Transcript Investing in Renewable Energy - Asia

Investing in Renewable Energy
Frank Pool
Working as: Sustainable Energy Development Specialist
Promotion of Renewable Energy, Energy Efficiency and Greenhouse
Gas Abatement (PREGA) at Asian Development Bank
http://www.adb.org/reach/netherlands.asp
Presentation at
APEC Village Power Workshop
Canterbury, New Zealand, 9 November 2004
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Why Renewable Energy?
• Kyoto only 1st tiny step in global GHG reductions of
60–80% needed in next 50 - 100 years
• Most developing Countries struggling to maintain
existing energy infrastructure – let alone keep up with
demand – let alone increase electrification
• Many mature renewable energy solutions available
• Complex barriers & slow stock turnover = slow &
steady major impact of energy efficiency possible
• Profound implications of peak oil for transport,
industry & grid/self/remote generation
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Renewable Energy is Different
from Energy Efficiency
• Renewable energy projects generally from larger
“packages” = easier to identify, design & finance
• Energy efficiency projects often smaller & more
complex to quantify, design, implement & M&V
• Range of different energy efficiency measures often
need to be “bundled” for fundable projects
• But - energy efficiency projects can be more cost
effective than renewable energy projects
• Below grid level - cost reflective pricing & energy
efficiency could make large renewable energy projects
oversized/uneconomic
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Critical Role of Energy Pricing
• Energy prices rarely reflect full costs of resource
proving, extraction, transformation, T&D, retailing
• Environmental & social costs rarely included =
externalities not internalised = energy still further
under-priced - including in developed countries
• Economics 101 - under-priced goods/services = under
supplied on supply side + wasted on demand side
• But - complex mix of other barriers can prevent costreflective pricing being effective on its own
• So cost-reflective energy pricing is a necessary (but
not sufficient in itself) pre-requisite for RE & EE
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Generic Renewable Energy Barriers
• Fossil fuel based technologies mature, well known,
with common O&M skills even in remote areas
• Fossil fuel subsidies common, very low first cost
equip, still runs when worn out & decades old
• Experimental renewable technologies often deployed
in remote locations without ongoing local skills
• Energy services expectations exceed ability to pay
• Assumed ongoing “free fuel” inputs -esp biomass
• No local ownership - “parachuted in” solutions
• More general marketing, awareness campaigns, TA
for RE capacity building expected to solve problems
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Specific Barriers
• Unrealistically low tariffs undermine economics
• Necessary resource assessments poor/unavailable
• Over-reliance on new renewable energy policies
• Early work not started on policy implementation
• Common mindset that new subsidies needed
• Multiple new/weak/overlapping govt agencies
• Capture by single technology focused advocates
• Unrealistic/incomplete pre-feasibility studies
• Lack of land collateral & real world track record
• More innovative financing instead of fundamentals
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The Good News
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Ongoing tariff reform & utility unbundling
Fossil fuel subsidies becoming unaffordable
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Growing donor/development funding interest
Strong higher technical skills in most countries
CDM already $4/tonne CO2 - can double FIRR
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Likely growing CDM price/market/simplicity
Successful commercial examples - eg PV SHS
Grid connected windpower now mainstream
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Still hydro (without major resettlement) potential
Efficient cook stoves & village biogas examples
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Unlocking Existing Funding
• Large under-utilised env/dev/SME funds common –
available to provide necessary project co-funding
• Local banking sector often keen/able to invest
• Domestic banking TA, loan guarantees etc can be
effective in mobilising existing funding sources
• Sustainable energy services provision model - wider
than traditional narrow R/ESCO business models
• Utilise/develop local expertise/networks/buy in
• Use commercially available/well proven technologies
• Ensure key stakeholders have strong commercial
drivers or are funded for active participation
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Role of ADB as Development Bank
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ADB key Asia Pacific regional development bank
Largest bank activity large loans – esp infrastructure
Loans only made to governments = sovereign debt
Loans often on-lent to local govt & private sector
Major loans involve long preparation & strict formats
Bank also administers, assists many donor grants
Major re-focus underway towards REGA technologies
Regional departments work with developing countries
Central Dept (RSFI) co-ordinates 3 donor funds under
REACH (Renewable energy, Energy efficiency And
Climate Change) & developing CDM facility
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ADB Support Available
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Major formal loans
Energy policy studies & development support
Support for energy restructuring/unbundling etc
Energy infrastructure & rehabilitation loans
Capacity building
Innovative financing scheme development
Resource assessment studies
Engagement by resident missions @ local level
Support from ADB staff, staff/special consultants
GEF project funding
Operating Canadian, Danish, Dutch REACH funds
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PREGA
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Netherlands funded project – Phase 2 to 31 Dec 06
Works through National Counterpart Agencies
Work done by National Technical Experts
International Technical Expert assistance possible
National contacts through ADB Regional Depts –
mainstreaming enduring change in focus within ADB
Co-ordination through RSFI – ADB Central Dept
Strong links to RSFI’s new CDM Facility
Country reports and policy studies mostly completed
Further pre-feasibility studies, feasibility studies.
workshops, few targeted demonstrations in Phase 2
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GEF Support Availability
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Works through executing agencies incl ADB
Grants for project design & implementation
Local & international consultants for project design
Strong focus on barrier identification, removal, M&V
National implementation
Requirement of 5:1 national co-funding: GEF grant
Huge database of completed & current projects
Strong project support from executing agencies
Well defined & transparent project processes
6 –18 month project design processes possible
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Specific Project Attributes Needed
• Realistic & rich country, energy & project contexts
• Make explicit current subsidies & non-tech losses
• Realistic hours of use & consumer energy demands
• Realistic tariffs/energy prices/special attributes/explicit
ongoing subsidies/O&M & training support
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Realistic O&M costs, renovation timescales & costs
Realistic, complete & explicit FIRR & EIRR
Commercially proven technology configurations
Accounting for local social & cultural dimensions
• Realistically real world field O&M post commissioning,
project hand over & warranty periods
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PREGA Renewable Energy PreFeasibility Project Examples
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BAN – coastal site wind-PV-diesel hybrid mini-grid
IND - hydro added to existing irrigation schemes
NEP – trolley buses using abundant hydropower
PAK – windpower, mini hydro, cattle colony biogas
PHI – coconut, bagasse, rice husks, tyres, waste oil
for cement clinker, bagasse cogen for elect export
PRC – wind farm
SAM – new hydro project’s social acceptability
SRI – coppice biomass power generation
VIE – geothermal, wind, rice husk, small hydro
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http://www.adb.org/reach/netherlands.asp
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