Assessment of National Regulations and Incentives f or

Renewable Energy and Energy Efficiency

Country Report Jordan

September 2009, Revised April 2010

Norsk-Data-Str. 1 61352 Bad Homburg, Germany

Tel: +49-6172-9460-103, Fax. +49-6172-9460-20 eMail: [email protected]

http://www.mvv-decon.com

Döppersberg 19 42103 Wuppertal, Germany

Tel: +49-202-2492-0, Fax: +49-202-2492-108 eMail: [email protected]

http://www.wupperinst.org

Economical, Technological and Environmental Impact Assessment of National

Regulations and Incentives for RE and EE: Country Report Jordan

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Table of Contents Page

1. Project Synopsis 1

2. Summary of Energy Situation in Jordan 2

3. Comparison of Jordanian Practice with International Practice in Energy Efficiency 3

3.1 Strategy 3

3.2 Legal Reform 4

3.3 Price Reform 5

3.4 An Agency 5

3.5 Standards and /or Labels 6

3.6 Financial Incentives 8

3.7 Obligations 9

3.8 Audits and the Promotion of ESCOs 10

3.9 Transport and Spatial Planning 11

3.10 Information 12

4. Comparison of Jordanian Practice with International Practice in Renewable Energy 14

4.1 Targets and Strategy 14

4.2 Legal Reform 15

4.3 An Agency 16

4.4 Standards and /or Labels 16

4.5 Financial Incentives (Capital Support) 16

4.6 Feed-in Tariffs and Obligations 17

4.7 Information 19

4.8 Industrial Policy 19

5. Case Studies 20

5.1 Evaluation of an Energy Efficiency Fund 20

5.1.1 Background and Context 20

5.1.1.1 The Jordan Renewable Energy and Energy Efficiency Fund 20

5.1.1.2 Background in Jordan 20

5.1.1.3 Scope of the Case Study 21

5.1.2 Evidence-based Policy Making 21

5.1.2.1 Alternative Forms of Intervention 22

5.1.2.2 Base Case 25

5.1.2.3 Impacts 26

5.1.2.4 Consultation 28

5.1.2.5 Compliance 28

5.1.3 Theory-based Evaluation 29

5.1.3.1 Methodology 29

5.1.3.2 Indicators 29

5.1.3.3 The Behavioural Matrix 29

5.1.4 Economic Cost-Benefit Assessment 34

5.1.4.1 Methodology Applied 34

5.1.4.2 Assumptions and Data Base 34

5.1.4.3 Result of the Cost-benefit Analysis 35

5.1.5 Conclusion 39



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Table of Contents Page


5.1.5.2 EE Fund as Policy Instrument 39

5.2 Evaluation of Policy Instruments for Private Wind Energy Development 40

5.2.1 Background and Context 40

5.2.1.1 Promotion of Private Investment in Wind Energy in Jordan 40


5.2.2 Comparison of Policy Instruments for the Promotion of Wind Power 41

5.2.2.1 General Context 41

5.2.2.2 Competitive Bidding 42

5.2.2.3 Feed-in Tariff 43

5.2.3 Evidence based policy 43

5.2.3.1 Result of the Comparison 51

5.2.4 Economic Cost-benefit Assessment 55

5.2.4.1 Assumptions and Data Base - Wind 55

5.2.4.2 Assumptions and Data Base - Steam Turbine HFO Fired 56

5.2.4.3 Result of the Assessment 58

5.2.4.4 Variation HFO Prices and Required Rate of Return on Equity 59

5.2.4.5 Carbon Credits 60

5.2.5 Conclusion 61

5.2.5.1 The Methodology 61

5.2.5.2 Policy instruments for wind 62

5.3 Evaluation of CDM Project: Amman Ghabawi Landfill Gas to Energy Project 63

5.3.1 Presentation of the Case Study 63

5.3.1.1 Context and Scope 63

5.3.1.2 Amman Ghabawi Landfill Gas to Energy Project 63


5.3.2 Evidence-based Policy Making 64

5.3.2.1 Steps of Policy Preparation 64

5.3.2.2 Alternative Forms of Intervention 66

5.3.2.3 Base case 67

5.3.2.4 Impacts 67

5.3.2.5 Consultation 69

5.3.2.6 Compliance 69

5.3.3 Theory-based Evaluation 70


5.3.3.2 Indicators 70

5.3.3.3 The behavioural matrix 70

5.3.4 Economic cost-benefit assessment 72

5.3.4.1 Methodology Applied 72

5.3.4.2 Assumptions and Data Base 72

5.3.4.3 Results of the Analysis 73

5.3.5 Conclusion 80

5.3.5.1 The Methodology 80

5.3.5.2 Revenues from CERs as a policy instrument 80

6. Institutional Reform - Some Possibilities 81

6.1 Concentrating Institutional Responsibilities 82

6.2 Strengthening Political Backing 82

6.3 Creating Adequate Incentives 83



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List of Annexes Annex 1: Mission Report

Annex 2: List of Stakeholders

Annex 3: Seminar Programme

Annex 4: Data Matrix

Annex 5: Presentation on Methodology

Annex 6: Preview on Training

Annex 7: Energy Situation in Jordan

List of Tables Table 1: Portfolio of Activities for the Fund

Table 2: Allocation of EE investment subsidies

Table 3: Estimation of Impacts

Table 4: Behavioural Matrix for Energy Efficiency Fund

Table 5: Key-parameters for the case study

Table 6: EE Investment subsidy programme

Table 7: Government budget impacts

Table 8: Operators' impact assessment

Table 9: Government Budget Impacts - Cash flow Projections

Table 10: Operators' Impacts - Cash flow Projections

Table 11: Behavioural Model of Competitive Bidding for Wind IPP and associated Indicators, Risks and Assumptions

Table 12: Behavioural Model of Feed-In Tariff for Wind IPP

Table 13: Criteria for Choice among Options

Table 14: Data for Wind Energy

Table 15: Data for HFO Steam Turbine

Table 16: Wind Energy - Economic Assessment Criteria

Table 17: Wind Energy - Impact of HFO and Return on investment requirements

Table 18: Wind Energy - Economic Assessment Criteria with Carbon Credits (Base case)

Table 19: Wind Energy - Economic Assessment Criteria with Carbon Credits

Table 20: Behavioural matrix for landfill gas recovery

Table 21: Key-data and Parameter

Table 22: LFG Flaring Option - Key Results

Table 23: LFG Electricity Generation Option - Key Results

Table 24: LFG Electricity Generation Option - Incremental Analysis - Key Results

Table 25: LFG Flaring Option - Cash Flow Projection

Table 26: Electricity Generation Option - Cash Flow Projection

Table 27: Incremental Investment for Electricity Generation - Cash Flow Projection

Table 28: Installed Capacity of Renewable Energy in Jordan



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List of Figures Fig. 1: Heavy Fuel Oil - Long-term Price Projection

Fig. 2: Forecasts of crude prices to 2030 (DOE/IEA)

Fig. 3: Forecast of Unit Costs for Wind Energy and Steam-turbine HFO

Fig. 4: Impact of required rate of return on investment upon unit costs

Fig. 5: Wind Energy Option - Net Cash-flow with Carbon Credits

Fig. 6: Forecasts of annual production of LFG

Fig. 7: Investment schedule for power generation (MW)

Fig. 8: CO2 equivalent emissions avoided by flaring

Fig. 9: GHG emissions avoided by electricity generation

Fig. 10: LFG Flaring Option - Impact of CERs upon IRR

Fig. 11: LFG Electricity Generation Option - Impact of CERs Generation Unit Costs

Fig. 12: LFG Electricity Generation Option - Impact of CERs upon IRR

Fig. 13: Electricity Generation Option - Incremental Analysis - Impact of CERs upon IRR

Fig. 14: Illustration of the Policy Process

Fig. 15: Scenarios of Jordan’s Primary Energy Demand

Fig. 16: High Scenario of Jordan’s Energy Demand by Fuel

Fig. 17: Scenario of Jordan’s Electricity Consumption

Fig. 18: Jordan’s Primary and Final Energy Intensity in Comparison to EU-27

List of Acronyms AFD Agence Francaise de Development BRT Bus Rapid Transit CCGT Combined Cycle Gas Turbine CDM Clean Development Mechanism CEGCO Central Electricity Generation Company CER Certified Emission Reduction CFL Compact Fluorescent Lamp CNG Compressed Natural Gas CSP Concentrated Solar Power CTF Clean Technology Fund DANIDA Danish International Development Agency DSM Demand Side Management EBPM Evidence Based Policy Making EE Energy Efficiency EHV Extra high voltage EIA Energy Information Agency EPC Energy Performance Contract ESCO Energy Service Company EU European Union g gram GEF Global Environment Fund GHG Green House Gas



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GJ Giga Joule GWh Giga Watt hours HV High Voltage IBRD International Bank for Reconstruction and Development (Worldbank) IDA International Development Agency IEA International Energy Agency IISD International Institute for Sustainable Development IPP Independent Power Producer JICA Japanese International Cooperation Agency JISM Jordan Institute for Standards and Metrology JREEEF Jordan Renewable Energy and Energy Efficiency Fund kWh kilo Watt hours LEED Leadership in Environmental and Energy Design LNG Liquefied Natural Gas LPG Liquefied Petroleum Gas LRT Light Rail Transit LV Low Voltage MED-EMIP Euro-Mediterranean Energy Market Integration Project MED-ENEC Euro-Med Project on Energy Efficiency in the Construction Sector MEMR Ministry of Energy and Mineral Resources MENA Middle East and North Africa MMBTU Million British Thermal Units MV Medium Voltage MW Megawatt NEPCO National Electric Power Company NERC National Energy Research Center NET PV Net Present Value OECD Organisation for Economic Cooperation and Development PPA Power Purchase Agreement PSA Production Sharing Agreement RCREEE Regional Centre for Renewable Energy and Energy Efficiency RE Renewable Energy TBE Theory Based Evaluation toe tons of oil equivalent UNDP United Nation Development Program USAID United States Agency for International Development

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1. Project Synopsis The "Regional Centre for Renewable Energies and Energy Efficiency (RCREEE)" was formally estab-lished June 25, 2008 through the signing of the "Cairo Declaration of Intentions on Establishment of a Regional Centre for Renewable Energies and Energy Efficiency (RCREEE)" by representatives of its member states: Algeria, Egypt, Jordan, Lebanon, Libya, Morocco, Palestine, Syria, Tunisia and Yemen. The overall objective of RCREEE is, through its interventions, to achieve: a) rapid implementation of cost-effective policies and instruments for the increased penetration of re-

newable energy (RE) and energy efficiency (EE) technologies and practices in member countries; and

b) increased market shares of companies and plants located in MENA-countries on the markets for technologies and services related to RE and EE in the MENA and EU regions.

For the first five years of operation, RCREEE receives financial support from the Governments of Egypt, Germany and Denmark. The European Commission (EC) supports RCREEE through two re-gional programs: "MED-EMIP" and Phase II of "MED-ENEC". Member countries will contribute finan-cially by increasingly co-financing the costs of the participation of national officials in RCREEE semi-nars and workshops. The present project is the first project support to RCREEE from the Danish Government. It is part of RCREEE's overall effort of providing member state administrations with better information and new planning tools and processes. It supports RECREEE in the development of a website which offers ac-cess to a complete subject-ordered list of member state RE&EE laws and regulations, reviewed policy documents, selected background and evaluation reports deemed to represent state-of-the art high quality analytical work as well as discussion blogs on topics deemed to be of general interest for RCREEE governments. In parallel and supporting the above activities, the project has gathered the pertinent information on EE and RE in each member country and made them available through the RCREEE website in an or-ganised manner. Likewise the methodology on evidence based policy development and theory based policy evaluation was discussed and extended in each country and their relevance and applicability il-lustrated through case studies. On the basis of the country reports, a regional report was prepared to allow policy makers and decision makers in all RCREEE member countries to see the status of their EE and RE policies in a comprehensive regional context. The activities were carried out by the project core team of four international experts assisted in each country by a national specialist. Workshops were held by the national specialists at the end of the pro-ject using the material and the methodological case studies developed throughout the project. The na-tional and regional reports were revised to take into account the comments received. Jordan was visited by the project team during 26 – 31 July 2009. The following sections in this report reflect the impressions gained by the project team through the discussions held during the course of the mission and all the information that has been available to the team. The main purpose of this country paper is to stimulate new thought on EE and RE policy development in Jordan.

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2. Summary of Energy Situation in Jordan Natural gas and crude oil/petroleum products cover approximately 98% of Jordan’s total primary en-ergy supply while renewable energy represents less than 1%. As Jordan lacks domestic natural gas and conventional crude oil resources, their high shares in the national energy mix imply a striking de-pendence on energy imports of more than 90%. In 2007, total spending on energy imports was equivalent to around 20% of the gross domestic product. While Jordan is short of conventional crude oil reserves, it accommodates an extremely large proven oil shale resource. Geological surveys indicate that the existing shale reserves cover more than 60% of the country and amount to in excess of 50 billion tonnes. So far, economic constraints did not justify the exploration of this resource. However, in 2007, the Jordanian government has adopted an up-dated national energy strategy in which it aims to foster oil shale exploration due to rising crude oil prices and growing energy demand. Most of the Jordanian energy sector is under auspices of the Ministry of Energy and Mineral Re-sources (MEMR), which was established in 1984. The role of the MEMR is to define policies, to fix tar-iffs and to regulate all activities with an impact on energy. MEMR’s responsibilities also include strate-gies and projects to promote renewable energy technologies, such as solar water heaters or wind en-ergy. There is a dedicated authority for nuclear energy that is responsible directly to the Prime Minis-ter. In the electricity sector, MEMR aims to increase the share of efficient natural gas-fired power plants and foster the utilisation of nuclear power as Jordan possesses significant proven recoverable re-serves of uranium. By 2013, the construction of the country’s first nuclear power plant is scheduled to begin. The plant is expected to be operational by 2017/2018. At the time being, total installed power generating capacity is 2,098 MW with fossil-fired steam units and combined cycle plants accounting for nearly 92%. Wind turbines, biogas facilities and hydro units cover less than 1% of the national power supply. Almost 95% of Jordan’s electricity is supplied by the Central Electricity Generating Company (CEGCO), while the National Electric Power Company (NEPCO) is responsible for the transmission and distribution of electricity. The 2007-2020 energy strategy of the Jordanian government includes ambitious targets to increase the contribution of renewable energy sources to the national energy supply. The share of renewable energy in the total energy mix shall reach 7% by 2015 and 10% by 2020, including 600 MW of wind energy projects and 300-600 MW of solar thermal projects. Furthermore, the strategy recognises the country’s great potential to reduce energy consumption via energy efficiency measures. For example, studies came to the result that the industrial and commercial sector may reduce energy consumption by 20%. In order to meet the target for renewable energy and to improve energy efficiency, legal pro-visions were established for a fund supporting renewable energy and energy efficiency projects.

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3. Comparison of Jordanian Practice with Internatio nal Practice in Energy Efficiency

This section attempts to compare the present status of energy efficiency with international practice. Public policy intervenes to correct market failures, in the case of energy efficiency the most common failures are: distorted energy prices, external costs, poor access to technical information, agent-principal problems, budgetary constraints and excessive risk aversion, poor skills of investment ap-praisal. Policy instruments are intended to correct or compensate for these distortions. The most common among these instruments can be categorised as: Corrective Measures

Price Reform Institutional and legal reform Labelling Dissemination of information Research, development and demonstration Financial incentives Support for energy service companies (ESCOs)

Compensating Measures

Standards Mandatory measures (e.g. compulsory audits and management obligations) Corporate agreements Efficiency obligations Transport and spatial planning

Normally these instruments should be combined within an overall strategy that sets out objectives and targets and defines the combinations of instruments that are expected to achieve the targets. The following discussion reflects this taxonomy. 3.1 Strategy Strategy sets out objectives and targets and defines the combinations of policy instruments that are expected to achieve the targets. A National Energy Efficiency Strategy was published in 2004. The strategy identifies critical policy ar-eas:

1. Tariff reform – which has largely been achieved 2. Legislation: to require and/or encourage high-efficiency equipment and services, through fiscal and customs measures, technical standards, building codes and thermal insulation requirements, and traf-fic optimization – which is in an early state of development 3. Awareness and training programs: training to key stakeholders and targeted groups, and increasing the general public’s awareness 4. Financial policies: including the establishment of a “special fund for financing energy conservation projects with a shared capital between the government and donor institutions to provide soft loans for these projects” - this is contained within the draft renewable energy law.

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A review of the entire energy strategy of Jordan was made in 2007; this detected no particular obsta-cles to the implementation of the 2004 energy efficiency strategy. The National Energy Research Centre had estimated that reasonable measures of energy efficiency could save 21% of the country energy consumption and this seems to have informed the updated strategy for energy efficiency within the 2007 Energy Sector Strategy. The revised strategy aims to save 20% energy at a cost of about $US 76 – 155 million. The figure of 20% saving is not explicitly identified as a target, but it is implicit in the wording of the discussion. Specific recommendations in the strategy are: To create a binding mechanism to implement programmes and procedures, covering: • Awareness in all sectors • Establish energy efficiency service offices for the public • Exempt equipment from taxes • Implement energy efficiency in transport: by better maintenance of vehicles, reducing taxes on ef-

ficient vehicles, use of light electrical systems, promote replacement of old vehicles, promote use of public transport, economical driving techniques, speed limits, telecommuting

• Implement codes for energy saving buildings • Create a national award for energy efficiency The MEMR is now planning to modify the 2007 Energy Strategy to take into account the new law (see below). 3.2 Legal Reform The proper implementation of energy efficiency requires an energy efficiency law that justifies the purpose of the activity, establishes a clear focus in government, assigns the responsibilities of actors, makes provision for an agency and specific instruments. The following list contains the most frequently occurring provisions in such laws:

• Recognising energy efficiency as an appropriate subject of legislation and regulation • Identifying and communicating in a policy document or national plan the principles of energy

efficiency policy • Identifying through technical analysis the potential for saving and prioritizing the sectors with

highest potential • Defining policy interventions to promote energy efficiency e.g. fiscal and financial incentives,

tradable certificates, and regulations • Drafting of legislation to implement policy interventions • Setting penalties for default • Creating institutional structures to promote energy efficiency • Assigning staff in proper numbers and with proper qualifications to the institutions and ensur-

ing adequate finance for the institutions • Drafting national programmes for short and long-term management of energy efficiency • Assigning responsibility to promote energy efficiency at national, regional and municipal levels • Monitoring and evaluating progress

There are no specific laws in force in Jordan at present that address energy efficiency. A draft Energy Efficiency Law was prepared in 2002 with the participation of NERC under GTZ funding and was submitted to MEMR. The concepts of the law were partially subsumed into Jordan’s National Energy Efficiency Strategy in 2004. A draft law has been prepared for the promotion of renewable energy. This law is relevant also to en-ergy efficiency because it proposes a fund to support activities in both energy efficiency and renew-

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able energy. The Law does not specify in any detail the activities would facilitate the achievement of these targets. The provisions of the Law and the modes of governance are discussed in detail in the section on renewable energy. The content that is relevant to energy efficiency is discussed under the section on financial incentives. The Law has been agreed by the Cabinet and will enter into force as soon as it is signed by the King. 3.3 Price Reform It is well established that energy demand is price sensitive, especially demand for electricity. The most reliable results come from industrialised countries. Price reform will save large quantities of en-ergy, especially in the long-run and can make a substantial reduction in GHG emissions from coun-tries with distorted prices. Subsidies put a large strain on public accounts and weaken foreign trade balances. They also tend to devastate the state-owned enterprises that are normally a victim of the practice. Until 2003, energy prices in Jordan were very low, sustained by concessionary oil from Iraq. After the war in 2003 these supplies ceased and prices rose very fast. There are now no significant subsidies to energy in Jordan. Petroleum products are sold at full international prices plus a tax, with the excep-tion of LPG for households which receives consumer subsidies from the government. Electricity is not subsidised overall, although there are cross-subsidies in the Bulk Supply Tariff that favour the distri-bution companies serving the rural and dispersed areas at the expense of the distribution company operating in Amman. There are also cross-subsidies in retail prices in favour of water pumping, street lighting and low-income households. Natural gas is procured from Egypt at international prices. 3.4 An Agency Many countries have found it useful to establish a specialised institution to prepare initiatives, draft regulations, monitor progress, ensure compliance, administer funds and perform other administrative activities. It will not necessarily be the only institution with powers in the area. If fiscal incentives are adopted then these will be managed through the office responsible for taxation, but there will still be a need to confirm the technical acceptability of the investment. Compliance with standards for equip-ment and boilers will normally be performed by special corps of inspectors already engaged in stan-dards work. The regulator would normally enforce any specific obligation on electricity networks. Despite the need to involve existing institutions, it is often considered useful to create a specialised agency. This agency would typically have the following responsibilities.

• Developing and disseminating targeted information to specific categories of users • Organising training; liaison with universities and professional bodies • Developing energy efficiency standards • Conduct of surveys; analysis of data and maintenance of database • Conducting or managing programmes of certification and labelling • Liaising with other state institutions (e.g. Taxation offices and inspectorates) • Administering energy efficiency funds • Specifying mandatory audits; certifying and/or licensing energy auditors • Designing short-term and long-term energy efficiency programmes • Monitoring, evaluating and reporting on the implementation state activities and private initia-

tives • Designing and proposing new interventions as opportunities are identified

Legislation would probably be needed to establish such an agency and to specify its duties.

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The National Energy Research Centre (NERC) was established in 1998 by the amalgamation of the National Renewable Energy Research Centre with other research institutions. Its mission is to con-duct research, development and training in new and renewable energy and to promote efficient en-ergy use throughout the economy; it began work in 2000. It is a semi-public organisation; the Presi-dent is nominated by the King on the recommendation of the Minister of Energy who is the Chairman of the Board of Directors. It needs to be strengthened to fulfil its tasks more effectively and to reflect the increasing importance of its mandate. About 10 – 15% of the funding of the Centre comes from government the rest is from outside sources, mainly from agencies of technical cooperation. The National Agenda, within the Infrastructure Up-grade Theme, declares an intent to “strengthen the role of NERC to develop the exploitation of new and renewable energy resources, promote energy conservation.” The Law for the Promotion of Renewable Energy foresees that the JREEEF will be governed by a Board of Directors reporting to the Office of the Prime Minister and including representatives from the Ministries of Energy (MEMR), Environment (ME), Planning and International Cooperation (MOPIC), and Finance (MF), one from the National Energy Research Centre, and four from the private sector. Although not specified it the law it is expected that NERC would act as the technical arm of the Fund. This could raise concerns about conflict of interest in that NERC is both an adviser to the Fund and a likely applicant. The World Bank apparently proposed a new entity to manage the energy efficiency and it maybe that this was their concern; the GoJ considered that the effort in creating a new agency was not justified. The JREEF was formally established with the entry into force of the new law and its detailed mode of operation is outlined in its work manual, but it still needs to be established by a sup-plementary regulation. This combination of the Fund in the Law and the enhanced role of NERC in the National Agenda, taken together, cover most of the roles of an agency identified in the preceding list. The preferred so-lution for governance is that the Fund should be controlled by a body that is independent of any par-ticular sectoral interest. Best practice might be an independent body with Ministerial representatives to ensure coherence with political objectives. The inter-Ministerial Committee in the Law proposed is a reasonable compromise. As an interim measure, a JREEEF Project Management Unit has been cre-ated comprising officials from the Renewable Energy Department of MEMR and the Projects Depart-ment of MOPIC. Inter alia, this PMU manages some of the early donor contributions. 3.5 Standards and /or Labels The obligation on manufacturers and importers of equipment to label goods or to meet specified stan-dards is a policy measure introduced to overcome the market failure caused by asymmetric informa-tion. Potential users of equipment, faced with a choice of designs, may not have the skills and infor-mation to understand the consequences of their choice. They may be tempted to choose low-cost equipment with high energy consumption in preference to higher price options that perform better. Manufacturers may not have an incentive to provide this information if they think that their compara-tive market advantages do not include greater efficiency than competitors. Labelling and standards are not exclusive; goods can be obliged to meet a certain minimum standards and then labelled ac-cording to their performance when it exceeds the standard. Labelling and standards both require test-ing facilities and protocols; both require rigorous and competent enforcement. Presently, no labelling system in force in Jordan. Responsibility for the development of standards lies with NERC and the Jordan Institution for Standards and Metrology (JISM). JISM is responsible for the development, promulgation and enforcement of standards and NERC has the technical expertise in

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the energy using appliances and should advise JISM in the technical specifications. The two agencies have developed standards and testing protocols and a design for a Jordanian label, but none of this has the force of law. There are no testing centres for appliances in Jordan, although NERC is attempt-ing to develop the necessary laboratories. UNDP in Jordan has now developed a project to be implemented by NERC to address some of the barriers to the development of a system of labels and standards. The project has been agreed and the project document will be published soon. The project aims to enhance the capacity of government and the respective agencies to develop standards and appropriate flanking policies for market trans-formation. It will also propose a sustainable arrangement for verification & enforcement of appliance labels and standards and will stimulate consumer awareness of the benefits of choosing more efficient products. Finally, it will also support the capacity of manufacturers to produce and market efficient ap-pliances. Standards for buildings are an important special case because:

• The rate of new building in developing countries is far higher than anywhere else in the world • Buildings are large consumers of energy • Buildings last for decades and will determine energy use for a very long time • Large improvements in the energy efficiency of buildings can be achieved at low cost • Developers will not normally make those improvements because of various chronic market

failures • The principal-agent dilemma is especially acute

Building regulations do not include any mandatory requirements for energy performance or specify the thermal properties of construction materials. There are some guidelines for the selection of HVAC equipment and for thermal insulation, but they are voluntary. Construction companies in Jordan are familiar with sustainable technologies for buildings and adopt them in Gulf countries, but do not im-plement them in their home country because there is no demand. In Amman and probably elsewhere the regulatory compliance with codes is outsourced to specialist organisations; the Jordan Engineering Association carries out all inspections related to technology and engineering, while Jordan’s Civil Defence performs those related to safety. The priorities of regu-latory compliance are structural integrity and safety. The Ministry of Public Works is preparing a code for green buildings. The work is conducted by the National Building Council, chaired by the Minister of Housing and Public Works; it is still in a prelimi-nary stage, but is expected to include mandatory minimum requirements for the thermal properties of external surfaces and for the recycling of grey water. The reuse of water, part from being important in its own right, is a significant contribution to energy saving as large amounts of energy are used to pump water up to Amman from much lower levels. Water pumping in Jordan represents 15% of elec-tricity demand. There may also be incentives for developers to exceed the minimum standards. The drafting committee is considering provisions to promote solar water heating, but no decision has yet been made. The municipalities will be responsible for verifying the design when they are submitted and for verifying completion according to specification. It is common in Jordan to outsource verifica-tion, as noted above, and this may be done for energy efficiency also. The code is expected to be published in the middle of 2010 and to be accompanied by guidelines for how it is to be interpreted by developers. The LEED (Leadership in Environmental and Energy Design) Green Building Rating System devel-oped by the U.S. Green Building Council (GBC) is well recognised in Jordan and three buildings are

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in the process of certification. A private firm of Jordanian origin has developed considerable expertise in this area and has been involved in the certification process for 63 buildings. The technical capacity clearly exists in the country. 3.6 Financial Incentives Financial incentives can be separated into economic and fiscal incentives. Economic incentives are aimed at encouraging investment in energy efficient equipment and processes by reducing the in-vestment cost directly and fiscal incentives are those actions that reduce the cost indirectly through the taxation system. Economic incentives can be further divided into investment subsidies and con-cessional finance. Investment subsidies change the perceived cost of an investment and conces-sional finance changes the financing conditions. Fiscal incentives differ from other financial incentives in several ways. They do not need to be funded directly; they are funded indirectly in that they repre-sent a loss of revenue to the state budget. Generally they are available to all who qualify according to the terms of the exemption; there is no application and award process. For this reason they are some-times preferred as being less susceptible to corruption and to political manipulation. They can be managed through the normal tax compliance regime. In middle income countries this approach is generally only practical with companies. A last instrument that might be included under this heading is feed-in tariffs for cogeneration. If the feed-in tariff is above the opportunity cost of electricity then the instrument does really constitute an incentive. The incentive is funded by other consumers of electricity unless a special compensation is paid from the state budget to the network. If the feed-in tariff is above the marginal cost of electricity at subsidised fuel prices, but below the opportunity cost then it is simply a regulation to correct the mo-nopoly purchasing power of the network and the distorted fuel prices. As noted above, the Law for the Promotion of Renewable Energy establishes a fund to be known as the Jordan Renewable Energy and Energy Efficiency Fund (JREEEF). The Law does not specify in detail the activities to be supported by the Fund, but there is some indication of possible applications. The concept seems to have originated with a World Bank proposal to subsidise the difference be-tween the costs of wind power and the costs of conventional generation through allocations from a Fund; it was subsequently broadened to allow a range of activities to be financed in both RE and EE. The concept allows for several different activities through so-called “windows” in the Fund.

• Renewable Energy Subsidy Window • RE and EE Interest Subsidy Window • RE and EE loan Guarantee Window • Studies and Technical Cooperation Window • Equity Window

The various windows will start up in stages, as resources become available. The Fund is designed to cope with the preferences of specific donors who can assign their contributions to specific windows the contributions of the Government of Jordan being free to move to cover essential deficits. It ap-pears that the RE subsidy window is controversial among some donors, presumably because they do not believe that this is the best vehicle for financial transfers of this sort. As we understand it the intention of the proposal is that:

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• the Renewable Energy Subsidy will provide a per-kWh subsidy to privately owned and operated RE facilities;

• the RE and EE Interest Rate Subsidy will provide interest-rate subsidies to a range of activities in RE and EE, for example ESCOs and installers of solar water heaters

• the RE and EE Guarantees will provide the basis for a loan guarantee program, to improve terms of credit for similar activities to those addressed by the interest rate subsidy scheme

• the Studies and Technical Cooperation window will provide grants for feasibility studies, training programs and similar initiatives for which a range of commercial, academic and government in-stitutions would be eligible

• the Equity window will in due course provide for equity contributions to appropriate corporate bodies

In a separate venture, the French Development Agency (AFD) is currently negotiating a dedicated credit line, to be made available to interested banks at preferential interest rates and without the need for government guarantees. The idea is that commercial banks would mix these funds with other funds at higher interest and on-lend to eligible projects at subsidised rates. Target areas could in-clude SWH manufacturers, suppliers and installers, industry and ESCOs. The total amount of the credit line is apparently about €40 million. Jordan has only one registered CDM project, which is the conversion of the heavy fuel oil plant at Aqaba to natural gas. The carbon credits accrue to the Government of Jordan. A second project to recover natural gas from a landfill site is in the late stages of registration; this is discussed in detail in the section on renewable energy. There have been some discussions among private energy management companies and industry about launching a CDM project under the provisions for Programmes of Activities, but nothing con-crete has been proposed. 3.7 Obligations Another approach, which may be combined with incentives, is to oblige companies to undertake en-ergy efficiency by mandatory measures. These can be multiple and include obligations to:

• To carry out audits at regular intervals • To report to central government database and possibly to communicate audit results to the

public • To report energy consumption, saving measures and implemented measures • To propose action plans to implement the energy savings measures identified in audits • To carry out certain specified measures • To appoint an energy manager • Mandatory certification of auditors • Mandatory comparison of operation and investment to reference values (norms, benchmark-

ing) Some, or all, of these requirements may be confined to large users and made conditional on crossing a defined threshold of energy use. Obligations can be mandatory or voluntary. Two main sets of voluntary agreements have been intro-duced. The first set comprises agreements between government and representative bodies of appli-ance manufacturers to reach specified improvements in the performance of appliances; the approach has also been extended to vehicles. The second set comprises agreements with individual industries to improve their own on-site energy performance. Industry can have various motivations to participate in these agreements. Appliance manufacturers may expect to persuade government to supplement

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their efforts with instruments aimed at stimulating purchases by consumers. It may in some instances be a mechanism to forestall regulation. This latter reason may also encourage participation in agree-ments to reduce energy use in industrial processes. Such agreements, although voluntary, may also be a condition for financial incentives. We are unaware of any such measures in Jordan other than the voluntary labelling of appliances de-scribed earlier. In liberalised markets an alternative to promoting energy efficiency through state financial incentives and funds is to place an obligations placed on suppliers. In this scheme a supplier or distribution net-work manager scheme is placed under an obligation to demonstrate programs that save specified amounts of energy related to their total supply volume. The supplier or network operator then builds the costs into his cost-base; he then has the usual interest of a commercial company in keeping his cost-base as small as possible. The requirement is enforced by the regulator; failure to comply may be penalized in proportion to the deficit between the target savings for the supplier and the amount achieved. Savings do not have to be made within the supplier’s own area; they can be in fuel oil, coal or transport fuels. Such schemes can be complemented by “white certificates”. In this arrangement, suppliers are obliged to demonstrate they either accomplished energy savings directly or have bought certificates from others who can show they have made savings. The electricity system in Jordan comprises a transmission company NEPCO that acts as a single buyer for the private generators and three distribution companies. Generators pay international prices for fuel and these are passed on to NEPCO. The distribution companies are bundled managers and supply companies; they face flat bulk supply tariffs from NEPCO that are differentiated by distribution company to provide cross-subsidisation according to their respective costs and revenues. The Elec-tricity Regulator is examining the prospects for imposing an energy efficiency obligation. The implementation of the obligation would involve the three distribution companies and NEPCO. The participation of NEPCO is considered important because they are the part of the industry that can benefit from the activity. Electricity is sold to households under a rising block tariff. The first block cov-ers sales of up to 160 kWh/month and is sold at about 50% of cost; the second block roughly breaks even and the third and fourth blocks subsidise the first block. Distribution companies will initially lose revenues from energy efficiency measures implemented by customers in the third and fourth blocks and the value of these lost revenues may exceed the savings in terms of the purchases avoided from NEPCO. This is especially true of the distribution companies that purchase at lower cost. In the longer-run, the law provides that any shortfall in revenues to the distribution companies in one regulatory period will be compensated through the bulk supply tariff in the following regulatory period. So in practice the distribution companies would be protected against any loss of revenues. A draft law has been prepared to implement this concept; it also provides that the electricity regulator will become a regulator for all energy sources. 3.8 Audits and the Promotion of ESCOs The original of an Energy Service Companies or ESCO is that an entity other than the energy supplier should identify, design, finance, supervise and commission projects for a client, to be compensated by a share of the energy savings achieved over a defined period. The partition of savings is determined by a special contract known as an energy performance contract (EPC). Actual practice varies widely; some ESCOs will finance the project, others will organise finance. Implementation is not easy and there are relatively few successful examples. The name ESCO is sometimes also given to companies that just provide consulting services, but do not enter into an EPC. It is important to be clear what is

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meant, as the latter is a much easier exercise than the former. Energy audits have in the main been performed by the National Energy Research Centre (NERC), and a private company - Energy Management Services (EMS). It is unclear how many of these audits are fully financed by the user; most of them appear to be paid in full or in large part by international agencies. The experience of EMS indicates savings of 20% with payback periods of less than 2 years are normally achievable. There is no mandatory requirement for audits and no government incentives at present, although this could be an activity of the proposed Fund. ESCO activities have been successfully implemented in Jordan by private companies over several years. EMS is a private company founded in Jordan in1991. It apparently ran a very profitable ESCO business based in energy performance contracting under which the ESCO took from a bank a loan to make investments in the premises of third parties and split the net savings 50/50 over a 5 year con-tract period. Although profitable, this activity was stopped after a change of ownership and review that conclude the financial exposure inherent in the business was too great. The company still conducts pre-audits and audits and will provide energy management services, but only on a conventional fee basis. This company and several other private companies, also NERC, have conducted many audits, both walk-through audits and more detailed audits on a variety of financial bases but generally involving some kind of support from technical assistance. NERC is perceived by private companies as creating unfair competition with the private sector as a government-subsidised agency. The Ministry of Planning is finalising ToR for a consultant to design energy efficiency services for the industrial sector in parallel with the project noted earlier to develop credit lines for investment in this sector. 3.9 Transport and Spatial Planning More than half of the global population now live in cities and according to UN Habitat, by 2030, it will be 60 percent. Cities consume enormous amounts of energy and they have great inertia; road sys-tems and land-use decided now will influence energy use for a hundred years. In urban metropolitan areas, transport creates a third at least of total greenhouse gas emissions. Promotion of public trans-port options and careful design of cities is critical for reducing emissions in cities. There is immensely rapid growth of urban areas in Jordan, occurring with little regard to energy use. Amman has begun to address some issues of unregulated growth through the Amman Master Plan (AMP), initiated in November 2006; this plan includes zoning and specification of transport corridors and proposes some mass transit projects, but has no explicit discussion of energy efficiency or re-newable energy and does little to ensure energy efficiency or wider concepts of sustainability. The Greater Amman Municipality does have a very active and innovative team that has launched several interesting projects. It has been active in managing waste disposal in a sustainable manner. The first large landfill site in Amman was located at Russaifa (or Rusiefeh) east of Amman in a densely populated area and attracted many complaints about the smell. The landfill was closed in 2003 and the municipality decided to shift the land filling activities 30 km to the east and to install methane gas recovery at the existing site; the gas recovery also removes a large part of the mercap-tans that are responsible for the unpleasant odours. The methane recovery at the first site was supported by a grant from DANIDA. It is operated by the Jordan Bio Gas Company owned 50% by the Central Electricity Generating Company and 50% by the

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Greater Amman Municipality and is intended as a demonstration plant. CEGCO buys the gas at the same tariff as it buys from NEPCO. The recovery from landfill was coupled with recovery from a pur-pose built biogas digester operating on waste from slaughter houses. The gas engines were fed from both sources. The plant provides between 2.5 and 2.8 MW of power and generates about 26 GWh per year. Power is bought by the Central Electricity Generating Company (CEGCO). The new site is intended to meet the requirements of Amman for the next 30 years. It has been pre-pared for methane recovery since the design stage. It divided into nine cells, constructed to interna-tional standards and will eventually be exploited through vertical wells. The waste is covered daily. The Greater Amman Municipality did a study in collaboration with IBRD of the financial implications of registering the site as a CDM project and concluded that it would achieve a 30% intern rate of return assuming a price for the CERs of 10.5 $/tonne. The site is expected to produce about 6 MW from each two cells. It is now in the later stages of validation for CDM. Other sites in Jordan are much smaller and probably not so easily developed. Jordanian municipalities pay for street lighting, but only the bigger municipalities have recently begun to work on replacing inefficient luminaries. It appears that basic data on numbers and types of lumi-naries are not always available and energy use is rarely analysed. It is claimed that savings of 20% in energy use for street lighting are generally available. There is no obligation on municipalities to submit to central government their plans for promoting sus-tainable development. In our discussions this idea received some support. NERC has made a study of urban energy use in the city of Irbid that concluded with recommendations on optimal transport routes and street lighting that found opportunities for saving with payback periods typically around 2.5 years. There appears to have been no follow up to the programme. At a policy level it might be inter-esting to consider creating an obligation on all municipalities to prepare a plan on sustainable devel-opment covering energy use and environmental issues. The Ministry of Transport is in the process of developing a long-term strategy for the sector and build-ing the capacity to monitor its implementation. A short-term strategy is already available, but it con-tains no discussion of energy use. Incentives to scrap old vehicle stock and large vehicles with exces-sive consumption are being examined, but this policy is driven mainly by a concern to reduce pollution and noise. There are two mass-transit projects in development; the light rail project between Zarqa and Amman, which will become operational in 2011, is to be submitted as a CDM project. The PIN has been prepared and accepted by the Designated National Authority. The main objective of the long-term strategy is to create a modern infrastructure with modern operat-ing practices and effective regulation. Energy use does not appear to be a priority, but the prepara-tion of the plan involves some essential market studies of demand for demand for transport services; this has never been done in Jordan before and it is impeded now by an absence of reliable data. Once prepared these demand forecasts could serve as a useful basis for an energy efficiency strat-egy for the sector. 3.10 Information Access to knowledge is costly and may impede an individual or company from undertaking activities in energy efficiency. It is a legitimate role of government to generate and disseminate knowledge as a public good. We interpret the term knowledge in this context very widely to include data, technical guidance, research and demonstration. This activity was identified as a priority under the 2007 National Energy Strategy. Several institutions

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are involved in providing information, these include: energy advisory offices in all Ministries; the En-ergy Efficiency Centre within MEMR; NERC; ERC and the Energy Center of the Jordan University of Science and Technology (EC-JUST). The Energy Center was instituted in June 2004 to establish closer relationship between the Jor-dan University of Science and Technology and the public and private sectors. Its tasks include: or-ganising seminars, workshops & public lectures on issues pertaining to energy by academic and in-dustrial experts; establishing & maintaining national public-private partnerships with professional, trade, & educational associations to deliver appropriate energy education & training.

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4. Comparison of Jordanian Practice with Internatio nal Practice in Renew-able Energy

This section attempts to compare the present status of renewable energy policy in Jordan with inter-national practice. Public policy intervenes to correct market failures. In the case of renewable energy, the most common failures are somewhat similar to those identified previously for energy efficiency, but with a different emphasis. Distorted energy prices, unrecognised external costs, poor access to technical information all play a part. There is however a significant difference. Many measures of energy efficiency are cost effective, but prevented by distortions of the conventional market. This is also true of some renewable options, such as solar water heating. Many renewable energy technologies are not cost-effective even if the distortions of the conventional market are removed. They are justified by the external costs that they avoid, especially the external costs of GHG emissions. This means that they must be financially subsidised to financial incentives of one sort or another are critical to renewable policy. In addition to these general market failures there can be specific market failures for electricity gener-ated from renewable energy that is fed into a national grid as electricity. Excessive and unjustified costs of connection to the grid, inability to connect, disputes over responsibility for payment – these can impede renewable deployment. Policy instruments are intended to correct or compensate for these various distortions. 4.1 Targets and Strategy Strategy sets out objectives and targets and defines the combinations of policy instruments that are expected to achieve the targets. The government of Jordan in 2007, after reviewing its achievements in attaining targets under the Na-tional Energy Strategy of 2004, discovered that progress had been disappointing. The review identified several reasons for this failure:

• High investment costs for renewables compared with traditional generation • The need for wide areas of land which are hard to secure • Lack of supporting legislation • The decision to implement on a BOO basis and not EPC that exacerbates the high cost

The government set revised targets of 7% of primary energy by 2015 and 10% by 2020, but did not provide a clear specification of accompanying policies that would plausibly achieve the targets. The main obstacle is the additional costs of renewables; the 2007 Energy Strategy estimates the extra cost at $US 1,415 – 2,115 million. There is no coherent analysis of what extra costs will be tolerated for the electricity generated from renewables and how they will be paid. The most important recommendations in the strategy for renewable energy were:

• Proceed with the issuance of the renewable energy law • Proceed with the implementation of the wind energy projects for electricity generation based on

BOO to the extent of 600 MW by end of 2020 (Kamsa 30-40 MW during 2007-2009; Fujaij 60-70 MW during 2007-2010; Harir 100-200 MW during 2008-12; Wadi Araba 40-50 MW during 2009-2013; 300 MW in other sites)

• Complete studies for thermal solar energy (300 – 600 MW)

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• Expand use of pv in remote areas • Carry out electricity generation from municipal waste • Focus research on biogas fuel • Create a fund to support renewable energy projects

The 2015 target translates into 600 MW of wind power and this should be doubled by 2020. Concen-trated solar power may enter the equation in 2015 and there is a general intention to have 300 to 600 MW of PV and CSP by 2020. Several interesting projects are proposed by the private sector, including a 100 MW pv plant proposed by Kawar Energy South of Amman producing 160 GWh per year with a budget of $400 million. The same company also has a concept for a 1 GW concentrated solar plant. 4.2 Legal Reform The main legal elements in a policy to promote renewable technologies are a clear targeted strategy or road map, a specialised agency to implement public activities and a support system specifically aimed at allocating the extra costs of the technology. The draft law for the promotion of renewable energy is intended to facilitate the achievement of the targets noted above. The draft law authorises the Ministry to establish a priority list for the development of lands with high potential for renewable development. The Ministry may then issue public tenders for the development of sites included on this Renewable Energy Resource Land Use List. Unsolicited proposals for the generation of electricity from renewable energy sources may also be directed to the Ministry, subject to certain general preconditions. Any proposal that is accepted will be certified as a Qualified Renew-able Energy Facility and is therefore eligible for priority dispatch and to sell the electricity from the fa-cility and concessionary terms as specified in a power purchase agreement. The facility is also enti-tled to tax reliefs as specified in the later section on financial incentives. The law also makes provision for the Jordan Renewable Energy and Energy Efficiency Fund (JREEEF). The Law does not specify in detail the activities that the Fund will support, but there is some supporting documentation that gives possible examples and this is discussed above in the sec-tion on energy efficiency. The proposed governance of the Fund gives it partial independence from line Ministries. It will be a mixed public/private institution, overseen by a Board of Directors reporting to the Council of Ministers and comprised of nine members including representatives from the Ministries of Energy (MEMR), En-vironment (ME), Planning and International Cooperation (MOPIC), and Finance (MF) and four from the private sector. As an interim measure, a JREEEF Project Management Unit has been created comprising officials from the Renewable Energy Department of MEMR and the Projects Department of MOPIC. Inter alia, this PMU manages some of the early donor contributions. The Law does not specify how funds will be allocated, but provides for this to be determined by sub-sequent regulation. It would be unfortunate if funds were allocated on an administrative basis. As a matter of best practice the Fund should ensure that all tasks to which it grants subsidies are the object of invitations to tender to supply companies and other qualified bidders. Open tenders will also stimu-late competent actors to enter into the field that would not have been considered under a scheme of

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administrative allocation. Although the Law is silent on this point, the supporting documents that are available seem to indicate that this is partly the intention. The resources of the Fund are envisaged to come mainly from international donors and direct budg-etary contributions from the Government of Jordan. The World Bank has indicated it will provide $6 million, apparently earmarked for subsidies to the first wind energy plant. The GoJ apparently consid-ered a levy on energy sales and this arrangement was supported by the World Bank, but the govern-ment rejected the idea as it would be unacceptable to impose this after the dramatic energy price rises of the past few years. The RE Promotion Law was submitted by MEMR to the Cabinet on February 13th 2008 and has now been approved. . 4.3 An Agency A specialised institution to make research, prepare initiatives, draft regulations, monitor progress, en-sure compliance, administer funds and perform other administrative activities can be useful in promot-ing renewable technologies. There is no dedicated agency in Jordan for the promotion of renewable energy. NERC does some work in renewables, but it is essentially a research institute and does not have a clear mandate to im-plement government policy in the field or to initiate development activities. 4.4 Standards and /or Labels Standards would be inappropriate for large developments in renewable energy. Commercial develop-ers are well equipped to decide for themselves on efficient and effective specifications. There is a good case for standards for small appliances such as solar heaters. Solar thermal obligations could be included in building codes and regulations. SWH is cheaper and more cost-effective if installed at the construction stage; it addresses the agent-principal problem that is especially acute in buildings; it ensures continuity and avoids dependence on public funding. Such obligations must be carefully phrased and designed to be practical. A compromise is to combine a time-limited programme of support with the introduction of obligations. Jordan has developed standards for SWH but they have not been well enforced or properly publi-cised. 4.5 Financial Incentives (Capital Support) Many financial incentives have been used in different countries to promote renewable energy. Sup-port can either be offered to investment or to operation. Investment support for renewables is general delivered through the same type of instruments that are used to support investment in energy effi-ciency, e.g. capital grants, tax exemptions, soft loans and loan guarantees. In the case of grid con-nected renewables it is possible also to offer support to operation either by allowing the electricity to be sold at inflated tariffs or by obliging certain parties to purchase specified volumes. These instru-ments are to some extent exclusive and are discussed together in the next section. The Cabinet issued a Decree in 2008 to exempt all renewable energy and energy efficient appliances

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from all taxes and import duties. There are some 25 manufacturers producing locally designed solar water heating systems in Jordan. The total number of installed systems in the country in 2006 is estimated at 661,500m

2, corresponding

to 463 MWt generating about 485 GWh of energy each year. The current penetration rate in house-holds is estimated at 14%. Deeper penetration could be helped by improved durability and perform-ance and by easier credit terms. SWH is especially cost-effective in large systems with substantial demands for hot water, such as ho-tels, hospitals and institutional housing, but this market seems to be less well serviced. The National Energy Research Centre has designed a National Plan for the Development of Solar Thermal Energy (NPSTE), but is has not been implemented. This is an area where well targeted support and policy could make a big difference. The draft law for the promotion of renewable energy provides for extensive investment incentives for renewable energy. It proposes that a Qualified Renewable Energy Facility shall be exempt from 75% of income tax otherwise for the first ten years of operation and that all materials, construction equip-ment, machinery, tools, goods and spare parts imported or locally manufactured for construction, op-eration and maintenance shall be exempt from customs duties, import or export levies, sales tax and value added tax. Also, any public lands on which it is proposed to construct a renewable energy facility can be leased from the government at no cost. Privately owned lands may be expropriated by the Ministry and leased at cost. Alternatively, the Ministry may require that the owner of such privately-owned land en-ter into a lease or other agreement with the promoter of such Qualified Renewable Energy Facility provided that the promoter pays reasonable rent for such land or enters into a reasonable profit-sharing relationship with its owner. The draft law also envisages that the Government may use ODA to subsidise renewable energy facili-ties and to prepare studies, including the activities of NERC. The Government of Jordan may make equity investments to reduce tariffs from RES. CERs should be used for the same purpose. Renewable energy projects are eligible for subsidy under the JREEEF described earlier. In particular the option for a Renewable Energy Subsidy (not explicit in the law, but apparently intended) will pro-vide a per-kWh subsidy to privately owned and operated RE facilities. The suitability of this instrument is debatable. Subsidy through a fund of uncertain duration and with uncertain sources of finance is not necessarily comfortable for an investor. A legally binding contract either as a PPA or as a feed-in tariff would be more effective. 4.6 Feed-in Tariffs and Obligations Grid connected renewable energy is rarely cost-effective in its own right. It must be subsidised if it is to be developed by private industry. There are two main ways of delivering the subsidy. One is by of-fering higher prices than those available commercially; the other is by creating a second valuable good that represents the value of the fact that the energy is generated from renewables. The second scheme is operated by issuing certificates that certify the renewable origin and then obliging an identi-fied group (normally suppliers) to buy them. This creates a market and therefore a price. The offer of higher tariffs may be created by tendering a concession, it being understood that the con-cession will be granted however the price achieved compares to market prices for electricity. This stands in continuity with traditional processes of tendering large plants to IPPs; it allows secondary

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criteria, such as percentage domestic content, to be added to the evaluation criteria. It has recently been adopted by Denmark for large developments. Higher tariffs made also be operated by a feed-in tariff that is made available to any generator.

Certificate based schemes define a quantity of renewable electricity to be produced and market forces identify a price that is unknown at the outset; feed-in tariffs fix a price to be paid for renewable elec-tricity, but it is unknown what volume will be offered.

There are at present two grid-connected wind farms operated by CEGCO, with a total installed capac-ity of 1.445 MW; they generated 3 GWh in 2006. The 320 kW plant (4 x 80 kW) at Al-Ibrahimya was commissioned in 1987; the 1.125 MW farm in Hofa was commissioned in 1996. The government has attempted to promote wind power for several years by tendering. In 2001 MEMR launched a tender for 75-90 MW of wind capacity on a BOO basis. The bid was won by EHN of Spain, but it proved impossible to reach agreement on the technical specifications. In July 2007, MEMR is-sued a pre-qualification tender for a 30-40 MW wind farm in Al-Khamsha near Jerash, to provide elec-tricity to NEPCO on a BOO basis for an initial period of twenty years. The RFPs indicated that the government would provide a free lease to the land and would pay the cost of grid interconnection. Carbon credits remain with the government. MEMR received sixteen prequalification requests, of which eight companies successfully prequalified and two bids were received. The negotiations with the preferred bidder are still underway; the main point of contention being the price as determined by the PPA. There is some debate as to the merits of assigning the responsibility for tendering to the Ministry. Un-der the law governing IPPs, the first two tenders for conventional plant were to be made by the Minis-try and subsequent tenders by NEPCO. This was justified, because at the time NEPCO was still an owner of generating plant, but these have now been sold off and this objection no longer applies. The third tender unfortunately coincided with the financial crisis and NEPCO received no offers. This has been interpreted as a signal that developers prefer to deal with government, because eventually they need the government guarantee of the PPA, the land agreement and the implementation agree-ment. It appears to have been deduced that all renewable plant for the foreseeable future should be tendered by the Ministry. This is not self-evident. NEPCO is the more appropriate partner. Whilst the dossier remains with the Ministry developers will see the negotiations as vulnerable to political pres-sure. It might be more appropriate for the Ministry to instruct NEPCO to acquire specified amounts of wind power at the best price. This gives confidence to investors that negotiations will arrive at a con-clusion. The policy is that all plants will be implemented on a BOO basis developed mainly through tenders, although unsolicited bids are also permitted. Government will underwrite the PPA and will sign an im-plementation agreement with the developer. Government will also provide land free of charge for 25 years and cover the connection charges to the nearest sub-station. Tax advantages will be offered. These conditions are contained within the Law for the Promotion of Renewable Energy as described earlier. The government has recently initiated prequalification for a second project in the South near Petra; twenty nine requests for prequalification have been received. The passage of the new law on renewable energy has radically changed the possibilities. The new legislation allows local and international companies to bypass a competitive bidding process and to negotiate directly with MEMR on price and establishment of projects. Renewable energy projects will be required to clearly state fixed electricity tariffs in their proposals before being approved. This is expected to allow the MEMR the scope to reach the goals of the National Energy Strategy.

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The National Electric Power Company (NEPCO) will be obligated to purchase all electricity produced by renewable energy power plants, and NEPCO will be required to cover the cost of connecting re-newable energy projects. The law also allows for net metering policies to allow private and small-scale renewable energy projects to sell excess electricity back to the network at full retail price. The GOJ apparently also considered the concept of a feed-in tariff, but decided against it because they had no baseline for the costs of wind power and were nervous about entering into an open ended commitment. 4.7 Information It is a legitimate role of government to generate and disseminate knowledge as a public good. The main need in this respect is for data on the renewable resource. It makes no sense for every devel-oper to make their own measurements of solar and wind data. The need is especially acute for wind as the extent of the resource varies locally. In 1989, NERC has prepared, in conjunction with the Danish consultant COWI and the Danish Re-search Institute RISO, a wind atlas identifying the most promising locations. Detailed measurements were begun in 1989 at 10 sites, but practical developments were impeded by increased perceptions of risk after the Gulf War. A more modem and comprehensive information base is needed. NERC have also prepared a solar map of Jordan. 4.8 Industrial Policy It is important that countries develop their own capacity to manufacture and / or assemble renewable technologies in parallel with the investment process. This can be done by targeted research, by grants to appropriate industries and by local manufacturing obligations in tendering. The EU has programmed for 2009 a project in cooperation with NERC to develop a wind turbine test-ing facility to be coupled to the grid. It will be located close to the proposed El Kampsa project. The in-tent is that the laboratories should be internationally accredited and will attract further investment. The EU will also fund a first pilot on CSP possibly with co-financing and with the eventual intent to link into the Mediterranean solar plan.

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5. Case Studies The purpose of the case studies is to demonstrate the processes of evidence-based policy making (EBPM) and theory-based evaluation (TBE). These techniques are well-known in the literature and have been widely applied, but not generally to technical areas of policy such as energy efficiency and renewable energy. There is potential for application in these areas because the methodologies pro-vide a systematic basis for analysis and debate among stakeholders around a common and clear statement of the policy intervention that can be maintained and improved throughout the project cycle from formulation, through implementation, monitoring and evaluation. The basic expression of this methodology is the behavioural model that underlies our understanding of the reaction of stakeholders to the policy instrument. 5.1 Evaluation of an Energy Efficiency Fund 5.1.1 Background and Context The first example that we choose in this case for illustration is the analysis of a Fund for energy effi-ciency, loosely based on the Jordan Renewable Energy and Energy Efficiency Fund (JREEEF). 5.1.1.1 The Jordan Renewable Energy and Energy Effi ciency Fund Public policy costs money and has to be funded. Some instruments are more costly than others. Any-thing that aims to stimulate investment is likely to be especially costly. A common mechanism for sup-plying the necessary resources is through an energy saving fund administered by a state agency. An-other option is to lay an obligation on energy suppliers to undertake energy efficiency programmes and to fund the expenditure from their revenues. There is a sense in which this is a specialised fund, operated by utilities and financed by a levy on the tariff. We have provided an analysis of this option in another case study. This case study focuses on the conventional Fund. The two are not necessarily mutually exclusive. 5.1.1.2 Background in Jordan Jordan proposes to establish a Fund with the objective to contribute to the development of renewable energy (RE) and energy efficiency (EE) in the Kingdom of Jordan, based on the diversity of renewable energy resources available in the country and on the potential for energy savings reflecting the pat-tern of energy consumption in the country and in particular activities prioritised under the energy strategy. The legal basis for the Fund is Article 21 of the draft Renewable Energy Promotion Law. This Article does not define the structure of the Fund as indicated above, but specifies simply the objectives, gov-ernance and sources of funding. The concept seems to have originated with a World Bank proposal to subsidise the difference be-tween the costs of wind power and the costs of conventional generation through allocations from a Fund. The concept has since been broadened to allow a range of activities to be financed in both RE and EE. The concept allows for several different activities through so-called “windows” in the Fund. • Renewable Energy Subsidy Window • RE and EE Interest Subsidy Window

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• RE and EE loan Guarantee Window • Studies and Technical Cooperation Window • Equity Window The various windows will start up in stages, as resources become available. The Fund is designed to cope with the preferences of specific donors who can assign their contributions to specific windows the contributions of the Government of Jordan being free to move to cover essential deficits. It ap-pears that the RE subsidy window is controversial among some donors, presumably because they do not believe that this is the best vehicle for financial transfers of this sort. As we understand it the intention of the proposal is that: • The Renewable Energy Subsidy will provide a per-kWh subsidy to privately owned and operated

RE facilities; • The RE and EE Interest Rate Subsidy will provide interest-rate subsidies to a range of activities in

RE and EE, for example ESCOs and installers of solar water heaters; • The RE and EE Guarantees will provide the basis for a loan guarantee program, to improve terms

of credit for similar activities to those addressed by the interest rate subsidy scheme; • The Studies and Technical Cooperation window will provide grants for feasibility studies, training

programmes and similar initiatives for which a range of commercial, academic and government in-stitutions would be eligible;

• The Equity window will in due course provide for equity contributions to appropriate corporate bod-ies.

Governance The Fund will be governed by a Board of Directors reporting to the Office of the Prime Minister and including representatives from the Ministries of Energy (MEMR), Environment (ME), Planning and In-ternational Cooperation (MOPIC), and Finance (MF), one from the National Energy Research Centre, and four from the private sector. As an interim measure, a JREEEF Project Management Unit has been created comprising officials from the Renewable Energy Department of MEMR and the Projects Department of MOPIC. Inter alia, this PMU manages some of the early donor contributions. The resources of the Fund are envisaged to come mainly from international donors and direct budg-etary contributions from the Government of Jordan. The GoJ apparently considered a levy on energy sales, but rejected the idea as it would be unacceptable to impose this after the dramatic energy price rises of the past few years. 5.1.1.3 Scope of the Case Study The proposed Fund covers both renewable energy and energy efficiency, but this makes for a very complex analysis and creates much duplication with our cases studies on feed-in tariffs and tendering for wind IPPs. We therefore focus in this instance on the energy efficiency tasks of the Fund. 5.1.2 Evidence-based Policy Making The procedure that we have proposed to implement evidence-based policy making comprises the fol-

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lowing steps.

1. Alternative forms of intervention need to be reviewed and short-listed. Evidence of the success or failure of similar instruments in developed and developing countries needs to be studied with special emphasis on the conditions that created success and failure

2. There must always be a base-case against which alternatives are screened. Alternatives should include all available instruments.

3. All the relevant potential impacts need to be identified and where possible, quantified

4. Impacts should be assessed in consultation with the subjects of policy

5. The cost of compliance needs to be assessed. Consideration should be given to how these costs can be minimized. It is necessary to consider who pays the compliance costs ; there are generally alternatives with different implications for equity. The procedures for compli-ance need to be worked out as does the procedure for monitoring impacts.

6. Indicators need to be established of what is expected from the policy measures. These indica-tors should cover outputs, outcomes and impacts. Intermediate indicators are important in help-ing understand how policies work, how measures interact and how they can be improved

7. Quantitative analysis of impacts is essential. The analytical method most commonly used is economic cost-benefit analysis .

8. Cost-benefit analysis should take into account opportunity costs of energy and external envi-ronmental costs.

9. Multi-criteria analysis maybe a useful support to decision making; sensitivity analysis is one expression of this idea

The first five steps are discussed in this section; the formulation of indicators is discussed in the sec-tion on theory-based evaluation and the last three steps are demonstrated in the section on economic cost-benefit assessment. 5.1.2.1 Alternative Forms of Intervention Alternative forms of intervention can be considered at many levels. The main aspects where alterna-tive forms of intervention could be imagined are in the scope, the governance and the size and source of resources. It is also necessary to ensure wide access to the Fund by a diverse group of prospective beneficiaries whilst maintaining a close linkage with energy policy objectives. Funding There is now a great deal of experience available of the design, scope and operation of Funds from individual cases and some consolidated analyses of several countries. Few of these accounts give the level of detail and the level of objective, critical evaluation that is truly desirable. The following is a summary of the experience from some well-known Funds. Funds from central government budgets have historically been common sources for energy efficiency and are still widely used. The Energy Savings Trust in the UK and the Carbon Trust are mainly funded by direct budgetary transfers agreed annually. About $50 million is allocated to the Energy Savings Trust and $130 million for the Carbon Trust. Levies on energy use are another popular option. The Danish Electricity Savings Trust was financed initially (for one year) by a direct government grant and thereafter by a levy on electricity consumption amounting to about $20 million.

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In developing countries one of the best known funds is in Thailand; the Energy Conservation Act of 1992 established the Fund and allocated an initial capital of US$60 million, (Kingdom of Thailand, 2007). The Act also attributed to the Fund annual revenues of comparable magnitude from a supple-mentary tax on all petroleum products sold in the country. An independent evaluation of the Fund prepared for APEC was broadly positive, (APEC, 2005). It argued that the financing model was simple and straightforward and was attractive to government because the main risk is the possibility of pro-ject proponents defaulting on loans and this risk is borne by the bank and the developer and is not covered by government. It found that the loans had leverage significant additional investment in the project from non-government sources. Malaysia has adopted a different funding scheme. Revenues for the Electricity Supply Industry Trust Fund come from voluntary contributions from the power companies; they contribute 1% of their total annual turnover. The Trust Fund is used for a variety of purposes including energy efficiency projects. Governance If it is to be effective a Fund needs to be administered well. It is not desirable that a Fund should be-come an addition to the budget of the Ministry. It is important to ensure the widest possible expertise when administering subsidy resources, and, in this, to engage expertise and creativity from the differ-ent interests in energy efficiency. It is also desirable that there be some independence from the Minis-try in administering the Funds if they are to be regarded by others as a genuine resource available to the most efficient implementing body. There are also often advantages in escaping the inflexibility of state budgetary regulations. On the other hand, it is essential that the Energy Savings Fund adminis-ters its resources within the national framework of energy-policy. There should therefore be an ade-quate link between the governance of the Fund and the political level. For example, the Electricity Saving Trust in Denmark is governed by a Board appointed by the Minis-ter for Environment and Energy. The Board brings in the desirable expertise and interests from supply companies, other commercial companies, consumers, municipalities and county authorities, as well as environmental and energy organizations. To ensure a link to the Council for Energy and Environ-ment that is responsible for energy policy, two of the Board’s members are appointed from among the members of the Council. There are also regulations within the Decree establishing the Fund to ensure that the subsidy resources are used in accordance with the priorities and goals of energy policy. Moreover, the Board must draw up an annual programme of action and the Minister can further pro-vide a framework for granting subsidies to ensure coherence with energy-policy goals, including indi-cating the main areas that shall be given priority. Governance in the UK is somewhat similar; the Car-bon and Energy Trusts are private companies governed by Boards that assemble a wide expertise. The link to the political level is achieved by relating the annual grant to a specified set of activities and monitoring performance. Transferring this arm’s length approach to developing countries can meet with opposition. In Thailand, the Energy Conservation Act and the Fund are administered by the National Energy Policy Committee chaired by the Prime Minister. In Malaysia, a special committee called the Electricity Supply Industries Trust Account Committee manages the trust account. The Committee comprises representatives from various concerned Ministries and the electricity sector. The Secretary General, Ministry of Energy, Water and Communications, chairs the Committee. A different approach was adopted in Brazil; in 1998, the regulator (ANEEL) imposed an obligation on utilities to invest a minimum of 1% of their net annual revenues in programmes of energy efficiency and R&D. Initially, only utilities were responsible for the formulation and implementation of pro-

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grammes and this was seen as a distortion that limited social impact. In 2000, Congress changed the allocation of the resources and created a national fund – CTEnerg. The 1% obligation went 50% to utilities and 50% to the Fund. Utility activity was restricted to energy efficiency. In 2004, the entire ap-proach came under political challenge, but after debate, a new law was approved. The Brazilian proc-ess and its effectiveness have been documented and evaluated. We can conclude that Funds are the most widely used option in developing countries for financing policies and likely to remain so. Their main weakness is a tendency to restrict the governance and ac-cess to a small group. It is desirable that Funds should be open and accessible on a competitive ba-sis. This avoids charges of distorting political influence, ensures cost-effectiveness, provides wide publicity and promotes the idea of energy efficiency. It introduces new and capable actors into the en-ergy efficiency business with commercial sense. Achieving this improved governance, access and monitoring should be the priority of technical cooperation. A longer and more extensively documented account of Funds and financial instruments generally can be found in Lucas, (2009). Scope The scope of the Fund must be analysed within the context of the other policy instruments planned or in place. For example it would be unnecessary to use a Fund to subsidise grid-connected electricity if feed-in tariffs or clear tendering strategies at above-market rates were already in place. Many might see these as superior instruments for this purpose than a Fund and in this context their inclusion in the Jordanian Fund is odd. It is also necessary to consider complementarities between instruments. If labelling and standards for appliances are to be introduced then it might be sensible to foresee loans to manufacturers to retool production lines as an activity of the Fund and money to support government procurement of efficient appliances. If the intention is to promote investment in industry and there has been little or no prelimi-nary audit policy then it would be desirable to include support for audits in the Fund. Similarly, if it is envisaged to make the appointment of energy managers mandatory, then training for such mangers should be included. With these considerations in mind, we propose a nominal portfolio for our hypothetical Fund as shown in the following table.

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Table 1: Portfolio of Activities for the Fund EE Fund interventions and operators' reactions

End Users Energy Service

Companies Governmental Insti-

tutions

Tar

gete

d re

sults

Improved capital stock

• Audits • Investment support • Demonstration

• Audits • Loan guarantees • Grants for equip-

ment

• Public Procure-ment

• Information cam-paigns

Improved opera-tions

• Audits • Training of energy

managers

• Audits • Conduct of train-

ing

Improved offer of equipment

• Government pro-

curement

Improved compli-ance

• Training of in-spectors

• Software devel-opment

5.1.2.2 Base Case The base case for the assessment is that there is no intervention. Clearly, even if there are no finan-cial incentives some actors will invest in energy efficiency. These actors are likely to seek support from the Fund for actions that they will perform anyway. As a public policy instrument the Fund will fail if it supports activities that would take place without it. To judge the percentage of activity that will be implemented by these “free-riders” is the most difficult aspect of defining the base case. Free-riders are less likely to be a problem when energy efficiency is still seen as a slightly curious concern. Once it is seen as a mainstream activity that a rational actor will pursue in his own interests then free-riding on financial incentives is likely to increase. This is why funds are generally seen as in-struments to kick-start an activity and not as a permanent institution. This is part of the reason why they are not a proper support for long-term ventures such as the support of renewable generation through operating subsidies. Estimation of free-riders will depend on how the resources of the Fund are distributed among options. Analysis of each option should then indicate the savings in energy and GHG emissions and the finan-cial benefits. This analysis needs to be done carefully and in consultation with stakeholders. For the purposes of this illustration we have introduced some illustrative numbers, with the following assumptions: • EE Fund expenditure of $10 million per year for a direct 10% investment subsidy • Pilot demonstration activities and direct assistance to the EE investors participating in the EE fund

programme of $3.0mn. The assumed allocation of the investment subsidies is shown in Table 2. These numbers are only il-lustrative, but to give some idea of the basis of calculation we give an idea of why we think the less obvious figures to be appropriate.

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Table 2: Allocation of EE investment subsidies

EE Fund interventions and operators' reactions

End Users Energy Service

Companies Governmental Insti-

tutions

Tar

gete

d re

sults

Improved capi-tal stock

$3.0mn $2.0mn $1.5mn

Improved op-erations

$1.0mn $1.0mn

Improved offer of equipment

$1.0mn

Improved com-pliance

$0.5mn

The figure for improving the capital of end-users is based on the interest foregone and fees for induc-ing through soft loans, loan guarantees or other instruments. In simplified terms it is assumed that the investment support is equivalent to a 10% investment subsidy. The general assumption is that the EE investors will require a 4 years payback period for their investment, which will be achieved with the fund's investment subsidy. The EE Fund will also provide technical assistance (a budget of $3.0 mn) is assumed for this purpose. With this the EE investment failures will be avoided. It is assumed that without such a technical assis-tance programme 30% of the EE investments would lead to failures. In most cases we assume free-riders of 20%, only in the case of governmental institutions we as-sumed that there would be no free-rider impact. 5.1.2.3 Impacts In assessing the impacts of these expenditures we have made dramatic assumptions for the sake of our case study. These assumptions are indicated in Table 3. We assume that the investments in equipment and appliances produce a 4 year payback; this is con-servative. We can convert this financial impact into a tonne of oil equivalent assuming a figure of $500 / tonne for mixed energy products and then calculate the CO2 avoided as a consequence assuming 3t of CO2 per tonne fuel for ease of calculation and presentation. If we assume 20% of the remaining savings eventually are returned through company tax to the Min-istry of Finance, then the Ministry receives an enhanced tax income. In addition, we assumed that the tax-collection efficiency is 80%. The present value of these revenue streams are significant and go a long way to covering the public expenditure through the Fund.

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Economical, Technological and Environmental Impact Assessment of National Regulations and Incentives for RE and EE: Country Report Jordan

(Draft)

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Table 3: Estimation of Impacts

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Regulations and Incentives for RE and EE: Country Report Jordan (Draft)

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5.1.2.4 Consultation Such a policy should be debated with a wide spectrum of stakeholders before the final form of the Fund and regulations are agreed. This very important step is often ignored in developing and middle income countries and the opportunity to strengthen performance is lost. Stakeholders in this case should include: • Commercial banks, • Industry, • Large commercial facilities, • Manufacturers of equipment, • Research institutes and universities, • Fuel suppliers, • Foreign donors, • Energy management companies, • Professional organisations, • NGOs. In the particular case of Jordan there seems to have been some consultation with foreign donors, but otherwise little attempt to seek views. 5.1.2.5 Compliance The operation of the Fund will require careful analysis of proposals submitted to the Fund and careful evaluation of the execution of projects against predetermined performance criteria. Some sort of analysis of additionality will be required. Projects that would go ahead anyway without the intervention of the Fund need to be excluded and projects that do not deserve to be funded in any circumstances must also be excluded. The analysis will require careful documentation of project objectives, costs and performance and these will need to be verified by experts. Training of staff will be essential; some technical investigations may need to be outsourced. The costs of this exercise will have to come from the Fund. Attempts to charge applicants at any stage in the process would generally run counter to the idea that the Fund is offering incentives. Realistic costing of the options must be made and realistic assessments of staff time and time and cost of ex-ternal consultants must be included in the budget. A monitoring system must be devised to record data on project activities. The data should include in-vestment, cost-savings and impacts on energy use. Care must be taken to balance the requirement for accurate information with the cost to the project owner of acquiring the data. In some cases it may be difficult to establish savings in complex integrated systems in changing environments and monitor-ing methodologies may need to be developed. Without this data the effectiveness of the Fund and the basis of knowledge for future policy will be damaged. At programme level the Fund staff should gather consolidated information and make assessments of benefits to the country, the participants and the state budget following the approach set out in Section

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4. The performance of the Fund should be assessed against predetermined indicators of performance. An independent institution should be engaged for monitoring and evaluating to review the accuracy of information, review the adequacy of reporting and to conduct interviews with stakeholders. A more de-tailed discussion of evaluation follows in Section 3. 5.1.3 Theory-based Evaluation 5.1.3.1 Methodology Evaluation of a project depends upon an underlying belief in how actors will be affected by the policy and how they will respond. We call this belief a “behavioural model”. We specify the behavioural model as a causal sequence in which the successive steps of policy implementation are shown in the first column and then in subsequent columns are listed various indicators, risks and assumptions. The successive steps of the policy may or may not specify recognisable behavioural assumptions; it de-pends very much on the type of policy investigated. The behavioural model is a formal description of the process of implementation, the concerns to be raised at each stage and the measures that are to be adopted to make everything is working as ex-pected. It provides a structure for the analytical steps and indicates the evidence that should be sought at each stage to support assertions or on which to found analysis. It allows the issues that might affect implementation to be identified and it allows different stakeholders to debate around a clear and concrete representation of the policy. In later stages it serves as the basis for monitoring and evaluation. 5.1.3.2 Indicators Indicators need to be established of what is expected from the policy measures. These indicators should cover outputs, outcomes and impacts. Intermediate indicators are important in helping under-stand how policies work, how measures interact and how they can be improved • Inputs are the financial, human, technical or organizational resources used in the endeavour, • Outputs are objectively verifiable indicators that demonstrate the progress made in implementing

the measures, • Outcomes are the immediate effects on the regulated subject, • Impacts are direct measurements of the improvements that the programme is designed to bring

about. 5.1.3.3 The Behavioural Matrix

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(Draft)

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Table 4: Behavioural Matrix for Energy Efficiency F und

Behavioural model Indicators

Input Output Outcome Impact Risks Assumptions

• Government prepares law de-tailing objec-tives, sources of funds, process

• Administrative and parliamen-tary time ($)

• Law and regula-tions (Y/N)

• Political process recognises the importance of the subject

• Finance se-cured, staff ap-pointed and trained

• Administrative time ($)

• Staff salaries ($) • Training costs

($)

• Volume of funds ($) • Numbers of staff

(#) • Qualifications (#)

• Funds are not available

• Foreign donors find option at-tractive

• Priorities and process finalised


• Work programme (Y/N)

• Explanatory ma-terial / call documents pre-pared and made available to in-terested parties


• Awareness among stakeholders (?)

• Stakeholders consult Fund staff and prepare proposals (Y/N)

• Awareness raised (?)

• Low priority of energy effi-ciency in stake-holders

• Proposals sub-mitted

• Time of propos-ers ($)

• Completed pro-posals (#)

• Conditions of fund are not at-tractive

• Administrative complexity de-ters participants

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(Draft)

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• Investment pro-posals evaluated and awards made


• Volume of funds dispensed ($)

• Awards made to free-riders or poor projects

• Investment pro-posals executed and monitored

• Investments from fund and from proposer ($)

• Engineering time ($)

• Time for M&E ($)

• Evaluation report (Y/N)

• Demonstrated cost savings from improved capital stock ($)

• Measured and inferred energy savings (#)

• CO2 reduction (#)

• Staff of centre are trained in M&E and budget is pro-vided

• Impacts of activ-ity can be relia-bly separated

• Proposals for better operation evaluated and awards made


• Number of propos-als (#)

• Number of awards (#)


• Awards made to free-riders or poor projects

• Proposals for better operation executed and monitored





• Demonstrated savings from im-proved opera-tions ($)

• Measured and inferred energy savings (#)



• Impacts of activ-ity can be relia-bly separated

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(Draft)

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• Proposals to im-prove manufac-turing lines evaluated and awards made





• Necessary flanking policies for labels and standards are implemented

• Proposals to im-prove manufac-turing lines exe-cuted and moni-tored





• Demonstrated upgrading of production lines (Y/N)

• Energy savings from improved appliances in-ferred (#)



• Proposals to im-prove compli-ance evaluated and awards made





• Other policies to improve compli-ance are im-plemented

• Proposals to im-prove compli-ance executed and monitored





• Improved com-pliance (?)

• Energy savings from improved compliance in-ferred (#)



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(Draft)

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• Monies are re-turned in aprt to state budget through corpora-tion tax

• Extra tax aid can be inferred from cost savings ($)

• Net costs of pol-icy reduced ($)

• Consolidate an-nual and multi-annual reports made





• Effectiveness of Fund identified and proposals for continuation made (Y/N)

• Funding sources are will-ing to continue

• Appoint inde-pendent evalua-tor

• Consultancy fees ($)


• Recommendations (Y/N)

• Revised priori-ties and practice (Y/N)

• Improved future savings (?)

• Data is not available

• Revise objec-tives, practice and repeat cycle


• Revised terms and conditions for Fund (Y/N)

• Future savings (?)

Note on symbols:

• $ indicates indicator is measured in financial terms • # indicates indicator is measured in numbers • Y/N indicates indicators is a yes or no observation • ? indicates indicator that cannot be quantified, but can be assesses qualitatively

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5.1.4 Economic Cost-Benefit Assessment 5.1.4.1 Methodology Applied The following cost-benefit analysis relates the impacts at the operator level (private investors and Government institutions) with impacts at Government budget level. The EE Fund intervention is re-duced to a 10% EE investment subsidy programme ($ 10 mn) together with an additional technical as-sistance programme ($ 3 mn), to that the total programme cost is $ 13 mn. • Government level: The Government allocates budget resources for the EE fund, the benefits for the

budget are increase tax revenues and - eventually - additional revenues for CERs.

• Operators' level: The operators receive from the Government a 10% subsidy for their EE invest-ments - with this subsidy they will realise those EE investments for which the pay-back period is 4 years.

5.1.4.2 Assumptions and Data Base The key-assumption for this example of a cost-benefit analysis is shown in Table 5. Table 5: Key-parameters for the case study

The assumed EE investment subsidy programme is resumed in Table 6.

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Table 6: EE Investment subsidy programme

The total budget for the EE investment programme is $13.0mn, of this $10.0mn are use for the direct 10% investment subsidy. Due to the free-rider impact, only $8.6mn are leading to EE investments, which can be attributed to the EE investment programme - this means an investment of $86.0mn. The EE investors contribute with $77.4mn or 90% of the EE investment. 5.1.4.3 Result of the Cost-benefit Analysis The impact upon the Government budget is shown in Table 7, the detailed cash-flow projection is shown in Table 8. The $13.0mn total budgetary resources allocated to the EE investment programme generate increased tax revenues. The pay-back period would be 4.5 years and the IRR is 19%. If the CO2 reduction impact is taken into account as well, considering a CER value of 10 $ / t CO2, the favourable impacts upon the Government budget would be increased further as it is shown in the sec-ond part of Table 7. Table 7: Government budget impacts

The impacts upon the operators realising EE investments is shown in Table 8. Without the Govern-mental EE programme (10% direct subsidy and demonstration programme) a high number of EE in-vestments would fail (30%) and the pay-back periods would be to long (6.7 years) and the resulting IRR would be below the required return on investment of 12%.

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With the EE Fund programme the EE investment failures would be avoided and the EE investment would have a pay-back period of 4 years (equivalent to a return on investment of 22.3%). The cash flow projections are given in Table 10. Table 8: Operators' impact assessment

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(Draft)

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Table 9: Government Budget Impacts - Cash flow Proj ections

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(Draft)

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Table 10: Operators' Impacts - Cash flow Projection s

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5.1.5 Conclusion 5.1.5.1 Methodology The case study demonstrates the advantages of developing deconstructed versions of policy prescrip-tions as an aid to analysis and to stimulate focused debate among stakeholders. In the case of the energy efficiency fund the deconstruction helps to reveal the nature and extent of the assumptions that must be made adequately to assess the impact. This helps to frame the defini-tion of the policy instrument and the cost-benefit analysis. 5.1.5.2 EE Fund as Policy Instrument The cost-benefit analysis of the assumed operation of the EE Fund shows clearly that such a EE Fund would be a win-win situation for the Government and the operators (private companies and Govern-mental institutions. • At the Governmental level, the presented example considered only the direct budgetary impacts -

the EE Fund expenditures are related to increased tax revenues and, eventually, additional reve-nues for CERs. The example could have been further elaborated by taking the opportunity costs of energy (the cost of increased energy supply in Jordan) into account.

• At the level of EE investors the beneficial impact of an investment subsidy (by taking into account

the free-rider impact) is underlined. The additional $3.0mn for a technical assistance programme avoids the failure of innovative EE investments.

• The example could have been further elaborated by taking into consideration the multiplier impacts

of the Fund's successful EE investment programme. Proven technologies will be taken-up by other investors in the future.

We note that an important factor that governs the predicted impact is the existence in Jordan of prices that largely reflect true costs.

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5.2 Evaluation of Policy Instruments for Private W ind Energy Development 5.2.1 Background and Context The second case study we choose for illustration is the analysis of competing instruments for the pro-motion of wind energy in Jordan. 5.2.1.1 Promotion of Private Investment in Wind Ene rgy in Jordan The Government of Jordan in 2007, after reviewing its achievements in attaining targets for renewable energy under the National Energy Strategy of 2004, determined that progress had been disappointing. The review identified several reasons for this failure:

• High investment costs for renewables compared with traditional generation • The need for wide areas of land which are hard to secure • Lack of supporting legislation • The decision to implement on a BOO basis and not EPC that exacerbates the high cost

The government set revised targets of 7% of primary energy by 2015 and 10% by 2020, but did not provide a clear specification of accompanying policies that would plausibly achieve the targets. The 2015 target translates into 600 MW of wind power and this should be doubled by 2020. The main ob-stacle is the additional costs of renewables; the 2007 Energy Strategy estimates the extra cost at $US 1415 – 2115 million. There is no coherent analysis of what extra costs will be tolerated for the electric-ity generated from renewables and how they will be paid. Two important recommendations in the strategy were:

• Proceed with the issuance of the renewable energy law • Proceed with the implementation of the wind energy projects for electricity generation based on

BOO to the extent of 600 MW by end of 2020 (Kamsa 30-40 MW during 2007-2009; Fujaij 60-70 MW during 2007-2010; Harir 100-200 MW during 2008-12; Wadi Araba 40-50 MW during 2009-2013; 300 MW in other sites)

The draft law for the promotion of renewable energy is intended to facilitate the achievement of these targets. The draft law authorises the Ministry to establish a priority list for the development of lands with high potential for renewable development. The law also makes provision for the Jordan Renew-able Energy and Energy Efficiency Fund (JREEEF). The Law does not specify in detail the activities that the Fund will support, but there is some supporting documentation that gives possible examples and this includes the use to finance the difference between the costs of generation wind power and the price offered by the network. 5.2.1.2 Scope of the Case Study This Case Study considers two policy instruments to promote wind power. One is a system of com-petitive bidding of specific favourable sites. The other is the adoption of a feed-in tariff at a predeter-mined rate.

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The case study applies the concepts of evidence based policy formulation and theory based evalua-tion with the intention to demonstrate how these techniques can clarify analysis. The study covers the following three aspects: • Evidence based policy preparation: For both policy instruments behavioural models are developed

and the respective expected impacts are analysed. • Economic assessment of the wind energy option: An economic assessment of the wind energy op-

tion for Jordan is presented indicating the major factors determining the economic viability of this option.

• Conclusions regarding the utility and application of the methodology and to some extent the sub-stance of the policy instruments analysed.

5.2.2 Comparison of Policy Instruments for the Prom otion of Wind Power 5.2.2.1 General Context Specification of the Alternative Policy Instruments For the following analysis the following simplifying assumptions are made: • The objective of the Jordanian Government is to develop the wind power use of certain well speci-

fied geographical areas • For these areas preliminary wind data are available and are made available to interested wind de-

velopers, but the Jordanian Government does not assume responsibilities. • The two options are:

- Competitive bidding for large areas. The Jordanian Government would select the most attractive bid with the lowest tariff requirement.

- A feed-in tariff perhaps differentiated by area For these two policy option the policy instrument and the concession awarding procedure are elabo-rated below. Wind Policy Objectives We assume that the objectives of the Jordan Government in developing the wind power potential of the country are: • Optimal development of the resource, • Lowest cost and most manageable grid extension, • Minimal administrative costs, • Surprise-free procedures, • Strong competitive pressures for cost reduction on manufacturers, • Maximisation of local content and development of local manufacturing capability, • Lowest project price, • Predictability of generation.

In achieving these objectives the government would need to consider how stakeholders will adapt to

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specific instruments. These concerns can be expressed through subsidiary objectives: • Transparent and non-discriminatory allocation of sites, • Clear criteria for choice among offers, • How developers will manage risks in the electricity market, • How developers will manage risks in the certificate market. Assumptions We assume in both cases that the certificates of emission reductions issues under any CDM certifica-tion process are assigned to the developer. It does not affect the analysis if they are assigned to other parties, because there will have to be compensating financial flows. We make this assumption be-cause we consider it to be the most appropriate choice. 5.2.2.2 Competitive Bidding Specification of the Option For the forthcoming discussion of the two options, it is necessary to specify the competitive bidding option (even to simplify the option certain extent for the transparency of the discussion): • Jordan will make available government owned land as the basis for a concession • The concession will be auctioned in a two-stage procedure (pre-qualification and competitive bid-

ding), - Pre-qualification: The admission criteria will be proven experience and financial capacity, - Competitive bidding: Selection of the most attractive bid.

• For the bid-evaluation there will be: - Bid acceptance criteria: The qualification of the bidder is acceptable - Ranking criteria: A set of ranking criteria based on the electricity sector policy options will be

applied. • Concession negotiation with the first ranked bidders: With the winner the conditions of the conces-

sion contract, the tariff and other technical conditions will be negotiated (concession contract and long-term PPA).

• Project implementation and monitoring: The Jordanian Government will carefully monitor the pro-ject implementation.

• In parallel the next competitive bidding round can be launched.

Advantages This option has the following advantages: • Low bid preparation effort: The basis for the tender is are the delimitations of the concession

area and the available data regarding the wind potential • Site development: The burden and responsibility of the site development remains with the inves-

tor. • Market response: The Government receives and immediate response from potential investors. • Integration into the national electricity system: The feed-in point is defined.

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5.2.2.3 Feed-in Tariff Specification of the Option • The Government determines the feed-in tariff, which offer attractive development potentials and

should provide incentives for the development of pilot projects. • The Government develops a comprehensive legal and contractual framework of feed-in tariffs and

the technical and contractual conditions to be applied. • The feed-in tariff will be guaranteed in form of long-term power purchase agreements (PPA). • Investors will evaluate the available information and will develop their sites. • The investment proposals will be evaluated according to well specified criteria, which are known to

all interested parties. • Preparation of the following generation of wind projects: Based on the gained experience the Gov-

ernment will revise the feed-in tariff and conditions for the next-generation wind projects.

Advantages of this Option The stated advantages of these options are: • Programme a dministration: Once the general conditions and the feed-in tariff are defined the pro-

gramme management and transaction costs are low. • Entrepreneurial freedom: The investors know the conditions and have the maximum freedom to in-

vite partners and to develop projects. • Market response: The attractive feed-in tariff and the legal and contractual framework facilitate the

development of the project. • Participation of national investors: The feed-in tariff offers also for national investors good business

opportunities because all sizes of wind parks can be developed. 5.2.3 Evidence based policy We specify the behavioural models for these two policy instruments as a form of logical framework in which the successive steps of policy implementation are shown in the first column and then in subse-quent columns are listed various indicators, risks and assumptions. The successive steps of the policy may or may not specify recognisable behavioural assumptions; it depends very much on the type of policy investigated. The indicators that we adopt are measures of input, output, outcome and impact. By these terms we mean the following: • Inputs are the financial, human, technical or organizational resources used in the endeavour, • outputs are objectively verifiable indicators that demonstrate the progress made in implementing

the measures, • outcomes are the immediate effects on the regulated subject, • impacts are direct measurements of the improvements that the programme is designed to bring

about.

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The behavioural model is a formal description of the process of implementation, the concerns to be raised at each stage and the measures that are to be adopted to make everything is working as ex-pected. It provides a structure for the analytical steps and indicates the evidence that should be sought at each stage to support assertions or on which to found analysis. It allows the issues that might affect implementation to be identified and it allows different stakeholders to debate around a clear and concrete representation of the policy. In later stages it serves as the basis for monitoring and evaluation. Behavioural models for the two policy instruments considered here are shown in Tables 11 and 12.

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(Draft)

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Table 11: Behavioural Model of Competitive Bidding for Wind IPP and associated Indicators, Risks and A ssumptions



• Transmission company pre-pares network expansion plan; agrees priorities with regulator

• Time of officials and electricity supply industry staff ($)

• Transmission expansion plan and agreed re-quirements and restraints in de-velopment of wind site

• Prepare and publish request for proposals in-cluding require-ments for do-mestic content.

• Time of officials to prepare RFP ($)

• Consulting con-tract to assist ($).

• Documents pre-pared (Y/N).

• Foreign and do-mestic investors and manufactur-ers perceive profitable oppor-tunities.

• Number of pro-spective inves-tors that request bid documents and seek to pre-qualify (#)

• Sufficient local capacity to allow multiple competi-tive bids.

• Bidders arrange consortium with local partners.

• Consortia formed (#)

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• Prepare and submit prequali-fication

• Time of officials to assess sub-missions ($).

• Possibly consult-ing advice ($).

• Number of bids submitted: value of domestic con-tent ($).

• Some exposure of a range of domestic inves-tors (?).

• Sensitisation of some foreign in-vestors to pros-pects (?).

• Qualified bidders appoint agent for measurement

• Agent appointed. Measurements completed on schedule (Y/N).

• Bidders will co-operate on measurement

• Bids prepared submitted and evaluated.

• Competitive bid-ding promotes low cost.

• Time of officials to assess sub-missions and prepare contract ($).

• Possibly consult-ing advice ($).

• Winning bid se-lected (Y/N).

• Number of bids submitted.

• Terms of pro-posed PPA (#).

• Value of domes-tic content ($).

• Some exposure of a range of domestic inves-tors (?)

• Sensitisation of some foreign in-vestors to pros-pects ($).

• Bids are higher than expected.

• Bidders discount value of CERs.

• Risk assessed as moderate.

• Winner deposits commitment fee / performance bond.

• Winner with-draws. Risk as-sessed as low.

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• Selected bid is constructed and commissioned.

• Construction schedule is ob-served because of contract penal-ties.

• Power plant commissioned (Y/N).

• Winner with-draws. Risk as-sessed as low.

• • Time overruns.

Risk assessed as moderate.

• Plant operates with high avail-ability because of contract penal-ties.

• Nominal cost of balancing power ($)

• Time to monitor and evaluate plant perform-ance ($).

• Volume of elec-tricity generated (GWh).

• Volume of fuel purchased for power plant (GJ).

• Financial cost of power acquired by NEPCO under PPA ($).

• Value of fuel saved at oppor-tunity cost ($).

• CO2 emissions are reduced from baseline; fuel burn is reduced; domestic manu-facture is strengthened; net cost to coun-try is acceptable.

• Time to monitor and evaluate plant perform-ance ($).

• Value of domes-tic content ($).

• Volume of CO2 emission reduc-tion (mt).

• Value of carbon emission reduc-tions ($).

• Net cost of pro-ject ($).

Note on symbols:

• $ indicates indicator is measured in financial terms • # indicates indicator is measured in numbers • Y/N indicates indicators is a yes or no observation

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Table 12: Behavioural Model of Feed-In Tariff for W ind IPP



• Prepare legislation and regulations nec-

essary to implement FIT

• Time of officials and legislature ($)

• Published law and regulations (Y/N)

• Possible delays in finding legislative

time

• NEPCO and Regula-

tor collaborate to de-fine terms and condi-tions to ensure opti-

mal development of sites

• Time of officials

and NEPCO staff ($)

• Conditions defined

(Y/N)

• Supplementary

conditions added to applications for FIT

• Control of devel-

opment will be dif-ficult

• Regulator and Minis-try collaborate to specify requirements

for local content

• Time of officials in Ministry and Regu-lator ($)

• Requirements de-fined (Y/N)

• Supplementary conditions added to applications for FIT

• Status of local manufacturers in negotiations en-

hanced

• Insufficient local capacity; may be a restraint on com-

petition • Monitoring local

content may be

problematic

• Explain and promote concept; foster

stakeholder group-ings - experts, land-owners, municipali-

ties, etc

• Time of officials in Ministry and Regu-

lator ($)

• Promotional mate-rials, meetings (#)

• Sensitised stake-holders; awareness

of opportunities (?) • Stakeholder bodies

(#)

•

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• Local and foreign in-vestors develop pro-

jects and made pre-liminary approach to regulator

• Time to prepare feasibility studies

($) • Consulting support

($)

• Feasibility studies (#)

• Consortia formed (#)

• Tariff set at levels that promote too

much or too little interest

• Local investors feel comfortable

with technical commercial and fi-nancial issues and

with operating on the carbon market

• Detailed measure-

ments of wind re-source performed

• Time of special-

ised consultants ($)

• Wind regime de-

fined (Y/N)

• Costs of acquiring

data seen as pro-hibitive

• Final project form de-fined; finance ar-ranged; land rights

acquired. Submitted to regulator

• Time of consortia and consultants ($)

• Final project speci-fication and imple-mentation ar-

rangements (#)

• Projects authorised (#)

•

• Auction of conces-

sion where there are competitive bids

• Time of officials in

Ministry and Regu-lator ($)

• Winning bid se-

lected (Y/N)

• Projects authorised

(#)

• NEPCO adapts net-work expansion plan to cope with timing

and nature of devel-opments

• Time of officials in Ministry and Regu-lator ($)

• Expansion plan re-vised (Y/N)

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• Authorised projects constructed and

commissioned • Construction sched-

ule observed be-

cause of commercial interest of owner

• Equipment, con-struction costs,

supervisory costs ($)

• Completed plant (Y/N)

• Power plant com-missioned (Y/N).

• Developers may delay or withdraw

for financial or technical reasons – little means of

control

• Plant operates with

high availability be-cause of commercial interest of owner

• Nominal cost of

balancing power ($)

• Electricity genera-

tion (GWh) • Fuel displaced (GJ)

• Volume of electric-

ity generated (GWh).

• Volume of fuel pur-

chased for power plant (GJ).

• Financial cost of

power acquired by NEPCO on terms of FIT($).

• Value of fuel saved at opportu-nity cost ($).

• CO2 emissions are reduced from base-

line; fuel burn is re-duced from baseline; domestic manufac-

ture is strengthened; net cost to country is acceptable.

• Time to monitor and evaluate plant

performance ($).

• Value of domestic content ($).

• Volume of CO2 emission reduction (mt).

• Value of carbon emission reduc-tions ($).

• Net cost of project ($).

• CO2 emissions are reduced from

baseline; fuel burn is reduced from baseline; domestic

manufacture is strengthened; net cost to country is

acceptable.

Note on symbols:

• $ indicates indicator is measured in financial terms • # indicates indicator is measured in numbers • Y/N indicates indicators is a yes or no observation

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5.2.3.1 Result of the Comparison Through consideration of this deconstructed specification of the policy instrument we can begin to as-sess the merits of each instrument according to the objectives of the policy. The results of this com-parison are shown in Table 13. This case study is intended purely as an indication of the policy process and its relationship to evi-dence and analysis. It is not intended to provide a definitive answer to the question of what policy in-strument is desirable. The study shows that either instrument can be elaborated to provide a convincing option for imple-mentation; it identifies some of the issues that need further exploration in each case and some of the risks that need to be managed before implementation is initiated.

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Table 13: Criteria for Choice among Options

Criterion Competitive Bidding Feed-in Tariff

Key objectives

Optimal development of the re-source

Letting a large concession as a whole should reduce the dan-gers of interference from sub-optimal location of turbines.

Uncoordinated development of sites could limit production from the combined area. Might be avoided by detailed monitoring by regulator, but at considerable effort.

Lowest cost and most manage-able grid extension

A large concession in common ownership should ease the

problems over locating, sizing and timing grid interconnections.

Feed-in tariffs create a high degree of unpredictability in de-mand for network reinforcement. Where projects are small, as is the case with most existing feed-in systems, this may not be

a problem, but in the development of a large resource in piecemeal fashion it might be difficult to manage.

Minimal administrative costs

These are significant in terms of preparing tender documents and evaluating bids. Small in comparison to the project size.

There is a substantial effort required to provide the legislation and regulation required to implement the policy. Subsequently costs are low as tariff is for a standardised product.

Surprise-free procedures

There is the danger of withdrawal of the preferred bidder at a late stage. The likelihood can be reduced by clear specification of objectives and conditions and by consistency in negotiation.

In the event of such a withdrawal the bidder should forfeit commitment fees and negotiations begun with the bidder next in line.

Surprises can originate from unexpected responses to tariff

levels especially at early stages (see above).

Strong competitive pressures for cost reduction on manufac-turers

A concession implies a quota of output fixed within a narrow range. There is some evidence that in quota systems because

the volume of turbine sales is fixed manufacturers are not moti-vated to cut prices to extend sales. The value of this argument in Jordan is debatable, because manufacturing technology is

determined by international costs and markets.

A feed-in tariff is alleged to encourage price cutting to encour-age higher volumes of sales at lower costs in turn leading to

lower costs through higher volumes. There is some evidence that this has happened on European markets, but the rele-vance of this to the Jordanian case is low.

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Maximisation of local content and development of local manu-facturing capability

This is easily incorporated into the concession bidding. A lower

limit can be set and a clear weighting applied to content above that limit. Monitoring of compliance is relatively straightforward because there is just the single project to monitor. Penalties for

non-compliance can be exacted.

A lower limit of local content can be set as part of the regula-tion. It would be more difficult to provide incentives to exceed the limit. Compliance would be more cumbersome because of

the larger number of projects, but not impossible.

Lowest project price

Tender of a concession should ensure that the lowest cost and most efficient operator wins the project and offers the lowest price electricity.

There is a significant problem in determining the level of feed-in

tariffs. Feed-in tariffs if set too low will mean that no projects are offered and if set too high will mean that many are offered and the output is costly. Over time, by trial and error this can be

corrected.

Predictability of generation

Saving major failings of the bidding system the predictability of the timing of generation additions should be good. The worst

scenario is that no bids are received, which is unlikely. If the preferred bidder withdraws, there will be the next best candi-date. Large commitment fees should be paid on contract set-

tlement and penalties for delays.

The development is less predictable; it depends upon how at-tractive the feed-in tariff is.

Subsidiary Objectives

Transparent and non-discriminatory allocation of sites

This is not an issue for the competitive tender, because the site is allocated to the preferred bidder.

It is not obvious how to offer sites under a feed-in tariff. First-come first served would be very hard to administer objectively and transparently in conjunction with necessary technical quali-

fications. Offering a site to the best technical proposal would equally be difficult; it would require penalties linked to deficient performance to avoid spurious technical claims. Auctioning the

sites would seem to be the best option. That would entrain considerable administrative costs, but would bring with it some of the advantages of the competitive bidding process.

Minimise data acquisition costs Competitive tender allows bidders to appoint a joint agent for

measurement.

Under FIT a joint agent is less feasible. Data costs may be

higher.

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Criteria for choice

It may be difficult to choose among competing offers unless the

technical criteria and weighting of criteria are carefully consid-ered and designed. This can be done. One option would be a base requirement in terms of peak capacity, load factor, do-

mestic content with the decision based on the PPA (evaluated according to a specified formula) adjusted by marginal im-provements in terms of the base criteria.

There is no problem of this kind. Proposals need to be screened for environmental, planning and technical acceptabil-

ity, but nothing else.

Risk for developer in electricity market

The developer faces no market risk for electricity; in the tender he proposes a PPA and that will be in force throughout the du-

ration of the project.

There is no electricity market risk for a developer in a feed-in tariff. Income is assured over the lifetime of the project.

Risk for developer in certificate market

The project will only be financially viable with large financial subsidies from the carbon emission reductions. The future

value of these is unknown and is a significant risk to the devel-oper. A large developer with a large portfolio of plant and ex-perience in the carbon market and strategies for that market,

may perceive this risk less highly than a smaller developer un-der the feed-in tariff scheme.

Unless the GoJ proposes to take on the market risk of the CERs by offering a high feed-in tariff and keeping the CERs,

the developer under the feed-in tariff is exposed to the same risks as for the concession. The smaller projects under the feed-in tariff may imply smaller companies to develop them and

consequently less experience of the carbon market and less willingness to be exposed to that uncertainty.

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5.2.4 Economic Cost-benefit Assessment 5.2.4.1 Assumptions and Data Base - Wind The data used for the assessment of the wind energy option are shown in Table 14. In this table a dif-ference is made between the cost of the wind energy supply to be under the responsibility of the wind energy IPP and the cost for stand-by capacity to be covered by the Jordanian electricity sector (or Steam Turbine HFO). Table 14: Data for Wind Energy

Exchange rate: 1.4 USD/Euro

These assumptions are: • Investment costs: 1500 USD/kW, • Cost for back-up: 1400 USD/kWh - the back-up capacity is required for 60% of the installed wind-

capacity, • Capacity factor: 30%, which corresponds to the expected operation condition of new wind energy

parks in Jordan (see: Renewable Energy and Energy Efficiency Current Situation and Possible Contributions / National Research Centre NERC, Amman, November 2007. In this document po-tential wind parks of 600 MW of capacity are considered which will produce 1577 GWh/year, which implies a capacityfactor of 30%).

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5.2.4.2 Assumptions and Data Base - Steam Turbine H FO Fired Price Forecast Based on Crude Oil Prices The US Department of Energy/Energy Information Agency has produced long-term forecasts of crude and petroleum product prices to 2030 (EIA, 2009). This is an authoritative source; it may not be right, but a great deal of effort and analysis has gone into its creation and it is a reasonable source to adopt. Figure 2 shows the forecasts of crude prices in real and nominal terms to 2030. It is statistically clear that fuel prices are strongly correlated over the medium term. We use a formula to describe a plausible relationship between HFO prices and crude oil prices. This formula is derived from regression studies of the price of HFO and crude at Rotterdam. The formula we use is: y = 0.97 x - 79 Where, y = HFO nominal price in $/tonne and

x = nominal price of crude in $/tonne This procedure gives a central case for HFO prices as shown in Figure 1. Fig. 1: Heavy Fuel Oil - Long-term Price Projection

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Fig. 2: Forecasts of crude prices to 2030 (DOE/IEA)

0

20

40

60

80

100

120

140

160

180

200

2010 2015 2020 2025 2030

$/

bb

l Crude Oil (weighted

average) 2007 US$/bbl

" nominal prices

We propose to use real 2007 prices for the cost benefit analysis to avoid having to link the power pur-chase agreement to inflation. HFO Steam Turbine The key-data for the HFO Steam Turbine alternative are given in Table 15. For the HFO price between 2010 and 2030 a linear interpolation is used. Table 15: Data for HFO Steam Turbine

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5.2.4.3 Result of the Assessment Figure 3-3 shows the projection of units cost for the two energy supply alternative. The increase steam-turbine generation unit cost is due to the assumed price increase (in real terms) for HFO. In addition to the base case, two price variations are considered: • 30% higher HFO prices • 30% lower HFO prices With these projections of the unit costs it is possible to determine economic assessment criteria (the cost of the Steam-turbine HFO alternative is the benefit of the wind power alternative). The results are given in Table 16. Table 16: Wind Energy - Economic Assessment Criteri a

In the base case the wind power alternative is not economically viable. Under the assumptions of 30% higher HFO prices, the wind option is not yet economic feasible. Fig. 3: Forecast of Unit Costs for Wind Energy and Steam-turbine HFO

0

5

10

15

20

25

30

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

Years

Cos

ts (

US

-cen

t/kW

h)

HFO

HFO - high

HFO - low

Wind

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5.2.4.4 Variation HFO Prices and Required Rate of R eturn on Equity The required rate of return on investment of IPP Wind developers is a key-factor in evaluating the costs of wind energy in Jordan. The analysis is based on a rate of 20%, which reflects the perceived risk regarding the innovative character of wind energy IPPs in Jordan and the still not well developed regulatory framework. Figure 4 illustrates the impacts of the required rate or return upon the unit costs of wind turbines. Fig. 4: Impact of required rate of return on inves tment upon unit costs

10.00

11.00

12.00

13.00

14.00

15.00

16.00

17.00

18.00

19.00

20.00

10% 12% 14% 16% 18% 20%

Wind IPP - Required rate of return

US

-cen

t / k

Wh

To illustrate the impacts of the stated assumptions a sensitivity test was prepared: • Wind energy - Required rate of return between 10% and 20%, • Price for HFO in 2010: The price was varied between 450 and 650 USD/tonne In Table 17 the NPV for a range of 2010 HFO prices and IPP wind return requirements are given. Table 17: Wind Energy - Impact of HFO and Return on investment requirements

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The conclusion of this assessment is: • Under the assumed long-term projection of the HFO of 800 USD/tonne the wind energy option is

very attractive for Jordan. The open issue is the level of HFO prices in 2010. • The key-issue is the return in investment expectation for wind energy. By developing an appropri-

ate and reliable legal and institutional framework for Wind Energy (reducing the return require-ments from 20% down to 14% or 12% the economic viability of the wind energy option is secured over a wide range of possible 2010 HFO prices.

5.2.4.5 Carbon Credits The economic rate of return on the investment is increased when we account for the economic bene-fits of generating less greenhouse gases and in particular less carbon dioxide. This can be put in eco-nomic terms by assuming a value for the reductions in carbon monetised by selling the certificates that certify the reduction (CERs) on the appropriate exchange. The certificates may be assigned to the developer or to the state. If they are assigned to the developer then the PPA would be adjusted accordingly to bring the expected rate of return on capital back to the required level. The CERs carry a risk, as their future value is not known. The optimal assignment of CERs will depend on which partner can best manage that risk. This will vary from development to de-velopment. If the developer is large and has a big portfolio of credits it may be best to add them to that portfolio. In other circumstances the developer may be unwilling to accept the risk and would therefore demand a disproportionately higher PPA and a better result might be obtained if the state took the CERs. The assignment does not affect the economic assessment of the project as a whole. Table 18 shows the situation for two price levels for the carbon credits (20 and 50 USD/t CO2). The CO2 emissions are based on the HFO alternative electricity generation. This would not be sufficient to achieve an eco-nomic feasibility of the wind energy option for Jordan. Table 18: Wind Energy - Economic Assessment Criteri a with Carbon Credits (Base case)

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Fig. 5: Wind Energy Option - Net Cash-flow with Ca rbon Credits

-8

-6

-4

-2

0

2

4

6

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

Years

Net

cas

h flo

w (

US

-cen

t/kW

h)

Base case Carbon credit (20 USD/tCO2) Carbon credit (50 USD/tCO2)

It is of interest to illustrate the importance of carbon credits for one of these different cases. This is done in Table 19 for IPP Wind Return Requirement - 14 % / HFO prices 2010 - 470 USD/tonne. Con-sidering this specific case, it can be seen that with a carbon credit of 20 USD / t CO2 the wind energy option would be highly attractive for Jordan, while offering a sufficiently high return for the IPP devel-oper. Table 19: Wind Energy - Economic Assessment Criteri a with Carbon Credits (IPP Wind Return Requirement - 14 % / HFO price 20 10 470 USD / tonne)

5.2.5 Conclusion 5.2.5.1 The Methodology The case study demonstrates the advantages of developing deconstructed versions of policy prescrip-tions as an aid to analysis and to stimulate focused debate among stakeholders. It demonstrates the approach for the case of two policy options for wind and shows how the options can then be analysed in the light of the policy objectives to form the basis for decision. The study then demonstrates the linkage between this deconstructed specification and detailed eco-nomic analysis.

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5.2.5.2 Policy instruments for wind It is beyond the purpose of this illustrative case study to draw definitive conclusions regarding the wind energy option for Jordan and the involvement of private wind IPPs. Some interesting aspects of the study are: • Competitive bidding: The start of the tendering and bidding process might not require an elabo-

rated legal and contractual framework and business negotiations might be initiated very fast. - This policy option is appropriate for big wind parks on land that can be legally tendered as a

single concession. - - Without a reliable sector strategy (development of the transmission network and required back-

up capacities) and stated sector policy objectives and legal / contractual framework, the nego-tiations can be at risk.

- • Feed-in tariff: The up-front efforts of this policy option are high because the appropriate feed-in

tariff has to be determined and the legal and contractual framework has to be developed.

There is some risk in the early stages that tariffs may be set too high or too low as there is little ba-sis on which to proceed. The standardised nature of the transaction makes it appropriate for small sites spontaneously of-fered by developers.

• Economic and commercial viability:

- The wind energy option can be economically justified, but the assessment shows that the main issues are the opportunity cost of fuel and the return on equity requirements of the wind IPPs. The option is only an economic viable (under the national perspective) under quite restrictive conditions, namely: - A power purchase agreement that is based on the opportunity costs of alternative supplies of

electricity - Sufficiently low perception of risk by the developer to bring discount rates down to say 14% - Quite large credits for the carbon emissions that are avoided (higher than $20 / tonne)

- The commercial viability depends very much upon the offered / permitted return on investment for the wind IPP. By establishing a reliable regulatory framework the perceived risk can be sig-nificantly reduced so that a return requirement of 14% will be acceptable for wind IPPs.

- If the Government decides to hand over the certificates of CO2 emission reductions to the wind IPP this will part of the equity remuneration.

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5.3 Evaluation of CDM Project: Amman Ghabawi Landfi ll Gas to Energy Project 5.3.1 Presentation of the Case Study 5.3.1.1 Context and Scope The example that we choose in this case study for illustration is the analysis of how finance through the Clean Development Mechanism (CDM) can be used to support the development of renewable en-ergy. The example chosen is the recovery of landfill gas. The case study is based loosely on the Am-man Ghabawi Landfill Gas (LFG) to Energy Project, but some data have been simplified to make the presentation easier. The full project document is available on the internet1. This is slightly different from the other policy options that we have considered in that the policy is es-tablished by the international community: All the Government has to do is to agree the terms and to establish the institutional requirements, in particular to establish a Designated National Authority (DNA) to communicate with the UNFCCC. The national policy option that we consider is therefore best described as the facilitation of CDM pro-cedures in country. 5.3.1.2 Amman Ghabawi Landfill Gas to Energy Projec t Background The first large landfill site in Amman was located at Russaifa, East of Amman, in a densely populated area and attracted many complaints about the smell. This landfill site was closed in 2003 and the Amman Municipality decided to shift the land-filling activities 30 km to the east to a site at Ghabawi and to install methane gas recovery at the existing site. The landfill gas recovery also removes a large part of the mercaptans that are responsible for the un-pleasant odours. The methane recovery at the first site was established as a GEF Project supported by a grant of $4 million from UNDP and DANIDA. It was intended as a pilot and demonstration project for recovery of biogas from anaerobic digestion of household and organic waste from slaughter houses (in a closed reactor tank) as well as extraction of biogas from the landfill and use of the gas in gas engine/generator units for electricity production. The project is operated by the Jordan Bio Gas Company owned 50% by the Central Electricity Gener-ating Company and 50% by the Greater Amman Municipality. CEGCO buys the gas at the same tariff as it buys from NEPCO. The plant provides between 2.5 and 2.8 MW of power and generates about 26 GWh per year. Ghabawi landfill is a controlled landfill started in 2003; it receives about 3,000 tons of waste per day. The waste is covered daily. The landfill is planned to have a total of 9 cells of which the first is full and the second is in use and is intended to meet the requirements of Amman for the next 30 years. It has been prepared for methane recovery since the design stage. Landfill gas will eventually be exploited through vertical wells.

1 Amman Ghabawi Landfill Gas to Energy Project, Project Design Document,

http://cdm.unfccc.int/Projects/Validation/DB/5C38RV1UM40R9YUV1WNXWICAKM4AD7/view.html

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Technologies for Landfill Gas An LFG plant comprises an extraction and a utilization system. The extraction system is made of per-forated pipes through which the gas may flow. Gas is pumped out of the landfill so maintaining a low pressure in the pipes that causes gas to flow towards the perforations. The pipes may be laid horizon-tally or vertically; horizontal pipes must be laid as the landfill progresses and can be used while the cell is still being filled. They do interfere with the movement of machinery and complicate the opera-tion. Vertical wells can be drilled after the cell is filled and although gas is lost, this is an easier solu-tion. The gas may be simply flared which has the advantage that it converts the strongly radiative forcing methane gas into the less strongly radiative forcing CO2, but does not generate income and is not eli-gible for CDM finance. The normal solution is to burn the gas in gas generators to make electricity. 5.3.1.3 Scope of the Case Study The intent of the Amman Ghabawi Landfill Gas to Energy Project is to reduce the greenhouse gas emission from Ghabawi landfill by extraction of the landfill gas and use of the methane (CH4) for en-ergy purposes. This case study uses the project to illustrate the benefits of CDM finance in general terms. 5.3.2 Evidence-based Policy Making 5.3.2.1 Steps of Policy Preparation The procedure that we have proposed to implement evidence-based policy making comprises the fol-lowing steps:

• Alternative forms of intervention need to be reviewed and short-listed. Evidence of the suc-cess or failure of similar instruments in developed and developing countries needs to be stud-ied with special emphasis on the conditions that created success and failure.

• There must always be a base-case against which alternatives are screened. Alternatives should include all available instruments.

• All the relevant potential impacts need to be identified and where possible, quantified • Impacts should be assessed in consultation with the subjects of policy. • The cost of compliance needs to be assessed. Consideration should be given to how these

costs can be minimized. It is necessary to consider who pays the compliance costs ; there are generally alternatives with different implications for equity. The procedures for compli-ance need to be worked out as does the procedure for monitoring impacts.

• Indicators need to be established of what is expected from the policy measures. These indi-cators should cover outputs, outcomes and impacts. Intermediate indicators are important in helping understand how policies work, how measures interact and how they can be improved.

• Quantitative analysis of impacts is essential. The analytical method most commonly used is economic cost-benefit analysis .

• Cost-benefit analysis should take into account opportunity costs of energy and external en-vironmental costs.

• Multi-criteria analysis maybe a useful support to decision making; sensitivity analysis is one expression of this idea.

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The first five steps are discussed in this section; the formulation of indicators is discussed in the sec-tion on theory-based evaluation and the last three steps are demonstrated in the section on economic cost-benefit assessment.

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5.3.2.2 Alternative Forms of Intervention There are two levels at which alternatives may be discussed. The high level decision is whether to re-cover landfill gas at all and if so what to do with it. If the gas is to be recovered then there are technical alternatives to review. Options for recovery The main options are: • To do nothing, • To recover the gas and to flare it, • To recover gas and generate electricity, • To recover process heat from the gas, • To upgrade the gas to pipeline quality and feed into the gas system. To do nothing involves of course no expenditure and no revenue. There is a large global welfare loss because of the emissions of methane from the landfill. Flaring involves some expenditure and avoids a large part of the global welfare loss. Some methane is still emitted to atmosphere because it is never collected and some methane that is collected passes through the flare unburned. There is also a potential financial and environmental benefit to be obtained by using the methane for a productive purpose. It appears that flaring is not eligible for CDM support, so, from a practical point of view there can be no revenue from this option and it is not feasible. Electricity generation is environmentally the most beneficial option, because the same large part of the methane emission is controlled and some combustion of fossil fuel elsewhere on the power system is avoided with the consequent avoidance of the associated emissions of CO2. Whether this option is economic is less clear, because the expenditures for the gas engine are considerable. However the option as a whole is eligible for CDM support and this may make the overall operation commercially at-tractive. Generation of process heat is impractical at the site because there is not means of using it. The same is true of upgrading the gas to pipeline quality. Technical Considerations The main technical choice is between horizontal wells laid as the cell is filled and vertical wells drilled after filling is complete. The first option provides a better recovery of gas, but complicates the opera-tion of machinery on the site; the second operation is less effective, but much simpler. In the Amman project this option was adopted. The Project Design Document (PDD) for the Amman Ghabawi LFG Project estimates that 30% of the gas will not be extracted by either technology as it will leak away from the extraction system. Vertical wells are installed as the cells are filled up and the final cover is made; this delays extraction from each cell by three years, which means that the gas produced over the first three years, will not be extracted. The PDD estimates that another 20% of the gas is lost during the first three years. The total recovery efficiency will therefore be about 50%.

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5.3.2.3 Base case The base case for this analysis is simply to cover the landfill without any recovery. We shall also inves-tigate the physical consequences of flaring and the commercial consequences of power generation under various conditions. 5.3.2.4 Impacts Assumptions We adopt the forecasts of landfill gas generation contained within the PDD. These are based on fore-casts of the volume of waste, growth rates, composition of waste and recovery factors. Gas will be generated from the site well after it is closed. According to the estimates in the PDD, maximum pro-duction will be achieved in 2031 and will decline rapidly thereafter. The period of interest for the CDM registration is from 2009 to 2029 and the forecast gas production for this period is shown in the Figure below. Fig. 6: Forecasts of annual production of LFG

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

2005 2010 2015 2020 2025 2030

Mil

lio

n N

m3

Annual extraction

The impacts on climate change from the recovery of this gas will depend on the methane content of the gas; this is estimated at 50% by volume. We also need to make assumptions about the rate of build up of generating plant, as when the avail-able gas exceeds the generating capacity it must be sent to the flare. The schedule proposed in the PDD is shown in the Figure 7.

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Fig. 7: Investment schedule for power generation (M W)

0

2

4

6

8

10

12

14

16

2005 2010 2015 2020 2025 2030 2035

Mw

e

Installed capacity

(MW)

The efficiency of the flare in destroying methane is assumed to be 90% and the amount of CO2 avoided on the power system is estimated for the case of Jordan, at 0.712 tonnes CO2 / MWh. Estimation On the basis of the foregoing assumptions we can estimate the carbon dioxide equivalent of emis-sions avoided by flaring methane. It is shown in Figure 8. This is from an environmental perspective a positive impact, but there is no financial benefit. The impacts in the case of electricity generation are summarised in Figure 9. Fig. 8: CO2 equivalent emissions avoided by flaring

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Fig. 9: GHG emissions avoided by electricity genera tion

0

100

200

300

400

500

600

700

800

2005 2010 2015 2020 2025 2030 2035

kt

/ y

ea

r

CO2 equiv of CH4 used

in power gen (kt/yr)

CO2 equiv of CH4

flared (kt/yr)

CO2 avoided on power

system (kt/yr)

Total CO2 saving

(kt/yr)

In the case of electricity generation the impacts are more complex. Some GHG emissions are avoided by using the methane for power generation. Other emissions are avoided by flaring the LFG that is in surplus and a third set of emissions are avoided because of the fossil fuel consumption that is avoided elsewhere. The irregularity in the graphs is caused by the irregular volumes of gas going to the flare; this is a function of the difference between the continually increasing volumes of gas available and the discon-tinuous additions of generating capacity. 5.3.2.5 Consultation This is not a policy option that requires wide consultation. Obviously there needs to be internal consul-tation in the implementing agencies and there needs to be some discussion with consultants and sup-pliers in terms of optimal design for the facilities, but widespread consultation outside of the agency is not necessary. 5.3.2.6 Compliance For similar reasons there is now issue of the state needing to ensure compliance of regulated sub-jects. It is only necessary to monitor the performance of the project to be sure of the GHG emissions avoided and therefore the CERs to award The monitoring plan contains the following: • The amount of landfill gas generated measured in normal cubic meter as well as the quantities fed

into the flare and to the gas engines are measured continuously, • The fraction of methane in the LFG is measured continuously with an infrared analyzer, • Temperature and pressure of the landfill gas are required to determine the density of methane in

the landfill gas, • The quantity of electricity used for operating the LFG plant is measured by an electrical meter,

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• The electricity produced and delivered to the Grid is measured by an electrical meter. There needs also to be proper procedures to report these data and provision for independent verifica-tion. 5.3.3 Theory-based Evaluation 5.3.3.1 Methodology Evaluation of a project depends upon an underlying belief in how actors will be affected by the policy and how they will respond. We call this belief a “behavioural model”. We specify the behavioural model as a causal sequence in which the successive steps of policy implementation are shown in the first column and then in subsequent columns are listed various indicators, risks and assumptions. The successive steps of the policy may or may not specify recognisable behavioural assumptions; it de-pends very much on the type of policy investigated. The behavioural model is a formal description of the process of implementation, the concerns to be raised at each stage and the measures that are to be adopted to make everything is working as ex-pected. It provides a structure for the analytical steps and indicates the evidence that should be sought at each stage to support assertions or on which to found analysis. It allows the issues that might affect implementation to be identified and it allows different stakeholders to debate around a clear and concrete representation of the policy. In later stages it serves as the basis for monitoring and evaluation. 5.3.3.2 Indicators Indicators need to be established of what is expected from the policy measures. These indicators should cover outputs, outcomes and impacts. Intermediate indicators are important in helping under-stand how policies work, how measures interact and how they can be improved • Inputs are the financial, human, technical or organizational resources used in the endeavour, • Outputs are objectively verifiable indicators that demonstrate the progress made in implementing

the measures, • Outcomes are the immediate effects on the regulated subject, • Impacts are direct measurements of the improvements that the programme is designed to bring

about. 5.3.3.3 The behavioural matrix In this case the behavioural matrix is rather simple as there are no strictly behavioural aspects to de-scribe; it is a technical project with technical performance indicators such as is normal in the execution of an engineering project. We omit the details of the CDM project cycle as these are well-known and lengthy.

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Economical, Technological and Environmental Impact Assessment of National Regulations and Incentives for RE and EE: Country Report

Jordan (Draft)

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Table 20: Behavioural matrix for landfill gas recov ery



• Proposal devel-oped and suc-cessfully steered

through to regis-tration

• Time of propos-ers ($)

• Consultancy ($)


• Documented regis-tration of project

• Project fails to meet CDM crite-ria

• Proposer is pre-pared to spend time and money

on the arduous process

• Plant procured

and installed

• Cost of plant and

construction ($)

• Functioning meth-

ane recovery and power generation (Y/N)

• Plant does not

function to speci-fication

• Plant operated • O&M costs ($) • Physical measure-ments, monitored,

verified and reported (Y/N)

• Flow measure-ments (#)

• Electricity gener-ated and ex-ported ($)

• Methane emis-sions avoided (#)

• GHG emissions reduced (#)

• Proper training is provided to op-

erators

• CERs received

and sold

• Brokerage costs

($)

• Transaction docu-

mentation (Y/N)

• Money received

for CERs ($)

• Financial benefit

to proposer ($)

• Market risk for

the CERs

• Project written up

and used to moti-vate other pro-spective spon-

sors

• Time of propos-

ers ($)

• Documented experi-

ence (Y/N)

• New applications

for CDM projects (?)

• Enhanced GHG

savings

• Project is seen

as technically and financially successful

Note on symbols: • $ indicates indicator is measured in financial terms • # indicates indicator is measured in numbers • Y/N indicates indicators is a yes or no observation • ? indicates indicator that cannot be quantified, but can be assesses qualitatively

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5.3.4 Economic cost-benefit assessment 5.3.4.1 Methodology Applied The following Cost Benefit Analysis of Amman Ghabawi Landfill Gas to Energy Project is a standard life-cycle cash flow analysis, costs and benefits are projected over a planning horizon of 20 years, it is assumed that the major part of the investment will be done in 2008, additional investments (with an extension of the LFG recovery) will be done over the period filling up the landfill site, as it was de-scribed in Chapter 2.4. The key-data were taken from the Amman Ghabawi PDD, also the time hori-zon was maintained. The analysis considers the point of view of the landfill operator (or the unit responsible for the LFG re-covery). The operator's investment and operation costs are put into a relation with the expected reve-nues in form of electricity sales to the national grid and eventually revenues obtained from selling CERs. CERs are obtained by flaring the LFG and by replacing CO2 producing electricity generation. External benefits such as avoiding unpleasant odours and smells be recovering the LFG is not taken into consideration. A potential financial and environmental benefit to be obtained by using the methane for a productive purpose is not taken into consideration The analysis is done in 3 steps: • Evaluation of the LFG flaring option assuming the situation that this option would be eligible for

CDM support. • Evaluation of the LFG electricity generation option, • Evaluation of the incremental investments to move forward from LFG flaring to electricity genera-

tion. 5.3.4.2 Assumptions and Data Base The general data and the specific data of the LFG plant are given in Table 21. The financial discount rate of 10% is also considered as the operator's required return on investment. The average electricity price the operator can obtain by selling electricity to the national grid is 4.3 US-cent / kWh. The value of CERs (based on CO2 equivalents) considered is 10.5 US $ / tonne.

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Table 21: Key-data and Parameter

5.3.4.3 Results of the Analysis LFG Flaring Option The first option analysed is the LFG flaring. As the external benefit of avoiding unpleasant odours and smells are not taken into consideration, the only revenue considered is the revenue obtained by selling the CERs. The result of the base case considering a CER value of 10.5 US $ / tonne is shown in Ta-ble 22. Figure 10 shows the result of a sensitivity test, it becomes apparent that with CER value of about 4.5 US $ / tonne the operators return on investment (IRR) reaches 10%. Table 22: LFG Flaring Option - Key Results

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Fig. 10: LFG Flaring Option - Impact of CERs upon I RR

0%

10%

20%

30%

40%

50%

60%

70%

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0

Value of CERs ($ / t CO2)

IRR

/ R

equi

red

retu

rn

But, as stated above, flaring is not eligible for CDM support, so, from a practical point of view there can be no revenue from this option and it is not feasible. LFG Electricity Generation Option The next step in the analysis is the evaluation of the electricity generation option. In addition to the avoidance of methane emissions we have the additional benefit of selling electricity to the national grid. This option is highly beneficial in the case that the revenues to be obtained from the CERs are sufficiently high. The base case (see the following Table 23), considering 10.5 US $ / t CO2 leads to an IRR of 29%. Without these additional CERs revenues the option is not feasible. Considering the CERs revenues, the operator's minimal electricity selling price would be 0.007 US $ / kWh (levelised costs determined by applying as discount rate the operator's required return of 10%), compared with a average off-take price of 0.043 US $ / kWh. Without the CERs revenue the required selling price would be 0.064 US $ / kWh, far higher than the off-take price. Table 23: LFG Electricity Generation Option - Key R esults

In Figure 11 the impact of the CER revenues upon the operator's required selling price is shown. It can be seen that the value of the CERs should be at least 4 US $ / t CO2. Figure 12 shows that at this

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CER price the required return on investment (IRR) reaches 10%. Fig. 11: LFG Electricity Generation Option - Impact of CERs Generation Unit Costs

0.000

0.010

0.020

0.030

0.040

0.050

0.060

0.070

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0


Uni

t cos

ts /

el. p

rice

($ /

kWh)

Fig. 12: LFG Electricity Generation Option - Impact of CERs upon IRR

0%

5%

10%

15%

20%

25%

30%

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0


IRR

/ R

equi

red

retu

rn

Electricity Generation Option - Incremental Analysi s The final step in the analysis is to see, if the incremental investment for the electricity generation can be justified by the additional benefits obtained from electricity generation. Only the additional invest-ments for electricity generation are considered. The results are shown in Table 24 for the base case of 10.5 US $ / t CO2. Under this condition the electricity generation option is financially feasible as it is shown by the IRR of 18%.

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Table 24: LFG Electricity Generation Option - Incre mental Analysis - Key Results

The electricity generation using the captured methane in itself is not financially feasible (the case that the CERs would not have a financial value). This dependence of the electricity generation option from the value of the CERs is shown in Figure 13. To justify the additional costs in electricity generation under the operator's return requirements, the CERs value should be at least higher than 2 US $ / t CO2. Fig. 13: Electricity Generation Option - Incrementa l Analysis - Impact of CERs upon IRR

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0


IRR

/ R

equi

red

retu

rn

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Table 25: LFG Flaring Option - Cash Flow Projection

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Table 26: Electricity Generation Option - Cash Flow Projection

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Table 27: Incremental Investment for Electricity Ge neration - Cash Flow Projection

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5.3.5 Conclusion 5.3.5.1 The Methodology The case study demonstrates the advantages of developing deconstructed versions of policy prescrip-tions as an aid to analysis and to stimulate focused debate among stakeholders. It demonstrates the approach of using recovered of landfill gas for electricity generation and shows how the options can then be analysed in the light of the policy objectives to form the basis for decision. The study then demonstrates the linkage between this deconstructed specification and detailed eco-nomic analysis. The economic analysis in this case study assumes the point of view of the operator, the revenues considered are those obtained from selling electricity to the national grid and from commercialising CERs. The implicit assumption is that these CERs are given to the operator. External benefits such as avoiding unpleasant odours and smells be recovering the LFG is not taken into consideration. A potential financial and environmental benefit to be obtained by using the methane for a productive purpose is not taken into consideration 5.3.5.2 Revenues from CERs as a policy instrument The case study shows a typical case for the required "additionality" for CDM projects. Without the ad-ditional revenues from commercialising the CERs recovery of LFG would not make economically sense because there are would not be sufficient revenues. Without the revenues from CERs the LFG IPP would require an off-take tariff of 0.64 US $ / kWh, 49% higher than the off-take price of 0.043 US $ / kWh.

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6. Institutional Reform - Some Possibilities The policy cycle is illustrated in the following figure. Fig. 14: Illustration of the Policy Process

formulate

Implement

monitorevaluate

reformulate Theory

Model

Indicators

Foresight Evidence

There are institutional needs at all stages of this cycle. Decision-making proceeds through the general processes available in the executive and legislative branches of government. Normally policy briefs will originate from the executive and be elaborated by Ministerial departments often with analytical support from agencies of government and paid consultants and in consultation with other stake-holders. Primary legislation is debated and finally sanctioned by the legislature. In many countries Ministerial Decrees are used to elaborate on primary legislation. This structure needs to be properly serviced with evidence and analysis if it is to work well. There is a need for an institution, or perhaps several, to gather and maintain evidence and to carry out analytical work that feeds into the formulation of policy and later guides the monitoring and evaluation and re-formulation of policy. Foresight studies are a part of the evidence that should be considered in policy formulation and these should take into account the evolution of global trends and policies in energy and the environment, but also of trends beyond these disciplinary frontiers. Implementation of policy may be conducted by Ministerial departments or nominated agencies. In de-veloped countries, implementation is often assigned to specialist agencies. In developing countries it is more common that policy is implemented by the Ministry. Implementation will often be demanding of resources, this may be the case for some market based instruments as well as the majority of regu-lations.

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6.1 Concentrating Institutional Responsibilities The Jordan energy sector is under auspices of the Ministry of Energy and Mineral Resources (MEMR), which was established in 1984. The role of the MEMR is to define policies, to fix tariffs and to regulate all activities with an impact on energy. MEMR’s responsibilities also include strategies and projects to promote renewable energy technologies, such as solar water heaters or wind energy. A specialised unit named Renewable Energy and Energy Efficiency Department handles these issues. The Department is responsible for plans, policies and strategies related to renewable energy and en-ergy efficiency. The Ministry of Planning and International Cooperation (MOPIC) and the Ministry of Environment (ME) assist the Department in energy policy-making. MOPIC focuses on the acquisition of international funding for energy projects and develops strategies or ideas for international projects. Those projects or strategies include renewable energy and energy efficiency. The Ministry of Envi-ronment introduces general policies for environmental protection and prepares plans, programmes and projects necessary to achieve sustainable development. It is responsible for all questions related to the Clean Development Mechanism (CDM) and, therefore, deals indirectly with issues related to re-newable energy and energy efficiency. Jordan has a well-developed setting of institutions and administrative bodies being responsible for the development, financing and dissemination of renewable energy technologies and energy efficiency measures. However, there could be a case for optimising the coordination between these entities. Studies on the deployment of renewable energy indicate that clearly defined institutional responsibili-ties are needed in order to successfully disseminate renewable energy technologies and avoid plan-ning delays or a lack of coordination between different authorities. For example, the government of In-dia has set up a Ministry of New and Renewable Energy which fosters the development, production and deployment of renewable energy technologies. The Jordan government is recommended to concentrate the responsibilities on renewable energy and energy efficiency under auspices of the Renewable Energy and Energy Efficiency Department and to strengthen its financial and personnel capacities. Alternatively, an inter-ministerial steering group could be established to coordinate related activities of the involved ministries. The organisation of the JREEEF seems to be a first step in that direction. The fund will be governed by a Board of Directors reporting to the Office of the Prime Minister, which includes, besides representatives from the industry, officials from the MEMR, ME, MOPIC and the Ministry of Finance. These Ministries plus other involved bodies could form a group for steering and coordinating national policies on renewable energy and energy efficiency. Furthermore, the government is suggested to create an independent agency for renewable energy and energy efficiency which implements and follows-up policies and regulations. At the time being, some of the potential tasks of such an agency, e.g. administering the JREEEF, are fulfilled by the NERC. However, NERC is essentially a research institute and a potential applicant for funding from the JREEEF. Its role has a hybrid character and needs to be defined more clearly in order to avoid conflicts of interest. An agency for renewable energy and energy efficiency should be independent from any sectoral interest and have a clear mandate for implementing policies or initiating activities in both fields. 6.2 Strengthening Political Backing The draft renewable energy promotion law and the JREEEF demonstrate that the Jordan government has already initiated important steps to foster the development and dissemination of renewable and ef-ficient energy technologies. Nonetheless, the country’s energy policy agenda suggests that a high pri-ority is given to the exploration of domestic oil shale resources and to the utilisation of nuclear power.

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Therefore, renewable energy technologies are facing strong technological competition from technolo-gies whose market prospects are strengthened by path-dependencies of the prevailing energy system (e.g. centralised generation structures, fossil-based technologies). Aiming at strengthening the political will for the commercialisation of renewable energy and energy ef-ficiency technologies, the awareness and expertise of political decision-makers about the potentials and merits of renewable energy and energy efficiency technologies as well as concerning the instru-ments for their dissemination should be enhanced. Initiatives in this regard need to involve domestic and international experts, technology demonstration and capacity building to create examples of best practice and increase the knowledge on renewable energy and energy efficiency. Programmes for ca-pacity building could encompass educational measures as well as international field trips to showcase plants. There are several examples for similar projects in other countries. For example, the United Na-tions Development Programme (UNDP) in cooperation with the Chinese National Development and Reform Commission (NDRC) et al. are conducting a project entitled “Capacity Building for the Rapid Commercialisation of Renewable Energy in China”. The project team organises capacity building measures, such as workshops, and provides support for the implementation and design of regulations and technology projects, such as feasibility studies or demonstration projects (UNDP et al. 2009). In Jordan itself, the UNDP has developed a project, which, among other activities, aims at enhancing the government’s capacities for developing and implementing energy efficiency standards and labels. 6.3 Creating Adequate Incentives The draft renewable energy law of the Jordan government comprises several measures to promote renewable energy and energy efficiency, The main instrument of the law is the JREEEF. The fund is based on a proposal of the World Bank to subsidise the difference between the costs of renewable-based power and the costs of conventional power generation. Besides the fund, the government offers tax exemptions and free land for renewable energy projects. In 2007 already, it launched a bidding process for 30-40 MW of wind power generating capacity. However, the bidding process had several drawbacks, such as the length of the process and high prices. Furthermore, it was conducted by NEPCO while it seems that developers would have preferred to deal with the government directly. The process, therefore, did not attract powerful international wind industry players. In case of further bid-ding processes, a stronger government involvement is recommended. In general, competitive bidding processes as an instrument for the promotion of renewable energy im-ply some risks, especially for projects in developing countries or emerging economies, as they do not offer investment security over a clearly defined period. Further risks, in case tenders have attracted sufficiently qualified bidders, are withdrawal of the preferred bidder at a late stage or “cost dumping” among the bidders. The United Kingdom tried competitive bidding for renewable energy resource obli-gations during the 1990s under its “Non-Fossil-Fuel Obligation” (NFFO) policy. Power producers bid on providing a fixed quantity of renewable power with the lowest-price bidder winning the contract. The process encouraged competing projects to bid below costs in order to be awarded contracts, with the result that successful bidders were unable to meet the terms of the bid or ended up insolvent. There-fore, contracts awarded to low-bidders did not always translate into projects. On the other hand, bid-ding processes implicate important advantages. They may reduce the danger of interference from sub-optimal location of turbines, ease problems over sizing and grid interconnections and lead to small administrative costs in comparison to the project size. The JREEEF and the bidding process for a limited scale of wind power imply a rather project-oriented approach of renewable energy promotion in Jordan. By contrast, feed-in tariffs, a frequently adopted policy instrument for renewable energy promotion, provide financial support to a larger number of pro-jects until costs become competitive. Offering guaranteed purchase prices over a clearly defined pe-

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riod of time (usually 20 years), feed-in tariffs can provide a high degree of investment security and contribute to the evolution of a domestic renewable energy industry. However, a regime of feed-in tar-iffs involves a substantial effort to provide the legislation and, therefore, implies significant start-up costs. Furthermore, feed-in tariffs create a high degree of unpredictability in demand for network rein-forcement. Despite the complexity of the instrument, many developing countries and emerging economies have implemented or plan to implement feed-in tariff schemes, including Argentina, Brazil, China, Ecuador, India, Kenya, Nicaragua, Pakistan, Mauritius, South Africa and Taiwan. One of the oldest feed-in schemes exists in Mauritius. In the early 1990s, the Mauritanian government has established a feed-in tariff for bagasse2 and co-generation. Sugar cane production is one of the major drivers of the Mauri-tanian economy with about 80% of the arable land being used for this purpose. Bagasse is used for co-firing in thermal power plants. One of the drivers of the spread of feed-in tariffs in developing countries is the fact that feed-in schemes are well suited for monopolised or strongly concentrated power markets as the combination of tariff payment and purchase obligation establishes a stable framework for independent power pro-ducers. Therefore, the instrument could be an interesting option for Jordan as it might help to diversify the number of power suppliers and increase the availability of capital needed to catch up with the ris-ing power demand. However, the introduction of such a regulation needs to be accompanied by measures to strengthen the infrastructure required for a high share of renewable electricity, especially the national power grid. Furthermore, the instrument would have to be carefully integrated into the existing framework of re-newable promotion policies, especially the JREEEF. Developing or emerging countries are vulnerable to the impact of feed-in tariffs on electricity prices, some of the costs resulting from a feed-in tariff scheme might be covered by the fund. This would be close to the currently proposed concept of the fund, which comprises a per-kWh subsidy for privately owned and operated renewable facilities. Other measures included in the proposal, such as a loan guarantee programme, grants for feasibility studies or training programmes, seem to be suited to work complementary with the feed-in scheme. Financing feed-in tariffs trough a fund, however, bears certain risks. For example, a change in government or macro-economic data might lead to stop-and-go policies, which constrain investment security. Fur-thermore, the fund would have to set aside large reserves as tariff payments are generally provided over a long time. In the case of Jordan, a country with limited financial capacities, there could be a case for an overall capacity cap in order to control the additional costs of the incentive scheme. The overall cap could be supplemented by capacity caps for specific technologies (e.g. 150 MW PV). In both cases, the regulation should include a provision for revising the caps before they are reached in order to ensure a steady effect of the incentive. Regardless if the Jordanian government decides to initiate renewables through bidding processes, feed-in schemes or other types of incentives, the Jordanian government is recommended to involve relevant stakeholders in the debate on the integration and design of the policy framework for renew-able energy and energy efficiency in order to avoid unintended effects. Concerning energy efficiency, the JREEEF comprises similar incentive programmes as for renewable energy technologies, such as loan guarantee programmes or interest rate subsidies. The updated na-tional energy strategy proposes further measures, like the introduction of efficiency labels for electrical appliances. Standards and labels for energy efficiency seem to be well suited for the Jordanian con-text as they are relatively easy to introduce and implement. As pointed out in earlier sections of this report, JISM and NERC have developed standards and testing protocols as well as a design for a Jor-

2 The fibrous residue remaining after sugarcane stalks are crushed to extract their juice.

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dan label which, however, have not yet been translated into legislation. The government is recom-mended to convert these proposals into law and provide support for setting up the infrastructure needed for the development, implementation and monitoring of energy efficiency standards, e.g. the establishment of testing centres for appliances. In addition to domestic policy schemes, we suggest to foster technology transfer from industrialised countries to Jordan. Although MOPIC is responsible for acquiring international funding for energy pro-jects, Jordan has only one registered CDM project with a second one being in the late stages of regis-tration. It is recommended to brief Jordanian government officials about the merits of international in-struments for technology transfer or other international funding opportunities for sustainable energy projects. As complex administrative procedures frequently constitute a barrier for setting up CDM pro-jects, the government is proposed to establish a specialised CDM centre within MOPIC, which sup-ports project developers during the administrative procedures. For that purpose, the government should closely collaborate with international organisations, such as UNEP, which offer capacity build-ing measures on the CDM for governmental officials.

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List of References Al-Taher, Ammer (2007): Energy Efficiency Strategy Jordan. Presentation at the MED-ENEC Capacity Building Workshop “Political and Economical Framework Conditions for Energy Efficiency and Re-newable Energies in Buildings, May 22-23. Beck, Fred; Martinot, Eric (2004): Renewable Energy Policies and Barriers. Working paper written for the “Encyclopedia of Energy”. EIA (Energy Information Administration; 2009): Jordan Energy Profile; http://tonto.eia.doe.gov/country/country_energy_data.cfm?fips=JO, last access on August 24th, 2009. German Federal Ministry of Education and Research (2009): Kooperation international. Ministry of New and Renewable Energy, http://www.kooperation-interna-tional.de/indien/themes/info/detail/data/21638/?PHPSESSID=680f7bab75f0d5d249ac70573566140b&cHash=22accf50b8&PHPSESSID=616a63c42230047a4b3d2468ef686040, last access on August 17th, 2009 Green Line Association (2007): Status and Potentials of Renewable Energy Technologies in Lebanon and the Region (Egypt, Jordan, Palestine, Syria), Beirut. GTZ (Deutsche Gesellschaft für Technische Zusammenarbeit; 2007): International Fuel Prices 2007. 5th edition, more than 170 countries, Eschborn. Hashemite Kingdom of Jordan (2009): The Final Report on Updated Energy Sector Master Strategy in Jordan for the Period (2007-2020). Second Part. Indian Ministry of New and Renewable Energy (2009): http://mnes.nic.in/, last access on August 17th, 2009. IEA (International Energy Agency; 2008): Deploying Renewables. Principles for Effective Policies, Paris. IEA (International Energy Agency; 2009): 2996 Energy Balance for Jordan, http://www.iea.org/Textbase/stats/balancetable.asp?COUNTRY_CODE=JO, last access on August 17th, 2009. Jacobs, David; Kiene, Ansgar (2009): Renewable Energy Policies for Sustainable Energy Policies. World Future Energy Council. Middle East Energy (2007): Country Focus: At the Crossroads, http://pepei.pennet.com/display_article/288632/89/ARTCL/none/none/1/Country-Focus:-At the cross-roads, last access on August 7th, 2009. MVV DECON; Wuppertal Institute for Climate Environment and Energy (2009): Energy Efficiency and Renewable Energy Policy in Jordan. Presentation held during a half-day seminar on methodology and policy for the project “Economical, Technological and Environmental Impact Assessment of National Regulations and Incentives for Renewable Energy and Energy Efficiency”, July 30th, 2009. NEPCO (National Electric Power Company; 2009): Statistics & Reports; http://www.nepco.com.jo/english_statisticalDetails.aspx?album_id=4, last access on August 6th, 2009. PACT (Policy Action on Climate Toolkit; 2009): Country- and Region-Specific Information, http://onlinepact.org/537.html, last access on September 17th, 2009. United Nations Development Programme (UNDP); Chinese National Development and Reform Com-mission (NDRC); Global Environment Facility (GEF) et al. (2009): http://www.ccre.com.cn/index.htm, last access on August 17th, 2009. World Energy Council (2007): 2007 Survey of Energy Resources, London. World Energy Council (2008a): Energy Efficiency Policies around the World: Review and Evaluation, London. World Energy Council (2008b): Energy Efficiency Policies Around the World: Review and Evaluation. Energy Efficiency Indicators, http://www.worldenergy.org/publications/energy_efficiency_policies_around_the_world_review_and_evaluation/1230.asp, last access on August 7th, 2009. World Energy Council (2008c): Energy Efficiency Policies Around the World: Review and Evaluation. Annex II. Overview of Energy Efficiency Policy Measures. Synthesis of the 2006 Survey, London.

Annex 1

Mission Report

Mission Report The country mission was successfully completed in the time span of 26 to 31 July 2009. The mission programme had been prepared by the local specialist in close collaboration with the Jordanian repre-sentative in RECREEE's Board of Trustees. The mission programme was as follows: Date Programme Item 26 July Travel to Amman 26 July Meeting at Ministry of Energy and Mineral Resources (MEMR) 26 July Meeting at Electricity Regulatory Commission 27 July Meeting Ministry of Transport 27 July Meeting at Energy Management Services Int. (EMS) 27 July Meeting at the EU Delegation 27 July Meeting at Ministry of Planning and International Cooperation 28 July Meeting at UNDP 28 July Meeting at National Electric Power Company (NEPCO) 28 July Meeting at National Energy Research Center (NERC) 28 July Meeting at Ministry of Environment 28 July Meeting at KAWAR Energy 29 July Meeting at Jordan University of Science and Technology (JUST) 29 July Meeting at Greater Amman Municipality 30 July Half day Seminar followed by informal discussions 31 July internal team meeting 1 August Transfer to Damascus Some stakeholder could not be visited, but participated in the half day seminar. A list of stakeholders is attached in the following Annex 2. Most of them (some 20 persons) attended the seminar and en-gaged in lively discussions. The seminar had three main objectives (1) to promote RCREEE in Jordan, (2) to discuss with stakeholders the findings of the mission and (3) to introduce the participants to the ideas of Evidence Based Policy Making and Theory Based Policy Evaluation by giving a detailed presentation on that topic (Annex 5) and by presenting case studies illuminating the methodology (Chapter 5 above). Finally the seminar was used to give a preview on the three day workshop on EE and RE policy development. The presentation is attached in Annex 6.

Annex 2

List of Stakeholders

List of Stakeholders Organisation Contact Person Position email Ministry of Energy and Mineral Re-sources

Eng. Ziad Sabra Director of Alternative Energy and Energy Effi-ciency Department

drenewable@memr. gov.jo

Ministry of Energy and Mineral Re-sources

Eng. Muwayiah Alternative Energy and Energy Efficiency De-partment

[email protected]

Electricity Regula-tory Commission

Dr. Ibrahim Rida Director of Technical De-partment

[email protected]

National Electric Power Company

Eng. Amanee Al-Zzam

Managing Director Assis-tant for Planning Affairs

[email protected]

Ministry of Environ-ment

Raouf Al Dabbas Senior Advisor [email protected]


Heide Köpping Advisor Energy Policy [email protected]

Ministry of Transport Eng. Nagam Al-soub

Department of Studies and Research

[email protected]

Ministry of Transport Eng. Asma Hwary

Head Department of Transport Economics

Ahwary.mot.gov.jo

Ministry of Transport Randa Rabadi Head of Monitoring [email protected] Ministry of Planning and International Cooperation

Dr. Saleh Khar-absheh

Director of Projects De-partment

[email protected]

Ministry of Planning and International Cooperation

M. Qatarnah Ass. Director [email protected]

Ministry of Planning and International Cooperation

Philipp Godron CIM Expert on Renew-able Energy and Energy Efficiency

[email protected]

National Energy Re-search Centre (NERC)

Eng. Waleed Shahin

Director [email protected]

NERC Muhieddin Tawalbeh

Manager [email protected]

Queen Rania Al-Abdullah Centrer for Environmental Sci-ences and Technol-ogy

Dr. Hani Abu Qdais

Director [email protected]

Greater Amman Mu-nicipality

Eng. Fawzi Massad

Deputy City Manager for Public Works

[email protected]

Greater Amman Mu-nicipality

Eng. Eid Al-lozi Area Developer [email protected]

Jordan Chamber of Industry

Eng. Abeer Sa-leh

Assistant Manager Indu-strial Department

[email protected]

UNDP Ms. Amal Da-babseh

Environment Specialist [email protected]

Delegation of the Omar Abu-Eid Environemnt&Energy [email protected]

European Commis-sion to the Hashemite Kingdom of Jordan

Focal Point

Energy Management Services (EMS)

Eng. Luay Jildeh Country Manager-Jordan [email protected]

KAWAR Energy Hanna Zaghloul CEO [email protected] TWh Energy Andrew

MacLellan Director Alternative en-ergy Practice EU and MENA

[email protected]

Annex 3

Seminar Programme

Economical, Technological and Environmental Impact Assessment of National Regulations and Incentives for Renewable Energy and Energy Efficiency

A project financed by the Ministry of Foreign Affai rs of Denmark

Methodology and Policy for Energy Efficiency and Re newable Energies Half-day Seminar - Jordan, 30 July 2009, 9:00 - 13: 00

Location Kempinski Hotel, Amman

Meeting Room 4 – Mezzanine level Objective of the Seminar: The seminar serves the objective of the project to support RCREEE’s overall effort of providing member state administrations with better information and new planning tools and processes. The seminar will give an introduction to evidence based policy development and the-ory based policy evaluation for Energy Efficiency and Renewable Energy and the seminar will be used to discuss some preliminary findings in Jordan. The seminar will have the following structure:

1. Welcome, by Eng. Ziad J. Sabra Director of Alternative Energy And Energy Efficiency De-partment/ MEMR

2. Introduction to the Project and to the Seminar, by the project team leader, Florian Sauter-

Servaes

3. Methodology: Evidence based Policy Making and Theory based Evaluation, by Nigel Lucas

4. Status of EE and RE Policies and their Development in Jordan, by Fayes Abdulla and Danyel Reiche

5. Preview on Three-day Training Workshop, December 2009, by Martin Ehrlich

6. General Discussion

Annex 4

Data Matrix

Part I Regulations / incentive schemes Primary Legislation Laws, Directives (e.g. Algerian Law on Electricity and Gas Distribution which contains a general strategy and in-

centives for the promotion of renewable energy).

Secondary Legisla-tion

Decrees or implementing regulations which regulate the implementation of primary legislation (e.g. Algerian De-cree on the Diversification of Power Generating Costs which specifies incentives of the Law on Electricity and Gas Distribution by introducing feed-in tariffs).

Policy Statements Official statements of relevant political decision-makers (e.g. minister for energy).

Under Discussion Law is being discussed by legislative institutions and/or is in draft phase already.

Adopted Law has been adopted by legislative institutions.

Implemented Law is in the process of implementation.

Targets/Aims Both specific targets (e.g. 10% of electricity from renewable sources by 2010) and general aims (e.g. promotion of renewable energy) formulated in regulations.

Instruments “Tools” or mechanisms selected to achieve targets/aims of a regulation (e.g. feed-in tariffs, standards).

Duration Timeframe of regulations (e.g. a law is effective until 2011 or shall be amended by 2011).

Governmental Enti-ties

E.g. ministries (Ministry for Environment) or agencies (e.g. national energy agency).

Industry E.g. utilities, state companies

Non-governmental organisations

E.g. renewable energy associations, industry associations, environmental organisations

Renewable Energy: Regulations / incentive schemes

Basic Information Content Impact Analysis (if available) Type of Law

Title of Law Year Responsible Institution

Status* Source Targets/ Aims

Instruments Dura-tion

Title of Analysis

Year Author Source

UD A I Primary Legislation

Bylaw Electricity Co m-panies Licensing Bylaw

2001 Electricity Sector Regula-tory Commis-sion (ERC)

A ERC - To promote renewable energy generation (ar-ticle 11)

- released from the licen s-ing fee which is paid upon licensing

- pay an annual license fee equal to 0.006 fils/kwh sold compared with 0.075 fils/kwh for others

Law General Electri c-ity Law, Tempo-rary Law No. (64)

2002 Minister of Energy & Min-eral Re-sources (MEMR) And ERC

A MEMR - To promote the use of renewable energy for generation (article 4)

Law Energy and Mi n-erals Law

Minister of Energy & Min-eral Re-sources

UD MEMR - To promote the use of renewable energy gen-eration (article 3)

- Chapter 4 is allocated for renewable energy. It regulates this sector and provides many in-centives for generation

Secondary Legislation

Policy statements

Strat egy Updated Energy Sector Master Strategy in Jor-dan for the pe-riod (2007-2020)

2007 MEMR A MEMR - Increase the renewable energy contribution in total consumed energy

- removal of renewable energy Barriers

-

- draft law for the rene w-able energy

- Development of an in-centive system to invest in the renewable energy

UD: Under Discussion and/or in draft phase; A: Adop ted; I: Implemented

Renewable Energy: Commissioned reports DURING THE PASE OF PREPARA-TION of regulation / incentive scheme Title of Study Year Author Source Main conclusion of report: # to be understood as fi rst impression for project members Development Of A Master plan For The Electricity Sector: Generation And Transmission Expansion

2006 PB Power ERC - Wind and biomass are the most promising renewable technologies for generation. - the parameters and costs and the relatively low gas price it may be difficult for renewables to

compete in Jordan. Jordan Energy Sector Master Plan – Final Report

2004 Charles River Associates Ltd.

MEMR - absence of financial incentives for development of renewable energy - the development of renewable energy are all highly desirable for Jordan - viable potential for renewable energy for power generation amounts to 3,350 GWh/year - no national target for solar thermal energy and there appears little political will to stimulate the

development of this sector - The impact of import duties and taxes on renewable energy projects are not transparent, as

government initiatives may be exempt from taxation, whereas private sector initiatives may not be

- The Government should not replace its existing electricity, oil and gas, renewable energy and other energy sector laws with a single law regulating the entire energy sector because the ad-vantages of making this change are significantly outweighed by the disadvantages of making this change

- Approaches to renewable energies will have to consider “added values” such as local job de-velopment and pollution issues as renewables are rarely the least cost solution

- Increased focus is required on research in to indigenous and renewable energy resources in Jordan

- Jordan should maximise the use of wind and solar energy - Jordan should encourage the use of municipal waste as a source of energy

3 4

Renewable Energy: Evaluation reports on IMPACT of regulation / incentive scheme Title of Study Year Author Source Main conclusion of report: # to be understood as fi rst impression for project members - - 3 4

Current Status of Renewables The current status gives valuable insights into the success of incentive schemes and regulations!

2000 2005 2007 Source Comments Installed C a-

pacity (GW) Annual Pr o-duction (GWh)

Installed C a-pacity (GW)

Annual Pr o-duction (GWh)

Installed C a-pacity (GW)

Annual Pr o-duction (GWh)

Wind 1.445 3 1.445 3 MEMR 2007 Data found for 2006 in-stead of 2007

Solar (Heaters) 158 380 Biomass/Waste 1 5 3.5 10 Geothermal Hydro 12 57 12 61 Solar (cells) 0.5 1 Total 410

Renewable Energy: Institutions Institution General Responsibilities of Institution Number of

Staff Budget (Mill. $ per year)

Link/Contact Involvement in legistlation process? Y/N

Governmental ent i-ties

MEMER 1. Provide various sources of energy needed for comprehensive development at minimum cost.

2. Supply consumers with electric power services throughout the Kingdom

3. Explore oil and gas in promising areas. 4. Attend to new and renewable sources of energy, such as utiliz-

ing solar energy in heating water for domestic and industrial uses, and follow-up on experimental plants for producing electric power using wind fans in remote areas.

5. Recommend amending some legislation for the purpose of in-creasing the contribution of agencies that consume less electric power.

6. Invite international companies to participate in utilizing shale oil. 7. Encourage power preservation and optimum use through pro-

grams specially prepared for this purpose. 8. Raise environmental standards, safety measures and optimum

utilization of energy.

15 (only re-lated staff)

Y

NERC (National En-ergy Research Cen-ter)

NERC established for the purposes of research, development and training in the fields of new and renewable energy; raising the effi-ciency of using energy in the different economic sectors.

45 N

Ministry of Planning and International Co-operation

1. Set general policy for the social and economic development process and regulate plans and programs for its implementation.

2. Follow-up and revise cross-sector procedures used for the at-tainment of national objectives.

3. Collaborate and coordinate social and economic policies with other ministries and relevant institutions to facilitate an effective implementation of stated objectives.

4. Set unified mechanisms for managing development in gover-norates and the Kingdoms' various regions.

?

5. Develop future strategies for the provision of a business envi-ronment that facilitates the private sector's role in accelerating economic growth rates.

6. Provide programs and mechanisms to enhance capacity build-ing in the civil service, through implementing national and local development programs to

7. ensure a consistent implementation of national plans, programs and policies.

8. Provide, source and manage the necessary funds for develop-ment projects through loans, grants and technical assistance, in coordination with the Ministry of Finance and the General Budget Department.

9. Networking and liaising between international financial donors and local ministries and governmental institutions.

10. Set follow-up, administrative, assessment and accountability strategies for the implementation of development plans, pro-grams and projects, in cooperation with concerned parties, as well as proposing necessary amendments.

11. Assess and coordinate monetary, financial and trade policies with development strategies and programs.

12. Assess privatization programs and policies, and encourage local and foreign private investment.

13. Set procedures and policies to strengthen ties with regional and international economic institutions, in coordination with other ministries and concerned parties.

14. Coordinate with the General Budget Department and institutions and departments concerned with preparing the National Capital Budget, to insure its compliance with long and short-term strate-gies and programs.

15. Management of domestic and external public debt in coopera-tion with the Ministry of Finance.

16. Insure that project deadlines and objectives are met, particularly those related to the Millennium Development Goals.

17. Compile and provide a comprehensive database of the national economy's socio-economic indicators and changeables.

18. Study and assess international economic indicators and forecast their impact on the national economy.

19. • Undertake any further socio-economic tasks assigned by the Cabinet or Prime Minister.


1. Setting a general policy for environmental protection, and pre-paring the plans, programs and projects necessary to achieve Sustainable Development.

2. Preparing the specifications and standards for the Elements and components of the Environment.

3. Monitoring and measuring the elements and components of the Environment and follow-up thereof through scientific centers au-thorized by the Ministry in accordance with set standards.

4. Issuing environmental instructions necessary to protect the En-vironment and its components and the conditions to establish agricultural, development, commercial, industrial, housing, min-ing and other projects and all services relating thereto for com-pliance therewith and the adoption thereof within preconditions for the licensing or renewal of licensing thereof in accordance with the legal principles in force.

5. Monitoring and supervision of public and private corporations and bodies including companies and projects to ensure their compliance with environmental specifications and measure-ments and the set technical standards.

6. Conducting research and studies related to matters of the Envi-ronment and the protection thereof.

7. Setting the principles (basics) of the handling of materials harm-ful and hazardous to the Environment, and the collection, classi-fication storage, transportation, destruction and disposal thereof in accordance with regulations issued for that purpose.

8. Coordinating national efforts aimed at protecting the environ-ment including setting a national strategy for awareness, educa-tion and environmental contact, and to transfer, utilize and pro-vide environmental data and take the measures necessary for that purpose.

9. Approving the establishment of national reserves and parks and the management, monitoring and supervision thereof.

10. Preparing environmental emergency plans. 11. Issuing publications related to the Environment. The Ministry is

the competent party to issue reports on the state of the Envi-ronment in Jordan.

12. Improving relations between the Kingdom and the Arab, regional international states, authorities and organizations in matters re-lated to protection of the Environment and recommending the

?

joining thereof and following up the execution thereof. Industry (e.g. util i-ties, state compa-nies)

Non-Governmental Organisations (in-cluding industry associations etc.)

Energy Efficiency: Regulations / incentive schemes

Basic Information Content Impact Analysis Type of Law

Title of Law

Year Responsible Institution

Status* Source Targets/ Aims

Instruments Dura-tion

Title of Analysis

Year Author Source

UD A I Primary Legislation

Law General Electricity Law, Tem-porary Law No. (64)

2002 Minister of E n-ergy & Mineral Resources (MEMR) And ERC

A - give to consumers economically efficient signals regarding the costs that their con-sumption imposes on the licensee’s business (article 47)

- Tariff structure that e n-courages efficient use of electricity

Law Energy and Minerals Law

Minister of E n-ergy & Mineral Resources

UD MEMR - To promote energy conservation (article 3)

Bylaw Organizing and man-agement of MEMR By-law

1985 Minister of E n-ergy & Mineral Resources

A MEMR - Preparing energy co n-servation studies and policies and supervise the implementation (ar-ticle 4)

Secondary Legislation

Policy statements

Strategy Updated Energy Sector Mas-ter Strategy in Jordan For the pe-riod (2007-2020)

2007 MEMR A MEMR - Energy efficiency i m-provement

- Establishment of energy efficiency fund

- Promotion program to use solar water heaters

- Application of energy ef-ficiency label on electri-cal appliances

- Promotion of using en-ergy saving lamps

- Energy consumption ra-tionalization in the transport sector

Strategy National 2007 MEMR - Reduce energy co n- - Tariff policy

Energy E f-ficiency Strategy

sumption - Reduce production

cost - Reduce investment in

the equipment used for the production, conver-sion, transport and dis-tribution of energy

- Legislations - Awareness and Training - Financial Policies -

Strategic plan

ERC Stra-tegic plan 2007-2010

2006 ERC A ERC - Energy consumption conservation

- Tariff policy - Awareness

UD: Under Discussion; A: Adopted; I: Implemented

Energy Efficiency: Commissioned reports DURING THE PASE OF PREPARATION of regulation / incentive scheme Title of Study Year Author Source Main conclusion of report: # to be understood as fi rst impression for project me m-

bers Jordan Energy Sector Master Plan – Final Report

2004 Charles River Assoc iates Ltd. MEMR - include incentives to promote efficiency in contrac tual arrangements - Current pricing structure does not provide incentiv e for JPRCO to improve effi-

ciency and reduce costs 2 - 3 4

Energy Efficiency: Evaluation reports on IMPACT of regulation / incentive scheme Title of Study Year Author Source Main conclusion of report: # to be understood as fi rst i m-

pression for project members 2 3 4

Energy Efficiency: Institutions Institution General Responsibili ties of Institution Number

of Staff Budget (Mill. $ per year)

Link/Contact Involvement in legistlation process? Y/N

Governmental ent i-ties

MEMER Same as above renewable energy table NERC (National En-ergy Research Cen-ter)

Same as above renewable energy table

Ministry of Planning and International Co-operation




Electricity Regulatory Commission (ERC)

1- To maintain an efficient structure for the sector as well as to develop it to ensure its economic feasibility.

2- To encourage investment in the sector in addition to improving the operational efficiency and sale of elec-tric power at reasonable prices.

3- To ensures the provision of safe, secure, reliable and high quality services in the field of electric power gen-eration, transmission, distribution, supply and system operation.

4- To ensure that the undertakings operating in the Sec-tor shall comply with applicable environment protec-tion standards and general public safety conditions enforced in the Kingdom by virtue of the laws in force.

5- To ensure that sufficient supply of electric power is being provided by licensees to consumers.

6- To ensure that prices charged by a licensee are suffi-cient to finance its activities and allow it to earn a rea-sonable return on its investments.

7- To protect the interests of consumers, provided that they comply with the terms set by the licensees with the consent of the Commission for providing electricity service.

8- To ensure that the regulation of the sector is fair and balanced to consumers, licensees, investors and other stakeholders.

Industry (e.g. utilities, state companies)

Non-Governmental Organisations (includ-ing industry associa-tions etc.)

Part II Energy Data: prices, taxes, subsidies, further data Energy prices: retail prices Per unit Source, incl. full author Language

Transport fuels Per litre The Final Report on Updated Energy Sector Master Strategy in Jordan For the period (2007-2020), MEMR, 2007

English & Ar a-bic

Electricity Per kWh

Heat/natural gas? Per kWh / m3

Energy taxes on Per unit Language

Transport fuels Per litre

Electricity Per kWh

Heat/natural gas Per kWh / m3

?

? Cost of electricity gener a-tion

Per unit Source, incl. full author Language

Per kWh The Final Report on Updated Energy Sector Master Strategy in Jordan For the period (2007-2020), MEMR, 2007

English & Ar a-bic

Subsidies Per unit Total (b n US$/a) Source, incl. full author Transport fuels Per litre Electricity Per kWh Heat/natural gas Per kWh / m3

Further Energy Statistics Topic Title of Report Year Author #

for citation in refer-ence list

Full author Language

Energy statistics: primary energy demand, final energy demand

The Final Report on Updated Energy Sector Master St rat-egy in Jordan For the period (2007-2020)

2007 MEMR 2007

Minister of Energy & Mineral Resources

English and Arabic

Potentials of renewable energies

The Final Report on Updated Energy Sector Master Stra t-egy in Jordan For the period (2007-2020)

2007 MEMR 2007


English and Arabic

Energy efficiency potentials

The Final Report on Updated Energy Sector Master St rat-egy in Jordan For the period (2007-2020)

2007 MEMR 2007


English and Arabic

Part III List of References MEMR 2007: Minister of Energy & Mineral Resources. The Final Report on Updated Energy Sector Master Strategy in Jordan For the period (2007-2020) The most important projects

• Hofa and Ibrahimeh in Wind • Russifa Biogas Plant • King Tala Dam Hydropower Plant

Annex 5

Presentation on Methodology


Amman: Seminar on Methodology and Policy, 30 July 2009

Economical, Technological and Environmental Impact Assessment of National Regulationsand Incentives for Renewable Energy and Energy Efficiency

Page 1

Evidence based policy makingand theory based evaluation

Nigel Lucas




• Evidence based policy making

• Theory based evaluation

• The linkages

– Theory

– Indicators

• How we are adapting it for this purpose

Page 2

Contents




Page 3

• What is Evidence Based Policy Making?

• Why do we need it? What have we been doing before -making it up?

• What is evidence?

• It is all very well, but I do not have the time or resources.

Evidence Based Policy Making?




Page 4

Many different definitions, but what it really means is just:

“An approach to policy development and implementation which usesrigorous techniques to develop and maintain a robust evidence basefrom which to develop policy options”.

All policies are based on evidence - the questions are:

•Is the evidence reliable?

•Are the processes by which evidence is turned into policy fit for theirpurpose?

What is Evidence Based Policy Making?




Page 5

•The key benefit of evidence-based policy making is better policy

•Policy may be driven by prejudice or short-term political pressure

•There is often a range of instruments to achieve identified policyobjectives and choice can be very difficult

•Foreign consultants and agencies often prescribe remedies from homewith little thought whether they are appropriate. Mimicry is not policy.

•Agencies have their own agendas and visions that may conflict amongthemselves and with those of government

•Countries need well-resourced, in-house capabilities to analyse andevaluate policy and more transparent processes

•Really just better, better resourced and more systematic policy making

Why do we need it?




Need evidence and process

Page 6

Good evidence is necessary, but not sufficient

Use it well Use it poorly

Use good information

Use poor information

There are policy processes that:




Page 7

• The evidence base must be both broad enough to develop a wide range of policyoptions, and detailed enough for those options to stand up to intense scrutiny.

• An evidence-based approach should show continuity between foresight, strategy, policy,and implementation

• Evidence does not necessarily mean hard facts like scientific data, although theobjectively verifiable evidence is important

• Evidence is any information that can be used to turn policy objectives into feasible andeffective policy instruments

• Can distinguish three main components:

• hard data (facts, trends, survey information)

• analytical reasoning that processes data to illuminate problems

• stakeholder opinion on an issue or set of issues.

• Research, analysis of stakeholder opinion, public perceptions and beliefs, cost/benefitanalyses, economic and statistical modelling are important sources of evidence

• Judgement of the quality of the methods that are used to gather and synthesise theinformation is vital

What is evidence?




• Often we work under pressure. Can only do whatis reasonable

• Four options for research

– Review existing research

– Commission new research

– Consult experts

– Consider a wide range of fully costed andappraised options

• Operate on different time scales

Page 8

Evidence and time horizons




Page 9

Reconciling evidence and time




Page 10

• LOOK FORWARD

• LOOK OUTWARD

• INNOVATE

• SEEK EVIDENCE directly addressed by EBP&TBE

• BE INCLUSIVE

• BE JOINED UP

• MONITOR directly addressed by EBP&TBE

• EVALUATE directly addressed by EBP&TBE

• LEARN directly addressed by EBP&TBE

Nine features of better policy making




Page 11

•Alternative forms of intervention need to be reviewed and short-listed. Evidence of the success or failure of similar instruments indeveloped and developing countries needs to be studied with specialemphasis on the conditions that created success and failure

•There must always be a base-case against which alternatives arescreened. Alternatives should include all available instruments.

•All the relevant potential impacts need to be identified and wherepossible, quantified

•Indicators need to be established of what is expected from the policymeasures. These indicators should cover outputs, outcomes andimpacts

•Intermediate indicators are important in helping understand howpolicies work, how measures interact and how they can be improved

The process of evidence-based policy making (I)




Page 12

•Impacts should be assessed in consultation with the subjects ofpolicy

•The cost of compliance needs to be assessed. Consideration shouldbe given to how these costs can be minimized.

•It is necessary to consider who pays the compliance costs; thereare generally alternatives with different implications for equity.

•The procedures for compliance need to be worked out and formonitoring impacts.

•Quantitative analysis of impacts is essential. The analytical methodmost commonly used is economic cost-benefit analysis.

•Cost-benefit analysis should take into account opportunity costs ofenergy and external environmental costs.

•Multi-criteria analysis is a useful support to decision making

The process of evidence-based policy making (II)




Page 13

What is Theory-Based Evaluation?

Theory-Based evaluation focuses on analysis of the theoretical or logical sequence

by which a policy intervention is expected to bring about its desired effects.

For instance, a theory-based evaluation might ask about the steps that are implicitbetween a policy initiative (e.g. introduction of minimum energy performancestandards for electrical appliances) and the policy outcome (reducing energy andGHGs). The Figure represents the implicit theory of policy makers:

Introductionof MEPS

Consumer isempowered tomake a betterjudgement andchangebehaviour

Manufacturersareincentivised tomake moreefficientmodels

Market istransformedand inefficientdevicesbecomeobsolete

Energy useand CO2emissionsfall;Domesticmanufacturestrengthened

The concept is similar to the logical framework for project evaluation, but because itdepends on an explicit behavioural model it can handle not linear logical structures




Page 14

Theory and the policy cycle

formulate

Implement

monitorevaluate

reformulate Theory

Model

Indicators

Foresight Evidence




Alternative theories

Page 15

Introductionof MEPS

Consumers areindifferent toenergy use –buy only onprice

Manufacturersare obliged tomake moreefficientmodels

Market isswamped bypoor qualitysmuggledgoods

Energy useand CO2emissionsrise;domesticmanufacturefalls

Failure to be clear about the causal sequence by which a policy is expected to workcan result in poor and even contrary outcomes

Theory Based evaluation does not prevent us constructing a bad model but tells uswhat indicators we should examine to make sure things are going well




Page 16

Indicators need to be established of what is expected from the policymeasures. This is vital for evaluation.

Indicators should cover:

•inputs, i.e. the financial, human, technical or organizational resourcesused in the endeavour

•outputs, (objectively verifiable indicators that demonstrate the progressmade in implementing the measures, e.g. the creation of a minimumenergy performance standard),

•outcomes (immediate effects on the regulated subject, e.g. the offer ofnew products and retooling of production lines) and

•impacts (direct measurements of the improvements that the programmeis designed to bring about, e.g. more efficient products and lower energyuse).

Indicators




Page 17

• Impact indicators tell you if you are getting the results that you wanted

• Generally thought they are not sufficient in themselves

• Intermediate indicators are useful and indeed necessary to verify theunderlying theory

Intermediate indicators




Page 18

Indicators and the theoretical model

IndicatorsCausal sequence Input Output Outcome Impact Risks Assumptions




Page 19

Indicators and the theoretical model of an efficiencyobligation

IndicatorsCausal sequence Input Output Outcome Impact Risks AssumptionsRegulatorprepares andpublishesconsultation paperwith licenceholders and otherstakeholders.

Time to preparedocumentationand technicaladvice ($).

Responses fromlicence holdersand otherstakeholders (#).

Sensitisation ofstakeholders (?).

Improvedinstrument (?).

Sensitisation ofstakeholders (?).

Regulator refinesand publishesfinal provisions.Requests plans.

Time to preparedocumentationand technicaladvice ($).

Licence holdersprepare plans(Y/N).

Regulator reviewsplans.

Official time andtechnical advice($).

Decision onacceptability(Y/N).

Accepted plansincorporated intobusiness plan(Y/N).

Regulator is lessinformed thanlicence holdersand allows weakplans to pass.

Rejected plansrevised andeventuallyaccepted.

Official time andtechnical advice($).

Decision onacceptability(Y/N).

Accepted plansincorporated intobusiness plan(Y/N).

Licence holdersobliged toincorporateefficiency targetsinto thinking (?).

Plansimplemented andreported at end ofyear.

Official time andtechnical adviceto monitor andevaluate ($).

View oncompliance ofresults (Y/N).

Investments andother activitiesimplemented ($).

Efforts made,costed anddocumented (?).

Cost-effectivesavings in energyand CO2emissions (GJand mt).

Imputedrelationships donot hold inpractice.

Regulator has thecapacity toanalyse longcomplex anddetailedcompliancereports.




Page 20

Indicators and the theoretical model

Efficiency andeffectiveness ofregulationanalysed byregulator.


Revised rules(Y/N).

Regulatedsubjects adjustprogrammes (?).

Better complianceand more cost-effective savings(GJ and mt).

Penalties appliedwhereappropriate.

Revenue received($).

Stringency ofprogrammeemphasisedamong allregulated subjects(?).

Cycle repeated toend of licenceperiod.


Annual plansmore rigorous andcontrols morefunctional (?).

Investments andother activitiesimplemented.

Regulatedsubjects complymore effectively(?).

Savings in energyand CO2emissions (GJand mt).

Imputedrelationships donot hold inpractice.

Regulatedsubjects identifyand exploitweaknesses.

Regulator has thecapacity toanalyse longcomplex anddetailedcompliancereports.

Final evaluation atend of licenceperiod.


Opinions oncompliance thatare introducedinto negotiationson licencerenewal (Y/N).

Poorly performinglicence holdersdisadvantaged inlicence renewal(?).

Compliancerequirementstaken sufficientlyseriously to affectlicence renewal.

Report byregulator on theeffectiveness ofthe obligation.


Betterunderstanding ofthe costs, benefitsand potential ofthe instrument

Well documented,cost-effectivesavings in energyand CO2emissions (GJ




Page 21

• 0$/tonne

• 2$/tonne

• 10$/tonne

• 50$/tonne

• 0$/tonne $0 / kW

• 2$/tonne $34 / kW

• 10$/tonne $170 / kW

• 50$/tonne $850 /kW

The price of carbon




Page 22

• Energy efficiency is win-win. No real issue – it is a sensible target ofpublic policy intervention. Lower costs; benefits to state and company.

• Renewable energy; it is not so clear. In many instances; definitelymore costly than alternatives.

• Why should Jordan pay the difference?

• If not Jordan then who and how?

• Without clarity on the extent to which Jordan (or the internationalcommunity) should be and is willing to accept the additional cost , it ishard to have entirely coherent renewable policy

Who pays and how?




Page 23

• Good indications that evidence is compiled and assessed both in REand EE

• Wide range of TA projects that have contributed to this

• Weakness seems to lie more in the process of policy making

• Sector is full of good ideas – innovative projects – personal initiatives,but little policy development

• Consultation seems weak – hard to obtain draft renewable law; hard tosee the perceived benefits of this rather secretive policy process

• Personally I am not convinced of some aspects of the Fund -consultation could have made the proposal stronger

• Comments would be helpful: what would you like from this project?

• We consult: we are outward looking and flexible!

Hesitant thoughts on Jordan




Many thanks for

your attention

Page 24

Annex 6

Preview on Training


Jordan, Half-day Seminar on Methodology and Policy, 30 July 2009


Page 1

Preview of the Information Workshop

- December 2009 -

Martin Ehrlich




Page 2

• Objective of the Impact Assessment Project

• Objective of the Training Component

• Audience for the Training Event

• Modules of the Training Event

• Programme for Senior Policy Decision Makers

• Programme for Policy Analysts and Consultants

Contents of the Presentation




Page 3

Objective of the Impact Assessment Project

• To achieve:

– Rapid implementation of cost-effective policies and instruments

– Accelerated deployment of cost effective RE & EE technologies

– Through:

• Increased penetration of „evidence based“ policy formulationand „theory based“ policy evaluation

• Specific objectives of the project:

– Comparative analysis of EE & RE policies

– Provision of impact assessments of EE & RE policy and promotioninstruments in RCREEE countries

– Strengthening of the methodological basis for policy formulation

– Provision of recommendations for adjustments of the policy makingprocess




Page 4

• Presentation of the methodological basis:

– Evidence based policy making and planning procedures

– Theory based evaluation and procedures for applicationin practice

• Country specific conclusions

• Recommendations regarding the policy making process

• Presentation of Case Studies

– Case Study on EE promotion

– Case Study on RE promotion

Objective of the Training Component




Page 5

• 1st day: Senior decision makers

• Presentation of the Impact Assessment Project

• Key elements of the methodology

• Recommendation of the country assessment

• 2nd & 3rd day: Policy analysts and RE & EE experts

• Detailed presentation of the synthesis report and countryassessments

• Discussion of case studies with presentation of the methodologicalbasis

Audience for the Training Event




Page 6

Modules of the Training Event

Morning Session Afternoon Session

1st

day

Presentation of the National

Regulations and Incentives Project

Key principles of evidenced based

policy making and theory based

evaluation

Presentation of International Practice

Result of the Country Review

2nd

day

Presentation of International

Practice in the Synthesis Report

– International practice

– Assessment of RCREEE practices

– Energy planning and political

consultation process

Presentation of the Country Report

– Methodological basis for policy

preparation

– Assessment of the policy making

process

Country specific conclusions and

recommendations

3rd

day

Case study on Energy Efficiency

Selected EE policy instrument

Theoretical framework

Results of the case study

Country specific conditions

Case study on Renewable Energy

Selected RE policy instrument

Theoretical framework

Results of the case study

Country specific conditions




Page 7

• Presentation of the Impact Assessment Project• Scope of the project and organisation• Value of international comparative analysis

• Key elements of the methodological basis for policy preparation andassessment

• Need for a methodological basis• Benefits of a sound methodological basis• Short and long term requirements

• Presentation of international practice• Policy making process• Policy implementation and impact assessment

• Result of the country review• EE and RE policy making process• Policy implementation• Observations and recommendations

Programme for Senior Policy Decision Makers




Page 8

• Presentation on methodological basis (international practice andpractice in RCREEE countries)

• Evidence based policy formulation

• Theory policy evaluation

Including: Economic evaluation of policy instruments / Integration ofclimate policy benefits in RE & EE policy analysis

• Presentation of case studies (including the discussion of casestudies prepared by participants)

• Presentation of selected policy instrument

• Required theoretical framework and selected approach

• Result of the case study

• Comment on country-specific conditions and challenges

Programme for Policy Analysts and Consultants




Page 9

• Key-documents for RCREEE countries

• Country Reports with the assessment of EE & RE policies andinstruments

• Synthesis Report

• Contacts within the RCREEE countries for networking andprofessional contacts

• Case Studies on evidence based policy preparation and andtheory based policy evaluation

Information Regarding the Available Project Results

Annex 7

Energy Situation in Jordan

Energy Situation in Jordan

Jordan Energy Mix and Demand Projections In 2006, Jordan’s total primary energy supply (TPES; 7.2 Mtoe) was dominated by fossil fuels with crude oil/petroleum products (70%) and natural gas (28%) representing 98% of the TPES. Renewable energy covered less than 1%. As Jordan is scarce of domestic natural gas and conventional crude oil resources, their high share in the national energy mix implicates a striking dependence on energy im-ports of more than 90%. In 2007, total spending on energy imports was equivalent to around 20% of the national gross domestic product. Jordan has literally no domestic conventional crude oil reserves and only one small gas field in the eastern desert near the Iraq border. Its output is used to fuel a nearby power station. However, the country accommodates significant oil shale and uranium reserves, which will be discussed later in this section. Jordan’s primary energy demand is expected to grow significantly in the coming years. The “Updated Energy Sector Master Strategy” of the national government encompasses three demand forecasts (low, medium, high). In 2020, the projected total energy demand ranges from 13.1 Mtoe (low scenario) to 17.1 Mtoe (high scenario) as illustrated in Fehler! Verweisquelle konnte nicht gefunden werden. . Fehler! Verweisquelle konnte nicht gefunden werden. shows the high scenario paths and the ex-pected role of different fuels. All scenarios project growing shares of oil shale and renewable energy due to large domestic reserves and high potentials. They are mainly used to increase the share of domestic energy sources. Fig. 15: Scenarios of Jordan’s Primary Energy Deman d

Fig. 16: High Scenario of Jordan’s Energy Demand b y Fuel

Electricity In 2007, Jordanian electricity consumption was 10,553 GWh up from 8,089 GWh in 2004 and 9,593 in 2006 (NEPCO 2009). Total installed capacity accumulated to 2,098 MW. Until 2020, the Jordan gov-ernment expects an annual growth of electricity demand of 7.2%, reaching 32,241 GWh in the year 2020. Fig. 17: Scenario of Jordan’s Electricity Consumpti on

Electricity production in Jordan is still predominantly based on thermal power plants, primarily using fuel and gas oil. Wind turbines, biogas facilities and hydro units cover merely 0.6% of the national power supply. In 2004, the government adopted an “Energy Master Plan” which envisaged the con-struction of an additional 2,100 MW of gas-fired capacity over the coming two decades. Besides fossil-fired power generation, there is an increasingly strong drive for nuclear power. By 2013,

the construction of the country’s first nuclear power plant is scheduled to begin. The plant shall be op-erational by 2017/2018. The thrive for nuclear power is part of the government’s aim to increase the utilisation of domestic energy resources as Jordan possesses significant domestic uranium resources. Uranium exploration got underway when a number of reservoirs were discovered. In 2006, proven re-coverable resources of uranium were at 30,400 tonnes. By comparison, Australia has the largest proven recoverable uranium reserve totalling 747,000 tonnes. Almost 95% of Jordan’s total electricity is supplied by the Central Electricity Generating Company (CEGCO). In recent years, the government has separated CEGCO from the National Electric Power Company (NEPCO), which is responsible for transmission of electricity from the generating plants to the distribution networks and load centres.

Oil Shale While Jordan is short of conventional crude oil, it accommodates an extremely large and proven oil shale resource. Geological surveys indicate that the existing shale reserves cover more than 60% of the country and amount to in excess of 50 billion tonnes. There are about 24 known occurrences; the eight most important deposits are located in west-central Jordan away from centres of population. Most of the fields are suited for open-cast mining and offer good transport linkages to potential off-takers despite their remote location. The government has undertaken several feasibility studies and test programmes to demonstrate the exploration of the oil shale reserves. Studies and experiments have shown that oil shale in Jordan can be used by direct burning to produce electricity, or by distillation to produce oil. The government gives great importance to the exploitation of this energy resource by carrying out the continuous technical and economic studies needed. The government asked local and international private-sector compa-nies to present offers to exploit Jordanian oil shale through distillation and direct burning to produce electric energy. In previous decades, the crude oil price did not justify the high costs of oil shale exploration opera-tions. However, in its 2007 energy strategy, the government fosters oil shale exploration due to rising crude oil prices and growing energy demand. The required investment projects shall be pursued through joint ventures and BOT (Build-Own-Transfer) projects. For the period 2007-2020, the energy strategy pursues different tracks to promote oil shale extraction, including projects on surface-mining, deep oil shale extraction and the utilisation of oil shale for power generation. Based on this approach, official energy demand scenarios forecast that by 2020, the share of oil shale could cover up to 18% (2.9 Mtoe) of the country’s total primary energy demand.

Renewable Energy According to the national Natural Resources Authority, Jordan has a huge potential for renewable en-ergy utilisation. Table 28 shows the capacity of renewable energy in the total energy mix in 2007.

Table 28: Installed Capacity of Renewable Energy in Jordan

Installed Capacity

(MW) Wind 1.5 Solar Heaters 158 Photovoltaic 0.5 Biomass/Waste 305

Among existing renewable energy plants are: A 1 MW biogas plant that utilises methane from organic waste decomposition for electricity production. Two wind farms with a total capacity of around 1.5 MW at Hofa and Al-Ibrahmiyah in the north of the country. In 2006, both wind farms generated a total of 3 GWh of electricity. Solar energy is mainly used for water heating. There are around 25 Jordanian manufacturers of solar water heating systems. The total number of installed systems in the country in 2006 is estimated at 661,500 m2, generating about 485 GWh per year. The current penetration rate in households is estimated at 14%. Until 2015, the dissemination of solar water heaters shall be in-creased by installing an area of 50,000 m2 of solar panels annually.

The government has set ambitious targets to increase the contribution of renewable energy sources to the national energy supply. The share of renewable energy in the total energy mix shall reach 7% by 2015 and 10% by 2020%, including 600 MW of wind energy projects and 300-600 MW of thermal so-lar projects. The implementation of the renewable energy targets as well as the elaboration of policy strategies is under auspices of the Renewable Energy and Energy Efficiency Department within the Jordanian Ministry of Energy and Mineral Resources (MEMR) in collaboration with the Ministry of Planning and International Cooperation (MOPIC). The latter is responsible for the acquisition of inter-national funding for energy projects and the development of international projects. The National En-ergy Research Centre (NERC) was formed in 1998 to support and conduct research, development and training activities on the fields of renewable energy and energy efficiency. In order to meet the targets of the energy strategy, in early 2008, the MEMR submitted a draft law for the promotion of renewable energy. It has not yet been adopted. The law includes a priority list for the usage of land with high potential for renewable development, substantial tax exemptions for renewable energy facilities (e.g. from income tax or customs duties) and makes provisions for establishing the Jordan Renewable Energy and Energy Efficiency Fund (JREEEF). The JREEEF shall provide different forms of subsidies for renewable energy facilities. The renewable energy promotion law and the fund are discussed in detail in Sections 4 and 5 of this report.

Energy Efficiency Jordan’s primary and final energy intensity are relatively high compared to industrialised regions such as EU-27 but lower than the regional average of the Middle East (see Fig. 18). As in the case of re-newable energy, the Ministry of Energy and Mineral Resources has the main responsibility for energy efficiency-related tasks.

Fig. 18: Jordan’s Primary and Final Energy Intensit y in Comparison to EU-27

In 2004, the Government of Jordan adopted a national strategy, which aimed to improve energy effi-ciency without affecting living standards and production. Seven specialised committees (e.g. taxa-tion/pricing committee, committee for improvement of electricity sector efficiency) were formed to im-plement the strategy. The committees conducted technical and economic studies for 20 different com-panies in industrial and commercial sectors, which came to the result that these companies may re-duce energy consumption by about 20% within two years. The 2007-2020 national energy strategy in-cludes several steps to realise energy efficiency potentials, the most important of which is the creation of the JREEEF. The fund will be designed to provide support for studies on energy efficiency im-provements in different sectors, awareness campaigns and training programmes. Regarding the transport sector, studies have shown that energy consumption can be reduced by 20%. In order to realise this potential, the national energy strategy promotes - among other steps - tax ex-emptions for small engine or hybrid vehicles, the replacement of old cars and a pilot project on the production of biofuel from the Jetrova plant.

Barriers for Energy Efficiency and Renewable Energy in Jordan The two main barriers for the quick development of the renewable energy technologies in Jordan are mainly the high prices of the equipment on the local market, and the relatively low cost of the electric-ity. These two main barriers lead often to high payback times (8 years for the solar domestic hot water system). As a result of lack of institutional point responsibility as well as relatively low energy pricing, a low level of general and specific awareness and motivation exists on the part of both consumers and industrial and commercial managers towards energy efficiency and renewable energy technologies. There are no dedicated financing schemes or special incentives provided for RETs initiatives. This barrier is especially important due to the high capital investment costs needed of some interventions that require the installation of specialized equipment. With insufficient financial incentives to invest in energy efficiency equipment, the local market for energy efficient measures and equipment is weak in

Jordan. Other barriers come from the lack of policies related to energy conservation and tax incentive to encourage the use of RETs. Most of the renewable energy activities in Jordan have been imple-mented through bilateral of multilateral cooperation with developed countries and international agen-cies with very little cooperation among the countries in the region. The renewable energy development is tightly bonded to the implementations of bilateral and international cooperation programs. The bilat-eral activities with foreign countries were mainly with the United States, Denmark, France, Germany, Italy, and Japan. The main regional and international organizations that have been active in promoting and developing renewable energy in the region, are the Arab League, ESCWA, European Union, UNDP, UNEP, FAO and GEF.