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Increasing supply-side confidence may have a positive impact on deployment. Private investment in facilities, marketing and distribution structures and the training of installers tends to accompany stable, predictable and long term policies. In the medium term this leads to a higher market presence, economies of scale, lower costs and improved product quality (Figure 29). Poor quality systems and inferior installations compromise the reputation of the technology and can produce a lack of consumer confidence. Generally a mix of instruments is essential for success. For example, carrot-based instruments in combination with information campaigns and training programmes can be structured to build professional support for the growing REHC technological demands. Carrots A lesson can be drawn from the German Market Incentive Program (MAP) and its fluctuating budget for renewable heating (Annex B4). The policy was successful in stimulating the market for solar thermal and was supported by the majority of the financial subsidies available under the programme. However, fluctuations in the available budget were reflected in the varying number of applicants and therefore reduced the total number of projects supported. Once the budget remained stable, thereby ensuring investor confidence, the number of solar thermal installations would increase. This demonstrates the need to provide stable, long-term policies in order to maximize the development of REHC. The French experience with solar thermal offers a relevant example of the importance of ex-ante and ex-post incentives10 (Annex B3). Prior to 2005 the French depended primarily on ex-ante incentives to support solar thermal, notably with the Chauffe-eau Solaires Programme (1999) and the Plan Soleil (2000). In other words, investors wishing to install a solar thermal plant were required to apply for funding through these subsidy programmes before installation. However with the implementation of the 2005 Finance Law, the primary support for solar thermal was altered to an ex-post tax rebate scheme offering incentives for 50% of the cost of solar thermal systems recovered by means of an income tax declaration after installation. Because financial support for solar thermal installations no 73 longer required pre-approval, incentives were more attractive. As a result, the annual installation of solar thermal increased significantly11. and is expected to increase further in coming years. This jump in market growth suggests that an ex-post financial support scheme may have pragmatic advantages (i.e. investors are able to receive financial compensation after they have installed their solar thermal plant, rather than having to wait for approval before construction begins). It can therefore be assumed that ex-post incentives are more attractive to potential investors who may be otherwise dissuaded by bureaucratic application procedures. This example demonstrates the need for simple, straight-forward application procedures to suit both applicants and administrators. Capital grants and subsidy programmes cannot assure investment certainty in the long-term without a large investment budget. Although such carrot-based support schemes have been successful in the growth of sector-specific renewable heating, the significant burden on public finance inherent in the design of these schemes may require further consideration of stick-based schemes. Sticks The success of the Danish Biomass Agreement, requiring utilities to buy and incinerate specified amounts of straw and woodchips, was due in large part to the flexibility introduced in 1997 (see Good Policy Practice section below). Initially when the policy was introduced, requirements were set for 1 Mt of cereal straw. Because of price hike problems associated with limited market competition, greater 10. Ex-ante incentives are those which require action prior to the installation of a renewable unit. Ex-post incentives allow actions for incentives to follow installation. Ex-ante incentives are forward looking; ex-post incentives are backward looking. 11. Annual solar thermal installations in France in 2000 were 23 500 m2, 12 000 m2 in 2001, 27 000 m2 in 2002, 38 900 m2 in 2003, 52 000 m2 in 2004, increasing to 121 500 m2 in 2005 following the shift to tax incentives.PDF Image | RENEWABLES FOR HEATING AND COOLING
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