198. Domestic and international investment in renewable energy is constrained by market and government failures (OECD, 2014). Rather than fostering RE investments on a project-by-project basis, MENA governments need to devise and implement consistent incentives frameworks for investment in renewable energy, across RE technologies, comprising standardised support measures such as feed-in tariffs and tax incentives.
199. In order to be effective, RE support mechanisms should aim at correcting market failures and avoid adding further market distortions. Cash-flow incentives, designed to spur project profitability and cash-flow during the project lifecycle (e.g. net metering and feed-in tariffs), should be favoured.
• Providing investors with well-designed, well-targeted and time-limited incentives. Those incentives comprise regulatory, financial and fiscal incentives, augmented by competitive bidding and transparent tariff criteria;
• Defining who is responsible for delivering the targets, and what tools are at the disposal of those institutions. This includes facilitating the business licensing process for renewable energy projects and ensuring transparency and time-compliance;
• Ensuring that renewable energy policies are aligned and co-ordinated with broader national policies. This requires clarifying strategic goals, and ensuring that policy frameworks are coherent with the broader national infrastructure, energy, environment and climate strategy framework, and designed accordingly.
Box 7. The OECD Checklist for Foreign Direct Investment Incentive Policies The OECD Checklist for Foreign Direct Investment Incentive Policies aims to provide policy-makers with a tool against which to assess the usefulness and relevance of FDI incentive policies. The Checklist lists the following types of unintended wastefulness resulting from investment incentives: • Ineffectiveness ; • Inefficiencies ; • opportunity costs ; • deadweight loss ; • triggering competition and adverse selection. Source: www.oecd.org/corporate/mne/oecdinvestmentpolicytools.htm |
200. To ensure investor confidence in policy regime continuity, governments need to guarantee minimum levels of legal security. The need for stable and predictable policy frameworks goes beyond strategic goal-setting and includes:
• Designing and implementing clear and predictable regulations: national energy strategies with robust and credible long-term objectives and renewable energy targets, transparent tariff-setting and standard off-take agreements;
• Ensuring close monitoring of existing support policies by independent energy regulators.