Renewable energy struggling to beat financial odds – experts

MANILA, Philippines – Energy experts particiating at a forum on clean energy  have agreed that the world faces financial constraints to push forward the development of renewable energy. 

This was the consensus of energy experts participating at a dialogue at the Asian Development Bank’s 10^th Asia clean energy forum held in Manila on Wednesday, June 17.

“The world has to invest around 60% of its GDP in the next 3 decades on energy to support a growing population, that’s half of the capital expenditure that the world has so far invested,” said Christopher Frei, secretary general of the World Energy Council (WEC).

At the same time, he explained, the global investor environment is in the midst of “great uncertainty” due to price benchmarks that have gotten speedier and more complex.

The price benchmarks have gotten speedier in the sense that key benchmarks such as oil and gas price developments as well as the price of solar energy components have been shifting dramatically in a short space of time, coupled with cataclysmic events such as the Fukushima disaster.

The investor climate is also more complex – there are more price signals that investors have to take note of now than in the past, when they hust had to monitor oil prices.

“Its biggest amount of investment needed in the greatest time of uncertainty,” Frei said.

The problem is that most of the money invested in renewable energy goes to a few countries where political risk is relatively low.

That’s the reason the WEC has developed a framework for policy makers to better understand how to manage political risks. This is to encourage more investment in renewables to head towards energy sustainability.

The WEC’s definition of energy sustainability revolves around 3 core dimensions – energy security, energy equity, and environmental sustainability – which it collectively calls the “energy trilemma.”

“The good news is that we’re seeing more and more countries are engaging in dialogues in order to achieve energy sustainability as well as sharing industry best practices with each other,” Frei said.

Good subsidies, bad subsidies

Another suggestion to push for the adoption of renewable energy is for policy makers to rethink their energy subsidies.

“Giving subsidies to renewable energy is good policy, but giving subsidies to fossil fuels is more about playing politics. So I think there is a need to increase the support given to renewable energy and reducing the subsidies given to fossil fuels,” said Yongping Zhai, ADB Technical Advisor for Energy.

Zhai added that the current  low global oil prices give policymakers a “golden opportunity” and that countries in the region such as Indonesia, India, Malaysia and China have already begun doing so.

He cautioned, however, against the expectation that policies to support renewable energy should be there forever, adding that policy support for renewable energy has just about peaked.

The solution, he explained, should lie in sound economics but at the moment the market is skewed towards fossil fuels.

“If we look for the least cost solution for energy demand, then we’ll end up with coal power plants because their carbon emissions are not taxed enough. Air pollution is not paid for by polluters, so the economics and the value system are wrong,” Zhai said.

ADB is looking forward to a solution to this ,and is hopeful that the 2015 United Nations Climate Change Conference to be held in Paris later this year will result in stiffer penalties for carbon emissions.

“This is a chance to make the economics of this right, and if we do that then there is  great chance that we’ll see a a bigger and faster penetration of renewable energy in the world’s energy mix.” Zhai said. – Rappler.com