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ECOWAS Status Report

RENEWABLE ENERGY AND ENERGY EFFICIENCY STATUS REPORT 2014 | 59 Policies take many forms and address different barriers to renewable energy development. Pricing instruments—such as feed-in policies or fiscal incentives—can provide a strong incentive to project developers. While a handful of countries in the region have implemented advanced feed-in policies, they remain absent in the majority of Member States. Fiscal incentives for renewable energy technologies, however, have now been enacted by nearly all Member States. Feed-in policies, taking the form of feed-in tariffs (FITs) or feed-in premiums (FIPs), are one of the oldest and most widely used mechanisms to promote renewable power generation worldwide. Feed-in policies provide guaranteed long- term payments for electricity generation, while guaranteeing grid access for renewable projects. FITs are now in place in 2 of the 15 ECOWAS Member States and are being developed in 2 additional Member States. Ghana established a FIT in 2011, providing 10-year technology- differentiated payments, with remuneration levels set to be reviewed every two years.21 Initial FIT rates were established in 2013, with solar PV receiving the highest level of support at USD 0.15/kWh (GHS 0.43/kWh).22 Nigeria’s FIT, established in 2012, supports the development of wind, solar, small hydro, biomass, and biodiesel, with payments guaranteed from 2012 to 2016 and subsequently revised every five years.23 Draft policies exist in the Gambia, where a FIT to support solar PV, wind, biomass, and biogas installations up to 1.5 MW in size has been included in the Renewable Energy Act 2013, adopted by the National Assembly in December 2013 but still awaiting full ratification; and in Senegal, where the draft FIT policy covers solar PV, solar thermal, wind, hydropower, biomass, and biogas installations.24 Cabo Verde is the only ECOWAS Member State to have adopted net metering for renewable energy projects. Net metering provides a strong incentive to spur development of household self-generation. Cabo Verde’s policy was first implemented in 2011 with the connection of a 9.9 kW solar PV system installed at ECREEE headquarters.25 A net metering policy is in the early stages of development in the Gambia. That country’s pilot net metering programme features a 2kW connection allowance; a larger-scale programme was tested with the connection of a 20kW solar PV system at Leo’s Hotel.26 Provisions for the proposed FIT and the formal adoption of net metering are included in the Gambia’s Renewable Energy Act 2012, which has yet to be adopted.27 Under the proposed regulations, the Gambia’s net metering programme would target systems at or below the FIT’s 20kW capacity minimum.28 In the ECOWAS region, financial instruments are the predominant means of supporting the renewable energy sector through national policies. Tax incentives take a number of forms, including investment or production tax credits as well as reductions or elimination taxes such as import duties, sales, and value-added tax (VAT). Renewable energy technologies are now supported through the tax code in 13 ECOWAS Member States. Import duties for renewable energy components have now been reduced or removed in Burkina Faso, which provides customs duty exemptions for solar PV and solar thermal technologies.29 Ghana exempts wind and solar generating systems from import duties,xx and Mali exempts solar panels, solar lamps, and other renewables from import levies and duties.30 Nigeria has placed a moratorium on import duties for renewable energy technologies.31 Benin, Cabo Verde, Côte d’Ivoire, the Gambia, Guinea, Guinea-Bissau, Niger, and Togo also provide full or partial exemptions from import duties or other taxes for renewable energy components.32 Value-added tax reductions for renewable energy projects have been established in Burkina Faso, which instituted aVAT exemption for solar PV and solar thermal; in Ghana, which has removed the VAT on renewable energy power generation equipment; and in Mali, which established a five-year VAT exemption in 2009 for renewable energy equipment.33 Additional tax incentives are in place in Cabo Verde, which provides a five-year “tax holiday” with an additional five years at a 50% tax reduction.34 The Gambia exempts renewables from sales tax35 while Niger has enacted a tax exemption for solar home systems and solar lamps. Nigeria has established a “tax holiday” of five to seven years for any investments in the energy sector, both renewable and non- renewable, as well as a VAT exemption for companies along the biofuel production chain, from the production of feedstocks to the generation of electricity.36 In Senegal, the government has established full tax exemptions for the purchase of materials or equipment for the domestic consumption of renewable energy.37 Governments often play a role in helping overcome the hurdles associated with financing renewable energy projects by providing project grants or preferential loans. This support is often in addition to loans or grants provided by international lending institutions, such as the AfDB, or development partners. National programmes can be designed to directly cover all or part of project costs, or to ease financing costs and access, and are often run through government agencies, specialised funds, or national banking institutions. ECOWAS Member States have employed various strategies to stimulate project development through financial support. Ghana has established a national Energy Fund—supported by a fixed charge of USD 0.06/litre on gasoline, kerosene, and diesel fuels produced in the country—with revenue going to research and development, as well as renewable energy promotion.38 In 2011, Nigeria’s Bank of Industry established a concessionary lending programme for power sector investments.39 Senegal provides a subsidy to cover 25% of the investment costs for biogas digesters under the Senegalese National Biomass Programme.40 Mali also supports renewable energy projects by providing public investment, loans, or grants. Tendering or auctions for renewable energy projects have rapidly gainedtheattentionofpolicymakersinrecentyearsbecauseoftheir xx. Subsidies are applicable only to whole systems, not component pieces. POLICY AND TARGET OVERVIEW 04

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