The Asian Development Bank (ADB) has approved a loan of $250 million as part of an assistance package to Energy Efficiency Services Limited (EESL), a public sector energy service company, to expand energy efficiency investments in India.
“India’s energy efficiency potential is largely untapped—amounting to possible energy savings of about 17% of the country’s total power generated in financial year 2019,” said ADB Principal Energy Specialist Mr. Jiwan Acharya. “The project will adopt proven energy efficient technologies to reduce electricity network losses and reduce greenhouse gas emissions.”
India has seen strong economic expansion over the last decade and a half, a period in which carbon dioxide emissions from fuel combustion have outpaced economic growth, reaching more than 2 billion tons in 2016, compared to 890,000 tons in 2000. The country is still largely dependent on fossil fuels, particularly coal power.
The government has recognized the need to achieve more sustainable economic growth while reducing carbon emissions. The country is aiming to achieve 175 gigawatts of renewables by 2022 from about 80 gigawatts as of August 2019. Under the COP21 Paris Climate Agreement, India pledged to reduce the energy intensity of its economy by 33% to 35% from 2005 levels by 2030. But the government faces various regulatory, institutional, financial, and consumer barriers to achieving these targets.
EESL was established in 2009 as a joint venture of four public sector undertakings of the Ministry of Power to pursue large-scale energy efficiency investments, providing a comprehensive package of project design, implementation, monitoring, and investment.
ADB previously approved a loan to EESL in 2016 for the Demand Side Energy Efficiency Sector Project, which focuses on efficient lighting and appliances. EESL is also implementing similar projects by KfW of Germany, Agence Française de Développement, and the World Bank.
The new ADB project is a sector loan guaranteed by the Government of India, allowing for the undertaking of subprojects with high readiness and inclusion of newer subprojects as they are developed. Activities to be undertaken by EESL in eligible states include energy efficiency opportunities not targeted by traditional energy service company investments, such as smart meters, distributed solar photovoltaic systems, and e-vehicles.
The project will also promote awareness of the benefits of using energy efficient technologies among stakeholders. Awareness campaigns will engage local organizations in knowledge-sharing and training, with a focus on women electricity consumers. Capacity building for electricity distribution, regulatory agencies, and other government bodies will also be carried out.
The total cost of the project is $592 million, of which the Clean Technology Fund will provide $46 million, to be administered by ADB, and the EESL will contribute $296 million.
Accompanying the loan will be a technical assistance (TA) of $2 million to support EESL in implementing the project, including a gender action plan, mobilizing private sector participation in energy efficiency services, identifying new business opportunities, and transferring knowledge about successful models. The TA will also support the identification and development of new subprojects and pilot test some technologies. The grant comes from the Clean Technology Fund, to be administered by ADB.
The project is due for completion in March 2025.
Global transformation of the electricity sector requires greater efforts to ensure security of supply
The electricity sector, which plays a large and growing role in energy systems around the world, is undergoing its most dramatic transformation since its creation more than a century ago. The importance of electricity is only set to increase in the years ahead, calling for a more comprehensive approach to electricity security to meet evolving challenges such as cyber threats, extreme weather events and rapidly growing shares of variable electricity generation from wind and solar power, according to a new report by the International Energy Agency.
The report, Power Systems in Transition, is the first major global study to examine in depth these three key areas for the future of electricity security at the same time and offer recommendations for addressing them in a way that supports the acceleration of clean energy transitions globally.
“Energy security is at the heart of the IEA’s mission because it is critical for social wellbeing, economic prosperity and successful clean energy transitions. We are dedicated to helping countries around the world ensure that all their citizens have access to clean, reliable and affordable energy,” said Dr Fatih Birol, the IEA Executive Director. “Electricity is essential for the functioning of modern societies – as the Covid-19 crisis has highlighted – and for bringing down global emissions. This is why we are continuing to expand and deepen our work on electricity security.”
The report is being launched today at the 2nd Global Ministerial Conference on System Integration of Renewables, which is co-hosted by the IEA and the Singapore government. The event will bring together Ministers, industry CEOs and thought leaders from around the world for discussions on the theme of “Investment, Integration and Resilience: A Secure, Clean Energy Future.”
Electricity accounts for one-fifth of global energy consumption today, and its share is rising. It is set to play a bigger role in heating, cooling and transport as well as many digitally integrated sectors such as communication, finance and healthcare. In pathways towards meeting international energy and climate goals, such as the IEA Sustainable Development Scenario, the trend will accelerate. In that scenario, electricity could surpass oil as the world’s largest energy source by 2040. Wind and solar’s share of global electricity generation would rise from 7% to 45%, with all renewables combined generating more than 70% of the total.
Many countries today enjoy a high level of electricity security thanks to centrally controlled systems, relatively simple supply chains, and power plants that can supply electricity whenever needed. But recent technology and policy developments are now radically changing the sector and with it, the electricity security model that has prevailed for the past century. These developments include steep declines in the costs of variable renewables, the trends of decentralisation and digitalisation, and the impacts of climate change.
The challenge for governments and utilities is to update policies, regulations and market designs to ensure that power systems remain secure throughout clean energy transitions. The new IEA report maps out key steps for achieving this. An essential goal is to make systems more flexible so they can smoothly accommodate the variable electricity production from wind and solar. This includes making the best use of the flexibility on offer from existing power plants that can generate electricity when required, as well as increasing investments in grids and other sources of flexibility such as demand-side technologies and storage resources. However, global investment in these areas is declining, a trend that has been exacerbated by the Covid-19 crisis. An increase in investments should be facilitated by better-designed markets that reward power system resources that deliver flexibility and capacity.
The growing digitalisation of electricity systems, the rise of smart grids and the shift to a wider distribution of generation resources offers many opportunities and benefits. But with cyber threats already substantial and growing, it is imperative to strengthen cyber resilience measures and make them a central part of the planning and operation of power systems. Governments can achieve this through a wide range of policy and regulatory approaches – from highly prescriptive ones to framework-oriented, performance-based ones.
The effects of climate change mean that electricity systems need to become more resilient to the impacts of changing weather patterns, rising sea levels and more extreme weather events. This can be accomplished by giving a high priority to climate resilience in electricity security policies and establishing better standards to guide the necessary investments. Enhancing the resilience of electricity systems to climate change also brings multiple benefits.
The new IEA report identifies best practices and lessons learned from around the globe. It also provides a set of recommendations for institutional frameworks that establish clear responsibilities, incentives and rules; measures to identify, manage and mitigate risks; and protocols to monitor progress, respond and recover, including through emergency response exercises.
“The IEA is the world’s energy authority where governments and industry leaders can share experiences and expertise to help move the world towards a more secure and sustainable energy future,” said Dr Birol. “This report is the reference manual for policy-making on electricity security now and for years to come.”
The IEA’s expanding work on energy security challenges will next year include a special report providing a forward-looking assessment of the global supply of critical minerals for clean energy technologies.
Solutions to accelerate renewables integration and power system resilience
Singapore and the International Energy Agency today co-hosted the second Global Ministerial Conference on System Integration of Renewables (SIR). The Conference was held as part of the Singapore International Energy Week (SIEW) 2020.
This is the first SIR Ministerial Conference to be held in Asia. Under the theme “Investment, Integration, and Resilience: A Secure, Clean Energy Future,” the SIR Ministerial Conference brought together close to 30 Energy Ministers, global CEOs and thought leaders to discuss emerging issues in the acceleration of renewables integration and power system resilience with a strong focus on Asia and Southeast Asia. The IEA also launched its new report on electricity security, Power Systems in Transition, at the Conference. The report provides important recommendations on modernising power grids for greater reliability and flexibility.
Singapore’s Minister in the Prime Minister’s Office and Second Minister for Trade & Industry, and Manpower and co-Chair of the SIR Ministerial Dr Tan See Leng said: “International cooperation and public-private partnerships remain vital as we navigate towards a more sustainable energy future. As we address the urgent need to future-proof our systems to create more resilience and flexibility, we must also increase the share of, and enhance the integration of renewable energy in our energy systems. We look forward to working with the IEA to advance global energy transitions.”
“The IEA is pleased to partner with Singapore for the 2nd Ministerial Conference on System Integration of Renewables as the country sits at the heart of Asia, a region that will be critical in shaping the future of global energy markets,” said Dr Fatih Birol, the IEA Executive Director. “Today, we shared important lessons from across Asia and beyond on how best to integrate growing shares of wind and solar into power systems while maintaining security of supply. This will be crucial if renewables are to become the fundamental cornerstone of global clean energy transitions.”
Singapore’s cooperation with the IEA has deepened significantly since it became an Association country of the IEA in 2016. Singapore and the IEA have co-hosted many innovative initiatives and programmes to advance the global energy agenda. These include the training programmes under the Singapore-Regional Training Hub, the Singapore-IEA Forum and the Capacity Building Roadmap on Energy Investment and Financing for ASEAN.
Impact of COVID-19 on Commodity Markets Heaviest on Energy Prices
While metal and agricultural commodities have recouped their losses from the COVID-19 pandemic and are expected to make modest gains in 2021, energy prices, despite some recovery, are expected to stabilize below pre-pandemic levels next year, the World Bank said.
Oil prices fell dramatically in the early stages of COVID-19 and have only partially regained pre-pandemic price levels, while metal prices declined relatively modestly and have returned to levels that preceded the shock, according to the semi-annual Commodity Markets Outlook report. Agriculture prices were relatively unaffected by the pandemic, but the number of people at risk of food insecurity has risen as a result of the broader effects of the global recession.
“The impact of COVID-19 on commodities has been uneven, and could have lasting effects for energy markets,” said Ayhan Kose, World Bank Group Acting Vice President for Equitable Growth, Finance & Institutions and Director for the Prospects Group. “When declines in commodity prices are short-lived, policy stimulus can buffer their impact. However, when prices remain depressed for an extended period, policy makers need to find solutions so their economies can adjust smoothly to a new normal. Because of COVID-19, the new normal for oil-exporting emerging and developing economies arrived earlier. In the post-COVID world, these countries need to be more aggressive in implementing policies to reduce their reliance on oil revenues.”
Oil prices are expected to average $44 per barrel in 2021, up from an estimated $41 per barrel in 2020. Demand is expected to rise only slowly as tourism and travel continue to be held back by health concerns and as global economic activity is anticipated to return to pre-pandemic levels only in the year after next. Supply restraint is expected to be eased steadily. Energy prices overall —which also include natural gas and coal—are expected to rebound sizably in 2021, following large declines in 2020, an upward revision from April’s forecast. A resurgence of a second wave of the pandemic that results in more lockdowns and less consumption, and delays in vaccine development and distribution, could lead to lower energy prices than forecast.
Metal prices are expected to post modest increases in 2021 after falling in 2020, supported by the ongoing recovery in the global economy and continued stimulus from China. A prolonged period of weak global growth would lead to lower prices than forecast.
Agriculture prices are expected to rise slightly in 2021, following an estimated 3% increase in 2020 following some shortfall in edible oil production. Concerns about food insecurity remain relevant in several emerging market and developing economies. These concerns are prompted by hits to incomes from the global recession, bottlenecks in food availability at the local level, and border restrictions that have constrained labor supply. Food price inflation has spiked in several countries.
The pandemic is only the latest in a long history of shocks to commodity markets. A Special Focus looks at the nature of commodity price shocks on 27 commodities during 1970-2019. It finds that highly persistent (“permanent”) and short-lived (“transitory”) shocks have contributed almost equally to commodity price variation, although with wide variety across commodities. Permanent shocks account for most of agricultural commodity price variability while transitory shocks are more relevant in industrial commodity prices. The varied duration of such shocks points to a need for policy flexibility.
A transitory commodity price shock may call for stimulative fiscal policy to smooth consumption; countries that depend on exports of commodities subject to cyclical price swings may want to build fiscal buffers during the boom phase and use them in the bust period to support economic activity. In countries that rely heavily on commodities that are subject to permanent shocks, structural policies such as economic diversification and broadening the tax base may be needed to facilitate adjustments to new economic environments.
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