WRI Stories Feed: 2011 Asia Clean Energy Forum

PRESS RELEASE: 6th Asia Clean Energy Forum Opens in Manila, Philippines

Michael Oko — Tue, 21 Jun 2011 21:26:18 -0400

ADB President Calls for “Radical Steps” on Clean Energy

Leaders in government, business, policy and nongovernmental organizations are gathering this week for the 6th Asia Clean Energy Forum in Manila, Philippines. According to the Asian Development Bank, 800 million people in Asia live without access to electricity and a significant push is needed to fast-track new business models and policies for clean energy development. With over 550 participants from 40 countries in attendance, ACEF is being organized the World Resources Institute, the United States Agency for International Development, and ADB to promote efforts to scale up clean energy in Asia and the Pacific.

“Asia is poised to be a world leader in clean energy that can propel the regional economy, while increasing its energy security,” said Manish Bapna, executive vice president and managing director, WRI. “In order to achieve its clean energy potential, leaders in Asia need to make the right policy decisions and increase their investment in clean energy. This forum will inform this important dialogue on Asia’s energy future.”

The year’s forum, from June 22 - 24, will focus on “New Business Models and Policy Drivers: Building the Low-Carbon Future,” including discussions around best practices in energy policy and regulation, financing and investment, innovative business models, and energy access. Parallel sessions will provide opportunities to discuss successful innovation and methods to break down barriers to large-scale clean energy development and deployment. (See the full agenda here)

“Asians have more to lose from climate change than any other people. The climate fight will be won or lost by decisions made in this region,” said Haruhiko Kuroda, ADB President. “An important key to lowering energy intensity is the elimination of fossil fuel subsidies and a rapid transition to renewable energy. Asia must also take radical steps to increase energy efficiency and the efficiency of entire economies.”

The opening plenary session, on June 22, will include remarks from Mr. Kuroda; Mohamed El-Ashry, Senior Fellow, UN Foundation and chairman of the Renewable Energy Policy Network (REN21); and Amory Lovins, Co-founder, Chairman and Chief Scientist, Rocky Mountain Institute (by video). Jennifer Morgan, WRI’s Director of Climate and Energy Program, will give the closing plenary speech.

“In order to meet the challenge of climate change, we need a fundamental transformation in our global energy system with a rapid increase of renewable energy and improvements in energy efficiency,” said Morgan. “With a significant increase in investment in clean energy, Asia can drive economic growth and innovation as it reduces carbon emissions that are altering the climate.”

WRI is working to support Asian countries in reaching their clean energy potential by drawing on the institute’s technical expertise, research, analytical tools, and stakeholder engagement. WRI experts work in areas such as policy and regulation, finance and investment, innovative business models and energy poverty to help a smooth transition to renewable energy.

“Hundreds of millions of people in Asia still lack access to energy and, meanwhile, energy demands are accelerating in the region,” said Athena Ronquillo-Ballesteros, Project Manager of International Financial Flows and Environment Project, WRI. “It’s up to governments, investors and other decision-makers to determine the path ahead for clean energy in the region. More investment is needed to increase energy access and move Asia toward a low-carbon future.”

Get more information about the 6th Asia Clean Energy Forum

Read an Op-ed by Jennifer Morgan and Athena Ronquillo-Ballesteros

Between Populism and Price Increases: Who Will Pay for the Cost of Renewable Energy?

Davida Wood — Tue, 21 Jun 2011 16:38:46 -0400

As feed-in tariffs gain traction as a policy mechanism of choice, we must keep in mind the bigger picture of the financial health of developing country electricity sectors.

It was not too long ago that the World Bank and other international financial institutions were drawing attention to the soaring debt levels of developing country utilities. In order for feed-in tariffs or other electricity policies to be effective, a comprehensive approach must address the financial and governance challenges that continue to trouble utilities. Most importantly, there must be transparent tariff setting processes that provide space for public scrutiny and input.

What are feed-in tariffs?

A feed-in tariff is a guarantee that renewable energy producers will be able to sell the electricity they generate at a price set in advance by the government. As of December 2010, 78 countries, states, and provinces have passed feed-in-tariffs for renewable energy, including a rising number of developing countries. Read more >>>

Tariff setting is a central issue that links both the financial and governance aspects of utility performance. In the past 10-15 years, reform efforts have pressed for tariffs to be raised in order to cover the full costs of providing electricity. The transition to cost-recovery principles has been a rocky policy path, which has alternated between social unrest directed at rate increases, and populist solutions which reinstated subsidies and incurred further debt. Missing in all of this has been a formal process in which consumers can engage in rate setting and decision-making about how to structure subsidies and price impacts.

A Lack of Public Input

In developing countries there are few institutions structured to allow for stakeholder engagement in a way that can accommodate a range of analyses and approaches. Unlike in the United States, where independent regulatory institutions came into being as a result of consumer protest against market manipulation by monopolies, developing country regulators were established to create an enabling environment for private investors. As a result, institutional processes for disclosing information and incorporating public input tend to be underdeveloped.

If independent agencies exist at all, they often lack sufficient mandate, authority and capacity to implement these tasks. When a lack of open, transparent processes combine with an absence of visible regulatory actions to curb inefficiencies, consumer confidence is lost. The lack of formal channels for integrating consumer perspectives has had adverse effects. With the lack of institutional space in which to explore a range of solutions, consumers have typically taken to the streets or threatened political stability in response to tariff increases that have been viewed as inequitable.

Consumers and Price Increases

In Indonesia, for example, the government was unable to sustain significant tariff increases even in spite of World Bank and Asian Development Bank loan conditionalities. Yet a closer look at the positions of consumer and public interest organizations show that they do not necessarily reject price increases per se.

A forthcoming Asian Development Bank (ADB) study notes that leading public interest organizations support Indonesia’s April 2010 decision to remove the electricity subsidy for consumers who use more than 6600W per month. This position is not new. What consumer groups have been protesting since the beginning of the sector reform program is the lack of transparency around tariff setting and subsidy processes. They argue that the lack of an independent regulatory process has meant that short term political interests have dominated subsidy determinations, resulting in poorly targeted subsidies and other inefficiencies. In all that time, prices have barely risen. One cannot help but wonder whether earlier openness to alternative perspectives – and formal process for considering them – may have hastened the path to financial recovery. Even now, public interest groups in Indonesia are calling attention to the lack of a clear tariff methodology and involvement of a body that could represent the public.

A Role for Civil Society

Civil society perspectives are particularly valuable in the context of the impending impacts of renewable energy. In the Indian state of Tamil Nadu, for example, the utility’s massive debt must be attributed to multiple types of subsidy payments that the state government has not transferred. As in Indonesia, tariffs have not been raised even as the costs of providing electricity have risen. As a state with one of the highest deployments of renewable energy in India, exceeding the national target of 10%, part of the deficit is linked to renewable energy subsidies. When tariffs are inevitably revised, the voices of consumers will be ever more important in the dialogue about how the costs are covered.

In Thailand, consumer groups advocate that renewable energy policy should be bundled with energy efficiency and demand-side management, rather than deployed in isolation. Attention to energy efficiency would not only bring the costs renewable energy down, but would curb the tendency of Thai utilities to overinvest, an inefficiency which has had an even bigger impact on tariffs.

In Indonesia, civil society organizations argue that subsidies for renewable energy, as for any other policy, should not come as a “blank check”, but should be linked to public interest objectives and regulatory oversight. Already, several corruption investigations are underway in connection with alleged price mark ups and manipulated tender processes. At one solar PV project, the cost of installation was increased by nearly 20% as a result.

In the Philippines, analysts note that there is a serious tendency to keep marginalized sectors, especially those who are non-industry players, out of energy decisionmaking processes. For example, the voices of indigenous peoples and local communities are ignored in the development of power and fuel projects. This lack of transparency and public participation in energy planning and development has led to compromised environmental principles and standards as well as social conflict resulting in escalating costs for the country. This should be avoided as the Philippines implements its recently enacted Renewable Energy Act; otherwise support for renewable energy would diminish.

Consumers have an important role to play in the rate setting process, providing analytic expertise, helping to reduce information asymmetry, and demanding better corporate governance and performance standards from utilities. They can also provide important input into the setting of investment priorities and the distributional impacts of tariff design.

Building Capacity and Participation

Yet the potential of civil society to participate in decision-making processes about the price and impact of renewable energy is far from realized. Prayas’ recent study “Clean Energy Regulation and Civil Society in India” documents the poor public response to the renewable energy tariff orders issued by Indian state regulatory commissions. The study, which reviewed regulatory proceedings and conducted stakeholder interviews in five Indian states, concluded that the lack of reliable data about renewable energy, including resource availability, costs, and performance means that only a handful of technically sophisticated CSOs are able to properly analyze regulatory decisions and the data that underpin them, and this work depends on the availability of adequate resources.

It also corroborates a global survey by the U.S. National Association of Regulatory Utility Commissioners (NARUC) which concluded that regulatory bodies tend to focus on investor issues and do not recognize the role of civil society participation, creating the perception of regulatory capture. For most CSO’s, the focus on investor issues has meant that the regulatory process is of little value to them.

Breaking the Cycle of Non-Engagement

Thus begins a cycle of non-engagement, for when CSOs stay away from regulatory proceedings, the perception that the process has been captured by project developers is reinforced, and has the potential to build popular suspicion of renewable energy generation rather than a constituency that demands more ambition.

To break this cycle, countries must build stronger regulatory institutions and transparent and accountable decision-making processes. There must also be investments in capacity building for the effective participation of civil society organizations. The political and economic sustainability of feed-in tariffs cannot be separated from the larger governance context of tariff-making processes and utility struggles with financial liquidity.

The authors are partners in the Electricity Governance Initiative, a global network of civil society organizations dedicated to promoting transparent, inclusive, and accountable decision making in the electricity sector. WRI and Prayas serve as the Secretariat for the initiative.

MEDIA ADVISORY: Asia Clean Energy Forum Kicks-Off June 22, Philippines

Lauren Zelin — Thu, 16 Jun 2011 13:20:23 -0400

Leaders exchange ideas on clean energy innovation, business models, policy and investment at ACEF2011

The Asia and Pacific region will be one of the most important areas for clean energy over the next several decades.

The Asian Development Bank (ADB), the U.S. Agency for International Development (USAID) and the World Resources Institute (WRI) will co-host the premiere knowledge-sharing platform for clean energy investment in Manila, Philippines, from June 22-24, 2011. The 6th Asia Clean Energy Forum (ACEF) will explore issues in the clean energy sector including policy, regulation, financing and innovative business models; all under the theme of “New Business Models and Policy Drivers: Building the Low-Carbon Future.”

Senior representatives from the host organizations along with energy leaders from around the world will participate in the event.

The Opening Plenary session on June 22 will include remarks from Haruhiko Kuroda, ADB President, and Mohamed El-Ashry, Senior Fellow, UN Foundation and Chairman of the Renewable Energy Policy Network (REN21).

On Friday, June 24, Jennifer Morgan, Director of WRI’s Climate and Energy Program, will give the closing plenary speech “A Vision for a Low Carbon Future.”

Throughout the week, WRI experts will be featured in panel discussions on topics including renewable energy policy, carbon and energy finance, greening public transportation, ESCOs, universal access to energy, energy efficiency financing, low emission development strategies, and more.

WHAT:
Asia Clean Energy Forum (ACEF) 2011, a detailed program of events is available here.

WHEN:
ACEF: June 22 – June 24, 2011

HIGHLIGHTS FOR MEDIA:

Wednesday, June 22, 2011 9-10:30 a.m.: Opening Plenary Session with remarks from Haruhiko Kuroda, ADB President, and Mohamed El-Ashry, Senior Fellow, UN Foundation and Chairman, REN21

Wednesday, June 22, 2011 10:30 a.m.: Media Availability with WRI experts

Thursday, June 23, 2011 6:00 p.m.: Cocktail reception hosted by WRI, ADB and USAID

WHO:
WRI experts are available for media interviews, including:

Jennifer Morgan, Director, Climate and Energy Program
Athena Ballesteros, Project Manager of the International Financial Flows and Environment Project
Dr. Zou Ji, China Country Director
For more information on WRI experts click here

WHERE:
ADB Headquarters, 6 ADB Avenue, Mandaluyong City, Philippines

RSVP:
To receive a press pass or to set up interviews, please contact:
DC: Lauren Cole at lcole@wri.org
Manila: Emily Chessin at echessin@wri.org
Beijing: Xiaohua Sun at xsun@wri.org

WRI Experts on Asia's Clean Energy Future

Maggie Barron — Thu, 16 Jun 2011 10:44:50 -0400

Why is Asia such an important region for clean energy deployment? WRI experts respond.

From June 22-24, the Asian Development Bank (ADB), the U.S. Agency for International Development (USAID) and the World Resources Institute (WRI) will co-host the premiere knowledge-sharing platform for clean energy investment in Asia, the 6th Asia Clean Energy Forum (ACEF). Taking place in Manila, Philippines, the event brings together energy leaders from around the world to discuss clean energy policy, regulation, financing and innovative business models.

I sat down with WRI experts who will attend the events in Manila and asked each of them, what is unique about Asia’s path to low-carbon development?

Opportunities of a Low-Carbon Economy

Large and small countries in Asia understand the opportunities of a low-carbon economy. We’re seeing these countries transition rapidly to renewable energy, and in doing so driving global markets. China, for instance, is leading the world in renewable energy investment, and others are looking to follow its lead. These successes may help drive even greater ambition among Asian countries, allowing countries to reap the economic, environmental and development benefits of a low-carbon economy.

— Jennifer Morgan, Director, Climate and Energy Program

Global Leadership and Innovation

The low-carbon transformation will be very different from technological transformations of the past because many of the innovations will come from developing countries, in particular countries from Asia.

These are the countries making large scale investments in energy infrastructure. They are transforming their economies to be competitive participants in the global clean energy value chain, as they make the transition from low cost, low skill manufacturing to high skill, high value-added manufacturing. They see the potential to become global leaders in the clean energy sector while meeting domestic energy challenges.

— Letha Tawney, Senior Associate, Two Degrees of Innovation

The Meaning of “Clean” Energy

Asia is home to a large proportion of the world’s poor, who either have no or very limited access to energy. And it’s also home to some serious gaps in governance. That’s why when we say “clean energy” we need to make sure we’re talking about both a type of fuel and an absence of corruption. There is no reason why vested interests will not become entrenched in the clean energy space, just as they have in the energy sector in the past.

So governments need to strive for more transparency, inclusive decision-making, and accountability. Business as usual will allow inefficiencies to continue, with little if any regulatory oversight.

Countries that exclude people from decisions about clean energy deployment run serious governance risks. To a farmer whose land is taken over without due process, it’s of very little consequence whether it’s for coal or for a solar PV plant. The governance challenges in the energy sector don’t go away just by calling it “clean.”

— Bharath Jairaj, Senior Associate, Electricity Governance Initiative

Scaling Up Smart Renewable Energy Policies

Asian countries are providing more and more examples of smart policies that lead to increased deployment of renewable energy in line with their broader development objectives. And they are learning from each other, instead of looking only to developed countries or international institutions for advice.

These countries can develop good models of what we refer to as “smart renewable energy policy”, but if they want to scale them up to the level that is necessary to meet the huge energy challenge Asia faces, they will need international financial support. For example, both India and Thailand pay guaranteed prices to renewable energy producers, paid for with a surcharge on electricity. They are supporting renewable energy with their own resources. Yet their resources are limited, so their support for renewables can only go so far. Donors need to step in, build on existing successes and help bring them to scale. A meeting like ACEF brings donor institutions and in-country experts together and provides an opportunity to form the partnerships necessary to expand on countries’ successes so far.

— Lutz Weischer, Research Analyst, Two Degrees of Innovation

A Role for Entrepreneurs

Entrepreneurs in Asia are taking on the issue of energy access. There’s a lot of talk about large solar installations, but those come with their own storage and distribution challenges – how are you going to expand the grid to get that solar energy to a remote village? That’s why there is so much potential for decentralized clean energy, like solar lanterns, microhydro plants, and biomass gasification.

For the first time we’re starting to see a critical mass of companies that are selling these kinds of electricity products, and prices keep coming down. So it’s no longer an issue of technology, or price. It’s now about getting these technologies to consumers. That’s a really important shift, and entrepreneurs are coming up with creative solutions to tap into this very significant rural market.

— Saurabh Lall, Research Officer, New Ventures

Energy Efficiency Brings a Competitive Advantage

In Asia, there’s very real pressure for companies to invest in energy efficiency, both from governments and from large customers who want to squeeze carbon out of their supply chains.

So there’s this confluence of very strong policy drivers, very strong demand drivers, and industries that recognize the opportunity to gain a competitive advantage. These all create the conditions for a good market for energy efficiency technology.

The challenge now is that a lot of the low-hanging fruit for energy efficiency projects has already been achieved. The next step is for companies to make longer term investments, and for that many of them need external financing. If Asian countries can help companies address some of the financing and capacity barriers, they can jumpstart a lot of new technology and continue to drive costs down.

— Xiaoyu Shi, Associate, Climate & Energy Program

An Urgent Necessity

Right now Asia is at a crossroads. Energy demand in the region continues to grow rapidly and is expected to rise at a rate well above the global average. Asia must decide whether to meet this demand using traditional carbon-intensive technologies or switch to clean energy and enable the transition to a low-carbon economy.

Asian countries face serious threats from the potential impacts of climate change on their economies, their ecosystems and their people. This combined with rising prices for food and fossil fuels make the case for low-carbon future. This is no longer a matter of choice - it’s an urgent necessity. With Asia leading the charge on massive investments in wind, solar, biomass and geothermal, it has the opportunity to become a major hub for clean energy investments.

— Athena Ballesteros, Project Manager, International Financial Flows and Environment

IPCC Study: Renewable Energy Could Provide Majority of World’s Energy by 2050

Lutz Weischer — Mon, 23 May 2011 09:09:17 -0400

Recently, the Intergovernmental Panel on Climate Change (IPCC) released a comprehensive study on renewable energy, entitled Special Report on Renewable Energy Sources and Climate Change Mitigation. The report finds that by 2050, nearly 80 percent of the world’s energy supply could be provided by renewable energy sources. WRI Analyst Lutz Weischer, who works on renewable energy policies, sat down to talk about the report’s implications.

Why is this report significant?

IPCC reports have a credibility and legitimacy that few other sources can match. Because this report draws upon the analysis of preeminent scientists, economists and engineers engaged in climate and energy research, the conclusions have considerable weight. This particular report looks at 164 peer-reviewed energy scenarios to find common themes about what the world’s energy supply will look like in 2050. They also assessed the literature on the technical potential of renewable energy sources, the benefits they can bring beyond reducing greenhouse gas emissions and the barriers that stand in the way of broader deployment. The report will be the go-to place for anyone who wants to get a credible and comprehensive view on the global potential of renewable energy.

What are the report’s primary findings?

The report predicts renewable energy, excluding traditional biomass¹, to grow three to ten times by 2050. Not all of the 164 scenarios analyzed in the report predict significant greenhouse gas emissions reductions; but those that do show a massive expansion of renewables. In other words, you can’t solve the climate crisis without renewable energy. Depending on how ambitious countries are, nearly 80 percent of the world’s energy supply could be provided by renewables in 2050. The best news is the report finds that we would have enough wind, water, sun and biomass resources available to meet all of the world’s energy needs with today’s technologies. However, it highlights several political and financial challenges to reaching those numbers.

Many fear that cost is the biggest barrier to large scale deployment of renewable energy. What’s your take on that?

People shouldn’t have to chose between affordable and clean energy - but in most cases fossil fuels are still cheaper than renewables. One reason is that most countries heavily subsidize fossil fuels. The IPCC report suggests that if fossil fuels were not subsidized and reflected their true costs – taking into account externalities like their impact on health and the environment – renewables would be much more cost-competitive.

The world needs cleaner energy, but we also need to find ways to increase energy access for the hundreds of millions of people who currently go without. At WRI, we try to reconcile these two goals. We’re studying ways to drive down the cost renewable energy and also improve its performance, so that it can become available to more people.

One strategy is for countries to phase out fossil fuel subsidies while adding incentives and subsidies for renewable energy that are designed to encourage innovation. In the long run, this would allow renewable energy to be competitive with traditional sources of power, and countries could phase out those incentives as well.

It’s important to note that in some regions of the world, such as rural regions in Africa, renewable energy is already a cost-competitive source of power.

What other policies are needed to tap into our renewable energy potential?

WRI’s research shows that it’s not enough to just create financial support for renewable energy. Smart renewable energy policy should also include targets (such as a renewable energy standard that sets a renewable generation requirement), improvements to a country’s regulatory structure (to ensure that rules are in place to integrate renewables into a country’s energy system), and incentives to encourage community participation in energy decisions. To accelerate the transition to clean energy, you also need companies that are willing to invest in renewable energy projects, and banks willing to back those projects. In developing countries, that support may need to come from bi- and multilateral development banks.

What does the IPCC report say about how renewable energy can meet development goals?

The report suggests that renewable energy may be a good way to increase energy access. In many areas of the world that lack advanced grid systems, electricity is best produced locally. Rather than importing and transporting diesel fuel to a rural area, for instance, a village could create a micro-grid based on the solar resources they have and save money in the process. In many remote areas, decentralized projects can be cheaper and cleaner than grid expansion, as well as providing energy security.

Much of the growth in renewable energy is predicted to come from developing countries. Why?

The report highlights that 53 percent of current renewable electricity generation capacity is in developing countries, and that the majority of future renewable growth will also be in developing countries.

Developing countries are interested in renewable energy for several reasons: energy access, energy security, economic development opportunities, and even the health benefits that renewable energy have over fossil fuels. These countries are acting in their national interests.

How does the IPCC report relate to WRI’s work?

WRI examines how to realize the full potential of renewable energies that is presented in the IPCC report. For example tomorrowk we will release a paper titled Grounding Green Power, that draws lessons learned from developing countries on smart renewable energy policy and provides guidance to donors who are looking for the most efficient ways to support the clean energy transition. In a recent report, High Wire Act, we looked at one of the key barriers identified in the IPCC report, integrating renewables into the power grid, with detailed case studies of the United States, China and the EU. We also conduct research on issues related to governance and finance and how they influence renewable energy deployment. At the upcoming Asia Clean Energy Forum in Manila, we will present the full spectrum of our renewable energy analysis.

The report looks at six renewable energy sources: Direct solar, geothermal energy, hydropower, ocean energy, wind energy and bioenergy. ”Traditional biomass” is a form of bioenergy and mainly refers to burning wood for cooking and heating purposes in many parts of the developing world. In most scenarios, a decrease in the use of traditional biomass is predicted, as people switch to more modern energy sources. To get an accurate idea of the growth in all other renewable energy sources, traditional biomass was excluded when calculating these growth rates. ↩

High Wire Act: Improving the Grid for Renewable Energy

Letha Tawney — Tue, 12 Apr 2011 12:22:58 -0400

China, the United States, and the European Union take on transmission upgrades

The European Union, China, and the United States have all made significant commitments to renewable energy deployment, at either the central or regional levels. But they all face a major challenge: how to integrate this power into the existing grids. As a new WRI report shows, policies to help transmit renewable energy have not kept pace with renewable energy ambitions.

Despite its potential, renewable energy puts new pressure on transmission infrastructure as it scales up. Excellent sources of sun, wind, and wave power are rarely conveniently located next to industrial centers and cities. The energy generated in remote places must be transmitted to heavily populated areas.

Renewable energy is also intermittent–that is, dependent on the sun shining or the wind blowing. Typically the most cost-effective way to manage intermittency is to draw energy from a large geographic area. This requires moving electricity across a more widely integrated grid than has historically been necessary.

Read the Report

Today’s transmission infrastructure is simply not up to the job. But just adding new wires will not resolve all of the obstacles to integrating renewable energy in the grid. Transmission policy, such as how electricity markets incorporate planning for intermittent sources and operations that keep the power flowing smoothly, must also evolve.

A new report from World Resources Institute, High Wire Act examines the relationship of renewable energy and transmission in the European Union, China, and the United States. Supported by the HSBC Climate Change Centre of Excellence, the research highlights how, in all three markets, transmission is currently a bottleneck to maximizing renewable energy’s cost-effective contribution to the power mix.

The main message for policy makers crafting renewable energy policies and for investors seeking to be a part of this $240 billion a year market is a simple one. Transmission constraints have to be addressed upfront to improve the chances of reaping the long-term rewards of a future powered by renewable energy.

As the report highlights, transmission policy has not kept pace with clean energy ambitions, largely as a result of concerns over associated costs and reliability. Transmission decisions are also shaped as much by complex politics as they are by economics. A deep tension between locally borne costs and national or supra-national benefits emerges over and over again. Local communities are reluctant to accept large infrastructure when most of the benefits are seen at the national level rather than locally. Each region examined in this report is uniquely grappling with this “local” versus “larger society” tension, based on its own political and regulatory norms.

The European Union

The renewable energy market is large and growing in the European Union, stoked by both EU-wide goals and national incentive programs. Recognizing that transmission policy and infrastructure has to evolve, the EU is in the midst of implementing the 3rd Legislative Package on Energy Markets, which is pushing towards more integrated electricity markets by 2014 and assistance for transmission projects that have an EU-wide strategic importance. However, it is unclear how much authority the countries will cede to the EU-wide bodies or whether they will remain largely advisory instead. The wide range of transmission cost policies across countries is also shaping the renewable energy market – driving projects to locate where the transmission costs are lower, rather than where the best renewable energy resources are.

China

China’s renewable energy growth – particularly through wind farms in the remote North and Northwest of the country – poses transmission companies with a large physical challenge. For this reason, among others, China is investing heavily in groundbreaking research into ultra-high voltage transmission, which will allow more efficient transmission over far larger distances.

However, the dramatic growth in new wind turbines has yet to translate into growth in renewable energy in the grid. A lack of connection standards for generators to follow, a lack of coordination between wind farm planning and transmission planning, inflexible electricity dispatching, and a lack of financial incentives for grid operators to buy renewable energy power have all contributed to the problem. As a result, many of these wind turbines are not contributing as much as they could to the national grid. The central government attempted to resolve several of these issues through the 2009 Amendments to the Renewable Energy Law, but it will take time for the effects to be widely felt.

The United States

While Congress is considering President Obama’s proposed Clean Energy Standard, currently renewable energy goals are set at the state level in the United States. This state-by-state approach is also reflected in very strong state control of transmission decisions, which has made large-scale projects or coordinated planning very challenging to accomplish –. The Federal Energy Regulatory Commission (FERC) is considering new federal rules for cost allocation, but substantial reform would likely face both legal and legislative challenges.

**Table 1. Incentives Driving Transmission Action**
	RE Goals	Coordination Efforts	Innovations
European Union	EU Renewable Energy Directive (June 2009) sets goal of 20 percent power from RE sources by 2020 and mandates grid connectors to provide access to new RE to achieve EU climate policy	The European Network of Transmission System Operators for Electricity (ENTSO-E) and the Agency for the Cooperation of Energy Regulators (ACER) have transmission coordinating missions	EU Priority Projects defined and assigned an EU coordinator to push the project forward
China	Renewable Energy Law (2005, 2009) obligates power grid companies to connect all RE generation sites that fall in their grid coverage	Renewable Energy Law Amendments (2009) require coordinated RE and transmission planning	Development of UHV infrastructure with $59.7 billion in investment
United States	Thirty-one state Renewable Portfolio Standards	Federal efforts encourage regional transmission planning, though there are no requirements	Innovative cost allocation resolutions such as the Tehachapi and Southwest Power Pool projects

**Table 2. Roadblocks to Sufficient Transmission Action**
	Local Interests	Costs
European Union	Transnational coordination and enforcement powers of EU institutions remain unproven while local opposition to large-scale infrastructure projects is significant in some areas	Transmission investment will be difficult in an era of austerity and slow economic growth
China	Disagreement between the grid operators and wind developers on technology standards and planning complicate RE generation connection	Vast distances between generation and load sites and chronic grid congestion necessitate massive transmission expansion
United States	Weak jurisdictional coordination in the transmission siting and approval process slows or stops transmission projects	Transmission cost allocation issues remain largely unresolved or are resolved at local level, reflecting narrow local interests

Going Forward

In a time of austerity, the issues raised by this report are all the more pressing. Public subsidies for renewables are under pressure and raising consumer costs to pay for renewable energy is even less palatable. Meeting renewable energy goals in the most cost effective manner is critical to the industry’s long-term success. But if the transmission issues highlighted by this research continue to fester, achieving competitive pricing with fossil fuel electricity will be all the more difficult and the goals themselves may fall by the wayside.

The lesson from this report is clear: if renewable energy investors and policy makers are to build a vibrant global renewable energy industry they must first transform the transmission landscape.

Q&A: Policies for Renewable Energy in Developing Countries

Kevin Lustig — Mon, 13 Dec 2010 11:42:18 -0500

Last month, WRI convened a group of international experts to discuss policies and incentives for increasing the use of renewable energy in the developing world. WRI’s Davida Wood and Lutz Weischer discuss the key lessons learned at the workshop and their work on helping developing countries make the transition to renewable energy.

What are some of the key renewable energy success stories in developing countries?

Lutz: There are many success stories, as many developing countries have scaled up renewable power in recent years. Of course, China gets a lot of attention, but the trend is much broader than that. The Renewables 2010 Global Status Report counts 45 developing countries with renewable energy targets and 42 with some sort of promotion policy.

One approach that has worked well in many countries is the so-called “feed-in-tariff,” which is a guarantee that renewable energy producers will be able to sell the electricity they generate at a price set in advance by the government. To date, there are 78 countries, states, and provinces that have passed feed-in-tariffs for renewable energy, including a rising number of developing countries. These include major emerging economies such as China and India, as well as smaller countries such as Tanzania and Thailand. In all of them, the feed-in-tariffs have led to more investment in renewable energy generation and an increased share of renewables in the electricity mix.

Davida: In India, electricity regulators at the state level have a mandate to set feed-in tariffs for a range of renewable energy technologies. Some of these state regulators have been very active and have succeeded in attracting considerable investment. For example, in the state of Gujarat, the regulatory commission set a tariff in January 2010 for photovoltaic solar power. Power purchase agreements for 500 megawatts (MW) were signed in just six months, backed up by financial guarantees.

But there are other approaches. In Brazil, after experimenting with various incentive schemes for increasing investments in renewable energy, the National Agency for Electrical Energy held the country’s first wind-only power auction in December 2009. More than 1800 MW of wind power was contracted for.

Lutz: One thing I’d like to add on India is that this has also been a success story for industry development and employment. India’s use of policies to create stable demand for wind power has led to development of a successful manufacturing base, making India the fifth largest wind power market in the world. An Indian company, Suzlon, which began in 1995 with just 25 people, is now the third largest wind turbine manufacturer in the world, employing over 16,000 people globally.

What are the barriers to increased development of renewable energy in the developing world?

Lutz: The number one barrier to renewable energy scale-up in the developing world is cost. Access to modern forms of electricity is crucial for both basic improvements in quality of life and for being able to develop a robust, modern economy. But most people in developing countries simply cannot afford the cost of electricity with increased renewables. They need policies that drive down the costs and increase the deployment of these technologies. Until clean power technologies reach full price parity with fossil fuels, even the best policies will come at an additional cost that can’t be borne by poor ratepayers in developing countries. That’s why international support is needed. For an international donor like the World Bank that’s committed to increasing energy access, you will get more renewable energy if instead of investing in individual wind farms, you invest in the policy environment that makes people want to build wind farms.

You will get more renewable energy if instead of investing in individual wind farms, you invest in the policy environment that makes people want to build wind farms.

Davida: An important element for this approach is access to data and methodologies. While feed-in-tariffs are widely adopted, regulators do not have sufficient access to information about the costs of renewable energy, and are dependent on project developers to provide these figures. At a forum convened by WRI and Prayas Energy Group, a commissioner from the Indian state of Gujarat I mentioned previously described the process by which his state’s tariff had arrived: a combination of technical inputs, public consultations, and artful guesswork. Participants at the renewable energy policy workshop we recently held at WRI also stressed that access to methodologies, benchmarking data and performance metrics, and techniques of competitive bidding are badly needed to support development of renewable energy resources. Independent oversight from civil society is a key ingredient here.

Lutz: That’s right; feed-in-tariffs can be quite successful, but they’re only successful if you’re doing a good job in setting your rates. If you set rates too low, you get no deployment, but if you only rely on information from developers, you end up setting your rate too high and providing windfall profits. Even if there’s good policy in place, developing countries often don’t have the domestic investment capital for these projects. So, you need an international mechanism that mobilizes finance and investment for these projects at affordable interest rates.

Davida: Furthermore, from a planning perspective, much more could be done to design off-grid renewable energy systems–in rural areas for example–that take advantage of the synergies between different forms of renewable energy. For energy on the grid, building capacity on integrated resource planning is key to integrating renewable and conventional energy sources.

Lutz: Yes, that’s true; the challenge of managing a national grid with multiple intermittent sources of energy is greatest in developing countries. You need engineers who are able to install renewable energy technologies, maintain them, and manage the grid.

Finally, some countries simply have not been able to replicate these success stories because they don’t know about them, or don’t know how to implement them in their own countries. So, one priority is facilitating the exchange between countries that have policies and those that don’t.

What is WRI doing to help overcome these barriers?

Lutz: We’re working with the World Bank on reforming their energy strategy, so that in the future, renewables will play a larger role in the Bank’s portfolio. We are also helping to disseminate information on successful policies, for example by convening a renewable energy policy workshop together with the Heinrich Boell Foundation North America. The workshop brought together 20 experts from developing countries that have implemented these policies or are currently considering them.

In the context of the United Nations climate change negotiations, we are advocating for a technology mechanism that will support capacity building and knowledge sharing on regulatory and policy incentives for renewables. We’re also working with negotiators in parallel processes such as the Clean Energy Ministerial and bilateral initiatives. In the coming months, we’ll also be working closely with major emerging economies to develop low-carbon development strategies for their power sector.

Davida: WRI’s Electricity Governance Initiative [EGI] is a joint project of WRI and Prayas Energy Group that works with civil society organizations in developing countries to analyze policy and regulatory decision-making processes. We are increasingly turning our attention to renewable energy. We have convened three forums that have brought regulators and civil society together to share experiences. Prayas has written a seminal paper on attempts to promote clean energy in five Indian states that holds lessons relevant to other countries. And our partners in South Africa and Thailand have used EGI methodology to intervene in national planning processes.

What’s next for this issue? What signs of progress should we look for in the near future?

Lutz: One thing we should look for is an increase in the number of countries that use these policies. There are also international moves in the works. Deutsche Bank has proposed a global feed-in-tariff mechanism. It will be interesting to see how that develops. The revised World Bank energy strategy will come out in 2011, and will hopefully give more weight to renewable energy. We should also look towards the technology mechanism that came out of the climate conference in Cancun, which will create a network of experts and clean technology centers that will help share experiences and build capacity. I’m also optimistic that the Clean Energy Ministerial next year in the United Arab Emirates will produce some more ambitious initiatives on renewable energy.

Davida: There are a lot of promising signs to look for: countries developing a better understanding of best practices in clean energy regulation. These include standardized power purchase agreements; increased transparency of the methodologies used to assess resource capacity, costs, and performance (which will benefit both governments and civil society organizations); harmonization of renewable and conventional energy policy and planning. Most of all, though, the way you’ll know that these policies are working is when you see falling prices and improved reliability for electricity from renewable sources. Ultimately, that’s the real test of these policies.

India’s Climate Bet: An Emerging Giant’s Alternative Route to Power

Manish Bapna — Fri, 19 Nov 2010 18:31:26 -0500

This piece originally appeared in Solutions (Volume 1: Issue 6) and is reposted with permission.

A native of Chicago, I spent my childhood summers with family in Udaipur, Rajasthan, then a verdant oasis in India’s most arid state. With each successive year, I witnessed with dismay the surrounding forests and lakes shrinking and drying up as factories and mines sprouted outside the city. My family, however, took it in stride as “the price we pay for development.”

I have never forgotten that firsthand lesson in environmental degradation, and in what seemed to me an unnecessary trade-off. What my family was faithfully expressing was the decades-old belief, held by India’s government and business elites, that development often comes at the expense of the environment. In recent years, that belief has been extended to climate change. India cannot be expected to act to reduce its spiraling greenhouse gas emissions without outside help, its diplomats have argued until recently, because combating poverty is a moral imperative and the national priority.

Key Concepts

At Copenhagen last December, India emerged as an unlikely partner, alongside the United States, China, Brazil, and South Africa, in brokering a political accord that saved the climate summit from collapse. Delhi has since formally pledged to reduce the emissions intensity of its GDP by 20–25 percent from 2005 levels by 2020, which will slow the growth rate of its greenhouse gas output.
Energy efficiency and solar innovations have the most potential to transform India’s national markets and habits. In the energy efficiency arena, India is preparing to rival the United States in innovation and ambition. India’s climate, population density, and nonelectrified rural areas together provide ideal conditions for deploying solar power solutions on a grand scale.
India’s success with frugal innovation indicates that its entrepreneurs could turn their talents to creating cheap clean energy products to serve both the massive domestic market and other emerging economies.
There are several key obstacles, including costs, governance issues, and technological barriers, that India must overcome to translate its paradigm shift in climate politics into an on-the-ground shift to a clean energy economy.

While this traditional view has some merit—it is hard to argue, for example, for reducing energy use in a nation where large swathes of the countryside are without electrification—it is increasingly one that does not add up. And for one simple, highly encouraging reason. India is beginning to demonstrate in its policies and actions that pitting climate and development objectives against each other is a false and unnecessary choice.

From Climate Laggard to Leader?

In the long-running drama of the United Nations climate change negotiations, India has generally been cast as a rogue player, refusing to curb its greenhouse gas emissions. Yet while Delhi likes to talk tough, its recent actions speak otherwise. While the United States Congress has conspicuously failed to pass comprehensive climate legislation to cap greenhouse gases, India has made significant policy strides toward a low-carbon economy.

At Copenhagen last December, India emerged as an unlikely partner, alongside the United States, China, Brazil, and South Africa, in brokering a political accord that saved the much-heralded climate summit from collapse. Delhi has since formally pledged to reduce the emissions intensity of its gross domestic product (GDP) by 20–25 percent from 2005 levels by 2020, which will slow the growth rate of its greenhouse gas output. While commitments made by developing countries are nonbinding (unlike those of industrialized nations), India’s pledge is nevertheless a major concession for a country that houses a third of the world’s poor and faces soaring energy demand to power development.

What’s more, unlike the United States, India already has a National Action Plan on Climate Change (NAPCC) in place to help meet its emissions commitment. Launched in June 2008 by Prime Minister Manmohan Singh, the NAPCC features eight national missions, ranging from climate research and development (R&D) to sustainable agriculture, with centerpiece scale-up programs for solar power and energy efficiency. Renewable energy, including wind and solar power, already accounts for 9.0 percent (16.5 gigawatts) of India’s electric capacity. This is more than twice the 4.0 percent (53.4 gigawatts) that makes up the clean energy slice of the U.S. power sector, and Delhi aims to further double renewable power generation in the next four years.¹

This wide-ranging policy agenda is not yet adequately funded and implementation will not be easy, if previous government efforts in advancing large-scale change are any indication. Nevertheless, the plan is impressively comprehensive, in contrast to the piecemeal mix of state sticks (renewable energy standards and regional cap-and-trade programs) and federal carrots (tax credits, the green stimulus package) that characterize current U.S. responses to climate change.

The most innovative and potentially transformative of India’s clean-energy policy solutions are highlighted later in this article. But to interpret the “what” of where India is heading with climate change solutions, it is first useful to understand the “why.”

India’s Climate and Development Policy: No Longer a Zero Sum Game

Why has India, over the past year, essentially abandoned its traditional approach of pitting clean energy and climate action against development in favor of preparing an aggressive effort to decarbonize its economy? I believe there are four key reasons.

First, the impacts. India, which houses a third of the world’s poor, will be at the frontline of climate change impacts as floods and droughts become more frequent and deadly, and yields for most crops decline. The 2009 monsoon season was a harbinger, bringing rains six times their normal volume and causing the worst floods South India has experienced in over a century. Shifts in temperature and precipitation patterns could trigger major repercussions for India’s agricultural sector. Temperature increases of as little as 0.5–1.5 degrees Celsius might trim yield potentials for wheat and maize by two to five percent. Ambitious global action to reduce the emissions that fuel climate change is very much in India’s interest.
Second, the politics. India wants to establish itself as a leading diplomatic player and a responsible global power, and to avoid always playing second fiddle to China. Leadership on climate change provides one pathway to this goal. Domestic politics also dictate that India improve its energy security in the face of soaring fossil fuel imports by developing alternatives. Today, coal and oil provide the umbilical cord for India’s energy supply, fueling 87 percent of all power and electricity. However, deployment of renewable energy, especially wind, is rising rapidly. And the government also has ambitious plans to boost nuclear power from its current three percent of installed electricity capacity, though it should be cautioned that similar plans over recent decades have failed to materialize.
Third, poverty reduction. Approximately 400 million rural Indians lack electricity and, for many, extending the national grid is prohibitively expensive. Enter distributed generation in the form of community-based, self-sufficient biomass and solar power. As the prices of these clean alternatives decline, distributed generation will increasingly become the obvious choice, not only for meeting basic household needs, but also for improving the productivity of businesses owned and operated by the poor, especially in rural areas. Moreover, clean energy can create new jobs, companies, and markets that can help stimulate more inclusive and sustainable growth in India.
Fourth, and perhaps most important, the economics. India is realizing that green energy can be cheap energy. The upfront costs of making buildings more efficient or switching to electric, two-wheel vehicles are outweighed over time by lower operational costs, producing a net economic as well as environmental benefit. Beyond that, India’s governing elite and many in the corporate sector see a big opportunity in the emerging, clean-energy market. Ashutosh Pandey, chief executive of Emergent Ventures India, one of the country’s largest consultancies, says his firm is diversifying into advising companies on investing in energy efficient technologies and renewable energy resources. “Companies see sustainability as a core issue now, and not just CSR [corporate social responsibility],” he told the Hindustan Times. “We are helping formulate many strategies around this. We are also investing in renewable energy within India, which is easily one of the most attractive markets today.” In the race to produce low-carbon products, India is also well placed to occupy a specific niche: namely, leveraging its ability to manufacture products cheaply, sometimes known as frugal engineering. India has a track record in developing $2,000 cars (the Tata Nano), $30 cataract surgeries, and most recently a $35 prototype tablet computer. Its entrepreneurs could equally turn their talents to creating cheap clean energy products to serve both the massive domestic market and other emerging economies.

India’s Green New Deal

This is the backdrop against which, in June 2008, Prime Minister Manmohan Singh signaled India’s intent to shift to a low-carbon economy by unveiling the comprehensive National Action Plan on Climate Change (NAPCC). Singh, a vocal advocate for the transformative power of science and technology, outlined a raft of ambitious existing and future policies and programs to address both climate mitigation and adaptation.

In so doing, he essentially abandoned the mindset that climate action must be at the expense of development progress. Despite this, Singh’s speech and subsequent roll out of the climate plan have not caused much public or political domestic debate. In sharp contrast to the divisive political battle over climate legislation in the United States, the three main coalition groups all back the NAPCC. (Although, no doubt, this support might waver as costly initiatives are rolled out.)

Delivering on the Prime Minister’s words, India has recently unveiled significant incentives for renewable energy. These include investment incentives for financial institutions; accelerated depreciation rates, ten-year sales tax exemptions, and customs and excise exemptions to stimulate private investment; attractive feed-in tariffs (prices at which utilities commit to purchase renewable energy); and renewable energy standards (which designate a percentage of power that utilities are mandated to source from renewables). Delhi also plans to roll out efficiency standards and codes for new appliances and buildings, and to launch a pilot trading program to incentivize energy efficiency.

On a Mission: India’s National Action Plan on Climate Change

National Solar Mission
National Mission on Enhanced Energy Efficiency
National Mission on Sustainable Habitat
National Water Mission
National Mission for Sustaining the Himalayan Ecosystem
National Mission for a “Green India”
National Mission for Sustainable Agriculture
National Mission on Strategic Knowledge for Climate Change

While all these missions (see list) have merit, I want to focus here on those with the most potential to transform national markets and habits.

Energy-Efficiency Innovations

In the arena of energy efficiency, India is preparing to rival the United States in innovation and ambition—at least on paper. The National Mission on Enhanced Energy Efficiency has four key components: a pilot, market-based trading system for energy-intensive industries; a fast-track shift to energy-efficient appliances; financing instruments to help unlock demand-side, energy-efficiency improvements; and initiatives to improve the efficiency of power plants.

While the U.S. Senate has apparently shelved legislative efforts to introduce a cap-and-trade system to reduce carbon emissions, India is expected to enroll up to 700 major industrial polluters in a market-based mechanism to enhance energy efficiency later this year. Managed by the Bureau for Energy Efficiency (BEE), the pilot “Perform, Achieve and Trade” program will set a percentage by which participating companies (responsible for half of India’s fossil-fuel use) must reduce energy intensity within three years. Those that beat their targets will receive tradable energy permits which they can sell to plants that fail to meet their own targets and would otherwise face penalties. While less transformative than a national cap-and-trade system in terms of emissions reductions, the impact will be far from negligible.

Meanwhile, new nationwide certification standards for buildings will potentially transform the market for energy-efficient appliances and materials. Sectors including household equipment and appliances; hotel and office equipment; and industrial products will all be subject to mandatory efficiency standards and labeling requirements for new products.

Image credit: Richard Morin/Solutions

The ball started rolling in January 2010 with mandatory energy-efficiency ratings introduced for four key appliances: refrigerators, air conditioners, tubelights, and transformers. India’s sprawling public sector will be required to procure only energy-efficient products which will help drive costs down. An energy-conservation building code will mandate maximum energy consumption norms per square foot for new commercial buildings. Commercial banks that invest in energy-efficiency projects will receive access to a partial-risk-guarantee fund to reduce the risks involved.

All told, India’s energy-efficiency plans will help avoid 20 gigawatts of additional electricity-generation capacity over the next four years and 100 million tons of greenhouse gas emissions annually, according to P Uma Shankar, the secretary of India’s Ministry of Power.

Solar Innovations

India’s climate, population density, and nonelectrified rural areas together provide ideal conditions for deploying solar-power solutions on a grand scale. In recognition of this potential, the National Solar Mission initiative lays the foundation for a clean-energy future. Its stated aim is to achieve 20 gigawatts of solar power by 2022, mostly via large photovoltaic (PV) and solar thermal power plants as well as rooftop PV systems. Other goals include replacing the use of kerosene lamps in rural areas with 20 million solar lighting systems, establishing a solar research center, and incentivizing PV manufacturing and skills training to boost the fledgling domestic solar industry. Several Indian states, including Andhra Pradesh, Gujarat, and Haryana, have also taken action by instituting statewide renewable portfolio standards (RPSs). India is expected to establish a national RPS this year, mandating that utilities get a certain amount of their energy supply from limitless natural resources such as solar and wind. Again, with this policy, India would leapfrog ahead of the United States, a country that has long debated, but so far failed to implement, such a market-transforming lever.

The Indian government proved to skeptics that these are not just paper commitments when it allocated financing for the solar mission in the 2010–2011 national budget as part of a 61 percent budget increase for the Ministry of New and Renewable Energy. Moreover, the budget introduced another bold initiative: a 50 rupee (approximately $1) tax on every ton of domestic and imported coal. The tax will capitalize a new National Clean Energy Fund that will help support solar technology development.

However, it will take a lot of money to attain the ambitious goals contained in the Solar Mission. Indian NGOs are already raising tough questions, for example, about how to ensure that solar subsidies focus sufficiently on the poor, especially those living without electricity.² And beyond that is a wider question: to what extent can clean energy be prioritized in a nation where much of the population still lacks clean water, sanitation, and access to basic education and health care?

A Steep Mountain to Climb

While the roadmap Delhi has adopted is impressive, I am not arguing that the agenda described above will alone transform India in short order into a low-carbon economy. It won’t. Nor would I argue that it will significantly reduce India’s poverty levels and its greenhouse gas emissions overnight. It can’t.

It is daunting to think of the sheer costs, the technological know-how, and the hardware that will be required to scale up these solutions to a level where they can truly transform India’s society and economy. Despite Delhi’s policy leadership, experience also highlights the mixed execution capabilities of the Indian government.

There are several key barriers that India must overcome to translate its paradigm shift in climate politics into an on-the-ground shift to a clean-energy economy. First, costs. Not all investments in clean energy and efficiency are win-win. In a country where more people than the entire U.S. population survive on less than a dollar a day, pouring billions into building a future low-carbon economy will be a tough sell. Second, governance. Indian government at all levels is often plagued by mismanagement, corruption, and stifling bureaucracy, making the rollout of complex policies and programs an uphill struggle. Third, technological barriers. In the power sector, the current grid is antiquated and suffers from frequent electricity losses. Electricity tariffs rarely follow a rational pricing scheme. And while the renewables sector is growing, fossil fuels will continue to dominate India’s energy supply for decades, requiring expensive investment in additional alternatives such as carbon capture and storage (CCS) to help hold down greenhouse gas emissions.

Overcoming these cost, implementation, capacity, and technology issues can be accelerated with appropriate external assistance. But such assistance should not be viewed by industrialized nations as aid. Rather, enabling India (and other emerging countries that are major and growing energy consumers) to transition swiftly to a low-carbon economy is a global, public good that requires coordinated international action. As Prime Minister Singh declared in launching the National Action Plan on Climate Change, “Our success in this endeavor will change the face of India. It would also enable India to help change the destinies of people around the world.”

Rao, N et al. An Overview of Indian Energy Trends 35-47 (Prayas Energy Group, Pune, 2009). ↩
Sant, G, Deshmukh, R & Gambhir, A. Recommendations for National Solar Mission (NSM) (Prayas Energy Group, Pune, 2009). ↩

A Vision for Clean Energy in Asia

Manish Bapna — Thu, 08 Jul 2010 11:39:28 -0400

This piece is adapted from a speech that was delivered on June 25th at the 5th Asia Clean Energy Forum: Meeting the Technology Transfer Challenge. The forum, hosted by the Asian Development Bank (ADB), the US Agency for International Development (USAID) and the World Resources Institute, is the premiere knowledge sharing platform on best practices in policy, technology, and finance for clean energy in the Asian region.

There once was a legendary industrialist who was notoriously protective of his privacy. So it came as a shock to a young reporter when he granted her request for an interview - on one condition: she could only ask three questions.

When the day of the interview arrived, she sat down and said: “You are one of the most successful people in the world and your business has redefined industry. What has made you so successful?”

He replied: “Good decisions.” She waited and waited but he said nothing else. She reflected a bit and then asked: “Well, how did you make such good decisions?”

He replied: “Experience.” She was beside herself. Two questions and he had answered with only three words!

So she thought long and hard about her last question: “How did you get this experience?”

The man replied, with a wry smile, “Bad decisions.”

This story captures an important message for me from this conference. Bold goals and big success require the ability to take risks and learn from mistakes. This will be especially true for all of us here committed to working towards a virtually zero-carbon economy.
However, the challenge we face is that we don’t have much time.

According to the IPCC, global GHG emissions should peak by 2015 – that is in 5 years—if we want a fighting chance to keep climate change below 2 degrees.
According to the International Energy Agency (IEA), investment in clean energy will need to exceed $2.2 trillion dollars over the next 10 years above the reference scenario.
We must meet these goals while still addressing major development and energy poverty challenges, including the spiraling energy needs of developing countries.

This conference has been a terrific platform to share what works, what doesn’t and what we can learn from each other. I’d like to offer a few lessons and insights that came through for me – and which I believe are essential if we are to succeed in fostering a clean energy revolution.

1. “Loud, Long and Legal”: The Right Policies for Clean Energy

To meet this challenge, we need clear and ambitious policy to promote clean energy, and we need to be able to learn as we go. The message of the Bonn Conference on Renewables about six years ago showed that policy needs to be loud, long and legal if we are to drive investment in clean energy.

We need processes to allow us to adapt and improve policy over time while providing the necessary level of predictability to investors.

This message is consistent with recent research from WRI and the Peterson Institute for International Economics on the wind and solar sectors. We found that new wind and solar investments were tightly correlated to government support policies. When strong and predictable incentives for clean energy were put in place, investments went up. When incentives expired or were canceled, clean energy investments collapsed.

We know that policy is critical for building clean energy markets. But we also know that we won’t always get policy design right from the start. Spain is a stark reminder of this. In 2007, Spain introduced ambitious feed-in tariffs that stimulated solar investment. But the scale of the subsidy was seen by some as too expensive, and there was pressure to remove it. When the government drastically reduced the tariff and set a rigid annual capacity cap to limit the number of eligible projects, solar investment collapsed. That is why we need processes to allow us to adapt and improve policy over time while providing the necessary level of predictability to investors.

In this regard, one thing that the ADB can do is scale up its efforts to help client countries improve the transparency, inclusiveness and accountability in policy and regulatory processes. This was one of the main conclusions reached at the dialogue on clean energy governance earlier this week.

2. Economic Cost-Benefit Analysis is at the Heart of Energy Planning

Even though I am an environmentalist, my next point is about economic cost-benefit analysis. Good economic analysis should be at the heart of energy planning, and at the heart of the ADB’s decisions about which projects and technologies they will support.

The problem is that most governments rarely use cost benefit analysis. Even MDBs don’t take economic analysis seriously. I was an economist at the World Bank for nearly a decade and led several cost-benefit studies for major energy and water projects. The incentive was to show that the project met the 12% hurdle rate, what was considered an acceptable rate of return. We never used economic analysis to internalize the full range of environmental and social costs, or to find ways to include non-monetary benefits such as jobs or energy security, or to assess alternatives or options in a meaningful way.

I would urge governments and the ADB to rigorously apply economic cost-benefit analysis to help inform the energy policy and investment decisions they take. They should do this in a transparent manner inviting public scrutiny to help test assumptions. Better policies and better investments will emerge from such open, inclusive processes. If the ADB seriously commits to this, it could open up new possibilities and investments for meeting the region’s energy needs.

3. Energy Efficiency: The Low-Hanging yet Hard-to-Pick Fruit

My third point is about energy efficiency. At this conference we have heard inspiring stories about how much is happening on renewable energy in Asia. By contrast, for all the talk of energy efficiency as a “low hanging fruit,” progress has been slow. A couple of observations emerged during this conference:

We need to connect energy efficiency projects with the right kind of financing. There are many groups working on this issue, and there is a need to share ideas on successes and failures as models are explored. One promising idea is to convene a workshop at the next ACEF to help find scalable business models to support the deployment of energy efficiency projects.

We need a constituency for energy efficiency at the national and international levels. Right now it does not exist as it does for other industries. This is due in part to the particular characteristics of the energy efficiency sector – it is creating something less (energy savings) rather than something more, which can make it intangible and abstract. The sector is also more fragmented and less visible than other industries. Perhaps we need to help create a coalition of consumers and civil society organizations who have a stake in improving existing energy systems.

As we focus on the clean energy revolution, we must not forget that we are still fighting the battle against energy poverty. More than a billion people in this region alone lack access to clean, modern energy services. This is unacceptable.

4. Energy for All: Financing Small and Medium Enterprises (SMEs)

As we focus on the clean energy revolution, we must not forget that we are still fighting the battle against energy poverty. More than a billion people in this region alone lack access to clean, modern energy services. This is unacceptable.

Over the past days, we heard a call for more emphasis on how to support and scale solutions promoted by small and medium enterprises (SMEs). The problem is that many of these SMEs lack access to the capital that they need to implement and scale their business ideas. Their financing needs are above the reach of microfinance but below those that attract private equity. This is what ADB President Haruhiko Kuroda referred to as the “missing middle” during his opening speech.

The ADB can help lower perceived risks around SMEs and clean energy, through partial loan guarantees to debt funders or patient (long-term) capital to equity funders. This is an important frontier for ADB’s work with its financial intermediary partners throughout the region.

5. Reality Check: Country Ownership for Clean Energy

My final point is about the importance of country ownership. Back in the 1980s and 1990s, Structural Adjustment Lending was popular with the World Bank and the IMF, yet these programs failed in large part because they were never truly owned or supported by the governments on whom conditions were imposed, or their citizens. Though I and many others around the table care deeply about clean energy, we do not want to repeat that same mistake. Clean energy support must be deeply owned within countries. This is the only way we will mobilize the radical and sustained changes needed for a clean energy revolution. Through its work on the Electricity Governance Initiative, WRI has been working with civil society, policymakers and regulators across Asia to improve transparency, inclusiveness and accountability in policy and regulation of the electricity sector.

For its part, the ADB needs to proactively engage in-country stakeholders and tailor its clean energy investments to meet their sustainable development needs. Our interventions to support clean energy must respond to the realities of implementation within Asian countries – and the diversity of circumstances and capacities that exist within this region. There is plenty of room for dirty business in clean energy, and so the ADB should emphasize the importance of good electricity governance when it makes its investments.

Conclusion: The Time for Political Leadership

Asia leads the world in the concept of “frugal innovation”… Imagine what could happen if you unleashed that entrepreneurship to focus on renewable energy technologies.

I remain incredibly impressed by the bold policy leadership demonstrated by Asian countries. China and India get lots of attention, but many other countries, notably our host country the Philippines, are taking action as well.

I believe that Asia will be the source of low-cost clean energy solutions to the world. As we know, many of the technologies already exist. The problem is that they are still too expensive. Asia leads the world in the concept of frugal innovation. Indian companies, for example, have been leading innovators – they have developed the $2,000 car (the Tata Nano), the $70 refrigerator, and the $30 cataract surgery. Engineering skills and big markets but relatively low purchasing power creates incentives to drive down costs in a radical manner and this fuels incredible innovation. Imagine what could happen if you unleashed that entrepreneurship to focus on renewable energy technologies.

When Asian companies see the size of the future market in clean energy, they will, I believe, lead the technological revolution that is needed. This revolution will radically reshape the energy sector in ways that current projections only begin to suggest.

I’d like to close with a story that may help inspire the bold political leadership that will be needed if this clean energy revolution is to succeed.

A few months ago, US Treasury Secretary Tim Geithner called a meeting with the leaders of the U.S. Climate Action Partnership (USCAP) – a coalition of businesses and environmental organizations that have been instrumental in pushing for mandatory climate legislation in the United States.

The meeting, over breakfast, took place in the middle of a severe snowstorm in Washington DC. It was therefore quite small as only a few USCAP members could attend. Secretary Geithner asked Jeff Immelt, the CEO of GE, why he supported mandatory climate legislation and when GE would start seriously investing in the United States again.

Immelt replied: “When I look to invest in energy, I look for 3 things”:

Scale of potential market: both the U.S. and Asia are at the top of my list;
Availability of credit: this is bouncing back in U.S. and already available in Asia;
Clear policy: The U.S. does not have clear policies to encourage clean energy. Asia does. We can do a cost-benefit analysis to assess our return on investment in Asia with confidence. Money will flow where risk-adjusted returns are highest. That is not the United States, it is Asia.

Note: Resources and presentations from the 5th Asia Clean Energy Forum are now available online!