Feed-in-tariffs and tariff premium for new technologies or small markets

Feed-in tariffs or tariff premiums are a policy instrument that allows a premium in addition to the cost of generation or market price of electricity from renewable energy sources for the project or debt service timeline. This instrument has been used widely by several countries since the beginning of this global transition and is today used primarily to support new or nascent technologies. Tariffs are then regularly revisited and revised downwards as the market matures and competition increases. Secured tariff per unit of electricity generated throughout the lifetime of a project can mitigate financial and operational risks for investors and reduce financing costs.

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PPP for large-scale solar programme in Morocco

 

Morocco has become an exemplar for forging successful public-private partnerships (PPPs) for its ambitious solar target of 2,000 MW capacity by 2020. In its first phase, the 160 MW Ouarzazate Noor 1 CSP Project was implemented through a PPP between the Moroccan Government (in various capacities), international financing institutions (IFIs) and a private sector consortium led by ACWA Power. The Government contributed to the PPP by providing tariff subsidies, and securing offtake and debt guarantees reducing risks to private and public investors. The tariff subsidy is spread through the lifetime of the project, reducing upfront capital requirements. The IFIs contributed through institutional expertise and concessional debt. The consortium of private parties, selected through a public tender, contributed equity financing and technical knowhow. The PPP model brought the total costs of the project down by 25-30%. A mandatory clause of local content procurement in the agreements will be crucial to boosting the local economy.

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