05 Policy Landscape

As of 2016, nearly all countries directly supported renewable energy technology development and deployment through some mix of policies.1 (→ See Enabling Technologies chapter.). A broad range of policies provided direct and indirect support, aimed at economy-wide economic development, environmental protection and national security. Technology advances, falling costs and rising penetration of renewables in many countries also have continued to require that policies evolve to stimulate renewables deployment and integration as effectively as possible.

Many countries built on the momentum spurred by the landmark Paris Agreement of the United Nations Framework Convention on Climate Change (UNFCCC) by communicating their first Nationally Determined Contributions (NDCs)i. A total of 117 NDCs were submitted by year-end 2016, largely from countries that formalised the commitments made in their Intended Nationally Determined Contributions (INDCs) submitted prior to the Paris climate conference. Of the 117 NDCs, 55 included targets for increasing renewable energy, while 89 made reference to renewable energy more broadly.3

By late 2016 at the 22nd Conference of the Parties (COP22) in Marrakesh, Morocco, more than 100 countries had officially joined the Paris Agreement, formalising their commitments to sustainable development, often through decarbonisation of the energy sector.4 At COP22, leaders of the 48 developing countries that constitute the Climate Vulnerable Forum (CVF), including COP22’s host nation of Morocco, committed jointly to work towards achieving 100% renewable energy in their respective nations.5 In addition, a new 20-country coalition launched the Biofuture Platform, dedicated to promoting the use of biofuels in transport and industry.6

Policies targeting broader environmental concerns or other resources and technologies in the energy sector also may impact renewable energy markets. For example, carbon pricing policies (either carbon taxes or emissions trading systems), if designed effectively, may incentivise renewable energy development and deployment across sectors by increasing the comparative costs of higher-emission technologies. On the counter side, fossil fuel subsidies continued to temper renewable energy growth globally in 2016.7 (→ See Global Overview chapter.)

Policy support specifically for renewable energy in 2016, as in past years, was focused mostly on power generation, whereas support for renewable technologies in the heating and cooling and transport sectors developed at a slower pace. (→ See Figure 45.) Policy makers in many countries also continued to advance policies to integrate renewable generation into national energy systems.8

Figure 45. Number of Renewable Energy Regulatory Incentives and Mandates, by Type, 2014-2016

This chapter provides a snapshot of 2016 developments and emerging trends in renewable energy policy across all sectors (power, heating and cooling, and transport) at the regional, national and sub-national levels. The final section focuses on local policy developments. The chapter does not attempt to assess or analyse the effectiveness of specific policy mechanisms. Developments related to each type of policy mechanism are described independently, although often a targeted mix of complementary policies is applied jointly. Renewable energy policies may be implemented in conjunction with policies specifically designed to expand energy access through the deployment of distributed renewable energy technologies (→ See Distributed Renewable Energy chapter.) or with policies that promote energy efficiency (→ See Energy Efficiency chapter and Figure 58). Specific details on new policy adoptions and policy revisions are included in the policy reference tables and policy endnotes.

Targets

Targets for renewable energy continued to be a primary means by which governments expressed their commitment to renewable energy deployment during the year. Renewable energy targets range from official announcements made by governments or heads of state to fully codified plans accompanied by quantifiable metrics and compliance mechanisms, and can focus on individual technologies or sectors, or on economy-wide energy usei.9 (→ See Reference Tables R15-R19.)

As of year-end 2016, renewable energy targets were in place in 176 countries. The majority of targets continue to focus on renewable energy use in the power sector, with targets for a specific share of renewable power instituted in 150 countries, and economy-wide targets for primary energy and/or final energy shares in place in 89 countries. Targets for renewable heating and cooling and transport energy use have been introduced to a much lesser degree, in place in 47 and 41 countries, respectively, by year-end 2016.

Several joint commitments were made at the regional and international levels. In addition to the 100% renewable electricity commitments made by the 48 CVF member states (see above), the EU proposed a new 2030 Framework under which it aims for renewables to account for at least 27% of total energy consumption and at least a 27% improvement in energy efficiency (relative to a business-as-usual scenario) to help reduce greenhouse gas emissions by 40% in 2030 (compared to 1990 levels).10 Leaders of Canada, Mexico and the United States reached a deal to source 50% of the region's electricity from non-carbon sources by 2025ii.11

At the national level, countries in Asia were particularly active in launching new targets or revising existing ones. China’s newest Five-Year Plan sets an overall goal of increasing renewable energy capacity to 680 GW by 2020, accounting for 27% of total power generation.12 China’s Five-Year Plan on Ocean Energy also established a target for achieving a total cumulative capacity of 50 MW of ocean energy from tidal, wave and temperature-gradient technologies by 2020.13 Additional renewable energy shares or installed capacity targets were enacted in India, Malaysia, the Republic of Korea, Singapore, Taiwan, Thailand and Vietnam.14

Elsewhere, targets were adopted or revised in Africa (Cabo Verde, Morocco , Nigeria and South Africa), Europe (France, Finland and Norway), Latin America and the Caribbean (Argentina, Aruba, Cuba, Jamaica and Mexico) and the Middle East (Azerbaijan and Saudi Arabia).15 Notably, Aruba joined a growing list of countries committed to achieving a 100% share of renewable energy in the electricity sector.16

A small number of new renewable transport targets also were established in 2016. In Finland, a target was set for 30% biofuel blending and 40% renewable transport fuels use by 2030, and in Norway a goal was set for 20% biofuels use in transport fuels by 2020.17 (→ See Reference Table R24.)

New or revised targets also were established at the sub-national level in Australia (Victoria) and in Canada, where all 10 provinces have set renewable energy targets; Alberta announced a 30% renewable electricity target by 2030.18 The US state of Massachusetts also established targets for installed power capacity.19 (→ See Reference Table R17.)

Although targets are an important tool, they do not guarantee success. For example, a number of countries in the EU (France, Luxembourg, the Netherlands and the United Kingdom) were identified as likely to miss their 2020 targets.20 Similarly, targets can become outdated quickly if deployment exceeds the original goals, such as in Europe where solar PV already has exceeded both its 2014 and 2020 targets.21

Power Generation

As in past years, policy makers introduced new support mechanisms and revised existing policies in an effort to respond to changing political, societal and market conditions, with the power sector continuing to receive the majority of attention. (→ See Figure 46.) Feed-in policies – feed-in tariffs (FITs) and feed-in premiums (FIPs) – remained the most prominent form of regulatory policy support for renewable power promotion in 2016. (→ See Reference Table R20.) However, throughout the year countries around the world (most notably in Europe and Asia) continued to shift away from these policies; this was particularly the case when supporting large-scale project deployment, where these mechanisms often have been replaced with auction-based procurement.

Figure 46. Countries with Renewable Energy Power Policies, by Type, 2016

The year 2016 marked the second in a row in which no new countries adopted feed-in policies at the national level. Although support for large-scale projects is shifting to tendering in an increasing number of countries, feed-in policies remain in force in many of these countries for the deployment of small-scale installations. Policy makers continue to adjust FIT rates as the technologies become more cost-competitive in ever more areas.

In 2016, the European Commission (EC) approved revisions to several feed-in mechanisms proposed by its member countries. These changes often included the adoption of market premiums for large-scale projects.22 In a separate move, the EC also announced plans (not yet adopted in 2016) to remove priority dispatch rights for new renewable energy projects, a notable feature of feed-in policies, with the objective of further restricting priority dispatch so that only installations smaller than 250 kW will qualify by 2026.23

At the national level, in the Czech Republic, the FIT that previously had been halted was reapproved for new projects and for projects built between 2006 and 2012.24 The EC approved France’s revised renewable energy support scheme, with only installations of less than 500 kW remaining eligible for the FIT; larger projects are to receive premium payments.25 Germany’s Renewable Energy Law (EEG) was reformed to transition from government-set FIT rates (a central component of the EEG originally adopted in 1990) to an auction-based scheme for projects larger than 100 kW.26 Greece’s FIT was amended to allow for small-scale projects and installations on non-interconnected islands to receive support; in separate legislation, Greece transitioned large-scale project support to a FIP that is to be provided over 20 years (25 years for CSP).27 Slovenia also amended its FIT, making it applicable only to projects below 500 kW.28

Elsewhere in Europe, Denmark reintroduced a FIT for small-scale wind power projects, after a previous programme reached its cap and was closed, and the United Kingdom reduced its FIT for all technologies by 65%.29 Ukraine reduced rates for commercial solar installations greater than 10 MW.30

In Asia, several countries reduced rates, including China (which reduced rates by 13-19% for its solar FIT but kept the distributed generation FIT unchanged), Japan (which reduced its solar FIT by 11% for 2016 and aims for cuts of 20% or more in three years), Pakistan (which cut tariffs for solar power by 36%) and the Philippines (which proposed new, lower rates for the third round of its FIT).31 Moving away from the general trend, Indonesia increased its solar FIT by more than 70% and set a fixed FIT rate for geothermal power.32

Modifications were made to feed-in policies in Africa as well. Ghana announced plans to update its solar PV FIT to last for 20 years (up from 10 years); Kenya announced its intention to transition away from FITs to tendering; and Egypt announced a new phase of its FIT programme, including requirements for 30% of financing for solar PV projects and 40% of financing for wind power projects to come from Egyptian sources.33

Sub-national jurisdictions in India (Tamil Nadu), Canada (Ontario) and Australia (Victoria and Queensland) also made changes to existing feed-in policies in 2016.34 Ontario offered 241 MW of contracts to solar PV, hydropower, wind and bio-power projects under the fourth round of its FIT and opened its fifth round of applications, and Queensland increased the size of solar power systems eligible for its FIT from 5 kW to 30 kW.35 In contrast, Tamil Nadu cut its solar PV FIT rates by 27%.36 (→ See Reference Table R20.)

Tenders (competitive bidding or auctions) for renewable energy are the most rapidly expanding form of support for renewable energy project deployment and are becoming the preferred policy tool for supporting deployment of large-scale projects. (→ See Reference Table R22.) At least 34 countries issued new tenders in 2016; most renewable energy tenders were for solar PV, and to a lesser extent for wind and geothermal power. Renewable technologies also were competitive in some technology-neutral tenders.

Asia was home to some of the largest tenders by capacity in 2016. For example, China tendered 5.5 GW of renewable energy capacity in 2016, up from 1 GW offered in 2015.37 India held a tender for the deployment of 1 GW of new solar PV capacity alone.38 Japan announced a schedule for its solar PV tender system, which will be introduced in 2017; Indonesia held a tender for 680 MW of new geothermal capacity spread across six regions; and Turkey held a tender for a single 1 GW solar PV plant.39 Sub-national tenders were launched during the year in Australia (New South Wales) and India (Tamil Nadu).40

Tenders and FITs increasingly are implemented alongside one another. In Europe, this is being driven by EC State Aid guidelines, which have led to policy changes in member countries attempting to meet the requirement to shift towards tendering for certain projects. In 2016, for example, Poland’s Renewable Energy Law replaced the existing green certificate scheme with a mix of tenders for large projects and feed-in payments for small-scale projects (up to 10 kW); Slovenia revised its feed-in support scheme to include a two-round tender process for projects over 500 kW; and Greece introduced a package of incentives that includes FIPs, tenders and virtual net meteringi.41 These reforms led to both Greece and Poland holding their first solar PV tenders in 2016, aiming to contract 40 MW and 100 MW of small-scale projects, respectively.42

National solar PV tenders also were held in France and Germany, while the Netherlands held solar power tenders and two rounds of offshore wind power tenders.43 In December 2016, Spain announced its intention to hold 3 GW of technology-neutral tenders in 2017.44 A new development in 2016 saw Denmark and Germany enter a unique partnership to launch mutual cross-border solar PV tenders. The pilot programme, the first of its kind, opened auctions to installations in either country, with the objective of expanding cross-border co-operation to include additional countries as well as onshore wind power.45

In Africa, Nigeria, in a similar fashion to the multi-pronged approach established in Europe, adopted a tender system for projects larger than 30 MW while formally approving its FIT rates first announced in 2015.46 Both Malawi and Zambia held their first renewable energy tenders in 2016: Malawi held tenders for four solar PV plants with a cumulative capacity of 70 MW, and Zambia held solar tenders for a total of 100 MW and set a record-low bid price for Africa at USD 0.06 per kWh under a 25-year PPA.47

In the Middle East and North Africa (MENA) region, Morocco called for tenders totalling 1 GW of large-scale renewable energy projects.48 Elsewhere in the MENA region, the Palestinian Energy Authority launched its first tenders in 2016, aiming to boost installed solar PV capacity by as much as 100 MW; Saudi Arabia launched a 100 MW solar PV tender; and Iraq announced a tender for a 50 MW solar PV project.49 Israel ended its two-year hiatus on new solar power deployment by launching plans to issue more than 1 GW of new solar tenders, as well as tenders for a 500 MW solar PV project in the Negev desert and a 40 MW PV project in Ashalim.50 Jordan announced its third round of tendering for solar power and its second round for wind power, including a new 200 MW solar PV tender.51 Sub-national tenders were held in the UAE (Abu Dhabi and Dubai).52

In the western hemisphere, Argentina held the first tenders under its RENOVAR programme, which awarded 2.4 GW of renewable energy in 2016 and includes a green trust fund to help secure investment.53 Chile held its largest power auction to date to supply 12,430 GWh of electricity annually for 20 years, or about one-third of the country’s energy needs; wind power received 40% of the available capacity in this auction, and the world’s lowest price for solar PV generation (USD 29.10 per MWh) also was bid.54 In Central America, El Salvador launched tenders calling for 100 MW of solar power and 50 MW of wind power capacity.55 Additional auctions were held in Guatemala, Honduras, Panama and Peru. Mexico selected 23 bidders to develop USD 4 billion worth of clean power projects, primarily from solar PV and wind power.56 Tenders also were held at the sub-national level in the Canadian province of Alberta.57

By contrast, South Africa’s successful tender programme, a model for many others around the world, was threatened by the country’s switch in focus from renewables to nuclear power and by the national utility’s refusal to sign PPAs with renewable energy projects.58 A similarly negative trend was witnessed in Brazil, where reduced demand for electricity and economic challenges caused by the country’s contracting national economy led officials to abandon plans to add new solar and wind power capacity through auctions in 2016. After multiple delays, the country’s only scheduled solar and wind power auction for the year was cancelled in December, making 2016 the first year since 2009 in which Brazil did not hold a tender for wind power.59 Due to the country’s economic slump, Brazil also took steps to ease the financial burden for now-struggling developers who had won contracts under previous tendering rounds, reducing penalty fees and considering extending project durations to 30 years.60

Net metering / net billing has been used to support the deployment of small-scale, distributed renewable energy systems by enabling generators to receive credits or payments for electricity generated but not consumed on site. In many cases, net metering policies have been adopted alongside other policy mechanisms – such as FITs or auctions – that support larger-scale projects. The pace of adoption of new net metering policies slowed in 2016, with Suriname and Slovenia adding new policies.61 As in past years, net metering continued to see opposition through challenges to the rates paid to power producers and through the adoption of connection fees for self-generators. However, a new trend towards increased accessibility of net metering through virtual net metering continued to emerge throughout the year.

At the national level, a number of amendments were made to net metering policies. Brazil’s net metering revision, adopted in 2015 and providing financial incentives to small-scale distributed solar PV systems, came into force in 2016.62 Costa Rica enacted a new net metering price structure designed to encourage businesses and homeowners to generate solar electricity, and Greece approved virtual net metering for specific investors, a change that allows for these investors to receive net metering credits from their ownership stake in off-site generation.63

At the sub-national level, in the United States, 41 states, the District of Columbia and 4 territories had adopted net metering policies as of 2016. Battles continued over net metering policies in state legislatures, public utility commissions and the courts between those promoting net metering programmes and electric utilities and their supportersii.64 Despite ongoing debate, California, Colorado, Michigan and Nevada all upheld or expanded support to self-generators under net metering programmes in 2016.65 In Arizona, after an initial rejection of calls to remove net metering, regulators ended the state’s retail net metering programme, transitioning new solar customers to a reduced incentive programme with rates to be decided by the state's public utility commission.66 In Australia, New South Wales revised its existing programme to move from its FIT to net metering for household solar systems.67

Regulatory policies that require the deployment of renewable power capacity – the most common of which are Renewable Portfolio Standards (RPS) – continued to be used worldwide in 2016, although the pace of implementation has slowed notably in recent years. At the national level, for the second year in a row, no new RPS policies were introduced in 2016. (→ See Reference Table R21.)

At the sub-national level, however, RPS trends are more dynamic. In the United States, 29 of 50 states, the District of Columbia and 3 territories had targets set under RPS by year’s end. In 2016, the general roll-back of state RPS targets was largely reversed, with more-ambitious RPS policy mandates adopted in the US Commonwealth of the Northern Mariana Islands, the District of Columbia and the states of Illinois, Maryland, Michigan, Minnesota, New York, Ohio, Oregon, Rhode Island and Vermont.68 In Ohio, the first state to freeze its RPS policy, an extension of the freeze that had been in place since 2014 was rejected in 2016, restoring the original policy.69

In addition to regulatory policies, several countries provided public funds through grants, loans or tax incentives to drive investment in renewable energy deployment. In early 2016, India launched a 30% capital subsidy for rooftop solar PV installations backed by USD 750 million (INR 50 billion) to fund the new programme; the fund is expected to support 4,200 MW of new capacity.70 The Republic of Korea pledged to invest USD 36 billion in clean energy by 2020, with 79% of the funds earmarked for deployment of renewable energy and 11% for energy storage.71 As of end-2016, Sweden removed its tax on solar production in order to advance the national target of 100% renewable electricity by 2040.72

Many such incentives have been reduced or eliminated in recent years in response to tightening fiscal budgets and/or falling technology costs. Significant examples from 2016 include the Netherlands, which plans to phase out subsidies over the coming decades (despite these plans, in 2016, a 33% increase in the government’s budget for support to renewable technologies was announced), and the United States, which rolled back support for a number of renewable technologies previously supported by the Production Tax Credit.73

At the sub-national level, Alberta (Canada) introduced a renewable energy credit funded through the province’s carbon tax on large industrial carbon emitters.74 In the United States, Florida removed property taxes from solar PV panels installed at businesses and manufacturing facilities, and Wisconsin authorised USD 7.7 million for rebates for small-scale, customer-based projects, including solar, geothermal, biogas, biomass and small-scale wind power for both power and non-power uses.75

Globally, the development and deployment of supporting technologies such as energy storage and smart grid systems drew increased focus from policy makers at the national and state/provincial levels. (→ See Enabling Technologies chapter.) To advance these technologies, many governments are adapting mechanisms that long have been used for the promotion of power generation technologies (including a mix of incentives and regulatory support), as well as newer mechanisms such as tenders, often through direct calls for their integration with renewable technologies.

For example, in 2016, Germany enacted a USD 31.5 million (EUR 30 million) programme to provide loans and grants to support residential solar PV systems combined with battery storage.76 India made multiple commitments to energy storage, calling for its first bid for solar energy (300 MW of projects) that mandated the inclusion of a storage component.77 Suriname similarly held a tender for a solar PV installation including battery storage.78 The United States also awarded USD 18 million to six solar PV projects that integrate energy storage.79 In a bid to better integrate renewable power sources in the national electricity mix, Jordan launched the first of three tenders designed to enhance the national transmission network to allow solar and wind power generated in the south to reach population centres in the central and northern areas of the country.80

Enabling technologies also continued to receive support through policies not directly tied to renewable energy. Sweden announced support for energy storage and smart grid technologies with investments of USD 5.5 million and USD 1 million (SEK 50 million and SEK 10 million) per year, respectively, with an initial outlay of USD 2.75 million (SEK 25 million) provided to energy storage in 2016.81 At the sub-national level, the US state of California enacted four new pieces of legislation to promote the deployment of energy storage; the state increased funding and required that investor-owned utilities accelerate the pace of deployment.82

In 2016, governments also adopted policies to support the development of domestic renewable energy supply chains. For example, under its FIT, Iran established a 35% premium for solar and wind power plants built using domestic content.83 Also in 2016, Turkey included a premium of up to 50% higher tariffs under the country’s wind power FIT if all turbine components are made in the country, and adopted a 50% tariff on solar panel imports.84 For the first time in the country, a local content requirement also was applied to tender specifications for the Karapinar solar PV project, for which it is anticipated that 75% of module components will be manufactured locally.85 In India, the government plans to support the development of its domestic solar panel manufacturing industry through a USD 3 billion (INR 210 billion) Prayas initiative of government incentives.86

During the year, policy makers expanded support for renewable deployment specifically for low-income communities. In 2016, for the first time, the US federal government launched an initiative to promote solar power and energy efficiency for low- and moderate-income Americans.87 Also during the year, Mexico instituted a USD 106 million initiative, supported by the International Finance Corporation, to finance the construction of solar-powered energy-efficient houses in low-income communities.88

Most policies targeted towards low-income populations have occurred at the sub-national level in the United States. As of 2016, programmes to expand access to renewable energy for low-income communities existed in California, Massachusetts and the District of Columbia, and 12 states had community net metering programmes to help low-income residents access solar PV by allowing the benefits of solar PV to be extended to renters and not only property owners.89 New state initiatives during the year included New York’s USD 3.6 million in funding to support solar PV deployment in low-income communities, and Illinois’ Future Energy Jobs Bill, which also promotes solar PV deployment for low-income communities.90

Renewable Heating and Cooling

Although renewable energy technologies in the power sector continue to receive the most attention from policy makers, some countries are taking measures to increase the deployment of technologies in the renewable heating and cooling sectors as well in order to achieve energy security goals (for example, in the EU) or greenhouse gas emission reduction goals, among others.91 Despite these efforts, the unique and distributed nature of the heating and cooling market continued to present challenges to policy makers during 2016. High upfront investment costs and competition with low-cost fossil fuels remained impediments to the deployment of renewable heat.92

As in the power sector, renewable heating and cooling technologies generally are promoted through a mix of targets, regulatory policies and public financing. During 2016, most government support for the renewable heating and cooling sector was provided through financial incentives in the form of grants, loans, rebates or tax incentives aimed at increasing deployment and, in some cases, incentivising further technological development. Countries also have adopted regulatory mandates, which often are enacted through building codes or, as in some US states, through the inclusion of renewable heat in RPS policies. (→ See Figure 47 and >Reference Table R23.) Although far less common than in the power sector, some governments have used FITs, including the United Kingdom’s Renewable Heat Incentive (RHI), and tendering mechanisms, such as those held in South Africa in 2016, to support deployment of renewable heating and cooling technologies.

Figure 47. Countries with Renewable Energy Heating and Cooling Policies, 2016

These policies have continued to focus on the promotion of heating and cooling technologies in the buildings sector and, in many cases, include linkages to energy efficiency policies.93 (→ See Energy Efficiency chapter.) The development of targeted mechanisms to overcome technical barriers to the promotion of renewable heating and cooling in industry – for example, R&D policies to help renewable technologies meet the technical standards (temperature, pressure, quantity) required by industrial consumers – remained a challenge for policy makers during the year.94

Europe is the largest producer of renewable heat worldwide and continues to be a global leader in the use of policies to advance the deployment of renewable heating and cooling technologies.95 In September 2016, the European Parliament adopted a resolution on renewable heating and cooling following the EC’s An EU Strategy on Heating and Cooling designed to promote the adoption of energy efficiency measures and to provide a framework for policy makers to better integrate renewable heating and cooling into the buildings, industry and electricity sectors.96 The parliamentary resolution called on EU member states to phase out older, inefficient, fossil fuel-based boilers and recommended the adoption of financing support mechanisms for renewable heat.97

At the national level in Europe, Bulgaria re-launched an energy efficiency loan scheme supported by the European Bank for Reconstruction and Development that provides support to a wide range of efficiency improvements and solar water heaters.98 Hungary expanded policy support to the heating and cooling sector through two rounds of tenders and offered new preferential loans in support of municipal renewable heating and cooling projects.99 Italy’s financial support scheme for up to 40% of the capital costs of renewable heating and cooling installations was revised following limited participation of the public buildings sector compared with extensive participation of the commercial sector. The revised policy increased the capacity limit for eligible installations by 150% and expanded incentives by linking payments to anticipated yield as well as to project size.100

Elsewhere in Europe, the former Yugoslav Republic of Macedonia allocated a new round of subsidies covering up to 30% of the cost of installing solar water heaters under its existing support scheme.101 In the Netherlands, a new building energy support scheme introduced grants for biomass boilers and solar thermal systems (and heat pumps).102 Portugal adopted two new incentive mechanisms to promote energy efficiency in the buildings sector, including grants for up to 60% of the cost of solar thermal systems in residential buildings and up to 35% in commercial buildings.103 Romania relaunched a subsidy scheme providing incentives of USD 700-1,870 (RON 3,000-8,000) for the installation of solar thermal systems (and heat pumps).104 The Slovak Republic adopted a new grant scheme promoting solar thermal systems (and heat pumps).105

Despite the positive developments in 2016, policy uncertainty affected the renewable heating and cooling sector in several countries in Europe. The United Kingdom released plans in early 2016 to remove solar thermal support from its RHI in an effort to “promote value for money”, but later reversed this action under pressure from industry groups.106 In Northern Ireland, the non-domestic RHI was heavily criticised for over-subsidising fuel use and, as a result, was closed to new applications in February 2016.107 In Switzerland, canton adoption of the national model building energy regulations (including a 10% renewable requirement for heating system retrofits) was delayed in many regions of the country.108 Similarly, the Swiss Harmonised Incentive Model (including calls for incentives of up to 20% of the total investment cost of solar thermal systems) has been confronted with competing financial policy priorities, forcing some cantons to pledge to end incentives entirely.109

Africa also was among the most active regions in renewable heat policy in 2016. Bids for South Africa’s long-delayed solar water heater supply, delivery and warehousing tender closed in January 2016.110 Lesotho, Mozambique and Zimbabwe continued to develop policy for renewable heat in 2016, following early actors on the continent such as Namibia and South Africa.111

Elsewhere, Chile extended to 2020 a tax credit for commercial solar thermal systems approximately two years after the original credit expired, including retroactive support for systems installed during the lapse.112 India enacted new loan incentives designed to help solar process heat developers finance the upfront costs of project development. This new policy builds on an existing 30% subsidy available to developers later in the project development cycle and on a long-term loan programme that offers preferential rates for deployment of solar thermal systems.113

The United States extended tax credits for solar thermal heat systems through 2021 and awarded grants through the SunShot Initiative to six R&D projects that aim to reduce the cost of concentrating solar collectors and the energy they generate, with some of the research designed to increase the supply of renewable process heat in the country.114 The federal tax credit for biomass stoves in the United States was allowed to expire as scheduled at year-end 2016.115 At the state level, New York State extended its Clean Heating Fuel Tax Credit incentivising the use of biodiesel in heating oil through 2020.116

Transport

Policy support for improving the sustainability of the transportation sector traditionally has occurred in two key areas: increasing energy efficiency (→ See Energy Efficiency chapter) and expanding the use of biofuels in road transport, although there also is growing interest in electric vehicles (EVs) (→ See Enabling Technologies chapter) and in advanced biofuels for aviation and maritime transportation. Strong policy support has allowed the renewable transport sector to weather some of the difficulties posed by low international oil prices. However, the reduced price competitiveness of renewable fuels has created investment challenges and has limited discretionary biofuel blending where not mandated.117

The policy debate over the sustainability of first-generation biofuels continued in 2016; there was a resurgence of the food versus fuel debate, particularly in Argentina, following the rising price of soy oil during the year.118 In Europe, the new package of clean energy and emissions reduction goals provided guidance on biofuels use. Specifically, the plan calls for a gradual reduction in the share of food-based biofuels in transport fuel, from 7% of transport fuel consumption in 2021 to 3.8% in 2030; “low-emissions” fuels, including renewable electricity and advanced biofuels, are targeted to increase from 1.5% in 2021 to 6.8% in 2030.119 In Canada, a set of guiding principles for sustainable biofuels was released.120

Despite ongoing debates over biofuel production and use, biofuel support policies continued to be adopted during 2016. Biofuel blend mandates and financial support for biofuel blending programmes continued to be the most common forms of support for renewable energy in the transport sector.121 (→ See Figure 48 and Reference Table R25.)

Figure 48. Countries with Biofuels Obligations for Transport, 2016

In 2016, biofuel blending policy was particularly active in North America. The United States released 2017 blending mandates under its Renewable Fuel Standard, requiring the blending of 73 billion litres (19.3 billion gallons) of renewable fuels, including 16.2 billion litres (4.3 billion gallons) of advanced biofuels and 1.2 billion litres (311 million gallons) of cellulosic biofuels. The United States also established a mandate for blending 7.9 billion litres (2.1 billion gallons) of biomass-based diesel in 2018.122 Canada announced its intention to adopt a national clean fuels standard, building on sub-national blend mandates already in place in 5 of the country’s 10 provinces.123

Elsewhere in 2016, Mexico mandated the blending and sale of E5.8 outside of the three metropolitan areas of Guadalajara, Mexico City and Monterrey, where ethanol blending was initially piloted.124 Argentina enacted a B10 and E10 mandate and announced plans for an E26 mandate to be enacted in 2017; Malaysia increased its B7 mandate to B10; and Indonesia increased its B5 mandate to B20.125 India set goals of E22.5 and B15 through a new policy that promotes the use of non-conventional biofuel feedstocks (for example, biodiesel from bamboo, rice straw, wheat straw and cotton straw, and ethanol from molasses).126 Panama’s ethanol mandate increased to E10; Vietnam established an E5 mandate; and Zimbabwe returned its blend mandate to E15 after a temporary reduction to E5 due to a lack of supply.127 At the sub-national level, Queensland (Australia) mandated that fuel retailers with 10 or more locations in the province sell specifed shares of renewable blended fuel.128 The mandate has been supported by a government-backed educational campaign, E10 OK, that promotes the use of biofuels and allows motorists to check the compatibility of their cars for E10.129 In the United States, Minnesota’s B10 mandate that is scheduled to increase to B18 by 2018 was upheld in court after having been challenged by multiple fossil fuel industry associations as being incompatible with the federal Renewable Fuel Standard.130

New financial incentives also were introduced in 2016 to promote biofuel production and consumption, biorefinery development and R&D into new technologies. Argentina extended tax exemptions for biodiesel production through 2017, Sweden introduced tax cuts on both ethanol and biodiesel, and Thailand provided subsidies to support a trial programme for the use of B20 in trucks and B10 for military and government use.131 At the US state level, Hawaii introduced a tax credit for biofuel producers, and Iowa extended biodiesel and ethanol tax credits through 2025.132 Incentives to the biofuels sector also were rolled back in 2016. Argentina increased taxes on biodiesel exports, Brazil’s tax exemption on ethanol was allowed to expire at year’s end, and, after being extended in late 2015, the biodiesel tax credit in the United States expired at year-end 2016.133

The year also brought increased policy support for the development and use of advanced biofuels. At the international level, the 191 member states of the International Civil Aviation Organization agreed in November to establish a global market-based measure to reduce the sector’s CO2 emissions, which includes specifications for advances in the production and use of sustainable aviation fuel.134 Nationally, Denmark set a mandate requiring that advanced biofuels represent 0.9% of transport fuel use by 2020.135 Australia awarded a USD 1.75 million (AUD 2.4 million) grant to develop and construct a biocrude and biofuel laboratory in Queensland, potentially leading to the capability of producing renewable diesel and jet fuel from plant material.136 The United States launched the Sustainable Biofuels Innovation Challenge to stimulate the development of advanced fuels, announced USD 90 million in funding for biorefineries capable of creating fuel from non-food domestic biomass, and provided separate funding for the development of a demonstration-scale facility capable of producing renewable diesel and renewable jet fuel from industrial waste gases.137

Despite increasing attention to advanced biofuels, use of these fuels in the aviation, rail and maritime transport sectors has largely been left out of broader strategies to advance the use of bioenergy in the transport sector. For example, jet fuel is not recognised under the California Low Carbon Fuel Standard, although its inclusion was under consideration as of year-end 2016.138 Nonetheless, some plans or policies were launched in 2016 that will support the integration of renewable energy in these sectors. For example, India launched its Green Port Initiative, which aims to install wind and solar power systems at major ports across the country.139

Few policies directly link electric vehicles to renewable energy at the national or state/provincial level despite the fact that policy support for EVs has been on the rise. (→ See Enabling Technologies chapter.) The potential interplay of renewable energy and EVs in transforming transport energy use is gaining political attention.140

City and Local Governments

Municipal policy makers play an increasingly important role in promoting the use of renewable energy. This is true for two reasons: 1) more and more policy makers at the local level are setting targets and enacting policies to advance renewables in their cities and towns, and 2) population growth combined with urbanisation has resulted in ever-greater demand for energy services in municipalities and has raised their share of the world’s energy consumption. In 2014, cities accounted for 65% of global energy demand, up from approximately 45% in 1990.141

Each city has a unique set of resources and pattern of energy use and therefore presents its own unique challenges and opportunities for policy makers. For example, cities such as New York (United States), London (United Kingdom) and Seoul (Republic of Korea) use much of their energy in the buildings and transport sectors, whereas other cities including Shanghai (China) and Kolkata (India) have large industrial sectors that account for the majority of their energy use.

Throughout 2016, the number of cities committed to transitioning to 100% renewable energy in total energy use or in the electricity sector continued to grow. This trend has continued to spread across the globe, with some cities, such as Burlington, Vermont (United States) and more than 100 communities in Japan having already achieved their 100% goals.142 (→ See Reference Table R26.) The Australian Capital Territory set a goal of 100% renewable energy by 2020.143 In the United States, Boulder (Colorado), Salt Lake City (Utah) and St. Petersburg (Florida) joined cities such as San Diego (California), San Francisco (California) and Burlington with targets to achieve 100% renewable energy or electricity.144 Los Angeles, the second largest US city, directed its municipal utility to determine how to move to 100% renewable electricity, although no specific target was established by year’s end.145

Several other large cities set less ambitious but still significant targets in 2016, building on the actions of a host of cities with similar targets. (→ See Reference Table R26.) Calgary (Canada) pledged to power all government operations on renewable energy by 2025.146 Tokyo (Japan) committed to meeting 30% of electricity demand with renewables by 2030.147 Cape Town and the Nelson Mandela Bay Metropolitan Municipality (South Africa) set goals of sourcing up to 20% and 10% of renewable electricity, respectively, by 2020 to increase energy security.148 New York City set targets for 1 GW of solar power capacity by 2030 and 100 MWh of energy storage by 2020.149 New York City, California and Massachusetts are the three US jurisdictions that had established targets for energy storage by year's end.150

A number of cities have established their targets through the carbonn Climate Registry (cCR), a global platform designed for cities to publicly and regularly report climate actions. As of 2016 the cCR had registered 237 renewable energy targets including 36 commitments to 100% renewables.151

In 2016, municipal policy makers continued to make use of their purchasing and regulatory authorities to spur deployment within their jurisdictions. Government purchasing authorities have the power to transition public transportation fleets to clean fuel or EVs, or to install solar panels on municipal buildings. Municipalities also face many unique challenges, such as the lack of capital needed to finance large infrastructure projects.

Municipal governments have the power to set local building codes, mandate the use of solar water heaters or enact energy efficiency standards. Additional regulations can mandate the collection of energy sector data, helping to improve future energy policy and planning efforts.152 In 2016, Santa Monica (California) mandated the installation of solar PV rooftop systems for all new buildings and passed a law requiring all new single-family homes to qualify as zero net energy, consuming only as much energy as they produce.153 San Francisco mandated the use of solar energy, either solar PV or solar thermal heating systems, in new commercial and residential buildings, becoming the largest city in the United States to institute such a mandate as well as the first city in California to allow such a requirement to be met through the deployment of solar thermal systems.154

Several city governments also implemented mandates specific to renewable heating and cooling in 2016, joining cities such as Barcelona (Spain), São Paulo (Brazil) and Shenzen (China) as well as 903 municipalities in Italy with existing mandates.155 Cities also have focused on linking renewable energy to district heating and cooling networks.

In 2016, Oslo (Norway) committed to phasing out fossil fuel heating in homes and offices in favour of renewable heat sources by 2020.156 New York City mandated the blending of biodiesel into heating oil in the city, with the required share increasing from 2% in 2016 to 5% by October 2017, 10% by 2025 and 20% by 2034.157 Through the NYC Retrofit Accelerator, New York City also encourages fuel switching away from natural gas for heat and hot water, favouring heat pumps and biofuels by providing information to consumers, including access to both public and private finance.158

In the transport sector, Oslo (Norway) pledged to power its public bus fleet with renewable energy by 2020 as part of the city’s “climate budget”.159 Reykjavik (Iceland) set a goal to fuel all vehicles (public and private) in the city with renewable energy by 2025.160 In the United States, Seattle’s publicly operated Seattle-Tacoma Airport became the first airport in the world to seek to supply airport-wide access to bio-jet fuel, and Sacramento County (California) began fuelling its liquefied natural gas trucks with biogas.161 In Mumbai (India), the ethanol import tax was eliminated in an effort to better align with a desire for increased national ethanol use and to reduce local pollution in the city. 162

Cities continued to collaborate in 2016 to achieve their renewable energy and climate mitigation goals. During the year, the C40 Cities initiative brought together leaders of 90 of the world’s largest cities to launch a pathway for cities to meet the goals of the Paris Climate Agreement.163 The Covenant of Mayors for Climate & Energy attracted another 600 members in 2016, increasing the total number of signatories to more than 7,200 communities with a combined population of 225 million citizens.164 The group is now committed to increasing energy efficiency and renewable energy deployment to reduce emissions 40% by 2030 (based on each member's Baseline Emission Inventory).165

At COP22 in Marrakech, in late 2016, local and regional leaders representing 114 countries launched the Marrakech Roadmap for Action, in part to mobilise the financing needed to make renewable energy infrastructure investments in cities around the world.166 Also at COP22, a new Covenant of Mayors in sub-Saharan Africa was launched to catalyse municipal-level action on energy access and climate change mitigation and adaptation.167 At the Habitat III conference in late 2016, countries around the globe adopted the New Urban Agenda, which establishes a roadmap for guiding sustainable urban development over the next 20 years.168 Under these initiatives, cities have adopted their own unique commitments and strategies for renewable energy deployment.