Public-Private Dialogue at IRENA’s 8th Assembly highlights what governments and businesses can do to unlock investment in renewable energy
“We find ourselves in a time when scaling-up renewable energy investment makes sense, even when not much of anything else makes sense,” Steve Sawyer, Secretary General of the Global Wind Energy Council told a ballroom filled with ministers, diplomats, parliamentarians and other leaders from public and private sector at IRENA’s 8th Assembly on 13 January 2018.
Reporting to IRENA’s decision making body from the Public-Private Dialogue, Sawyer’s statement rang true in that in a world of fake-news and fast changing circumstances, for more than a decade a renewable energy has been an increasingly reliable and affordable investment.
Globally, annual renewable energy investment rose to almost USD 265 billion last year — outpacing that in conventional sources of electricity. However, current investment levels in renewable energy are far from what is needed to meet the ambitions of the Paris Agreement, and IRENA analysis has shown that to meet that climate goal, annual investment levels need to roughly triple from current levels and be consistent every year from now up to 2050. It is expected that 85% of the total investment will have to come from private finance with approximately two-thirds of funds mobilised in emerging renewable energy markets.
While plummeting renewable energy costs and genuine interest in switching to renewables from the private sector are making this global goal more achievable, access to financing and scaling-up investment remains a major challenge.
Seeking to promote the wider and faster uptake of renewable energy technologies, in January 2014 IRENA and 35 leading players in renewable energy from around the world established a Coalition for Action. Today, the swelling Coalition of 75 members including private companies, industry associations, research institutes and civil society, gathered in a Private-Public Dialogue at IRENA’s 8th Assembly, to engage with participants of IRENA’s Legislators Forum and government representatives, in a discussion that highlighted key opportunities and challenges in growing renewable energy markets worldwide, and the need for better alignment between government, legislators and industry.
Coinciding with the Dialogue and Assembly, and feeding into their discussions, the Coalition launched two white papers: one on the scaling up of investment in emerging markets, identifying the challenges and opportunities for unlocking investment in renewable energy; and another on community energy and the broadening of renewable energy ownership.
During the Dialogue, there was a broad consensus that a lack of bankable renewable projects in the marketplace (compounded by political and market barriers), not capital, was failing to attract investment for a scale-up of renewable energy investment necessary to meet the Paris Agreement targets and the Sustainable Development Goals.
To help address this challenge, the group had these take-home messages for the Assembly and its participants:
- Political will, clear targets and a long-term policy framework that ensures a broad and just participation in the energy transformation, are crucial to successfully scale up investment.
- Public finance institutions need to move away from direct financing to focus on risk mitigation including off-taker guarantees and currency risk hedging mechanisms, which in turn is critical to reduce financial costs.
- Standardized contract templates are an important tool to reducing transactions and in allowing for the aggregation of projects to create larger financial deals.
- Non-discriminatory market access is needed, allowing for both private and community based investors to engage effectively in the energy transition.
- The importance of maximizing socio-economic benefits at all levels, especially the local community level including local job creation.
- Support long-term and effective carbon pricing and the removal of existing fossil fuel subsidies.
Reducing Greenhouse Gas Emissions through Energy Efficiency – and Learning from One’s Peers
China, India, Indonesia, the Philippines, Pakistan, and Vietnam are critical for global climate action. Why? Among other reasons, because three-fourths of all new coal-fired power plants to begin operations before 2020 globally will be in these six Asian countries. Fostering more energy efficiency will be imperative in the countries’ efforts to adopt a low carbon energy path.
One initiative that supports efforts to scale up energy efficiency and clean energy – and lower greenhouse gas emissions – in these six countries is the Energy Transition in Asia program managed by the Energy and Extractives Global Practice.
Comprising of knowledge exchange and capacity building on key issues, the program recently held a workshop in Singapore to share lessons learned on energy efficiency, following last year’s learning forum on solar auctions, also held in the city-state. Participants agree that peer-to-peer learning works. After sharing best practice efforts in China, India, Japan, Korea, Mexico, the United Kingdom, and host country Singapore, team spirit and friendships strengthened, along with confidence, productivity and learning outcomes.
By the end of the three-day workshop, participants from governments not only requested follow-up assistance but also to learn more from their newfound friends about conserving more energy. “We were able to advance country engagement with the clients on energy efficiency,” explained Xiaodong Wang, team leader for the Energy Transition in Asia initiative. “Conducive policies that combine mandatory regulations with financial incentives are essential drivers to create market demand for catalyzing investments in energy efficiency.”
Results are already encouraging. China is a leading example. From 1990 to 2010, more than half of global energy savings took place in China, thanks to the government’s ambitious targets, stringent regulatory policies, generous financial incentives, and effective institutions – all of which reiterate strong commitment to energy efficiency. Reducing energy intensity was made a mandatory target, allocated to each province and 17,000 energy intensive enterprises. Efficiency standards for appliances, buildings, and vehicles were upgraded and complemented with billions of dollars of financial incentives in output-based subsidies, rebates for energy efficient consumer products, and compensation for the phase-out of inefficient stocks. All these efforts were monitored across the country.
India also led by example. Energy savings targets – at least for energy intensive industries – were made mandatory with the Perform, Achieve, and Trade scheme (PAT), which also allows the trade of Energy Savings Certificates to achieve targets in a least-cost way. Non-compliance at the end of the three-year cycle incurs a financial penalty. The results of the first phase surpassed targets. The second phase began in April 2017.
Workshop participants from India reminded, however, that these are early years. Following a visit to the district cooling system under Marina Bay Sands – the world’s largest underground facility and its most efficient – S.P. Garnaik, Chief General Manager of India’s Energy Efficiency Services Ltd. (EESL), a joint venture under the Ministry of Power, envisioned replicating such a system in India. But while a policy framework is being prepared to support the use of district cooling systems in rapidly urbanizing India, Garnaik admits that substantial results may take time, as “these are very new concepts.”
In addition to the mandatory output-based target approach in China and India, participants also noted Singapore’s green mark program, which combines mandatory building codes with financial incentives from the government for auditing and investment costs, as a model to emulate.
Indeed, the knowledge gap between participating countries is large. Yet even countries in the ‘nascent’ phase are eager to make progress.
Energy intensity in Asia is highest in Vietnam, with energy consumption by industry accounting for almost half of the country’s total energy use. Current efforts towards energy efficiency are encouraging. Labeling schemes have been established and energy management systems now require energy managers and auditors in large energy users. Indonesia is implementing a similar system.
Learning from one’s peers can be galvanizing. As Trinh Quoc Vu of Vietnam’s Energy Efficiency and Sustainable Development Department at the Ministry of Industry and Trade explains, Vietnam is eager to learn from China’s and India’s shift to a mandatory target approach. Indonesia’s delegates were inspired by their peers’ experience in expanding pilot programs. The Bank is providing advisory services to both Indonesia and Vietnam in their efforts to scale up energy efficiency.
The workshop also highlighted the critical role of strong government support in developing the ESCO business. ESCOS are energy service companies which design and implement energy savings projects. Energized by his peers, Trinh is now intent on exploring mechanisms for promoting and incentivizing the ESCO business in Vietnam.
The World Bank Group supports many energy efficiency financing mechanisms worldwide, including through credit lines, risk sharing facilities, dedicated funds, program-for-results (PforR), and development policy loans. Critical to success is a strong pipeline for deal flows, as well as technical assistance.
In India, the Partial Risk Sharing Facility for Energy Efficiency initiative, financed by the Clean Technology Fund (CTF) and Global Environment Facility (GEF) resources, is supporting private sector ESCO-implemented energy efficiency projects through partial credit guarantees. The proposed new US$300 million India Energy Efficiency Scale Up Operation with EESL is expected to leverage over $1.5 billion of demand side energy efficiency investments across residential and public sectors. Similarly, the China Energy Efficiency Financing Project has leveraged the original World Bank financing eight times over, with a total investment of US$2.6 billion. The project has led to an annual reduction of 11 million tons of CO2 emissions.
Such figures may seem ambitious, but workshop participants were unfazed. Many are confident they will accomplish similar achievements. When learning from one’s peers, who all face challenges in their respective development journey, anything can seem possible.
The Sustainable Energy Forum for East Africa 2018
The Sustainable Energy Forum for East Africa, a key event for promoting access to renewable energy sources in the region, will take place between 19 and 21 March 2018 in Kigali, Rwanda.
Leaders from governments, businesses, civil society and international organizations are expected to attend the Forum and exchange ideas on how to improve access to clean energy sources in East Africa. The event comes at a crucial moment when the international community is focused on improving progress on Sustainable Development Goal 7 and the goals set by the Paris Climate Agreement.
Off-grid renewables, clean cooking fuels, and energy financing and policies are among the many issues that will be discussed in the plenaries. The Forum will also feature sessions on sustainable cities, East Africa’s geothermal projects and future potential, and gender mainstreaming in energy access.
Speakers attending the Forum include: Rachel Kyte, CEO of Sustainable Energy for All; Ambassador Libérat Mfumukeko, Secretary General, East African Community (EAC); Tareq Emtairah, Director of Energy, United Nations Industrial Development Organization (UNIDO); Robert Zeiner, Director International Cooperation, Austrian Development Agency; Upendra Tripathi, Director General, International Solar Alliance (ISA); and Sakari Oksanen, Deputy Director General, International Renewable Energy Agency (IRENA); Monojeet Pal, Manager, African Development Bank (AfDB).
This year’s Forum will take place in Kigali, Rwanda. The city is a very special location since it hosted one of the most successful international treaties in human history, the Kigali Amendment to the Montreal Protocol.
The Sustainable Energy Forum for East Africa 2018 is organized by the East African Centre for Renewable Energy and Energy Efficiency (EACREEE) in collaboration with the United Nations Industrial Development Organization (UNIDO), the EAC Secretariat, the Austrian Development Agency (ADA), Sustainable Energy For All (SEforALL), and the Ministry of Infrastructure of the Republic of Rwanda (MININFRA), and is hosted by the government of Rwanda.
The organizers welcome participants from the public and private sectors, including sub-national entities, development finance institutions, domestic and international enterprises, international organizations, industry associations, and experts from academia.
Global Energy Transition Must Accelerate to Thwart Climate Change
A new report, Fostering Effective Energy Transition, published today by the World Economic Forum presents its Energy Transition Index 2018, benchmarking 114 countries according to the current state of their energy systems and their structural readiness to adapt to future energy needs.
The report ranks countries on their current energy system performance along three dimensions – energy security and access, environmental sustainability of the system, and potential for inclusive economic growth and development – and evaluates the extent to which enabling conditions that facilitate a low-carbon transition are present.
“With this new fact-based framework, we do not only get a view of the performance of national energy systems today but also a much-needed perspective on what is needed to succeed in the future”, Roberto Bocca, Head of Basics and Energy Industries, World Economic Forum.
The key finding of this year’s Index is that worldwide progress toward environmental sustainability has stalled, demonstrated by a near-flat trend in carbon intensity: marginal improvement has occurred at only 1.8% a year over the past five years versus the 3% threshold required to achieve the Paris Agreement on climate goals. In terms of affordability, household electricity prices have risen in real terms in more than half of countries since 2013, despite an overall fall in fuel prices.
On a more positive note, recent global trends indicate more than 80% of countries registering an improvement in their energy systems over the past five years. However, it also concludes that a new strategy is needed to assist the one billion people currently without electricity.
The Energy Transition Index (ETI) in 2018
According to the findings, Scandinavian and Western European nations lead the overall rankings, with Sweden, Norway and Switzerland making up the top three. The United Kingdom (7) and France (9) are the only G7 economies in the top 10.
Other large economies show mixed performance. Germany (16) faces challenges from high energy prices and rising emissions but has a high level of readiness (11), attributed to strong institutions and regulations. The United States (25) scores poorly on environmental sustainability, but a strong innovation ecosystem, robust institutional framework and vibrant capital markets contribute to a higher readiness rank (22).
Colombia (32), Brazil (38) and Russia (70) have well-performing energy systems due to abundant natural resources, but also have low levels of readiness as a result of gaps in human capital and challenges in their institutions and regulatory frameworks.
The report identifies countries that demonstrate above average levels of readiness, despite lower rankings on current performance, suggesting the potential to “leapfrog” to more advanced energy systems. These include the Republic of Korea (49), Jordan (65), and Kenya (71). Increased investment in renewables and energy efficiency in the latter, for example, has led to significant expansion in energy access.
China (76) also achieves leapfrog status due to recent mandates for electric vehicles and political commitment to addressing environmental challenges, including steps towards the creation of a carbon trading market. Its performance suffers due to its low rank on environmental sustainability.
India (78) has improved its performance by making strides towards energy access and reducing energy subsidies. India has taken a series of bold measures, particularly on renewables deployment and energy efficiency, and ranks as an “Emerging Country” that is rapidly approaching the leapfrog category.
Fostering Effective Energy Transition, produced with analytical support from McKinsey & Company, concludes with seven steps for an effective energy transition, as well as illustrations of successful experiences and tested frameworks that countries can learn from. Long-term roadmaps with clear imperatives, goals and milestones – and establishment of enablers identified in this framework – are essential for countries to accelerate their energy transition.
“Disruption in the energy system is approaching an inflection point and policy-makers, business and society must get ready to capture the opportunities that energy transitions offer. Predictable yet flexible country energy roadmaps are a crucial part of an effective transition that creates value for both business and society”, said Thomas Seitz, Senior Partner, McKinsey & Company.
“There is an urgent need to speed up the transition toward more sustainable energy production and use, including reductions in greenhouse gas emissions, greater access to energy and improvements in air quality. To do this we will need to harness a broad portfolio of energy technologies and deepen cooperation between governments, industry and civil society stakeholders”, said Fatih Birol, Executive Director, International Energy Agency and Co-Chair of Stewardship Board, Shaping the Future of Energy System Initiative, World Economic Forum.
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